Maharaja Shree Umaid Mills Limited

Draft Internal Audit Report Production Review - FY 2016-17

26 April 2017
Detailed Observations

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1. Absence of BOM version to identify amendments made in BOM

Background & Observations

There was no log maintained for the changes made to the BOM for the period April 2016 December 2016, instead the previous BOM was updated.
It was noted during the period April 2016 to December 2016 , 615 BOMs were updated and no versions of the same were maintained in SAP.
Plant 1000 2000 3000 3100
Number of BOM's Updated 69 4 458 80

It is important to note that the above changes does not include following type of amendments which were difficult to identify in absence of Log of changes / version management:
1. Instances where material ratio ( quantity , yield) was changed without changing the material type.
2. Instances where existing materials were replaced with different materials.
The above instances could not be verified for the defined SOP compliance for BOM amendments.

For details of BOMs which were updated for more than 3 times refer, Annexure 1

Potential Impact Management action

Unauthorized changes in the absence of log. Pending

Root Cause

System was not configured to maintain BOM versions. Person responsible: Amit Sharma, Abhay Karhade
Timeline:

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Annexure 1

Annexure 1

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2. Inconsistencies in machine downtime recording

Background & Observations

There was no process defined to bifurcate between controllable and un-controllable reasons, for downtime also there was no formal action plan and root cause documented for reduction in downtime.
Machine downtime was entered in Z - delay report after each shift at all plants and reasons were noted. On review of delay report for all plants following inconsistencies were noted.

Number of entries not entered /

Particulars Total Sample Reference
in Z Delay
1000 Variance between downtime reported as per Z delay report and maintenance report 450 75 Annexure 2
3000 Variance between downtime reported as per Z delay report and maintenance report 200 40 Annexure 2a
There was variance between downtime as per maintenance report and Z delay report for the same purpose Refer Annexure 2b.
2b.

Potential Impact Management action

Incorrect MIS reporting for production loss reasons. We have initiated the process to maintain reasons for delay in Z-delay Report

Root Cause
Person responsible: S.K Banerjee, Ravi Rana, Anand Garg
There was no review of Z delay report. Timeline:
Absence of defined process for review and monitoring of SOP.

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Downtime trend for plant - 1000

Down time
5% Trend showing department wise downtime
Repair reasons.

Labour
30%
30%
Maintenance as per
schedule
Power fail
7%
28% Others

Month wise downtime trend - 1000

100%
80%
60%
40%
20%
0%
Apr May Jun Jul Aug Sep Oct Nov Dec

Repair Labour Maintenance as per schedule Power fail Others

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Annexure 2, 2a, 2b

Annexure 2

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3. Absence for reasons for lower efficiency

Background & Observations

On analysis it was observed that there was no tracker maintained to record reasons for decrease in efficiency of machines for plant 1000, 2000 (Old looms) and 3000.
It was noted that efficiency percentage of machines was entered in SAP, but reasons for lower efficiency was not maintained by department.
On discussion with spinning head it was informed that major reasons for decrease in efficiency was speed loss and idle machine time. However root cause for speed loss was not documented. Refer Annexure 3 for trending of
efficiency percentage.

There was no process defined to calculate OEE (Overall Equipment effectiveness).

Overall Equipment Effectiveness is defined as APQ = OEE
Where,
A = Availability
P = Performance
Q = Quality.

Potential Impact Management action

Analysis of reasons for inefficiencies cannot be documented and improved. Pending

Root Cause
Person responsible: S.K. Banerjee.
SAP was not configured to record the reasons for inefficiency. Timeline:
Absence of tracking of reasons for speed loss.

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Annexure 3 Efficiency Trend

Efficiency Trend for the period April 2016 to December 2016

Departments April May June July August September October November December
Spinning (Ring frame) 84.55% 83.01% 89.91% 75.22% 83.39% 83.99% 82.07% 77.23% 86.84%
Looms 39.37% 64.57% 60.20% 68.44% 84.73% 38.62% 46.83% 46.58% 27.48%
Dying (Poplin) 67.38% 70.91% 48.22% 63.05% 83.52% 27.62% 44.54% 23.16% 25.42%
S&S 82.77% 61.47% 63.35% 73.82% 85.93% 41.05% 45.89% 59.55% 26.97%

