AND
ANALYSIS OF THE COMPANY
BY
BHAVANA A
BY
BHAVANA.A
02XQCM6016
Place: Bangalore
Date: 15-12-2003
(BHAVANA A)
Registration #: 02XQCM6016
GUIDE’S CERTIFICATE
PLACE: BANGALORE
DATE: 15-12-2003
PROF. B. SRINIVASAN
(Internal Guide)
Acknowledgement
At the very outset, I take this opportunity to express my sincere regards and
I would also like to thank staff of ABB, Peenya for sharing their valuable
Last but not the least, I wish to express my gratitude to all those who have
the project.
(BHAVANA A)
CONTENTS
Company Profile 1
History 2
Business Focus 3
ABB India 4
Business Segments 6
Product Profile 9
Vision & Mission 11
ABB & Technology 14
ABB & Global Research 15
Environmental Policy of ABB 16
Social Policy of ABB 17
A Financial Overview 18
Organization Structure 22
Personnel Policy 41
Systems 42
Project Undertaken 43
Conclusions & Recommendations 59
List of Charts & Graphs
ii. Revenue 18
iii. Profit 19
ABB’s entire global organization is built around their main customer group in
order to serve individual customers more efficiently and create more value for
them.
ABB operates in more than 120 countries and has office in 87 of those countries
to give its global and local customers the support they need to develop and
conduct their business successfully.
HISTORY
Strategy- Build on our leadership in power and automation technologies for utility
and industry customers.
Culture- Shared Intentions- “our ABB”, open communication and dialogue, fast
decisions, execution, disciplined culture, acting in the overall interest of ABB.
People- Leadership based on respect for values, trust and accountability – say
what we mean, mean what we say.
ABB INDIA
ABB in India serves utility and industry customers with the complete range of
ABB’s offerings. The company has a vast installed base, extensive local
manufacturing at 8 units and a countrywide marketing and service presence. As
a strategic thrust to our standard products business, ABB has developed a
national channel partner network, which ensures geographical reach and
penetration for our products and services.
In order to leverage India’s intrinsic technology strengths and the vast pool of
highly qualified software professionals, ABB has set up a dedicated global R&D
Center in Bangalore, which focuses on software development and Industrial IT
development and deployment. It also helps maintain and support a range of
software intensive products and acts as a partner for ABB R&D centers as well
as business areas within the group.
3200 employees
8 manufacturing facilities
25 marketing offices
4 service centers
3 training centers
BUSINESS SEGMENTS OF ABB
ABB has streamlined its divisional structure to focus on two core businesses:
Power Technologies and Automation Technologies. ABB is a recognized global
leader in all its businesses
The businesses of the ABB Group is organized into 3 Business Segments, which
are as follows-
ABB Power Technologies serves electric, gas and water utilities as well as
industrial and commercial customers, with a broad range of products,
systems and services for power transmission, distribution and automation.
ABB is the World’s largest supplier in the field of Power Transmission.
ABB has the widest global presence and the most complete product range
available. The Power Transmission Segment provides Products and
Services like
Air and Gas Insulated Switch Gear Products
Solution and High Current Systems
Power Transformers and Reactors
Products and Solutions for Power Cables
High Voltage Direct Current Systems.
ABB also provides a complete range of equipment for Power Distribution, from
Transformers and Switchgears to complete Distribution Systems. It provides
products for distribution of Electrical Energy including Medium-Voltage
Switchgears, Apparatus and Prefabricated Factory Assemblies. It also provides
Solutions and Systems for Distribution of Energy to Rural, urban and Industrial
consumers as well as for Airport Installations.
ABB Automation Technologies blends a robust product and service
portfolio with end-user expertise and global presence to deliver solutions
for control, motion, protection, and plant integration across the full range
of process and utility industries.
ABB’s Automation Business Segment provides a wide variety of products,
systems used in almost all industries as well as solutions for particular
applications and industries. It provides Automation Power Products like
Drives, Motors and Power Electronics, Instrumentation and Control
Products like Field Devices for Sensing, Controlling and Actuating,
Analyzers, Metering Equipment, Control and Information Systems, Diesel
Engine Supercharges etc..
