A PROJECT REPORT ON INVENTORY MANAGEMENT

SUBMITTED TO MAEERs MIT International School of Broadcasting & Journalism (CMS) BY ANIKET NANDKISHOR LOHIYA Roll No.2715156 Batch No.27th

IN PARTIAL FULFILLMENT OF POST GRADUATE PROGRAM (PGP) YEAR, 2010 - 2011

MAEERs MIT International School of Broadcasting & Journalism (CMS)

1

CONTENTS

Chapter No. Declaration

DETAILS

PAGE NO. 3 4 5 7 8

Certificate from Organization Certificate from Guide Acknowledgement Abbreviations I 1.1 1.2 INTRODUCTION Abstract Theoretical Background of the Topic COMPANY PROFILE 1.3 1.4 1.5 Company Address CEO Message Corporate Governance Report For The Year 2008-09 1.6 1.7 1.8 1.8 1.9 1.10 1.11 1.12 1.13 Companies Financial Position Important Ratios of The Company Share Price of the Company Future Plans Vision & Mission Code of Conduct Dos & Donts Profile Of The Company Values & Philosophy
2

9 10

11 12 13 18

19 20 21 22 23 25 26 31 32 33 34 35

1.14 1.15 1.16 1.17 1.18 II 2.1

Words From Director Company Environment Achievements Need for Managing Inventory Inventory Costs DATA PROCESSING & DATA ANALYSIS Techniques Used In Managing Inventory & Practical Implementation

36 37 38 41 42 44 45 48 49 66 67 68 69 72 73 79

2.2 2.3 III 3.1

Product Details SAP FINDINGS How Videocon Handle SAP System to Manage Inventory?

3.2 3.3 IV

Some Stock Movement Codes In SAP Flow Chart Of Stock Movement CONCLUSION Data Collection Sources Bibliography

80 81 82 83 84

DECLARATION

I, Mr. ANIKET NANDKISHOR LOHIYA hereby declare that this project report is the record of authentic work carried out by me during the period from 19th May, 2010 to 17th July, 2010 and has not been submitted to any other University or Institute for the award of any degree / diploma etc.

Signature Name of the student ANIKET NANDKISHOR LOHIYA

Date 17th July, 2010.

CERTIFICATE

This is to certify that Mr. / Ms. ANIKET NANDKISHOR LOHIYA of MAEERs MIT International School of Broadcasting & Journalism (CMS) has successfully completed the project work titled INVENTORY MANAGEMENT in partial fulfillment of requirement for the completion of PGP course as prescribed by the MAEERs MIT International School of Broadcasting & Journalism (CMS)

This project report is the record of authentic work carried out by him/her during the period from 19th May, 2010 to 17th July, 2010. He / She have worked under my guidance.

Counter signed by Signature Signature

Name

Name

Project Guide (Internal)

Director

Date:

Date:

ACKNOWLEDGEMENT

I would like to extend my sincere thanks to Mr. Palve, my external project guide for his guidance & support throughout my training at Videocon Industries Limited. His calm & demeanor & willingness to teach me has been a great help in successfully completing the project. My learning has been immeasurable & working under him was a great experience.

My sincere thanks also extend to all the staff members for providing a hospitable & helpful work environment & making out summer training an exciting & memorable one.

My heartfelt thanks are also towards my course coordinator Mrs. Haridas & project guide Prof. Krishna without his help & enthusiasm the project would not have been materialized in the present form. The learning from this experience has been immense & would be cherished throughout life.

Aniket N. Lohiya (MIT ISBJ)

ABBREVIATIONS

Annual Requirement of a particular material in units or numbers or kgs.

ABC BOM C CO EOQ FG FI JIT L MM MRP MRP 2 O PO Q RM SAP TR KEYS U

Activity Based Costing Bill of Materials Carrying Cost Control Economic Order Quantity Finished Goods Financial Accounting Just In Time Lead Time (In Days) Materials Management Materials Requirement Planning Manufacturing Resource Planning Ordering cost per order Purchase Order Lot size, in units Raw Material System Application & Products Transaction Keys Avg. Daily usage of Inventory

ABSTRACT The project titled INVENTORY MANAGEMENT aims at understanding & analyzing the Management of Inventory of the Videocon Industries LTD, a manufacturing unit of many different types of home appliances like refrigerator, television, washing machine etc.

As Inventory management includes various techniques which are being implemented in the plant (Like ABC analysis, JIT, Single Piece Flow System etc). Even those tools which are not practically implemented (Like Reorder Point, Safety Stock etc) are studied. These methods along with their workings, importance as well as practical implementation are studied in detail.

INVENTORY MANAGEMENT

The Dictionary meaning of Inventory is 'A list of goods'. In a wider sense, inventory can be defined as an idle resource which has an economic value. It is however, commonly used to indicate various items of stores kept in stock in order to meet future demands.

Inventory is assets to the firm and requires investment and hence involves the commitment of firms resources. The inventories need not be viewed as an idle asset rather these are an integral part of firms operations.

Inventory refers to stockpile of products that a firm is offering for sale and the component that makes up the product. We can also say that inventory is composed of assets that will be sold in the future in the normal course of business. But the question arises how much inventory be maintained? If the inventories are too big, they become strain on the resources; however, if they are too small, the firm may lose sales.

In any organization, there may be following four types of inventory:

(a) Raw materials & parts - These may include all raw materials, components and assemblies used in the manufacture of a product; (b) Consumables & Spares - These may include materials required for maintenance and day-to-day operation; (c) Work in progress - These are items under various stages of production not yet converted as finished goods; (d) Finished Products - Finished goods not yet sold or put into use.

10

Registered Office

14 KM Stone, Aurangabad - Paithan Road, Village: Chittegaon, Tal. Paithan, Dist.: Aurangabad - 431 105 (Maharashtra)

Manufacturing Facilities

14 KM Stone, Aurangabad - Paithan Road, Village: Chittegaon, Taluka Paithan, Dist.: Aurangabad Maharashtra

Village Chavaj, Via Society Area, Taluka & Dist. Bharuch Gujarat

Vigyan Nagar, RICO Industrial Area, Shajanpur, District Alwar, Rajasthan

11

CEO Message

This year marks a milestone in the history of Videocon with the acquisition of the complete Colour Picture Tube operations of the Thomson group and the Indian operations of AB Electrolux, Sweden. Further subscribing to their faith in Videocon, Thomson and Electrolux bought about 15% and 5% stake respectively in Videocon Industries Ltd., our flagship company having a market capitalization of around USD 2.5 billion. The group today is one of the largest manufacturers of Colour Picture Tubes and Glass shells from state of the art units in Italy, Poland, India and China which form the backbone of many Colour Television manufacturers around the world. Our Oil & Gas operations contribute to Indias ever growing demand for energy and developmental needs. Our strategy continues to drive the fast changes in the technology and markets, but our foundations remain rock-solid. These directives are value systems that nurture the growth and the progression of the corporate, essayed by a multi-stage process consisting of pruning of the business portfolio and management processes, identifying new business opportunities and creating innovative products, keeping in tune with changing needs and adapting to its demands. Videocon group is more ready than ever for further expansion and serving to continue spreading happiness to millions of people around the world through its products.

Chairman Venugopal N. Dhoot

12

CORPORATE GOVERNANCE REPORT FOR THE YEAR 2008-09 (As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges) COMPANYS PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE

The Corporate Governance philosophy of your Company stems from its belief that Corporate Governance is a key element in improving efficiency as well as enhancing investor confidence. Your Company seeks to maximize shareholder value while safeguarding and promoting the interests of other stakeholders and maintaining a steadfast commitment to ethics and code of conduct. Your Company believes that retaining and enhancing stakeholders trust is essential for sustained corporate growth and has engrained into its culture and into each associate, the values of honesty and fairness. For your Company, adherence to Corporate Governance stems not only from the letter of law but also from the inherent belief of doing business in the right way. Tenets of your Companys Corporate Governance Philosophy are: Accountability and fairness towards all stakeholders; Create value for all stakeholders without compromising on ethical principles; Comply with laws in all countries in which the Company operates; and Clear communication of relevant information and high degree of disclosure levels.