Source : MIS reports

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4.Inconsistencies in input output ratio

Background & Observations

On analysis of BOMs master and Input wiz a wiz output ratio following inconsistencies were observed:
Plant 1000:
It was observed that in case of 31 production orders input output ratio was not matched, i.e., the base quantity was not equal to consumption quantity as per BOM.
Plant 2000:
2000:
On analysis of standard v/s actual weft yarn requirement, it was observed that 80,000 Kgs of yarn was consumed lower than actually required as per BOM, variance % was ranging from 35% to 121%. ( BOM v/s
Actuals)
On analysis of standard v/s actual yield for loom, it was observed that for sort 1106, actual yield was also shown as standard yield however the difference was adjusted ( 87000 meters) against 4 production orders
out of total 35 production orders made for 78 Lac meters.
It was also observed that standard yield percentages ( Input v/s Output meters ) were varying for same sorts for Looms and the variation was ranging between 90.76% to 166.79% which ideally should be 91.74%
Plant 3000:
It was observed that in case of 3 materials ( Mercerization stage ) yield defined as per BOM is 100%, on comparison with actual yield percentages it was observed that actual yield was ranging between 93% to
108%.
Refer Annexure 4 for details

Potential Impact Management action

Standard output cannot be determined for each process . Plant 1000: Pending

Plant 2000: We are working on sort master, BOM for consumption viz a viz variation will be updated.
Plant 3000: The BOM master has been updated

Root Cause
Person responsible: Aashish Sonwalkar, S K Banerjee
BOM master was not reviewed on a periodic basis. Timeline:

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Annexure 4

Annexure 4

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5. Cost saving opportunity for packing material

Background & Observations

On analysis of packing material following inconsistencies were observed:

Packing material like paper cones, paper tubes, plastic cones, wooden pallets, HDPE bags, GI pipes etc., are issued to production floor and charged off to the cost Centre. However plastic cones, wooden pallets
etc., are used multiple times and there is no register in place to track the usage, scrap generated and transferred to scrap sales.
Assessment of plastic cone requirement was not made, therefore additional paper cones were used for internal consumption amounting to INR 2.70 Lacs for the period April 2016 to December 2016. Last purchase
of plastic cones was done during September 2015.
BOM for packing material was not defined, further it was noted that below mentioned packing material can be substituted for internal consumption of packing material to reduce the packing cost.
a. Plastic separator can be used as a substitute to corrugated paper sheet.
b. GI pipe can be used as a substitute at plant 2000, 2001 for internal consumption instead of paper tube .
c. Plastic pallet can be used as a substitute to wooden pallet.
d. HDPE sheet can be used as a substitute to Polythene stretch film
e. In case of Open end yarn, yarn was transferred in bags instead of doff baskets.
Refer Annexure 5 for the details.

Potential Impact Management action

Excess packaging cost for internal consumption Pending

Root Cause
Person responsible: S K Banerjee and Aashish Sonwalkar
Reusable packing material was not used. Timeline:
Feasibility analysis of packing material was not performed.

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5. Annexure

Plastic cone
Internal Consumption 20% Paper cone used Cost of each cone Excess cost
7,51,490 1,50,298 2 2,70,536

Number of Number of
Qty used per Total Actual Number of Total Cost Savings (in one
Material Cost per Piece times can be Cost per Use Alternate Material times it can be Cost per piece Cost per Use Initial Investment
month cost per month pieces required Reduction per use year)
used used

Wooden Pallet 36 440 10 15,840 44 Plastic Pallet 50 150 3200 32 1,60,000 -12 90,000

corrugated sheet Plastic sheet

288 16 5 4,503 3 300 150 130 1.3 39,000 -2 90,000
corner Corner

corrugated sheet 720 34 5 24,422 7 Plastic sheet 700 150 130 1.3 91,000 -6 6,30,000

Polythene film 720 186 1 1,33,920 186 Bag/ HDPE Bag 50 30 399 15.96 19,950 -170 2,55,000

Paper Tube 500 19 4 9,250 5 GI Pipe 50 150 130 1.3 6,500 -3 22,500

Total 1,87,935 3,16,450 10,87,500

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5. Annexure
Packing material Recommended material
currently used Plastic cone to be used instead of paper cone

GI pipe, Plastic tube to be used

instead of paper tube

Plastic pallet to be used instead of

wooden pallet

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5. Annexure

Packing material
Recommended material
currently used

HDPE bag to be used instead of

polythene film

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6. Inconsistencies in standard quality parameters

Background & Observations

It was observed that, cost sheet of each packing material was not prepared during the period April 2016 to December 2016, there was no feasibility study conducted to reduce the cost of packing material.

