AN ANALYSIS ON INVENTORY MANAGEMENT

AT
Ericsson India Global Service Ltd
Submitted in partial fulfilment of the requirement for the award of the
Degree of Master of Business Administration

Submitted by
Name
Enrolment No
Reg No.
Specialization

:
:

KAMALAKANNAN B
:

09NFM5750
MBA (FM)

Under the guidance of

-------------------------------------------------------

School of Distance Education

BHARATHIAR UNIVERSITY
Coimbatore - 641 046

2015
DECLARATION

I hereby declare that this project work titled

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any candidate of any university.

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Signature of the Centre Co-ordinator

CERTIFICATE
This is to certify that the project work titled
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submitted to BHARATHIAR UNIVERSITY in partial fulfilment of the
requirements for the award of the degree of Master of Business
Administration is a record of the original work done by
------------------------------------------ under my supervision and guidance and that
this project work has not formed the basis for the award of any degree /
diploma /associateship / fellowship or similar title to any candidate of any
university.

Signature of the Guide

Name and designation

Forwarded by:
Director/ Co -ordinator of the Study centre
School of Distance Education,
Bharathiar University,
Coimbatore - 46.
Submitted for university examination held on .......................

Internal Examiner

External
Examiner

ABSTRACT
Every organization needs inventory for smooth running of its activities.
It serves as a link between production and distribution processes. The
investment in inventories constitutes the most significant part of current
assets/working capital in most of the undertakings. Thus, it is very essential
to have proper control and management of inventories. The purpose of
inventory management is to ensure availability of materials in sufficient
quantity as and when required and also to minimize investment in
inventories. Raw materials, goods in process and finished goods all represent
various forms of inventory. Each type represents money tied up until the
inventory leaves the company as purchased products. Because of the large
size of the inventories maintained by firms, a considerable amount of funds
is required to be committed to them. It is therefore absolutely imperative to
manage inventories efficiently and effectively in order to avoid unnecessary
investments. A firm neglecting the management of inventories will be
jeopardizing its long run profitability and may fail ultimately. The reduction in
excessive inventories carries a favorable impact on the companys
profitability.
The study starts with an introduction to inventory management,
Companys profile, its Vision & Mission, Achievements and also the need for
study, review of literature and objectives are set out for the study. Research
methodology, Data analysis & Interpretation, Findings and Suggestions of the
study follow.
One of the main areas of the project is the analysis part, where the
data are analyzed & interpreted, to find out how the inventories were
managed. Some of the tools used in inventory are regarding to:
Economic Order Quantity
Safety Stock
ABC Analysis
FSN Analysis
Trend Analysis and

Inventory Turnover Ratio.

And then conclusions, limitations & scope for further study were
discussed.
CONTENTS
CHAPTER

TITLES

PAGE NO.

LIST OF TABLES
LIST OF CHARTS
I

INTRODUCTION
PROFILE OF THE COMPANY
NEED FOR THE STUDY

1
7
39

II

REVIEW OF LITERATURE

39

III

OBJECTIVES OF THE STUDY

55

IV

RESEARCH METHODOLOGY

55

DATA ANALYSIS AND INTERPRETATION

57

VI

FINDINGS OF THE STUDY,

74

VII

CONCLUSION

77

VIII

LIMITATIONS OF THE STUDY

SCOPE FOR THE FUTHER STUDY

78

BIBILIOGRAPHY

79

LIST OF TABLES

TABLE NO.

NAME OF THE TABLE

PAGE NO.

5.1.1

ECONOMIC ORDER QUANTITY

43

5.2.1

SAFETY STOCK

44

5.3.1

ABC ANALYSIS

47

5.4.1

FSN ANALYSIS

48

5.5.1

CALCULATION OF INVENTORY TREND

72

5.5.2

INVENTORIES PERCENTAGE

73

5.6.1

INVENTORIES TURNOVER RATIO & VELOCITY

75

LIST OF CHARTS

CHART NO.

NAME OF THE CHART

PAGE NO.

5.3.1

ABC ANALYSIS

47

5.4.1

FSN ANALYSIS

48

5.5.2

TREND OF INVENTORY

74

CHAPTER-I
1.1 INTRODUCTION

Inventory control is vitally important to almost every type of business,

whether product or service oriented. Inventory control touches almost every
facets if operations. A proper balance must be struck to maintain proper
inventory with the minimum financial impact on the customer. Inventory
control is the activities that maintain stock keeping items at desired levels. In
manufacturing since the focus is on physical product, inventory control focus
on material control.
Inventory means physical stock of goods, which is kept in hands for
smooth and efficient running of future affairs of an organization at the
minimum cost of funds blocked in inventories. The fundamental reason for
carrying inventory is that it is physically impossible and economically
impractical for each stock item to arrive exactly where it is needed, exactly
when it is needed.
Inventory management is the integrated functioning of an organization
dealing with supply of materials and allied activities in order to achieve the
maximum co-ordination and optimum expenditure on materials. Inventory
control is the most important function of inventory management and it forms
the nerve center in any inventory management organization. An Inventory
Management System is an essential element in an organization. It is
comprised of a series of processes, which provide an assessment of the
organizations inventory.

1.2 PROFILE OF THE COMPANY

www.ericsson.com

1.2.1 ERICSSON CORPORATION

Ericsson (Telefonaktiebolaget

L.

M.

Ericsson)

is

Swedish multinational provider of communication technology and services.

The company's offerings comprise services, software and infrastructure in

information and communications technology for telecom operators and other

industries,

including

traditional

telecommunications

as

well

as Internet

Protocol (IP) networking equipment, mobile and fixed broadband, operations

and business support services, cable TV, IPTV, video systems, and an
extensive services operation. Ericsson had a market share of 35% (in 2012) in
the 2G/3G/4G mobile network infrastructure markets
Founded

in

1876

by

Lars

Magnus

Ericsson, the

company

is

today

headquartered in Stockholm, Sweden. The company employs more than

110,000 people and works with customers in more than 180 countries,
including Canada, United States, China, India, Brazil, Pakistan, Japan, South
Africa, Australia, Germany, Italy, the UK, and Sweden. Ericsson holds over
37,000 granted patents as of May 2015, including many in the wireless
communications field.
Ericsson became a major supplier of telephone equipment to Scandinavia.
Because its factory could not keep up with demand, work such as joinery and
metal-plating was contracted out. Much of its raw materials were imported,
so in the following decades Ericsson bought into a number of firms to ensure
supplies of essentials like brass, wire, ebonite, and magnet steel. Much of
the walnut used for cabinets was imported from the United States.
1.2.2 ERICSSON CORPORATION TODAY

BUILDING CUSTOMER LOYALTY WORLDWIDE

Network performance is a central part of any subscribers experience. Not

only that, it is also the principle driver for customer loyalty to an operators
brand.
Many operators I have spoken with describe a major issue - they see their
network element KPIs as green but their end-user satisfaction KPIs dont
give the same positive view. When trying to determine where to focus when
building customer loyalty, this disparity can be a problem.
The question becomes how can the marketing department use these
satisfaction insights to proactively profile a customer and pinpoint the most
relevant attributes that can drive customer loyalty?

Part of the challenge is the huge volume of data that is scattered over
different systems. Unless correlated in the right way, this data is difficult to
understand.
The advent of big data has created new opportunities and with the right
capabilities in place it is possible to focus with a level of granularity on the
customer experience. This allows operators to create a customer centric view
and extract end-user satisfaction KPIs for each users service level. With
these insights the marketing department can create customer profiles from a
wide range of dimensions to determine the best ways to build loyalty.
Being able to identify dissatisfied customers and the root cause is important.
For example which customers consume a high level of data but recently
have been receiving a lower service level than average. Knowing this gives a
lot of guidance when focusing different retention activities.
Being able to identify service level fluctuations per user is also important. For
instance, users that are acquainted with a certain level of service are more
likely to react to sudden degradations, while a more constant service level
experience will be less noticeable.
Another case could be when cross-selling new products, the ability to profile
users experiencing a high service level is important as the chance of crossselling new products can be up to four times more successful.
1.2.3 (a) HISTORY OF Telecommunication
Telecommunication occurs when the exchange of information between two or
more entities (communication) includes the use of technology.
Communication technology uses channels to transmit information (as
electrical signals), either over a physical medium (such as signal cables), or
in the form of electromagnetic waves. The word is often used in its plural
form, telecommunications, because it involves many different technologies.
Early means of communicating over a distance included visual signals, such
as beacons, smoke signals, semaphore telegraphs, signal flags, and
optical heliographs. Other examples of pre-modern long-distance
communication included audio messages such as coded drumbeats, lungblown horns, and loud whistles. Modern technologies for long-distance
communication usually involve electrical and electromagnetic technologies,
such as telegraph, telephone, and tele printer, networks, radio, microwave
transmission, fiber optics, and communications satellites.
A revolution in wireless communication began in the first decade of the 20th
century with the pioneering developments in radio
communications by Guglielmo Marconi, who won the Nobel Prize in Physics in
1909. Other highly notable pioneering inventors and developers in the field

of electrical and electronic telecommunications include Charles

Wheatstone and Samuel Morse (telegraph),Alexander Graham
Bell (telephone), Edwin Armstrong, and Lee de Forest (radio), as well
as Vladimir K. Zworykin, John Logie Baird and Philo Farnsworth (television).
1G (or 1-G) refers to the first generation
of wireless telephone technology (mobile telecommunications). These are
the analog telecommunications standards that were introduced in the 1980s
and continued until being replaced by 2G digital telecommunications. The
main difference between the two mobile telephone systems (1G and 2G), is
that the radio signals used by 1G networks are analog, while 2G networks
are digital.
2G (or 2-G) is short for second-generation wireless telephone technology.
Second generation 2G cellular telecom networks were commercially
launched on the GSM standard in Finland by Radiolinja (now part of Elisa Oyj)
in 1991. Three primary benefits of 2G networks over their predecessors were
that phone conversations were digitally encrypted; 2G systems were
significantly more efficient on the spectrum allowing for far greater mobile
phone penetration levels; and 2G introduced data services for mobile,
starting with SMS text messages. 2G technologies enabled the various
mobile phone networks to provide the services such as text messages,
picture messages and MMS (multimedia messages). All text messages sent
over 2G are digitally encrypted, allowing for the transfer of data in such a
way that only the intended receiver can receive and read it.
3G, short form of third generation, is the third generation of mobile
telecommunications technology.[2] This is based on a set of standards used
for mobile devices and mobile telecommunications use services and
networks that comply with the International Mobile Telecommunications2000 (IMT-2000) specifications by the International Telecommunication
Union.
3G finds application in wireless voice telephony, mobile Internet access, fixed
wireless Internet access, video calls and mobile TV
3.5G
3.5G is a grouping of disparate mobile telephony and data technologies
designed to provide better performance than 3G systems, as an interim step
towards deployment of full4G capability. The technology includes:
High-Speed Downlink Packet Access
Evolved HSPA
3GPP Long Term Evolution, precursor of LTE Advanced
4G

