CHAPTER 1

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 organisation 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 coordination and optimum expenditure on materials. Inventory control is the most important function of inventory management and it forms the nerve centre 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 History of Washing Machine Ancient peoples cleaned their clothes by pounding them on rocks or rubbing them with abrasive sands; and washing the dirt away in local streams. Evidence of ancient washing soap was found at Sapo Hill in Rome, where the ashes containing the fat of sacrificial animals was used as soap. The earliest washing "machine" was the scrub board invented in 1797. American, James King patented the first washing machine to use a drum in 1851, the drum made King's machine resemble a modern machine, however it was still hand powered. In 1858, Hamilton Smith patented the rotary washing machine. In 1874, William Blackstone of Indiana built a birthday present for his wife. It was a machine, which removed and washed away dirt from clothes. The 2

first washing machines designed for use in the home. The Hurley Machine Company of Chicago, Illinois introduced the first electric-powered washing machine (the Thor) in 1908. Alva J. Fisher was the inventor. The machine was a drum type with a galvanized tub and an electric motor, for which a patent was issued on Aug. 9, 1910.

Market Shares and the Key players

The washing machine market is divided into two segments. In India, Semiautomatic washing machines account for about 78% of total washing machine sales in 2003-04. In the semi-automatic washing machine market LG is the market leader holding 27 per cent share followed by Videocon with 24 percent share followed by Whirlpool (17) and Samsung (16 percent), Godrej (5 percent), BPL (4 percent) and Electrolux (3 percent) and rest by others. In the fully automatic segment estimated 3lakhs units, LG is the market leader holding 20 per cent share followed by IFB accounting for 17 percent market share. Unlike Western countries, there is still a large demand for semi-automatic twin-tub washing machines in India (compared to fully automatic machines) because of their much lower price. Trends in demand for washing machines have been very similar to those for refrigerators

1.3

COMPANY PROFILE

WHIRLPOOL Corporation Worldwide

Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances, with annual sales of more than $18 billion, more than 73,000 employees, and more than 70 manufacturing and technology research centers around the world. Whirlpool's primary brand names -- Kitchen Aid, Roper, Bauknecht, Ignis, Brastemp, Consul and its global Whirlpool brand -- are marketed in more than 170 countries worldwide. Whirlpool Corporation is a significant supplier to Sears Holdings Corporation, which owns and controls the Kenmore brand name. Whirlpool's global platform provides our operations with resources and capabilities no other manufacturer can match. Whirlpool's global procurement, product development and information technology organizations help our operations 3

reduce costs, improve efficiencies and introduce a continuous stream of relevant innovation to consumers. Inspired by our bold innovations and designs, customers around the globe trust Whirlpool to make their lives easier. More than ever before, our brands are connecting with customers in ways that will last a lifetime. The beginning of the 20th Century witnessed what many have characterized as the Second Industrial Revolution. Most notably, Henry Ford introducemassproduction for automobile manufacture and George Westinghouse ushered in the age of readily available electricity for illumination and power. This dramatically and forever changed the prevailing ways of business, industry and domestic life. Against this background, the predecessor of the modern day Whirlpool Corporation was formed in 1911 as the Upton Machine Company. Its founders were Chicagoan Lou Upton, owner of a patent for a manually operated clothes washer that had never been produced and his uncle Emory Upton, a machine shop owner in the St. Joseph, Michigan area. The commitment to serve homemakers was in evidence even in those early days as Lou Upton challenged his uncle to power his washer electrically so the women of the country could be assisted in their washing chore. His uncle rose to the challenge, and thus the new company was established in the St Joseph area where the Company's headquarters remain to this day! The first main customer for the infant company was Federal Electric, but this customer later turned competitor, threatening the very survival of the Upton Machine Company. A replacement customer was not found till 1916, when a valued and strong relationship was forged with Sears Roebuck & Co., which endures to this date. In 1921 the Upton Machine Company had more than outgrown its existing production facilities. With a loan from Sears, they constructed a new facility but by 1929 due to the huge popularity of its washers, this added capacity too began to feel the strain. Hence in 1929 the Upton Machine consolidated with The Nineteen Hundred Washer Co., a business founded in 1898.The combined entity was named the Nineteen Hundred Corporations. Despite the nations economic woes during the Great Depression, Sears and the Nineteen Hundred Corporation continued to prosper. Sears' entry into the international market and its introduction of an unique sales education program designed by Lou Upton, provided added momentum to washer sales during this period. This to date is a tradition at Whirlpool educating sales channels and service and management people in innovative techniques for improving 4

job performance. By 1941 the Nineteen Hundred Corporation was acknowledged as the No. 1 producer of washers in the US and in the world. Whirlpool continues to hold this position to this day. In 1947, as demand for its products soared, the Nineteen Hundred Corporations management became increasingly convinced that a fully-developed dual distribution system would produce economies of scale and other major benefits for both Sears and the Nineteen Hundred Corporation. So planning began for the national distribution of the Companys own line of laundry products. The brand name would be Whirlpool, the seemingly appealing brand name for an innovative Agitator washer developed in 1920. The Whirlpool brand of automatic washers was formally launched in August 1949, followed by automatic dryers in the same year. In 1950, due to the tremendous salience gained by the Whirlpool brand, the Company decided to change its name to the Whirlpool Corporation. The Whirlpool brand was aggressively growing and demand outstripped production capacity. By 1954, its growth momentum not withstanding, the company was feeling increasingly pressurized to respond to some growing challenges in its operating environment. The direction was clear a broader product line was needed, the fastest route to which was either acquisition or merger. In 1955, Whirlpool took over the Seeger Refrigeration Company, thereby acquiring a quality refrigeration line. As part of the merger, it also acquired Seeger's air conditioning and cooking range businesses. The Whirlpool brand product offering now encompassed a full line of major appliances. The Whirlpool brand was popular in Canada and Latin America by virtue of licensing agreements. In 1980, a decision was taken to explore opportunities inside and outside the appliance industry worldwide. This resulted in joint ventures and also merger and acquisition throughout Europe, Latin America, and Asia. This has led Whirlpool brand, becoming the worlds single largest home appliance brand. India was identified as a growth market in the late 80s. The Whirlpool Corporation entered into a joint venture agreement with the TVS group to produce automatic washers at a plant set up in Pondicherry. A modest beginning was made to establish the Whirlpool brand in India. In 1995 the Whirlpool Corporation acquired Kelvinator of India Limited and entered into the refrigerator market. Later in 1995, majority

ownership was gained in the TVS joint venture and the two entities were merged to form Whirlpool of India Limited. The Whirlpool brand went from having no awareness to claim an awareness of up to 85% and a market share of 25%. Whirlpool has the distinction of being the most preferred brand in the washing machine category with market leadership in the segment it pioneered worldwide the automatic washing machine. In less than three years, the Whirlpool brand had become a household name and has today emerged as a leader in the domestic home appliances market. The Companys Corporate Headquarters is at Benton Harbor, Michigan, USA.

History
1911: Louis Upton founded the Upton Machine Company in this year to produce motor-driven wringer washers. 1916: First order of washers was sold to Sears, Roebuck & Co. 1929: Upton Machine Company merged with Nineteen Hundred Washer Company of New York. 1948: First 'Whirlpool' brand automatic washer with dual distribution was introduced. It included two product lines one each was distributed through Sears and Nineteen Hundred. 1957: The company was rechristened as ' The Whirlpool Corporation.' 1958: The company moved out of country for the first time and invested in Brazilian appliance market through purchase of equity in Multibras S.A. 1968: The Elisha Gray II Research & Engineering Center was completed in Benton Harbor . In the same year, the company's revenues crossed the legendary $1 Billion mark for the first time. 1978: Within a decade company doubled its feat of $1 Billion mark and reached the $2 billion revenue level. 1986: The 'Kitchen Aid' division of Hobart Corporation was purchased. 1987: Whirlpool tied-up with Sundaram Clayton Ltd. of India to form TVS Whirlpool Ltd 1989: This was a historic year since the revenues catapulted to heights of over $6 Billion mark. Also, the joint venture with N.V.Philips of Netherlands called Whirlpool Europe B.V. was formed to manufacture and market appliances in Europe. 1990: Company established joint venture with Matsushita Electric Company of Japan to produce vacuum cleaners for the North American market.

1991: The company introduced and committed globally to its Worldwide Excellence System, which is a TQM program dedicated to exceeding customer expectations. The vision to globalize 'Whirlpool Corp'. was realized in the same year. 1993: First time Whirlpool became the No.1 stand-alone brand in UK, Ireland, Netherlands and Belgium 1995: Whirlpool Corp. acquired majority of stake in the TVS Whirlpool Ltd. The DC manufacturing facility of Kelvinator India was also acquired. 1996: Whirlpool Washing Machines Ltd. and Kelvinator India Ltd. merged together to form Whirlpool of India Ltd. 1998: This year gave birth to a new company vision that says, "Every Home Everywhere with Pride, Passion & Performance." 1999: Whirlpool of India crossed the milestone of 1 million sales appliances. 2002: The ' Whirlpool Strategic Architecture ' was launched as a framework to achieve the vision. The revenues of Whirlpool Corp. soared to $10.5 Billion. 2001: Whirlpool India registered profit & sold 1.2 million appliances. It also achieved the No.1 position in DC & FA. 2002: The Aircon range was successfully launched and the Whirlpool of India acquired 6% market share. 2003: A new mission statement of "Everybody creating loyal customers for life" was adopted. 2006: Whirlpool Corporation acquires Maytag and become the Worlds largest white goods company.