It was observed that there was no reconciliation performed for the packing material used.

Quality testing machines used for packing materials are calibrated outside on a yearly basis, there was no check performed between the year to check if the machine is calibrated. ( Machines for checking CS, ECT are old
machines and needs to be replaced) .

Potential Impact Management action

Lower quality procurement of packing material. Pending

Root Cause
Person responsible: Amrish Pundir
Cost sheet was not prepared for all packing material. Timeline:
Quality test machines were not procured not timely basis.

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7. Boiler layout and coal feeding procedures optimization

Background & Observations

On review of boiler layout it was observed that, the coal feeding process can be automated resulting into reduction in man power cost.

Particulars Value (INR)

Total Labours required (in Numbers) 12

Labour feeding expenditure per month 1,12,680

Current Expense per year 13,52,160

Labour required post trolley is implemented 6

Total cost post implementation of trolley 6,76,080

Total savings per Annum 6,76,080

Steam used by each department was not tracked since meters were not installed to check the consumption, the steam consumption was charged on plant wise basis the steam recorded on each plant meter.
Actual steam utilized Vs standard steam required was not tracked.

Potential Impact Management action

Excess cost in boiler Pending

Root Cause
Person responsible: R K Gupta
Trolley was not used to feed coal in the boiler Timeline:

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7. Annexure

CURRENT PROCESS RECOMMENDED PROCESS

Currently 12 Labor force can

labors work at be reduced to 6
boiler location if coal feeding is
and manually done by trolley.
feed the coal
in the
conveyor.

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8. Absence of monitoring of aged semi finished goods

Background & Observations

On review of stock as on 28th February 2017 following discrepancies were observed:

1. It was observed that materials in process (semi finished goods) was lying for more than 90 days was not moved to the next process. For example material amounting to INR 5.6 lakhs was maintained at auto corner stage for
more than 90 days Refer Annexure 8

Potential Impact Management action

Semi finished material lying at production floor may lose its value. Plant 2000 & 3000 - Old material shall be consumed.
Plant 1000 - Pending

Root Cause
Person responsible: S K Banerjee Aashish Sonwalkar
Review of ageing of material was not performed. Timeline: 30 June 2017

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Annexure 8 Summary of Aged Semi Finished Goods as on Feb 2017

0 - 15 days 15-
15-30 days 30-
30-90 days 90-
90-180 days 180 - 1yr > 1 year Total
Plant Production Supervisor
1000 Auto Corner 70,08,592 1,59,504 2,75,299 3,28,821 2,31,815 5,053 80,09,085
1000 Blow room 9,70,601 5,74,617 - 68 272 1,864 15,47,423
1000 Carding 14,47,240 6,79,295 - 108 85,878 - 22,12,521
1000 Comber 12,02,836 2,00,516 11,393 - - - 14,14,746
1000 Doubling 3,37,613 14,094 2,69,395 42,720 79,151 - 7,42,972
1000 Draw-frame 1,36,95,225 2,80,158 15,32,682 49,944 3,93,470 1,12,290 1,60,63,768
1000 Lap 18,91,885 7,49,510 - - - - 26,41,395
1000 Mercerise 9,55,642 4,61,281 2,51,319 27,011 3,623 - 16,98,876
1000 Mixing 1,28,06,736 13 67,65,916 18,642 11,631 1,596 1,96,04,534
1000 Open end 23,46,433 59,441 1,29,316 15,404 - - 25,50,595
1000 Reeling 38,12,465 2,53,737 1,55,547 49,151 12,854 389 42,84,145
1000 Ring Frame 43,31,168 1,04,632 76,208 1,01,716 73,128 35,874 47,22,726
1000 Speed Frame 1,06,20,540 66,367 20,50,700 21,779 27,794 99,132 1,28,86,311
1000 TFO 19,31,234 129 84,404 1,59,436 1,00,293 29,124 23,04,619
1000 Warehouse 61 15,512 4,27,907 48,060 2,185 142 4,93,867
1000 Winding 20,62,695 89,128 9,87,066 5,34,312 99,196 39,370 38,11,768