Your Company is committed to Corporate Governance and endeavors to adhere to the highest standards of corporate values and ethics which predates SEBI and Clause 49 of the listing agreements and in doing so, it has consistently enhanced shareholders value. The Company is in compliance with the requirements of Clause 49 of the Listing Agreement. The details of Compliances are detailed hereunder:
13

BOARD OF DIRECTORS

1. Composition as on 30th September, 2009:

In keeping with the commitment of the management towards the principles of integrity and transparency in business operations for good corporate governance, your Companys policy is to have an appropriate blend of executive and independent directors to maintain the independence of the Board, and to separate the Boards functions of governance and management.

Accordingly, the Board of Directors of the Company comprises of eminent persons having versatile experiences in diversified fields, including Finance, Marketing, Technical, Management and Administration. The strength of the Board, at the end of the financial year, was eleven of which two are Promoter- Executive; one Non Executive - Non Independent and eight are Independent Directors.

14

Category Directors No. of Directors

CATEGORY Promoter, Executive

DIRECTORS Mr. Venugopal N. Dhoot (Chairman and Managing Director) Mr. Pradipkumar N. Dhoot (Whole-Time Director) Ms. Gunilla Nordstrom (Nominee AB Electrolux Public) Mr. S. Padmanabhan Mr. Satya Pal Talwar Mr. Radhey Shyam Agarwal Mr. Arun Laxman Bongirwar Maj. Gen. S. C. N. Jatar Mr. Karun Chandra Srivastava Mr. Ajay Saraf (Nominee - ICICI Bank Ltd.) Dr. B. N. Singh (Nominee - IDBI Limited)

NO. OF DIRECTORS 2

Non - Executive, Non Independent Non - Executive, Independent

1 8

Mr. Venugopal N. Dhoot and Mr. Pradipkumar N. Dhoot are relatives within the meaning of Section 6(c) of the Companies Act, 1956.

2. Board Procedure:

The Company has a well-defined process of placing vital and sufficient information before the Board pertaining to business to be considered at each Board Meeting so as to enable the Members of the Board to participate in the discussion and discharge its responsibilities effectively.

15

The Company is in substantial compliance with the Secretarial Standards governing Board Meetings, as set out in Secretarial Standards 1 issued by the Institute of Company Secretaries of India. The Company Secretary, in consultation with the Board of Directors, finalizes the agenda of the Board and Committee Meetings, which is distributed to the Board/Committee Members well in advance.

The basic information furnished to Board Members and the Procedure is as set out hereunder:

The Company has defined guidelines for the meetings of the Board of Directors and Committees thereof. These guidelines seek to systematize the decision making process at the meetings of Board / Committees, in an informed and efficient manner.

All Board/Committee Members are given notice of the meetings in advance. The meetings are governed by structured agenda. The agenda alongwith the explanatory notes are distributed well in advance.

The Board/Committee Members have unqualified access to all information available with the Company. The information generally provided to the Members inter-alia includes: Annual operating plans and budgets; Quarterly, Half Yearly and Annual financial results; Minutes of the Annual General Meetings / Extraordinary General Meetings / Board Meetings / Meetings of Audit and other Committees to the Board; Notice of Interest; Material important litigations, show cause, demand, prosecution and penalty notices, if any; Sale of material nature of investments, subsidiaries and assets, which are not in the normal course of business;
16

Establishment, operations and Set up of Joint Venture, Subsidiary or Collaboration etc., Investment/Divestment of Joint Ventures, Subsidiaries; Acquisitions/Amalgamation etc; Compliance Reports; Minutes of the Board Meeting, Annual General Meetings of Subsidiary Companies and significant transactions if any; and Related Party Transactions.

Minutes of the proceedings of each Board/Committee meeting are recorded. Draft minutes are circulated amongst all members for their comments. The minutes of the proceedings of the meetings are entered in the Minutes Book.

The guidelines for the Board/Committee meetings facilitate an effective post meeting follow-up, review and reporting process for the actions taken on decisions of the Board and Committees.

3. Code of Conduct:

The Board has laid down a code of conduct for all directors and senior management of the company, which has been posted on the website www.videoconworld.com. All directors and senior management personnel have affirmed compliance with the code for 2008-09. A declaration to this effect signed by the Managing Director is given in this Annual Report.

17

4. Meetings:

During the financial year, the Board met eleven times on 27th October, 2008; 07th November, 2008; 23rd January, 2009; 31st January, 2009; 26th February, 2009; 02nd April, 2009; 27th April, 2009; 29th April, 2009; 21st May, 2009; 31st July, 2009 and 11th August, 2009. The gap between any two meetings has been less than four months.

18

COMPANYS FINANCIAL POSITION

FINANCIAL STATEMENTS OF THE COMPANY FOR THE YEAR ENDED ON MARCH 2009 & MARCH 2008

PARTICULARS

YEAR 2009 (Rs. In Crores)

YEAR 2008 (Rs. In Crores)

SOURCES OF FUNDS Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus LOAN FUNDS Secured loans Unsecured loans Total USES OF FUNDS Fixed assets Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments NET CURRENT ASSETS Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total NOTES Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacks)
19

229.41 95.00 46.01 6,929.63 6,735.04 2,349.51 16,384.59 9,004.95 4,298.83 4,706.12 1,314.15 3,064.90 8,820.90 1,521.48 7,299.42 16,384.59 3,056.96 10.83 122.93 2294.07

229.30 46.01 6,538.49 4,401.25 3,604.34 14,819.39 8,947.78 4,310.63 4,637.15 1,289.52 2,695.59 7,641.68 1,444.55 6,197.13 14,819.39 2,524.79 214.72 178.17 2294.51

FINANCIAL RATIOS OF THE COMPANY

PARTICULARS Face Value Dividend Per Share Net Operating Profit Per Share (Rs) Operating Profit Margin (%) Net Profit Margin (%) Return On Capital Employed (%) Current Ratio Quick Ratio Debt Equity Ratio Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Dividend Payout Ratio Net Profit Earnings Per Share Book Value

YEAR 2009 10.00 3.50 374.75 20.18 10.23 12.17 1.76 2.15 0.95 6.00 6.82 6.25 1.81 11.10 39.64 294.96

20

VIDEOCON INDUSTRIES LIMITED SHARE PRICE DETAILS

DIVIDENT HISTORY (Rs. Per Share) 22nd March 2010 17th March 2009 18th March 2008 17th March 2007 18th March 2006 2.00 1.00 3.50 3.50 2.50

52 WEEKS HIGH LOW PRICE OF THE SHARE

HIGH 268.15

LOW 169.25

21

Future Plans

The Future is here

To strengthen and maintain & its leadership status, the Videocon group has clearly charted out its course for the future. Aggressive development is in full swing at the R & D Centers to bring out state-of-the-art technologies including True Flat, Slim, Extra Slim, Plasma & LCDs, at the earliest.

Cost rationalization processes - are in various stages - including rationalizing factories in Europe, increasing automation and improvement of efficiency in China, accessing flass shells from India for international CPT facilities and a lot more - are in various stages of implementation.

Internationally all existing client relationships are being strengthened. The cost competitiveness and increase in capacity in Poland has opened up big opportunities in the OEM business.

Last but not the least, in the domestic market consolidation with multiple brands paves the way for an unassailable lead in the market.

In the Oil & Gas business, having all the basic operator capabilities of a prospecting entity, the group is looking to add more explorations and production depth as also oil bearing assets. The group will also get into gas distribution in India significantly.

