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OM Assignment No.

1 Operations Management

Study of a Manufacturing Co. from Annual Report


(Select Annual report of 2007-8 or Calendar Yr 2007 only)

Objective of the Assignment –

1. To get familiar with Co. Annual Report – Which info is lying in


which corner?
2. To understand – What-all info can be extracted from such
reports.
3. To judge the operational health of Co. thru’ some selective
ratios.

Imp. Instructions –

1. Joint Assignment of 2 students, hence interaction for analysis /


comments is expected.
2. Last Date of Submission : ……… 2008 (-ve marks, if delayed)
3. Coping strictly prohibited – Both parties will get 0 marks
4. Following is a template. The same format must be followed.

Company Name: Cipla Limited.


H.O. Location: Mumbai Central,
Factory Location: Mumbai Central
CEO: Dr. Y. K. Hamied
Products Manufactured: Bulk Drugs, Tablets & Capsules,
Liquids, Creams,
Capacity Analysis -
2006 -07

Product Units Installed Production Sales


Name Capacity
Tablets & Million
Capsules
Bulk Drugs Tonne
Aerosols/ Thousand
Inhalation
Liquids Kilolitre

2007-2008

Product Units Installed Production Sales YoY


Name Capacity Increase
%
Tablets & Million
Capsules
Bulk Drugs Tonne
Aerosols/ Thousand
Inhalation
Liquids Kilolitre
Financial Analysis
( All fig. in Rs Cr. except employees)
07-08 % of 06-07 % of YoY %
Sales sales Change
Net Sales ----- ------
(Excluding other income) Rs.
Material Cost
Employee Cost
No. of Employees (assumed or ---- -----
actual )
Inventory held on yr. end
Power & Fuel Cost
Interest paid
Depreciation
Exports
Imports
Net Profit (NOPAT)

Average Earning of Employee Rs. ----- L/Yr Rs. ----- L/Yr

Revenue /Employee Rs. ----- L Rs. ------ L


( Sales / No. of Emps.)
Inventory/Turn-Over ----- Times ----- Times

E.P.S. (Rs.)

Student’s Name 1. __________________ , Roll No. __________


2. __________________ , Roll No. __________
Page 2

1. Go thro’ all pages of the annual report, particularly – Chairman’s


statement, Directors’ Report, Corporate Governance, Explanatory
Notes, Product & Capacity Details

2. Find answers to following issues and give your comments (not


exceeding this page).

( Imp. : Whole assignment should not exceed 2 Pages.


No folder/ Plastic cover required.
Only printed pages, No hand-written / No e-mail )

1. Capacity Utilization: How is Production and Sell w r t Installed


Capacity?
Is there improvement w r t last year.?
Is company moving with market trends ?

2. Productivity , Quality– How do find this company’s


productivity of their input resources like

Manpower, Capital, Power?
Is there any improvement w r t last year?

3. Inventory Management – Is there any improvement over last yr.?


What steps/ measures are taken to curtail
it?

4. Profitability - Is there any rise/fall over last yr.?


For what reasons there is rise/ fall?

5. Future Plans - What info do you get from the Chairman’s


statement/ Directors’ Report
Student’s Name__________ , Div. -_________, Roll No. __________

OM Assignment No. 1 Pg. 1. Operations Management

Study of a Manufacturing Co. from Annual Report


(Annual report of 2004-05)
Company Name: Maruti Udyog LTD
H.O. Location: New Delhi
Factory Location: Gurgaon, Haryana
Managing Director: Jagdish Khattar
Products Manufactured: A1 (Maruti 800), A2 (Alto, Zen, Wagnor) A3 (Esteem, Baleno)

Product Units Installed Production (%) Cap. Sales YOY


Name Capacity (Unit) (Unit) Utilization (Unit) (Units)
Passenger Cars and Nos. 3,50,000 4,72,908 135.11 4,72,122 -
Light Duty Utility Vehicles
(2003-04)

Passenger Cars and Nos. 3,50,000 5,40,409 154.41 5,36,301 + 13.6 %


Light Duty Utility Vehicles
(2004-2005)