4G provides, in addition to the usual voice and other services of 3G, mobile
broadband Internet access, for example to laptops with wireless modems,
to smartphones, and to other mobile devices. Potential and current
applications include amended mobile web access, IP telephony, gaming
services, high-definition mobile TV, video conferencing, 3D television,
and cloud computing.
4.5G
4.5G is a grouping of disparate mobile telephony and data technologies
designed to provide better performance than 4G systems, as an interim step
towards deployment of full5G capability. The technology includes:
LTE Advanced
MIMO
5G
5G denotes the next major phase of mobile telecommunications standards
beyond the current 4G/IMT-Advanced standards.
NGMN Alliance or Next Generation Mobile Networks Alliance defines 5G
network requirements as:
Data rates of several tens of Mb/s should be supported for tens of thousands
of users.
1 Gbit/s to be offered, simultaneously to tens of workers on the same office
floor.
Several hundreds of thousands of simultaneous connections to be supported
for massive sensor deployments.
Spectral efficiency should be significantly enhanced compared to 4G.
Coverage should be improved.
Signaling efficiency enhanced.
Latency should be significantly reduced compared to LTE.
Next Generation Mobile Networks Alliance feel that 5G should be rolled out
by 2020 to meet business and consumer demands. In addition to simply
providing faster speeds, they predict that 5G networks will also need to meet
the needs of new use-cases such as the Internet of Things as well as
broadcast-like services and lifeline communications in times of disaster.
1.2.3 (b) HISTORY OF Ericsson
1876 Lars Magnus Ericsson opens telegraph repair
workshop
1881 First major contracts won in Norway, Russia and
Sweden

 1900 1000 employees globally, SEK 4 million in sales and

50,000 telephones produced
1902 Sales office opens in US
1905 First acquisition made in Mexico
1923 First automatic 500-point switches in service
1946 Foundation for research into television established
1950 LM Ericsson telephone exchange supports world's
first international call
1977 First digital telephone exchange (AXE) installed
1988 First GSM system order from Vodafone, UK
1991 AXE lines exceed 105 million in 11 countries, serving
34 million subscribers
2000 Ericsson becomes world's leading supplier of 3G
mobile systems
2001 Ericsson conducts the first 3G call for Vodafone, UK
2005 Ericsson wins biggest contracts to date to manage
operator 3's networks in Italy and the UK
2008 Research center established in Silicon Valley, USA
2009 Verizon and Ericsson collaborate to carry out first
data call on 4G network
2011 Ericsson completes the acquisition of Telcordia
2012 Ericsson completes the acquisition of BelAir

Governance Structure

1.2.4 BOARD OF DIRECTORS

Board members elected by the Annual General Meeting of
shareholders 2015
Leif Johansson (first elected 2011)
Chairman of the Board of Directors, Chairman of the
Remuneration Committee and of the Finance Committee
Anders Nyrn (first elected 2015)
Deputy Chairman of the Board of Directors, Member of the
Finance Committee
Jacob Wallenberg (first elected 2011)
Deputy Chairman of the Board of Directors, Member of the
Finance Committee

 Roxanne S. Austin (first elected 2008)

Member of the Remuneration Committee
Nora Denzel (first elected 2013)
Born 1962. Master of Science in Business Administration, Santa
Clara University, USA. Bachelor of Science in Computer Science,
State University of New York, USA.
Brje Ekholm (first elected 2006)
Member of the Remuneration Committee
Alexander Izosimov (first elected 2012)
Member of the Audit Committee
Ulf J. Johansson (first elected 2005)
Chairman of the Audit Committee
Sukhinder Singh Cassidy (first elected 2015)
Born 1970. Bachelor of Arts Degree in Honors Business
Administration from the Richard Ivey School of Business,
University of Western Ontario, Canada.
Kristin Skogen Lund (first elected 2013)
Member of the Audit Committee
Hans Vestberg (First elected 2010)
Born 1965. Bachelor of Business Administration and Economics,
University of Uppsala, Sweden.
Board Chairman: Svenska Handbollfrbundet.
Board Member: Thernlunds AB and UN Foundation.
Holdings in Ericsson: 333,329 Class B shares1.
Principal work experience and other information: President and
CEO of Telefonaktiebolaget LM Ericsson since January 1, 2010.
Previously, First Executive Vice President, CFO and Head of Group
Function Finance and Executive Vice President and Head of
Business Unit Global Services. Various positions in the Group
since 1988, including Vice President and Head of Market Unit
Mexico and Head of Finance and Control in USA, Brazil and Chile.
International advisor to the Governor of Guangdong, China and
co-chairman of the Russian-Swedish Business Council. Founding
member of the Broadband Commission for Digital Development,
and heading the Commissions task group on the post 2015

development agenda. Member of the Leadership Council of the

United Nations Sustainable Development Solutions Network.
1.2.5 (a) ERICSSON VISION STATEMENT
Ericsson vision is a Networked Society, where every person and every
industry is empowered to reach their full potential
Professionalism
Respect
Perseverance
Believe a better, more sustainable world will take shape when all people are
connected. Ericsson has long envisioned the arrival of a Networked Society:
one in which connectivity brings people closer together than ever before,
where collaboration is part of everyday life, and where every person and
every industry is empowered to reach their full potential. Mobility is fueling
this change, and with more than 40 percent of the worlds data flowing
through networks that we manage, we have a unique opportunity to lead this
transformation.
1.2.5 (b) Ericsson MISSION STATEMENT
We lead transformation through mobility. The potential of the Networked
Society lies in transformation through mobility. Transformation in the way
people

organize

their

individual

lives

and

carry

out

vital

tasks.

Transformation in the way we work, the way we share information, and the
way we do business. Transformation in the way we consume and the way we
create.
1.2.6 CORE COMPETENCIES
Respect. Professionalism. Perseverance. These are the core values that
define Ericsson culture and guide us in our daily work and in the way we do

business. They guide us in our commitment to our customers a

commitment that is bound by trust, innovation and performance.
1.2.6 CORE COMPETENCIES

Innovation: Unique and compelling solutions valued by our customers

and aligned to our brands

create competitive advantage

and

differentiated shareholder value.

Operational Excellence (OPEX): A methodology for solving problems &

continuous improvement of products & processes through pursuit,
acquisition, and utilization of knowledge using critical thought and
planned experimentation helps us achieve operational excellence.

Customer Excellence: Excelling the customer expectation from the

company, its brands, products and services are a three-step process.
The three steps are: Know a customer, Be a customer, Serve a
customer.

Knowing a customer helps us know who our customers are, how to

treat them, how we add value, and what the drivers of brand loyalty are. This
information is gathered from the customer's data base history. This way we
are better able to customize products for them and recommend the right
product to solve problems. Being a customer is important to share customer
knowledge and insights, drive actions based on customer insights, be
passionate about our brands and customer loyalty and provide a positive
voice for our brands. We show empathy for customers and seek to resolve

their problems by creating consistent customer touch-points, with our

endeavor always being to provide unique solutions for the customer.

1.2.7 PRODUCTION
MANUFACTURING FACILITIES IN INDIA

Ericsson Supply Site Jaipur awarded "Challengers Award - Large

Business" at the Frost & Sullivan Green Manufacturing Excellence Awards
2013
Complements Ericssons recent achievement of meeting its global
sustainability targets a year ahead of schedule.
Recognizes effective deployment of Green Manufacturing Practices at
Ericsson
Ericsson today announced that its manufacturing Supply Site in Kukas,
Jaipur, received the Challengers Award Large Business at the Frost &
Sullivan Green Manufacturing Excellence Awards. Ericsson won this
award after a stringent assessment done by the Frost & Sullivan
representatives, who appreciated Ericssons approach to reduce its own
carbon footprint consistently and life cycle management solutions for
products/solutions development.

Speaking on the occasion, Daniel Sundelius, Head Ericsson Supply Site

Jaipur said, "We are delighted to have received this award from Frost &
Sullivan. Sustainability and Corporate Responsibility (CR) have always
been a priority at Ericsson and a natural part of our identity since our
commencement. This award recognizes the effective deployment of Green
Manufacturing Practices at Ericsson. We have been committed towards
identifying and implementing sustainable manufacturing practices in our
operations and supply chain."
The Ericsson Supply Site Jaipur was Indias first such telecom equipment
site set up in 1994 at Kukas, Jaipur (Rajasthan). It has been critical in
addressing local market demand from customers keeping in mind the
companys sustainability initiatives. At this supply unit, Ericsson manages
production lines providing equipment for radio access network, core
network, transmission solutions and modules. Over the years, Ericsson
India has significantly increased its local production capabilities both in
terms of capacity and cutting edge technology. Ericsson expanded its
existing manufacturing level from AXE wireline switching to become the
first multinational company to set up manufacturing of GSM Radio Base
Station (RBS) series at its facility in Kukas, Rajasthan. In year 2011,
another assembly line was added to increase the production capacity.
Ericsson is now extending its capabilities towards exports from India.
As a part of the assessment process, Frost & Sullivan evaluated initiatives
taken and results achieved towards Reduce, Reuse and Recycle of
Materials, Water, Energy, Emissions, Effluents, Waste and Products and
Services. It also captured the efforts made by Ericsson Supply Site Jaipur
towards sustainable manufacturing practices, creation of a safe workplace
for employees and impact on society on account of the plants operations.