Whirlpool of India
Whirlpool, right from its inception in 1911 as first commercial manufacturer of motorized washers to the current market position of being world's number one manufacturer and marketer of major home appliances, has always set industry milestones and benchmarks. The parent company is headquartered at Benton Harbor, Michigan, USA with a global presence in over 170 countries and manufacturing operation in 13 countries with 11 major brand names such as Whirlpool, Kitchen Aid,

Roper, Estate, Bauknecht, Laden and Ignis. The company boasts of resources and capabilities beyond achievable feat of any other in the industry. Whirlpool initiated its international expansion in 1958 by entering Brazil. However, it emerged as truly global leader in the 1980's. This encouraging trend brought the company to India in the late 1980s. It forayed into the market under a joint venture with TVS group and established the first Whirlpool manufacturing facility in Pondicherry. Soon Whirlpool acquired Kelvinator India Limited in 1995 and marked an entry into Indian refrigerator market as well. The same year also saw acquisition of major share in TVS joint venture and later in 1996, Kelvinator and TVS acquisitions were merged to create Indian home appliance leader of the future, Whirlpool India. This expanded the company's portfolio in the Indian subcontinent to washing machines, refrigerator, microwave ovens and air conditioners. Today, Whirlpool is the most recognized brand in home appliances in India and holds a market share of over 25%. The company owns three state-of-the-art manufacturing facilities at Faridabad, Pondicherry and Pune. Each of these manufacturing set-ups features an infrastructure that is witness of Whirlpool's commitment to consumer interests and advanced technology. In the year ending in March '06, the annual turnover of the company for its Indian enterprise was Rs.1, 375 Corers. According to IMRB surveys, Whirlpool enjoys the status of the single largest refrigerator and second largest washing machine brand in India. The company's brand and image speaks of its commitment to the homemaker from every aspect of its functioning. It has derived its functioning principles out of an undaunted partnership with the homemakers and thus a slogan of You and whirlpool, the world's best homemaker dots its promotional campaigns. The products are engineered to suit the requirements of smart, confident and in-control' homemaker who knows what she wants. The product range is designed in a way that it employs unique technology and offers consumer relevant solutions. Whirlpool of India engaged a real life celebrity couple Ajay Devgon & Kajol to endorse the brand who symbolise the values that brand stands for. Their 8

relationship represents what the Whirlpool brand has always epitomised in its advertising through the years- A relationship based on equality, love and romance.

Achievements
Whirlpool came to India on the crest of a long trail of achievements and has since furthered this record. By end-1999, Whirlpool became the largest selling appliance brand in the country. A couple of years later, it also became the largest exporter of home appliances from India. In the course of this growth and development, Whirlpool has also achieved immense brand equity in the Indian market. Whirlpool has successfully established new rules of marketing and branding in the home-market sector. Its rivals have adopted the new practices, but the Whirlpool brand stands out to the extent that authoritative surveys reported it to be the most preferred brand in refrigerators and washing machines in 2003. (Mill ward Brown Brand Track). Whirlpool of India exports to more than 50 high-value markets in Asia and other parts of the world as well. Its products are customized to the local standards and different needs of each of these markets. These qualities of Whirlpool are exemplified in its Indian sales as well. The company has set up a highly equipped product development centre in Pune, which provides global design services to three other Whirlpool research and development facilities based in Brazil, Italy and the US. Indeed, the Indian operations of Whirlpool are a very important contributor to its global vision of "Being in every home, everywhere". In washer products, Whirlpool was again the first to come out with a Combimatic a single tub semi-automatic washing machine that did away with the hassle of shifting clothes from one tub to another.

Recent Developments
Leveraging its leadership position in the domestic appliances industry, as the homemaker, Whirlpool has also successfully launched air conditioners and microwave ovens, customizing them to Indian conditions. As part of its ongoing expansion and diversification in the Indian market, Whirlpool is also incessantly adding to its own substantive understanding of the Indian customer particularly the motivations, needs and desires of the homemaker. Through this approach,

Whirlpool will further expand its promise of offering innovative, technologydriven solutions for Indian homes.

Promotion
Whirlpool's promotion strategy has introduced unique values in the home appliance market. As recently as the early 1990s, most consumer durables were promoted just as desirable accessories, and the purchase decision crystallized through the male breadwinner in the Indian family. Whirlpools promotions broke new ground with reference to each of these longstanding premises in the Indian consumer market. Whirlpool created its marketing position around the tagline, You and Whirlpool the worlds best homemakers. Based upon this premise, Whirlpools promotions encouraged and helped women to consciously identify themselves as the real homemakers in the family. These encouraged women to take pride in their homemaking roles, facilitated by Whirlpool. This strategy also took Whirlpool to the core of every home, as envisaged in the mindset of customers; thereby enabling instant connection with the brand. In the process of establishing such an emotional connects with the customer, Whirlpools promotions have also generated memorable campaigns. Foremost among these is the Whirlpool, Whirlpool. audio refrain, which is the hallmark of all audio-visual communications for this brand. Whirlpool has also created many memorable taglines for specific products, such as Ice, ice baby for refrigerators. It changed the media trend for consumer durables advertising in India, which hitherto was heavily skewed towards print. Whirlpool was the first home appliance brand to orient its promotions towards television advertising. The core of Whirlpools communication has remained constant over the years.

Brand Values
Whirlpool stands for ideas and innovations that focus on the genuine needs of customers in modern societies, and creates enabling solutions that are more efficient and durable than those provided by any other home appliance brand. To this end, Whirlpool genuinely abides by its promise of being a Partner in homemaking, in modern society; with eternal commitment and loyalty to its customers. 10

Whirlpool launched the worlds first top-loading automatic washer soon after World War II. In the ensuing years, this product became the standard for all home appliance manufacturers. Whirlpools technological and innovative expertise with food preservation and refrigeration technologies has led to its sustained involvement in the US space programme over the decades. It created the system that enabled astronauteat diverse kinds of food in zero gravity conditions in the Gemini, Apollo and Skylab projects.

Board Of Directors:
Arvind Uppal (Managing Director) Shazhard Aakthr

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 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

Transformation Systems
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Whirlpool is transforming into a completely customer-centered company where the customer lies in the core of every of our functions. This focus has arrived as direct consequence of our core competency of customer excellence. It allows us to build Customer Loyalty. The transformation is made up of five elements: Market leadership through customer loyalty Innovation Diversity with inclusion and core competencies Passion for customer excellence Operational excellence The elements of the transformation hold the promise of making Whirlpool a growing company and thereby increasing value for our shareholders. The five elements are the basis for describing our strategy internally and guide the development of our plans and initiatives. Whirlpool has swiftly moved from being a World Class Manufacturer to a World Class Marketer using the brand-building framework. We are dedicated to creating unique branded solutions that build customer loyalty and achieve brand excellence.

Table 1.1 Customer Excellence

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Know a Customer Know our brands and products Know the drivers of loyalty

Be a Customer Buy and use our products Think deeply about our products and services Share customer knowledge and insights Drive actions based on customer insights Be passionate about our brands and customer loyalty Provide a positive voice for our brands

Serve a Customer Recommend our products Show empathy for customers and seek to resolve problems Create consistent customer touch points Provide unique solutions for the customer Take a customer- facing job rotation Build strong relationship with customers to reinforce their decisions

Know the customers data base History Know how to recommend the right product and solve problems Know how the customer views my job Know who our customers are, how to treat them and how we add value

About WOIL:
3 Manufacturing locations 5 Regional Offices and 18 Branches 3000 Employees 53000 Share holders Whirlpool Investment: $ 150 M (Rs 700 crores) 82.33 % Ownership of Whirlpool Corporation 23.5% of the market in refrigerators and washing machine Whirlpool launched worlds first top-loading washer. Exports to more than 50 high-value markets in Asia and other parts of the world as well Product development centre in Pune, which provides global design services to 3 other Whirlpool R & D facilities based in Brazil, Italy and USA Manufacturing facility in India, packs off a new appliance for retail distribution every 30 seconds 13

Journey of WOIL
1987: Whirlpool and Sundaram Clayton of India enter in to a Joint venture to form TVS Whirlpool Ltd 1995: A majority control is acquired in TVS Whirlpool Ltd and Kelvinator of India is acquired 1996: Kelvinator of India and Whirlpool washing machine ltd combined to form WOIL 1999: WOIL crosses the mile stone of 1 million in the sale of appliances 2000: WOIL become Indias largest selling refrigerator brand 2000: Second largest washing machine brand. 2001: Started making profit

2004: Sales turnover of 1200 crores 2006: Sales turnover of 1274 crores.

Mission Statement

We will be demanding of ourselves Like no other brand does. We will Serve with pride in every Indian home and Bring prosperity to our Investors

So as to care for our consumers

We will Dare to change

The standards of our industry and be the Envy of our competitors.

We will be Leaders in Home Appliances

Which all others will start to emulate.

