Just in Time Inventory Control, Working Capital Management, Work in Progress analysis, observations and discussions, interviews, analysis

of financial data through graphs, tables etc Steps undertaken:1. Study of Production Process !irst step was to study the production process This was undertaken to get an in depth understanding of procedure involved in production, working of different departments of production, materials used at different levels of production, labour employed, levels of efficiency and utili"ation of resources, degree of automation, interdependence between processes, bottlenecks at various levels etc This was helpful not only to identify areas with scope of cost reduction and control within the department but also formed a ground for study of other functions like purchase, human resource planning, finance etc and their interdependence, hence enabling cross functional analysis of cost

The following procedure was adopted for the purpose of the studyi The first step was to carry out an unstructured interview with the senior manager, production in order to get an overview of production procedure, processes involved, costs incurred etc ii The ne#t few days were spent at the shop floor, where an in$ depth study of the production process was done through observations and inputs from the supervisors and department heads iii %e#t I identified areas where there was e#cess cost due to rework and defectives, deviation from standards etc These areas are$ C! dept, &! dept, Powder coating, '!( dept
1

iv

&iscussions were carried out with the persons responsible and feedback was taken for the same

Inputs were taken from other departments such as human resource department regarding skilled and unskilled labour, training and development etc , finance department regarding overheads and other financial implications etc for cross functional analysis of costs

vi vii

)nderlying problems behind these high costs were determined 'ecommendations along with ways of implementation were given for controlling costs in these areas and also for reducing cost wherever possible

viii

!eedback was taken regarding applicability of the recommendations

2. Study of Inventory Cost %e#t study of stores department was made in order to study the scope of cost reduction and control in inventories Inventories form a ma*or portion of costs in a manufacturing concern The purpose was to find out costs involved in form of cost of inventory, its +uantitative and financial aspects, working capital involved, costs such as carrying costs, wastages, etc It also involved study of cost control methods and cross functional analysis of cost keeping in view interdependence between various departments such as production, ,', etc The following procedure was adopted for the purpose of the studyi I began with an unstructured interview of the senior manager, stores, regarding the functions of the stores department, processes involved, current cost control measures and a detailed discussion about the functioning of various groups under the stores dept$ supply management, line management, supplier, -M', TP-, &irect Purchases ii .econdly, financial data and information was collected from persons responsible for various groups under stores
2

iii

Problem areas were identified on the basis of the interviews, discussions, observations and analysis of the data provided These are$ -M', /P-, obsolete stock, WIP, wastes etc

iv

'ecommendations were made and their implementation methods were given after taking inputs from other departments such as production, ,', etc as the implementation involves continuous involvement of these departments as well 0arious cost control tools used are$ Just In Time inventory control Work in progress analysis Working Capital analysis 1bsolete stock control Wastage reduction etc

. Study of !u"an #esource $epart"ent %e#t, study of human resource department was conducted in order to find out the functions of the human resource department, types of direct labour employed, training and development, incentives given, overtime, efficiency of labour, costs due to labour, current cost control methods etc The following procedure was adopted for the purpose of the study$ i )nstructured interview of manager, ,'& regarding the functioning of the ,' department, inputs regarding labour employed, re+uirement during various periods in the year, overtime, incentives, information about the managerial staff ii iii !inancial data and information was collected from the ,' department The data provided was analysed using graphs, tables etc

iv

Problem areas were identified 2 basic wage fluctuation, overtime, training and development

&iscussions were carried out with the persons responsible and also with other department heads such as of production, stores etc

vi

'ecommendations and ways to implement the same were given

%. Study of &verheads %e#t step was to study the overheads e#cluding the selling and distribution e#penses which were beyond the scope of the pro*ect This was done to find out the different overhead costs, costs contributing most to overall cost and also to determine overhead costs with scope of cost reduction The following procedure was adopted for the purpose of the study$ i ii iii iv Interviews and discussions with the finance head and heads of other departments Collection of data from the finance department regarding overheads (nalysis of the financial data through graphs, tables etc &etermining the areas where overhead costs were more and finding reasons for the same v Identifying areas where cost reduction is possible$ Communication, Tour e#penses, ,ousekeeping e#penses, etc vi 3iving recommendations and ways to implement the same

#eport Presentation In this step the task is report preparation, presentation and implementation of the report, ma*or findings and recommendations coming from the study The compilation of data was done, conclusions were made and recommendations were submitted

C!'#T 1
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Cost #eduction and Control under 1arious !eads

.trategically applied and managed, cost reductions and control is of vital importance to the company in order to gain competitive advantage as well as improve upon its profitability through proper reduction and control of its cost without compromising on +uality and value !or too many firms, cutting costs is a management priority when business conditions are weak, only to be forgotten when economic growth resumes 5ut continually increasing operating efficiency is fundamental to success in both good times and bad In this report, I aim to present an approach to building competitive advantage by reducing costs throughout every aspect of the enterprise 1rganisations need to adopt a strategic approach to cost reduction that generates near$term cost savings while at the same time builds a more efficient operating model over the long term !irms that use cost reduction to create a leaner, more efficient organi"ation will not only survive the current difficult economic conditions, but will also prosper throughout all phases of the business cycle ' Strategic 'pproach to Cost #eduction and ControlTo reap these benefits, firms need to take a strategic approach to cost reduction with the following characteristics6 Co"prehensive approach- (naly"ing the entire organi"ation for cost$cutting opportunities Sustaina9le Cost Savings- Increasing efficiency by rethinking both what the firm does and how it does it Phased I"ple"entation- Initiatives include both +uick wins and longer$term measures that are more difficult to implement but offer greater cost savings

Senior (anage"ent Co""it"ent- (n essential ingredient is the full commitment of senior management, which can best be demonstrated by appointing a prominent senior e#ecutive to lead the effort !irms that are prepared to make the commitment to a strategic cost reduction program can not only generate short$term cost savings, they also build long$term competitive advantage by creating leaner, more efficient operations !irms that integrate an ongoing search for increased efficiency into their business cultures will be those that emerge as leaders in the years ahead Cost reduction and control in #an9a:y has 9een done under the following heads:C&ST #)$-CTI&/ '/$ C&/T#&*

Production Process

Inventory

!u"an #esoure

&verheads

Cost #eduction and Control in Production Process

P#&$-CTI&/ $)P'#T()/T The production department is responsible for catering to the market demand through compliance with the monthly production schedules by the marketing department My first task was to gain an insight into the functioning of the production department at different levels of production and to study the production process 1bservations were made regarding materials used in different departments, labour employed, degree of utilisation of labour and material, capacity utilisation, productivity and efficiency of labour, defectives etc &iscussions were made with the department heads .upportive information and financial data was collected and inferences were drawn !inally, areas with scope of cost reduction and control were identified, recommendations were made and their feasibility was discussed with the department
10

heads

The following is the description and study of production department of 'anba#y

-aboratories -td

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11

)1'C-'TI&/ T)STI/+ ;-'*IT,

$)SC#IPTI&/ &. 1'#I&-S $)P'#T()/TS: P#)SS S!&P: Press shop is the first department in the production floor It marks the beginning of the process of making the refrigerator 0arious processes like edge binding, punching are carried out on side panels, main door, cabinet back and table top for final assembly P&4$)# C&'TI/+: !or powder coating the main components are the refrigerator side panels, main door, cabinet back, table top which are loaded on the conveyor belt for pre chemical treatment It is mainly a phosphate process, which involves making up of a phosphate layer on the parts (fter passing out through the different stages of PCT the parts are passed through water drying oven This dries of the water from the parts 5efore sending the parts for powder coating they are visually inspected to see if there is any defect %e#t step involves passing of parts through PC booths where negatively charged powder at the 899 :0 is spread on them by reciprocating powder spraying guns This is followed by powder curing of the parts in the powder curing oven 1'C--( .&'(I/+: This shop is used to manufacture liner of the refrigerator i e the inner portion of the refrigerator The raw material for this is the high impact polystyrene sheets C'0I/)T 'SS)(0*,:

12

In this the cabinet or the body of the refrigerator is fitted on the line The body is made of sheet steel These sheets are worked in press shop to have re+uires shape and si"e The cabinet is *oined with side panel;s body and covered with paper Wire is also fitted for electric connections etc

C'0I/)T .&'(I/+: In this section the foam is filled at the backside of the liner This helps in forming an insulating layer between the liner and the side panels Chemical which is used in this process is6

P1-<-1- = C<C-1P>%T(%> ? P1-<MI@ P1-<MI@ = I.1C<(%(T> ? P1-< )'>T,(%> !1(M

$&&# 'SS)(0*, '/$ .&'(I/+: 0arious operations performed in this department are as follows6 Powder$coated doors are received from powder coating shop (fter proper bending of the sheets, top and bottom channel fitment is done which is followed by -ock !itment Taping is done on gasket The foamed door goes to the Inspection stage (fter proper inspection, it is sent to screw fitment line where screwing is done after placing the assembled P&P on the door #).#I+)#'T&# .I/'* 'SS)(0*, *I/): In this stage of the process refrigerator is assembled with different components

13

;-'*IT, $)P'#T()/T: (fter '!( refrigerators are send to +uality department for +uality check, if it adhere to +uality standards then it is finally dispatched otherwise corrective steps are taken

.I/$I/+S

The following are the findings in the production process as a result of in depth study of the process, observations at the shop floor, and discussions with the department heads and supervisors

1. P#)SS S!&P: &iscussion was mainly on the following point6 Material used6 .teel sheets, Pre$coated sheets Process6 0arious processes like edge carried out on side Panels, main door, cabinet back and table top for final assembly binding, punching are

&efects 6 &ent and scratches 'easons6 &ue to roller on machine Manual problem

14

'ubber is not there on the conveyor belt due to which dent takes place

.olution for minimi"ing defects6 Proper maintenance of machines 2. P&4$)# C&'TI/T+: Material used6 Chemical and Powder Process6 It is mainly a phosphate process, which involves making up of a phosphate layer on the parts (fter passing out through the different stages of PCT the parts are passed through water drying oven This dries of the water from the parts 5efore sending the parts for powder coating they are visually inspected to see if there is any defect %e#t step involves passing of parts through PC booths where negatively charged powder at the 899 :0 is spread on them by reciprocating powder spraying guns This is followed by powder curing of the parts in the powder curing oven &efects6 .pots mainly in red colour 'easons6 'ed Powder .olutions6 'ework . C'0I/)T .&'(I/+: This is one of the most important stage of process where if there is any defect then the whole cabinet is scrapped which leads to loss of 's A99 per refrigerator &efects BvoidC6 8 !oam seepage Bthis is mostly a manual problem where the foam looses its elasticity 7 Chemical mi#ing

15

P1-<-1- = C<C-1P>%T(%>? P1-<MI@ Bpoly6cyclo ? 899684C, this is done manually P1-<MI@ = I.1C<(%(T>? P1-< )'>T,(%> !1(M, this is done through machines Pouring rate6 D9E gFsec Total foam 6 7 G kg Bon an average per refrigeratorC

&ensity of foam which is re+uired in cabinet foaming varies from /9$/A gmF litre There is a direct relationship between density and material re+uired

3enerally they are working on the density of between /4 and /G on an average

1ther &efects6 8 Wrong pasting of the tapeFfoam sticker BThis leads to void in cabinet foamingC 7 &ents 'easons6 Manpower and lack of inspection of manpower .olution6 Job rotation %. $&&# .&'(I/+: Powder$coated doors are received from powder coating shop (fter proper bending of the sheets, top and bottom channel fitment is done which is followed by -ock !itment
16

Total foam6 D99 gm on an average <. #.': Process: 0arious operations are performed6 5ase Plate !itting ,inge bottom fitting Inverting the body .titching and table top belt ,ole drilling in liner .lab and sticker 5ack$.heet fitting Thermostat fitting 5ulb fitting >vaporator fitting Compressor fitting Condenser fitting Clamps fitting and turning -ock rings6 )sed at the following places in condenser6 o .uction

17

o >cthc o &ischarge o &rier condenser o ,igh side sealing o Charging sealing6 on this punching is done

=. ;-'*IT,: Inspection is done on following places6 Press .hop6 !irst piece inspection Powder Coating6 Petrol (udit Cabinet !oaming6 Petrol (udit 899H inspection is being done on '!8 and '!7 and also on Cabinet !oaming -& 8, -&7, -&/ B)sed for checking leakagesC Charging and plugging are also checked at various points >. 1isit to (ongia and Co"pany: Mongia I Co BMfg Co -td C is a locally based company manufacturing deep free"ers, air conditioners etc I visited Mongia I Co ;s plant to gain more knowledge about use of 5ra"ing and -ock ring This was done to know the pros and cons of using bra"ing and lock ring

18

'/'*,SIS '/$ #)C&(()/$'TI&/:

(fter going through all the above mentioned processes I have identified following areas where there is scope for cost reduction6

1?