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Annexure 8 Summary of Aged Semi Finished Goods as on Feb 2017

Plant Production Supervisor 0 - 15 days 15-

15-30 days 30-
30-90 days 90-
90-180 days 180 - 1yr > 1 year Total
2000 Grey Inspection 29,17,800 1,01,479 6,98,714 13,39,571 16,21,070 49,24,749 1,16,03,384
2000 Looms 16,89,115 1,73,303 68,110 3,34,386 13,00,446 4,530 35,69,889
2000 Size 72 sub store 57,13,225 1,11,435 9,810 - - - 58,34,470
2000 Sizing 7,23,214 8,917 539 - - - 7,32,671
2000 Warehouse 74 71,217 1,37,219 707 3,529 40 2,12,787
2000 Warping 52,390 6,552 - - - - 58,943
2100 Grey Inspection 34,98,971 1,05,870 7,51,503 79,94,709 2,05,76,609 93,87,510 4,23,15,172
2100 Looms 14,92,145 96,920 2,65,686 10,80,169 3,88,088 20,013 33,43,020
2100 Sizing 85,63,964 8,45,827 46,031 - - - 94,55,822
2100 Warehouse 5,010 1,40,454 55,676 13,232 13,686 - 2,28,059
2100 Warping 61,188 373 1,588 - - - 63,149

Plant Production Supervisor 0 - 15 days 15-

15-30 days 30-
30-90 days 90-
90-180 days 180 - 1yr > 1 year Total
3000 Bleaching 9,77,373 - - 372 - - 9,77,746
3000 Dying 9,91,245 - - 972 - - 9,92,217
3000 Finishing 40,47,950 1,51,395 - - 5,29,152 - 47,28,498
3000 IMS 50,226 - - - - - 50,226
3000 Mercerising 83,80,869 41,124 - 20,73,464 7,66,446 - 1,12,61,903
3000 Re-work 9,63,633 2,08,181 2,63,701 3,49,450 58,652 - 18,43,616
3000 Stock difference location 6,58,864 7,48,919 1,64,782 - - - 15,72,565
3000 Warehouse 2,01,463 19,995 87,304 86,234 5,66,146 - 9,61,141
3100 GREIGE - 3100 - - 26,49,082 4,03,379 2,94,289 5,12,640 38,59,390

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9. Inconsistencies in maintenance process

Background & Observations

Preventive maintenance schedule is defined in SAP for the equipment's which determines the periodicity of maintenance ( Monthly, Quarterly, yearly).
On review of preventive maintenance during the period April 2016 to December 2016 following discrepancies were noted:
1. On review of 6784 preventive maintenance orders , noted in 730 orders there was delay in maintenance, ageing of such delay ranged from 14 days to 175 days. For further details refer Annexure 9
2. On review of 7938 maintenance orders, noted 478 orders there was delay in technically completing the orders in SAP, resulting into incorrect ot delayed scheduling of next preventive maintenance. For further details refer
Annexure 9a.
9a.
3. Segregation of Duty : It was observed that same person was responsible to raise and close the maintenance order in the system.
4. On review of equipment's included in preventive maintenance plan it was observed that CARD077 was not included in the schedule, further maintenance was not performed for 318 equipment's for the period April 2016 to
December 2016. For details refer Annexure 9b.
5. 9c..
On review of maintenance report it was noted that in case of 470 machines, deviations were found in the time for which machine was under maintenance as per production report. For details refer Annexure 9c
6. Breakdown Maintenance: On review of breakdown report it was observed that breakdown notifications were not updated in SAP at all times, resulting to incorrect recording of breakdown time and reasons for the same.
7. On analysis of spares issued for maintenance it was observed that material was issued to a cost center but was not updated in SAP against which machine the spare was used. For details refer Annexure 9d.

Potential Impact Management action

Incorrect scheduling of preventive maintenance plan. Pending

Excess break down of machinery.
Machines which high maintenance cost cannot be found if not updated in SAP.

