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transcript
CHAPTER 1
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1.1 INTRODUCTION
Inventory control is vitally important to almost every type of business, whether
product or service oriented; inventory control touches almost every facets if
operations. A proper balance must be struck to maintain proper inventory with the
minimum financial impact on the customer. Inventory control is the activities that
maintain stock keeping items at desired levels. In manufacturing since the focus is on
physical product, inventory control focus on material control.
“Inventory” means physical stock of goods, which is kept in hands for smooth and
efficient running of future affairs of an organisation at the minimum cost of funds
blocked in inventories. The fundamental reason for carrying inventory is that it is
physically impossible and economically impractical for each stock item to arrive
exactly where it is needed, exactly when it is needed.
Inventory management is the integrated functioning of an organization dealing
with supply of materials and allied activities in order to achieve the maximum co-
ordination and optimum expenditure on materials. Inventory control is the most
important function of inventory management and it forms the nerve centre in any
inventory management organization. An Inventory Management System is an
essential element in an organization. It is comprised of a series of processes, which
provide an assessment of the organization’s inventory.
1.2 History of Washing Machine
Ancient peoples cleaned their clothes by pounding them on rocks or rubbing them
with abrasive sands; and washing the dirt away in local streams. Evidence of ancient
washing soap was found at Sapo Hill in Rome, where the ashes containing the fat of
sacrificial animals was used as soap. The earliest washing "machine" was the scrub
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board invented in 1797. American, James King patented the first washing machine to
use a drum in 1851, the drum made King's machine resemble a modern machine,
however it was still hand powered. In 1858, Hamilton Smith patented the rotary
washing machine. In 1874, William Blackstone of Indiana built a birthday present for
his wife. It was a machine, which removed and washed away dirt from clothes. The
first washing machines designed for use in the home. The Hurley Machine Company
of Chicago, Illinois introduced the first electric-powered washing machine (the Thor)
in 1908. Alva J. Fisher was the inventor. The machine was a drum type with a
galvanized tub and an electric motor, for which a patent was issued on Aug. 9, 1910.
Market Shares and the Key players
The washing machine market is divided into two segments. In India, Semi-
automatic washing machines account for about 78% of total washing machine sales in
2003-04. In the semi-automatic washing machine market LG is the market leader
holding 27 per cent share followed by Videocon with 24 percent share followed by
Whirlpool (17) and Samsung (16 percent), Godrej (5 percent), BPL (4 percent) and
Electrolux (3 percent) and rest by others. In the fully automatic segment estimated
3lakhs units, LG is the market leader holding 20 per cent share followed by IFB
accounting for 17 percent market share.
Unlike Western countries, there is still a large demand for semi-automatic “twin-tub”
washing machines in India (compared to fully automatic machines) because of their
much lower price. Trends in demand for washing machines have been very similar to
those for refrigerators
1.3 COMPANY PROFILE
WHIRLPOOL Corporation Worldwide
Whirlpool Corporation is the world's leading manufacturer and marketer of
major home appliances, with annual sales of more than $18 billion, more than 73,000
employees, and more than 70 manufacturing and technology research centers around
the world. Whirlpool's primary brand names -- Kitchen Aid, Roper, Bauknecht, Ignis,
Brastemp, Consul and its global Whirlpool brand -- are marketed in more than 170
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countries worldwide. Whirlpool Corporation is a significant supplier to Sears
Holdings Corporation, which owns and controls the Kenmore brand name.
Whirlpool's global platform provides our operations with resources and
capabilities no other manufacturer can match. Whirlpool's global procurement,
product development and information technology organizations help our operations
reduce costs, improve efficiencies and introduce a continuous stream of relevant
innovation to consumers.
Inspired by our bold innovations and designs, customers around the globe trust
Whirlpool to make their lives easier. More than ever before, our brands are
connecting with customers in ways that will last a lifetime.
The beginning of the 20th Century witnessed what many have characterized as
the Second Industrial Revolution. Most notably, Henry Ford introducemassproduction
for automobile manufacture and George Westinghouse ushered in the age of readily
available electricity for illumination and power. This dramatically and forever
changed the prevailing ways of business, industry and domestic life.
Against this background, the predecessor of the modern day Whirlpool
Corporation was formed in 1911 as the Upton Machine Company. Its founders were
Chicagoan Lou Upton, owner of a patent for a manually operated clothes washer that
had never been produced and his uncle Emory Upton, a machine shop owner in the St.