Vision Statement
The pervasive vision of Whirlpool is, Every Home, everywhere, with pride, passion and performance, rests on the pillars of innovation, operational excellence, and customer-centric approach and diversified talent. These are embedded within our business goals, strategy, processes and work culture. Be it our products that are the 14

result of innovation and operational excellence to meet every need of our consumers or the people behind these products that come from a wide spectrum of backgrounds, everything we do features a distinct Whirlpool way

Product Categories of Whirlpool Present in India are as follows:

The four product categories are:

Refrigerators Washing Machine Air Conditioners Microwaves

Unique Feature of WHIRLPOOL: The 6th Sense Technology A Various Products Available in the Market

Table 1.2 Refrigerators

Direct Cool Frost Control Frost Free

Genius Royale | 180 L

Fusion Maxigerator | 310 L Iceberg 340Elite 340 L 15

Genius Premier | 180 L Genius Supreme | 180 L

Fusion 27 Premier | 260 L

Iceberg 340 Dlx 340 L

Fusion 24 Royale | 230 L Iceberg 310 Elite 310L Fusion 24 Premier | 230 L Iceberg 310 Dlx 310 L Fusion 21 Royale | 200 L Fusion 21 Premier | 200 L Delight 30 Dlx 280 L Delight 30 Elite 280 L Delight 26 Elite 250 L Delight 26 Dlx 250 L Delight 23 Elite 220 L Delight 23 Dlx 220 L Delight 23 Classic 220 L

Table 1.3 Washing Machines

Semi Automatic Whitemagic H 70 | 7 kg Whitemagic S 70 | 7 kg Whitemagic Super-Soak | 6.2 Kg Whitemagic E 65 | 6.2 Kg Whitemagic S60-Buzz | 6 Kg Whitemagic SI 60 | 6.2 Kg Fully Automatic H 65 | 6 Kg Ltrs F-65 | 6 Kg FP 65 | 6 Kg FP 60 DLX | 6 Kg FP Splash | 5 Kg Horizontal Axis Sensation EX | 6.5 Kg Sensation EM | 6.5 Kg

Table 1.4 Air Conditioners

Split Magic Cool 200Qcs | 2 ton Magic Cool 150Qcs | 1.5 ton

Window Magic Cool 150EL | 1.5 ton Magi Cool 100 EL | 1 ton Magic Cool 150EM | 1.5 ton

Table 1.5 Microwaves

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Convection Magi Cook MT 22C | 22 Ltrs Magi cook 30C Feast | 30 L Jet Chef Elite | 30 L Magi cook 23C Treat | 27 Ltrs Jet Chef Magnum | 30 L

Grill Magi Cook MT 22GSi | 22 Ltrs Magi Cook MT 27 G | 27 Ltrs Magi Cook 22G | 18 Ltrs Magi Cook Plug Grill | 18 Ltrs

Solo Magi cook 20S | 20 L

Manufacturing Facilities in India

Whirlpool has invested heavily in its manufacturing facilities in India. While the factories in Faridabad and Pondicherry have been upgraded to meet the exacting world class standard of Whirlpool, the one under the construction at Ranjangaon, Pune will set the standards as one of the worlds front runners in environmental sensitive and eco-friendly manufacturing units.

Faridabad The refrigerator facilitated at Faridabad in Haryana manufactures direct cool. Refrigerators ranging from 165 liters to 310 liters. Infusion of technology and up gradation of machinery along with streamlining of processed has enhanced the plant capacity from 7,00,000 units to 8,50,000 units annually. Whirlpools focus at this plan in on manufacturing refrigerators that are made to suit Indian conditions and requirements, while matching Whirlpool global quality standard. Pondicherry The washers facility at Pondicherry, manufacturers semi automatic and automatic washers. Constant feedback from consumers has resulted in improved product quality and styling, leading to an improved market share. This unit was awarded the coveted ISO 9001 certification in 1994 and ISO 14001 certification in 1996. Ranjangaon A state of art gallery for the manufacturers of the Global No Frost refrigerator at Ranjangaon near Pune, this Rs. 300 crore plant built to exacting world-class standards, underlines Whirlpools commitments to India. It has been designed in

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accordance with the ecological and environmental criteria that have become such a concern in todays scenario the world over.

Market Share in the Last Fiscal Year

The market share for the period April 2010 March 2011 Category Refrigerators Washers Microwave 34.3 27 3 Share (in %)

Companys Turnover

Whirlpool of Indias net sales for the period April 2010 -March 2011 stood at Rs. 3000 crores with a 'Profit before Interest, Depreciation and Tax' of Rs. 14.57 crores. Company witnessed a growth of 40% (Approx.) in net sales over the same period last year.

Whirlpool of India, Pondicherry

Whirlpool of India Limited is a fully owned company by Whirlpool Corporation, USA Head quarters at Benton Harbor, Michigan USA. Whirlpool Corporation is the worlds leading manufacturers and marketer of home appliances. Washing Machines, Dryers, Dish Washers, Refrigerators, Freezers, Cookers, Microwave Ovens, Room Air Conditioners, Small kitchen Appliances, etc. WOIL, washer unit, Pondicherry was the first manufacturing venture of the Whirlpool Corporation, USA, the worlds largest manufacturer of home appliances. In 1987, this 18

unit was formed as a joint venture with M/s Sundaram Clayton limited, a TVS group companies and was named as TVS Whirlpool Limited. This unit is located on a 100 acre sprawling area manufacturing automatic and semi automatic washing machine. This unit is certified ISO 9001 facility by UL. It has also been cleared for S mark certification from Japanese Quality standards for Exports to Japan after our facility approval. In WOIL, washer unit has 12 departments comprising of 225 employees. Out of which 85 is management, executives and rest 140 are production operators. The various departments in the company are:

Table 1.6 Departments

Administration Department Human Department Material Department Process Plant Engineering Development Maintenance Department (PMD) Medical Department Planning Resource

Finance Department Production Department Stores Department Regional Technology Center(RTC) QualityAssuranceDe partment(QAD) Procurement Department

About the Unit

450 Crores turn over 19

 Assembly of washing machines and small appliances like coffee maker, Microwave oven etc Capacity to produce 10lakhs units a year Today WOIL target 8lakhs units per annum 5% of the total volume is exported A UL certified unit. 100% EOU unit First plant in Thirubhuvanai Village

About Working Environment

Best pay master in Pondicherry Excellent collaborative working relationship Highly flexible and committed union team In the last 14 years no single minute line stoppage Always on a Win-Win relationship.

Recognition and Rewards

The employees in Whirlpool are given recognition based on their performance. The types of recognition given vary for White Collars (WC) and Blue Collars (BC). The following figure gives an idea about this.

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WPO
HOME APPLIANCES

RECOGNITION Types of Recognition

WC > Pinnacle Award > Spot Award > Team Award > Long Term Service Award BC > Star Employee Award > Attendance Award > Long Term Service Award > Suggestion Award > IC project Award > Incentive Award

June 06

Figure 1.1 Types of Recognition

1.3.22 WOIL Enduring Values:

* RESPECT *INTEGRITY * SPIRIT OF WINNING * DIVERSITY *TEAM WORK

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MANAGING DIRECTOR

VICE PRSIDENT

DIRECTOR Plant Head

SENIOR MANGER

PURCHASE MANAGER

Company is shown by a flat organisation structure as below:

S1

22
FINANCE MANGER HUMAN RESOURCE MANGER PROCESS ENGINEERING DEVEOLOPMENT MANGER S4 S5 S6 MEDICAL MANGER REGIONAL TECH. CENTER MANGER S7 S8

PRODUCTION MANGER

QUALITY MANGER

S2

S3

Figure 1.2

Organisation Structure

Project in the background of the Company

With regard to Whirlpools Inventory, an awareness level in implementing a system for their Inventory management was predominant due to the increased difficulty in orderly execution of their Inventory transaction. The major problem with Whirlpools Inventory system was the lack of exact inventory norms and huge investment in inventory. Another constraint is limitation of space. Hence, it was essential to put a inventory system in place with the constraint treated as a part of the system so as limit the drawbacks. On this basis the project has been carried out at Whirlpool Of India Ltd., Pondicherry to frame out a system for fixing up of optimal inventory norms and orderly execution of aggregate Inventory, which includes raw materials used by the company The project also helps in knowing the amount of inventory to be kept or needed for manufacturing of a particular model of washing machine just by giving its model number.

SCOPE OF THE PROJECT

The study is limited to parts dealt by eight buyers.

LIMITATION OF THE PROJECT

The duration of the project is limited to 6 weeks The data used were secondary data.

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OBJECTIVES OF THE PROJECT Primary objective:

To maintain optimum level of inventory.

Secondary objectives:
To fix the optimum inventory norms. To find out the share of each component and its validity in the total inventory.

Summary
The above-mentioned chapter deals with introduction on Inventory control and importance of Inventory management in the highly competitive manufacturing sector. It discusses on the history, structure and profile of the organization. The chapter then deals with the objectives set out and the project in the background of the company.

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CHAPTER 2

25

LITERATURE REVIEW Market

The home appliances market, euphemistically called the 'white-goods sector' has expanded greatly in the past two decades, with especially accelerated growth since the latter half of the 1990s. Within this broad sector, refrigerators are the largest segment, followed by washing machines. By dint of its clear market leadership in these two segments, Whirlpool can justly claim itself to be the best-known home appliance brand in India. Growing incomes and consumerist trends of an opening economy have given a fillip to the demand for modern home appliances and the white-goods sector has attracted a huge proliferation of brands, both Indian and multinational. Yet, this sector has been characterised by cut-throat competition, with many brands witnessing fluctuating and floundering fortunes. The market leaders have been operating on razor-thin margins even as they have had to constantly innovate their product offering and improve their marketing. Whirlpool has shown a steadfast robustness. By 2000 Whirlpool had become India's largest selling refrigerator brand and the second largest washing machine brand, with approximately a quarter of the total market share in these categories (Source: ORG Retail Audit). Significantly, Whirlpool has continued to build upon this lead steadily. With total sales amounting to nearly Rs. 12.5 billion, it commands a 23.5% share of the market in refrigerators and washing machines (ORG Retail Audit).