.&'(I/+ SC#'P #)$-CTI&/: .i# sigma pro*ect was undertaken and targets were fi#ed i e to have one defect

per shift but there are appro#imately G defects per shift It means that there are 89 defects per day which is leading to high costs These defects are there mainly because of void and the reason for the same are as follows6

!oam .eepage$ manual problem

19

 Chemical Mi#ing Bmanual problemC

Temperature .etup6 It is because of the climatic conditions Temperature has to be maintained between 79$7E degrees which is done through oven and chillers Temperature is being displayed and if it goes up and the workers forget to switch on the chiller it could lead to problems If there is any problem in foaming then alarm gets on and many time workers are not aware of the e#act reason for the same

2? -S) &. 0#'7I/+ I/ P*'C) &. *&C6 #I/+:

'anba#y is using lock ring in its condensers for sealing the gases This is much more costly than a method called bra"ing which is used by other manufacturers )se of 5ra"ing in place of -ock 'ing will not affect +uality if done properly )se of 5ra"ing re+uires skilled labour and it is fool proof method -ock 'ing re+uires proper dimensions otherwise lock ring will not fit properly on the pipe which can lead to leakage, which is not the case with 5ra"ing

? $)/SIT,:

&ensity of foam re+uired in cabinet foaming varies between /9$/A gmF ltr %ormally they are working on the density of /4$/G If this density could be reduced to /7 by keeping other things same then it would lead to saving of cost of material without affecting +uality in anyway .ame applies for door foaming also

20

%? )/!'/C)()/T &. ;-'*IT,: We can improve the +uality without increasing the cost by using P) paint instead of powder coating .ome of the motor companies are using it and the e#tra cost which will be incurred by using P) paint will be offset by reduction in wastage due to its usage

21

22

#)C&(()/$'TI&/S:

1. .oa"ing Scrap: If we could reduce wastage to 7 per day which is the target then we can save the cost in the following way6

%umber of scraps daily6 89 per day Total working days in a year6 79E days &ue to the wastage there is loss of 's A99 as the whole cabinet is re*ected if there is any defect Total costs save if scraps could be reduced6 >@2A>@BAAC #s 11D 2ADAAA

I"ple"entation:

.pecial training should be provided to unskilled workers

23

 .i# .igma should be implemented Proper inspection should be there Job rotation for employees

2. $ensity of ca9inet foa"ing:

'ange of density6 /9$/A gmF ltr %ormally they work on the density of /4$/GgmFltr Total material used is 7 G kg Cost of the material is 's DJ 78 If the density could be reduced to /7 gmFltr then the cost can be reduced by6 BDJ 78K7 GCF/4 G? J DA per gm =.EB@2A>@2=AAFdaily production? C #s BDBAD 1=

. $ensity of $oor .oa"ing:

Total material used6 D99 gms B D99KDJ 78K7CF/4? G 9D per refrigerator <.AE@2A>@2=AAC #s 2BD <%D<%>

24

 Assuming that other surrounding conditions like temperature etc are normal. I"ple"entation: Proper training should be given to the workers so that they can control surrounding temperature through operating chillers and ovens as and when re+uired %. *oading 0elt:

This should be removed as it is continuously being run without any load and it also poses difficulty in detecting fault

<early maintenance charges and electricity charges would be saved

<. 0#'7I/+ I/ P*'C) &. *&C6 #I/+:

Cost of 5ra"ing per point is G9 paise Cost of -ock 'ing per point is G 's which includes both material and labour cost -ock ring is used on G points which are6 a b c .uction >cthc &ischarge
25

d e

&rier condenser ,igh side sealing6 5ra"ing cannot be done here

Total costs saving:

's 4 G per point could be saved by doing bra"ing in place of lock ring %.<@%@2=AA@2A>C #s EBD %D%AA

I"ple"entation:

.killed labour is re+uired so speciali"ed training should be given -eakage checking should be fool proof and needs to much more effective Most leading refrigerator manufacturers are using bra"ing T&T'* C&ST #)$-CTI&/ T!#&-+! P#&$-CTI&/ P#&C)SS: If all the a9ove "entioned points are i"ple"ented cost reduction in total will 9e #s 1DB DBED2=%

26

C&ST #)$-CTI&/ '/$ C&/T#&* I/ ('T)#I'*

27

Inventory Control

28

The advent of modern industriali"ation has in its wake highlighted a number of management problems, an important one of which is cost reduction and control the cost of material accounts for nearly more than G9H of the total cost in production, material s are procured and stocked in the shape of inventories It is , basically ,necessary to hold inventories such as raw material ,WIP and finished goods to act as a cushion between supply and demand, both of which will normally fluctuate to facilitate steady and efficient plant operation and to enable the firm to meet the market demand and to keep the manufacturing cycles going smoothly with least interruption effectively controlled inventories can contribute substantially to a concerns profit Thus, the cycle of production is made up of materials in flow and a corresponding finished goods outflow, the intermediate stages being the holding of stock of raw material , holding of goods in process and the stock of finished goods,

The game of inventory management aims to attain a healthy balance between cost of inventory and cost of not having itB cost of stock outC 1n the one hand , it might lead to overstocking and on the other hand , it could lead to principle of JIT , the concept of no stocking but getting material L*ust in time to meet schedule;

Current cost control methods (5C

Manufacturing organi"ations find it useful to divide material into / categories for the purpose of material control (n analysis of the material cost will show that a smaller percentage of of items of materials in the stores may contribute to a large H of the value of consumption and vice a versa

29

!.%

The classification is based on rate of consumption of the items with respect to the 'eceipt and inventory of the item B !ast , .low Moving and %on moving C

This is used to decide the review of the inventories to increase the stock deplete the stock or disposal of the stock

ST&#)S $)P'#T()/T

The stores department of the company is responsible for maintaining an ade+uate level of inventory at all times, ensuring the material is supplied on line for production in a timely fashion It coordinates the supply chain between the company and its suppliers It ensures there is no e#cess inventory lying with the company and also applies various tools for cost and +uality control of inventory in the plant

30

The stores department of 'anba#y is divided into five different groups on the basis of various roles and responsibilities in the department The groups and their respective responsibilities are as follows6$

-I%> M(%(3>M>%T 3'1)P

The line management group is responsible for ensuring that the raw material is fed on line, to different production departments in time

It also ensures that the material is fed at proper intervals and there is no shortage or e#cess at any level of production

It takes care of receipt of material at the gate, checks the material for defects and also maintains direct contact with the production department and takes feedback regarding any problems encountered with the material supplied

.)PP-< M(%(3>M>%T 3'1)P

The supply management group is responsible for taking inputs from the production department regarding the production plan for the coming month

Then on the basis of this production plan, the group finds out the +uantity of material re+uired through a software called )0'#6 which not only gives the estimate of +uantity of various raw materials re+uired for the
31

production but also gives feedback regarding the +uantity of inventory currently available at the plant and hence the net amount to be ordered

The group then forms a schedule regarding the daily budgeted re+uirement and gives it to the third part logistics 8G days in advance, on the basis of which the order is placed with the supplier

It is also responsible for intimating any change in the daily production plan to the third part logistics and ensuring fle#ibility in the supply of material to suit the changing production re+uirements

It further is responsible for applying various cost and +uality control measures for proper inventory management

.)PP-I>'

The supplier forms a ma*or part of the inventory supply chain (n important aspect taken care of by the department is managing and developing supplier relations

The stores department ensures that the re+uirement is being timely fulfilled by the supplier It also takes corrective actions in case of defaults if any

The supplier maintains direct contact with the third party logistics which supplies it the details regarding the month;s re+uirement and the supply schedule

32

In case of any default on the part of the supplier in providing ade+uate +uantity or +uality of material, the supplier transfers the material to the plant through the fastest mode of transportation and bears the cost as well

T,I'& P('T< -13I.TIC.B/P-C

Third party logistics is one of the most critical elements of supply chain at 'anba#y /P- is overall responsible for the suppliers that fall beyond area of E9kms from 'anba#y

The functions of /pl is as follows$

1'&>' M(%(3>M>%T$ the /pl takes production schedules and the material re+uirement schedules from the supply group and communicates the same to the supplier It ensure that the order is being supplied by the supplier

.I%3-> T'(%.P1'T>'$ the /pl is solely responsible for the transport of material from the suppliers beyond E9 km to it;s warehouse and then transfer this material from the warehouse to the plant The payment for transportation is made variably, on basis of distance covered, weight of material or the volume of material

1%-I%> !>>&I%3$ the /pl is responsible for feeding the material at different production departments onc it has reached the plant premises
33

5)!!>'$ the /pl maintains buffer stock of raw material e+uivalent to the material re+uirement during the transit period, in its warehouse that is located at three kilometer from the plant

.T1'(3>$ the /pl stores the material at its warehouse till the need arises at the plant and bears the carrying costs for a fi#ed payment of 94H of invoice amount

Most of the material under the /pl is the ( class items

-1C(- MI-: ')%

The function of -M' is to collect the material re+uired for production from the suppliers and supply it at the plant on a daily basis

#oute (apping of *(#

Total %o of local .uppliers on -M' Total no of routes

8A G

34

Terms and conditions6

1nce pickup truck to be provided by 'anba#y

!i#ed timing for loading and movement of truck and movement of truck, to be acknowledged by supplier

.hort +uantity supplied to be intimated by driver and to be supplied by supplier same day on his own

&efective material to be replaced by the supplier

'1)T>.6$

(&!'*I

$)#'0' SSI

C,& 8 31&'> J

C,& /

C,& 7

35

ROUTE 2

CHANDIGARH 1

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38

Routes- Chandigarh 3
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39

=. $irect Purchases-

The direct purchase refers to those materials that are procured directly by the ,ead 1ffice, Mumbai

7 /

This is purely a corporate decision The materials under this group are mainly Class ( items >#ample$ .teel, Imported pre coated sheets, &iesel, etc

4 G J A E

These materials are ordered in bulk for all manufacturing units together The lot si"e is also large Nuality assurance This helps the company in getting the best prices in the market It enables hedging

40

41

'/'*,SIS '/$ #)C&(()/$'TI&/S

1. *ocal (ilk #un-

-ocal Milk 'un B-M'C is an important aspect in management of inventory in 'anba#y

0enefits:

.upplier discipline and sense of responsibility Nuantity assurance !i#ed time of material receiving 5etter planning Control on last minute stock out
42

J).T I% TIM> inventory control applied -ess transportation cost due to same route and proper planning &efects easily noticeable due to small lot si"e >asy replacement, as suppliers are locally located -ess Working Capital re+uired >asy tracking of order status

P#&0*)( I$)/TI.IC'TI&/-

PRODUCTION LO

(lthough efforts have been made to utilise the services of -M' to the fullest, which have contributed in managing the locally available material supply to a large e#tentO There still e#ists certain loopholes within this process which lead to an increase in the costs due to inventory These are as follows6$

43

Production Loss (in mins)- LMR

300

250

200 Time in mins

150

%INE 1 %INE 2

100

50

0 Apr May June July Aug Sept O t N!" De Jan #e$ Mar 2006-07

#easons:-

8 7

5reakdown at supplier end Improper production planning by supplier / -ack of fle#ibility of supplier to provide for production variations at 'anba#y

4 G

Transportation problems$ breakdowns &efective material

#eco""endations:-

44

'anba#y must identify fre+uently defaulting suppliers and should create an alternate supplier base

7 / 4

!le#ibility in supply Improving .upplier relations Production must be streamlined

2. Third Party *ogistics-

The monthly schedules as well as the daily production plans are forwarded to the third party logistics B1m -ogisticsC

1m -ogistics then gets in touch with the outstation suppliers and informs them about the monthly re+uirement 1m -ogistics also maintains a buffer stock sufficient for 'anba#y to use during the period of transit and also acts as a safety stock in case of any variations due to production or supplier problem
45

Whereas the third party logistics maintains contact and coordination regarding the supplies with the outstation suppliers, and ensures there is no shortages at any time The stores department at 'anba#y is re+uired to contact the third party logistics and communicate any changes in re+uirements etc

The third party logistics in return charges a fi#ed amount of 9 94H of the invoice amount for its services of stocking the material, maintaining contact with the suppliers, feeding the material online, etc

In addition to this, the cost of transportation of material from the supplier to third party logistics warehouse is borne by 'anba#y

0enefits

.aving in communication cost Insulation against labour cost, diesel cost etc Tracking of transportation status of orders 'epresentatives in almost all cities where suppliers are based

P#&0*)( I$)/TI.IC'TI&/:-

%1 P'1P>' I%0>%T1'< C1.T C1%T'1- M>T,1&

46

P)'C,(.> P'1C>..$

The ma*or problem with this system of procurement is that the purchase procedure is not streamlined

There is no set pattern of picking up invoices from the third party logistics This hinders proper management and control of inventory &ue to this the facility of third party logistics is not being utilised to the best The inventory cost of 'anba#y increases significantly as the interest is charged on the inventory lying idle at the shop floor

This leads to storage problem as the space at the plant is limited

.IP> 1! I%01IC>$

The si"e of the invoice is large This is not supportive to any e#cess production in a day as it would re+uire another large invoice to be picked up from the third party logistics, for a small amount re+uired

The e#cess inventory lying at the shop floor would be sub*ect to interest charges as the credit period will be reduced

47

48

#eco""endation:-

8 I%01IC> 5'>(:)P

(ssumption$ only 8A9 -ts 'efrigerator is being manufactured in this plant Calculation for Working Capital 6B5lockedC I am calculating working capital B5lockedC for 'efrigerator Plant on the basis of working capital of 1ne 'oll 5ond When we are picking invoice on a daily basis from /P-

49

&n the Invoice of 1AAA: &(< 8 1pening .tock of '5 5udgeted Production (ctual Production >#cess Production >#cess Invoice 'e+uired Closing .tock of '5 Cost of one 'oll 5ond Working CapitalB5lockedC per unit of 'oll 5ondB's C Interest 'ate Interest (mount Working CapitalB 5lockedC 7DDE9J / 7/49/G D 7/89/8 8 7G4DGA E 9 8/ //844 G8 /G478/ 8 8999 8897 897 8999 EDE /// EJ A98 /// EJ JD7 /// EJ &(<7 EDE 8999 88DA 8DA &(</ A98 8999 899D D

&n the invoice of <AA:

1pening .tock 5udgeted Production (ctual Production >#cess Production >#cess Invoice Closing .tock Cost of one 'oll 5ond
50

/DE 8999 8897 897 G99 /DE /// EJ 798 /// EJ 8999 88DA 8DA

798 8999 899D D

8D7 /// EJ

Working CapitalB5lockedC per unit of 'oll 5ondB's C Interest 'ate Interest (mount Working CapitalB 5lockedC .avings because of breaking up of Invoice 7/9E8A 8 8/7EAJ / JA89G EJ J4898 87 EE97A AG 9 8/ 8844/ J8 87//DJ

8-ST I/ TI() F8IT? I/1)#/T&#, C&/T#&* S,ST)(

The rationale behind JIT inventory system is that it reduces the carrying cost significantly in as much as raw material arrives at the firm e#actly when it is re+uired for the production process The philosophy of JIT control system implies that the firm should maintain a minimum B"ero levelC of inventory and rely on suppliers to provide material *ust in time to meet the re+uirements The traditional inventory system on the other hand re+uires maintaining a healthy level of safety stock to provide protection against uncertainties of production and supplies

There are broadly two aspects of JIT$ 8 7 Just in time production Just in time purchasing

51

JIT aims to produce and deliver finished goods *ust in time to be sold, sub assembled *ust in time to be assembled into finished goods, fabricates parts *ust in time to go into sub assembles and purchased material *ust in time to be transformed into fabricated parts

15J>CTI0>.6$

8 7 / 4 G

MinimumF "ero inventory and its associated costs >limination of non value added activities and all wastes Minimum batchF lot si"e Pero breakdowns and continuous flow of production >nsure timely schedules both inside and outside the firm

ST)PS I/ 8-ST I/ TI() I(P*)()/T'TI&/

P#&$-CTI&/ C&/T#&*

P-#C!'S) ST#)'(*I/I/+

52

(I/I(ISI/+ 0-..)#GS'.)T, ST&C6

(I/I(ISI/+ 4'ST)S '/$ /&/ 1'*-) '$$I/+ 'CTI1ITI)S

1. P#&$-CTI&/ C&/T#&*

A.