22

VISION & MISSION

Videocons mission: A reflection of continuity and change Videocons mission expression has been crafted to envelope both extant and emerging realities: To delight and deliver beyond expectation through ingenious strategy, intrepid entrepreneurship, improved technology, innovative products, insightful marketing and inspired thinking about the future. A breakdown of the statement above reveals a means and end approach, where the end is articulated at the beginning with the means linked to it. To delight and deliver beyond expectation the end This segment not only underlines the importance of the ultimate goal customer satisfaction (delight) and ultimate target - the customer, but also of intermediate processes and principals, which have contributed to building a robust, dependable. Videocon value chain (deliver). As a result of its focus on developing loyal customers and reliable associates, Videocon is able to exceed expectations. through ingenious strategy the means

In the cutthroat world of today, it is only by taking recourse to advance planning and strategy that a business can hope to survive. Although textbook strategy has its uses, reproducing it in verbatim for the real world would be foolish because of the absence of textbook conditions. Thus, there is a need for a bounded rationality, spontaneity and improvisation that is flexible enough for scenarios both imaginable and unimaginable.
23

Videocon ingenious man oeuvres are actually flexi-strategy that abstracts from shifting ground conditions and decides game-plans, or sometimes changes the rules of the game. intrepid entrepreneurship the means

An enterprise with the odds stacked against it makes great business sense. This is because higher the obstacles lower the number of players likely to be active in that field - thus, fetching extraordinary returns. The only requirement is a bold and confident attitude willing to brave the odds. Videocons foray into oil and gas is a bold and intrepid Endeavour that arises from immense faith on the surefooted competence of the companys in-house managerial talent. improved technology the means

Technology is no more a premium input; it has become the bare minimum in recent years. Rapid advances have only fuelled this phenomenon. Videocon is extremely vigilant in shunting out dated technology and replacing it with the best-in-class offers of the times.

innovative products the means

Product development, innovation and customization are the tools Videocon uses to stay ahead of the competition. This is because a continuous stream of innovative products excites the market and enhances brand recall. A strategy that Videocon banks on a lot, especially on the domestic front.

24

insightful marketing the means

The market share battle scene has long shifted from technology and processes to the psyche of the customer. This means that those with deeper insights into the elusive mind of the buyer are likely to dominate. Videocon is reinforcing marketing strengths to read better the pulse of the market and help create products that map perfectly into customer preferences. inspired thinking about the future. the means

The future is unpredictable, but not doing anything about it is fraught with grave risk. Videocon extrapolates future trends on the basis of current changes in technology and preferences as well as sheer gut feel. Fine-tuned business instincts are worth their weight in gold, lots of it. The company has perfected its practice almost into an art form with some calculated gambles like oil and gas proving to be absolute money-spinners.

25

Code of Conduct

Need and objective of the Code Clause 49 of the Listing Agreement entered into with the Stock Exchanges requires that as part of Corporate Governance, the listed entities shall lay down a Code of Conduct for Directors on the Board and the Senior Management of the Entity. Accordingly, the Board has laid down this Code for its Directors on the Board and the Senior Management.

Applicability The Code of Conduct is applicable to the members of Board of Directors and Members of the Senior Management Team of the Company, one level below Whole Time Director, viz. Business Heads, Unit Heads, Presidents, Joint Presidents and all other executives having similar or equivalent rank in the Company by whatever designation and the Company Secretary of the Company (hereinafter referred to as \"Senior Management\"). The applicability to the Board of Directors and/or the Senior Management will depend on context of Code of Conduct. The Company Secretary shall be the Compliance Officer for the purpose of this Code. The Code shall come into force with effect from 1st January 2006 and future amendments / modifications shall take effect from the date stated therein.

26

 Companies Belief System

This Code of Conduct attempts to set forth the guiding principles on which the Company shall operate and conduct its routine activities and daily business with its stakeholders, government and other regulatory agencies, media as also anyone else with whom it is connected.

It recognizes that the Company and more particularly, the Board is a trustee and custodian of stakeholders and in order to fulfill its fiduciary obligations and responsibilities, it has to maintain and continue to enjoy the trust and confidence of the stakeholders and also of overall public at large.

The Company acknowledges the need to uphold the integrity in every transaction and activity it enters into and believes that honesty and integrity in its internal conduct would be judged by its external behavior.

The Company shall be committed in all its actions to the interest of the countries in which it operates. The Company is conscious of the reputation it carries amongst its stakeholders, customers and public at large and shall endeavor to do all it can to sustain and improve upon the same in its discharge of obligations. The Company shall continue to initiate policies, which are customer centric and which promote prudence.

27

 Philosophy of the Code The Code envisages and expects: Adherence to the highest standards of transparent and ethical conduct, including proper and ethical procedures in dealing with actual or apparent conflicts of interest between personal and professional relationships.

Full, fair, accurate, sensible, timely and meaningful disclosures in the periodic reports required to be filed by the Company with government and regulatory agencies.

Compliance with applicable laws, rules and regulations. To address misuse or misapplication of the Companys assets and resources; The highest level of confidentiality and fair dealing within and outside the Company Transparent process of decision making at every level of Management. Fair and equitable treatment and accountability to all the stakeholders including customers, shareholders, employees and society at large.

Negative ethos to be defined precisely what we shall not do.

28

 General Standards of Conduct

The Company expects all Directors and the Senior Management to exercise good judgment, to ensure the interests, safety and welfare of customers, dealers, employees, and other stakeholders and to maintain a co-operative, efficient, positive, harmonious and productive work environment and business organization.

The Directors and the Senior Management while discharging duties of their office must act honestly and with due diligence. They are expected to act with that amount of utmost care and prudence, which an ordinary person is expected to take in his/her own business. These standards need to be applied while working in the premises of the Company, at off-site locations where the business is being conducted whether in India or abroad, at Company-Sponsored business and social events, or at any other place whether they act as representatives of the Company.

The Company expects all Directors and the Senior Management to; Maintain and help the Company in maintaining highest degree of Corporate Governance Practices. Shall not communicate with any member of press or publicity media or any other outside agency on matters concerning the Company, except through the designated spokepersons or otherwise authorized. Shall ensure compliance with SEBI (Prohibition of Insider Trading) Regulations, 1992 as also other regulations as may be applicable from time to time. Shall affirm compliance with this Code on an annual basis as at the end of the each financial year of the Company within 7 days.
29

 Conflict of Interest Conflict of interest occurs when personal interest of any member of the Board of Directors or the Senior Management interferes or appears to interfere in any way with the interest of the Company. Every member of the Board of Directors and the Senior Management has responsibility to the Company, its stakeholders and to each other. Although this duty does not prevent them from engaging in personal transactions and investments, it does demand that they avoid situations where conflict of interest might occur or appear to occur. They are expected to perform their duties in a way that they do not conflict with the Company\'s interest such as

Involvement / Interference The Non-Executive Directors and the Senior Management are expected to devote their attention to the business interest of the Company. They are prohibited from engaging in any activity that interferes with their performance or responsibilities to the Company or otherwise is in conflict with or prejudicial to the Company.

Business Interests If any member of the Board of Directors or the Senior Management considers investing in securities issued by the Companys customer, supplier or competitor, they should ensure that these investments do not compromise their responsibilities to the Company. Many factors including the size and nature of the investment; their ability to influence the Companys decisions, their access to confidential information of the Company, or of the other entity, and the nature of the relationship between the Company and the customer, supplier or competitor should be considered in determining whether a conflict exists. Additionally, they should disclose to the Company any interest that they have which may conflict with business of the Company.