Product Guide:
Building Systems and Services
Control Systems
High Voltage Capacitors
Instrumentation
o Actuators and Positioners
o Analytical Instruments
o Control Valves
o Flow Measurement
o Interface Products
o Pressure and Level
o Measurement
o Process Control
o Recorders and Indicators
o Temperature measurement
Low Voltage Products
Medium Voltage Products
Motors and Drives
Oil and Gas
Robotics
Transformers
Valves and Actuators
Service Guide:
Asset Assessment
Consulting
o Eutuch Process
o Solutions
Environmental Services
Installation and Commissioning
Maintenance and Field Services
Optimization
Performance Services
Spare Parts and Repairs
Training
Financial Services
VISION AND MISSION
Vision:
To be as the most capable and reliable partner while build future
competitiveness.
We want our customers to become “Front Runners”
We want to become “Main Partners” on the road to Excellence, by offering
Innovative, “Best in Class” level products and services by fostering the
growth of resources that will play responsibility roles in the companies
within the ABB Group.
Mission Statements:
We supply competitive, top-market level Consultancy Service.
We support change projects including the implementation step and getting
the planned results.
We optimize all companies Processes.
We promote Know-how at International level.
We sustain the implementation of “Global Process”.
We foster the growth of resources that will play managerial roles.
Values:
We create value:
ABB’s strategy
In the short to medium term, this is our strategy for sustainability:
ABB has been recognized as a Technology Leader for over a century, with
many pioneering breakthroughs to its credit. The company invests about 7% of
its Group’s Turnover in research and order related development, which is
weaved into a fabric of its business offering. The company has an excellent
track record when it comes to “intensity of innovation”, with around 75% of their
business being based on products developed in the past five years. The
ultimate aim of their technology initiatives is to make their utility and industry
customers more competitive while reducing environmental impact.
ABB is unique in their approach to R&D. The work is organized via Research
labs in Business Areas and Corporate Research Centres. Currently it has about
1200 researchers and scientists working in Corporate Research Centres. They
also have Research Centres located in Sweden, Switzerland, Germany, Norway,
Finland, Italy, 2in the US ad the latest additional is an Indian Centre, which is
their 1st Research Centre in Asia.
Combined they have over 6000 scientists and engineers working in R&D in their
Divisions and in Corporate Research Centres. All of these are working hard to
invent new technologies, which will ensure a continued successful partnership
with their customers. Additionally, the fresh and innovative thinking arising from
synergies with over 70 universities and research institutes is an important factor
in keeping ABB a world Technology Leader.
ENVIRONMENTAL POLICY OF ABB
o Integrated management
o Process of improvement
o Employee education
o Prior assessment
o Customer advice
o Research
o Precautionary approach
o Emergency preparedness
o Transfer of technology
o Openness to concerns
ABB’s social policy was adopted in February 2001. It draws on four sources: the
United Nations’ Universal Declaration of Human Rights, the International Labor
Organization’s fundamental principles on rights at work, the OECD Guidelines
for Multinational Enterprises and the Social Accountability 8000 (SA 8000)
standard, an auditable standard for the protection of workers’ rights developed
by the Council on Economic Priorities Accreditation Agency.
o ABB in society
o Human rights
o Freedom of engagement
o Equality of opportunity
o Working hours
o Employees
o Suppliers
o Community involvement
o Business ethics
A FINANCIAL OVERVIEW
Revenues
(Rs. In Millions)
14000
12006
12000 10558
10000 8934
7934 8068
8000
6000
4000
2000
0
1998 1999 2000 2001 2002
Profit After Tax
(Rs. In Millions)
900 813.5
800
700 653.3
600 540.1
500 377.3 372
400
300
200
100
0
1998 1999 2000 2001 2002
Return on Capital Employed (%)
30
26
25 21.8
20 18.4
15 13.6
12.4
10
0
1998 1999 2000 2001 2002
Employees and Productivity
Number of Employees
5000 4726
2000
1000
0
1998 1999 2000 2001 2002
4000
3711
3500
3000 2899
2500 2402
2200
2000 1890
1500
1000
500
0
1998 1999 2000 2001 2002
ORGANISATIONAL STRUCTURE
ABB is not only unique at its business front but also in its Organizational
Structure. The Company follows Matrix Form of Organizational Structure.