Joseph, Michigan area. The commitment to serve homemakers was in evidence even
in those early days as Lou Upton challenged his uncle to power his washer electrically
‘so the women of the country could be assisted in their washing chore’. His uncle rose
to the challenge, and thus the new company was established in the St Joseph area
where the Company's headquarters remain to this day!
The first main customer for the infant company was Federal Electric, but this
customer later turned competitor, threatening the very survival of the Upton Machine
Company. A replacement customer was not found till 1916, when a valued and strong
relationship was forged with Sears Roebuck & Co., which endures to this date. In
1921 the Upton Machine Company had more than outgrown its existing production
facilities. With a loan from Sears, they constructed a new facility but by 1929 due to
the huge popularity of its washers, this added capacity too began to feel the strain.
Hence in 1929 the Upton Machine consolidated with The Nineteen Hundred Washer
Co., a business founded in 1898.The combined entity was named the Nineteen
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Hundred Corporations. Despite the nation’s economic woes during the Great
Depression, Sears and the Nineteen Hundred Corporation continued to prosper.
Sears' entry into the international market and its introduction of an unique sales
education program designed by Lou Upton, provided added momentum to washer
sales during this period. This to date is a tradition at Whirlpool – educating sales
channels and service and management people in innovative techniques for improving
job performance. By 1941 the Nineteen Hundred Corporation was acknowledged as
the No. 1 producer of washers in the US and in the world. Whirlpool continues to hold
this position to this day.
In 1947, as demand for its products soared, the Nineteen Hundred
Corporation’s management became increasingly convinced that a fully-developed
dual distribution system would produce economies of scale and other major benefits
for both Sears and the Nineteen Hundred Corporation. So planning began for the
national distribution of the Company’s own line of laundry products. The brand name
would be ‘Whirlpool’, the seemingly appealing brand name for an innovative Agitator
washer developed in 1920.
The Whirlpool brand of automatic washers was formally launched in August
1949, followed by automatic dryers in the same year. In 1950, due to the tremendous
salience gained by the Whirlpool brand, the Company decided to change its name to
the Whirlpool Corporation. The Whirlpool brand was aggressively growing and
demand outstripped production capacity.
By 1954, its growth momentum not withstanding, the company was feeling
increasingly pressurized to respond to some growing challenges in its operating
environment. The direction was clear – a broader product line was needed, the fastest
route to which was either acquisition or merger. In 1955, Whirlpool took over the
Seeger Refrigeration Company, thereby acquiring a quality refrigeration line. As part
of the merger, it also acquired Seeger's air conditioning and cooking range businesses.
The Whirlpool brand product offering now encompassed a full line of major
appliances.
The Whirlpool brand was popular in Canada and Latin America by virtue of
licensing agreements. In 1980, a decision was taken to explore opportunities inside
and outside the appliance industry worldwide. This resulted in joint ventures and also
merger and acquisition throughout Europe, Latin America, and Asia. This has led
Whirlpool brand, becoming the world’s single largest home appliance brand.
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India was identified as a growth market in the late ‘80’s. The Whirlpool Corporation
entered into a joint venture agreement with the TVS group to produce automatic
washers at a plant set up in Pondicherry. A modest beginning was made to establish
the Whirlpool brand in India. In 1995 the Whirlpool Corporation acquired Kelvinator
of India Limited and entered into the refrigerator market. Later in 1995, majority
ownership was gained in the TVS joint venture and the two entities were merged to
form Whirlpool of India Limited.
The Whirlpool brand went from having no awareness to claim an awareness of
up to 85% and a market share of 25%. Whirlpool has the distinction of being the most
preferred brand in the washing machine category with market leadership in the
segment it pioneered worldwide – the automatic washing machine. In less than three
years, the Whirlpool brand had become a household name and has today emerged as a
leader in the domestic home appliances market. The Company’s Corporate
Headquarters is at Benton Harbor, Michigan, USA.
History
1911: Louis Upton founded the Upton Machine Company in this year to produce
motor-driven wringer washers.
1916: First order of washers was sold to Sears, Roebuck & Co.
1929: Upton Machine Company merged with Nineteen Hundred Washer Company
of New York.