MONTHLY PRODUCTION CONTROL-

53

P anned !s" #ctua

'0000

50000

&0000 $nits o% re%rigerator

30000

)lanne* )r!*u t+!n ,0'-,0. A tual )r!*u t+!n ,0'-,0.

20000

10000

0 M!nt(

54

55

56

The monthly production trends reveal that the actual production e#ceeds the budgeted production every month, e#cept in the month of !ebruary 799A, wherein the actual production is /H lower than the budgeted production due to In the remaining months, the e#cess production varies between 8H upto EGH of budgeted production

'easons for e#cess production$

The reasons given for such variation is that the production level is ad*usted to the changes in the demand pattern as communicated by the marketing department

IMP(CT$

57

(s the production plan is not accurate and the fluctuation is very high, therefore it is difficult to send accurate schedules to the suppliers, which may lead to delays

(lso it is difficult to streamline the process of ordering the material as the re+uirement is uncertain

It also increases the buying cost of the material

'ecommendations$

IMP'10> &>M(%& !1'>C(.TI%3$ .ince the actual production e#ceeds the budgeted in almost all the months it can clearly be stated that the demand forecasting needs to be more accurate and should take into consideration the fluctuation in demand The production process should be fle#ible enough to accommodate slight variations in demand, but a regular trend of low estimate demand estimate needs to be taken care of The production e#cess is ma#imum during the peak seasons of July and (ugust The market forecasting must consider this aspect and create more buffer in schedules

58

.)PP-I>' '>-(TI1%.$ The supplier relations must also be developed in a way that they can provide material for seasonal variations in production, so that the demand can be met

B. DAILY PRODUCTION CONTROL:-

#ctua !s" P anned Dai & Prouction

3500

3000

2500

2000 )lanne* Da+ly A tual Da+ly 1500 $nits 1000 500 0 1 2 3 5 ' . / 0 10 12 13 1& 15 1' 1. 10 20 21 22 23 25 'une 2006

59

#ctua !s P anned Dai & Production

1000 1/50 1/00 1.50 1.00 1'50 1'00 1550 1500 1&50 1&00 1350 1 3 & 5 ' . / 0 11 12 13 1& 15 1' 1/ 10 20 21 22 23 25 2' 2. 2/ 20 (e)tember 2006

)lanne* Da+ly A tual Da+ly

$nits

#ctua !s" P anned Dai & Production

1&00

1200

1000

/00 )lanne* Da+ly A tual Da+ly '00 $nits &00 200 0 1 2 & 5 ' . / 0 11 12 13 1& 15 1' 1/ 10 20 21 22 23 25 2' 2. 2/ 20 30 December 2006

60

#ctua !s" P anned Dai & Production

3000

2500

2000

1500

A tual Da+ly )lanne* Da+ly

$nits

1000

500

0 March 2007

The above given samples of daily actual vs planned production, one from each +uarter, reveal that the daily production varies from the planned daily production

There is no particular trend followed for the level of daily production The daily production mostly e#ceeds the planned production In certain cases it falls below planned production level, but the trend is to produce e#cess units of refrigerator per day

'easons6$

"or e#cess dail$ production%&

61

Proper utilisation of labour employed The productivity of labour had increased and low level of production would lead to more idle human resource

Production level is kept more than planned in order to hedge against breakdowns "or low dail$ production%&

8 7

5reakdowns Improper production planning

>ffect6$

Material purchase can not be streamlined as the material is to be picked up from the third party logistics as per the invoices, which have been determined on the basis of planned production

Improper coordination with supplier / The material, once it reaches the premises of 'anba#y , is sub*ect to interest have to bear the interest charges on the entire additional invoice even if the production e#ceeds by a small number ,ence working capital of 'anba#y is stuck 4 This also increases the carrying charges of 'anba#y and the facility of Third party logistics remains underutilised

charges, as that is the beginning point of its credit period ,ence, 'anba#y would

'ecommendation6$

62

The daily production must be controlled and there should be a definite trend of production to be adhered to strictly

In order to hedge against unavoidable breakdowns, the trend should be such that the planned production for the first few days should be kept higher so that any loss can be covered up

/ 4

>vents of breakdowns must be reduced and should be looked into In order to take care of proper utilisation of human resource, the number of labour employed and the overtime must be looked into as the labour employed is sufficient to produce more than the planned production, then there is scope of reduction of no of labour employed or in the amount of overtime This way not only e#cess cost will be reduced, there would also be more consistency in productivity

2. P-#C!'S) ST#)'(*I/I/+

The ordering process at 'anba#y does not follow any pattern and needs to be streamlined

>#cess material is picked up from the warehouse of third party logistics due to which adds to the stock of inventory at the 'anba#y Premises

&ue to this more working capital gets stuck in inventory 'anba#y has to bear the interest charges on this stock of mateial

It increases the carrying cost of raw material (lso the third party logistics is being paid 9 94H of the invoice amount for stocking the material at its warehouse and bearing the carrying costs (lso the credit period of materials begins once the material reaches the factory premises
63

Therefore, the facility of third party logistics remains under utilised and above this additional cost is being incurred (lso there is no control over inventory levels to be maintained

'*T)#/'TI1) ()T!&$S &. &#$)#I/+In order to determine the cost saving through change in the pattern of picking up invoices from the third party logistics, i am comparing the interest cost under 4 plans 6$ 8 7 / 4 Monthly !ortnightly Weekly &aily

Material .elected6$ >P> !oam Insulation Month selected6$ %ovember 799J Nuantity re+uired6$ 87999 units (mount Bin rupeesC 6$ 's 7E/79 H age of total cost of material$ 9EH Bconsidering only /P- materialC

M1%T,-< C1.T C(-C)-(TI1%6$

64

Total Nuantity 'e+uired$ 87999 units %o of orders$ 8 Nuantity per 1rder$ 87999 units 'ate of Interest$ 8/H &aily re+uirement$ 4J7 units Interest of month for >P>$ 's 8D8/ Bapplied on sum total of balance 'M remaining at end of each day for the entire monthC Total (nnual Interest Cost$ 's 7/D8EED

!1'T%I3,T-< C1.T C(-C)-(TI1%$ Total Nuantity 'e+uired$ 87999 units %o of orders$ 7 Nuantity per 1rder$ J999 units 'ate of Interest$ 8/H &aily re+uirement$ 4J7 units Interest of month for >P>$ 's DD/ EA Bapplied on sum total of balance 'M remaining at end of each day for the entire monthC Total (nnual Interest Cost$ 's 8747///

65

W>>:-< C1.T C(-C)-(TI1%$ Total Nuantity 'e+uired$ 87999 units %o of orders$ 8 Nuantity per 1rder$ /999 units 'ate of Interest$ 8/H &aily re+uirement$ 4J7 units Interest of month for >P>$ 's G/J D Bapplied on sum total of balance 'M remaining at end of each day for the entire monthC Total (nnual Interest Cost$ 's JA887G

&(I-< C1.T C(-C)-(TI1%$ Total Nuantity 'e+uired$ 87999 units %o of orders$ 8 Nuantity per order$ 4J7 units 'ate of Interest$ 8/H &aily re+uirement$ 4J7 units Interest of month for >P>$ 's 848 J Bapplied on sum total of balance 'M remaining at end of each day for the entire monthC Total (nnual Interest Cost$ 's 8AJDDJ
66

Plan

;tyG Invoice

'"ount F#s.? 7E/79 848J9 A9E9 88E9

Cost F)P)? 8D8/ G8 DD/ EA G/J D 848 J

Total Cost

C&ST S'1I/+ Fover daily cost?

(onthly fortnightly 4eekly $aily

87999 J999 /999 4J7

7/D8EED 8747/// JA887G 8AJDDJ

7784ED/ 89JG//A 4D487D $

Therefore, it is recommended for 'anba#y stores department to pick up invoices from the third party logistics on daily basis as this would lead to minimum interest cost of 's 8AJDDJ ,ence, by implementing the same minimum cost saving of 's 4,D4,87D can be achieved

#)C&(()/$'TI&/- $'I*, &#$)#I/+ P#&C)SS

67

(I/I(-( C&ST S'1I/+- #s. %E%12E

68

. (I/I(ISI/+ 0-..)#G S'.)T, ST&C6S

69

3PL Transit Da&s 2007-0*

/10 .10 '10 '10 510 &11 &10 310 310 210 110 110 110 010 010 2angal G4 al+! Hy*er Al+gar( 2a**+ Da3an !re r a$a* 310 '10 110 110 '10 510 510 515 310 &11 '10 &1. 5!l6at Mu3$a Na7+6 a + .10 '1/ 510 &12 510 &1/ NCR 210 110 )UNE 510 51& 8A)I 510 &13 Ja+pur 010 & 210 110 310 '10 510 515 510 &1. 510 &12 510 &1/ '10 51& 510 510 &13 .10 '1/

Da&s

&

Apr+l,0' Apr+l,0.

The transit period variations need to be controlled which would help reduce the re+uirement of safety stock which is being maintained in order to cover up for delays in transit of material

>fforts should be made to reduce the transit period to the minimum so that the buffer stock can be reduced c 5y doing so, 'anba#y can also switch to maintaining a buffer for the number of days re+uired for transportation through the fastest mode i e (ir transportation in order to provide for certain rare unforeseen risks of delay This would help reduce the working capital stuck in buffer and safety stock and would also reduce carrying cost on such stocks

70

%. (I/I(ISI/+ 4'ST)S '/$ /&/ 1'*-) '$$I/+ 'CTI1IT)S 1. Packing standardisation:(t Present$ Nuantity per pack ordered is not uniform >ffect$ Time is consumed by the labour to unpack, count and segment the material as per the online re+uirement This leads to increase in overall labour cost 'ecommendation$ .tandardi"e +uantity in each pack uniformly .maller items can be packed in multiples of the standard +uantity

2. Ther"ocol wastage:(verage thermocol scrap per shift per day$ G units

71

Cost per unit$ 's 4G Total cost of wastage per day$ 's 4G9 Total (nnual Cost$ 's D/J99 'easons$ Place allocated for thermocol storage is not ade+uate 5reakage during transportation because of improper packing 5reakage due to mishandling while loading, unloading and feeding online

#eco""endations Thermocol packing6 The thermocol should be brought to the plant, packed in reusable bo#es Thermocol should be fed online in these bo#es only These bo#es will be resent to the suppliers for repacking of fresh stock

72

&0S&*)T) ST&C6 $ISP&S'*

WF,

Item Code

&esc

Closing .tock

Closing .tock 4/9,DE/

5'( DAA7DD94

884EKG79K /G 3P.P P(%>- 8G9 -I%>' .,>-! !)-- 5>0' 79G

D8/8

5.M DAA98AEJ

C1:>

4A/E 78AJ GAGG J99E 44E9 E7J 8G9 7GJ4 / 4E4

7D9,98/ 7EJ,D7A 7A8,/4E 7JA,8AJ 777,A4J 78A,DJG 7G,A9/ 87A,4DG EJ,48E

5.M 'M.DAA7/G7D &C(- C1:> 79GF78G 5'( DAA7DD89 5'( DAA8A97/ 5'( DAA7DD84 .89 '99 .8G '>0DAA7J7JG DAA7J88G DAA7DD84 G9/K/D9K /G 3P.P TT1P 8G9 T& 499K/G9K 7 3P P- .TI!%>' 8G9EEGK477K 7 3PP-(I% 5(C: 8G9 '1-- 51%& P(%>- 8G9 ,IP -I%>' 88E9KG49K/ 9 8G9 EEGK477K 7 3PP-(I% 5(C: 8G9 &C(- C1:> /99 -I%>' .,>-! ,(-! 5>0' 79G 5.M DAA98AEA 5.M 'C.4/9DDJJD 5.M DAA99/7A 5.M DAA/7944 5.M DAA/794G 5.M DAA/794J C1:> 3(. '$8/4( ,!C M(.T>'5(TC, PP ')5< '>& &>C(- !' &11' !'11TI &>C(- !' .I&> -, !'11TI &>C(- !' .I&> ', !'11TI

