In Financial Parlance - MOUMAN BISWAS

DESIGN OF EFFECTIVE SUPPLY CHAIN FOR WORKING CAPITAL MANAGEMENT
Submitted by :
MOUMAN BISWAS
Enrollment number: 06Bs1858 ICFAI BUSINESS SCHOOL HYDERABAD BATCH OF 2006-2008
ICFAI Business SchoolHyderabad
NAME OF THE ORGANIZATION:
KITCHEN APPLIANCES INDIA LIMITED (VIDEOCON GROUP OF COMPANIES)
A REPORT ON
DESIGN OF EFFECTIVE SUPPLY CHAIN FOR WORKING CAPITAL MANAGEMENT

Submitted by :
MOUMAN BISWAS
Enrollment number: 06Bs1858 ICFAI BUSINESS SCHOOL HYDERABAD BATCH OF 2006-2008
A report submitted in the partial fulfillment of the requirements of MBA Program of ICFAI Business School
Company Guide GUIDE: Mr. Siddhartha Sengupta MATERIALS MANAGER KAIL
FACULTY Prof.S.N Mookherjee ICFAI BUSINESS SCHOOL Kolkata
ACKNOWLEDGEMENT:
I feel privileged to be associated with Videocon Group of companies, which is one of the leading companies in manufacturing of consumer durables in India. I deeply express my gratitude to Kitchen Appliances India Limited for giving me an opportunity to work as a trainee in their manufacturing unit at Salt Lake. I would like to give my sincere regards to Mr. Goutam Sengupta, Vice President of Kitchen Appliances India Limited. Last 3 months has been a great learning experience for me, which will help me to work in the corporate world. I would like to thank Mr. Siddhartha Sengupta, Materials Manager of Kitchen Appliances India Limited, for giving me his valuable time and inputs needed for preparing this final report.
I am really grateful to my faculty guide Prof.S.N.Mookherjee whose practical knowledge and experiences has helped me in understanding and analyzing various aspects of this project. I would convey my regards to Prof.Santanu Roy, Director of ICFAI Business School, and Kolkata for giving me this opportunity. Finally, I would also like to thank all the employees of KAIL for their kind cooperation.
TABLE OF CONTENTS: Acknowledgement..Pg.3 Abstract..Pg.5 1.) INTRODUCTION
About Videocon
Pg.6 About Kitchen Appliances India Limited..................Pg.8 Brief idea about working capital.. Pg.10 Brief idea about supply chain.. Pg.12 Purpose of the project...Pg.16 Scope of study. Pg.18 Outline of the work.. .Pg.19
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ICFAI Business SchoolHyderabad Limitation of the
study..Pg.21 Source of data.Pg.23 Time schedule.. Pg.24 2.) MAIN TEXT Pg.26
KAILs norms for inventory..
.Pg.27 Plan procedure..Pg.28 Importance of inventory in KAIL ..Pg.29 ABC analysis. ..Pg.30 Existing inventory policy in KAIL for A items..Pg.34 Proposed inventory system Pg.37 Extra material holding.. ..Pg.52 Inventory policy for B & C items in KAIL.Pg.60 Slow moving and non-moving materials Pg.62
.Pg.63
3) RECOMMENDATION..
4) APPENDICES..Pg.67 5) REFERENCES..Pg.74
ABSTRACT:
In todays world manufacturers are faced with increased global competition, more informed customers, increasingly complex supply chains and the pressure of being first-to-market with the most innovative products. To maintain a globally competitive posture and to cope with mounting pressure to improve productivity, while at the same time reduce costs, manufacturing industry is to concentrate much on the investment of working capital. And inventory is the most integral portion of the working capital. Manufacturers need to be sure that the relationship between suppliers, partners and distributors is unimpeded by traditional stumbling blocks of time and location. Kitchen Appliances India Limited is a wholly owned subsidiary of Videocon manufactures wide range of products starting from Televisions, refrigerators, washing machines, DVD players to micro wave oven, air conditioners and etc. Its approximate investment in inventories amounts to 10crores.So,it is crucial that KAIL should develop and use various tools and technique so that it can achieve optimum utilization of its resources.
ICFAI Business SchoolHyderabad In this Project report last 12months data i.e. April, 2006 to March, 2007 has been analyzed based on various inventory models and tools. This project aims at understanding effective use of working capital which will contribute to the operational efficiency of the organization; optimum use will help to generate maximum returns.
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. Shri Nandlal Madhavlal Dhoot, the founder of the Videocon group in early 80s,through a technical tie up with Toshiba Corporation of Japan, Videocon International Limited launched Indias first color Television. Today Videocon is the largest seller of big screen color televisions in India and exports more than 1million color televisions. Now the group operates through 4 key sectors :1.consumer durables 2.Thomson CPT 3.CRT glass 4.Oil and gas. With a turnover exceeding Rs50 billion,18 manufacturing units and more than 10000 employees ,the Videocon group appliances. Companys product range is highly diversified-it makes Television, air conditioner, VCRs, washing machine, refrigerator, microwave oven, water purifier, audio system and many more. has become a market leader in manufacturing of consumer electronics and home
LOGO LOGIC:
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This is the new Videocon symbol. It reiterates the ethos of a company dedicated to maintaining the highest international standards of excellence through quality, technology and innovation. For over a decade now, Videocon has been bringing the latest and very best in Consumer Electronics and Home Appliances. Successfully adapting the best of international technology to suit Indian needs, and crafting it to improve the quality of life as million of satisfied customers will agree. The new symbol of Videocon asserts its passion for global impact, and the two Es on either side represent the Groups wide spectrum of interests ranging from Electronics to Energy. Along with the steely glint, this communicates the group's global ambition, its strength, sterling credentials and innovative drive.
VISION: To bring happiness in every home with global presence offering high quality products to ease & enrich human life. MISSION: To delight and deliver innovative products through ingenious strategy, intrepid entrepreneurship, improved technology, insightful marketing and inspired thinking about the future.
ORGANISATIONAL DETAILS: NAME OF THE ORGANIZATION:

KITCHEN APPLIANCE INDIA LTD. (VIDEOCON GROUP OF COMPANIES) Kitchen Appliances India Limited (KAIL) is a manufacturing unit in Eastern India of Videocon Industries Ltd. It was set up in 1999 to
ICFAI Business SchoolHyderabad produce Consumer Electronics & Home Appliances products for
Videocon, Akai, Hyundai, Sansui, Kenstar, Toshiba, Electrolux brands. Its product range starts from Televisions, refrigerators, washing machines, DVD players to micro wave oven, air conditioners and etc. It is the main plant in Eastern India which handles 20% of the total demand. It has its registered office at:171,Mittal Court C-Wing, Nariman point Mumbai-400021.
KAIL has 26 branches in India. In West Bengal it has 3 such manufacturing units. At Salt Lake At Taratala At Siliguri
Its product range starts from television, air conditioner to micro wave oven, refrigerator and many more. These varieties of products which 10
ICFAI Business SchoolHyderabad are manufactured in KAIL along with their brand name are listed as follows:
SL No. 1. 2. 3. 4. 5. 6.
Product type Color Television Washing Machine Refrigerator Air conditioner Microwave Oven Audio, DVD
Brand Name Videocon, Akai,
Hyundai,
Sansui,
Kenstar, Toshiba, Electrolux Videocon, Kenstar. Electrolux Videocon, Akai, Electrolux Videocon, Akai ,Electrolux Kenstar Videocon, Akai, Sansui,Hyundai,Nest
This project is carried on in the Salt Lake factory.
ADDRESS OF THE ORGANIZATION: BLOCK-BP. SECTOR V.
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ICFAI Business SchoolHyderabad SALT LAKE CITY, KOLKATA- 700091 In Salt Lake Factory mainly CTV i.e. color Television, Refrigerator, DVD are manufactured.
A BRIEF IDEA ABOUT WORKING CAPITAL:

In a simple term, working capital may be defined as that part of capital of an organization which is used to maintain its main operating activities by means of a continuous rotation of capital employed for this purpose. There are basically two concepts of working capital. i) Gross working capital: This concept is the wider concept which means that the summation of all its current assets is its working capital. ii) Net working capital: According to this net concept the difference between the value total current assets and current liabilities is the working capital. So in simple, Working capital is the firms investment in current assets. Current assets are comprised of all the assets that the firm expects to convert into cash within the year, including cash, accounts receivable, inventories etc. Working capital management is the process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets. The objective of
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ICFAI Business SchoolHyderabad working capital management is to maintain the optimum balance of each of the working capital components. Good management of working capital is part of good financial management. Effective use of working capital will contribute to the operational efficiency of an organization; optimum use will help to generate maximum returns on their investment. Before going deep in to the project one must know how this working capital circulates in different forms to generate revenue and profit. The fact that working capital only amounts to a few months supply means that the working capital cycle, a cycle running from cash to inventories, inventories to work-in-progress, work-in-progress to finished good finished goods to receivables and lastly receivables to cash . Working Capital Cycle There are two elements in the business cycle that absorb cash Inventory (stocks and work-in-progress) and Receivables (debtors owing you money). The main sources of cash are Payables (creditors) and Equity and Loans.
Each component of working capital (namely inventory,
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ICFAI Business SchoolHyderabad receivables and payables) has two dimensions TIME and MONEY. When it comes to managing working capital - TIME IS MONEY. If company can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, company could reduce the cost of bank interest or will have additional free money available to support additional sales growth or investment.
A BRIEF IDEA ABOUT SUPPLY CHAIN:

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. An example of a very simple supply chain for a single product, where raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centers, and ultimately, customers. Realistic supply chains have multiple end products the with shared components, along facilities the supply and chain capacities. operated Traditionally, marketing, distribution, planning, manufacturing, and purchasing organizations independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales revenue conflict with manufacturing and 14
ICFAI Business SchoolHyderabad distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.
Supply Chain Decisions:

We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4)distribution, and there are both strategic and operational elements in each of these decision areas.
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ICFAI Business SchoolHyderabad Location Decisions: The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service
Production Decisions:
The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, which plant to serve which customer market etc.As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production equipment schedules, scheduling Other production on machines, and maintenance. considerations include workload
balancing, and quality control measures at a production facility.
Inventory Decisions
These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semifinished or finished goods. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain
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ICFAI Business SchoolHyderabad operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies, control policies - the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, determining extra material holding at each stocking location. These levels are critical, since they are primary determinants of customer service levels.
Distribution Decisions:
How well a company can collaboratively manage the process of moving goods from sourcing to the point of consumption in the market place. It is concerned with the movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers).It also includes decisions related to transportation strategy, including frequency, routes, and contracting.
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PURPOSE OF THE PROJECT:

This project aims at exploring the efficient utilization of working capital. As the title of the project suggests, there exits a close relationship between supply chain and working capital management. In a manufacturing industry a major component of the working capital is inventory. Out of the 4 major decision areas of supply chain management i.e. (i) location, (ii) production, (iii) inventory, and (iv) Distribution, why inventory has been considered for this project are discussed in detail under the heading of scope of the study. A lions share of the working capital is required for procurement of raw material, component, work-in-progress. The concept of supply chain management is very much required to understand the effective utilization of working capital investment in inventory. This project aims at exploring the efficient utilization of working capital in
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ICFAI Business SchoolHyderabad inventories. Project is undertaken to determine the required amount of investment of working capital in inventories. A huge amount of money is tied up in holding inventory. This project will be concentrating on CTV i.e. Color Television. which holds more than 50% of the market and Value wise it captures 80% of the total business. In this plant 90% of the production capacity is used for manufacturing of CTV. Average monthly production of CTV is approximately 30,000. For manufacturing CTV raw materials are procured from outside. In this category they have more than 70 models of televisions. Mainly these raw materials can be classified into 4 broad categories. These are 1) picture tube, 2) front cover & back cover 3) electronics and 4) packaging. For procurement of such raw materials it requires to invest approximately 10crores per month, which is a main portion of the working capital in KAIL. While it is necessary to keep a certain amount of materials on hand to satisfy the needs of customers, both commercial and consumer, its required to maintain a balanced view of how much is too much. If it has a lot of extra bulk in its inventory, it runs several risks. First of all, it cuts into companys net worth, showing as excess stock that is not moving. Also, large quantities of stock mean that some of it could become outdated or even expire, if any of it is perishable. Keeping the minimum amount of stock necessary increases its bottom line and reduces waste. It also allows you to provide a greater number of products and respond more quickly, aiding in meeting the next goal of good supply chain management. So, proper inventory management is important to the financial health of the organization. On the one hand out of inventories leads to interruption in production process, therefore results in loss of sale on the other hand too much inventory holding results in large inventory 19 carrying cost in terms of
ICFAI Business SchoolHyderabad opportunity cost of foregone interest; warehousing costs; damage and pilferage; obsolescence; insurance etc. So, it is utmost essential to effectively manage this important component of the cash cycle .Poor inventory management results in illiquidity.
SCOPE OF THE STUDY:

Out of the 4 major decision areas of supply chain management i.e. (i) location, (ii) production, (iii) inventory, and (iv)Distribution, area of inventory has been considered for this project. The reason for selecting inventory is as follows: This project is carried at KAILs Salt lake factory, which is one of the manufacturing plants of Videocon Group of companies. Both location and production decisions are strategic in nature. Generally these decisions are controlled by the Head office from Aurangabad. So, its not a feasible area where any sort of analysis can be made. KAIL is a manufacturing unit. In case of Distribution decision Videocons marketing division takes the responsibility of selling
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ICFAI Business SchoolHyderabad the products, which are manufactured here to the ultimate consumers. In a manufacturing unit like KAIL one of the key areas is managing inventories, which is also an important part of supply chain management. Inventories constitutes major portion of the working capital. Effective use of working capital will contribute to the operational efficiency of an organization; optimum use will help to generate maximum returns on their investment. Considering all the factors in the organization, inventory seems to be one of the most crucial component of working capital as well as a feasible area to analyze further for the aforesaid project.
OUTLINE OF THE WORK:

A substantial amount of working capital is mainly tied up in holding these inventories. Specially, this project aims at determining what quantities of inventories the company should hold at any point of time. Working capital can be acquired piecemeal to meet immediate needs as they arise that is Just-inTime (JIT). Such policy has advantage of reducing the average investment in working capital, thereby minimizing the interest charges, insurance expenses and storage cost associated in holding the inventories. But this policy has its own disadvantages. There will be increased ordering cost, problem in
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ICFAI Business SchoolHyderabad maintaining independence in operation and variation in product demand, inflexibility in production scheduling etc. This project aims at exploring the efficient utilization of working capital in inventories. Project is undertaken to determine the required amount of investment of working capital in inventories, which is to be planned according to the production plan of the specific month. It can also find out the redundant or extra holding of material. The fact that working capital only amounts to a few months supply means that the working capital cycle, a cycle running from cash to inventories, inventories to work-in-progress, workin-progress to finished good finished goods to receivables and lastly receivables to cash .So, it is utmost essential to control the inventory in such a manner so that it provides maximum number of inventory turns with lesser amount of working capital. More the number of turns in a year, more the amount generated by investing the same amount of working capital. From a companys operating point of view, excess working capital means In addition, unnecessary working inefficiencies.
capital increases the amount of the capital charge. Currently, cost of capital is 14%. The objective of this project is to maintain the optimum balance of each of the working capital components. This projects aim will be to reduce unnecessary blockade of working capital and reduce cost of on such investment. Value of this each class of components should be well classified according to ABC analysis. As per ABC classification items are classified on the basis of their annual consumption value in an organization. However, it is important to keep an overall 22
ICFAI Business SchoolHyderabad perspective. It is not cost-effective to closely manage a large number of low value inventory lines, nor is it necessary. A usual feature of inventories is that a small number of high value lines account for a large proportion of inventory value. So , control should be imposed on the basis of the value of these items. ABC analysis helps to identify non-moving and slow moving items included in inventory stock, where working capital is unnecessarily tied up. They occupy space and consume carrying cost. These materials must be identified and must be taken care of as soon as possible. On the other hand, safety stock of each class of these components is to be fixed up according to the value of these items. High value item generally holds low percent of safety stock. Analytical review of inventories can help to identify areas where inventory management can be improved. Slow moving items, continual stock outs, obsolescence, stock reconciliation problems and excess spoilage are signals that stock lines need closer analysis and control.
LIMITATIONS OF THE STUDY:

Data tabulation and collation is a long stretched activity and continuous updating in bill of material of each set makes the process all the difficult. Therefore, the bill of material has to be frozen at a certain point of time and further calculation is to be done on the basis of those data collected up to that point of time.
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ICFAI Business SchoolHyderabad As per the company policy sometimes few confidential data is not disclosed. KAIL is one of the important manufacturing units of Videocon group. It is the main plant in Eastern India which handles 20% of the total demand. In KAIL the production plan are given by Head Office. In such situation KAIL has little flexibility to implement any change at its own. KAIL sends its account to the head office where it is prepared taking all the units together. So, it is not possible to get the individual financial results of this plant. In such situation various important data which were required for the analysis remained unanswered. KAIL is a manufacturing unit. It does not get the sale proceeds of the goods which are produced here. It only gets that portion of sale proceeds which is invested by KAIL i.e. cost of producing those goods. Being a cost centre it runs on no profit-no loss basis. So, it becomes difficult task to calculate return on investment or return on total assets etc. Because of time constraint it is not possible to go further deep into the analysis. From the various related websites financial data which has been downloaded gives a picture of financial position of the Videocon Appliances as a whole which includes all the products under the brand name of Videocon that are manufactured by different 24
ICFAI Business SchoolHyderabad units across the country. So, analyzing current asset and current liabilities position becomes an impossible task to accomplish within such a short time span.
SOURCE OF DATA:
PRIMARY SOURCE: Videocon is Indias first company to successfully implement my SAP ERP version 2004.The primary source of data was the company documents. This data includes all the data related with the production quantity and value , bill of material, stock value and quantity, each months production plan etc. These data are fed in to Microsoft Excel to facilitate easy tabulation and calculation.
SECONDARY SOURCE:
The secondary source are the different books, articles and journals on supply chain, working capital management and inventory control and their inter connection. Apart from this, various research papers from internet have been studied to get an idea to make analysis on the right path.
SCHEDULE:
This project includes several steps to accomplish the purpose of this project successfully. During these 14 weeks training period various time schedules has been framed to avoid any sort of delay, postponement or interruption in project work. To give a brief idea 25
ICFAI Business SchoolHyderabad about the schedule there are couple of things which are highlighted below.
LITERATURE STUDY:
Review and study of some literature which includes journals, company documents, power point presentation, and various articles has been done during the first couple of weeks of the project. This helps to understand the data and meaningfully convert them into valuable information to make further analysis on it.
INTRODUCTION WITH THE SAP SYSTEM:

KAIL uses my SAP since December, 2005 where the company stores all its data and information. Some training has been given to learn how to work on SAP, extract data from the company database and put into Excel to make necessary calculation & analysis.
STUDY OF RESEARCH PAPER:

Various Research paper has been studied to find the close link between the supply chain and working capital management. This has been done continuously through out the project period to get an idea to make analysis on the right path.
STUDY OF KAILS EXISTING INVENTORY SYSTEM:

Continuously study has been done to study the KAILs existing inventory policy. Also an effort has been made to compare the existing system with the proposed one.
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MAKING ANALYSIS IN TWO PHASES:

For this project financial year 2006-2007 has been taken into consideration. Last 12 months data has been analyzed here. In the first phase from April to September were analyzed and then rest was taken care of. This analysis was completed by the first week of May.
FINAL ANALYSIS AND PROJECT FINAL REPORT:

For last couple of weeks are utilized for careful and vivid study of the project and reach to a conclusion. So that valuable points can be brought to the notice.
PREPARATION OF FINAL PRESENTATION:

Last few days of project period would be utilized for the preparation of the final presentation. Total work done in the project is expected to be presented in the presence of company guide and faculty guide as per the time schedule.
MAIN TEXT:
Videocon is the largest seller of Big Screen Color Televisions in India and exports more than 1 million Color Televisions per year. Its
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ICFAI Business SchoolHyderabad monthly revenue generated by sale of only CTV is Rs. 150 crores. 10% of this revenue comes from the sale of CTV which are produced in this KAILs Salt Lake factory. In financial parlance, inventory is defined as the sum of the value of raw materials, components, fuels and lubricants, spare parts, maintenance consumables, semi processed materials and finished goods at any point of time. The operational definition of inventory would be the amount of raw materials, fuel and lubricants, spare parts and semi processed materials to be stocked for the smooth running of the business. Since, these resources are idle when kept in the store, inventory is defined as an idle resources of any kind having an economic value. Inventories are maintained basically for the operational smoothness which they can effect by uncoupling successive stages of production, whereas the monetary value of inventory serves as a guide to indicate the size of the investment made to achieve this operational convenience. The material management department is expected to provide this operational convenience with a minimum possible investment in inventories. The objectives of inventories, operational and financial is , needless responsible to say, are conflicting. outs The as material large department for both stock well
investment in inventories. The solution lies in exercising a selective control and application of inventory control techniques. NORMS FOR INVENTORY IN KAIL:
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ICFAI Business SchoolHyderabad The norms for inventory could be set by either the top management or the material management department. The top management usually sets monetary limits for investment in inventories. The material management department has to allocate this investment to the various items and ensure smooth functioning of company. KAIL produces approximately 70 models of Color televisions every month. For producing such huge variety of models almost 2000 types of materials are used. So, where such variation of materials exits it would be worthwhile if the materials are classified on the basis of their values. So that management can focus their attention and effort where investment is highest.
KAILS EXISTING INVENTORY POLICY:

KAIL produces variety models of color televisions for Videocon. Product categories are 14, 20 conventional 15 TFT 21 conventional 21 TFT 21 slim 25 flat & conventional 29 flat
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ICFAI Business SchoolHyderabad Chassis type: 70%= POC > Philips one chip 20%=TSB2 > Toshiba 6%= GIII > a version of Philips IC 4%=>MOC
PLAN PROCEDURE:
Plan is sent by VIDEOCON .Generally it sends 3monthly rolling plan. Like in January the plan is of next 3months, it includes plan for Jan, Feb and March. Again in February plan, it includes plan for Feb, March, April. In this plan they include picture tube size and chassis type and size. Based on this chassis type KAIL can calculate the requirement for each material (from BOM). Every 20th of the month, Videocon Industries marketing division depending on the market situation confirms KAILs production schedule for the next month. If any change is to be made, it again sends a revised plan to KAIL. KAILs total production can be classified in the following manner:10%= 29 40%=21 True Flat Television 5%=20/21 conventional 40%= 15True Flat Television
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ICFAI Business SchoolHyderabad 5%=14 conventional
Why Inventory is so important in KAIL for manufacturing CTV:

This project will be concentrating on CTV i.e. Color Television which holds more than 50% of the market and Value wise it captures 80% of the total business. Average monthly production of CTV is approximately 30,000. In a manufacturing industry like Videocon, a large portion of working capital is required to acquire its inventories. On an average it requires to invest 10 crores per month to finance theses inventories.90 % of the total cost is spent to get the materials.5% accounts for wage payments and other direct cost .Rest 5% is for payment of various overhead charges which includes factory overhead and administrative expenses. Break up of total cost for manufacturing a CTV: Inventory=90% Waged and other direct Cost=5% Overhead=5% KAIL does not have to bear the cost of selling and distribution overhead. The reason behind it is that KAIL is a manufacturing unit of Videocon which manufactures various types of consumer durables. KAIL directly can not sell the product to the consumers. After production, finished goods are dispatched to the marketing division of Videocon in Kolkata, which takes the responsibility of marketing those goods in the market. KAIL dose not get the sale proceeds of the goods which are produced here. KAIL only gets that portion of sale 31
ICFAI Business SchoolHyderabad proceeds which is invested by KAIL i.e. cost of producing those goods. Being a cost centre KAILs main aim should be minimization of total cost.
ABC ANALYSIS:
ABC analysis is a basic analytical management tool which enables top management to place the effort where the results will be greatest. This technique is popularly known as ALWAYS BETTER CONTROL. The annual consumption values help the management to exercise selective control and focus its attention only on a few items when there are lakhs of items in stores. The annual consumption value analysis of any organization would indicate that a handful of top high value items-less than 10% of total number-will account for a substantial portion of about 75% of the total consumption value, and these few vital items are called A items which need careful attention of the management. Similarly a large amount of bottom items over 70 % of the total number called the trivial many-account only for about 10% of the consumption value and are known as the C class. The items that lie between the top and bottom are called the B category. However, it is important to keep an overall perspective. It is not costeffective to closely manage a large number of low value inventory lines, nor is it necessary. A usual feature of inventories is that a small number of high value lines account for a large proportion of inventory value. So , control should be imposed on the basis of the value of these items. ABC analysis helps to identify non-moving and slow moving items included in inventory stock, where working capital is unnecessarily tied up. They occupy space and consume carrying cost. 32
ICFAI Business SchoolHyderabad These materials must be identified and must be taken care of as soon as possible.
METHODS FOLLOWED FOR ABC ANALYSIS: For ABC analysis last 24 months data has been considered. Downloaded the each months production plan from the system Copy the product code from the production plan & feed into my sap to get the Bill of Material. After that data are used to make a model matrix against each months plan. Using this model matrix each items consumption quantity is calculated. Multiplying the quantity with MAP (moving average price) value of these items are calculated. Now, these data are used to classify the materials in to A, B, C category. Here, consumption value of each items for the last 24 months April 2005 to March,2007 has been taken into consideration. After analyzing I tried to identify the various categories of items used in production process. It has been shown in a tabular form. i.e
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ICFAI Business SchoolHyderabad CATEGORY A ITEMS Picture tube, buffer, packing box, front cover, back cover, tuner, FBT, B speaker, Remote, SMPS Mains cord, IC,MICON, heat sink, transistor C etc. Resistor, CFR, Tape , Felt,coil, screw, header , Fuse, diode, knob, sticker etc.
To give a more real picture here 3months consumption value has been selected where there is fluctuation in the consumption value depending on the market situation. February,2007 when consumption value is high depending on the market situation.
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VALUE (in crores) (In %) Quantity (In %)
TOTAL 14.04
A 10.53
B 2.11
C 1.4
1791
75% 101 5.60%
15% 181 10.10%
10% 1509 84.25%
March, 2007 when consumption value is moderate TOTAL 10.37 A 7.77 B 1.55 C 1.03
1461
75% 74 5.06%
15% 141 9.65%
10% 1246 85.20%
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December, 2006 when consumption value is low.
TOTAL 6.93
A 5.19
B 1.047
C .693
1402
75% 80 5.70 %
15% 143 10.19%
10% 1179 84.09%
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ICFAI Business SchoolHyderabad ABC ANALYSIS

90 80 70 60 50 40 30 20 10 0 A B C
VALUE,QUANTITY
VALUE QUANTITY
EXISTING INVENTORY POLICY FOR EACH OF THE ACATEGORY ITEMS IN KAIL: PICTURE TUBE
Videocon is the only manufacturer of CRT glass shells for CPT i.e. color picture tube and controls 80% of the CPT production across the world. Videocon sends this picture tube according to the next months plan from Aurangabad or directly from manufacturing centers to KAIL. Since Videocon has control on manufacturer of CPT in India,there is no problem for supply of CPT to KAIL .The CPT is received in the lot of full truck load. On an average KAIL holds 15 37
ICFAI Business SchoolHyderabad days stocks of CPT in hand. These 15 days stock includes 7 days transit time from Aurangabad to Kolkata.
CKD kit (complete knocked down kit)