Frost & Sullivan launched the Green Manufacturing Excellence Awards in

2009. The objective of this award platform is to propagate the concept of
sustainable development and assist companies in adopting these
concepts through assessments, feedback, benchmarking and sharing of
best practices. The annual cycle ends with recognizing companies, who
have been the frontrunners in the sustainable development journey on a
national platform.1.2.8 ERICSSON BRANDS

Ericsson has received three prestigious brand awards this month. On April
12, Ericsson received an EFFIE/THE BEST BRAND award in the Corporations &
Organizations category for its brand adaptation project in Russia. Just a few
days later, on April 17, The Networked Society, Ericssons global brand film
created in 2011, received two gold medals at the New York Festivals Worlds
Best Television & Films awards.

mobile broadband

LTE

Networked Society

sustainability

connectivity

operator

services

applications

consumers

TV

4G

ICT industry

network operators

broadband

OSS/BSS

BSS
1.2.9 ERICSSON INDIA GLOBAL Pvt LIMITED Noida, Kolkata,
Chennai, Bangalore

Communication is changing the way we live and work. Ericsson plays a

key role in this evolution, using innovation to empower people, business and
Society. Ericsson is not only the worlds leading provider of
telecommunication equipment it is also a global services leader with a
portfolio that includes network rollout and professional services, such as
managed services, consulting and education, systems integration and
customer support.

At Ericsson we use innovation to empower people, business and

society. We envisage a Networked Society that is sustainable, and where
everything that can benefit from a connection will have one. Our mobile and
fixed networks, multimedia solutions and telecom services make a real
difference to peoples lives, and the world we live in. Ericsson is the worlds

fifth largest software company and among the top-10 global IT services
organization. Spearheading the organizations services strategy is Ericssons
Global Delivery Model with has four centers around the world India, China,
Mexico and Romania.

Ericsson India Global Services (EGI) is the largest and the fastest
growing Global Services Center (GSC) that delivers a wide array of multivendor and multi-technology ICT services to leading telecommunication
operators across the world. From managed services to application
development & management, consulting, systems integration, product
engineering, Customer Support, R&D and outsourcing EGI offers the full
gamut of services for telecommunication operators.The width and the depth
of EGIs service portfolio offers its talented team of over 19000 people (as on
March 31st, 2015) unique opportunities to work on frontier technologies
creating solutions that shape the future of the telecommunication industry.

Consulting to outsourcing: EGIs range of services helps operators

around the world to focus on their core business of attracting, serving and
retaining customers. Operators can minimize risk by engaging EGI to
integrate equipment from multiple vendors and handle technology-change
programs, as well as to design and integrate new solutions. EGI runs the
worlds largest Network Operations Center (NOC) managing more than 300
million subscribers. It also has a strong telecom R&D operation that is a hub

for innovation and end-to-end lifecycle management. EGI is strongly

supported by Ericssons 10 Regions covering 180 countries.

To be the ICT Offshore services leader, EGIs mission is to deliver ICT

services to the operator segment globally and perform R&D for Ericssons
products in the areas of OSS, BSS, IP & Broadband and BUSS in Revenue
Management and aims to become the undisputable ICT offshore services
leader in the Telecom industry by providing a complete set of end to end
capabilities for the converged IP.
Ericsson Share Prices

2015-11-04

+/-(%)

HIGH

LOW

ERIC-A (SEK) 79.00

1.61

79.50

77.95

ERIC-B (SEK) 84.55

2.18

84.70

83.15

ERIC (USD) 9.92

1.69

9.92

9.81

Egi organization

Scope of
Operations
Global
services
India (GSI) is
a corner
stone in
BUGS Global
delivery
strategy. GSI
is the

organizational name of the BUGS operation and operates in accordance to

BUGS Service Delivery strategy, processes and tools.
There are some GSI organizational exceptions which are important to take
into account while reading this GSI OD:

GSC Head - This role belongs to the GSI Head.

GNOC Head - This role belongs to GSI Head

MS-IT is structured below CSI-ADM & PMO and new structure

is updated in MS
blueprint.

Head of CS Reports to Head of GSI however receives

Functional directions from GSO organization and Operational
Directions from BL PRS.

Service Delivery Strategy & OD is built under Strategic

Program and Technology& Quality.

Security management Function is built under Technology

and Quality

All support functions for GSI are residing below GSI Head.
GNOC Head & MS Delivery Head are the two defined units below Head of GSI.

The purpose of GSI Ope rational Description is to define how GSI would
function in order to leverage the benefits of global scale and Ericsson ways of
working. In addition, this document identifies the specific ways of working
that are unique to the GSI.
Below is the GSI organization and reporting structure.

The details of the units are as follows:

Operations
Operations in GSI is responsible to operate, manage and monitor the
Customers telecommunications (services and resources) provided to its endusers, covering all the domains of a MS contract (Network, Services and
BSS/OSS). The actual scope of the deliverable for each customer is defined in
the WLA which generally is back to back aligned with Customer MS Contract.
From MS Contract delivery perspective, the main service functions are Assurance, Fulfillment, Service Desk which are internally supported by
Operations Support, Operational Excellence, Automation and Demand
Management.
Further the process deployment is handled by GDF to support MSTOP
implementation wherever needed
Refer to Operational Description of Operations for details:
http://erilink.ericsson.se/eridoc/erl/objectId/09004cff86e53d0f?docno=EGI13:014411Uen&action=approved&format=msw8
Customer Support
Customer Support India offers the full suite of Customer services ranging
from Global support, Local support, PSM, SUM, Integration Support, Network
Level Support & Proactive Support. Customer Support India has an
assignment for all Competencies viz Core Networks, Radio Access Network,
BSS, OSS and DU IB. The dedicated Customer Support Team provides 24X7
supports across a wide array of services including GSM, WCDMA, LTE,
Wireline and CDMA to various regions. The unique combination of global
competence and local presence ensures round the clock support and an
immense capacity to respond to situations requiring immediate attention.
Apart from the above we have also started the following:
ERT services including Help Desk function within Tier 1

RPCM function
Proactive Support in all domains
SWDP for RAN & Core
Building up the Secure Support function (Solution Support)
In addition to this we have strong competence in carrying out activities like
Multi vendor HLR Migration, CUDB migration, IN migration, RAN Integration,
OSS integration and also MDE development.
Refer to operational description of CS for details.
http://anon.ericsson.se/eridoc/component/eriurl?docno=EGI13:007989Uen&objectId=09004cff866df5f1&action=approved&format=pdf
CSI - ADM & PMO
CSI, ADM unit is a function of GSI organization responsible for building
competence & capability in Consulting, System Integration and IT Application
Development & Maintenance domains. It works with regions right from
presales to delivery phase by providing services to create solutions best fit
for end customer requirements and execution of delivery projects.
The purpose of CSI-ADM unit is to enable Ericssons ICT journey and strategy
towards providing services through an industrialized, scalable, best in class
global delivery set up. It strengthens BUGS service delivery offerings towards
end customer and overall revenue at large.
Refer to operational description of CSI for details.
http://anon.ericsson.se/eridoc/erl/objectId/09004cff86594f06?docno=EGI13:006224Uen&action=approved&format=msw12
Network Engineering
Network engineering is an SDU within GSI aligned with the Ericsson Service
Delivery Model. It provides MS and PRS (NRO & NDO) engineering deliveries
across the regions through its talent pool located across various GSI centres
in India. The unit provides both remote and onsite support for the
following Services across all competence domains within the ICT arena
Refer to Operational Description of NE for details.
http://erilinkkl.ericsson.se/eridoc/erl/objectId/09004d038040e40d?
docno=EGI-13:017965Uen&action=approved&format=msw8

Tactical Planning & Implementation

Tactical Planning and Implementation unit is a function of GSI organization
which is responsible for Planning and Implementing the lowest Cost Structure
and Optimal Resource Mix while enabling the fastest Competence Buildup
within Ericsson Global Services Center India (GSI) Operations. The team is
additionally responsible for driving all in-shored Global Transition and
Transformation (GT&T) projects, in line with the 6 step transformation model
and is aligned with the Ericsson Global delivery organization and strategy.
Few key responsibilities of TP&I team are listed below:
Monitor the Regional / GSC level HC figures in line with the agreed TRCP
figures.
Drive implementation of efficiency projects (all PAs) through GT&T
programs (Local Efficiency and Off-Shoring).
Ensure that sending and receiving organizations for off-shoring are
synchronized, and that investments in staff build up and knowledge transfer
happens in time to achieve the business case, but still avoiding unnecessary
under-absorption.
Support the BU Driver and/or the BUGS GSI Management(Senior
Management of GSI Delivery Units) to allocate Local transformation
Managers for regional delivery projects and monitor their performance
requesting changes whenever is needed.
Service Delivery Readiness 0-12 months (operational & tactical) & 12-18
months (strategically)
Plan, Implement and Follow-up on Lowest Cost of Sales Structure in own
Region / GSC (Headcount, Sourcing and Supply)
Ensure that MORE and AH data is maintained and reported according to the
Regional / GSC ways of working.
For each request, the RM pro-actively finds the best possible resource /
service solution for the requesting unit and Ericsson. Presenting alternative
resource solutions in case of prioritization
Resource Management SPOC for EGI.
Management escalation related to resources, quality and emergencies for
delivery to EGI customers

 Drive the Business with Region like managing the demand, escalations,
T&T & governance
Accountable for all transition and transformation activities, from the
Regions / GSC, to meet the defined cost criteria and savings according to the
approved business case.
Support the implementation of processes, methods, tools and BUGS
blueprints to achieve gains of efficiency in the service delivery chain.
Refer to operational description of TP& I for details.
http://anon.ericsson.se/eridoc/erl/objectId/09004cff8502ce90?docno=EGI11:003430Uen&action=approved&format
Communications
Communication unit within EGI and GSI, as a whole, is strongly dedicated to
build and protect Ericssons perception and brand through integrated
communications with internal and external stakeholders as well as focus on
strong brand management.
The unit provides operational excellence in communications by:
1. Closing perception gaps by communicating clear messages that
overall support the business and the brand in an efficient way
2. Using communications to ensure that all stakeholders get a better &
holistic understanding of the Ericsson strategic direction, objectives and
performance
3. Ensuring that communications to all stakeholders is on a fair and
equal basis according to regulatory requirements
Additionally, Communications in overall supports Ericssons Business through
engaged employees and communicative leaders. The unit effectively
communicates and supports leaders to create condition for:
1. Communicative leadership
2. Employee engagement
3. Willingness to change by putting content into context
4. Making the complex simple
5. Putting business priorities in focus

Communications within EGI and GSI is same and maintained in uniform

manner; however, we have two separate mailing IDs for EGI and GSI to
ensure that right messages reach the right audience and avoid unintended
spam.
Communications is also responsible for driving EGIs Corporate Social
Responsibility agenda and activities.
Refer to Operational description of Internal Communications for details.
http://anon.ericsson.se/eridoc/erl/objectId/09004cff864e79eb?docno=EGI13:005308Uen&action=approved&format=pdf
Common Units
Following units are common between EGI and GSI and have shared
responsibilities.
Technology & Quality
This is a shared unit and the high level details are mentioned in EGI OD (refer
reference section).
Human Resource
This is a shared unit and the high level details are mentioned in EGI OD (refer
reference section).
Finance & Support
This is a shared unit and the high level details are mentioned in EGI OD (refer
reference section).
ITICS
This is a shared unit and the high level details are mentioned in EGI OD (refer
reference section).
Roles and Responsibilities

Responsible for global delivery resources and centralized

Service Delivery
GSI is centrally responsible for service delivery towards all
the regions. The demands are received directly from the
regions or through TP&I and other demand management
teams in Software delivery units. The SDUs in GSI are
responsible for global delivery resources and service delivery.