Board of
Directors
Executive
Committees
CEO
Reporting to CEO
Corporate Communications
Reporting to CFO
Group Controlling
Investor Relations
Finance Advisory
Risk Management
Reporting to ECM
Human Resources
Sustainability Affairs
BUSINESS AREAS
AUTOMATION TECHNOLOGIES
Automation Technologies
POWER TECHNOLOGIES
Power Technologies
Distribution Transformers
Power Systems
Medium-Voltage Products
High-Voltage Products
Power Transformers
Downstream Upstream
ABB INDIA
ABB India
Automation Power
Technology Technology
Business Business
Areas Areas
Business Business
Units Units
Automation Technologies
Power Technologies
The Power Technologies division serves electric, gas and water utilities as well
as industrial and commercial customers, with a broad range of products, services
and solutions for power transmission and distribution. The portfolio includes
transformers, switchgear, breakers, capacitors and cables, as well as high- and
medium-voltage applications.
ABB’s solutions facilitate the flow of electrical power from generating stations,
transmitted through cross-country power lines. ABB’s distribution systems further
help to bring electric power from high-voltage substations to end-users. ABB
delivers end-to-end solutions, playing a key role in electrification and energy
projects- both new and retrofit – for urban and rural utilities as well as for
industrial and commercial customers.
ABB has pioneered several technologies in India including the introduction of self
blast SF6 technology, first HVDC back-to-back converter station, first SVC, first
HVDC transmission line, first 400 kV switchyard, India’s first IPP, turnkey
substation for the first barge mounted IPP and many more.
ABB India has also delivered several turnkey substation solutions up to 400KV
for central and state power utilities across the country and beyond. Recent
international successes include significant orders in Syria, Bhutan and Iceland.
Our focus on technological innovation helps us provide state-of-the-art products
and solutions to our customers, making them more efficient and competitive.
UNIT
HEAD
UNIT HT
CAPACITORS
UNIT LT
CAPACITORS
INDUSTRIAL
SOLUTIONS
SERVICE &
COMMISIONING
CONTROLLER
LOGISTICS
UNIT HV CAPACITORS
UNIT HV
CAPACITOR
S
MARKETING TECHNICAL PRODUCTION
MANAGER MANAGER MANAGER
CUSTOMER
INSPECTION
CLEARANCE
COMMERCIAL STORE
ASPECTS KEEPER
SUPERVISOR
WORKERS
Marketing Department:
The basic aim of the department is to meet its Order Target as per the budget.
The Company has its Regional Marketing Offices spread across the Country. These
offices tender the prospective orders, quote as per the specifications of the relevant
Manufacturing Unit and bag the orders which are forwarded to the Manufacturing
Unit. For Tendering, Standard Tenders are used that lists the Specialty of ABB. The
functions of the Marketing Department of the Business Unit include-
Order Handling
o Sending orders based on enquiry
o Studying the customers need by visiting the site
o Assisting in Designing and Manufacturing
o Preparing Production and Dispatch Schedule
o Conducting Seminars for customers for Product Awareness, etc.
Customer Clearance
o Getting the Drawings Approved
o Re-engineering and Follow-up
Commercial Aspects
o Checking the Creditworthiness of the customer
o Getting Bank Guarantee
o Preparing Invoice
o Receivables Management on the receipt of Materials Acceptance Statement /
Materials Receipt Certificate from the customer
The Department also carries out Developmental Activities like Training, Product
Development etc..