CKD kit contains various types of materials which are sold together as a kit. CKD kit is sent by Videocon from Aurangabad or directly from the manufacturer. The items included in that kit come from the overseas sources like EAST KIT ELECTRONIC MANUFACTURING CO. LTD from China. EAST KIT along with their own manufactured materials, acquires different materials from different countries across the world (like transistor from Taiwan, IC.MICON from Malayasia,opto-coupler from Japan etc) & after export worthy packing it is despatched directly to KAIL and other companies. So, in this case as materials are procured from different part of the world so it is quite obvious to place the order for CKD long before the actual requirement arises. Here in KAIL it goes for 3months rolling plan. Approximately it gives an idea to the manufacturer about their expected requirement for the next 3months.According to that they initiate procurement & production plan. Delivery depends on the schedule given by KAIL to the manufacturer. In case there is less requirement of CKD in a specific month they carry forward the balance to the next month and if there are more requirements in the next month then this balance gets adjusted. KAILs stock policy in case of CKD is 5to 7days holding.
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ICFAI Business SchoolHyderabad It is procured in bulk of 5000 or 10000. 2 to 3 such consignments in a month meet the demand. This material takes little space to store. This company deals with volume. So it goes for capacity booking. For sophisticated item like CKD it generally goes for FCL i.e. full container loading. CKD items=FBT, tuner, SMPS, Remote etc in A items.
FRONT COVER AND BACK COVER:

Front cover and back cover are supplied by Videocon directly from Aurangabad. So, Videocon sends it as per the production schedule .It is sent from Aurangabad in lot sizes of 1500 to 1600 depending on full truck load quantity. Since F/C, B/C occupy lot of space, chassis assy. Production schedule is finalized on the basis of availability of F/C, B/C. KAILs stock policy for F/C &B/C is JIT (just in time) but it is not always possible to maintain JIT policy since materials come from distant place. Regarding front cover and back cover approximately is 15 days holding which includes 7 days holding for obsolete items. Since they are dependant on model and size of the CTV they become obsolete within a very short span of time.
PACKING BOX:
Packing box is supplied by the local suppliers. But the raw material, paper, which are used to produce these packing boxes are procured from North India by the vendor. So sufficient time is given to the supplier before delivery date. Generally by 15 th of each month next
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ICFAI Business SchoolHyderabad months requirement for packing box is forecasted to them and 80% of which are confirmed by KAIL. Based on that forecast, suppliers start production but delivery the same according to the schedule given by KAIL. Supply is strictly maintained JUST IN TIME. Materials come in lot size of 100 to 1000 units.
BUFFER:
Buffer is procured from local supplier. As it occupies space, orders depend on the monthly plan as and when basis. Company stock policy is JUST IN TIME but since company produces 60 +/- 5 types of CTV models in a month about 7 days stock is kept. Generally 7days prior notice is given to the suppliers.
SPEAKER:
Speakers are purchased from North India. For producing each unit of CTV 2 units of speakers are required. In some models 4 units of speakers are required. There exists long term yearly agreement with the suppliers. As it occupies very little space KAIL orders in bulk. Order size varies from 15000 to 16000.So there are 4 to 5 orders per month.
PROPOSED INVENTORY STRATEGY:
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ICFAI Business SchoolHyderabad To formulate an inventory strategy first the cost and the
characteristics of the items should be considered. This project aims at exploring the efficient utilization of working capital in inventories. Project is undertaken to determine the required amount of investment of working capital in inventories, which is to be planned according to the production plan of the specific month. It can also find out the redundant or extra holding of material. The fact that working capital only amounts to a few months supply means that the working capital cycle, a cycle running from cash to inventories, inventories to work-in-progress, work-in-progress to finished good finished goods to receivables and lastly receivables to cash .So, it is utmost essential to control the inventory in such a manner so that it provides maximum number of inventory turns with lesser amount of working capital. More the number of turns in a year, more the amount generated by investing the same amount of working capital. From a companys point of view, excess working capital means
operating inefficiencies. In addition, unnecessary working capital increases the amount of the capital charge. The objective of working capital management is to maintain the optimum balance of each of the working capital components. Inventory management is an important aspect of working capital management because inventories themselves do not earn any revenue. Holding either too little or too much inventory incurs costs. Costs of carrying too much inventory are: Opportunity cost of foregone interest; warehousing costs; damage and pilferage; obsolescence; insurance etc. 41
ICFAI Business SchoolHyderabad Costs of carrying too little inventory are: Stock out costs: lost sales; delayed service etc. Ordering costs: freight; order administration; loss of quantity discounts etc. Carrying costs can be minimized by making frequent small orders but this increases ordering costs and the risk of stock-outs. Risk of stockouts can be reduced by carrying "safety stocks" (at a cost) and reordering ahead of time. EOQ ASSUMPTIONS: 1. Demand for the item is known and constant. 2. Lead time is known and constant. (Lead time is the amount of time that elapses between when the order is placed and when it is received.) 3. The cost of all units ordered is the same, regardless of the quantity ordered (no quantity discounts). 4. Ordering costs are known and constant (the cost to place an order is always the same, regardless of the quantity ordered). 5. When an order is received, all the items ordered arrive at once (instantaneous replenishment). 6. Since there is certainty with respect to the demand rate and the lead time, orders can be timed to arrive just when we would have run out. Consequently the model assumes that there will be no shortages.
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ICFAI Business SchoolHyderabad Based on the above assumptions, there are only two costs that will vary with changes in the order quantity, (1) The total annual ordering cost and (2) The total annual holding cost. Shortage cost can be ignored because of assumption 6. Furthermore, since the cost per unit of all items ordered is the same, the total annual item cost will be a constant and will not be affected by the order quantity. EOQ SYMBOLS: D= annual demand (units per year) S = cost per order (Rupees per order) H = holding or carrying cost per unit per year (Rupees to carry one unit in inventory for one year) Q = order quantity CLASSIC ECONOMIC ORDER QUANTITY (EOQ) MODEL The only costs that need to be considered for the EOQ model are the total annual ordering costs and the total annual holding costs. These can be quantified as follows: ANNUAL ORDERING COST The annual cost of ordering is simply the number of orders placed per year times the cost of placing an order. The number of orders placed per year is a function of the order size. Bigger orders means fewer orders per year, while smaller orders means more orders per year. In general, the number of orders placed per year will be the total annual demand divided by the size of the orders. In manufacturing unit like KAIL, the order cost would include the time to initiate the work order, time associated with picking and issuing components excluding time 43
ICFAI Business SchoolHyderabad associated time. In short, Total Annual Ordering Cost = (D/Q) S with counting and handling specific quantities, all
production scheduling time, machine set up time, and inspection
ANNUAL HOLDING COST The annual cost of holding inventory is a bit trickier. If there was a constant level of inventory in the warehouse throughout the year, we could simply multiply that constant inventory level by the cost to carry a unit in inventory for a year. Unfortunately the inventory level is not constant throughout the year, but is instead constantly 44
ICFAI Business SchoolHyderabad changing. It is at its maximum value (which is the order quantity, Q) when a new batch arrives, then steadily declines to zero. Just when that inventory is depleted, a new order is received, thereby immediately sending the inventory level back to its maximum value (Q). This pattern continues throughout, with the inventory level fluctuating between Q and zero. To get a handle on the holding cost we are incurring, we can use the average inventory level throughout the year (which is Q/2). The cost of carrying those fluctuating inventory levels is equivalent to the cost that would be incurred if we had maintained that average inventory level continuously and steadily throughout the year. That cost would have been equal to the average inventory level times the cost to carry a unit in inventory for a year. In short, Total Annual Holding Cost = (Q/2)H TOTAL ANNUAL COST The total annual relevant inventory cost would be the sum of the annual ordering cost and annual holding cost, or TC = (D/Q)S + (Q/2)H This is the annual inventory cost associated with any order size, Q.
METHODS FOLLOWED FOR CALCULATING OF EOQ IN KAIL:

Here this EOQ model has been used to help in controlling the working capital investment in inventories efficiently. The best 45
ICFAI Business SchoolHyderabad ordering strategy requires balancing the various cost factors to ensure the organization incurs minimum inventory costs. In the simplest form of this EOQ model assumes the annual demand or usage for a particular item is known with certainty. Here in KAIL average annual demand of CTV can be taken as 300000 units.
It also assumes that orders to replenish the inventory of an item are filled instantaneously. Given a known demand and a zero lead time for replenishing inventories , there is no need for a company to maintain additional inventories or safety stock to protect itself against stock out.
Avg. Inventory=Q/2
Without any Safety stock
But in actual practice when competition is so intense it is not feasible to run a business without maintaining any safety stock. Because, instant replenishment of inventories is not a realistic assumption. According KAILs policy for A category items, an
46
ICFAI Business SchoolHyderabad quantity equal to 5% of monthly demand of each item is kept as a safety stock.
In this analysis keeping the safety stock norms according to KAIL I have tried find out average holding of each materials and cost associated with holding of these materials.
In case of finding out of average inventory holding safety stock has been taken into consideration. Average inventory holding=(Order size+ safety stock)/2
EOQ
Avg. Inventory Safety Stock
Each of this A items has been analysed separately and also compared to the KAILs existing policy.
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ICFAI Business SchoolHyderabad In finding out total cost of holding inventory per annum material cost remains same. Because, it has been observed that on such a large scale production price negotiation with the suppliers is done on yearly agreement basis. Any discounts or rebate in price has already been adjusted.
PICTURE TUBE:
For producing 1unit of CTV 1unit of picture tube is required. So, its annual demand can be taken as 300000units. EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) PIC TUBE demand cost p.u
30000 0
360
20
1800
360
775
800
**safety stock=average monthly consumption*5%