30

 Applicable Laws

The Directors and the Senior Management of the Company must comply with applicable laws, regulations, rules and regulatory orders. They should report compliance and any inadvertent non-compliance, if detected subsequently to the Board and the concerned authorities. Disclosure Standards The Company shall make full, fair, accurate, timely and meaningful disclosures in the periodic reports required to be filed with Government and Regulatory agencies.

The Directors and the Senior Management of the Company shall initiate all actions deemed necessary for proper dissemination of relevant information to the Board of Directors, Auditors and other Statutory Agencies, as may be required by applicable laws, rules and regulations. Use of Companys Assets and Resources

Each member of the Board of Directors and the Senior Management has a duty to the Company to intimate in advance its interests while dealing with the Companys assets and resources. Members of the Board of Directors and the Senior Management are prohibited from:

Using corporate property, information or position for personal gain. Soliciting, demanding, accepting, or agreeing to accept anything of value from any person while dealing with the Companys assets and resources.
31

 Good Corporate Governance practices

Each Member of the Board of Directors of the Company should adhere to the following so as to ensure compliance with good corporate governance practices. Dos

Attend Board meetings regularly and participate in the deliberations and discussions effectively.

Study the Board papers thoroughly and enquire about follow up reports on definite time schedule.

Involve effectively in the matter of formulation of general policies. Be familiar with the broad objective of the Company and the policies laid down by the government and the various laws and legislations.

Ensure confidentiality of the Companys agenda papers, notes and minutes.

Donts

Do not reveal any information relating to any constituent of the Company to anyone. Do not do anything, which will interfere with and /or be subversive of maintenance of discipline, good conduct and integrity of the staff.

32

COMPANY
The Videocon group emerges as a USD 2.5 Billion global conglomerate continuing to set trends in every sphere of its activities from a conference room sized assembly line in 1979.

Today the group operates through 4 key sectors:

CONSUMER ELECTRONICS, HOME APPLIANCES & COMPRESSOR MANUFACTURING IN INDIA

We enjoy a pre eminent position in terms of sales & customer satisfaction in many of our consumer products like Colour Televisions, Washing Machines, Air Conditioners, Refrigerators, microwave ovens & many other home appliances, selling them through a Multi Brand strategy with the largest sales & services network in India. Refrigerator manufacturing is further supported by our in house compressor manufacturing technology in Bangalore.

33

DISPLAY INDUSTRY & ITS COMPONENTS

With the Thomson acquisition Videocon has emerged as one of the largest Colour Picture tube manufacturers in the world operating in Italy, Poland & China, continuing to lead through new innovative technologies like slim CPT, extra slim CPT & High Definition 16:9 format CPT.

COLOUR PICTURE TUBE GLASS

Videocon is one of the largest CPT Glass manufacturers in the world with a high level of experience and technical expertise operating through Poland and India. Videocon will leverage on this synergy after the Thomson acquisition to internally source glass for its CPT manufacturing increasing efficiencies and lowering costs.

OIL & GAS

An important asset for the group is its Ravva oil field with one of the lowest operating costs in the world producing 50,000 barrels of oil per day. The group has ambitious plans for expansion in this sector globally.

34

VALUES & PHILOSOPHY

Shri Nandlal Madhavlal Dhoot, the founder of the Videocon Group, completed his education in Ahmednagar and Pune. He was a successful sugarcane and cotton cultivator. As a next logical step to vertical integration, he boldly took upon an entrepreneurial venture by importing machinery from Europe to set up the Gangapur Sakhar Karkhana (Sugar Mill) in 1955. Those were the times when the village did not even have electricity. Thus was unleashed an Industrial Revolution.

The die was cast. Over the years, Nandlalji's path-breaking attitude found expression in a myriad ways, earning him the well-deserved reputation of the pioneer of industrial activity in Marathwada.

In early 80's Nandlalji initiated his three sons - Venugopal, Rajkumar and Pradeep into business. Through a technical tie up with Toshiba Corporation of Japan, he launched India's first worldclass color Television: Videocon. Today, Videocon is household name across the nation- India's No. 1 brand of Consumer Electronics & Home Appliances, trusted by over 50 million people to improve their quality of life.

35

K. R. KIM Vice Chairman and CEO Videocon Industries Limited

K R Kim was appointed as Vice Chairman and CEO, Videocon Industries Limited in 2008. Since then, he has led the company to expand its operations throughout the country in the Domestic and Global operations of the consumer durables and infotainment division.

A veteran in the consumer goods industries and the former MD of LG electronics, K.R Kim, a Law graduate from Seoul National University has been associated for over 30 years with LG Electronics before joining Videocon. During his tenure he served at esteemed positions of President and that of a Managing Director.

K.R Kims proficient leadership skills, task driven approach and matchless degree of excellence and discipline has conspicuously carved his identity worldwide. Moreover, he has been the proud recipient of the Super Achiever award from CETMA (Consumer Electronics and TV Manufacturers Association) for his role in advancing maturity of Indias Electronics and Durable goods market. He has also been awarded for Excellence in Corporate Leadership and Entrepreneurial Spirit established by CNBC TV 18- by our Honorable Prime Minister Mr. Manmohan Singh.

36

VIDEOCON HAS AN ENVIRONMENT WHICH IS

Driven by Performance Strong Value base Empowered Inclusive Diversified Talent base Fun-filled

CREATIVITY & AUTONOMY:

An individual's creativity is the basis for value creation. Videocon respects diversity and autonomy, allowing each of its employees to exercise their creativity to the full.

EMPHASIS ON COMPETANCE:

Competence is the basis for performance. Videocon sees competence as the most important factor in its personnel decisions.

37

ACHIEVEMENTS:

Videocon Group accomplished all its set goals. Videocon continued to grow even in the recent past when companies all across the world were afflicted by the recession and decrease in consumer spending. This indeed is a reflection of the contribution and commitment of all associated with the Group. Today, the Videocon Group is a household name for the Indian consumer.

Before stepping into the year ahead and setting new targets it is worthwhile to dwell on the company's achievements in the current year; RETAIL DRIVE

The Group on its retail drive, introduced retail chain Digiworld to ensure easy availability & access to its customers even in strategic B, C and D markets. This step by the group is to reinstate its focus on all the markets, to further strengthen the Positioning of its brands and gain more market share. AFTER SALES SERVICE

Recognized over 1500 authorized service points across India and 53 direct service centers in metros and A & B class cities for emergency and high-end product support. Introduced a unique 2-2-2 service initiative where Videocon pledges to attend, sort problems and replace defective products. Also a fleet of service vans has been designed to meet the requirements of the customers pan India apart from Organizing 'Free Service Camps' on a regular basis.

38

MARKETING EFFORTS

High-visibility promotional activities are splashed across all the media finding special prominence in the print, electronic and radio media. Videocon has laid special focus on OOH, and has covered all the major landmarks Pan India. Marketing spends are very judiciously planned, strong initiatives which include hi-blitz promotional campaigns across all the media i.e. print, electronic, radio & digital plus Various BTL & on ground activities, marketing collaterals, visual merchandising etc. are regularly done to attract consumer footfalls.

RESEARCH & DEVELOPMENT

The company gives utmost importance to its R & D activities. The company carries on new innovations in product development, quality improvement, process control, process implementations.

Specific areas where company carried out its R & D activities;

Home theaters. Large screen televisions. Flat televisions. Plasma televisions. Manufacturing components for CTV.

39

Benefits gained by the company due to above R & D

Increased productivity. Reduced power consumption. Able to stand in competition.