Responsible for Service delivery competence and resource

management
GSI is responsible to develop the competence of the
resources to meet the ever changing and dynamic business
requirements. This is achieved through Strategic Learning
plan, training needs identification and individual competence
development plan. All the software delivery units in GSI are
responsible for delivering services and building competencies.

Support with resources upon request from the regions for

peak situations, New Product Introductions(NPI) and as well as
for specific competencies.
GSI is responsible for providing support to regions with
resources and competence. GSI also provides support in the
areas of solutioning for new opportunities. These requests
are received through regions directly or indirectly through
Business Management/Demand management teams in
software delivery units.

Target Process Driver

CFO of EGI along with his primary responsibilities also ensures the
implementation of Target setting process across GSI. GSI follows the
standard target setting process.

Ways of Working
GSI is an service organization and by virtue of its business it follows Service
Delivery process as part of Ericsson Business Process (EBP).
The ESDM updates are received from SD&O as per defined planned and the
same are communicated for implementation as applicable for all respective
units.
GSI also use Operations Maturity Model (OMM) for continuously improving
the implementation of Ericsson defined processes.
GSI carries a special charter to reduce cost-levels beyond the Ericsson
standard levels by applying large scale, offshore practices & methods, new IT
infrastructure and tools complementing Ericsson's portfolio.
Standard Service Delivery
The WP Operational Governance is described in WP governance & Steering
Principles.

HR Operating Models
HR ways of working is defined in the HR Operating Model.
Communications
Participate, share knowledge and re-use best practice in the GSC
Communication Community where Communicators from all GSCs as well as
BUGS Head of Internal and External Communications and Head of SD&O
Communication participates.
GSI Delivery Models
GSI has different types of delivery models: GNOC, SSD, MS SERVICE
DELIVERY DIRECTOR for MS, OS, Sr. CPM, IT-MS, CS and RWPBS.
The table below outlines the specific WoW for GSI delivery model.
Delivery
Model

GSC
Proposition
/
Capabilitie
s

Scope
Agreements

Order
Services
/
Resourc
es

Deliver
y

Cost
Recoveri
ng

Delivery
Follow up

GNOC

Capabilitie
s defined
by MS
strategies

WLA & SLA

MS
Global
Assignm
ent

MS
process
es

MS cost
model
via EAB

MS
Operations
Support
Follow up
Reports

SSD

Capabilitie
s defined
in tactical
Allocation

Defined WP
activity scope

WP
Request
& OSDP

WP
Deliver
y
Process
es

SSD
Standard
Cost
Model

Operations
Support
Follow up
Reports

Resource
& Work
Package
Based
Service

Domain
Project
capabilities Scope/WLA/Prop
defined in
osals
tactical
Allocation

OSDP

Service
Deliver
y
Executi
on
Process
es

ICRRB &
Purchase
Order

Operations
Support
Follow up
Reports

Customer
Support

Capabilitie
s defined

CSR

CS
Deliver

CS cost

Operations
Support

Tier 1 Central
WoW/WLA and

by SD&O
Tier 2 WLA
Delivery
manageme
nt together
with PRS
Portfolio
MS-IT

Capabilitie
s defined
by MS
strategies
and
demarked
by GSI in
GSI OD

y
Process
es

model

Follow up
Reports

WLA & SLA

MS
Global
Assignm
ent

MS
process
es

ICRRB /
Purchase
Order

MS
Operations
Support
Follow up
Reports

Global
Capabilitie
PMO India s for
holding
principal
and Sr.
CPM s

WLA, SLA and

Global PMO
defined scope

Global
Assignm
ent

CPM
process
es

ICRRB /
Purchase
Order /

GPMO
Reports

Network
Engineeri
ng

Capabilitie
s Defined
in GSI OD

Defined Time & Global

Material and
Assignm
also WP
ent
activities binded
by GSI and
Region defined
WLA and SLA.

Time &
Materia
l, WP,
MS

ICRRB /
Purchase
Order /
Fixed
cost
model as
GSCI
manage
d
Deliverie
s

Network
Engineerin
g tools
based
report and
Operations
Support
Follow up
Reports

MS
SERVICE
DELIVERY
Head for
MS

Capabilitie
s Defined
in GSI OD

MS Delivery
Scope

MS
Deliver
y
Process
es

MS Cost
Model

MS
Operations
Support
Follow up
Reports

Global
Assignm
ent

Internal Communication
There are several formal and informal communication fora within GSI.
Examples of these include:

EGI Intranet

Annual All Employee Meeting (AEM)

News Letters & Mailers

Leadership collateral and events

Videos

Campaign collateral

Participate, share knowledge and re-use best practice in the

GSC Communication
Community where Communicators
from all GSCs as well as BUGS Head of Internal and External
Communications and Head of GSO Communication
participates
A communication plan is prepared which includes all the major
communication forums with schedule.

Organizational Interfaces
GSI interacts with the Function/Support function heads through various
forums. GSI also has interface with various regions through Regional
Governance meetings with all Regional Operations Head. GSI interacts with:
a) Group Functions
b) Units with Group Responsibility
c) Business Units
d) Regions
e) Our Employees
f) Our Partners
g) Our Suppliers
h) Governments and Regulators

Legal Entities
Global Services India is not a legal entity and have no legal capacity. As a
consequence cannot enter into contracts or employ personnel, as this is
always done through appropriate legal entity.
References
EGI OD:
http://anon.ericsson.se/eridoc/erl/objectId/09004cff8410da69?docno=EGI10:000125Uen&action=approved&format=pdf
Ericsson R&R: 00024-3212 Uen
BUGS R&R: EAB-14:028977Uen
Annexures
Alignments and Deviations as per GSC Blueprint
Annexure A - Global Service Center

Global Service Center

GSC BP function

GSC implementation in GSI

GSC Head

Head of GSI also head of GSC functions Ensure centralize Global

in GSI
scale

Annexure B - Global Network Operations Centre

Comment

Global Network Operation Center (GNOC)

GSC BP function

GSC implementation

Comment

GNOC Head

GNOC head is Head of GSC functions in This split specifies

GSI. Operational Units below GNOC :
industrialization and
Global scale.
NOC Operations Head Head of
Operations GSI.
NOC Engineering Head Head of
Engineering GSI
NOC MSIT Head of CSI&ADM in GSI.
NOC ITICS Head of ITICS in GSI
[Securities]

MS Service
MS delivery Head is Head of PQM / MS
Delivery
Delivery Head below Head of GSI.
Director/Manager

MS Engineering

MS Engineering Head is Head of NE and

Functionally below GNOC Head

Agreement
Management &
Sales Support
(MS Contracts)

Each SDU / BU in GSI are enabled to

handle this function as applicable. The
specifics are as below:
CSI- This function is under Demand
management or Engagement
Management.
NE- This function is under Business
Management/Regional Delivery
Operations This function is under
Demand Management and Agreement
Management.

New MS Blueprint for GSI

to ensure industrialized
MS Operational model for
a large Organization like
GSI and hence GSC India.
This is done in alignment
with MS Head SD&O.

Industrialized model
implemented for a large
scale Organization GSI
and hence GSC functions
within GSI / GSC India.

Process
Automation &
Tools

This function is defined below Head of

T&Q reporting to head of GSI, however
specific NOCs have separate teams for
process implementation and roll out as
below:
CSI This function is under Service
Delivery.
NE This function is under Network
Analytics.
Operations - This function is under
Operations Support

Customer
Network Change
Management

Change Management team is under

Operations Support (under Operations)
and is aligned as per MS blueprint. It is
responsible for change arising from
Operations and Network Engineering
activities.

This is a EGI function

defined for GSI and all
GSC functions within GSI.

Annexure C - Standardized Service Delivery

Standardized Service Delivery (SSD)

GSC BP function

GSC implementation

SSD Head

SSD is a virtual organization and is

present in CSI, CS and NE. SSD Function
for GSI is defined below Network
Engineering. SSD head is functionally
reporting to head of GSI.

SSD Area
Manager

This role is present in NE, CSI.

IWP Technical
Architecture

This role is present in CSI and Network

Engineering and reports to SSD Head.

Comment

Since SSD is a virtual organization hence

this role is performed by SWDP in
Customer Support

Annexure D - Customer Support

Customer SW Support (CS)

GSC BP function

GSC implementation

CS Head

Head of customer support is defined

below Head of GSI.

CS Tier 1 Head

Head of Tier 1 is defined below Head of

customer support.

CS Tier 2 Head

Head of Tier 2 is defined below head of

Customer support.

Comment

Annexure E - Operations Support

Operations Support (OS)

GSC BP function

GSC implementation

Comment

OS Head

Head of Operations Support is defined

below Head of Operations fro MS
Operations. However functionally reports
to Head of GSI.

Please refer to
Operations support
function below
Operations.