Items 2004-05 % 2003-04 % YoY %


Change
Net Sales (Excluding other income) 10,911 - 9,018 - 20.98
(Rs. Cr)
Material Cost
Employee Cost (Rs. Cr) 196 1.8 177 1.9 10.42
No. Of Employees ( Actual) 3,453 - 3,334 - 3.56
Inventory (Rs. Cr.) 666 6 439 4.9 51.57
Power & Fuel Cost( Rs. Cr) 58 0.5 95 1 (39.35)
Interest (Rs. Cr) 36 0.4 43 0.5 (17.05)
Depreciation(Rs. Cr) 457 4.2 495 5.5 (7.69)
Exports (Rs. Cr) 982 9 941 10.5 4.38
Imports (R/M and M spares) (Rs. Cr) 1,608 19.7 1,360 20.4 18.19
Net Profit (after Int., Dep., Tax) (Rs. Cr) 853 7.8 542 6 57.5

Ratios

Items 2004-05 2003-04


Average Earning of Employee (Rs. L /year) 5.67 5.32
Revenue /Employee (Sales / No. of Emps.) 316 271
Inventory/Turn-Over Ratio 15.4 Times 15.2 Times
E.P.S. (Rs./ Share of FV Rs. ……. /-) 29.6 18.8
Student’s Name- ____________, Division ___, Roll No. _______________

Pg. 2 : Analysis of MUL Operations 2004-05

1. Capacity Utilization:
 Co. is utilizing it’s installed capacity at optimum level, which shows Co’s efficiency to use
available resources
 MUL also reduced the number of hours required to produce a vehicle. From a high of
100 hours in FY01 to 41.86 hours in FY05, it has come a long way in improving its
Productivity and efficiency.

2. Productivity & Quality :


 Productivity –Company has implemented the Maruti Production System (MPS) on the
shop floor. MPS has a systematic way to identify and eliminate waste in operations, such as
unnecessary movement of men and material, in-process waiting
 Productivity measured in terms of HPV (Hours per Vehicle) i.e. man-hours spent to
produce one vehicle, showed an improvement of 9.2 per cent during 2004-05
 To reduce inventory across the value chain, company had adopted a system of “e-nagare”,
an online system to schedule and order material and other components. Inventory levels at
the MUL plant reduced by 22 per cent
 Maruti has improved productivity and cut cost through kaizen practices
 Quality-During 2004-05, able to reduce warranty cost per vehicle by 16 per cent compared
to the previous year, and by more than 50 per cent over the last three years
 Safety-Using the Japanese practice of Kiken Youchi Training or KYT, employees across
the shop floor regularly identify potential safety hazards in their area of operations. Based
on this feedback, the layout and sequence of the manufacturing process is modified to
prevent accidents.

3. Inventory Management :
 MUL follows just-in-time (JIT) inventory principles. Around 70 per cent of components
are outsourced, and manufacturing is undertaken based on JIT inventory principles
 MUL has successfully improved average inventory turnover from15.2 in 2003-04 to 15.4
in 2004-05 and average receivables from 17.8 days in 2003-04 to 14 days in 2004-05.

4. Profitability :
 Net profit increased 57.5 per cent
 Net profit margin (PAT /Net Sales) increased from 6 %t in 2003-04 to 7.8 % in 2004-05
 ROCE increased from 22.3 % in 2003-04 to 32.1 % in 2004-05
 Return on av. net worth (RONW) increased from 16.5 % in 2003-04 to 21.5 % in 2004-05
 EPS increased from Rs. 18.77 in 2003-04 to Rs. 29.55 in 2004-05.

5. Outlook and future strategies :


 Identify specific customer segments like teachers and motorbike owners, and offer them
customized schemes and explore new markets for export
 Co. is now preparing for further efficiency called the “The Next Leap”
 New Car Manufacturing Plant at located in Manesar, Haryana (2006)
Student’s Name- ____________, Division ___, Roll No. _______________