Videocon Industries Ltd. Key Recent Developments

Apr 18, 2010: Videocon Intends To Produce 4,800MW Of Power Apr 15, 2010: Videocon to Establish 1,000 MW Thermal Power Project In Punjab State, India Apr 15, 2010: Videocon to build thermal power plant in Punjab, India Apr 06, 2010: Anadarko Petroleum Announces Drill stems Test Results for Wahoo#1 Well At Wahoo Field on Block BM-C-30 In Campos Basin, Brazil Mar 22, 2010: Anadarko Petroleum Strikes Gas in Deepwater Mozambique

40

INDUSTRIAL CONGLOMERATE INCREASE EFFICIENCY & CUSTOMER SATISFACTION WITH VG SERVICE

In the consumer electronics industry, customer service has always been one of the most crucial factors of growing business. In order to serve its customer better, VG-IT implemented a web-based Call Management System using ASP.NET 3.5 and SQL Server 2005. The robust and stable application with comprehensive user support enables to handle larger call volumes approx 20000 plus customer calls per day.

Currently around 1500+ users are using the system, which includes 700 franchisees and Call Center, branches and corporate users. Considering very high and ambitious business objectives VG-IT decided to scale up IT infrastructure to fulfill business requirement and need. It has four main categories:

41

NEED FOR INVENTORY

Every organization needs to maintain a minimum level of inventory with them so as to fulfill the customers demand. Also they foresee the future demand to plan their inventory level accordingly. The reasons to maintain the inventory can be as follows;

1. Transactionary Motive: - To meet the day to day sales requirements, production process & customer demand. 2. Precautionary Motive: - The firm should keep some inventory for unforeseen circumstances. 3. Speculative Motive: - The firm keeps some inventory in order to capitalize opportunities to make profits.

OBJECTIVES OF INVENTORY MANAGEMENT

1. To ensure the continuous flow of raw materials for uninterrupted production. 2. To maintain sufficient stock of raw materials in periods of short supply & anticipating price changes. 3. Controlling extra investments in inventory by maintaining optimum inventory. 4. To minimize inventory carrying cost in business (Ordering as well as Carrying). 5. To eliminate wastages due to inventory pile up. 6. To ensure adequate & timely supply of finished goods to market through proper distribution.

42

INVENTORY CONTROL: -

Inventory control is the systematic control & regulation of purchase, storage & usage of materials in such a way as to maintain an even flow of production & at the same time avoiding excessive investment in inventories. Inventory control is the core of materials management. The need & importance of inventory varies in direct proportion to the idle time cost of men & machinery, & the urgency of requirements.

It is highly uneconomical to keep men & machines waiting & the requirements of modern life so urgent that they cannot wait for materials to arrive after the need for them has arisen. Hence, every firm must carry inventories. Inventory control is a planned method of determining what to indent, so that purchasing & storing costs are minimum without affecting the production or sales.

INVENTORY CONTROL INVOLVES;

Reducing the cost related to inventory. Spoilage. Obsolescence. Timely ordering. Recording. Handling etc.

43

OBJECTIVES OF INVENTORY CONTROL: -

To provide continuous flow of required materials, parts & components for efficient & uninterrupted flow of production.

To minimize investments in inventories keeping in view operating requirements. To provide for efficient store of materials so that inventories are protected from loss by fire & theft & handling time & cost are kept at minimum.

To keep surplus & obsolete items to minimum.

44

INVENTORY COST: -

Every firm maintains some stock of raw materials, work-in-progress and finished goods depending upon the requirement and other features of the firm. It is benefited, by holding inventory but there is cost involved with it. Had these cost not there, there would not have been any problem of inventory management and every firm would have maintained higher and higher level of inventories. The cost of holding inventory includes the following:-

Holding Cost. Set up cost. Ordering cost. Shortage cost. Stock out cost.

HOLDING COST:

The cost which is incurred by the firm to hold the inventory that can be classified as warehouse rent, etc. The holding cost can also be called as Storage Cost. Each & every firm must have some inventory with them but this holding cost must be managed properly; so it wont affect the profits of the firm.

45

ORDERING COST:

The cost associated with the acquisition or ordering of inventory is known as ordering cost. Firms have to place order with suppliers to replenish inventory of raw materials. Such expenses involved are referred to as ordering cost. The ordering cost may have fixed component which is not affected by the order size; and a variable component which changes with the order size. It includes:

Carriage Inward Insurance Inward Communication cost Stationary Cost Demurrage Charges

Ordering Cost= (A*O)/Q

Where; A = Annual Requirement of a particular material in units or numbers or kgs. O = Ordering cost per order Q = Lot size, in units

46

CARRYING COST:

The very fact that the items are required to be kept in stock means additional expenditure to the organization. The different elements of costs involved in holding inventory are as follows:

1. Interest on capital / cost of capital / opportunity costs 2. Obsolescence and depreciation 3. The cost of storage, handling and stock verification 4. Insurance Costs

The average inventory carrying costs can, therefore, be as follows:

Interest/costs of capital/opportunity cost 15 to 25% Obsolescence and depreciation cost 2 to 5% Storage, handling etc. 3 to 5% Insurance costs 1 to 2% Total 21 to 37%

Carrying Cost= (C*O)/Q

Where; C = Carrying cost O = Ordering cost per order Q = Lot size, in units

47

STOCK - OUT - COST (A Hidden Cost):

A stock out is a situation when the firm is not having units of an item in store but there is demand for that either from the customers or production department. There is always a cost of stock out in the sense that the firm faces a situation of lost sales or back orders.

Some examples are:

Non availability/ small amount available with vendors Non availability of substitutes Quality desired not matching with the supplied ones Updated or improved product not available.

SET UP COST:

This cost can also be named as Production Change Cost. It is the cost which we incur to convert the raw material into finished goods. Sometimes it may vary.

48

WHY DO WE MAINTAIN INVENTORY?

Purposes of Inventory Management: 1. To meet variation in FG demand. 2. To protect against variation in RM delivery. 3. To allow flexibility in production scheduling: production in larger lots, lower set up costs. 4. To maintain independence of operations in between stages (WIP). 5. To avail of economic purchase.

TECHNIQUES USED FOR INVENTORY MANAGEMENT

The finance department of every organization aims at maintaining an optimum level of inventory on the basis of the trade-off between cost and benefit to maximize the owners wealth. There are various tools for effective inventory management. The tool depends upon the type of inventory, namely materials, work-in-progress or finished goods. Some of these tools have an impact not only on inventory but on whole structure of the organization. They help in reducing cost and improving the efficiency of organization as a whole.

49

PERPETUAL INVENTORY VERIFICATION

This is done on continuous basis to check out actual inventory level available. In Perpetual Inventory Verification the inventory is checked out by both the ways in documents as well as in stores. In PIV method some stocks are checked randomly. The database which, ideally should refreshed simultaneously whenever there is change in inventory & it should match physical level. Practically saying these two numbers rarely match; some reasons are mismatch are given below

Delay in entering data Technical Errors (intranet or SAP not working) Documentation Error (document not submitted) Posting Error Material issued but document not processed Document processed but material not issued Material send for job work but not received effectively Pilferage Material waiting for quality check

50

BENEFITS

1. The exact amount of inventory present in the plant can be checked.

2. Checking it against the database of the stores can give us a fair idea about how efficiently the system is working.

3. Any faults in the system, regarding the errors associated with updating of database of stores department can be traced.

51

ABC ANALYSIS:

The most important thing in Inventory Control Management is classifying different type of inventories to control them as per their importance. The ABC Analysis is based on the assumption that same degree of control should not be exercised on all items of inventory. The ABC Analysis classifies various inventory items into three sets of groups based on their priority. The most important item classified as Class A, those are intermediate importance are classified as Class B, & the remaining are classified under Class C. Utmost attention is required for Class A followed by Class B & then items in Class C.

The 10% items in the inventory accounts for 70% consumption in value so they are classified as Class A items; 20% of items in the inventory accounts for 20% of consumption in value so they are classified under Class B & 70% of the items in the inventory accounts for 10% of consumption in value which comes under Class C.