PQM

PQM pool is defined below each GSI

Ensure scale of deliver
specific SDU / BU for MS and for multi
and robustness.
SDU / BU this pool is defined below Head
of PQM / MS delivery Head below Head
of GSI.
CSI-ADM PQM or MS Delivery functions
are held below Service Delivery &PMO
function.
Network Engineering PQM or MS delivery
functions are held with Region specific
delivery units [RD Functions].
Operations PQM or MS Delivery functions
are held below Operations Support
Head/Operations Head.

Agreement
Each SDU / BU in GSI are enabled to
Management and handle this function as applicable. The
Sales Support
specifics are as below:
CSI- This function is under Demand
management or Engagement
Management.
NE- This function is under Business
Management/Regional Delivery
Operations This function is under
Demand Management and Agreement
Management.

Process & Tools

Specific NOCs have separate teams for

process implementation and roll out as
below:
CSI-ADM&PMO This function is under
Delivery Excellence
NE - This function is under Network
Analytics
Operations - This function is under
Operations support

Annexure F - Resource Based Services

Resource Based Services (RBS)

GSC BP
function

GSC implementation

RBS Head In GSI this function is called as Resource and Work

Package based Services. SDU heads are RBS heads.
RBS CSI&ADM Head is Head of CSI&ADM
RBS NE head is Head of Network Engineering
RBS
Compete
nce
Domain

This function is under Competence Domain Head in NE.

GSC
Project
Office

Project office is under Competence Domain in NE

Project Office is under Service Delivery in CSI&ADM

Comments

Annexure G - Support Functions

Business Control
GSC BP
function

GSC implementation

Business Head of Finance and support EGI holds this position for GSC
Control
functions in GSI. Head of Finance and Support reports to
Head
head of GSI.
Order
Office

This Functionality is placed below Finance & Support.

However this function is responsible for booking and
managing Orders and Finance.

Comment

Human Resources
GSC BP function

GSC implementation

HR Business
Partner

Head of Human Resource EGI also holds this

position for GSC functions in GSI. This is defined
and set up as per Global HR Blueprint.

Comment

Service Delivery Strategy & OD

GSC BP function

GSC implementation

Service Delivery
Strategy & OD

This function is divided among two functions in GSI

Strategic Program Management and Quality.

Comment

Communication
GSC BP function

GSC implementation

Internal
Communication

EGI Head of Communication is delivering this

function for GSC India.

Comment

External
There is no external communications approval for
Communications GSC s or EGI or GSI. External communication is
under Region RINA and they are in term serving for
GSI.
Global Delivery Partnership
GSC BP function

GSC implementation

Global Delivery
Partnership

Complete Functionality is divided among the Heads

of two EGI functions; these two functions are
applicable and delivering for GSI too.
The said functions are Sales and Marketing and
TP &I. Both these functions are reporting to Head
of EGI / GSI.

Comment

Tactical Planning & Implementation

GSC BP function

GSC implementation

Comments

Tactical Planning This role is played by Head of TP&I who reports to

&
Head of GSI.
Implementation
Global Transition This role is played by Transformation Head who
& Transformation reports to Head of TP&I
GRM

This function is referred as Resource Fulfillment

who reports to Head of TP&I

Security Management
GSC BP function

GSC implementation

Security
Management

This function is implemented below the Head of

Technology and Quality in EGI.

Comment

Sales Opportunity Generation (SOG)

GSC BP function

GSC implementation

SOG Driver

This function lies within each SDU / BU.

Comment

NE This function is under Business Management.

CSI-ADM&PMO This function is under Competence
Domain.
All these functions work with respective Regional
interfaces and do not interface with end customer
of Ericsson directly
Individual Assessments
GSC BP function

GSC implementation

Comment

Individual
Assessment
Driver

This function is under Human resource in EGI.

IT
GSC BP function

GSC implementation

IT

This function is divided between Technology &

Quality and IT Infrastructure and Cloud [ITICS] .
Technology & Quality does all new development
in IT space like Go-Open, IT Infrastructure and
cloud hold the operations part.

Comment

Facility Management
GSC BP function

GSC implementation

Facility
Management

EGI Facility Functions are handled by EGI Finance

and Support Function.

Comment

Change Information

S
No.

Date

Change Description

Documen Prepared /
t
Modified By
Version

17-Dec-2013

First version of GSI OD

First
version

Nupur
Chaudhuri

13-Jan-2014

Updated as per review comments in

discussion with Gunnel & Malay

Second
version

Nupur
Chaudhuri

10-Jun-2014

1. Updated as per OD template.

Third
version

Malay Goel

2. Duplicate information which is part

of units OD is removed.
3. Alignment & Deviations tables
moved to annexure.
4. Alignment & Deviations tables
updated to bring more clarity to map
GSI roles vis a vis GSC blueprint
5. Updated to incorporate Gunnel
Thompson (from GSO) comments

1.3 NEED FOR THE STUDY

Every organization needs inventory for smooth running of its activities. It
serves as a link between production and distribution processes. The
investment in inventories constitutes the most significant part of current
assets/working capital in most of the undertakings. Thus, it is very essential
to have proper control and management of inventories. The purpose of
inventory management is to ensure availability of materials in sufficient
quantity as and when required and also to minimize investment in
inventories. So, in order to understand the nature of inventory management
of the organization, I took this Inventory Management as a topic for my
project, to give findings and suggestions by adopting and analyzing different
inventory control techniques.
CHAPTER-II

REVIEW OF LITERATURE

2.1 MEANING OF INVENTORY

Inventory generally refers to the materials in stock. It is also called the
idle resource of a company. Inventories represent those items which are
either stocked for sale or they are in the process of manufacturing or they
are in the form of materials which are yet to be utilized.
It also refers to the stockpile of the products a firm would sell in future
in the normal course of business operations and the components that make
up the product.
Inventory is a detailed list of those movable items which are necessary
to manufacture a product and to maintain the equipment and machinery in
good working order.

2.2 TYPES OF INVENTORIES

A manufacturing firm generally carries the following types of
inventories:

Raw Materials.

Bought out parts.

Work-in-process inventory (WIP).

Finished goods inventories.

Maintenance, repair and operating stores.

Tools inventory.

Miscellaneous inventory.

Goods in transit.

Goods for resale.

Scrap Material.

2.3 REASONS FOR HOLDING INVENTORY

To stabilize production.

To take advantage of price discounts.

To meet the demand during the replenishment period.

To prevent loss of orders.

To keep pace with changing market conditions.

2.4 MOTIVES OF HOLDING INVENTORIES

The Transaction Motive which facilitates continuous production and

timely execution of sales orders.

The Precautionary Motive which necessities the holding of inventories

for meeting the unpredictable changes in demand and supplies of
materials.

The Speculative Motive which induces to keep inventories for taking

advantage of price fluctuations, saving in re-ordering costs and
quantity discounts etc.,.

2.5 COSTS ASSOCIATED WITH INVENTORY

Production cost.

Capital cost.

Ordering cost.

Carrying cost.

Shortage cost.

2.6 INVENTORY CONTROL

The main objective of inventory control is to achieve maximum
efficiency in production & sales with minimum investment in inventory.
Inventory control is a planned approach of determining what to order,
when to order and how much to order and how much to stock, so that costs
associated with buying and storing are optimal without interrupting
production and sales.
2.7 BENEFITS OF INVENTORY CONTROL
The benefits of inventory control are:

Improvement in customers relationship because of the timely delivery

of goods and services.

Smooth and uninterrupted production and hence, no stock out.

Efficient utilization of working capital.

Economy in purchasing.

Eliminating the possibility of duplicate ordering.

2.8 PRINCIPLES OF INVENTORY CONTROL

Inventory is only created by spending money for materials and the

labour and overhead to process the materials.

Inventory is reduced through sales and scrapping.

Accurate sales & production schedule forecasts are essential for

efficient purchasing, handing & investment in inventory.

Management policies which are designed to effectively balance size

and variety of inventory with cost of carrying that inventory are the
greatest factor in determining inventory investment.

Forecasts

help

determine

when

to

order

materials.

Controlling

inventory is accomplished through scheduling production.

Records do not produce control.

Control is comparative & relative, not absolute. It is exercised through

people with varying experiences and judgment rules & procedures
establish a base from which the individuals can make evaluation and
decision.

With the consistent practices being followed, inventory control can

become predictable and properly related to production and sales
activity.

2.9 INVENTORY CONTROL TERMINOLOGY

Demand:

It is the number of items required per unit of time. The demand may be
either deterministic or probabilistic in nature.
Order cycle:
The time period between two successive orders is called order cycle.
Lead time:
The length of time between placing an order and receipts of items is
called lead time.
Safety stock:
It is also called buffer stock or minimum stock. It is the stock or
inventory needed to account for delays in materials supply and to account
for sudden increase in demand due to rush orders.
Inventory turnover:
If the company maintains inventories equal to 3 months consumption.
It

means that inventory turnover is 4 times a year

i.e., the entire inventory is used up and replaced 4 times a year.

2.10 INVENTORY COST RELATIONSHIPS
There are two major cost associated with inventory. Procurement cost
and carrying cost. Annual procurement cost varies with the numbers of
orders. This implies that the procurement cost will be high, if the item is
procured frequently in small lots. The annual procurement cost is directly
proportional to the quantity in stock. The inventory carrying cost decreases,
if the quantity ordered per order is small. The two costs are diametrically
opposite to each other. The right quantity to be ordered is one that strikes a

balance between the two opposition costs. This quantity is referred to as

Economic Order Quantity.
2.11 ECONOMIC ORDER QUANTITY
MEANING
A decision about how much to order has great significance in
inventory management. The quantity to be purchased should neither be
small nor big because costs of buying and carrying materials are very high.
Economic order quantity is the size of the lot to be purchased which is
economically viable. This is the quantity of materials which can be purchased
at minimum costs. Generally economic order quantity is the point at which
inventory carrying costs are equal to order costs. In determining economic
order quantity it is assumed that cost of managing inventory is made up
solely of two parts i.e., ordering cost and carrying cost. The cost relationships
are shown in below figure.
FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY (EOQ)

Economic Order Quantity

Costs

Annual Total Cost

Annual Inventory
Carrying Cost
Annual Ordering Cost
Q* Economic Order Quantity
Order Quantity
2.12 SAFETY STOCK
MEANING
The

economic

order

quantity

formula

is

developed

based

on

assumption that the demand is known and certain and that the lead time is
constant and does not vary. In actual practical situations, there is an
uncertainty with respect to the both demand as well as lead time. The total
forecasted demand may be more or less than actual demand and the lead
time may vary from estimated time. In order to minimize the effect of
uncertainty due to demand and the lead time, a firm maintains safety stock,
reserve stocks or buffer stocks.
The safety stock is defined as the additional stock of material to be
maintained in order to meet the unanticipated increase in demand arising
out of uncontrollable factors.
In simple it is tells about which is used to protect against uncertainties.
Because it is difficult to predict the exact amount of safety stock to be
maintained, by using statistical methods and simulation, it is possible to
determine the level of safety stock to be maintained.