5.M DAA8JG/D

7G7J 8E4 JJ 779 /D9 /D9 /D9 7E9

E8,ED/ JA,9D4 G/,E9/ G7,7// 4G,7G7 4G,7G7 /7,J9/

5'( 'C%DAA7J7J/ MCC '>(&< C1%&>%.>' 8G973

'99

DAA7AAJ8

,IP. P-TP P&P 88J9KG7GK8 A 8G9 M(.T>'5(TC, PP 5 '>& ,IP. P-TP .,>>T 8789KG49K/ 9 :>M:1T>/87GFC1'-IT>CD9@ P$

7G9 A7 G 4G9

8E,789 8E,E9E J/,7/D

5.M DAA9D74E '99 DAA7AAJ7

5.M 448J7JJD

.7G T1PF5TM 3.:T !' 7J9&& &C

799

87,D8E

.88 '99

'3:DAA8EADG 4D9MM 'C%DAA7J7J4 1CC 8G9 1% -(51)' J15

AE9 EG 48E D9 D9

89,G84 7,JJA D,EEJ E,DEA E,DEA

5.M 'M.DAA7E99A !'>>P> P(C: 5(C: 799 -T 5.M 'M.DAA/7GD9 &>C(- P('-> 899 -T -, 5.M 'M.DAA/7GD8 &>C(- P('-> 899 -T ', .I&> 3.:T !' 7J9 && &C$ .88 'M.DAA8EADJ 89EEMM

/99 49

E,DAJ E,/G4

5'( 'M.DAA7J444 &C(- P>P.I /99 M(.T>'5(TC, PPCP C(%&< 5.M DAA/9/E7 '>&

7/ D9 /DG 7G 77 G 49 49

A,DJA A,D/A A,/D9 A,/4E J,GEA J,894 J,894

5.M 'M.DAA/7GED &>C(- P('-> 899 -T !'1%T 5.M 'M.DAA7E99J !'>>P> P(C: .I&> $ - , 799 -T 5.M J999847G 5.M DAA79GD/ 5'( DAA78E9/ 5.M DAA78E94 %itric acid M(.T>'5(TC, PP C(' '>& >PC P1W&>' >M>'(-& 3'>>% >PC P1W&>' ')5< '>& 51TT-> '>T .T'IP WF1 P'I%T 5'( 'M.DAA7JEA4 8G9 '99 '3:DAA7JD88 '>(&< &11' 3(.:>T 8G974

8J99 897

G,J8J J,AE/

5'( DAA89E7D

>PC C(''>5I(% '>&

49 J/9 49

G,499 G,8J9 G,9GE

5'( 'M.DAA7J/G8 !I3)'>& 3-(.. 8G95.M DAA8/78E >PC P1W&>' .I-:< 3'>< :-I%1-A.FC1'1-I%.798F&>3 . 5.M 448J8AA4 .88 $GG

8DA AD7

4,AD8 4,7J8

'3:DAA7JD9/ T1PF5TM 3(.:>T 44/mm 8G9T1)C, .P'(< .I-:<3'< 788

5.M DAA8GG4J

/993M

/J DD

/,D7D /,AD4

5.M 'M.DAA7E994 !'>>P> P(C: 51TT1M 799 -T T1)C, .P'(<$788 P 5-)> /99 5.M DAA79847 3M T,>'M1C1-> 51TT1M 8 PC 5'( 'P(DAA7JD/G 5.M DAA/8DE7 8G9&>C(- (PP< 8A9 .I&> 51TT1M C10>' G89KGEJ 8G95'( 'P(DAA7EJA4 /P-<

//

/,AG/

899 /9

/,G88 /,4AE

D// 87/J 8G8 /9 /GJ

/,74A /,8J4 7,E7G 7,AAD 7,AG7

5'( 'M.DAA7JEA/ 51TT-> '>T .T'IP /78mm$8G95.M 'M.DAA7E99G !'>>P> P(C: .I&> $ ' , 799 -T 5.M DAA8//77 5'( DAA7J/4E M(.T>'5(TC, PP .I-:< 3'>< P&P .TI!%>' 8G9(%3-> 51('& 49K49K/ GDJmm 5'( 'P(DAA7JD/A 5.M 448/A/E9 8G9>PC 5'I--I(%T '>& P-)3 !' T T1P T& C,(MP C&< 5.M 'M.DAA7D8// 3'> 5.M 'M.DAA7J44G &C(- P>P.I 79GF78G

8794 79

7,A9D 7,J/8

89497 8J

7,J98 7,4/D

75

5.M DAA78GJA

T1)C, .P'(< ')5< '>& /993 T1)C, .P'(< 5'I3,T '>&

78

7,//8

5.M DAA78GA9

/993 !I@1&I%> G9$C!FC(T(-<.T$

79

7,7EE

5.M 448J7JA7 5.M DAA99//9 5.M DAA/8DE8

CED9 M(.T>'5(TC, PP > 3'>>% &>C(- (PP< 8A9 &11' ')55>' .P(C>' !' >0(P &'

8A G 8G 8G

7,8J4 7,9E/ 8,D97

5'( 'M.DAA7A9// 8G9!'P &11' ,I%3> 5'(C:>T 5'( 'M.DAA7GEJ/ 8G95'( 'M.DAA7J77A P(P>' .>T C(5 8G9 5.M DAA/79E8 5.M 4/9494D7 &>C(- !'11TI &11' /99-T C1'1!I- %C T1)C, .P'(< >M>'1-& 5.M DAA78GJD 5.M DAA/79AG 5.M DAA/79E7 3'>>% /993 &>C(- !'11TI .I&> ', /99 -T &>C(- !'11TI .I&> -, /99-T (%3-> 51('& 49K49K/ G79mm 5'( 'P(DAA7JD/E 8G9C1MP 5(.> P-(T> 8G9- -3 5'( 'M.DAA7EGA/ C1MP 5.M 'M.DAA74E49 &C(- (M)- 79GF78G 5'( 'P(DAA7JD/4 T,>'M1C1-> T1P 8 PC 8G9,I%3> PI% %<-1% M(T'I@ 5.M 'M.DAA7E97G T(--&' 5'( 'M.DAA8A7A7 P-)! !' T5- TP !'% PC C('5
76

8EJ9

8,EAD

E48 8AG A 89

8,A9A 8,4DJ 8,/4E 8,7AA

88 A A

8,779 8,88D 8,88D

47G

DJ8

7/ G 79

EGJ JAE J/9

G99 8999

//9 7/9

'>& 5'( 'M.DAA/7AAA P-)3 !' T T1P 8G9 C&< 3'< 77G 8GE J4A,G7A G 5'( DAA7DEDA D47KJJGK 4G 3P.P &' 8A9 C, T& 8/GAG 9

(nalysis6$ Total obsolete stock costing 's /GADEJD has been lying idle with the stores department

>ffect6$ 8 Working Capital of 's /GADEJD is stuck in such inventory which can be recovered and put to alternate use 7 / Carrying cost is being incurred on such material The stock is also sub*ect to depreciation and spoilage which would further deplete it;s value over time

'ecommendation6$

It is recommended to dispose off the obsolete stock at the earliest Cost saving$ 's /G,AD,EJD

77

If a model;s production is being stopped permanently due to certain reasons, then the material inputs which have no alternative usage must be disposed off at the earliest at the earliest so that financial cost as well as carrying cost can be saved

'eporting to higher management must be improved

78

$epart"ent 4ise 4ork In Progress 'nalysis

WIP of refrigerator plant is divided into 89 departments6 Cabinet !oaming &oor !oaming >vaporator .ection In*ection Moduling Maintenance Powder Coating Press .hop Nuality 'efrigerator !inal (ssembly

79

 0acuum !oaming

I took the data of all the departments but I could get data 1ctober 799J to March 799A .o I analy"ed the data and studied the trend and practices of individual departments Then I had conversation with respective supervisors regarding WIP and its deviation in their respective departments

WIP is divided into two categories named raw material and Manufactured Material which has been issued from stores but lying on shop floor is treated as raw material whereas any material on which some work has been done comes under manufactured WIP The manufactured item are valued on the cost of raw material with labour overhead of a constant percent of raw material I have taken the percentage of (pril 799J in my analysis which is 8GH for loading the manufactured WIP and analy"ed the data of loaded WIP for getting correct picture

In the following pages a brief introduction, WIP items, WIP data and the comments are given for every departments (nd then the suggestions are given to control the Work In Progress at each level of production

1.Ca9inet .oa"ing:

80

C! receives cabinet components i e side panels and top bottom from Powder Coating and -iner from 0acuum !oaming In Cabinet assembly cabinet components are assembled with liner (fter that 1CC wire and bottom piece are fitted in between the side panels Then assembled cabinet is transferred to cabinet foaming area Then in the machine these are filled with a chemical which turns into foam (fter foaming the cabinet assembly starts, firstly the base plate is fi#ed then legs are fi#ed and then the cabinet is moved to '!( line C! has following items in its WIP6

Ite" Code

$escription 899 C,(MP '&< . P(%>-

4IP

4G!

PAJ99884

(..-< -, 899 C,(MP '&< . P(%>-

47

C!I

PAJ9988/

(..-< ', 899 C,(MP '>(&< C(5 5TM

47

C!I

PAJ99888

PI>C> (%3-> C(5I%>T '>(' 4AJ$

/JG

C!I

'M.DAA7A8/G 'C%DAA7J7J4 'M.DAA7J77A DAA79DJ8 DAA78/JA PAJ998/J PAJ998/G 'M.G/8D978G

8G91CC 8G9 1% -(51)' J15 P(P>' .>T C(5 8G9 1CC 7G9 1% -(51)' J15 P(P>' .>T 7G9 /99 M(I% -I%>' (..-< /99 '>(&< C(5 5TM PI>C C1'%>' 3)..>T /99
81

J79 8D 8/G // /E7 / J9 /

C!I C!I C!I C!I C!I C!I C!I C!I

DAA8/EA/ DAA7DA/J

1CC /99 1% -(51)' J15 TI5 9 49@EA@J// /99- C '>& TI5 9 49@EA@J// /99-

/ AE

C!I C!I

DAA7DA/A

.(M 3'>< TI5 49@EA@4AD 899F8G9-

/87

C!I

DAA7DA/G

5 '>& TI5 49@EA@4AD 899F8G9-

77E

C!I

DAA7DA//

M 5-)> TI5 49@EA@4AD 899F8G9-

899

C!I

DAA7DA/7 PAJ99984

M 31-& 8A9F8E9 M(I% -I%>' (..-< 8A9F8E9 '>(&< . P(%>-

8J9 /D

C!I C!I

PAJ9998/

(..-< -, 8A9F8E9 '>(&< . P(%>-

88E

C!I

PAJ99987 PAJ99748

(..-< ', 8A9F8E9 '>(&< .-I&> 8A9F8E9F78G '>(&< C(5 5TM

88E 8

C!I C!I

PAJ9999D

PI>C (%3-> C(5I%>T '>(' G7E$

AE/

C!I

'M.DAA7A8/J DAA8/EE7 DAA9848A

8E91CC 8E9 1% -(51)' J15 P(P>' .>T C(5 8A9F8E9 TI5 4@EA@G/8 8A9 T1 7G9

7789 EJG AEG

C!I C!I C!I

DAA7DA7G DAA7DA7E

5 '>&

A7E

C!I C!I

TI5 4@EA@G/8 8A9 T1 7G9 C 8947

82

'>& TI5 4@EA@G/8 DAA7DA7A C 5-)> TI5 4@EA@G/8 DAA7DA7D >3'>>% TI5 4@EA@G/8 8A9 T1 7G9 ' DAA7DA/9 '>& TI5 4@EA@G/8 DAA7DA7J . 3'>< TI5 4@EA@G/8 DAA7DA/8 PAJ999E9 .M3'>< 79GF78G M(I% -I%>' (..-< 79GF78G PAJ999E7 '>(&< . P(%>78/ . P(%>78/ A8D 7G9 /G99 C!I C!I C!I C!I C!I 8A9 T1 7G9 79 /G C!I C!I 8A9 T1 7G9 J9A C!I 799 C!I 8A9 T1 7G9 /D8 C!I 8A9 T1 7G9 4J9 C!I

(..-< -, 79GF78G '>(&<

PAJ999E8 DAA797JA DAA9848E /979JDGG

(..-< ', 1CC 799 1% -(51)' J15 P(P>' .>T C(5 799 C1%&>%.1' C-(MP C1'%>' .)PP1'T 5'(C:>T

DAA8JJGG /979499G /979498E

8 JC' '>(' .)PP1'T !'(M> B-,C '>(' .)PP1'T !'(M> B',C .)CTI1% -I%> .TIC:>' P>

/7G9 J J

C!I C!I C!I

499JAJG7 DAA7DD7D

T<P> C1'%>' .)PP1'T

7999 P-(T> 8799

C!I C!I

83

879KJG ', C1'%>' DAA7DD/9 879KJG -, PI%C P(..I0(T>& MJ @ 79 G9A79AA .C'>W. M. ,>@ !- ,& 51-T P% P-& ',W4D997J/J MJ @ 79 D897A98J 'M.D889E4G7 51PP T(P> /Q $ 5'1W% 5'1W% .>(-(%T T(P> 8 GQ 84JG9 894 8G7 8/7 74 C!I C!I C!I C!I C!I 8A99 C!I .)PP1'T P-(T> 8799 C!I

',W4G99E4/4 M(.:I%3 T(P> 8Q P,W499A9DJ4 C>--1 T(P> /Q

&ata of WIP in C!6 Particulars C! Production In units 9ct9J 79D779 /GJD8 %ov$9J /J7878 7G94/ &ec$9J G7977A 74A7E Jan$9A 89A8A88 4G4G9 !eb$9A D874GG 4A7G/ Mar$9A A94EJE G4J48

84

Comments by supervisors$

This department makes cabinet which is a very e#pensive item and costs 's A99 per refrigerator .o WIP in this department is very significant

This department control WIP on the basis of space available C! has two lines -ine 8 can store E9 cabinets and -ine 7 can store J9 cabinets They make cabinet till the space is full

%e#t shift re+uire cabinets for startup so every shift needs to keep these re+uired stock of cabinets

In the beginning of every shift and every time after changing mould !irst Piece Inspection is done, this takes around half an hour .o they need to keep some e#tra cabinets in buffer to handle that

2. $oor .oa"ing:

85

Powder Coating delivers &oor .heets and 0acuum !oaming delivers Plastic &oor Panel BP&PC to &! &! puts gasket into P&P &oor assembly is also put on the door sheet and P&P (fter door assembly &oor .heet and P&P are sent to !oaming Machine In this machine !oaming chemical is put in inner of door panel, as soon as it starts spreading liner is put over it The foamed door after inspection is sent to '!( line via conveyor belt

&! has following item in its WIP6

Ite" Code PAJ9988A PAJ99/D/

$escription 899 C,(MP &11' C1(T>& 8G9- &11' C1(T>& 8E9 M(T'I@ T(-&11'

4IP 7/ /E

4G! &!I &!I

PAJ99G89

C1(T>& 78G M(T'I@ T(-&11'

JG

&!I

PAJ99G77

C1(T>& 7G9 I%!I%IT< T(-&11'

G/

&!I

PAJ99G7/ PAJ99848 PAJ998AA PAJ9944G

C1(T>& /99 C3 &-@ &11' C1(T>& 8A9 C,(MPI1% &11' C1(T>& 8A9 %1 8 T(-- &11' C1(T>& '&< &' 51TT1M C,%-

7J 4 4J 4A

&!I &!I &!I &!I

MAJ99J8G

C,(MPI1% PP '&< &' T1P C,(%%>-

8JG

&!I

MAJ99J8J MAJ99J89

C,(MPI1% PP

8G4

&!I &!I

'&< &' 51T C,%- 8A9 %1 8 T& /7

86

PP '&< &' T1P C,%- 8A9 %1 8 T& MAJ99J4A PP '&< &' T1P C,%- T& 8E9$7G9 MAJ99J7E PP '&< &' 51TM C,%- T& 8E9$ MAJ99J7D 7G9 PP C10>' !1' -1C: T(-- &' . 'M.DAA7E98G 3'>< .P(C>' 'M.DAA7E98E T(--&' -C: C<-$8 M(T'I@ T(--&' 'M.DAA7E98D C,'M 'M.DAA7E979 -C: C<-$7 M(T'I@ T(--&' -C: 5TM C(P M(T'I@ /GAJ &!I 8/G9 84G9 &!I &!I !' C,%M(T'I@ 8JJG &!I 798 &!I 888J &!I 8884 &!I /G &!I

'M.DAA7E978 T(--&' ,I%3> PI% %<-1% M(T'I@ 'M.DAA7E97G T(--&' -1C: ->0>' 8E9 M(T'I@

8/G9

&!I

'M.DAA7E8G7 T(-- &' 'M.DAA7EG/J C10>' !1' -1C: T(-- &' .. C10>' !1' -1C: T(-- &' ' 'M.DAA7EJ44 '>& C10>' !1' -1C: T(-- &' > 'M.DAA7EJ4G 3'>>% C10>' !1' -1C: T(-- &' 'M.DAA7D9G4 C&< '>&
87

8DAD E7J

&!I &!I

87D

&!I

/9

&!I

88JG

&!I

C10>' !1' -1C: T(-- &' 'M.DAA7DJ/9 C&< 5-)> 5)., JGGJDDDD 497J/AE !1' MJ 51-T$&11' /D99 /G99 8999 8/99 C3FC3&-@ 499 8999 8999 &!I &!I &!I &!I &!I &!I &!I 784 &!I

,(%&-> 5T- .,>-! .-I&>$/993

'M.DAA9DDE8 -1C: 51&< 8A9 >C1%1M< 4974E49 -C: C-IP$PGFPJ -1C: DAA9DAJA P-(T>& 51&<

'M.DAA7GJ4A -1C: (..< M(P(: 'M.DAA7GDDG >%& PI>C>. 1! -1C: W>-& 3(.:>T '>(&< 8A9F8E9 GJ8D9J4A DAA89AJ9 PAJ999DD PAJ99944 PAJ998JA -C W>-& 3(.:>T '>(&< 799 -C 78G P&P (..-< WIT, 3(.:>T 8E9 P&P (..-< WIT, 3(.:>T 7G9 P&P (..-< WIT, 3(.:>T 8A9 PAJ99978 C,(MP P&P (..-<

/G /G AE JG /

&!I &!I &!I &!I &!I

3(.:>T

7J

&!I

&ata of WIP in &!6 Particulars &! Production In units 9ct9J 84D8G7 /GJD8 %ov$9J /7/8/77 7G94/ &ec$9J 8AED/8 74A7E Jan$9A //E7E4 4G4G9 !eb$9A 78D98A 4A7G/ Mar$9A 779G/8 G4J48

88

Comments by supervisor6

1n 8 of every month production starts early whereas stores issue material a bit late so on the last of previous month more material has to be issued which increase the WIP

.ometimes there is a short run in ne#t line because of which the concerned department does not pick material and it comes under WIP When the ne#t run of same model comes only then they pick up the material

.ometimes few model become obsolete and its production is stopped then also WIP increases in an uncontrollable manner

.ometimes door are made on the re+uisition of service department 5ut they don;t take delivery on time

This department gets defected doors for rework for which they always need to keep 4 or G P&P;s which increase WIP
89

. )vaporator Section:

>vaporator is the heart of the refrigerator It is located at the top of the cabinet of the refrigerator it is the only component, where refrigerator cooling effect is produced It is responsible for the cooling In a layman language evaporator is called as a free"er The evaporator sheets, made of aluminum are bought from the vendor These sheets have a properly designed path or circuit for the flow of the refrigerator These sheets brought from outside are sub*ected to powder coating process This process includes many sub$ processes i e &egreasing, ,ot Water 'insing etc then these sheets go for final evaporator assembly where few processes are done on it to make it a complete evaporator These evaporators are then delivered to '!( line

>. has following item in its WIP6

Ite" Code 497G4DJ /979GGG7 4G//99J/ E8JEDAJG DAA94DE7 DAA8DE/8

$escription C) T)5> / GQ (-)MI%I)M ,>(&>' -C (- WI'> /F/7Q C) C)T PC. EQ (- .)CT -I%> EEGMM 8JG- -C '1-- 51%& P(%>- !1' 8A9-T P0C ,>(T .,'%: .->>0>

-&( 4IP >(C >(C :3 >(C >(C >(C G79 79G 97 77/9 EA9 GG9

4G! >.I >.I >.I >.I >.I >.I

DAA79E8D DAA78JGE

8999MM '1--51%&
90

>(C P%- >(C

G99 849

>.I >.I

799-P%C,=P%T=.)CT '1--51%& DAA78JJ9 /99-P%C,=P%T=.)CT (DAA78D77 5: 8A9>(C 799>(C /99>(C EJ >.I 77J >.I 49 >.I P%>(C 894 >.I

-C=P)%C,=5>%&=C1(T (5:

DAA78D7/

-C=P)%C,=5>%&=C1(T (5:

DAA78D7G

-C=P)%C,=5>%&=C1(T (- 5: 899- 8F7 -C=P%C,=

DAA77988

5%&=CT 8A9(5(C: WIT,1)T

>(C

7/

>.I

'5CDAA7GG//

C1(TI%3

>(C :3 :3 .>T

7G /J JG 8GG9

>.I >.I >.I >.I

',W/98997GA C1PP>' WI'> TI%%>& 793 ',WG/7/D/84 (- !- ,& 'I0>T. 8F4 @ 8FE 'M.49J8E77A &>!'1.T I%&IC(T1' .>T P0C ,>(T .,'I%: .->>0> 'M.J8A899A4 DAA8G4/8 4/9MM ,>(T .,'I%: .->>0> $ A49 mm >P> 'M.DAA9DE8G 'M.DAA8A/D8 !1(M I%.)-(TI1%

>(C >(C

//99 /499

>.I >.I

.->>0> /G9 C) C(PI--('< 4D G P.I E !>>T 8A9- C-I%C,>& >0(P1'(T1'

>(C >(C

JJ9 /E84

>.I >.I

'>0DAA7G4JD 'M.GAD97888 'M.J84DGGJ9

(..-< C(5-> WI'> TI> 899 MM C(5-> TI> 8G9MM

>(C >(C >(C

/D 7DG9 GG9

>.I >.I >.I

91

'C.4G/997DA PAJ9999/ PAJ999AG

C) P'1T>CTIC '1& 8A9F8E9 '>(&< >0(P (..-< 79GF78G '>(&< >0(P (..-< 899l '>(&< >0(P1'(T1'

:3 >(C >(C

8 897E /AE

>.I >.I >.I

PAJ9989A PAJ998/8 PAJ998J9 PAJ997DA

(..-< /99 '>(&< >0(P (..-< 7G9 '>(&< >0(P (..-< 7AG '>(&< >0(P (..-< '5

>(C >(C >(C >(C

J8 J7 78 88

>.I >.I >.I >.I

&ata of WIP in >.6 Particulars >. Production In units 9ct9J 8/8E47 /GJD8 %ov$9J 7D7G97 7G94/ &ec$9J GG7DJA 74A7E Jan$9A J//88E 4G4G9 !eb$9A J7/A/D 4A7G/ Mar$9A DD//A/ G4J48

92

Comments by supervisor6

It is a basic department which stays one step ahead of the main refrigerator line .o it needs to maintain WIP

.ince it is a basic department so it has to keep A9FE9 evaporators prepared for the ne#t run

>very shift has to keep /9F49 evaporators ready for the ne#t shift because startup takes some time

If any new model comes then it must maintain e#tra material for that model along with the current model

%. InHection (olding: 'efrigerator consists of some plastic components also i e top and bottom door channels, chillers, tray flap, drain pan, table top having control knob, apron These components are

93

molded in this section There are A in*ection$molding machines, by using these machines above mentioned components are manufactured IM has following items in it WIP6 Ite" Code D478/8J4 49J8947D 49J99/8J DAA78494 DAA77A79 DAA9D74E DAA8//77 DAA7D89A DAA77ED/ DAA99/7A DAA7D97/ DAA7GA7E DAA7GA7A DAA99//9 $escription PP Powder 3PP. Powder ,IP. Powder M5 5lack M5 -3 White M5 5 'ed M5 . 3rey M5 Cdy 5lue M5 .. M5 'uby 'ed M5 Cdy 'ed M5 Metallic 3old M5 Metallic 5lue M5 > 3reen -&( 4IP :3 :3 :3 :3 :3 :3 :3 :3 :3 :3 :3 :3 :3 :3 889G9 8EAJ9 898/J 8/7 4G8 8J4 899 7/9 8AE 77J 77E 7J 7/ G /D 4G! IMI IMI IMI IMI IMI IMI IMI IMI IMI IMI IMI IMI IMI IMI

&ata of WIP in IM6 Particulars IM Production In units

94

9ct$9J /A4/J7E /GJD8

%ov$9J GA4949J 7G49/

&ec$9J 8AG9DED 74A7E

Jan$9A G98749A 4G4G9

!eb$9A GG7G77D 4A7G/

Mar$9A 4J89AA8 G4J48

Comments by supervisor6

In slack time this department need to keep the tools which cannot be returned to the supplier

It increases the WIP because in slack time production is less so these tools are not into finished goods and are kept lying on the shop floor

<. (aintenance:

Maintenance department is liable for smooth operation of all the departments in the shop floor It performs both breakdown maintenance and preventive maintenance Preventive maintenance is perormed on .undays It does not have any WIP of itself (ll the WIP is of the respective departments it serves
95

M%T has following items in its WIP6

Ite" Code

$escription C<C-1P>%T(%> I.1P>%T(%>$

-&( 4IP

4G!

DAA8/89/ DAD94GD/

AG67G P1-<1- !' %1% C!C I.1C<(%(T>FM&I

:3 :3

E999 /8G9

M%T M%T

DDDDDAJ4

&IP,>%<->MT,(%>

:3 :3

//AG 88999

M%T M%T

'M.DAA9GD98 C('> /9 3(.

&ata of WIP in M%T6

Particulars IM Production In units

9ct$9J 7EDE7G8 /GJD8

%ov$9J 4/E7G7G 7G49/

&ec$9J /9DAGG7 74A7E

Jan$9A A747D87 4G4G9

!eb$9A GJJ7ADD 4A7G/

Mar$9A 4E849D9 G4J48

96

Comments by supervisor6 8 7 5aan 'eporting is not correct (ll the WIP reported does not belong to Maintenance (ll WIP of different department is put in maintenance but it really belong to other departments / Their WIP should not be more than 's 4 lakh on a given date

=.Powder Coating:

(fter press shop steel sheets are sent for powder coating Powder Coating includes pre chemical treatment, surface prepration and then coating with re+uired plastic powder In this process the cabinet components are loaded on a over head conveyer, firstly these components are sub*ected to pre chemical treatment which involves following things6

97

3rease 'emoval Chemical 'emoval .urface Prepration Pinc Phosphating

(fter the coating process the cabinet components are sub*ected to pass through the powder coating owen In this owen the cabinet components are sub*ected to have contact with hot air temprature of around 7G9 C so that the sprayed powder gets uniformly layered and firmly sets on the surface of the cabinet components (fter these processes components pass through inspection and then it goes for coding for assembly

PC has following items in its WIP6

Ite" Code

$escription 899 C,(MP '&< . P(%>-

-&( 4IP

4G!