LIMITATIONS OF ABC ANALYSIS

This system suffers from major drawback. An item of inventory may not be very expensive, but may be very critical to production process and/ or may not be easily available; still it will be classified under group C. It would require serious attention but due to this classification, it will receive less attention. Similarly a not very important component may receive extra attention than it deserves. In either case it is detrimental to the growth of the company. This is a serious limitation of ABC analysis.

52

PRACTICAL IMPLEMENTATION

This technique is strictly followed in VIDEOCON INDUSTRIES LTD. They always keep an eye on the items which are very crucial for production process than others; such items are given more importance than others so there will not be any excess or deficit of those items. There are around 3500 items which are categorized under A, B, & C. ECONOMIC ORDER QUANTITY MODEL: This is to solve order quantity problem:

After ABC analysis we get to know which item deserves how much attention. The next Problem is to determine the lot size in which a particular item of inventory will be required. The importance of effective inventory management is directly related to size of the inventory. A firm should neither place too large or too small orders. The inventory management basically focuses on maintaining an optimum level of inventory in order to minimize the cost attached with different inventory levels.

The optimum level of inventory is known as Economic Order Quantity (EOQ) or Economic lot size. This refers to that quantity per order, which ensures that total of carrying and ordering cost is minimum.

53

The approach to determine EOQ is based on the following Assumptions:-

The total usage of particular item for a given period (usually a year) is known with certainty and the usage rate is even throughout the year.

There is no time gap between placing an order and getting its supply The cost per order of an item is constant and the cost of carrying inventory is also fixed and is given as a percentage of average value of inventory.

There are only two costs associated with the inventory, and these are the cost of ordering and the cost of carrying the inventory.

EOQ is generally used to determine the order quantities of class C items and sometimes for class B items also. This method is rarely used for class A items because class A items are ordered only when requirement arises, there is no need to keep inventory of class A items. The formula for estimating EOQ is;

EOQ= (2A*O)/C

Where; A = annual requirement of a particular material in units or numbers or Kgs O = Ordering cost per order C = carrying cost per unit

54

BENEFITS OF EOQ

It makes sure that there is neither an excess nor deficit of inventory. It saves cost as it saves carrying and ordering cost. It results in saving of time.

PRACTICAL IMPLICATION

There are no exact rules to find out storage cost, maintenance cost etc. Since the production unit of VIDEOCON is involved in manufacturing tailor made products, assessment of EOQ is not very relevant for this kind of business line. However the general usage items like nuts, bolts, crimes, wires etc are common for all types of items. Hence it may have restricted application for Refrigerator plant.

55

REORDER POINT (Under Certainty Conditions): To solve order point problem:

Reorder point is that level of inventory at which an order should be placed for replenishing the current stock of inventory. It may be defined as level of inventory when fresh order should be placed for procuring additional inventory equal to the economic order quantity. It is the inventory level which is equal to consumption during the lead time. Reorder point is calculated as:

RP = L*U

Where; L = Lead time (in days) U = Average daily usage of inventory

BENEFITS:

It makes sure that plant does not run out of stock in any given day. It makes it easier to keep track of inventory and to know when exactly next lot of material is needed.

PRACTICAL IMPLEMENTATION:

Practically Reorder Point is not calculated for VIDEOCON INDUSTRIES LTD. Trends of requirements of various items are observed & accordingly order point is estimated for different items.

56

To emphasize on the importance of reorder point, a calculation based on assumed lead times & average usage of inventory is done. This can be proved to be helpful in implementing reorder point at VIDEOCON.

The difficulty in estimating lead time is that it is never fixed & also it depends not only on material but also on supplies & its geographical location. A material which can be ordered from different suppliers may have different lead times. As far as average daily usage of inventory is concerned, that fact is that VIDEOCON follows engineered to order business, i.e. manufacturers according to immediate demand. Thus, it becomes difficult to estimate average daily usage of inventory. As the demand keeps changing day by day.

LEAN MANUFACTURING:

There are many hidden wastes in any organization. To get rid of these hidden wastes we need to first unhide them. The best way to do this is to have a VISUAL FACTORY where there is nothing hidden. Lean Manufacturing is a tool to enable us to achieve this objective;

FUNDAMENTALS OF LEAN MANUFACTURING:

1. Smooth flow of Material & Information to meet on demand service to customers but without having to hold high inventories.

57

2. Elimination of hidden wastes. These wastes fall into seven basic categories:

a. Over Production b. Defects/Rework c. Motion d. Transportation e. High Inventory f. Over processing & g. Waiting

3. To achieve waste elimination, workplace organization using the 5 S System is necessary:

a. Sort ... Remove unneeded items b. Set in order... A place for everything and everything in its place (PEEP) c. Shine ... Clean enough to inspect and expose any defect. d. Standardize... Create instructions and Standard Operating procedures e. Sustain... Maintain the above through support and encouragement

4. Reducing Lead Time at every stage of every process through;

a. Visual Controls using Kanban cards b. Receiving material just in time (JIT). c. Line Balancing to avoid up piling up of material at any stage. d. Studying the flow of material or Value Stream Mapping. e. Total Productive Maintenance to improve overall operation of the equipment. f. Set up time reduction using SMED (single minute exchange of dies).
58

Lean manufacturing is a management philosophy focuses on reduction of the seven wastes to improve overall customer value. Lean management (also known as Big JIT) is a philosophy of operations management that seeks to eliminate waste in all aspects of aspects of firms production activities: human relations, vendor relations, technology and management of materials and inventory.

By eliminating waste quality is improved, and automatically, production time and cost are reduced. To solve the problem of waste lean manufacturing has several tools at its disposal. All of these tools aim at reducing wastes, of one of several types, as far as possible.

Some of the tools of lean manufacturing which helps in inventory management and control are:-

Just In time (Right amount in the right place at right time) Kaizen (Continuous Improvement Process) Kanban (Pull Production) Single Piece Flow System Gemba Walking Virtual Storage

59

JUST IN TIME (JIT) CONCEPT:

The basic philosophy behind JUST IN TIME is that the firm must keep the minimum level of inventory in hand. This is in direct contrast to the traditional philosophy of keeping sufficient level of safety stock to make sure that production will not get interrupted. This system benefits to any organization in two ways -

Reduces the ordering cost. This happens by locating the inventory on the proper place. Reduces over stock of the organization. It can be done by building the relationship with the suppliers to get the supply of the goods on time.

PRACTICAL IMPLEMENTATION

Just In Time is nearly implemented at each & every stage of manufacturing / production in the plant. Stores & Fabrication departments are the main user of this technique. In Videocon after implementing JIT, the whole remaining steps are taken simultaneously. So, Material keeps moving properly. Also, provisions are made so that all the parts of the product are kept together.

60

Packing of the finished goods in the company are best example of JIT followed in the company. All the finished goods are to be packed in the wooden cases. There are certain issues related with the packing; Bulky & Over Sized Storing Constraints Wood becomes dry so cant be nailed properly

So, to avoid all these problems as soon as the material is about to complete assembly department informs to packing as well as purchase department about the same. As soon as these two departments get to know this they get ready with their packaging material to pack those finished goods; just in time as the finished goods being received by them.

KANBAN SYSTEM

The Japanese refer to Kanban as a simple parts-movement system that depends on cards and boxes/containers to take parts from one work station to another on a production line. Kanban stands for Kan- card, Ban- signal.

61

The essence of the Kanban concept is that a supplier or the warehouse should only deliver components to the production line as and when they are needed, so that there is no storage in the production area. Within this system, workstations located along production lines only produce/deliver desired components when they receive a card and an empty container, indicating that more parts will be needed in production.