DETERMINATION OF SAFETY STOCK

If the level of safety stock is maintained is high, it locks up the capital
and there is a possibility of risk of obsolescence. On the other hand, if it is
low, there is a risk of stock out because of which there may be stoppage of
production. When the variation in lead time is predominant, the safety stock
can be computed as:
Safety Stock = (Maximum Lead time- Normal Lead time) * Demand

SAFETY STOCK

The service level of inventory thus depends upon the level safety
stocks. Large the safety stocks, there is a lesser risk of stock out and, hence,
higher service level. Sometimes higher service levels are not desirable as
they result in increase in costs, thus, fixing up a safety stock level is critical.
Using past date regarding the demand and lead time data, reliability of

suppliers and service level desired by management, safety stock can be

determined with accuracy.

2.13 ABC ANALYSIS

MEANING
The inventory of an organization generally consists of thousands of
items with varying prices, usage rate and lead time. It is neither desirable
nor possible to pay equal attention of all items.
ABC analysis is a basic analytical tool which enables management to
concentrate its efforts where results will be greater. The concept applied to
inventory is called as ABC analysis.

Statistics reveal that just a few items account for bulk of the annual
consumption of the materials. These few items are called A class items which
hold the key to business. The other items known as B & C which are
numerous in number but their contribution is less significant. ABC analysis
thus tends to segregate the items into three categories A,B & C on the basis
of their values. The categorization is made to pay right attention and control
demanded by items.

FEATURES OF ABC ANALYSIS

A Class (High Value)
B Class (Moderate Value)
1. Tight control on Moderate control

C Class (Low Value)

Less control

stock levels
2. Low safety stock Medium

Large

3. Ordered

Less frequently

Bulk ordering

Individual

Collective posting

frequently
4. Individual

posting in stores Monthly control

5. Weekly

Quarterly control

control

reports

Moderate efforts

Minimum efforts

6. Continuous
effort to reduce
lead time
ADVANTAGES

This approach helps the manager to exercise selective control & focus
his attention only on a few items.

By exercising strict control on A class items, the materials manager is

able to show the results within a short period of time.

It results in reducer clerical costs, saves time and effort and results in
better planning and control and increased inventory turnover.

ABC analysis, thus, tries to focus and direct the effort based on the
merit of the items and, thus, becomes an effective management
control tool.

2.14 FSN ANALYSIS

All the items in the inventory are not required at the same frequency.
Some are required regularly, some occasionally and some very rarely. FSN
analysis classifies items into fast moving, slow moving, nonmoving items.

2.15 INVENTORY TURNOVER RATIO

Kohler defines inventory turnover as a ratio which measures the
number of times a firms average inventory is sold during a year.

A higher turnover rate indicates that the material in question is a fast

moving one. A low turnover rate, on the other hand, indicates overinvestment and locking up of working capital on undesirable items.
Inventory turnover ratio may be calculated in different ways by
changing the numerator, but keeping the same denominator. For instance,
the numerator may be materials consumed, cost of goods sold or net sales.
Based on any one of these, the ratio differs from industry to industry.
Stock turnover is measured in terms of the ratio of the value of
materials consumed to the average inventory during the period. the ratio
indicates the number of times the average inventory is consumed and
replenished. By diving no. of days in a yeat by turnover ratio, the number of
days for which the average inventory is held, can be ascertained.
Comparing the no. days in the case of two different materials, it is
possible to know which is fast moving & which is slow moving. On that basis,
attempt may be made to reduce the amount of capital locked up, and
prevent over-stocking of slow moving items.
Net sales
Inventory turnover ratio =
Avg. inventory
No. of days in a year
Inventory velocity =
Inventory turnover ratio
2.16 A STUDY ON INVENTORY MANAGEMENT BY KINGTON
In this review Mr.. KINGTON, who as done the project about
Inventories at WOIL, it is constitute the most significant part of the current

assets of a large majority of companies in India. Raw materials, goods in

process and finished goods all represent various forms of inventory. Each
type represents money tied up until the inventory leaves the company as
purchased products. Because of the large size of the inventories maintained
by firms, a considerable amount of funds is required to be committed to
them. It is therefore absolutely imperative to manage inventories efficiently
and effectively in order to avoid unnecessary investments. One of the most
critical and time-consuming aspects of manufacturing is managing the tasks
of maintaining sufficient amounts of materials on hand at all times. One of
the main areas of the project is the analysis part where the data obtained
from the existing study is been utilized. For the analysis part, ABC analysis
was carried out. The norms were fixed for each of the inventory part taken
into account for the project. There by the inventory to be kept for the
production of each model was also arrived at.

2.17 A REPORT ON INVENTORY MANAGEMENT BY SUNIL

In this review Mr. SUNIL, who as done the project about A report
Inventory at WOIL, an Inventory Management System is an essential element
in an organization. It is comprised of a series of processes which provide an
assessment of the organizations inventory. The Inventory Management
System also aids the organization in achieving its goals and objectives with
the primary focus on adding value for the customers. The management of
inventory adds value for customers (quality, speed, flexibility, and cost), and
this is the primary consideration of the Operations Management System.
Inventory management is possibly one of the richest areas of operations
management, with many tools and techniques available to help managers
run their processes as effectively as possible.

In this project he made an analysis for Export Oriented Units (EOU) and
fixing norms for Coffee Maker, Coffee Grinder, Grind Mill & Micro Oven. After
finishing analysis he compares between the Suggested norms and Existing
norms. He also made an analysis of Washing Machine and their norms for
different classification of Washers at WOIL. Finally he used correlation with
Statistical Tools. He also classified EOUs & Washers products with ABC
Classification.
2.18 INVENTORY AS MANAGING INVENTORY BY WOLFE BAGBY
In this review Mr. WOLFE BAGBY explains inventory as Managing
inventory to Meet Profit Goals, Shortening the cash cycle, avoiding inventory
shortage, Avoid excessive carrying costs for unused inventory, Improving
profitability by decreasing cash conversion, JIT.
Getting smart about inventory
When a manufacturing firm works to gain greater control over
management of its inventory, it helps to know what this means for a
company. For starters, maximizing a manufacturers cash flow and
profitability includes keeping a watchful, discerning eye on changes in
supply and demand, which means simultaneously scrutinizing external
factors that might affect supply and demand.
Shortening the cash conversion cycle
Much of this can be accomplished when manufacturers update
their scheduling systems. The Web-based nature of an inventory
management system allows Electronic data interchange of projected
demand and vendor requirements are transmitted throughout the
distribution network. This, in turn, keeps the networks, production and
deliveries in near real-time synchronization with the latest network
inventory, forecast and actual demand information. Another way to

shorten the cash conversion cycle is to have clear channels of

communication with vendors. Still, advanced inventory management
software is nothing without a strong internal supply chain, especially
when loyal employees who want to work on behalf of the companys
goals support it.
Avoiding inventory shortage
Most manufacturers recognize that supplier inventories are
important. Even though more stock means higher total costs, the
alternative is often too little stock which tends to put the brakes on
operations. This means negative impact in more ways than one. One
obvious way to take precautions for avoiding inventory shortage is by
using more than one vendor in particular areas of the supply chain.
Avoid excessive carrying costs for unused inventory
Most companies need to reduce inventory in whatever way
seems most reasonable, considering the variables faced by the
manufacturer. This isnt to say that manufacturing firms will be
eliminating warehousing anytime soon. But, it is important to note that
drastic reductions in inventory costs are available to most any
company that wants better control. Much of this effort deals with
building collaborative relationships with suppliers to the point where
most inventory-related matters can be worked out. Consignment
inventory is another way to save inventory costs. Give someone else
the responsibility for moving inventory so it doesnt cost the
manufacturer as much to hold onto it
Improving profitability by decreasing cash conversion

Boosting financial performance is another benefit that comes

from better inventory management. In fact, a large number of
manufacturers enjoy significant savings and better performance by
choosing the approach to inventory reduction that works best for them.
One

vital

measurement

for

determining

how

effectively

manufacturers inventory management system is operating is referred

to as inventory turnover. Essentially, it measures how efficiently
inventory moves through the organization. In fact, manufacturing
executives are told never to underestimate the importance of
inventory turns. Gaining better control over accounts receivables
policies is another popularly reported approach for using inventory to
improve profitability. Depending upon the nature of business, early or
on-time payment discounts can be the incentive for moving inventory
faster.
JIT
For years, American manufacturers have strived for improved
inventory management systems. The closer they get to carry zero
inventories, the closer they get to reach the manufacturing efficiency.
Such thinking, combined with todays available technology, has
brought inventory management systems to a new level. Manufacturers
can now meet their customers demand without incurring the costs and
burdens that come from stocking excess inventory. Features such as
effective forecasting, vendor management and data management
control make it possible for manufacturers to achieve a much higher
rate of efficiency. These features enable manufacturers to seek to
manage inventory as a financial investment, as well as a method for
putting more money in their pockets.
2.19 A STUDY ON INVENTORY MANAGEMENT BY CHARLES ATKINSON

In this review Mr. CHARLES ATKINSON explains inventory as inventory

management topics, he explains average inventory levels, in this topic he
explained about two parts. The first half part of this article covers how to find
what inventory levels should be, and the second half covers how to evaluate
it..
Average Inventory Levels
Part I: How to Optimize Average Inventory Levels?
In this part, it provides a brief description for how optimal inventory
levels for materials are kept. Essentially, this section can serve as a starting
point for inventory managers. The First thing he determines the ideal
inventory levels is a material's Economic Order Quantity (EOQ). This is the
amount one should be ordering when you place orders.
Next he determines Safety Stock (SS). This is the amount that you
should have remaining when the EOQ arrives. This should be intuitive
because safety is what you have when your shipment arrives and when the
order arrives (EOQ) it gets added to the safety stock.
It is clear that average minimum and maximum level because you
might not receive the EOQ exactly when you planned to and therefore may
have more or less. On average you should have the SS amount when you
receive shipments. Between these two average minimum and maximum
values lies your long-term average inventory.
Part II: How to Assess (evaluate) Inventory Levels?
Average Inventory can be calculated by Simplistic Method.