Technical Department:
Quality Manager
o Quality Control at the following stages
Inward Inspection- specifies the parameters for inward inspection
On Process –
Material Specifications
Production Instructions
Process Modules
Work Instructions
Final Inspection – with respect to Final Product
o Instructs in case of Deviation in the Production Process and not involved in the day-
to-day activities
o Vendor Identification – In case of new equipments, with respect to
Sustainability
Quality
o Vendor Development – Vendor Rating, every Quarter on the basis of
Delivery Rating
Price
Quality
Technical Engineer
o Designing
o Re-engineering
o Preparing Bill of Materials (BOM)
Production Department:
Planner
o Prepares the Purchase Requisition along with the preferred Supplier
o Prepares the Production Schedule
o Participates in Subcontracting
Inspection
o Inspects the Materials received
o Prepares Material Receipt Advice (MRA) if accepted
o Records the acceptance in the SAP system that alters the Stores Ledger
Store Keeper
o Accepts the Goods against the MRA
o Issues the Materials to the Production against the Issue List
o Dispatching the Finished Goods
o Physical Stock Taking
Supervisor
o Carries on Material Planning
o Issues Materials Requisition to Stores
o Issues materials for Production at Plant
o Documentation at the end of each process
o Other Activities
Supervision
Operations
Control
Stores Data
UNIT LV CAPACITORS
UNIT LV
CAPACITORS
MARKETING TECHNICAL
MANAGER MANAGER
INDUSTRIAL SOLUTIONS
INDUSTRIAL
SOLUTIONS
MANAGER
SERVICE &
COMMISSIONING
COMMISSIONING
ENGINEER
The Service and Commissioning Department is basically concerned with After Sale
Services and its activities include-
Purchases Spares and Components for the customers
Regular Feedback form the customers
Assistance in the erection of the equipment
Providing Service at the Customer’s Site
Commissioning the equipments at regular intervals
CONTROLLER
CONTROLLER
HT CAPACITORS LT CAPACITORS
The Controller looks after the overall business and the financial Aspects of the
Business Unit and reports both to the Business Area Manager and the Divisional
Finance Controller. His activities are centralized for the Petty Issues, known as
‘Group Service System’ or ‘GP’.
Preparation of Full Cost Module(FCM)- Before a Quotation is made, a FCM is
prepared to test the feasibility of the project by considering-
o Overhead Recovery
o Gross and Net Margins, etc.
Forecasting- This function includes Verifying the Compliance of the targets set as
per the Budget by checking-
o Invoice for Order Target- The rate of converting the orders to invoice
o Receivables for Revenue Target
o Working Capital for EBIT Target
o Capital Employed for Cash Flow Target -Here the Target will be to maintain a
Positive Cash Flow
The Confirmation of the Targets is reported through ‘Rolling Forecast’ to-
o The Country Management every Month
o The Global Management every Quarter
Receivables Management – Although the Commercial Aspects of receivables
Management are taken care of by the Marketing Personnel, the Controller
aims at “Reducing the Receivables and Collecting More by visiting the
Regional Offices and Meeting the Customers Personally”.
Inventory Management- The Controller also participates in the Inventory
Management in the matters like, the preparation of Purchase Order to
consider
o Cash Flow Situations
o Prices, etc.
Costing- The Controller also monitors the Material Cost and the Overhead
Cost incurred at the Production Site for each Job.
Monthly Closure of Accounts- The Books of Accounts pertaining to the
Business Unit are closed every month, for the purpose of Reporting. The Key
areas of Concentration, among others will be-
o Level of Work-in-progress
o Closing Inventory as per Accounting Standards
o Provision for Future Orders
o Intra and Inter Company Reconciliations
o Matching Revenues to Cost
Auditing- The Controller is also responsible to get the books audited at the
Business Unit Level. The Audits along with the External Annual Audit
includes-
o Quarterly Audit
o Half-Yearly Audit
o Transactional Audit
o Quarterly Audit
The company has a SAP system which covers the transactions relevant to
booking of order received from customers, to dispatch of finished product to the
customer to the clearance of Accounts. Thus the system covers the areas like
order handling, engineering, planning, purchasing, quality control, inspection,
stores, manufacturing, servicing and commissioning, and accounting.
The SAP picks up data from the database and uses this data for the purpose of
the above said departments. This system is presently fulfilling all the routine
requirements of the users.
INVENTORY MANAGEMENT PRACTICES AT ABB, PEENYA
The Marketing Department bags the order for the products from the customers.
Once the order is obtained a mail in which the details of the order are explained,
is sent to the Engineering Department. The Department also keeps track of the
project.