In case of line interruptions, each work-station will only produce enough components to fill the container and then stop. In addition, Kanban limits the amount of inventory in the process by acting as an authorization to produce more inventories. Since Kanban is a chain process in which orders flow from one process to another, the production or delivery of components is pulled to the production line. In contrast to the traditional forecast oriented method where parts are pushed to the line. The Kanban method described here appears to be very simple. However, this is a "visual record" procedure.

ADVANTAGES OF KANBAN PROCESS

A simple and understandable process Provides quick and precise information Low costs associated with the transfer of information Provides quick response to changes Limit of over-capacity in processes Avoids overproduction Is minimizing waste Control can be maintained Delegates responsibility to line worker

62

Kanban represents an efficient tool to continuously rationalize the production process and find the source of problems". Since the circulation of Kanban will stop if there is a production problem on line, it is easy to both spot and correct the problem instantaneously.

PRACTICAL IMPLEMENTATION:

The stores department of Videocon uses this system. They attach a Kanban Card to each & every item present in the stores department. Kanban card carries information about that product which is very useful in estimating its requirements. Kanban card generally carries following information;

CAT NO.: ......................................................................................... DESCRIPTION: .............................................................................. INITIATOR: .................................................................................... BUYER: ........................................................................................... CONSUMPTION: ........................................................................... MAXIMUM LEVEL: ...................................................................... MINIMUM LEVEL: ........................................................................ REORDER LEVEL: ........................................................................

KANBAN CARD

63

KAIZEN: For Continuous Improvement

Kaizen literally stands for Kai-change and Zen-to become good. The Kaizen philosophy lies behind many Japanese management concepts such as Total Quality Control, Quality Control Circles, small group activities, labor relations, etc. Kaizen is based on a Five-S framework:

Seiri Tidiness Seiton Orderliness Seiso Cleanliness Seiketsu Standardized clean up Shitsuke Discipline

Key elements of Kaizen are:

Quality Quality circles Effort Suggestion for improvement Teamwork - Involvement of all employees Willingness - To change Communication Improved morale Personal discipline

64

The Kaizen method of continuous incremental improvements is an originally Japanese management concept for incremental change. The Kaizen cycle has four steps:

Establishing a plan to change whatever needs to be improved Carrying out changes on a small scale Observing the results Evaluating both the results and the process and determining what has been learned

BENEFITS OF KAIZEN:

It improves safety. It improves efficiency of workers as well as the whole plant. It improves the dedication of the employees as it keeps them safe from any kind of mishap. It makes the plant well-organized.

PRACTICAL IMPLEMENTATION:

In VIDEOCON INDUSTRIES they were initially totally labor intensive before 2007; after which they followed SAP system. SAP system is totally computerized system where even production is done by the machineries on their own. Just a single person is required on every computer system to make an entry of the material & to give the order to that machine. Productivity improvement as well as profitability increased due to this.

65

GEMBA WALKING

Gemba means Actual Place. Instead of relying on reports to run a plant or company, the manager should put on some walking shoes and "go and see" at the "actual place", whether its a factory or a store. This Practice is also followed in VIDEOCON.

66

In this organization as it is wide spread in Home Appliances; producing products like Televisions, Microwave ovens, Refrigerators, Washing Machines, Air Conditioners etc. It requires huge quantity of different types of raw materials to be maintained for all these goods.

67

68

SAP

They are maintaining their Inventory with the help of SAP system. SAP system includes many modules like CO, MM, and FI etc. SAP is an ERP Software where SAP stands for Systems Applications and Products in data processing. SAP was developed by German software company SAP AG in 1972 and the initial version was called SAP R/1. In 1979, SAP launched SAP R/2 and in 1981, new version called SAP R/3 was launched. SAP ERP is designed to cater all the needs of an organization using a single. SAP maintains a central database for all the departments of an enterprise and all SAP modules are interconnected and hence real time reporting becomes possible unlike in legacy systems where lack of interconnection among different applications result in time lag. Currently, more than 12 million users work each day with SAP solutions. There are now 121,000 installations worldwide, more than 1,500 SAP partners, over 25 industry-specific business solutions, and more than 75,000 customers in 120 countries. SAP is the world's thirdlargest independent software vendor. SAP now are moving away from describing their system as a set of SAP Modules, and now are using the term solutions, which is much better, as follows: Financials Human Resources Customer Relationship Management Supplier Relationship Management Product Lifecycle Management Supply Chain Management
69

Business Intelligence Marketing Operations

DIFFERENT MODULES OF SAP SYSTEM: -

SAP FI - Which stands for Financial Accounting - is the SAP Module where regulatory or statutory data is tracked and managed. The SAP FI Module has the capability of meeting all the accounting and financial needs of an organization. It is within this SAP FI Module that Financial Managers as well as other Managers within business can review the financial position of the company in real time as compared to legacy systems which often times require overnight updates before financial statements can be generated and run for management review.

SAP CO - Which stands for Controlling - is the SAP Module which allows you to perform your management accounting. The SAP CO (Controlling) Module provides supporting information to Management for the purpose of planning, reporting, as well as monitoring the operations of their business. Management decision-making can be achieved with the level of information provided by this module.

70

Some of the components of the CO (Controlling) Module are as follows:

-

Cost Element Accounting Cost Center Accounting Internal Orders Activity-Based Costing (ABC) Product Cost Controlling Profitability Analysis Profit Center Accounting

SAP MM - Which stands for Materials Management and this is part of SAP Logistics which helps you manage end-to-end procurement and logistics business processes, from requisitioning to payment, including;

Requisitions Purchase orders Goods receipts Accounts payable Inventory management BOMs Master raw materials, finished goods etc

71

Some of the main SAP MM transactions are:

-

ME51N - Create Requisition. ME21N - Create Purchase Order. MIGO - Goods receipt a PO. MIRO - Create Invoice.

HOW TO LOG IN SAP SYSTEM?

After installing SAP system on the computer we will get an icon named SAP logon. To get entered in system we have to click it; after which we will get options to LOG ON. Every company which is having SAP system will have their own Username & Password. After entering username & password it ask about the license information for multiple logon. After clicking on continue with the same logon; SAP system gets opened to us.

After Log In into SAP system we get two options on the screen i.e. SAP Menu & Favorites. SAP Menu includes Office, Cross Application Components, Logistics, Accounting, HR, Information System, & many more options. Wherein Favorites option includes Materials Management, FI reports, Master data & many more options.

72

Videocon deals in mainly manufacturing different Home Appliances. They need different type of raw materials for different products to be manufactured.

They are having two types of inventory with them; Import Local

Import inventory includes DIODE, HEADER, HOLDER, IC etc. which they have to bring from outside the country. This material is a bit costlier as it is from outside. Local materials include BRACKET, CUSHION, COVER, STICKER, SPRING etc. which they can get from local market. There are some items which can be directly sold out through the company which are termed as SKD under SAP system & as usual company also has some scrap materials which can be sold out in the market. With the help of SAP system the Finance dept get to know about the cost involved in maintaining the inventory in the organization. There are many inventory items which are to be held by the company for more than 30 days. With the help of this they also can compare the difference between the inventories of weekly, monthly basis etc. And can find out the different reasons because of which the cost increases / decreases. They can generate a summary report to see this difference.

73

Inventory management is basically a part of MM module which includes MRP (Material Requirement Planning known initially), now MRP 2 came into existence (known as Manufacturing Resource Planning), BOM (Bill of Material) etc. BOM is also useful & can be operated through FI module in SAP.

Bill of Materials (BOM) is a bill or we can say a report showing us the complete listings of material, parts, and components. It has complete description about the material. It does not only show the material description but also helpful in getting to know in which sequence that material is used in producing the final product.

Every ingredient used is listed in the bill of materials. Strict record keeping is the key rule to creating a bill of materials, because no item can be skipped. This is largely because the bill of materials can be used later to narrow down issues for repairs of a product if necessary. In addition, a bill of materials is essential when ordering replacement parts.