Root Cause

Training to user departments. Person responsible: Aanand Garg, N.P.Pachauri

Not updating records in SAP on a timely basis. Timeline:

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Annexure 9

Annexure 9

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10. Inconsistencies noted in Production Accounting

Background & Observations

On analysis of production orders following discrepancies were observed:

1. It was observed that as on Feb 09th 2017, 52,389 were open, i.e., were not technically completed in SAP. and the ageing of the same was ranging from 12 days to 836 days. For details refer Annexure 10.
2. In case of FRC ( Fents, Racks and chindi) production was not recorded against each production order instead it was booked under any production order on shift wise basis. For details refer Annexure 10a.
3. In case of 33 production orders, production of material was booked at a later date, but consumption was not booked. For details refer Annexure 10b.
4. In case of 40 production orders , production in machine was confirmed as per the production report but was not delivered. For details refer Annexure 10c.
5. In case of 7 production orders, tolerance limit of booking production against the order was raised in SAP and production was booked without posting consumption in SAP. For details refer Annexure 10d.
6. It was observed that in case 203 production orders of FRC waste was generated against production order but was later reversed for the greater quantity which was generated for the same. For details refer Annexure 10E
7. It was noted in case of chemical consumption and waste generation at plant 3000 and 2000, consumption was not booked against each production order instead it was posted against any production order on shift wise basis. For
10F..
details refer Annexure 10F

Potential Impact Management action

Production can be booked against old open production orders to reduce cost of current order. Point 1: Technically completion of Production orders has been initiated on monthly basis.
Production order wise efficiency cannot be tracked. Point 2: Initiated booking in SAP Zdyelotw.
Material will be lying at a particular stage if confirmed in machine and not delivered against each order. Point 7: Chemical consumption is posted as per tolerance level maintained in BOM.
Pending for remaining points

Root Cause Person responsible: Kishor Prayag, Ravi Rana

Timeline:
Backflush system was not used In SAP for chemical consumption and waste generation.
Production orders were not technically completed on timely basis.

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Annexure 10

Annexure 10

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11. Inconsistencies in Waste Management in BOM

Background & Observations

On analysis of production orders following discrepancies were observed:

1. It was observed waste was not recorded against each production order, it was recorded shift wise or day wise against any production order.

2. Plant 1000: ItI was observed that there was variation in waste percentages defined in BOMs for the same processes, Refer Annexure 11.

3. On analysis of actual waste yield wiz a wiz standard waste yield defined in BOM for each process it was noted that actual waste yield was higher than defined in BOM. Refer Annexure 11 for further details

4. On analysis of waste percentages it was also noted that there was no waste recorded at OPEN END.

Potential Impact Management action

Waste generated against each production order cannot be tracked. Pending

If the actual waste generated is lower than standard, actual material can be adjusted in waste.

Root Cause

Review of standard and actual waste on timely basis. Person responsible: S K Banerjee
Timeline:

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Annexure 11

Waste %
Production Stage
Min BOM % Max BOM % Average Actual %

AUTO CONER -0.94% -0.52% -0.62%

B/DRAW FRAME -0.70% -0.15% -0.09%

CARDING SECTION -12.74% -1.62% -3.54%

COMBER -17.46% -15.36% -15.21%

DOUBLING -0.24% -0.24% -0.22%

F/DRAW FRAME -0.25% -0.15% -0.32%

LAP -0.15% -0.15% -0.02%

MERCERIZING -9.45% -0.59% -1.61%

OPEN END -4.10% -2.12% 0.00%

PARALLEL WINDING -0.94% 0.00% -0.09%

REELING -1.33% -1.33% -0.19%

RING FRAME -6.15% -1.54% -2.22%

RJK WINDING -0.44% -0.44% -0.20%

SPEED FRAME -0.94% -0.52% -0.76%

TFO -0.24% -0.20% -0.08%

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12. Sub Optimal utilization of SAP

Background & Observations

On analysis of production orders following discrepancies were observed:

1. Break down maintenance was not updated in SAP.
2. ZPMSM - report was not updated.
3. Back flush system was not used in case of chemical consumption, waste generation.
4. For plant 2000, 2100, 3000, 3100 Z-delay report was updated only after November 2016.

Potential Impact Management action

Machines which often break down. Pending

Machine wise cost of repairs and spares issued cannot be tracked.

Root Cause
Person responsible: Anand Garg, N P Pachauri
Users were not trained regarding all the features in SAP. Timeline:

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