Here, Safety stock for picture tube=(300000/12)*5% =1250 units
*
Pic Tube
Average inventory= (Order size +safety Stock)/2 Order Annual deman d Size No of Ordering Carrying Safety cost p.u(CC) 360 (OC) 775 387 139355 Avg Total orders cost Total stock** inventory* carrying OC&CC cost 1250 1013 364500 503855
EOQ
300000
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ICFAI Business SchoolHyderabad KAIL 300000 800 375 135000 360 1250 1025 369000 504000
Difference in Cost:
KAILs policy 503855
As per EOQ Model 504000
difference 145
From the above calculation it is observed that the order size under KAILs existing policy and proposed policy are more or less same which leads to a very negligible amount of difference in total cost i.e Rs145.So, there is no need to change the existing policy.
BUFFER:
For producing 1unit of CTV 1unit of buffer is required. So, its annual demand can be taken as 300000units.
EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) Buffer demand cost p.u
30000 0
360
35
50
17.5
3513
1000

Here, Safety stock for buffer =(300000/12)*5%
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ICFAI Business SchoolHyderabad =1250 units
Average inventory= (Order size +safety Stock)/2 Order Total No of size Ordering Carrying Safety cost p.u(CC) 17.5 17.5 (OC) 3513 1000 85 300 30600 108000 Avg Total orders cost stock** inventory* carrying OC&CC cost 1250 1250 2382 1125 41685 19688 72285 127688
Buffer Annual deman d EOQ KAIL 300000 300000
Difference in Cost:
KAILs policy 127688
difference 55403
Although the cost under proposed method is much less than KAILs existing policy, but considering other important factors it will be advisable to follow the existing policy. The reasons behind it are highlighted as follows: Buffer is procured from local supplier So, lead time is much less in this case. So, no need to go for large order size. Moreover, it occupies space. So, large stocking of buffer will lead to higher carrying cost. Company stock policy in this case i.eJUST IN TIME would be the appropriate one.
PACKING BOX:
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ICFAI Business SchoolHyderabad For producing 1unit of CTV 1unit of packing box is required. So, its annual demand can be taken as 300000units.
EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) Packing Box demand cost p.u
30000 0
360
20
150
30
2683
1000

Here, Safety stock for packing box = (300000/12)*5% =1250 units
*
Packing
Average inventory= (Order size +safety Stock)/2 Order Annual No of Size Ordering Carrying Safety cost p.u(CC) 30 30 1250 1250 1967 1125 (OC) 2683 1000 112 300 40320 108000 Avg Total carrying OC&CC cost 59010 33750 99330 141750 deman d orders cost stock** inventory* Total
Box
EOQ KAIL
300000 300000
Difference in Cost:
KAILs policy 141750
Difference 42420
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ICFAI Business SchoolHyderabad Packing box is supplied by the local suppliers. In KAIL Supply of packing Box is strictly maintained by JUST IN TIME system. But in case of ordering in lot sizes of 1000units there are several number of orders to be placed in a year which leads to increase in ordering cost. On the other hand, although carrying cost according to the proposed system of ordering is higher than the existing one. But in total of ordering and carrying cost are much less than existing policy. So, sit will be recommendable to change the existing policy to avoid the unnecessary blocking of working capital.
FRONT COVER:
For producing 1unit of CTV 1unit of front cover is required. So, its annual demand can be taken as 300000units. EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) Front cover demand cost p.u
30000 0
360
30
175
52.5
2028

Here, Safety stock for front cover= (300000/12)*5% =1250 units
*
Front
Average inventory= (Order size +safety Stock)/2 Order Annual No of Ordering Carrying Safety 52 Avg Total Total
ICFAI Business SchoolHyderabad Cover deman d EOQ KAIL 300000 300000 2028 1600 148 188 size orders cost (OC) 53280 67680 cost p.u(CC) 52.5 52.5 stock** inventory* carrying OC&CC cost 1250 1250 1639 1425 86048 74813 139328 142493
Difference in Cost:
KAILs policy 142493
Difference 3165
BACK COVER:
For producing 1unit of CTV 1unit of back cover is required. So, its annual demand can be taken as 300000units.

Here, Safety stock for Back cover=(300000/12)*5%
Average inventory= (Order size +safety Stock)/2 =1250 units EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) demand cost p.u
Back cover
30000 0
360
30
175
53
52.5
2028
1600
Difference in Cost:
KAILs policy 142493
Difference 3165
AS calculation for front cover and back cover are same the analysis for them also would be same. From the above table it can be seen that there are not major differences in the order size. In KAILs policy ordering costs are bit higher than the proposed system; but as front cover and back cover occupies space this difference in ordering cost gets adjusted with the increase in carrying cost under EOQ model. So, as a whole there are hardly any difference in total cost.
SPEAKER:
For producing 1unit of CTV 2units of speakers are required. So, its annual demand can be taken as (300000units*2) =600000units. EOQ Annual Ordering Carrying Price(i cost (%) n Rs) Carrying cost(in Rs) (units) KAILs Order size(units) Speaker demand cost p.u
60000 0
360
20
70
14
5555
15000

Here, Safety stock for picture tube=(600000/12)*5%
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ICFAI Business SchoolHyderabad =2500 units
Average inventory= (Order size +safety Stock)/2
Order Speake r Annual deman d EOQ KAIL 600000 600000 5555 15000 108 40 Size No of Ordering Carrying Safety orders cost (OC) 38880 14400 cost p.u(CC) 14 14 2500 2500 4028 8750 Avg Total stock** inventory*
Total carrying OC&CC cost 56392 122500 95272 136900
Difference in Cost:
KAILs policy 136900
Difference 41628
It is clearly seen that there is a huge difference in two order size. As a result, there is a significant difference in total cost. Although under proposed methodology cost is much less but after taking other market variables into consideration KAILs policy is the most suitable one. The reasons behind it are highlighted as follows: Competition in the market so intense that sometimes supply of speakers may fall short of such huge demand in the market. So in such situation KAIL goes for strategic stock policy for speakers which means build stock to avoid competition. Speakers are very delicate and fragile material .So when it is brought from the suppliers place it is transported in a delicate transport in bulk. Because it can not be transported with other materials in order to avoid damage of such brittle materials. 55
EXTRA MATERIAL HOLDING:

Further I have continued my studies by finding out the extra holding of materials which lies in the hands of the company above its stock holding policy. This showed that where unnecessary working capital has been blocked. Here last 6months data has been taken to find extra holding of inventory. METHODOLOGY FOLLOWED FOR CALCULATING EXTRA HOLDING OF THE MATERIALS: To find out the extra holding of each material, the stock at the beginning of each month has been collected from the company data base. According to company stock norms an average inventory holding is maintained on the basis of per day consumption. Like in case of picture tube KAIL holds 15days consumption . For A category material this has been shown in a tabular form. Material Picture tube Buffer Packing box Front cover Back cover Speaker Holding days 15days 7days 7days 15days 15days 30days in
The production figure for the above said period has been taken for finding out the actual requirement of these materials according to its plan schedule. Production figure has been shown in a tabular form. 56
MONTH OCT,06 NOV,06 DEC,06 JAN,07 FEB,07 MARCH,07
PRODUCTN 17296 16663 16468 21089 22689 24229
Comparing the actual requirement with the company stock finds the extra holding for that particular material. Dividing the extra material holding by per day consumption gives extra holding in terms of days.
PICTURE TUBE: Stock policy: 7days holding

For making 1set of CTV 1unit of picture tube is required. Multiplying the production figure with 1,monthly requirement of material has been derived.
PIC TUBE OCT,06 NOV,06 DEC,06 JAN,07 FEB,07 MARCH,07 Monthly reqrmnt 17296 16663 16468 21089 22689 24229 per day prod 577 555 549 703 810 808 15days consmptn Op stck extra holding 8648 20502 11854 8332 17198 8867 8234 17056 8822 10545 9967 -578 12155 18091 5936 12115 14247 2133 in days 21 16 16 -1 7 3
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ICFAI Business SchoolHyderabad Extra holding of Picture Tube