The example of summary report which can be generated with the help of SAP system is given below. The reports for Inventory & Finished goods can be taken differently. The report can be generated on weekly, monthly, quarterly basis. As it is mentioned this company is having many home appliances as its product. Each product is having its own different plant; thus, for every plant there will be different summary of inventory as well as finished goods as requirements differ.

74

COMPARISON OF INVENTORY MAINTANANCE COST (WEEKLY BASIS) OF DIFFERENT PRODUCTION PLANTS

Plant

LOCAL 30+VALUE 23-Apr 7-May

IMPORT 30+VALUE 23-Apr 7-May

LOCAL BAL 23-Apr 7-May

IMPORT BAL 23-Apr 7-May

SKD ,SCRAP 23-Apr 7-May

VI01 VI02 VI03 VI04 VI05 VI06 VI07 VI08 VI09 Total

134.10 26.49 105.89 12.52 6.60 137.85 0.30 91.49 515.21

135.19 9.88 136.02 12.00 6.52 126.32 0.35 90.43 516.70

73.53 49.32 85.73 30.83 0.01 0.47 20.57 0.93 343.00 604.39

70.93 73.70 192.44 43.68 0.01 0.51 29.42 1.41 369.64 781.73

181.71 38.41 244.20 1.58 4.00 195.21 0.07 32.95

196.26 16.07 30.71 80.09

36.18 77.34

39.29 6.20

41.88 8.72 62.56 3.85 23.01 23.69 100.76 0.33 462.37 727.16

245.53 224.63 3.93 3.02 73.01 0.06

281.48 63.54 70.17 0.01 6.88 23.01 27.42 110.68 0.33

286.12 19.40 0.01 30.18 0.48 370.46

391.55 465.79

698.14 795.79 784.21 856.72 743.14

From this report summary we can have total inventory of both weeks & can make comparison of the total inventory stock of both the weeks. The reasons of differences can be Processing time, Demand etc.

NOTE: - THESE FIGURES ARE APPROX.

75

COMPARISON OF FINISHED GOODS MAINTANANCE COST (WEEKLY BASIS) OF DIFFERENT PRODUCTION PLANTS

Plant

FG 30+ VALUE

FG BAL

Total Stk Value FG Diff +/-

23-Apr

7-May

23-Apr

7-May

23-Apr

7-May

VI01 VI02 VI03 VI04 VI05 VI06 VI07 VI08 VI09 Total

19.69 20.54 1.86 26.05 3.19 76.40 0.07 210.52 34.98 393.30

18.70 19.98 5.44 15.47 3.48 14.93 0.51 88.39 31.30 198.19

466.71 93.69 49.16 22.93 18.93 27.11 18.01 5.11 701.65

581.51 46.77 31.83 21.95 28.19 0.64 34.34 66.90 7.05 819.18

486.41 114.22 51.02 48.98 22.12 76.40 27.18 228.54 40.09

600.21 66.75 37.27 37.42 31.67 15.57 34.84 155.28 38.35

113.81 -47.47 -13.75 -11.56 9.55 -60.83 7.67 -73.25 -1.74

1094.96 1017.37 (77.59)

We can find out the reasons because of which we have to incur high amount to maintain the finished goods with the company for more than 30 days. The reasons can be Demand, Processing time, Choice of the Consumer, Market Conditions etc.

NOTE: - THESE FIGURES ARE APPROX.

76

In SAP system there are different TR Keys (Transaction Keys) given to get to know about the different informations. Like to get to know about the inventory status the function key is ZINVENTORY. To get to know about the inventory information the key is MB51, to get to know about the production report the key is MCP6, for closing stock report key is MC.5, for getting to know about the opening stock, inwards, outwards as well as closing stock of an inventory the function key is MB5B etc

MATERIAL DETAILS

MB51 function helps us to know about the total detail of the material like; its stock, its movement, purchase order number (PO), quantity, its per unit amount, date of purchase, vendor (from whom it is purchased), plant detail like in which plant that particular item is used. After getting into more details it also able to get to know about the store location, what is the movement type? Like transfer within plant, goods receipt, GD goods issue delivery etc. it also shows us the purchase order quantity quoted by the purchase head etc.

PRODUCTION REPORT

MCP 6 function generates a periodical production report which can be day wise / monthly. This report is having different codes within itself. This report includes a MRP controller report which indicates number of Finished Goods (FG) produced in the code 006. Number of SKD i.e. goods sold directly from the company or consumed in code 007. In both the codes we can get gross quantity produced as well as actual scrap generated in quantity.
77

PLANT WISE INVENTORY DETAILS

MC.5 this code is for getting monthly closing stock report. This report helps us to get to know storage location of the raw material as well as the valuation of the same. This is very helpful in finding which raw material is stored in different plants.

INVENTORY STATUS

MB5B this key is used to generate the report in the SAP system which shows the opening, closing as well as inward & outward movement of the raw material which company have with them. This report is generated on either daily or weekly or monthly basis.

INVENTORY AGEING

ZINVENTORY is the key to see the inventory aging. Inventory ageing means to see whether company is using inventory more than 30 days or not. This report shows us the inventory status. If the company is using its inventories more than 30 days or may be more than that it will be shown in the report.

78

UTILIZATION OF SLOW MOVING INVENTORY

In the organization there are also some inventories which are with the company for more than 30 days; can also be called as Slow Moving Inventory. To utilize this inventory management of the company have to take decision whether to sell it out as its holding cost is huge, or to utilize the same for producing some another product.

For this companies management calls a meeting of production as well as purchase department to decide the same. It is totally depends upon the management how to make use of this kind of inventory.

79

INVENTORY MOVEMENT

SOME DIFFERENT STOCK MOVEMENT CODES USED IN SAP SYSTEM ARE

CODE 101 102 131 132 601 602 261 262 551

TRANSACTION GOODS PURCHASED (OUTSIDER) PURCHASE RETURN GOODS PRODUCED (WITHIN) GOODS REISSUED (DEFAULT) SALES PROCEEDS SALES RETURN CONSUMPTION CONSUMPTION REISSUED SCRAP MATERIAL

80

THE FLOW CHART OF THE (STOCK MOVEMENT) TRANSACTION IS

MATERIAL

101 - GOODS PURCHASED (OUTSIDER)

102 PURCHASE RETURNS

551 SCRAP MATERIALS

SCRAP SALES

261 CONSUMPTION

131 GOODS PRODUCED (WITHIN)

262 CONSUMPTION REISSUED

132 GOODS REISSUED (DEFAULT)

601 SALES PROCEEDS

602 SALES RETURNS

81

CONCLUSION

The conclusion of this project work can be;

The Videocon Industries LTD follows SAP system to control & manage their work thoroughly.

SAP system helpful in all organizational functions like Managing inventory Activity-Based Costing ( ABC) Product Cost Controlling Profitability Analysis Profit Center Accounting Purchase orders Goods receipts Accounts payable BOMs etc

Different modules of SAP help the management to work smoothly with few errors.

82

METHODS OF COLLECTING DATA & THEIR SOURCES

As far as possible I have collected the data on my own. I also tried to get myself involved with the people of different people of different departments. I have taken help from Finance, Accounts, Stores, Purchase, Marketing as well as Fabrication department to complete this project.

Websites like google, as well as the website of the company helped me to get to know about the company in more details. The companys future mission as well as directors report & Corporate General Report is taken from companies website.

83

Bibliography

http://www.videoconworld.com/ http://www.videocon-industries.com/pages/financial-info/annual-reports/index.php http://www.moneycontrol.com/financials/videoconindustries/ratios/VLF www.videocon-industries.com/.../Videocon%20Industries%20Ltd_2009.pdf http://money.rediff.com/companies/videocon-industries-ltd/14060139/ratio

84