Inventory
The term inventory has meaning far beyond the usually accepted raw materials, WIP, Stocked components and finished goods related to a companys products. For effective control, all items required for manufacture must be included in the planning and control activities. These obviously include tools, fixtures, gages, cutters, testing equipments and similar devices employed in the production processing operations. Supplies such as lubricants, grinding materials, cleaning and sterilizing

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compounds and fuels must be part of the formal inventory plan. Inventory has real value only when it is flowing through operations. Inventories constitute the most significant part of the current assets of a large majority of companies in India. 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 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. It is possible for a company to reduce its inventories to a considerable degree of 1020 per cent without any adverse effect on production and sales by using inventory planning and control techniques. The reduction in excessive inventories carries a favourable impact on the companys profitability. In analyzing the performance of profit making organization, financial and business analysts have developed a variety of financial ratios; many may also apply to inventory management. They have been used as the basis for developing inventory model as well. Return On Asset (ROA) Ratio of Profit before Tax (PBT) as a % of Total Assets less cash ROA = Operating Profit Total Assets Inventories are assets and reducing investment in inventories can have a beneficial effect on ROA Inventory Turn over Ratio The annual cost of goods sold divided by the cost of inventory has always been considered a measuring stick for inventory management. Inventory T/O Ratio = Annual Cost of Goods sold Cost of inventory

Importance Of Inventories
The three important reasons for holding inventories are: 27

* Transactions motive It emphasizes the need to maintain inventories to facilitate smooth production and sales operations. * Precautionary motive It necessitates hold of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. * Speculation motive It influences the decision to increase or reduce inventory levels to the advantage of price fluctuations. Over investments in inventories results in unnecessary tie-up of the firm's funds and loss of profit, excessive carrying costs and risk of liquidity. Under investments in inventories results in production hold-ups and failure to meet delivery commitments. Efforts should be made to place an order at the right time with the right source to acquire the right quantity, at the right price and quality.

A Glance through Whirlpool Washers Semi Automatic Whitemagic H 70 | 7 kg Features

28

1-2, 1-2 Handwash System Agitronic Soak

RS 9400-9700

Castors 2-year Warranty End of Cycle Buzzer Hot wash Water Level Selector Electro-Mechanical Controls 340 W Wash Motor Multiple Wash Programs 150 W Spin Motor Rust Proof Plastic Base Aqua Shower 7 Kg Capacity Water Inlet Hot/ Cold See Thru Window (wash side & spin side)

29

Whitemagic S 70 | 7 kg Features

1-2, 1-2 Handwash System Agitronic Soak

Castors 2-year Warranty

Water Level Selector Electro-Mechanical Controls

340 W Wash Motor Multiple Wash Programs

150 W Spin Motor End-of Cycle Buzzer

Rust Proof Plastic Base Aqua Shower

7 Kg Capacity See Thru Window (wash side & spin side)

Water Inlet Hot/ Cold

30

Sparkle | 6.5 Kg Features 1-2, 1-2 Handwash System Agitronic Soak

Castors 2-year Warranty

6.5 kg Capacity 340 W Wash Motor

Multiple Wash Programs 150 W Spin Motor

End of cycle buzzer Lint Filter

Stylish Looks Aqua shower

Up to 30% water saving Stain wash

31

Whitemagic Super-Soak | 6.2 Kg

Features Rs 7825-8125

32

1-2, 1-2 Handwash System Agitronic Soak

Castors 2-year Warranty

End of Cycle Buzzer Water Level Selector

Electro-Mechanical Controls 6.2 Kg Capacity

340 W Wash Motor Multiple Wash Programs

150 W Spin Motor See Thru Window (only wash side)

Water Inlet Cold Rust Proof Plastic Base

33

Verve | 6.5 Kg Features Agitronic Soak Castors

2-year Warranty 6.5 kg Capacity

340 W Wash Motor Multiple Wash Programs

150 W Spin Motor Rs 7490-7790 End of cycle buzzer

Lint Filter Stylish Looks

Impeller Wash ystem

34

Whitemagic S60-Buzz | 6 Kg Features Whitemagic E 65 | 6.2 Kg Features Castors 2-year Warranty

End of Cycle Buzzer Water Level Selector

Electro-Mechanical Controls 6.2 Kg Capacity

340 W Wash Motor Rs 7625 Multiple Wash Programs

150 W Spin Motor See Thru Window (only wash side)

Water Inlet Cold Rust Proof Plastic Base

6 kg Capacity 1-2, 1-2 Handwash System 35

Castors 2-year Warranty

Figure 2.1 Semi Automatic Washers Fully Automatic

Splash | 5 Kg Features

36

1-2, 1-2 Handwash System Agitronic Soak

Double Rinse Castors

2-year Warranty 4 Wash Programs

Plastic Wash Tub Water Storage

Agipellers & Aquashowers Water Saver

3 dispensers for Detergent, Bleach and Softener 5 Kg Capacity

Rs 10740

Speedy Cycles Delicate Spin

37

FP 60 DLX | 6 Kg Features

38

6 kg Capacity Agitronic Soak

Memory Backup Castors

2-year Warranty Superb Powerful 575 W Motor

4 Wash Programs Plastic Wash Tub

Water Storage Speedy Wash Program

RS 12625

39

H 65 | 6 Kg Features StainWash System Sixth Sense Technology F-65 | 6 Kg Customized Wash Programs Features 6 kg Capacity

Powerful 575 W Motor 1-2, 1-2 Handwash System

8 Preset Wash Programs Stainless Steel Wash Tub

Agitronic Soak Double Rinse

Rs 1817518775

Digital Display Memory Backup

Child-Lock Castors

2-year Warranty Built-in Heater

40

StainWash System Sixth Sense Technology

Customized Wash Programs 6 kg Capacity

Powerful 575 W Motor 1-2, 1-2 Handwash System

8 Preset Wash Programs Stainless Steel Wash Tub

Agitronic Soak Low Spin Speed

Double Rinse Rs1560016200 Memory Backup Child-Lock Digital Display

Castors

41

42

Figure 2.2 Fully Automatic Wash

Sensation Elite | 6.5 Kg Features Child-Lock 6.5 kg Capacity

Sensation Deluxe | 6.5 Kg Dirt Level Programs Features Eco Wash

Dry Tap protection Water Level Selector

Auto Restart Hotwash- cold to 95 deg C

Number of Wash Programs (> 100) Stain Wash ( 10 types of stains) Rs 22990 Lowest water Consumption at 8.5lt per kg Anti Crease Cycle

Delay Wash Pedestal ( Optional)

End of cycle buzzer Lint Filter

43

6.5 kg Capacity Dirt Level Programs

Adjustable Installation Water Level Selector

Auto Restart Hotwash- cold to 95 deg C

Lowest water Consumption at 8.5lt per kg Anti Crease Cycle

29 Wash Programs

Rs 19990

44

Sensation Classic | 6.5 Kg Features 6.5 kg Capacity Dirt Level Programs

Adjustable Installation Water Level Selector

Auto Restart Lowest water Consumption at 8.5lt per kg Rs 18990 Anti Crease Cycle 29 Wash Programs

Hot Wash-45 deg C

Horizontal Axis Inventory Management

If a management objective of either increasing or decreasing inventory level is to be set, the goal should be positive effect in ROA. To apply ROA concept 45

to inventory decisions, specific incremental changes should be examined. Management normally sets an ROA rate for incremental investment in the inventories that are common to all facilities. Each decision for an inventory reduction opportunity should be governed by the rate of return on the net asset change. In the context of inventory management the firm is faced with the problem of meeting two conflicting needs To maintain a large size of inventory for efficient, smooth production and To maximize the profitability the company has to maintain a minimum

sales operation. inventory. Inventory management is the active control program, which allows the management of sales, purchases and payments. A complete Inventory Management Control system contains the following components:

Inventory Management Definition Inventory Management Terms Inventory Management Purposes Definition and Objectives for Inventory Management Organizational Hierarchy of Inventory Management Inventory Management Planning Inventory Management Controls for Inventory Determining Inventory Management Stock Levels

Introduction to Inventory Management

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.In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed inorder to maximise profits

Definition Of Inventory Management

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Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status. Handles all functions related to the tracking and management of material. Include ABC analysis , lot tracking Cycling support etc. Management of the inventories, with the primary objective of determining,controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock holding and handling costs

Employing Good Principles Of Inventory Management

In the business world, not everyone follows good principles that aid in their success. However, the principles of inventory management cannot be ignored if you expect to maintain a quality business with a good reputation for always being able to assist a customer. Employing good principles is the best way to profit in any industry because it keeps you afloat in a world of chaos and madness. Principles maintain organizational quality and responsibility to a project, aspects that are most important in inventory management.The following inventory management principles should be understood clearly to maintain proper inventory.