Extra stock in no of days consumotion 25 20 15 10 5 0
No v, 06 Ja n, 07 Fe b, 07 ar ch ,0 7 De c, 06 O ct ,0 6
Picture Tube
-5
Month
Like in case of picture tube KAIL holds 15days consumption. It shows wide fluctuation in holding of picture tube. This is because of the fact that there is seasonal variation in the demand for CTV. In September production figure was quite high. It reached 37000 units of production during the Puja season, which is the biggest festival in Eastern region. Again when market goes down stock figures proves to be much higher than the actual requirement. This continued for next 2 months also. When in January production figure rises there was no extra holding of material. Rather it became a negative figure. But, positive note is that control was imposed properly and extra holding was reduced and month of March. very close to the perfect position in the
BUFFER: Stock policy: 7 days holding
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ICFAI Business SchoolHyderabad For making 1set of CTV 1unit of buffer is required. Multiplying the production figure with 1, monthly requirement of material has been derived.
Buffer Rqrmnt p.m OCT,06 17296 NOV,06 16663 DEC,06 16468 JAN,07 21089 FEB,07 22689 MARCH,0724229
per day prod 577 555 549 703 810 808
7days consmptn 4036 3888 3843 4921 5672 5653
Op stck 8167 8545 4571 5131 7304 6090
extra holding In days 4131 7 4657 8 728 1 210 0 1632 2 437 1
Extra holding of buffer

Extra stock in no of days consumption 10 8 6 4 2 0
Buffer
Month
In case of buffer stock position is much under control. In the month of October and November although stock is higher than the requirement, in January its just the perfect figure. In following months also control was there. So, here working capital blockage is much less than the picture tube.
Packing Box: Stock policy: 7days holding

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ICFAI Business SchoolHyderabad For making 1set of CTV 1unit of packing box is required. Multiplying the production figure with 1monthly requirement of material has been derived.
Packing box Monthly prod per day prod 15 days consmptn Op stck extra holding inDays OCT,2006 17296 577 4036 8325 4289 7 NOV,2006 16663 555 3888 6591 2703 5 DEC,2006 16468 549 3843 4523 680 1 JAN,2007 21089 703 4921 7064 2143 3 FEB,2007 22689 810 5672 7765 2093 3 MARCH,2007 24229 808 5653 6073 420 1
Extra holding of Packing Box

8 7 6 5 4 3 2 1 0
Extra stock in no of days consumption
Packing Box
Months
In case of packing box position is much under control. In the month of October and November although stock is little higher than the requirement; but, in January its just the perfect figure. In following months also control was there. So, here working capital blockage is much less than the picture tube.
Front Cover and Back cover: Stock policy: 15 days holding
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ICFAI Business SchoolHyderabad For making 1set of CTV 1unit of front cover and 1unit of back cover are required. Multiplying the production figure with 1, monthly requirement of material has been derived.
FRONT COVER Monthly prod per day prod 15 days consmptn Op stck extra holding inDays OCT,2006 17296 577 8648 22347 13699 24 NOV,2006 16663 555 8331 19835 11504 21 DEC,2006 16468 549 8234 9806 1572 3 JAN,2007 21089 703 10544 12924 2380 3 FEB,2007 22689 810 12154 15506 3352 4 MARCH,2007 24229 808 12114.5 14258 2143.5 3
BACK COVER Monthly prod per day prod 15 days consmptn Op stck extra holding inDays OCT,2006 17296 577 8648 18009 9361 16 NOV,2006 16663 555 8332 18745 10414 19 DEC,2006 16468 549 8234 10974 2740 5 JAN,2007 21089 703 10545 12201 1657 2 FEB,2007 22689 810 12155 14082 1927 2 MARCH,2007 24229 808 12115 13208 1094 1
Extra holding of F/C & B/C

Extra stock in no of days consumption 30 25 20 15 10 5 0
F/C B/C
Months
In case of front cover and back cover holding of material was quite high in the first 2 months. KAILs stock policy for front cover and back cover is JIT (just in time) but it is not always possible to maintain JIT policy since materials come from 61
ICFAI Business SchoolHyderabad distant place. Regarding front cover and back cover
approximately is 15 days holding which includes 7 days holding for obsolete items. Since they are dependant on model and size of the CTV they become obsolete within a very short span of time. So, according to the market demand and customer preference model changes so frequently that it leads to accumulation of stock of obsolete materials. These are to be disposed off as soon as possible.
Speakers: Stock policy: 30 days holding

For making 1set of CTV 2units of speaker is required. Multiplying the production figure with 2, monthly requirement of material has been derived.
SPEAKER Monthly prod per day prod 30 days consmptn Op stock extra holding in days OCT,2006 34592 1153 34592 59232 24640 21 NOV,2006 33326 1111 33326 56078 22752 20 DEC,2006 32936 1098 32936 48743 15807 14 JAN,2007 42178 1406 42178 63032 20854 15 FEB,2007 45378 1621 48619 62938 14319 9 MARCH,2007 48458 1615 48458 65908 17450 11
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ICFAI Business SchoolHyderabad Extra holding of Speakers

Extra stock in no of days consumption 25 20 15 10 5 0
Speakers
Months
Through out the 6months speakers holding are much higher than the actual requirement. The reason behind it can be cited as follows: Competition in the market so intense that sometimes supply of speakers may fall short of such huge demand in the market. So in such situation KAIL goes for strategic stock policy for speakers which means build stock to avoid competition. Speakers are very delicate and fragile material .So when it is brought from the suppliers place it is transported in a delicate transport in bulk. Because it can not be transported with other materials in order to avoid damage of such brittle materials.
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B AND C CATEGORIES OF MATERIALS:

In KAIL there is hardly any difference in the stock policy for B and C category of materials. B categories of items are Mains cord, IC, MICON, heat sink , transistor etc. C categories of items are Resistor, CFR, Tape, Felt, coil, screw, header, Fuse, diode, knob, sticker etc. Inventory monitoring approaches for B & C categories of items: Continuous Review or fixed order quantity system (Q-system): This approach maintains a constant order size but allows the time between the placements of order to vary. This method of monitoring inventory is sometimes referred to as Perpetual Review system. When the inventory level reaches the reorder level, an order is placed. On hand inventory serves as order trigger(R).This type of system provides closer control over inventory items since the inventory levels are under perpetual scrutiny. Periodic Review or Fixed-order period system (P-system): This approach maintains a constant time between the placements of order, but allows the order size to vary. This method of monitoring inventory is sometimes referred to as a fixed interval system or fixed periods of time. The amount that is ordered at a particular time point is the difference between current inventory level and a predetermined target inventory level. If the demand has been low during the prior time interval, inventory levels will be relatively high and the amount to be ordered will be relatively low. 64
ICFAI Business SchoolHyderabad KAIL follows combination of both the P and Q methods for its B and C category materials. Periodic review is made monthly for each and every material. Along with that if it finds stock level of any material reaches the reorder level an order is triggered. Average material holding for these materials is 1months.
NON-MOVING AND SLOW MOVING INVENTORIES:

Materials that are not consumed for a long period of time approximately for 6months are known as non-moving materials. Similarly materials that are consumed very slowly and in small quantities in the production process is known as slow moving materials. Whereas , those materials and equipments that are not damaged and which have economic worth but are no longer useful for the companys operation owing to reasons such as change in product line are known as obsolete materials. Non-moving and slow-moving materials occupy space and carrying cost. In KAIL the slow-moving materials are first identified. Then they are taken under observation for the next 3months.If the material still remains as it is then they are called non-moving materials. Then for the next 3monthsagain these materials are taken under observation .Finally if still remain non-moving and are no longer needed for production of any other set then these materials are termed as obsolete materials.
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RECOMMENDATION:
Color Picture Tube:
They are the most important and the most critical item in the complete process. They are received directly from the manufacturers and are not dependant on the models. They are received on a monthly order basis in a continuous flow KAILs existing policy of ordering picture tube is almost same with the EOQ model. So, there is no need to change the present method. An important aspect here is that since the picture tubes are very fragile they have a high rate of breakage and a high rate of goods is returned as rejected lots. Proper care should be taken to deal with the large number of rejections in every received lot. (Rejection list has been given in the Appendices- , pg no. 73) Again in case extra material holding picture tubes stock is much higher than the actual requirement, where a large portion of working capital unnecessarily is tied up. So ,management should immediately take some control measure to reduce this holding level.
BUFFER:
Although the cost under proposed method is much less than KAILs existing policy, but considering other important factors it will be advisable to follow the existing policy. The reasons behind it are highlighted as follows: Buffer is procured from local supplier So, lead time is much less in this case. So, no need to go for large order size.
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ICFAI Business SchoolHyderabad Moreover, it occupies space. So, large stocking of buffer will lead to higher carrying cost. Company stock policy in this case i.e JUST IN TIME would be recommended. Extra material holding of buffer is under control, so no such recommendation for buffer.
FRONT COVER ND BACK COVER:

There are not major differences in the order size between KAILs existing policy and new system. In KAILs policy ordering costs are bit higher than the proposed system; but as front cover and back cover occupies space this difference in ordering cost gets adjusted with the increase in carrying cost under EOQ model. So, as a whole there are hardly any difference in total cost . In case of front cover and back cover holding of material was quite high in the first 2 months. So , strict control on such stock is highly recommended. Since they are dependant on model and size of the CTV they become obsolete within a very short span of time. Stock policy for front cover and back cover should be JIT (just in time).
PACKING BOX:
Packing box is supplied by the local suppliers. In KAIL Supply of packing Box is strictly maintained by JUST IN TIME system. But in case of ordering in lot sizes of 1000units there are several numbers of orders to be placed in a year which leads to increase in ordering cost. On the other hand, although
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ICFAI Business SchoolHyderabad carrying cost according to the proposed system of ordering is higher than the existing one. But in total of ordering and carrying cost are much less than existing policy. So, it will be recommendable to change the existing policy to avoid the unnecessary blockage of working capital.
SPEAKERS:
There is a huge difference in two order size. As a result, there is a significant difference in total cost. But considering the following factors KAILs existing policy will be recommendable Competition in the market so intense that sometimes supply of speakers may fall short of such huge demand in the market. So in such situation KAIL goes for strategic stock policy to avoid stock out position. But proper care should be taken to reduce the huge extra holding of speakers.
B AND C CATEGORY OF MATERIALS:

Orders are placed every month with a holding of 1months stock. These types of materials are required for manufacturing almost all type of CTV. So, their monthly requirement is almost confirmed. In such case, instead ordering every month KAIL can order in bulk for 2 or 3 months consumption. As a result, time and cost both can be saved from monthly review of stock. But considering the following factors KAILs existing policy will be recommendable: 68
ICFAI Business SchoolHyderabad In case of huge stock of these materials there is high possibility of mishandling material, which may result in wastage, misuse, rejection etc. Moreover, accumulation of 2 /3months stock will be very space consuming as well. It will lead to increase in carrying cost. Depending upon the market demand and customer preference model and size of the television change so frequently that any time the stock of material can be obsolete.
69
APPENDICES: ABC Analysis: Details of each of the Aitems:

DESCRIPTION COMPONENT
MAP
PIC TUBE 1100008119 1100008928 1100008931 1100008117 1100008116 1100008144 1100017234 1200001322 PICTUBE,21"TFT,YAMMED,GENERIC PIC TUBE,15"CTV,YAMMED,GENERIC PIC TUBE,29"CTV,TFT,YAMMED,GENERIC PIC TUBE,21"CTV,YAMMED,GENERIC PIC TUBE,14"CTV,YAMMED,GENERIC PIC TUBE,20"CTV,YAMMED,GENERIC PIC TUBE,25"CTV,TFT,GENERIC ASSY,PICTURE TUBE,21"TFT PC PC PC PC PC PC PC PC 1,687.80 1,577.02 3,983.95 1,622.20 995.23 1,569.92 2,651.04 2,190.71 10075 5375 1295 2884 3450 1900 825 619.9
1700458 5 8476483 5159216 4678274 3433544 2982848 2187108 1358060 4528011 7 432822 321672 272602 252383 225126 217715 215565 208920 192701 188606
FRONT COVER 1200003648 1200003664 1200001567 1200005623 1200001568 1200001910 1200004775 1200008175 1200001039 1200011812 FRONT COVER,22 NP,HY GREY+VD SILVER FRONT COVER,PANASONIC-21"/22NP,HIPS L G FRONT COVER,3643QS,PEARL GREY(JK2000) FRONT COVER,5502QS,VD SILVER FRONT COVER,3643QS/3653QS,HIPS BLACK FRONT COVER,5502QS,HIPS,LIGHT GREY FRONT COVER,HY21C01,BURNISH SILVER FRONT COVER,15SL,INTR.SER,MINT BLUE,VD S ASSY,FRONT COVER,HY29FW01 FRONT COVER,HY22F07,B.SILVER+SANSUI BLAC PC PC PC PC PC PC PC PC PC PC 157.29 123.72 123.91 186.95 102.33 161.27 157.8 104.46 1,101.15 172.01 2752 2600 2200 1350 2200 1350 1366 2000 175 1096
70
VALUE
TOTAL
UOM

1200004931 1200014036 1200005042 1200006628 1200012958 1200008266 1200003644 1200012962 1200001599 1200001598 1200010992 1200001933 1200001587 1200011968 1200001603 1200005619 1200011528 1200008174 1200003939 1200003874 1200011815 1200003650 1200003669 1200001915 1200003666 1200001902 1200001946 BACK COVER 1200003592 1200011111 1200000653 1200004893 1200012961 1200001382 1200003591 1200006485 1200001799 1200004991 1200001796 FRONT COVER,HY21C01,HIPS LIGHT GREY FRONT COVER,K2K21,SANSUI BLACK+SILVER FRONT COVER,5443QS,UNPTD,LIGHT GREY FRONT COVER,K2K21",HIPS LIGHT GREY FRONT COVER,HY22F08,AKAI SILVER FRONT COVER,HY22F01T,HIPS LIGHT GREY FRONT COVER,15SL,SONY,NEW,HIPS, LIGHT GR FRONT COVER,HY22F08,HIPS BLACK FRONT COVER,HR2K-WT,MET.SILVR+AKAI S.GRY FRONT COVER,HR29,HIPS LIGHT GREY FRONT COVER,15NP,VD SILVER+HY.GREY.CRET FRONT COVER,HARDROCK2000, HIPS L GREY FRONT COVER,FIRST20DP-P,BURNISH SILVER FRONT COVER,K2K21DTH,B.SILVER+S.BLACK FRONT COVER,HY22FW01,BURN SILV+HY GREY FRONT COVER,7641QS,VD SILVER FRONT COVER,HY22F07,HIPS LIGHT GREY FRONT COVER,22SL,INTR.SER,MINT BLUE,VD S FRONT COVER,IS29G,HIPS LIGHT GREY FRONT COVER SUPER-14,HIPS,LIGHT GREY FRONT COVER,S2S21,SILVER/UV BLACK FRONT COVER,5153QST,PEARL GREY FRONT COVER,SY21SUPEREYEP,BURNISH SILVER FRONT COVER,7631QS,HIPS LIGHT GREY FRONT COVER,SY14SUPEREYEP,BURNISH SILVER FRONT COVER,21X50,HIPS LIGHT GREY FRONT COVER,SUPER21/TECHNO21,HIPS L GY PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC PC 119.09 157.41 151.58 122.15 159.87 102.65 78.71 140.72 201.71 221.51 96.23 163.56 113.87 156.91 190.46 251.25 131.48 146.05 167.58 93.64 159.23 165.8 171.29 236.38 120.92 169.8 142.87 1500 1084 1102 1325 1000 1546 2000 1089 751 675 1525 843 1200 861 700 530 1000 900 783 1388 767 700 675 484 900 634 675
178635 170620 167052 161849 159870 158699 157420 153256 151452 149615 146722 137932 136644 135134 133322 133059 131480 131445 131247 130018 122185 116060 115621 114329 108828 107710 96437 6264749
1218159 1157337 359303 340980 330434 329980 327035 326502 320655 315818 312120
BACK COVER,22SL/NP,C2C21/B2B21,HIPS M GY BACK COVER,B2B21,SANSUI BLACK BACK COVER,22WF/FS/MKII,COOL GREY BACK COVER,5448QST,COOL GREY BACK COVER,HY22F08,BLACK BACK COVER,HY29FW01 COOL GREY BACK COVER,22SL/NP,COOL GREY BACK COVER,CT1416,NEW,COOL GREY BACK COVER,5512/5438QS,HIPS MIDDLE GREY BACK COVER,CT-1500,COOL GRAY BACK COVER,5501/2/FU21,HIPS BLACK
PC PC PC PC PC PC PC PC PC PC PC
200.52 223.64 266.15 227.32 254.18 397.43 223.25 148.41 213.77 123.85 231.2
6075 5175 1350 1500 1300 830.3 1465 2200 1500 2550 1350
71

1200001821 1200008816 1200004990 1200006125 1200012963 1200011319 1200001788 1200001789 1200001370 1200000655 1200011323 1200001371 BUFFER 1300001227 1300000740 1300001414 1300001176 1300001224 1300000755 1300000742 1300000735 PACKING BOX 1300001168 1300002493 1300002762 1300002932 1300003726 1300002400 1300003268 1300001354 1300002401 1300000632 1300003732 SPEAKER 1100001799 1100001804 1100001801 1100004296 1100008303 1100001795 BACK COVER,HR29/HY29/29X50,HIPS M GREY BACK COVER,3653QSP,SANSUI BLACK BACK COVER15TFT,CT1500/15F10TEV,HIPS MGY BACK COVER,14"CON 12,NEW BACK,HIPS L GY BACK COVER,HY22F08,HIPS BLACK BACK COVER,HY25F01,COOL GREY BACK COVER,21X50/HR2000/HY22,HIPS M GREY BACK COVER,3610R/3643QS,HIPS BLACK BACK COVER,FIRST20,COOL GREY BACK COVER,1403/14BS,SUP 14,HIPS,L GREY BACK COVER,HY25F01,HIPS MIDDLE GREY BACK COVER,FIRST20,HIPS LIGHT GREY PC PC PC PC PC PC PC PC PC PC PC PC 385.54 132.98 101.66 126.9 212.69 300.86 276.56 107.79 194.94 119.18 271.24 178.38 792 2200 2850 2200 1300 825 880.9 2200 1200 1899 825 1200 305342 292556 289731 279180 276497 248210 243614 237138 233928 226342 223773 214056 8408689 437992 169600 125567 115635 111040 104604 91679 87120 1243237 281086 241749 239211 233267 228175 228113 178641 160320 157252 146097 139352 2233262 507060 399202 262993 249437 237762 197028
BUFFER,THERMOCOLE,SET,B2B21/22NP/22SL BUFFER,THERMOCOLE,SET,5438QS BUFFER,THERMOCOLE,SET,CT-1500 BUFFER,THERMOCOLE,SET,5143QSR BUFFER,THERMOCOLE,SET,HY22F01,NEWBACK BUFFER,THERMOCOLE,SET,FIRST20/CP20F BUFFER,THERMOCOLE,SET,5502QS BUFFER,THERMOCOLE,SET,3643QS
PC PC PC PC PC PC PC PC
68.17 57.94 35.94 88.95 69.4 40.79 67.91 39.6
6425 2927 3494 1300 1600 2564 1350 2200
BOX,PACKING,5PLY,CTV22NP,POC1D BOX,PACKING,5PLY,BROWN,PURE MONO,5453QSP BOX,PACKING,5PLY,3653QSPP,PURE MONO BOX PACKING,5PLY,HY22F07 BOX PACKING,5PLY,FIRST20DP-P,NEW GRAPHIC BOX,PACKING,5PLY,IS15,INTER. SERIES BOX PACKING,5PLY,HY22F08,POC BOX,PACKING,5PLY,HY21C01 BOX,PACKING,5PLY,IS22,INTER. SERIES BOX,PACKING,5PLY,5502QST BOX PACKING,5PLY,SY21SUPEREYEP,NEW GRAPH
PC PC PC PC PC PC PC PC PC PC PC
108.11 105.32 59.65 107.1 69.93 50.85 107.08 106.88 105.41 108.22 101.35
2600 2295 4010 2178 3263 4486 1668 1500 1492 1350 1375
SPEAKER,55X153MM,8E,20W SPEAKER,T,60MM,RND,6E,15W,FL LENGTH LESS SPEAKER,57X127MM,8E,20W,120Hz SPEAKER,50X120MM,8E,15W SPEAKER,76X127MM,16E,5W, MONO SPEAKER,100MM,SQUARE,8E,25W,HARDROCK21
PC PC PC PC PC PC
35.86 20.43 30.37 27.87 26.82 54.73
14140 19540 8660 8950 8865 3600
72