PAJ99884

(..-< -, 899 C,(MP '&< . P(%>-

>(C

47

C!I

PAJ9988/

(..-< ', 899 C,(MP '>(&< C(5 5TM

>(C

47

C!I

PAJ99888

PI>C> (%3-> C(5I%>T '>(' 4AJ$

>(C

/JG

C!I

'M.DAA7A8/G 'C%DAA7J7J4 'M.DAA7J77A

8G91CC 8G9 1% -(51)' J15 P(P>' .>T C(5 8G9

98

>(C >(C >(C

J79 8D 8/G

C!I C!I C!I

DAA79DJ8 DAA78/JA PAJ998/J PAJ998/G 'M.G/8D978G DAA8/EA/ DAA7DA/J

1CC 7G9 1% -(51)' J15 P(P>' .>T 7G9 /99 M(I% -I%>' (..-< /99 '>(&< C(5 5TM PI>C C1'%>' 3)..>T /99 1CC /99 1% -(51)' J15 TI5 9 49@EA@J// /99- C '>& TI5 9 49@EA@J// /99-

>(C >(C >(C >(C >(C >(C >(C

// /E7 / J9 / / AE

C!I C!I C!I C!I C!I C!I C!I

DAA7DA/A

.(M 3'>< TI5 49@EA@4AD 899F8G9-

>(C

/87

C!I

DAA7DA/G

5 '>& TI5 49@EA@4AD 899F8G9-

>(C

77E

C!I

DAA7DA//

M 5-)> TI5 49@EA@4AD 899F8G9-

>(C

899

C!I

DAA7DA/7 PAJ99984

M 31-& 8A9F8E9 M(I% -I%>' (..-< 8A9F8E9 '>(&< . P(%>-

>(C >(C

8J9 /D

C!I C!I

PAJ9998/

(..-< -, 8A9F8E9 '>(&< . P(%>-

>(C

88E

C!I

PAJ99987 PAJ99748

(..-< ', 8A9F8E9 '>(&< .-I&> 8A9F8E9F78G '>(&< C(5 5TM

>(C >(C

88E 8

C!I C!I

PAJ9999D

PI>C (%3-> C(5I%>T '>(' G7E$

>(C

AE/

C!I

'M.DAA7A8/J DAA8/EE7

8E91CC 8E9 1% -(51)' J15

>(C >(C

7789 EJG

C!I C!I

99

DAA9848A

P(P>' .>T C(5 8A9F8E9 TI5 4@EA@G/8 8A9 T1 7G9

>(C

AEG

C!I

DAA7DA7G

5 '>& TI5 4@EA@G/8 8A9 T1 7G9 C

>(C

A7E

C!I

DAA7DA7E

'>& TI5 4@EA@G/8 8A9 T1 7G9

>(C

8947

C!I

DAA7DA7A

C 5-)> TI5 4@EA@G/8 8A9 T1 7G9

>(C

4J9

C!I

DAA7DA7D

>3'>>% TI5 4@EA@G/8 8A9 T1 7G9 '

>(C

/D8

C!I

DAA7DA/9

'>& TI5 4@EA@G/8 8A9 T1 7G9

>(C

799

C!I

DAA7DA7J

. 3'>< TI5 4@EA@G/8 8A9 T1 7G9

>(C

J9A

C!I

DAA7DA/8 PAJ999E9

.M3'>< 79GF78G M(I% -I%>' (..-< 79GF78G '>(&< . P(%>-

>(C >(C

79 /G

C!I C!I

PAJ999E7

(..-< -, 79GF78G '>(&< . P(%>-

>(C

78/

C!I

PAJ999E8 DAA797JA DAA9848E /979JDGG

(..-< ', 1CC 799 1% -(51)' J15 P(P>' .>T C(5 799 C1%&>%.1' C-(MP C1'%>' .)PP1'T 5'(C:>T

>(C >(C >(C >(C

78/ A8D 7G9 /G99

C!I C!I C!I C!I

DAA8JJGG /979499G /979498E

8 JC' '>(' .)PP1'T !'(M> B-,C '>(' .)PP1'T !'(M> B',C

100

>(C >(C >(C

/7G9 J J

C!I C!I C!I

.)CTI1% -I%> .TIC:>' P> 499JAJG7 T<P> C1'%>' DAA7DD7D 879KJG ', C1'%>' DAA7DD/9 879KJG -, PI%C P(..I0(T>& MJ @ 79 G9A79AA .C'>W. M. ,>@ !- ,& 51-T P% P-& ',W4D997J/J MJ @ 79 D897A98J 'M.D889E4G7 51PP T(P> /Q $ 5'1W% 5'1W% .>(-(%T T(P> 8 GQ >(C >(C >(C >(C >(C 84JG9 894 8G7 8/7 74 C!I C!I C!I C!I C!I >(C 8A99 C!I .)PP1'T P-(T> >(C 8799 C!I .)PP1'T P-(T> >(C 8799 C!I >(C 7999 C!I

',W4G99E4/4 M(.:I%3 T(P> 8Q P,W499A9DJ4 C>--1 T(P> /Q

&ata of WIP in PC6 Particulars PC Production In units 9ct$9J 7DDE94 /GJD8 %ov$9J 798/4G 7G49/ &ec$9J /GE/GE 74A7E Jan$9A /8D9GD 4G4G9 !eb$9A GG4AG9 4A7G/ Mar$9A GG7J/D G4J48

101

Comments by supervisor6

8 7

Main material for this department is powder which is a high cost item Powder consumption is not constant in porduction .ometimes it takes lesser and sometimes it takes more than standard +uantity (nd the difference is significant

Powder cost around 's 8/9 per :g and varaince per run can ve up to G99FJ99 :gs It increases unnecessary WIP in the department

.hort run is a big problem &ue to shrot run ready items keep lying in their warehouse and unwanted and unneeded WIP is created

1n the re+uirement of service department small +uantity of any speicific powder if re+uired but powder comes in large packets and lesser +uantity is not issued by stores

B.Press Shop:

102

This is the first step of making refrigerator here flats sheets are given desired shapes to make body of refrigerator i e cabinet and door ,ere seven components are made6 .ide panel 5ack sheet &oor 5ottom piece Table Top .ide Pallet Top and ,ori"ontal .trip (ll these seven components have to undergo three different operations6 Punching 5ending .hearing

P. has following items in its WIP6

Ite" Code 8788479G

$escription GA4K477K 7 C(5 5(C: 899 JEJK4AGK 7 3P P- 5TM PI>C>

-&( 4IP :3 89/4

4G! P.I

878847/4 878847G9

899 8894KGJA GK 7 3P P- .-I&> 899

103

:3 :3

849/ J4D

P.I P.I

DAA8G7DA DAA8JE/8 DAA7GD8J DAA7DD9/ 87884/4J PAJ99/EA DAA7J7JD DAA7J7A9

AAG GKJ8G GK9 /G &11' 899 8G/9K4ADK 4 3P.P TF5 .T'IP 899 AAAKJ8GK G &11' 899 M 31-& 9 /GKG79 4KE/A 3P.P P(%>- 899 E49K4DEK / C-IP 1% 899 8G9 '>(&< .-I&> EEGK477K 7G C(5 5(C: 8G9 EA7KGJAK /G 3P P- .-I&> 8G9 9 4GKJ87 GK8879 3P.P &' 8G9

:3 :3 >(C :3 :3 >(C :3 :3

EAD 778 874 7EJ /J7 /99 749 744

P.I P.I P.I P.I P.I P.I P.I P.I

DAA7DEDJ DAA7A77A PAJ99748 8988J4DJ

T& 88G9KG99K9 /G C-IP 1% 8G9 8A9F8E9 '>(&< .-I&> 899/KGA7 4K /G . P(%>- 8A9 A/9KG7EK 7 3P P- 5TM PI>C>

:3 :3 >(C :3

44J 744 EAG 8E4G

P.I P.I P.I P.I

8788478E

8A9 D47 GKJJG GK /G T &' 8A9

:3

88/E

P.I

DAA9DA/4 DAA894/G DAA8JE/9 DAA8DJG9 DAA7GJAG DAA7A9GG

C,(MP A49K4A4 AK 7 C(5 5(C: 8A9 8G/9KG/8K 4 3P.P TF5 .T'IP 8A9 87DEKA/9K /G 3P P- .-I&> 8A9 D44KJJG 4K G T& 8A9 C,(MP .. DAGKJJGK /G T &11' 8A9 %1 8 9 4GKJJGKD47 3P.P &' 8A9

:3 :3 :3 :3 >(C :3

7978 7/8 8J84 E8G 7E9 7E7D

P.I P.I P.I P.I P.I P.I

DAA7DEDA

C,(MP T&

:3

JG/

P.I

104

9 4GKJJGKDAG 3P.P &' 8A9 %1 8 DAA7DEDE T& :3 7E9J P.I

&ata of WIP in P.6 Particulars P. Production In units 9ct$9J 8EGGD/7 /GJD8 %ov$9J 7GAD47D 7G49/ &ec$9J 74DAG7E 74A7E Jan$9A 749EEG9 4G4G9 !eb$9A /8JGDG8 4A7G/ Mar$9A 7/4DGJ/ G4J48

Comments by supervisor6

'un cut is a big problem which increases WIP It happens due to many reasons like breakdown and mainly form shortage of material

Material of obsolete model kept lying in their warehouse

105

.ometimes some material is re*ected but the supplier takes it back only on E th and 7Gth of the month .o till date that re*ected material is counted in their WIP

!or few models and for service re+uirements small runs are made which need material in small +uantity but stores issue material in bulk only .o rest of the bundle keep lying till the ne#t run comes

.ometimes there is material shortage and they have have to work wither other si"e of material instead of the re+uired one .o unnecessary WIP is generated

>.;uality:

Nuality departmetn is the customer side of production function of unit It is what checks acceptance and standards meeting capability of refrigerator it is what makes 'anba#y The '(%5(@< Nuality department has its role a few times in the total process but its main function is at the end when the frige gets completed and is ready to be sold There are many types of test performed on each and every model of the fridge NT< has following items in its WIP6 Ite" Code DAA88GGD DAA88GJ9 DAA88GJ8 DAA88GJ7 DAA8J47/ DAA8GDED $escription -1:'I%3 4%.T/A -1:'I%3 J% -1:P'>P -1:'I%3 4%.T// -1:'I%3 A% -1:C(P J /G -&( 4IP >(C >(C M>(C >(C >(C 7GGGE 498JG /DE99 E/GE9 7G84G 7GJJ9 4G! NT< NT< NT< NT< NT< NT<

106

&ata of WIP in NT<6 Particulars NT< Production In units 9ct$9J 84J///8 /GJD8 %ov$9J 8JG7E/E 7G49/ &ec$9J 7/744/7 74A7E Jan$9A 78/J8G9 4G4G9 !eb$9A 848AGD9 4A7G/ Mar$9A 89A9DJ/ G4J48

Comments by supervisor6

Their WIP consists of G type of -ock 'ings which come from pune and it is very critical for +uality test The lead time os these itmes is 7 weeks so high inventory has to be maintained

107

These +uality test are not standard !or e#ample sometimes double side lock ring is done insteas of single one .o due to unpredictability of the process high WIP is maitained

E.#efrigerator .inal 'sse"9ly:

'!( has following items in it WIP6

Ite" Code

$escription

-&( 4IP >(C >(C 48G9 /49

4G! '!I '!I

',WG/8A//7J (- W(.,>'B5I3C !' >0P' 'M.9499A94A (-)MI%I)M .TIC:>' (%3-> 51('& 49K49K/ GA7mm 'P(DAA7JE4A 8A9(%3-> 51('& 49K49K/ A9Emm 'P(DAA7AG9E 8E9(%3-> 'P(DAA7JE4D 51('& >&3>

>(C

A7G

'!I

>(C

E7G

'!I

P'1T>CT1'. (P'1% M1)%TI%3 5'(C:>T$

>(C

A99

'!I

DAA849/A '5CDAA7DA8G DAA8D4E/

8E95(C: 7@4A4@D94 78G- C '>& 51TT-> .,>-! 8E9F78G 51TT1M C0' GJ7KJEAM(TFI%!

>(C >(C >(C

8D9 JGA G97

'!I '!I '!I

'P(DAA7E4G7 'M.GD4797JJ

/P-< 51TT1M ,I%3>

>(C C(&MI)M >(C

G99 89/

'!I '!I

108

P-(T>& 'M.DAA7EJ9/ 'M.DAA8/DGD 'M.DAA8//84 5'1W% .>(-(%T T(P> 8 I%C, 5)-5 5'(C:>T C1MM1% 5)-5 C10>' C1MM1% 5)-5 ,1-&>' 8J@9 7 TI%%>& DAA784J9 WI'> C('> 511:->T &C M1&>-.$ 'M.DAA7GG/D DAA8//79 C1MM1% C()TI1% .TIC:>' C,I-->' 'CTDAA7D9JA 'M.DAA7J/JE 'M.DAA7EGA4 3PP. -C C,I-->' T'(< !-(P PP=TPT C-IP !' -3 C1MP 5(.> P-(T> C1MP 'M.DAA7AAAG C1MP C1%&>%.1' M%T3 'M.GD47J8DE 497G4E/ '0TDAA7JEE8 'M.49JG7GDA DAA9AED7 P-(T>& C1PP>' C)T PI>C> GQ C'I.P>' T'(< PP M(T'I@ -C &'(I% .>(-I%3 49K7Gmm &'(I% T)5> JJ9mm 8G9F78GF/99&'I>' WIT, 5'(P>& C1PP>' '&'DAA7GEA9 'M.DAA897EE T)5> >$87 -(MP. >0(P !'(M> -3 W,IT> 799DAA777// -C
109

>(C >(C >(C

87 EJG D89

'!I '!I '!I

>(C

AE9

'!I

>(C >(C (..-< M(T >(C >(C >(C

/9J A79

'!I '!I

T'(<

E/ DA GE8

'!I '!I '!I

5(.>

P-(T>

8A9

-3 >(C 8D9 '!I

5:T P% >(C >(C >(C >(C >(C 4JA9 J49 /9J 799 /7D '!I '!I '!I '!I '!I

>(C >(C

AA7 AE9

'!I '!I

>(C

8D9

'!I

'C.4G//9AG/

!-)@ P1W&>' !' 5'(PI%3 !1(M !1' .)CTI1% -I%>

:3

'!I

499JAJJG DAA7DE77 'M.DAA7JJ4J 'M.DAA/9G99 'M.DAA7JJ4G '!&DAA7D9JE

W,IT> !1(M .TIC:>' 4E9K89K89 !11T 51TT1M P('T !11T T1P P('T WIT, -)3.