First, how much inventory to have on hand to ensure continuity of supply in the event of an uncharacteristic increase in either demand and/or lead time should be determined. This quantity of inventory is called the safety stock. There is no universally used formula for determining safety stock quantity,

Second, when to reorder materials for inventory is to be known. Generally, this point in time is determined when the quantity of materials in stock 47

decreases to a certain level, called the reorder point. The reorder point is determined by the formula: ROP=SSQ+(QUDxALT)Where, ROP=ReorderPoint SSQ=SafetyStockQuantity QUD = Quantity Used Daily ALT = Average Lead Time (in days) Third, you must know how much to order. A complex mathematical equation determines the Economic Order Quantity, or EOQ. The equation recognizes the tug of war between acquisition costs and inventory carrying costs: when you order bigger quantities less frequently, your aggregate acquisition costs are low but your inventory costs are high due to higher inventory levels. Conversely, when you order smaller quantities more often, your inventory costs are low but your acquisition costs are higher because you are expending more resources on ordering. The EOQ is the order quantity that minimizes the sum of these two costs.

Cleanliness and Organisation

The principles of inventory management are simple and easy to follow, if you simply make it a point to do so. For example, one of the top priorities in inventory management is to maintain a clean, organized warehouse in which all items are properly stored and labeled. This is important for several reasons. First of all, cleanliness is important for you and your staff, as well as for any products you store. Organized storage and labeling allows you to easily locate and order, pull, or stock any item in your warehouse without a long, difficult search.

Stock Rotation
If you employ good principles of inventory management, youll be certain to rotate your stock, selling through older stock before delving into new shipments. This will assure that you always have fresh product and dont lose money by having to write off old items that were never sold or used. It also means that, again, none of your items appear as though theyve been in the warehouse untouched for years because they wont have time to build up dust and dirt to a significant degree.

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Tracking

Keeping careful track of all of the items in your warehouse is one of the best principles of inventory management. How can you possibly sail smoothly and run an efficient department if you dont know part numbers and quantities you have in stock or where they may be located in your warehouse? For inventory control to work at its best an organization must consider the costs of acquisition, carrying, ordering, and stock out, the organization must also look at its reordering system, its budgeting for inventory, insurance and forecasted demand. Both excessive and inadequate inventories are not desirable. Therefore, the concept of just in time is introduced.

Just In Time
The JIT or zero inventory concept has become a subject discussion in Production and Inventory Control circles. The management approach emphasises minimizing the set-up cost and start-up costs. The investment theory of EOQ has been enhanced by JIT approach. In practice, instead of ignoring EOQ, the JIT principle suggests that management concentrates its efforts on reducing the set-up costs. JIT technology has a larger impact on forecasts and accuracy. The reduction of lead time due to smaller lot sizes and zero inventory for receiving, WIP and assembly protection may be as much as 2/3 rd. it has always been the longer lead time that adversely affects forecast accuracy as well as directly affecting the amount of safety stock needed for any given level of customer service. In the content of inventory management the firm is faced with the problem of meeting two conflicting needs: To maintain a large size of inventory for efficient and smooth production and sales operations. To maintain a minimum investment in inventories to maximise profitability

Successful Inventory Management

Successful inventory management involves balancing the costs of inventory with the benefits of inventory. Many small business owners fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, 49

insurance and taxes, but also the cost of money tied up in inventory. This fine line between keeping too much Inventory and not enough is not the manager's only concern. Others include: Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin; Increasing inventory turnover -- but not sacrificing the service level; Keeping stock low -- but not sacrificing service or performance. Obtaining lower prices by making volume purchases -- but not ending up with slow-moving inventory; and Having an adequate inventory on hand -- but not getting caught with obsolete items. The degree of success in addressing these concerns is easier to gauge for some than for others. For example, computing the inventory turnover ratio is a simple measure of managerial performance. This value gives a rough guideline by which managers can set goals and evaluate performance, but it must be realized that the turnover rate varies with the function of inventory, the type of business and how the ratio is calculated (whether on sales or cost of goods sold).

The Purchasing Plan

One of the most important aspects of inventory control is to have the items in stock at the moment they are needed. Thus, buying requires advance planning to determine inventory needs for each time period and then making the commitments without procrastination. Part of your purchasing plan must include accounting for the depletion of the inventory. Before a decision can be made as to the level of inventory to order, you must determine how long the inventory you have in stock will last. For instance, a retail firm must formulate a plan to ensure the sale of the greatest number of units. Likewise, a manufacturing business must formulate a plan to ensure enough inventories are on hand for production of a finished product. In summary, the purchasing plans details: When commitments should be placed; When the first delivery should be received; When the inventory should be peaked; When reorders should no longer be placed; and When the item should no longer be in stock. 50

Well planned purchases affect the price, delivery and availability of products for sale.

Raw Materials and Purchased parts

When raw materials, part or component is to be purchased, the question of how much to receive in any one delivery is critical and fundamental to inventory management. An effective material control system has to: 1. Ensure availability of materials for production. 2. Reduce wastage of Raw materials 3. Achieve economy of buying and storage cost 4. Reduces pilferage, theft, obsolescence and other material losses. 5. Avoid excessive investment in stock 6. Help in maintaining perpetual inventory system to furnish information to Management regarding materials. 7. Help in ascertaining values of jobs, processes and orders.

Controlling Inventory
To maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establish adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control. They are listed below, from simplest to most complex. Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items. Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of the inventory is counted every so many days on a regular basis. Click sheet control enables the manager to record the item as it is used on a sheet of paper. Such information is then used for reorder purposes.

51

 Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item that was sold. As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence of computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer. Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action. Off-line point-of-sale terminals relay information directly to the supplier's computer who uses the information to ship additional items automatically to the buyer/inventory manager. The final method for inventory control is done by an outside agency. A manufacturer's representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise is removed from stock and returned to the manufacturer through a predetermined, authorized procedure. A principal goal for many of the methods described above is to determine the minimum possible annual cost of ordering and stocking each item. Two major control values are used: 1) the order quantity, that is, the size and frequency of orders; and 2) The reorder point, that is, the minimum stock levels at which additional quantities are ordered. The Economic Order Quantity (EOQ) formula is one widely used method of computing the minimum annual cost for ordering and stocking each item. The EOQ computation takes into account the cost of placing an order, the annual sales rate, the unit cost, and the cost of carrying inventory

Developments In Inventory Management

In recent years, two approaches have had a major impact on inventory management: Material Requirements Planning (MRP) and Just-In-Time (JIT and 52

Kanban). Their application is primarily within manufacturing but suppliers might find new requirements placed on them and sometimes buyers of manufactured items will experience a difference in delivery. Material requirements planning is basically an information system in which sales are converted directly into loads on the facility by sub-unit and time period. Materials are scheduled more closely, thereby reducing inventories, and delivery times become shorter and more predictable. Its primary use is with products composed of many components. MRP systems are practical for smaller firms. The computer system is only one part of the total project which is usually long-term, taking one to three years to develop. Just-in-time inventory management is an approach which works to eliminate inventories rather than optimize them. The inventory of raw materials and work-inprocess falls to that needed in a single day. This is accomplished by reducing set-up times and lead times so that small lots may be ordered. Suppliers may have to make several deliveries a day or move close to the user plants to support this plan.

The Basics of Production Inventory Management:

Production inventory management differs from general warehouse

management because it involves the determination of how quickly to produce a particular product. The factors involved in many cases are similar, though there are some variances in making the final decision as to how quickly manufacturing should push items through the production line. They are:

Available Materials
The first concern in production inventory management is on the front end of the process. If there is ni enough materials required for production, then one cannot move forward in providing the products to others. So it should be made ceartain that all the supplies, from raw materials to factory workers, to complete the production process is there.

Supply and Demand

The current demand for the product on the market should be determined. Good production inventory management occurs when one produce just enough material to satisfy customers needs without overextending the production line and manufacturing too many of any given product.There is non need to have an incredible 53

amount of backstock lying around, as this detracts from the net profit. On the other hand,there should be no short supply when a large order comes in, so having a little extra on hand is a graet idea.

Quality Control
Never simply assume that everything manufactured will be flawless. An important consideration in production inventory management is to allow room for error. In other words, calculate a sufficient amount of product to assume that, even with flaws that get past quality control efforts, there is sufficient stock of the product required.

Cost Analysis
In many instances, even the best production inventory management strategies fail in the long run due to the cost of the production process being overlooked as a factor. It is important to maintain a cost effective production process, and this includes making sure that the inventory is not an overwhelming factor. This comes back to not overproducing any items that come off the assembly lines. Doing so is a waste of time and materials, costing excess money to create. Obviously, conservation of the materials, time, and energy consumed in manufacturing unnecessary goods is essential to maintaining a cost effective production inventory management strategy.

Employing Effective Inventory Management in Workplace

To employ effective inventory management in the workplace, one must start at the bottom and work way up the ladder of techniques. The first thing to consider is how other employees who are involved in the stock and supply within the warehouse are currently handling the inventory for which you are now responsible. Lack of knowledge on the part of employees is one major distraction when you are attempting to create effective inventory management systems within your department or supply The following actions can help save money when you are stocking inventory Improvement in quality or changes in specifications that would lead to savings in process time or other operating savings; Developing new sources of supply;

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 Quantity savings due to large volume, through consideration of economic order quantity Greater use of bulk shipments A reduction in unit prices due to negotiations; Initiating make-or-buy studies; Substitution of less costly materials without impairing required quality Application of new purchasing techniques

Summary
This chapter deals with inventory, its importance, concepts and ideas on inventory management, its elements and techniques. The chapter gives an idea about the various types of washers the company is manufacturing.