The Engineering Department is mainly concerned with order handling and in the
preparation of documents needed for production. The Department prepares all
the Engineering Designs with the assistance of AutoCAD Software Package. The
Designs are sent for Customer Clearance. The necessary alterations are made
in the Drawings, if required, which calls for re-engineering.
The department also prepares a BOM (Bill of Materials) using the MS Excel
Package which is later transferred to SAP. The BOM lists all the materials
required for the said project and the Quantity of each item. The document also
states the Substitute Materials that can be used when the original material are
not available. A copy of BOM, enclosed with the supporting Drawings is
forwarded to each of the following departments –
Planning or Purchase
Quality Control/Inspection
Stores
Production
The Planning or Purchasing Department decides the Quantity of each material
stated in the BOM with the assistance of the system which considers-
* Safety Stock/Minimum Stock
* Materials already ordered but awaiting receipt
* Requirement of the materials by other projects
* Maximum Stock Level
Thus a PR (Purchase Requisition) is raised for such articles for which the stock-
in-hand is not sufficient to fulfill the requirements. If the item for which the PR is
raised is an earlier supplied item, the Materials Master is checked which contains
a list of Suppliers with the price details. The criteria for selecting the supplier are
*Price, *Quality and *Delivery Time. If the item required is a new item, the Item
Specification is explained to the Vendor, Capacity of the Vendor is Judged,
Quotations for the Products are received. Once the Supplier is selected a PO
(Purchase Order) is raised which is placed with the supplier.
There are three types of PO’s. They are:
1. Stock PO- for those goods that go to the Stores and are accounted in the
System.
2. Miscellaneous or Miss PO- for those goods that go to the Production
directly and are not accounted in the System. This includes consumable
Items like Soaps, Auxiliaries, Grease etc..
3. Subcontract PO- This is raised in case of subcontracting the order,
wherein all the Raw-Materials are supplied to the Subcontractor, who
carries on only labour work on the materials.
The Department also issues an IL (Issue List) to the stores, which is a basis on
which the issues are made by the Stores to the Production.
The Inspection or Quality Control Department receives the goods along with the
DC (Delivery Challan) and carries on a Random Sampling Test with respect to
the Physical Dimensions specified in the design enclosed to the copy of BOM
issued by the Engineering Department. Incase of Chemicals/Electrical
Equipments, the Supplier, himself should test the materials in a Laboratory and a
copy of the Test Results should be enclosed to the DC which usually denotes
the max./min. capacity in terms of percentage, which is cross-checked with the
design specifications or the Planner’s orders.
If the goods received are as per the designs a MRA (Materials Receipt Advice) is
generated in the system which alters the Stock Figures.
The goods then move to the Stores Department where the stores person
receives the goods and verifies them against the MRA. The stock is put in the
respective Bin Location. Whenever the production department requires the
materials, the stores make the necessary issues on the basis of the IL received
from the Planner. Once the goods are issued, the system is again updated with
the changes.
Once the goods are issued to the Production and the Production Process is
complete, the Production Manager issues the IO (Issue Order) to the Stores and
the Finished Goods move to the stores. The department which is also in charge
of Dispatch of the Final Product to the customer dispatches the Final Product,
along with the Mounting Equipments and other accessories to the customer’s
site.
The product moves out of the factory along with the Invoice and the relevant
Drawings for the Mounting and other internal connections of the Capacitors
Banks and other Manuals. This is, however backed up by Advice and
Consultation for Total Implementation.
Apart from this the department also follows the Perpetual Inventory System, by
taking Physical Stocks every Quarter.
ACCOUNTING POLICIES FOR INVENTORY AT ABB
2) ABC Analysis:
It is a Selective Approach aimed at keeping the Investment low and at the
same time avoiding stock-outs of Critical items. The high value items, in
terms of money value consumption get segregated for Pinpoint Control and
extensive paper-work is avoided in case of low value items.
ABB does this analysis in the following way:
The consumption of each of the Raw-material used at the plant is
observed over a period of time. On the basis of their usage, the total
money value of each of the items consumed is extrapolated for a
year.
The materials are arranged in descending order of the consumption
value.