Most methods of accounting take the beginning inventory of a period,

add it to the ending inventory of a period, and divide by 2. This essentially
provides the mathematical average for a given month.
Avg. Inventory = (Beginning Inventory+ (Beginning Inventory +
Units Produced-Units Sold))/2
Or more simply:
Avg. Inventory = (Beginning Inventory + Ending Inventory)/2

CHAPTER-III
OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
To analyse the efficiency of Inventory Management of Whirlpool of India Ltd.
SECONDARY OBJECTIVE
To identify optimum level of inventory which minimizes the cost.
To identify the safety stock level for various components.
To classify the various components based on its value and movements.
To identify inventory requirement of the company for the next year.

CHAPTER-IV
RESEARCH METHODOLOGY
4.1 RESEARCH
Research is a process in which the researcher wish to find out the end result
for a given problem and thus the solution helps in future course of action.
The research has been defined as A careful investigation or enquiry
especially through search for new facts in branch of knowledge
4.2 RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure
using, which researcher has to use facts or information already available, and
analyze these to make a critical evaluation of the performance.
4.3 DATA COLLECTION
Primary Sources

Data are collected through personal interviews and discussion with FinanceExecutive.
Data are collected through personal interviews and discussion with Material
Planning- Deputy Manager.
Secondary Sources

The data are collected from the annual reports maintained by the company
for the past six years viz., 2002-2007
Data are collected from the companys website.
Books and journals pertaining to the topic.
4.4 TOOLS USED IN THE ANALYSIS
Economic Order Quantity.
Safety Stock.
ABC Analysis.
FSN Analysis.
Linear Regression method.
Inventory turnover ratios.

PERIOD OF STUDY
The period of the study at Whirlpool of India Limited, Puducherry is for one
month.
CHAPTER-V
DATA ANALYSIS AND INTERPRETATION
5.1 ECONOMIC ORDER QUANTITY (EOQ)
MEANING

Economic Order Quantity is the Inventory management technique for

determining optimum order quantity which is the one that minimises the
total of its order and carrying costs.

TABLE 5.1.1 ECONOMIC ORDER QUANTITY

No. of

Sl.

No.

No.

Carryin
Components

Demand

Re-

Order

Cost/u

Cost/

nit/yea

Per year order

6000

6201

12,200

&MSC HW

EOQ

year

17

30,000 5.43

17,251.
48,000

6,200

Base Trans receiver 1,44,00

3.

Ordere per

66,272.

Radio Base station

2.

order

units

Radio Base station 3,60,00

1.

of

09

4,000

2.78

3,687.8
1,700

36

12,000 39.05

LTE Radio Access

Network
4.

3,011.0
96,000

1,700

36

8,000

31.88

WCDMA/HSPA
Radio
5.

Access

Network
2,40,00
0

4,760.9
1,700

36

20,000 50.41

GSM Radio Access

Network
6.

7,141.4
30,000

CDMA

1,700

2,500

4.20

Radio

Access Network
.

8,449.8

Carrier Wi-Fi

42,000

1,700

3,500

4.97

21,600

4,700

10,075. 1,800

2.14

71
8.

Radio Dot System

Zero Site
RBS 6401
RBS 6402
RBS 6501

PAU 6000 Family

9.

Microwave
Fronthaul Units
7,714.9
9,600

6,200

800

1.24

Aggregation Units
10.

Router 6000 Series

MINI-LINK

Indoor

Units
MINI-LINK Outdoor
Units
3,60,00
0

47,244.
6,200

05

30,000 7.62

SE Family
11.

SSR 8000 Family

NetOp EMS
NetOp PM
1,80,00

MINI-LINK

33,406.

6,200

59

15,000 5.39

Indoor 42,000

6,200

16,136. 3,500

2.60

12.

Units
MINI-LINK Outdoor
Units
Microwave
Fronthaul Units
Aggregation Units
91
SGSN-MME

13.

Evolved

6,200

3,500

2.60

7,500

11.43

Packet

Gateway
Wi-Fi

Mobility

Gateway
16,136.
42,000

91

SPO 1410/1460
14.

PAU 6000 Family

7,874.0
90,000

6,200

18

Marconi MHL 3000 42,000

6,200

18

5,378.9 3,500
7

15.

Marconi
Family

OMS

7.81

Service

Aware

Support Node
16.
Service-Aware
Policy Controller
3,00,00
0

46,619.
65,200

18

02

25,000 6.44

HDS 8000
17.

BSP 8000
25,935.
66,600
Cloud

10,100

69

5,550

2.57

Execution

Environment
18.
RX8200 Family
RX8300 Family
RX9500 Family
8,485.2
7,200

10,000

600

0.85

DC/DC Regulators - 1,800

15,400

5,264.9 150

0.34

Point of Load
19.
DC/DC
and IBC

Converters

Power

Interface

Modules

Board

Power

Management
20.
Power

Modules

Discontinued
Products
5,264.9
1,800

15,400

150

0.34

ANALYSIS & INTERPRETATION:

In the above table the EOQ & the no. of orders purchased per year for
various components are calculated. The calculated EOQ is compared with the
no. of units of each component purchased in the organization. It is found
that, there is a variation in the EOQ & no. of unit purchased. It is understood
that the company is not following EOQ for purchasing the materials &
therefore the inventory management is not satisfactory.

5.2 SAFETY STOCK

MEANING

Safety stocks are the minimum additional inventory which serve as a safety
margin to meet an unanticipated increase in usage resulting from an
unusually high demand and an uncontrollable late receipt of incoming
inventory.

Table 5.2.1 Safety stock

Normal
Sl.
No.

Components

Max. Lead Lead

Dema Safety

Time

nd

Time

Stock

3,60,0 37,44
1.

Radio Base station 6000

0.27

0.166

00

48,00
2.

Radio Base station 6201

0.27

0.166

4,992

1,44,0 14,97
3.

Base Trans receiver &MSC HW

0.27

0.166

00

LTE Radio Access Network

96,00
4.

0.27

0.166

9,984

WCDMA/HSPA Radio Access Network 0.27

0.166

2,40,0 24,96

5.

00

GSM Radio Access Network

30,00
6.

0.27

0.166

3,120

CDMA Radio Access Network

42,00
7.

0.27

0.166

4,368

Carrier Wi-Fi
8.

Radio Dot System

Zero Site
RBS 6401
RBS 6402
RBS 6501
21,60 2,246.
0.27

0.166

0.27

0.166

9,600 998.4

0.27

0.166

3,60,0 37,44

PAU 6000 Family

9.

Microwave Fronthaul Units

Aggregation Units

00

10.

Router 6000 Series

MINI-LINK Indoor Units
MINI-LINK Outdoor Units

SE Family
11.

SSR 8000 Family

NetOp EMS
NetOp PM
1,80,0 18,72
0.27

0.166

00

MINI-LINK Indoor Units

12.

MINI-LINK Outdoor Units

Microwave Fronthaul Units
Aggregation Units
42,00

SGSN-MME

0.27

0.166

0.27

0.166

42,00 4,368
0

13.

Evolved Packet Gateway

Wi-Fi Mobility Gateway

4,368

SPO 1410/1460
14.

PAU 6000 Family

90,00
0.27

0.166

9,360

Marconi MHL 3000

15.

Marconi OMS Family

42,00
0.27

0.166

4,368

Service Aware Support Node

16.

Service-Aware Policy Controller

3,00,0 31,20
0.27

0.166

00

HDS 8000
17.

BSP 8000
66,60 6,926.

Cloud Execution Environment

18.

RX8200 Family
RX8300 Family

0.27

0.166

0.27

0.166

7,200 748.8

RX9500 Family

DC/DC Regulators - Point of Load

19.

DC/DC Converters and IBC

Power Interface Modules
0.27

0.166

1,800 187.2

Power Modules Discontinued Products 0.27

0.166

1,800 187.2

Board Power Management

20.

ANALYSIS & INTERPRETATION:

In the above table, safety stock for the various components calculated is
shown. Actual demand is given for each component for a period of 1 year
and the lead-time is calculated at a maximum of 100 days & normal of 60
days and these were converted into per annum. So, from calculation of
safety stock, we can able to determine how much the company can hold the
inventory in reserve stock per annum.

5.3 ABC ANALYSIS

MEANING

The ABC system is a widely used classification technique to identify

various items of inventory for purposes of inventory control. On the basis of
unit cost involved, the various items are classified into 3 categories:
(1)A, consisting of items with the large investment,
(2)C, with relatively small investments but fairly large number of items
and
(3)B, which stands mid-way between category A & C.
Category A needs the most rigorous control, C requires minimum attention
and B deserves less attention than A but more than C.
A Class (High Value)
Radio Base station 6000
Radio Base station 6201
Base Trans receiver &MSC HW
LTE Radio Access Network
A Class (High Value)
WCDMA/HSPA Radio Access Network
Drive assly - NBO - China (Agitator) - 2 pin drive
GSM Drive
Radioassly
Access
- ECONetwork
Dlx - NBO - China (Impeller)
timer
- Eco Dlx
(Ningbo) - With buzzer (S60)
CDMAWash
Radio
Access
Network
Heater (WW)
Carrier Wi-Fi
Heater (Chandini)
Radio
Dot System
WW Zero
Motor Site
- Welling
RBS 6401
Splash
Motor
RBS
6402
RBS
6501
Motor - Jeamo
Heating Element, High/Mid End,FLT70
PAU 6000 Family
Microwave
Fronthaul
Units
Heater Low
end
Timer T2-EC6018-FLT
Aggregation Units
Water Distribution
Actuator, FLT70
Router
6000 Series
MINI-LINK Indoor Units
Bellow, FLT70
MINI-LINK Outdoor Units
Thermostat Variable, Low End, FLT70
SE Family
Universal
Motor Assy, Mid & High End,FLT70
Motor Low end
Window Glass,FLT70
Drain Pump, FLT

SSR 8000 Family

NetOp EMS
NetOp PM
B Class (Moderate Value)
HDS 8000
BSP 8000
Cloud Execution Environment
RX8200 Family
RX8300 Family
RX9500 Family
DC/DC Regulators - Point of Load
DC/DC Converters and IBC

WCDMA/HSPA Radio Access Network

C Class (Low Value)
CDMA Radio Access Network
Carrier Wi-Fi
Radio Dot System
Zero Site
RBS 6401

RBS 6402
RBS 6501
PAU 6000 Family
Microwave Fronthaul Units

Table 5.3.1 ABC ANALYSIS

Categories

Total No. Items in Classes

Percentage

45

35

20

20

100

Total

ANALYSIS & INTERPRETATION :

The above table shows the classification of various components as A, B
& C classes using ABC analysis techniques based on unit value. From the
classification A classes are those whose unit value is more than Rs.100 and
constitutes 45% of total components. B classes are those whose unit value is
between Rs.25-100 constitutes 35% of total components and C classes are
those whose unit value is less than Rs.25 constitutes 30% of total
components. It is good that the company maintains its inventories based on
its value using controlling techniques.