CHAPTER 3
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EXISTING SYSTEM STUDY AND DATA ANALYSIS Integrated Materials Management

The main activity of production system is to convert raw materials into useful products by value addition process. The materials which are required for production purposes are normally procured and stored in raw material ware houses and then they are shifted to shop floor. The different functions of materials management are material planning, Purchasing, Receiving, Stores, Inventory Control, Scrap and Surplus disposal. For better operation of the system, these functions are to be integrated. The integrated material management will result in the following advantages: Better Accountability Better Coordination Better Performance Adaptability to computerized system

Inventory Control
Inventory is essential to provide flexibility in operating system. The inventory can be classified into raw material inventory, in-process inventory and finished goods inventory. The main functions of inventory are as follows: Smoothing out irregularities in supply Minimizing the production cost 56

 Allowing organisation to cope with perishable material

WASHER CLASSIFICATION

Washers

Semi Automatic

Fully Automatic

Horizontal Axis

TT

Chandini

Ruby

WW

Splash

Classic

Deluxe

Elite

Deluxe Sapphire

57

Washer Classifications
The figure shows the classification of washers at whirlpool o f India limited. The three main classifications are Semi Automatic washers, Fully Automatic washers and Horizontal Axis. All the three main categories are further sub-divided as follows: The classifications of Semi Automatic Washers are as follows:

Semi Automatic

Ruby

Twin Tub (TT)

Chandini

Verve

Sparkle

Old Tango

New Tango

H 70

S 70

SI 70

S 60

SI 60

Super Soak

SLI 60

E 65

Classifications of Fully Automatic Washers:

The classifications of Fully Automatic Washers are as follows:

Fully Automatic

Cost Tradeoffs
Our objective in (WW) minimum cost operating World Washer inventory control is to find the Splash doctrine over some planning horizon. All relevant cost the cost of the item, F carrying cost and stock out cost. These costs can be expressed in a procurement cost, 65 H 65 general cost equation: FP 65 FS 65 58 FP 60 FS 60 Dlx

Total annual relevant cost = Cost of The item

+ Procurement + Carrying + Stock out Cost Cost Cost

Each cost in the equation can be expressed in terms of order quantity and reorder point for a given inventory situation. The solution method is then to minimize the total cost. This can be accomplished graphically; by tabular analysis using trial and error; or by using calculus, the most accurate method. Graphically, minimizing total cost means Cost Tradeoffs. Q* is the optional order quantity. Annual cost Annual total cost Annual Carrying cost Q* Annual procurement cost

Total Cost Curves

In real situation, mostly products will be with sub assemblies and components. These types of products are called as Dependent items. Under such situations, the need of Material Requirement Planning arises. MRP is a technique for determining the quantity and timing for the acquisition of dependent items needed to satisfy master schedule requirements. The basic inputs for MRP are as listed below: Bill Of Material Master Production Schedule Economic Order Quantity Beginning Inventory

SAP
SAP is the name of both the software company founded in 1972 under the German name, Systems, Applications, and Products in Data Processing. It is leading ERP software package which the company produces. This abbreviation stands for "Systems 59

Applications and Products." SAP software is used by major corporations in over 50 countries for financial processing and management. SAP is made up of individual, integrated software modules that perform various organizational system tasks. There are a number of technical reasons for which various companies are implementing SAP. They are: Highly configurable Highly secure data handling Min data redundancy Max-data consistency Can capitalize on economics of sales like Purchasing, Tight-integration cross function There are two divisions in SAP - Technical and Functional Technical Module: ABAP Course Functional modules are: FICO - Finance and Costing MM -Material Management PP - Production Planning SD - Sales And Distribution

SAP R/3 is a third generation set of highly integrated software modules that perform common business function based on multinational leading practices. It takes care of any business enterprise however diverse in operation, spread over the world. In R/3, system all the three servers like Presentation, Application Server and Database Server are located at different systems.

SAPS in Inventory Management

SAP Inventory Management system allows you to manage stocks on a quantity and value basis in order to plan, enter, check goods movements and carry out physical inventories. Provides up-to-the-minute information on all the items needed to produce your product and keep your manufacturing operations running smoothly. Inventory Control maintains and provides information on inventory status. This includes planning and costing information, inventory valuation and stock status

60

information for materials used by the company. The financial impact of stockroom or warehouse activity is transmitted to the GL

User Benefit
Defines all items used to manufacture your products

Inventory Control defines all items from raw material to end products, even tools, reference items, and resources - used in the manufacture of your products. You define each items planning parameters, including lead times, planner/buyer responsibility and order policy data, to use in other Fourth Shift Edition applications for requirements planning.

Defines detailed cost data You can define the costs added at the item level and rolled costs for materials, labor and overhead. Costs can be defined for up to ten cost types, so you can analyze the impact on product costs and inventory investment of using various costing methods. Reduces data entry time When adding items, you only need to enter the basic information planning and cost data can be entered later at your convenience. Using single keystrokes, you can browse through your Item Master, add explanatory notes about an item, change planning parameters, print item information for a selected group of items, or inquire about an items components, and then return to start working on a different item. Theres no time wasted moving from window to maintain item information.

Supports material management Inventory Control maintains inventory balances by stocking location. Using single keystrokes, you can inquire about an items stock status and inventory value, move or adjust inventory and then print a stock status report for a selected group of items. 61

Automatically creates financial transactions As you use Inventory Control to record your material movements and cost

changes, corresponding financial transactions are created for transfer to the general ledger. In this way, your general ledger reflects actual manufacturing activities and a complete audit trail is maintained back to the source transactions. Provides accurate, timely inventory information Inventory Control is the basic building block for all other manufacturing modules, since it maintains your item information and inventory balances. Based on this information, Fourth Shift plans and controls all items-materials, resources, tools and reference items-used to manufacture your products. You maintain up-to-the-minute inventory balances by stocking location and can easily access inventory value and stock status information

BILL OF MATERIAL
Simplifies data entry to save time and improve accuracy, while making your engineering, scheduling and inventory control functions more efficient. Bill of Material maintains product structure information for the materials, resources, tools, and reference items used to manufacture your products. It helps you manage future engineering changes by scheduling each planned change on the date on which it becomes effective. The Bill of Material module helps reduce the time and effort involved in maintaining product structure information. The ability to easily perform related functions results in tremendous increase in productivity.

Benefits:
Provides a common base of product structure information Maintain product structure information about how you manufacture your products. Easily create or modify a single level bill of material, and then print it. A copy bill of material feature enables a new bill to be created by duplicating a similar bill of material and making appropriate changes. This feature significantly reduces redundant data entry. Defines how to manufacture your products

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Maintain product structure information about how you manufacture your products. Easily create or modify a single level bill of material, and then print it. A copy bill of material feature enables a new bill to be created by duplicating a similar bill of material and making appropriate changes. This feature significantly reduces redundant data entry. Defines how to manufacture your products Maintain product structure information for material components, phantom assemblies, reference items, tools and tool returns, resources and even by products and co-products. You can indicate whether a component is used on a per order or per item basis to build a product, the percent of component scrap, and the leadtime offset for issuing the component to an order. Add descriptive text about particular parentcomponent relationships to provide explanations or warnings. Tells you where items are used in products On-line, where used inquiries can be used to research the effect of a pending engineering change on other parts of your product structure, in either single-level or multilevel where-used format. Supports reference numbers and operation sequencing A point of use identifier (reference number or designator) and operation sequence identifier can be used to specify detailed manufacturing requirements, and define multiple occurrences of a component in the same bill-of-material. You can also use descriptive text for further explanation about each component. Handles routing information and process requirement Using resource components, you can define work centers, operation descriptions, and capacity requirements for each step in a routing. Schedule planned engineering changes affecting routings by date effectivity. Identifies sales order configuration information Specify a bill with options for quantity, and optional, required, and common components within each group of components for a custom configured product. This information is used for option selection to minimize data entry efforts during order

63

entry and quotations when the Custom Products module is used in conjunction with the bill of material. Provides information to manage engineering changes Manage future engineering changes by scheduling each planned change by the date on which it becomes effective. You can phase in engineering changes and minimize excess and obsolete inventory, since your bills form the basis for production planning and scheduling. You can also review all effective components for a bill of material based on in and out effectivity dates you specify, enabling you to compare bills of material at different points in time.

Defines manufacturing requirements Translate your master schedule, forecasts and customer orders into manufacturing requirements. They are used to plan subassembly priorities, pick components for orders and provide the basis for product costing.

Material Requirements Planning Minimize your investment in inventory and increase inventory turns, while meeting customer service objectives. Material Requirements Planning calculates and maintains an optimum manufacturing plan based on the master production schedule, sales forecasts, inventory status, open orders, and bills of resources. By highlighting exception conditions and facilitating interactive analysis and decisions, it provides powerful decision support tools to help planners take action to accomplish the manufacturing plan and buyers to manage the purchasing plan. The system includes the capabilities for master scheduling and capacity requirements planning.

User Benefits
Minimizes inventory investment and prevents stockouts 64

Minimizes excess and obsolete inventory, part shortages, expediting, interruptions in production, and split orders by helping to ensure the right parts are in stock when needed. By recognizing pending engineering changes, the system helps avoid stockouts for new products and reorders for obsolete products. Makes the planner and buyer more effective

Recommended actions are highlighted, simplifying the planners and buyers jobs. Since recommended actions can be analyzed and implemented completely on-line, the system reduces paper work and helps planners and buyers make better decisions.