>(C >(C >(C >(C

8G/9 8999 8774 4DJ 74G DA

'!I '!I '!I '!I '!I '!I

!11T T1P P('T WIT,1)T -)3. >(C !'>>P>' &' (..-< 78G ,IP. -C 3P P-(T> !1' 5TM PI>C> >(C >(C .I-0>' >(C T1P C(%&< '>& >(C >(C >(C >(C 4/Jmm >(C >(C >(C

DAA797E4 'M.DAA8/J/A

BG9KE9C 3'1MM>T !1' (P'1% ,(%&-> 51TT1M

A4G 78G9

'!I '!I

DAA787E8

C1(T>& ,(%&->

JJD

'!I

'M.DAA7D84/ 'M.DAA7E79G

M(T'I@ IC> T'(< C1MM1%

/D/ 89/ 47G GJ9

'!I '!I '!I '!I

',WDAA9/EAJ :>< M(TFI%! '!%DAA9/ADG -I3,T .WITC, J>''< -I%>' DAA9D/D8 'M.DAA7EGJ8 8E9F78G -I%>' .,>-! 3 T<P> M(TFI%! -1C: 5'(C:>T T(-- &11' 'M.DAA7E8G/ M(TFI%! &>C1 .T'IP

G9J G9J

'!I '!I

>(C >(C >(C

DA9 E899 8499 48G9

'!I '!I '!I '!I

',W4D997J/J MJ@79 ,>@ 51-T DAA7J/88 4DJ998AA MJ@79 ,>@ .-1TT>& 51-T

MJ@79 '& ,& .-1T .C'>W$ >(C

110

,(%&-> MJ@47 .. 51-T /94N-T< C1%> DAA8/4G9 DAA7A7/8 PT M(.:I%3 T(P> 9 G I%C, >(C '1>(C 7999 747 7G '!I '!I '!I

',W4G99E4/4 M(.:I%3 T(P> 8 I%C, MCC '>(&< C1%&>%.1' 799DAA84J48 -C %1 89@8/ DAA97ED8 .C'>W %1 J@8D DAA7877G .>-! T(P C1M5 .>-! T(P

>(C

/79

'!I

T,.

7G

'!I

.C'>W=W(.,>'

>(C >(C >(C :3 !1' >0(P >(C

7G99 8/99 G79 8G

'!I '!I '!I '!I

'&M94977JAA %<-1% &11' .T1PP>' B%&.C DAA787/8 448/4JA/ P) -131 M(T'I@ P)TT< !(-3)%$AEJ '>(' 'M.JGGJEA7/ 8A9F78G .I-0>' 5'(PI%3 '1& GH(3 J 4G/74A9G H .)PP1'T

89A9

'!I

:3

7G GG

'!I

&ata of WIP in '!(6 Particulars '!( Production In units 9ct$9J /4J797A /GJD8 %ov$9J GDJD7/4 7G49/ &ec$9J /AE//E4 74A7E Jan$9A 4/8AAG9 4G4G9 !eb$9A 4J/9AD4 4A7G/ Mar$9A 7AEJJD8 G4J48

111

Comments by supervisor6

.hort supply of any material causes high WIP in the department because if one item is not supplied then goods are not completed and other materila keep lying on the floor

1ne problem increases WIP is bulk issue >ven if we need small +uantity of materail we have to take material in bulk Whatever material is left in that bulk it is kept till ne#t run of same model and same color comes .o for those many days WIP gets blocked

1ne more cause of WIP is breakdowns If there is a breakdown then whatever is there on the line is stopped and it is not finished so it is counted in our WIP

1A.1acuu" .oa"ing:

112

This is the department where the fridge gets its internal structure ,igh impact polystirene sheets are first heated at two stations at around 499$G99 C sheet is then moved over a desired shpae and vacuum pressure is applied &ue to vacuum created below the sheet, the sheet is sucked inside and gets the shape of the die Thus thy make two shapes one is called -iner and is sent to C! and othe is Plastic &oor Panel which they send to &!

0! has following itmes in its WIP6

Ite" Code

$escription ,IP. P-TP -I%>' 88E9KG49K/

-&( 4IP

4G!

DAA7AAJ/ DAA7J44E

8G9

>(C

J9 8879

0!I 0!I

,IP P-TP P&P DD9KGD9K8 4 8A9 - >(C ,IP P-TP -I%' 897GKGE9K/ 4

DAA7JGD8

8A9 ,IP. P-TP P&P DD9KGD9K8 A

>(C

88/7

0!I

DAA7AAG4

8E9,IP. P-TP P&P 88GGKGD9K8 A

>(C

88E

0!I

DAA7AAGG

799 ,IP. P-TP -I%' 887AKG8DK4

>(C

J99

0!I

DAA7AAGJ

799,IP. P-TP P&P 8/79KGD9K8 A

>(C

GAG

0!I

DAA7AAGD DAA8/89J

7G9 %)T P-(T> $ /99 C3&-@ '1)%& 5)., !1' %1 J .C'$

>(C >(C

4G 8/GG

0!I 0!I

DAA94GJ9

3'>>%

>(C

ADG9 87JG9

0!I 0!I

'M.DAA9/EGJ '1)%& 5)., !1' %1 E .C'$ >(C

113

W,IT> '1)%& 5)., !1' MJ 51-T$ 'M.DAA94GJ8 5-)> 'M.JGGJEA7/ '>(' .)PP1'T !1' >0(P DAA774DD W,IT> T(P> >(C >(C >(C E4G9 78A G8 G 0!I 0!I 0!I

&ata of WIP in 0!6 Particulars 0! Production In units 9ct$9J 79D84D /GJD8 %ov$9J /J7878 7G49/ &ec$9J G8D7EE 74A7E Jan$9A 89A8A88 4G4G9 !eb$9A D874GG 4A7G/ Mar$9A A94EJE G4J48

Comments by supervisor6

Chan ge of run is

one reason of increase of WIP In any going run suddenly order comes to stop that

114

and start new run so whatever material produced, unproduced or half produced is there is kept untill ne#t run comes, till then its ther WIP 7 The changeover of rotary is a long process so for that time we need to keep some material ready so that every time the ne#t department is not affected due to changeover / This department runs only in one shift and feeds both shifts .o at the end of first shift WIP is very high so if u calculate after that shift then WIP crosses all limits 4 %ormally machine does not breakdown but if it goes then it takes 7 days to repair .o they need e#tra safety stock #)C&(()/$'TI&/S

'ight (ccountability$ Maintenance department has 4 items as per WIP sheet available through software 5((% but supervisor claims none of them In every department accountability should be clearly defined and communicated

Change of 'un$ .hort run is a most fre+uently given reason for the increasing 8WIP To avoid this situation, production planning process must be reviewed (ny change of run must be communicated in advance and any sudden change of run must be avoided

Parallel supply$ 1ne reason of increasing WIP is default on part of suppliers &elay in delivery must be avoided and fre+uently defaulting suppliers must be looked into

.mall Nuantity$ .tores should issue material in smaller lots so that no e#cess inventory is lying at any production level .tandardisation of packaging of material can also be implemented

115

'ight Nuantity$ It has been observed that sometimes stores issue material to the departments, which is more than the re+uisition This practice should be stopped as the e#cess material is of no use till the ne#t run and increases WIP in the long run

Purchase Process$ The purchase process must be looked into from time to time in order to avoid delays

Change of (ttitude$ -ast but not the least, change in attitude of the department supervisors is re+uired The need to control and reduce WIP must be communicated to them and its implementation must be ensured

116

C&ST #)$-CTI&/ '/$ C&/T#&* I/ !-('/ #)S&-#C)

117

I/T#&$-CTI&/

118

-abour costs constitute a significant portion of the total cost of a product It includes the monetary as well as the fringe benefits provided to employees The total of these benefits given to the workers should be sufficient enough to attract and retain the labour force The will to work among workers should be created with the conse+uent increase in efficiency

)nder the present political conditions with a restive labour in organised industry, it is very difficult to reduce labour cost Therefore, proper control and accounting for labour cost is one of the most important problems of a business enterprise 5ut control of labour cost presents certain practical difficulties due to the human element involved -abour is the most perishable commodity and as such should be effectively utilised immediately -abour, once lost, cannot be recouped and is bound to increase th cost of production Therefore, economic utilisation of labour is a need of the hour to reduce the cost of production

-abour cost control is an important ob*ective of management and the realisation of this ob*ective depends upon the cooperation of every member of the supervisory force from the top e#ecutive to foreman

!rom functional point of view, control of labour costs is affected in large industrial concerns by the coordinated efforts of the following departments6$

Personnel department >ngineering department Time and motion study department

119

Time keeping department Pay$roll department Cost (ccounting department

Current Cost Control (ethods at #an9a:y :-

Training and development$ The skilled and unskilled labour is provided on the *ob training
120

This is done in order to improve efficiency of labour and also to decrease defects during production

Proper -abour Cost 'eporting$ &aily productivity and manpower reports are maintained separately by all production departments This helps management in controlling labour cost and improving efficiency

Time .tudy$ Proper time re+uired to do complete each *ob is being determined through Time .tudy This involves the following$ (nalysis of work .tandardisation of methods Time study of standard methods

This forms the basis of payment and calculating the premium or bonus payable It facilitates budgeting and helps improve efficiency It also helps to control costs through proper production control

Time :eeping$ Proper time recording is carried out for the workers, making distinction between normal time, overtime, late attendance and early leaving This is done through time cards

121

Job evaluation$ Proper *ob evaluation is being done to understand the duties and responsibilities and hence determine whether skilled or unskilled labour is re+uired for the *ob and also specify skill set re+uired for proper performance of the *ob This reduces defectives and improves efficiency

.pecialisation$ .pecialisation is encouraged through repetitive performance of tasks This improves +uiality of work, reduces defectives and also improves performance

*'0&-# C&ST '/'*,SIS:-

%umber of labour employed per day per shift$ Permanent$ 8G9 Casual$ 7G9

122

T1T(-

499

%umber of hours per shift per day$ %ormal$ E hours 1vertime$ 7 hours

>#tra labour employed to hedge for absenteeism, etc$ /9 Bout of casual labourC

W(3>.$ Wages to contractual labour$ 's 74A9F month Bunder min wage actC 1vertime 'ate$ 's 7/ AG per hour Wages to permanent labour$

'//-'* *'0&-# C&ST F2AA=-AB? 'ctual Total $escription .TIP>%& T1 W1':M>% W1':M>%R. W(3>.$5(.IC
123

F*akhs? 1.1E E<.A<

MI.C>--(%>1). W(3>. T1 W1':M>% &1)#TI() 4'+)S T& 4&#6()/-0'SIC >.IC C1R. C1%T'I5)TI1%$W1':M>% P'10 !)%& C1R. C1%T'$W1':M>% ,1).> '>%T (--1W(%C> T1 W1':M>% (%%)(- .T(T)T1'< 51%). T1 W1':M>% ->(0> T'(0>- (..I. T1 W1':M>% Conv >#p Workmen Canteen >#penses

==.=A 2 .2% >.2% 11.A= %=. = 1E.%E A.22 12.<A 12.%E

T&T'* #efrigerators Production F/os? C&STG#). 'ctual %<1EB=

2E=.%%

#s.=<.<> CostG #). 0udgeted #s.B=.><

'nalysis of Total 4age Cost:-

124

+#,- C.(T P-R R-/R0,-R#T.R (2006-07)

1&0

120

100

C.(T (Ru)ees)

/0 Ser+e71 '0

&0

20

0 Apr-0' May-0' Jun-0' Jul-0' Aug-0' Sep-0' O t-0' N!"-0' De -0' Jan-0. #e$-0. Mar-0.

15.>'0(TI1%.$ Total wage cost per refrigerator is much lower than the budgeted wage cost Per refrigerator total wage cost fluctuates over the months The variance in months of July and 1ctober 799J is very high

125

0asic 4ages and &verti"e 'nalysis.