Chart 5.3.1 ABC Analysis

50
45
40
35
30
25
45
20
35
15
10

20

5
0
A

5.4 FSN ANALYSIS

MEANING
All the items in the inventory are not required at the same frequency.
Some are required regularly, some occasionally and some very rarely.
FSN classifies items into Fast moving, Slow moving and Non-moving.
5.5 TREND ANALYSIS
MEANING
Regression means dependence and involves estimating the values of a
dependent variable Y, from an independent variable X.
Y = a + bx

Where a= y b x;

b = xy n x y
x2- nx 2

Table 5.5.1 CALCULATION OF INVENTORY TREND

YEAR
(x)

Inventories
(Rs.)
Y

2003

9,17,88,514

2004

X
X=x-2005

X2

XY
(Rs)

-2

8,66,68,300

-1

18,35,77,028
-8,66,68,300

2005
2006

20,37,85,550
17,58,61,213

0
1

0
1

0
17,58,61,213

2007

17,22,82,014

34,45,64,028

TOTAL()

73,03,85,591

10

25,01,79,913

x = x/n = 0/5 = 0
y

= y/n = 73,03,85,591/5 = 14,60,77,118.2

b = xy n x y
73,03,85,591 =2,50,17,991.3

25,01,79,913- 5 * 0 *

10-5*0
x2- nx 2
a = y b x = 14,60,77,118.2 2,50,17,991.3 * 0 =
14,60,77,118.2
y = a + bx
= 14,60,77,118.2 + 2,50,17,991.3 x
The forecast of inventory for the year 2008 is computed by substituting x =
2008 in the above equation.
=14,60,77,118.2 + 2,50,17,991.3 x

=14,60,77,118.2 + 2,50,17,991.3 (x-2005)

=14,60,77,118.2 + 2,50,17,991.3 (2008-2005)
=14,60,77,118.2 + 2,50,17,991.3 (3)
=14,60,77,118.2 + 7,50,53,973.9
=22,11,31,092.1
Therefore inventory for the year 2008 will be approximately Rs.22,11,31,100

Table 5.5.2 INVENTORIES PERCENTAGE

Years

Inventories

Percentage

2003

9,17,88,514

9.65

2004

8,66,68,300

9.15

2005

20,37,85,550

21.40

2006

17,58,61,213

18.50

2007

17,22,82,014

18.10

2008

22,11,31,100

23.20

TOTAL

95,15,16,691

100

ANALYSIS & INTERPRETATION:

In the above table shows the percentage of inventories increases from
9.65 to 18.10 in the year 2003-2007. the inventory for the year 2008 is
expected to be 23.20 which is again in the increasing trend. This infers that
the inventory requirement is increasing in the future period also. It shows
satisfactory position of inventories as it implies increasing production &
demand for the product.

Chart 5.5.2 TREND OF INVENTORY

70
60
50
40
30
20
10
0
2003

2004

2005

2006

2007

2008

5.6 INVENTORIES TURNOVER RATIO

MEANING
This ratio is calculated to consider the adequacy of the quantum of
capital and its justification for investing in inventory. A firm must have
reasonable stock in comparison to sales. It is the ratio of net sales and the

average inventory. This ratio helps the financial manager to evaluate

inventory policy. This ratio reveals the number of times finished stock is
turned over during a given a accounting period.
The formula for the ratio is

Net sales
Avg. Inventory

Table 5.6.1 Inventories Turnover Ratio & Velocity

Net Sales
(Rs.)

2003
2004
2005

12,30,05,134
16,06,43,669
11,73,30,581

Avg.
Inventory
(Rs.)
8,42,09,371
8,92,28,407
14,52,26,925

2006
2007

55,53,74,571
79,11,78,220

18,98,23,381
17,40,71,613

Year

Ratio

Velocity
(in Days)

1.46: 1
1.80: 1
0.80: 1

250
203
456

2.92: 1
4.5: 1

125
81

ANALYSIS & INTERPRETATION :

In the above table shows inventory turnover ratio for the past years.
The ratio is showing increasing trend from1.46 to 4.5 in the year 2003 to
2007, except in the year 2005 which shows only 0.80 times.
Whereas in the velocity of inventories shows less in 2007 as compared
to 2003 which is 81 days in 2007 and 250 days in 2003 except in the year
2005 which is 456 days. This shows that the inventories are easily converted
into sales within the shortest period i.e. the company was able to sell Rs. 4.5
by investing rupee one in the stock in 2007.

CHAPTER-VI
6.1 FINDINGS OF THE STUDY

 It is found that, there is a variation in the EOQ & no. of unit purchased.
It is understood that the company is not following EOQ for purchasing
the materials. So, the inventory management is not satisfactory.
From calculation of safety stock, we can able to determine how much
the company can hold the inventory in reserve stock per annum.
From the classification A classes are those whose unit value is more
than Rs.100 and constitutes 45% of total components. B classes are
those whose unit value is between Rs.25-100 constitutes 35% of total
components and C classes are those whose unit value is less than
Rs.25 constitutes 30% of total components. It is good that the
company maintains its inventories based on its value using controlling
techniques.
From the classification F items are those which moves fastly and
constitutes 43% of total components. S items are those which moves
slowly constitutes 57% of total components and N items are those
which doesnt move (Non-moving items). According to data given,
there is no Non-moving items. It is not good as the company maintains
low percentage in fast moving items in compared to Slow moving
inventories based on movements using controlling techniques.
From the calculation it shows, that the percentage of inventoried
increases from 9.65 to 18.10 in the year 2003-2007. the inventory for
the year 2008 is expected to be 23.20 which is again in the increasing
trend. This indicates increasing efficiency of the management.

 The ratio is showing increasing trend from1.46 to 4.5 in the year 2003
to 2007, except in the year 2005 which shows only 0.80 times.
Whereas in the velocity of inventories shows less in 2007 as compared
to 2003 which is 81 days in 2007 and 250 days in 2003 except in the
year 2005 which is 456 days. This shows that the inventories are easily
converted into sales within the shortest period i.e. the company was
able to sell Rs. 4.5 by investing rupee one in the stock in 2007.

6.2 SUGGESTIONS AND RECOMMENDATIONS

According to EOQ, as the company does not follow EOQ for its
purchasing, the company can be adjusted to order materials. This will
reduce the cost & help to enhance the profit of the company.
The company is required to maintain safety stock for its components in
order to avoid stock-out conditions & help in continuous production
flow.
Under ABC analysis, the management must have more control on A
than B&C, because A class constitutes more(45%) of higher values.
There should be tight control exercised on stock levels, to avoid
deterioration. This is done through maintaining low safety stock,

continuous check on schedules & ordered frequently in inventories, in

order to avoid over investment of working capital.
The company must not go to the Non-moving items as far as possible,
because there will be unnecessary blocking of working capital. This
would hinder the other activities of the organization.
The past data shows increase in inventory the company is also
expecting

more

inventories

for

future

period

i.e.

2008.

The

management is required to maintain the same inventory trend in the

forth coming year also.
The inventory turnover ratio indicates whether investment in inventory
is within proper limit or not. It also measures how quickly inventory is
sold. It requires to maintain a high turnover ratio than lower ratio. A
high ratio implies that good inventory management and it also reflects
efficient business activities.

CHAPTER-VII
CONCLUSION
A better inventory management will surely be helpful in solving the
problems the company is facing with respect to inventory and will pave way
for reducing the huge investment or blocking of money in inventory. From
the analysis we can conclude that the Company can follow the Economic
Order Quantity (EOQ) for optimum purchase and it can maintain safety stock
for its components in order to avoid stock-out conditions & help in
continuous production flow. This would reduce the cost and enhance the

profit. Also there should be tight control exercised on stock levels based on
ABC analysis & maintain high percentage in fast moving items in inventories
as per on FSN analysis for efficient running of the inventory. Since the
inventory Turnover ratio shows the increasing trend, there will be more
demand for the products in the future periods. If they could properly
implement and follow the norms and techniques of inventory management,
they can enhance the profit with minimum cost.

CHAPTER-VIII
8.1 LIMITATIONS OF THE STUDY

The entire analysis applies only to Whirlpool India Ltd, Puducherry.

The study takes into account only the quantitative data and the
qualitative aspects were not taken into account.

The assumption made in the EOQ and Safety stock formulas restrict the
use of the formula. In practice, unit cost, lead time, requirements of
inventory items are not accurately predictable. Rate of consumption
varies in many cases. As such application of the formula often becomes a
difficult and complicated matter.

ABC analysis is not one time exercise and items are to be reviewed and
recategorised periodically.

8.2 SCOPE FOR THE FURTHER STUDY

To give plan to the company what to order, when to order and how
much to order.

It is useful for deciding operating policy & volume of inventory.

It helps to develop the policies for the executives in inventory.

It helps the company what items goods are categorized.

Project helps to deal with forecasting in inventory.

BIBLIOGRAPHY
WWW.ERICSSON.COM
REFERENCE:
Kamalakannan@ericsson.com
J Kington Mayson Jebadoss j.kington.mayson.jebadoss@ericsson.com