1100004303 1100001797 TUNER 1100004526 1100015795 REMOTE 1100003774 1100014958 1100014882 1100003775 1100001694 1100003776 SMPS 1100004241 1100004238 1100019126 1100004237 FBT 1100011384 1100003298 1100003301 SPEAKER,57X127MM,16E,5W SPEAKER,50X120MM,16E,5W,FIRST20 PC PC 21.46 30.51 7400 4955 158804 151167 2163454 1367009 139464 1506472 210044 197849 197284 174105 112675 111807 1003764 447300 230916 151971 93596 923782 770493 674101 368117 1812711
TUNER,EWT-5F3T1-E09W-1,FS TYPE,GDC,TEXA TUNER,GDC,FS,EWT-5F3T1-F09W-2
PC PC
63.73 65.63
21450 2125
REMOTE HANDSET,POC1,H.E,SP1-02,SANSUI REMOTE HANDSET,H-EK2,SHE REMOTE HANDSET,V(EK2)-LE REMOTE HANDSET,POC1,L.E.,SP1-01,SANSUI REMOTE HANDSET,TSB2,HYU-003,HYUNDAI REMOTE HANDSET,VP1-01, POC1 VIDEOCON
PC PC PC PC PC PC
44.96 44.51 26.66 43.59 45.13 37.69
4672 4445 7400 3994 2497 2966
SMPS,FERRITE CORED,TM0065-0L SMPS,FERRITE CORED,13.5V,TM0148-0L,MO TRANSISTOR,2SC4458,SMPS,PREFORMED SMPS,FERRITE BEAD,18.5V,TSB2,TXXX0080
PC PC PC PC
34.08 30.18 17.81 29.89
13125 7651 8533 3131
FBT,20",TF-107-2B,WTH BLEEDR RES,KNOT FBT,FERRITE CORED14",TF-0126-OU,KNOTTING FBT,FERRITE CORED,21"TSB2,BSC24-01N4013E
PC PC PC
75.17 75.63 76.71
10250 8913 4799
73
Production plan:
74
For September,06
BRANCHES 3653QSPP 5153QSP IS 15 15X-50 22NP IS 22 5502QST 21X-50WT 5505QS 21X-50 IS 29G 29X-50 7642G TOTAL VIDEOCON SY -14- SUPER EYE SY - 21- SUPER EYE FIRST 14 DP FIRST 20 DP HR-15 K2K-15 B2B-15 S2S-15 FURATTO 21 EYE HARD ROCK 21 EYE B2B-21 S2S-21 HARDROCK 2000 HARDROCK-2KWT K2K-21 SLIM EX 214 PJ-29-M PJ-29-M - WT HARD ROCK 29 HARD ROCK 29 WT SLIMEX-291 B2B-29 +DVD 510 GRAND HYUNDAI CT-14MN
KAIL 3000 800 4500 200 3500 1400 900 200 400 500 400 200 150 16150 1850 400 350 600 400 800 450 400 100 350 700 450 500 250 1200 100 100 150 150 200 50 200 9750 700
75
ICFAI Business SchoolHyderabad CT1416 CT15NS CT1500 CT20MN CT22NS CT2202 CT2205 CT22WF CT2902 CT2929 TOTAL AKAI 15F03 15F04 21C01 22F01T 22FW01T 22F08 22F03 22F06 22F07 29F04G 29FW01G TOTAL SANSUI 300 200 100 300 400 300 300 250 100 100 3050 1200 1900 1000 400 450 2000 150 250 2800 450 250 10850
76
Rejection percentages of Picture Tube:

CPT CPT CPT % of Rej 1.25 2.99 10.44 3.52 0.56 0.49
Cost of Value of rej consumption
SEP 932441.40 OCT 1034134.33 NOV 3478904.30 DEC 1159801.98 JAN 234089.38 FEB 221133.43
74396000 34592000 33326000 32936000 42178000 45378000
77
REFERENCES:
Bibliography:
Working capital management-V.K Bhalla Production and operations management-manufacturing and servicesChase, Richard B, Nicolas, J Aquilano and F Robert Jacobs Supply Chain Management-Sunil Chopra Principles of Inventory and Material Management-Teresine, Richard J.
Websites:
www.effectiveinventory.com www.inventoryops.com www.inventoryanalytics.com www.inventorymanagement.com www.themanager.org www.apics.com
78

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DESIGN OF EFFECTIVE SUPPLY CHAIN FOR WORKING CAPITAL MANAGEMENT

ICFAI Business SchoolHyderabad

NAME OF THE ORGANIZATION:

KITCHEN APPLIANCES INDIA LIMITED (VIDEOCON GROUP OF COMPANIES)

DESIGN OF EFFECTIVE SUPPLY CHAIN FOR WORKING CAPITAL MANAGEMENT

ICFAI Business SchoolHyderabad

Company Guide GUIDE: Mr. Siddhartha Sengupta MATERIALS MANAGER KAIL

FACULTY Prof.S.N Mookherjee ICFAI BUSINESS SCHOOL Kolkata

ICFAI Business SchoolHyderabad

ICFAI Business SchoolHyderabad Limitation of the

ICFAI Business SchoolHyderabad

ICFAI Business SchoolHyderabad

ICFAI Business SchoolHyderabad

ORGANISATIONAL DETAILS: NAME OF THE ORGANIZATION:

Brand Name Videocon, Akai,

This project is carried on in the Salt Lake factory.

ADDRESS OF THE ORGANIZATION: BLOCK-BP. SECTOR V.

A BRIEF IDEA ABOUT WORKING CAPITAL:

Each component of working capital (namely inventory,

A BRIEF IDEA ABOUT SUPPLY CHAIN:

Supply Chain Decisions:

balancing, and quality control measures at a production facility.

ICFAI Business SchoolHyderabad

PURPOSE OF THE PROJECT:

SCOPE OF THE STUDY:

OUTLINE OF THE WORK:

LIMITATIONS OF THE STUDY:

INTRODUCTION WITH THE SAP SYSTEM:

STUDY OF RESEARCH PAPER:

STUDY OF KAILS EXISTING INVENTORY SYSTEM:

ICFAI Business SchoolHyderabad

MAKING ANALYSIS IN TWO PHASES:

FINAL ANALYSIS AND PROJECT FINAL REPORT:

PREPARATION OF FINAL PRESENTATION:

KAILS EXISTING INVENTORY POLICY:

ICFAI Business SchoolHyderabad 5%=14 conventional

Why Inventory is so important in KAIL for manufacturing CTV:

ICFAI Business SchoolHyderabad

VALUE (in crores) (In %) Quantity (In %)

75% 101 5.60%

15% 181 10.10%

10% 1509 84.25%

VALUE (in crores) (In %) Quantity (In %)

15% 141 9.65%

10% 1246 85.20%

ICFAI Business SchoolHyderabad

December, 2006 when consumption value is low.

VALUE (in crores) (In %) Quantity (In %)

15% 143 10.19%

10% 1179 84.09%

ICFAI Business SchoolHyderabad ABC ANALYSIS

CKD kit (complete knocked down kit)

FRONT COVER AND BACK COVER:

PROPOSED INVENTORY STRATEGY:

production scheduling time, machine set up time, and inspection

METHODS FOLLOWED FOR CALCULATING OF EOQ IN KAIL:

Without any Safety stock

Avg. Inventory Safety Stock

**safety stock=average monthly consumption*5%

KAILs policy 503855

As per EOQ Model 504000

**safety stock=average monthly consumption*5%