Handles two-level master scheduling You can enter a production plan and the system will calculate production

forecast requirements based on your planning bill. When using Order Entry, actual orders consume the forecast at the production plan level or master schedule level. The remaining available-promise is used to recalculate production-forecast requirements, which helps synchronize sales requirements with production availability. Calculates work center loads and capacity requirements

Calculates work center loads based on resource requirements defined in the bill of resources. You can define work center capacity and load exceptions using the shop floor reporting module. You can analyze how to reschedule the load by pegging to the source of requirements. Improves purchase planning and vendor scheduling

Provides buyers with the visibility to determine long term purchase requirements over the planning horizon. Based on open and released purchase orders, the system also generates a vendor schedule for each outside vendor that helps expediting and negotiating efforts. Simulates material and resource requirements Simulate the impact of changes to the master schedule, forecast, orders, and product structure on material and resource requirements, using the net change MRP planning capabilities. With resources defined in your planning bills, you 65

can assess resource requirements using level-by-level MRP planning and firm up a realistic schedule.

Product Costing
Develop accurate product costs and variances by product line, simulate the cost impact of material and labor cost changes, and project future costs for planning and budgeting. Product Costing provides product-costing information to assist you in analyzing and controlling operations. It helps ensure costs are accurately developed, and provides a flexible tool for analysis and simulation. It supports decisions concerning projected costs, variance analysis by product line, inventory valuation and product pricing. Using multiple methods of developing product costs, one can easily assess the effect of changes to material and labor costs, overhead rates, scrap and yield, and product structure.

User Benefits
Ensures accurate development of costs Provides a flexible tool for analysis and simulation Helps project future costs Provides multiple cost elements Allows establishment of multiple cost types Provides optimal calculation of costs Ensures security of cost data

Purchasing
Simplifies buying decisions, purchase order creation and vendor analysis while reducing paperwork, enabling buyers to be more effective.

User Benefits
Gives buyers more time for value-added tasks Simplifies purchase order creation Handles vendor item and unit of measure conversion Provides easy buyer access to vendor information Supports all types of purchases

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 Improves control over receiving activity Improves control of accounts payable and general ledger Improves measurement of variances

Financial Accounting
Provides clear audit trails and simplifies reporting and budgeting. General Ledger provides a comprehensive analysis of the companys financial position and generates financial reports. In addition, a report writer capability gives you tremendous flexibility in designing your own financial reports. Define all your company's accounts and their hierarchical relationships in chart of accounts Save time and prevent mistakes when entering manual journal entries with transaction templates Create your own set of recurrent transactions, including automatic frequency reminders Adjust your foreign currency accounts to the changes in your local currency Display your accounts' balances and transactions and view all your financial reports in any desired currency and in each detailing level Display your reports in a comparative view between months, quarters, years, or any other period Define and track your budget in any currency and view a summarizing budget report, which compares the actual versus the planned figures Create unlimited financial reporting templates with financial reports design

Screen Shots of SAP

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Figure 3.5 SAP Easy Access

This is the initial screen. By entering the SAP code one can navigate to the desired section. The SAP code varies from purpose to purpose.

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Figure 3.6 BOM Initial Display Screen

The BOM (Bill Of Material) initial display screen, where by giving the material code and plant level, a list of where the particular material is been used will be displayed.

Figure 3.7 Model Wise Display

When a specific model code is given, a list of materials used in the particular model will be displayed level-by-level. From this, the level (whether main level or sub level), part description, and the number of times the particular component is been used can be found out. It gives a full description of the particular model along with its name.

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Figure 3.8 New Part Addition

In this, addition of new parts is possible by going to changing scheduling agreement part. Here new part additions for specific supplier can be made. Hence, the components supplied by each supplier can be made up to date. The name of the supplier, vendor code, purchase order number and the currency of dealing can also be known.

Figure 3.9 Blocking of Part

In SAP, not only addition of part is possible. It is also possible to delete a particular part and block a particular part/parts supplied by each supplier. By going into the 70

change schedule part , and choosing the edit icon, all these functions can be done. This helps in avoiding confusion and having a clear and exact idea about the parts dealt by each supplier.

Figure 3.10 Material Display

Sl. o Details on Items Source By navigatingninto this section, the history of the given material will be displayed. The details about the supplier who is handling the said material, history of purchase Part have order, the date, changes No been made etc will be displayed in detail. Part Description BOM Qty / Washer UOM

Import / Indigenous Supplier Name SOURCE OF DATA Supplier Location Procurement Unit Cost Lead Time

Table 3.1

Volume per Day Buyer wise list Containerization Type Container qty Mode of Transport 71 Vehicle Type

Material Planning and production

Store

Production Inventory norms

(inv in days) Coimbatore Chennai Pondy Classification A B C 1 0.25 1 2 Madurai 2 1 1 4 Hyderabad Bangalore 3 2 4 8

Nagpur Chandigar Bombay Pune Goa 4 4 8 15 h Ambala Calcutta 5 6 10 20 Imported 6 25 50 50

The table shows the sources from where the relevant data were collected for the project work. The part no:, its description, quantity used per washer were collected from Bill Of Material (BOM) The details on the location of supplier, their name, material cost, lead time was obtained from Procurement department. The production schedule and the buyer wise list were gathered from Material Planning and production department. Data on container quantity, mode of transport etc were received from Stores department.

Table 3.2

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The table shows lead time for supplier from different location, both with in India and outside India and is expressed in days. The lead time for Class A materials, class B materials and class C materials is also shown.

Production Pattern
Maximum Per Day production 3200 Nos Normal per Day production 2200 to 3200 Nos

Inventory Policy
Total Inventory Cost = RM Inventory Cost+ WIP+FG Inventory Cost

Inventory Cost
Inventory Cost depends on the Inventory Policy Major Guiding factors for Inventory Policy are: Material classification (abc) Supply lead time

Inventory Norms
Way Forward Effective Material Requirement Planning Introduction of strong performance measure indicators for material management systems.( eg : Inventory turnover cost etc) Implementation of new systems like Kanban, Vendor Managed Inventory (VMI), Purchasing card (e-procurement) etc.

Figure 3.11 Buyer-Supplier Data

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Buy erSupplier Data

A 7% B 20%

H 28%

C 19% G 7% F 7% E 3% D 9%

The chart shows the number of suppliers with which each buyer has to deal with. The chart shows the percentage part also. It can be seen from the figure that Buyer H deals with maximum no: of suppliers (19) and buyer B deals with least no: of suppliers (3)

Table 3.3 Buyer-Supplier Data

Buyer - Supplier Data Buyer No. of Suppliers A 5 G B C D E F G H 14 13 6 2 5 5 19

B C

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BuyerNo. of Parts (dealing with)

G; 652

H; 31 A; 23

B; 42 C; 37 D; 1 3 E; 1 25 F; 1 90

Figure 3.12 Buyer-No: of parts

The chart shows the number of parts each buyer in the organisation is dealing with. The chart shows the parts dealt by eight buyers (employees of the company who are responsible to deal with the suppliers of the specific parts.)

Table 3.4 Buyer - No. of Parts

Buyer - No. of Parts (dealing with) Buyer A B C D E F G H No. of Parts 23 42 37 13 125 190 652 31

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SupplierLocation Data

Imported 30%

Indigenous 70%

Figure 3.14 Supplier-Location data

The chart shows the segmentation of suppliers with in India and out side India. The suppliers with in India is represented as Indigenous, which constitute about 70 % and the suppliers outside India, shown as Imported constitute about 30%.

Table 3.5

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Supplier Location Location Indigenous Imported Count 48 21

Production Lay Out

MAIN LINE 1

JIT STORES

TUB BASKET TOP/CON TROL PANNEL

PACKING & FINAL

WARE HOUSE

Figure 3.15 Production Lay Out

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SOUND BOOTH

MAIN LINE

HORIZONTAL AXIS

PACKING

UNDER BASE
MAIN LINE 2

CABI NET LINE

So un d TESTI Bo NG oth

Production Lay Out [Ha]

Figure 3.16 Production Lay Out [Ha]

(HA- Horizontal Axis) The figures (3.14 and 3.15) show the production lay out of washers in the company. First figure shows the lay out for all the three categories. While the second figure shows the lay out exclusively for Horizontal Axis washers.