126

12100

'0000

10100

50000

/100

&0000

'100

30000

!"ert+3e 4age7 pr!*u t+!n

&100

20000

2100

10000

0100 1 2 3 & 5 ' . / 0 10 11 12

15.>'0(TI1%6$ 5asic wages moves in same direction as production in most of the months In month of June, Production had decreased but basic wages have increased even further In month of March, production has risen but basic wages have fallen down 1vertime e#ists in every month Production and overtime are moving in the opposite directions in certain months$ Production decreasing$ overtime increasing$

127

July, &ecember Production increasing$ overtime decreasing$ .eptember, 1ctober, January The increase in overtime is widely disproportionate to increase in production

#)'S&/S &aily production 0ariation leading to underutilisation of labour 1ccasional breakdown adding to abnormal idle time 0ariation in speed of line by the production department which again reduces utilisation of labour >#cess labour employed for safety against absenteeism, etc )nderperformance of labour -ack of proper training especially for unskilled labour

1vertime$ >#ecution of rush orders 5reakdown of machinery or failure of power during normal hours -ack of proper manpower planning and control as overtime is a regular feature and is also sometimes highly disproportionate to the production

128

'ecommendations$

8 7 /

Proper daily production planning to reduce e#cess labour employed 'educing absenteeism and turnover and hence also the e#cess labour employed Proper on the *ob and off the *ob training to skilled as well as unskilled labour to improve productivity

'educe the events of breakdowns and shortage of raw material in order to avoid abnormal idle time

There is a need to look into the labour employed and the labour utilisation at various levels of production separately for all production departments and reassess the re+uirement

10>'TIM>$ Proper planning and control of manpower &iscourage production target of normal time to be carried on to overtime hours 'educe breakdowns and shortage of material >valuate need of overtime and fully utilise the labour during normal hours

129

Training and $evelop"ent Training and development is an essential aspect of labour cost control in order to improve efficiency and productivity It also helps ensure lesser defects during production which add to the production cost It has been observed that the cost of defects due to manpower mishandling is high This cost is controllable trough proper training 1n the *ob as well as off the *ob training must be provided to permanent as well as contracted labour Job rotation would also help in improvement and efficiency

#e"oving non value adding activities Certain non value adding activities should be avoided such as in case of providing material on line, the packaging must contain standardised +uantity of material for all items which would save time of segmenting the material (voidable rework must be reduced$ In case of powder coating department, wherein the entire process of powder coating has to be repeated as there is a slight fault in the red coloured paint which leads to uneven coating This consumes a lot of manpower and time and hence increases labour cost as well

130

Policies for (anagerial Staff

;-)STI&//'I#):$o you have any e"ployee hand9ookI <es

4hat are the ChoiceGsalary pay co"ponentsI !#' *T' &ffice wear allowance Conveyance allowance .uel 3 "aintenance rei"9urse"ents Child education 3 hostel allowance (edical rei"9urse"ents .ood 3 +ift voucher +roup personal accident insurance 'ank wise,.r >#e$'s 84999p m 'ank wise,.r >#e$'s 87999p a %o Mementos >#e$'s 8499p m <es,.r >#e$'s 8E99p m <es,'s 7499p a B7 childrenC <es,.r >#e$'s 7999p m %o <es,to .ales people <es,P,M with paramedical health (ediclai" insurance Invest"ents Special personal allowance insurance <es, limit upto ta# slabs 's 8799p m 5asic=performance payFsale 'ny other incentive=>0(=&0(

're there any #etiral policies of the co"panyI +ratuity Provident fund
131

<es <es <es

Superannuation

<es,,igher band$.r mgr I above

$o you provide any ShiftingGrelocation 3 transfer 9enefits to e"ployees 3 the conditions for the sa"e

<es,as per the *ob re+uirements I the whole amount is reimbursed

$o"estic travel policy 9eing given to the e"ployees (ode of travel Type of hotel acco"odation .acilities for 9oarding 3 $aily allowance &ut of pocket allowances *ocal conveyance entitle"ent Is there any +rade wise classification for e"ployeesI

<es 3rade wise,by trainFair 3rade wise

3rade wise 3rade wise 3rade wise

<es

4hat are the policies related to $eputation 3 Is there any allowance for the sa"eI <es, 's 7G999p m

&verseasGInternational travel opportunities for the e"ployees Class of travel Classification of countries $aily allowance .oreign e:change entitle"ents
132

<es >conomy I >#ecutive <es %il %il

*ocal conveyance 3 other e:penses 'ny other Is there any +rade wise classification for e"ployeesI

%il %il

<es

$oes your co"pany has policy for giving "o9iles to e"ployees within a particular +radeG*evelI If ,esD Cost of handset #ei"9urse"ent of "onthly usage .or"alities on separation <es %ot provided 's AG9 p m 1n pro$rata basis

$oes your co"pany provide any Insurance securityI !ospitalisation policy +roup personal accident insurance policy 'ny other <es %il <es P,M, Cashless

$o you provide any loan like "arriageD"edical e"ergencyD housing security deposit 3 car loan etcI If ,esD under what heads 3 how is it paidI %o

$o you have a redressal foru" for grievances of the e"ployeesI <es

133

Is there any facility like *eave )ncash"entI !ow can it 9e availedI P - for 4 days, rest can be encashed

!ow "any *eaves are allowed in the 1st year of Hoining itselfI D &ays BC - = . - C

!ow "any !olidays are availa9le under the following heads: Co"pany declared holidays &ptional holidays Casual leave Sick leave Privilege leave 8oining leave Transfer Hoinong leave (aternity leave (iscarriage leave Co"pensatory off -nauthorised leave 'ny other E &ays %o D &ays B9$GyrsC, 87 &aysBG$89yrsC, 8E &ays B89 yrs I aboveC 79F7GF7E &ays %il / &ays .couting Trip = J &ays E4 &ays %o <es, within a week %il %il

!ow do you deal with e"ployees co"ing late 3 going earlyI

If 74 times a yr, no incrementFprobation e#tended

4hat is the separation procedure followed 9y the

134

/9 &ays noticeFsalary settlements

co"panyI

4hat are the 9asis of ter"ination of e"ploy"entI

>n+uiry= 'esignationFTermination

$o you have e:it interviewsI

<es

!ow "uch ti"e you take to settle an e"ployees full 3 final accountI

8G &ays$salary=leaves, J9 &ays$ P !=3ratuity

'ny other policy not "entioned a9ove

'ecruitment =Performance appraisal

*I(IT'TI&/ The policies for managerial staff, salary, benefits etc are all decided by the head office hence no related data was available Certain aspects under this cost component could not be analysed and recommendations could not be +uantified due to unavailability of daya and also due to shortage of time

135

C&ST #)$-CTI&/ '/$ C&/T#&* I/ &1)#!)'$S

Cost pertaining to a cost centre can be divided into two portions$ direct and indirect The indirect portion of total cost constitutes the overhead costs These days we hear that the overhead costs are increasing in every organisation 1verhead costs do not indicate inefficiency if accompanied by$

136

-arge scale production Increase in efficiency and productivity of labour -ess human efforts will be re+uired because of automated machines but more machine e#penses will have to be incurred

More depreciation, maintenance e#penditure and similar other items because of more use of machinery

Improved methods of managerial control may reduce the direct costs but will increase the overhead costs

1verheads can be classified as$ 8 Works overheads 7 (dministrative overheads / .elling and distribution overheads 4 'esearch and development overheads The pro*ect mainly deals with the works and administrative overheads

'nalysis: S./o .inal (ar

137

1ariance till (ar. 0udget (ar

8 Car >#penses 2. Co""unication / 3I4 3eneral >#penses G -egal I Proffesional J -unch I Conveyance A >mployee ,ealth I .afety E Printing I .tationery D .ecurity 1A !ouse 6eeping 88 .ubs I Training 12. Tour ):penses 8/ >ntertainment 84 'epairs I Maintanance 8G9,E7J 99 799,999 99 E,G99,999 99 4D,8A4 99 2D==<DB>E.AA 1D>AADAAA.AA F>=<DB>E.AA? E47,7E7 99 7,9/J,999 99 8,8D/,A8E 99 =D<<ADBB1.AA <D=>%DAAA.AA F>==DBB1.AA? /,94A,7DE 99 /,999,999 99 B4A,7DE 99C AGD,GEG 99 E99,999 99 49,48G 99 GDA,/JG 99 AAG,999 99 8AA,J/G 99 /48,D9J 99 /99,999 99 B48,D9J 99C 8,DG9,888 99 8,E99,999 99 B8G9,888 99C /A7,4GE 99 499,999 99 7A,G47 99 GA/,97J 99 7/9,999 99 B/4/,97J 99C 1DA< D=11.AA EAADAAA.AA F1< D=11.AA? 8JJ,89D 99 7G9,999 99 E/,ED8 99

138

B5uildingsC 8G 'ates I Ta#es 8J 'ent

/,74D,8J9 99

G,7G9,E49 99

799,999 99

799,999 99

499,999 99

499,999 99

Total

22D 2AD2EB.AA

2BD2B<DAAA.AA

%DE<%DBA .AA

Production:

AAE,A4G 99

4G8,DAJ 99

Per -nit 0ase cost

12.21

2>.2E

C.MP#R0(.1
10:000:000100

/:000:000100

':000:000100

#M.$1T

&:000:000100

8ARIANCE 2UDGETED ACTUA%

2:000:000100

1 2 3 & 5 ' . / 0 10 11 12 13 1& 15 1'

92:000:000100; .2-R3-#D(

139

(fter analy"ing the records of the overheads of previous financial year we came to the following analysis6 8 1verall cost of overheads during the previous year was less as compared to the budgeted, but in certain heads we have seen variances 7 1verhead Cost has not been allocated separately to each department, but has been taken as the cost of 'anba#y as a whole

Pro9le" Identification: 8 Communication$ %ot proper negotiations with different telecom service and security providers were there 7 ,ouse :eeping$ >#cess house keeping staff because the e#tra labour which were in plant also used for house keeping / Tour >#penses$ There is no individual limit set for the tour e#penses, of departments %umber of people eligible for such purposes has not been determined

/ There is no limit to the department wise overhead costs This leads to lack of cost control as well as lack of accountability for e#cess costs

140

#eco""endations: 1. Co""unicationThe communication e#penses have e#ceeded the budgeted e#penditure by 's 8G/J88 This has a scope of cost reduction through negotiations with the telecom service providers Current telecom service provider$ ,!CTerms of usage$ Min commitment pre month6 's 799FmonthFconnection Call 'ate to Mobile6 's 8 79F min Call 'ate to -andline$ 's 9 49Fmin

With the involvement of )tility managers, negotiations were communications 8 %egotiations with ,!C-$ Min monthly commitment$ %il Call 'ate to Mobile$ 's 8 79F / min

done with

different telecom service providers so that the company can reduce their cost on

This shall lead to an annual saving of 79H in communication e#penditure amounting to 's 789A77 7 Installation of Tata Indicom in specific departments ,ead 1ffice at Mumbai uses Tata Indicom phones

141

The call rate of Tata to Tata phones is %ITherefore, Tata Indicom phones are being installed in specific departments for communicating with the ,ead 1ffice

This had led to a cost saving of AG$ E9H of communication e#penditure on .T& calls amounting to 's 8A7E99

!urther negotiations are being conducted with Tata Indicom for providing us lower rates as compared to those being charged by ,!C-

T&T'* C&ST #)$-CTI&/ - #s. > <22 2. !ouse 6eeping$ 'anba#y maintains an e#cess of contractual labour of on average /9 persons per shift, with two shifts per day This e#cess is maintained to overcome any shortage of labour in case of absenteeism 1therwise this e#cess labour is put to house keeping work This e#cess labour generally remains underutilised ,ence, there is scope of cost reduction through reduction through proper analysis of e#cess labour re+uirement and reducing the number employed . Tour ):penses The limit on e#penditure on tours must be set department wise The number of people eligible for such purposes must be determined, within the department

142

%.Security- It is recommended to negotiate with other security providers G It is also recommended to break all the overheads department$ wise so that the company can know about the e#act position of the overheads w r t to each department and improve accountability

#)C&(()/$'TI&/S:#)C&(()/$'TI&/ Cost Control F#s.? PROCESS Cost #eduction F#s? #e"arks

143

.oa"ing Scrap

88,79,999

5eing Implemented$ Team formed

$ensity of ca9inet foa"ing $ensity of door foa"ing

/A,A9,/8J

5eing Implemented$ Team formed

7A,G4,G4E

5eing Implemented$ Team formed

0raJing instead of lock rings T&T'* INVENTORY Invoice 0reakup $aily &rder Process Ther"ocol 4aste &9solete stock disposal 8ust In Ti"e Inventory Control D/J99 /GADEJD Production Control Purchase streamlining 4ork In Progress Control T&T'* !-('/ #)S&-#C) 0asic 4age Control &verti"e Control OVERHEADS &ept wise control

DA,/4,499

Nuality Issues

#s.1DB DBED2=%

7,/9,E8A 8 4,D4,87D

$ Can be implemented Can be implemented .hall be implemented .hall be implemented

#s.% DE>D%1<

Proper daily production planning, reduce absenteeism Proper utilisation of labour, proper planning

144

Co""unication ):pense

/E/G77

5eing Implemented$ %egotiations in process

Tour ):penses Control

&epartment Wise limits

.hall be implemented

!ousekeeping

'educe e#cess employed

%ot yet decided

Security T&T'*

!inding alternate #s. > <22

%ot yet decided

+#'/$ T&T'*

#s.2D21D=1D2A1

C&/C*-SI&/

Cost 'eduction and Control is a valued ob*ective of the company in order to build upon its competitive advantage Many cost control measures such (5C and !.% control, :ai"en etc are being implemented The cost including material cost, human resource cost and overhead costs are within the budgeted limits

145

!or 'anba#y and 5oyce Mfg Co -td , cutting costs is not only a management priority when business conditions are weak, only to be forgotten when economic growth resumes 5ut rather is aimed at for continually increasing operating efficiency, fundamental to success in both good times and bad

The pro*ect SCost 'eduction and ControlT provides an insight into the efficiency of various deparments at 'anba#y , highlighting areas with need for cost control and also those having scope for cost reduction (n analysis of various cost components suggest that the overall cost control mechanism of 'anba#y is very efficient The costs and e#penditures are planned, managed and controlled well within the budgeted limits

P'1&)CTI1% P'1C>..6$ The production process is highly efficient and there is a lot of stress on +uality improvement, also keeping a check on costs There is scope of cost reduction of 's 8A/AD7J4 through control of re*ections, foam density control and use of alternative method of leak control i e replacing lock rings with bra"ing

I%0>%T1'<6$ Constant efforts have been made in order to control costs of inventory through employing (5C analysis, !.% analysis, use of Third Party -ogistics and -ocal Milk 'un etc but there is a need to fully utilise the resources as well as reducing blocked working capital, carrying costs etc There is scope of cost reduction of 's 4/,DE,48G through application of Just In Time inventory control, &isposal of 1bsolete stock, etc
146

,)M(% '>.1)'C>6$ The labour costs, though well controlled can be reduced through a constant check on the overtime employed, proper utilisation of labour, reducing e#cess labour and keeping a check on absenteeim

10>',>(&.6$ There has been a continuous decline in the overhead costs over few years still there is scope of reducing 's /E/G77 in e#penditure on communication Proper limits must be put on e#penses of each department ,ousekeeping e#penses can be controlled through reducing e#cess labour employed

,ence with the application of given recommendations the cost to the company can be reduced by 's 7, 78, J8, 79

147

148

#).)#)/C)S

0&&6S:-

Cost (ccounting by Charles T ,orngren, .rikant M &atar, 3eorge !oster

!inancial Management by I M Pandey

1perations 'esearch by : : Chawla, 0i*ay 3upta, 5hushan : .harma

4)0SIT)S:-

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149