The cost of each material is expressed as a Percentage of the Total
Cost of the Raw-materials consumed during the last year.
The Materials constituting the first 60% by Value will form the A Class
items, the next 30% form B Class items and the Last 10% form the C
Class items.
3) FSN Analysis:
For the purpose of Monitoring and Controlling the Inventories, the Company
classifies the inventory into Fast Moving, Slow Moving and Non Moving
categories.
The category is done as under-
Non Moving Items- It includes Stock which has not at all moved for
the past 6 months.
Slow Moving Items- It includes Stock which has not at all moved for
the past 3 months.
Fast Moving Items- It includes the stock which is not included in the
above 2 categories.
The FSN Analysis considers only Quantity of Stock and the Transactions (i.e.
movement of Quantity of Stock) and not the Value of Stock.
The Non Moving and Slow Moving Items are found at 10% each of the Total
Stock.
A list of these stocks is provided to the Planner and the Engineer, who try to
accommodate these items in the Prospective Projects. Thus efforts are made
to minimize these stocks.
It may happen that different departments may refer the same materials in
different ways. When such a thing happens, the Purchase Department may
place several orders on the same item and this may lead to unnecessary
blocking of funds. This problem can be avoided if only every item of Inventory is
identified in a unique way. Identifying Inventories is very important for inventory
Control, i.e. Inventories can be controlled only if they are identified. Unique
Identification of inventory helps in avoiding confusions and duplications. It will
help Standardization and application of Cost Reduction Techniques.
1 2 3 4 5 6 7 8 9 10 11 12 13 14
N A A A N N N N N N N/A N/A N/A
N – Number
A – Alphabet
The Capacitors Unit at ABB, Peenya, Bangalore follows the following criteria-
Position 5- Size of the Paper used for Drawing; usually A4 or A3
Positions 6 to 10- General Category of Articles- like Insulators, films, Foils etc.
Position 11- Hyphen
Positions 12 to 14- Sub-category to the main numbers in the Positions 6 to 10.
The rest of the position remains the same as Standard Articles. When a
component part numbered under this system is called up again repeatedly for
other new orders, the article shall be treated as Standard Article and re-
numbered according to Standard Items and the will be amended.
ANALTSIS OF INVENTORY OF ABB INDIA
Diagram No. 1
Loans/Adva Fixed
nces Assets
8% 13%
Cash &
Sundry Bank
Debtors Balances
42% 25%
Inventories
10%
Investments
2%
The above graph shows that the Inventory constitutes 10% of the Total Assets.
Diagram No. 2
Loans and
Avances
10%
Inventories
Cash and 12%
Bank
Balances
29%
Sundry
Debtors
49%
The above graph shows that Inventory constitutes 12% of Total Current
Assets.
RATIO ANALYSIS
(ABB INDIA)
This ratio is not of much relevance because most of the Products in the
Capacitors Segment are made to orders. So the efficiency with which the
company converts Finished Goods to Sales is not of any significance as goods
are manufactured only when the order is obtained.
REASONS FOR PILING UP OF INVENTORIES
Conclusion
During the project work the Inventory Management Practices at ABB is found
satisfactory. A few conclusions where changes are needed have been drawn
from the study.
Inventory Holdings were not as per the target levels set, the reasons for
which are explained earlier.
Non Moving Stock and Slow Moving Stock account for 10% each of the
total inventory which increases the carrying cost of Inventories.
The products are classified into ABC categories on the basis of their
values alone. Also the categories are not considered while taking
Physical Stock.
Recommendations
In case of changes in specifications made by the customer at a later date,
the items piles up in the Inventory. This should be avoided by charging the
cost of the product to the customer and disposing the items immediately.
The Planner should select the best of the Suppliers considering the factor
of Delivering Time, thus avoiding the Buffers pile up as inventory.
The Minimum Order Quantity Should be reduced.
If the Non Moving Items that are not likely to be required for further
projects, should be sold or scrapped. Also, action must be taken to
remove Slow Moving Items.
In case of Physical Stock taking, the ABC materials of stores control
should be adopted. The product should be classified into categories
considering their value as well as the Frequency of Replenishment during
a period.