Process Chart in Detail

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SOUND BOOTH FINAL

SOUND BOOTH

MAIN LINE

HORIZONTAL AXIS

PACKING

PACKING &

I. Under Base Assembly 1. Motor Assembly i) Spin Motor Assembly ii) Wash Motor Assembly 2. Break band assembly in Spin motor 3. Pulley tightening in wash motor II. Tub Assembly 1. Bellow fixing in tub 2. Drive Assembly in tub 3. Dump valve assembly fixing III. Basket Line 1. Balance ring and basket tightening IV. Control Panel 1. Timer tightening in Control panel 2. Drain selector and wash spin selector 3. Hose assembly 4. Buzzer tightening 5. Wiring connection V. Cabinet Line 1. Coil loading in de-coiler 2. Straightened 3. Punching Bench 4. Turn over 5. Boxing Station

VI. Main Line 1

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1. Under base assembly in Cabinet 2. Tightening 3. Tub insertion into cabinet assembly 4. Tub tightening with cabinet 5. Basket insertion into cabinet assembly 6. Basket tightening with spin motor and belt assembly in wash motor 7. Agitator assembly into the drive 8. Top tub and spin tub cover assembly VII. Main Line 2 1. Control Panel assembly into the cabinet assembly 2. Wiring connection with control panel and motor 3. Front panel assembly VIII. Testing and Packing Line 1. High Voltage checking 2. Water Testing 3. Water draining 4. Machine sound testing 6. Inspection cover testing

ABC Analysis of Inventory

There are several methods to control inventory. One method is to control the stocked items by recording balances in the stores after each issue and receipt, termed as Perpetual Inventory System. In the second method EOQ are fixed for each item. (Showing normal quantities) on the basis of average consumption of each item, the average time required for procuring the supplies and carrying cost of each item. Maximum and minimum levels of stock of each item are also fixed. ABC (Always Better Control) analysis or Selective Approach System is the third and most effective technique. In this inventory are classified according to their turn over. In fact, in inventory, only a few high valued items consume a major portion of the total capital invested on inventory while most of the items with low usage values consume an insignificant part of the capital. A management should first focus its 80

attention to the items with high usage values and then t low usage value. It is observed that only 5 to 10% of the items stored are of high usage value. These items utilise about 70 to 80% of he total capital. Such items are put under A category and need greater and constant attention. Items, which utilize about 10 to 20% of the total investment are put under B category and are about 10 to 20% of the total items. A large number of items say, 70 to 85% of the items utilise only 5 to 10% of the total investment. Such items are placed in category C. Thus by ABC analysis, management discriminates among various items of inventory with regard to attention in control and is able to ensure the availability of the items for production at a minimum cost. A sample curve is as follows:

Cumulative Curve of ABC Analysis

100% 90% 70% Cu.% of cost A 10% B 30% C 100%

Cu. % of No: of item

Table 3.6 Classification of items under ABC

Category A B C Percentage of total items 5 to 10 10 to 20 70 to 80 Percentage of total material cost 70 to 80 10 to 20 5 to 10

From the above classification, it is clear that A items are of minimum quantity and of maximum value out of total quantity and value of materials. They have to be controlled fully by all methods of Inventory Control from the time of purchase until they are consumed in production. B and C items are of major portion of total 81

quantity of raw materials but having minimum capital investments. Therefore, they are to be managed through less stringent controls.

Advantages
i. ii. iii. Effective control is applied on the high value items rather than concentrating on all items. This results in reduction in value of material losses. Optimum investment in materials as minimum required quantity of A items with high values is purchased. Storage cost is kept at minimum amount as high value materials representing minimum quantity are kept in stores. The ABC classification process is an analysis of a range of items, such as products are divided into three categories: A - Outstandingly important B - Of average importance C - Relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way; with more attention, being devoted to category A, less to B, and least to C.

ABC DISTRIBUTION

257

564

52

Figure 3.18 ABC Distribution

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The chart shows the segmentation of materials into A, B and C class. The table below gives the details on number of items constitute each class.

Table 3.7 ABC Distribution

CLASS A B C NO: OF ITEMS 257 52 564

Table 3.8

ABC Calculation
Classification A B C TOTAL % % of Items 257/873*100 = 29.4387 52/873*100 = 5.9565 564/873*100 = 64.6048 100 % of Cost 43314.44/49431.67*100 = 87.6249 2062.34/49431.67*100 = 4.1721 4054.89/49431.67*100 = 8.2030 100

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ABC CLASSIFICATION

120

100 87.6249 80 64.6048 60

100

100

40 29.4387

20 5.9565 0 % OF ITEMS % OF COST 8.203 4.1721 C 64.6048 8.203

% OF COST

A 29.4387 87.6249

B 5.9565 4.1721
% OF ITEMS

TOTAL 100 100

Figure 3.18 ABC Classification

The chart shows the cumulative percentage of cost and cumulative percentage of items for each class (A, B, C). The table provides the calculation of the same.

ABC Analysis Graph

100 80 B 84

Cumulative % of Cost 60

40

20

40

60

80

100

Cumulative % of items

Figure 3.19 ABC Analysis Graph

The graphical presentation shows the results derived from ABC analysis. It is representation of points mentioned in the above table.

Summary
The existing system study was done to find out how the inventory is managed, present inventory norms and to find out if there exists any drawbacks in the current system. The chapter deals with the types of washers the company is manufacturing; the advantages, user benefits and effectiveness of SAP (Systems Applications and Products). It also deals with the data source, present inventory norms and the details on buyers, supplier, their location, and number of parts each buyer/supplier dealing with. It is then followed by data analysis part. One of the main areas of analysis part was ABC analysis. 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.

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CHAPTER 4

RESULTS AND RECOMMENDATIONS Norms Fixing

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The inventory norms were calculated for all the components and parts dealt by the eight buyers. The main aim of norms fixing were to in handling the whole lot of components properly and making it available to shop floor for smooth production, The norms fixing thus helps in achieving and maintaining an optimum inventory level, if the norms were effectively implemented and followed properly. The following table will give a feel on how the inventory norms were calculated.

Table 4.1 Table showing Calculation of Norms

Vendor Buyer A A B B C C D E E F G H Supplier I I II II III III IV V V VI VII VIII Code 91010012 91010012 91010295 91010765 91010445 91010445 91011335 91010555 91010310 91010310 91011065 91010017 PO No 1204000652 1204000652 1204000711 1204000924 1204000741 1204000741 1204000757 1204000742 1204000816 1204000816 1204000803 1204000709 Part No. P010618240F P010618220H P019034080R P0186120300 P0186405100 P018640010B P010111380C P019054100B P019111060A P0190401200 P019107020B P019101090B Part Description Motors Motor spin Control panel assy H 65 Tub cool grey 1c Wm sparkle Wash timer base Wash timer base assy Tub sup.weld Power cord Escutcheon Escutcheon - ss Counter weight Front panel

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No: off 1 1 1 1 1 1 2 1 2 1 1 1

Unit No: No: No: No: No: No: No: No: no: No: No: No:

Category Electrical Electrical Electrical Plastic Electrical Electrical Steel Electrical BT BT BT Plastic

Inde/Imp Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous Indigenous

Location Local Local Domestic Domestic Local Local Imported Domestic Domestic Local Imported Local

Family TT TT WW TT ALL TT FA WW WW WW HA WW

Model ALL ALL H 65 Sparkle/verve ALL Sparkle WW/SPLASH H 65 ALL F65 SENSATION F65,H65

M/C colour Common Common SS Cool grey Common Common Common Morning blue Light grey SS Common Black

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MT COST 494 405 827.77 338.8 147.76 147.76 156.86 86.78 74 69.75 131.8 40.2

MT CLASS A A A A A A A A A A A B

Lead Time 4 4 0.5 0.5 2 2 1 1 2 2 4 2

Max Stock 1383200 1134000 124165.5 118580 206864 206864 120458 26034 146520 41850 67481.6 10291.2

Sgtd .Norms 2800 2800 150 350 1400 1400 450 300 1980 600 512 256

Annual Cumu.Ann. Consumption (RS) Cnsmp.Value 849505618 696457035 63174578.63 58262419.6 25409843.92 25409843.92 18143055.04 6622962.82 5647606 5323250.25 570166.8 389340 849505618 1545962653 1743011751 1919641123 2621629453 2647039297 3299627225 4795657277 4837556620 4925735405 5441524653 5460096630

Cu.Usage % 14.35265224 26.11950276 29.44870637 32.4329126 44.29321601 44.72252294 55.74819174 81.02406822 81.73197019 83.22177722 91.93619127 92.2499704

Formula Maximum Stock= Suggested Norms*Material Cost Suggested Norms=Lead Time*No: of units used*Per day Production Annual Consumption (RS) = Annual Consumption (units)*Per unit Cost

Abbreviations PO No: - Purchase Order Number No: of Number of times the particular part is used in a specified model Inde Indigenous (with in India) Imp Imported (Out side India) M/C Colour machine colour MT Cost Material Cost 89

MT Class Material Classification Max Stock Maximum Stock Sgtd Norms Suggested Norms Cumu.Ann.Cnsmo.Value Cumulative Annual Consumption Value Cu. Usage Cumulative Usage in %

Results
Investments in A class items are very high. The company, resulting in excessive inventory in hand, did not properly follow the norms fixed. The provisions in the SAP software can be used more effectively.

Recommendations
Investment in A class items should be minimized by purchasing goods from the suppliers who offers higher amount of discount at a periodical basis. The norms have to be implemented properly and thus they can try to reduce the inventory level. The Provisions in the SAP software should be utilized properly and from that they should verify the stock list. Materials should be kept in proper order and should be easily accessible by concerned people in the production area. Proper co-ordination should be done with the vendor and the vendor meeting should be made in a regular interval. Steps should be taken for quick realization of stocks.

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CHAPTER 5

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. If they could properly implement and follow the norms and techniques of inventory management, then it will ensures smooth availability of materials for production, Reduces wastage of Raw materials, Achieve economy of buying and storage cost, Reduces pilferage, theft, obsolescence 91

and other material losses. It helps in maintaining perpetual inventory system to furnish information to management regarding materials, helps in ascertaining values of jobs, processes and orders. Thus, they can maximize the turn over of the company.

References
1. Paul H. Zipkin, Foundation of Inventory Management, McGraw-Hill International Editions; 2000 2. B.S. Goel, S.K.Mittal, Operations Research, Pragati Prakashan; 2004 3. Dennis W.Mcleavery, Peter J. Billington, Production Planning and Control, Prentice Hall of India; 1995 92

4.http://www.inventorymanagement.com 5.http://www.nextlevelpurchasing.com 7.www.whirlpoolindia.com.

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