1948: First 'Whirlpool' brand automatic washer with dual distribution was
introduced. It included two product lines one each was distributed through Sears
and Nineteen Hundred.
1957: The company was rechristened as ' The Whirlpool Corporation.'
1958: The company moved out of country for the first time and invested in
Brazilian appliance market through purchase of equity in Multibras S.A.
1968: The Elisha Gray II Research & Engineering Center was completed in Benton
Harbor . In the same year, the company's revenues crossed the legendary $1 Billion
mark for the first time.
1978: Within a decade company doubled its feat of $1 Billion mark and reached the
$2 billion revenue level.
1986: The 'Kitchen Aid' division of Hobart Corporation was purchased.
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1987: Whirlpool tied-up with Sundaram
Clayton Ltd. of India to form TVS Whirlpool Ltd
1989: This was a historic year since the revenues catapulted to heights of over $6
Billion mark. Also, the joint venture with N.V.Philips of Netherlands called
Whirlpool Europe B.V. was formed to manufacture and market appliances in
Europe.
1990: Company established joint venture with Matsushita Electric Company of
Japan to produce vacuum cleaners for the North American market.
1991: The company introduced and committed globally to its Worldwide
Excellence System, which is a TQM program dedicated to exceeding customer
expectations. The vision to globalize 'Whirlpool Corp'. was realized in the same
year.
1993: First time Whirlpool became the No.1 stand-alone brand in UK, Ireland,
Netherlands and Belgium
1995: Whirlpool Corp. acquired majority of stake in the TVS Whirlpool Ltd. The
DC manufacturing facility of Kelvinator India was also acquired.
1996: Whirlpool Washing Machines Ltd. and Kelvinator India Ltd. merged
together to
form Whirlpool of India Ltd.
1998: This year gave birth to a new company vision that says, "Every Home
Everywhere with Pride, Passion & Performance."
1999: Whirlpool of India crossed the milestone of 1 million sales appliances.
2002: The ' Whirlpool Strategic Architecture ' was launched as a framework to
achieve the vision. The revenues of Whirlpool Corp. soared to $10.5 Billion.
2001: Whirlpool India registered profit & sold 1.2 million appliances. It also
achieved the No.1 position in DC & FA.
2002: The Aircon range was successfully launched and the Whirlpool of India
acquired 6% market share.
2003: A new mission statement of "Everybody creating loyal customers for life"
was adopted.
2006: Whirlpool Corporation acquires Maytag and become the Worlds largest
white goods company.
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Whirlpool of India
Whirlpool, right from its inception in 1911 as first commercial manufacturer
of motorized washers to the current market position of being world's number one
manufacturer and marketer of major home appliances, has always set industry
milestones and benchmarks. The parent company is headquartered at Benton Harbor,
Michigan, USA with a global presence in over 170 countries and manufacturing
operation in 13 countries with 11 major brand names such as Whirlpool, Kitchen Aid,
Roper, Estate, Bauknecht, Laden and Ignis. The company boasts of resources and
capabilities beyond achievable feat of any other in the industry.
Whirlpool initiated its international expansion in 1958 by entering Brazil.
However, it emerged as truly global leader in the 1980's. This encouraging trend
brought the company to India in the late 1980s. It forayed into the market under a
joint venture with TVS group and established the first Whirlpool manufacturing
facility in Pondicherry.
Soon Whirlpool acquired Kelvinator India Limited in 1995 and marked an
entry into Indian refrigerator market as well. The same year also saw acquisition of
major share in TVS joint venture and later in 1996, Kelvinator and TVS acquisitions
were merged to create Indian home appliance leader of the future, Whirlpool India.
This expanded the company's portfolio in the Indian subcontinent to washing
machines, refrigerator, microwave ovens and air conditioners.
Today, Whirlpool is the most recognized brand in home appliances in India
and holds a market share of over 25%. The company owns three state-of-the-art
manufacturing facilities at Faridabad, Pondicherry and Pune. Each of these
manufacturing set-ups features an infrastructure that is witness of Whirlpool's
commitment to consumer interests and advanced technology.
In the year ending in March '06, the annual turnover of the company for its
Indian enterprise was Rs.1, 375 Corers. According to IMRB surveys, Whirlpool
enjoys the status of the single largest refrigerator and second largest washing machine
brand in India.
The company's brand and image speaks of its commitment to the homemaker
from every aspect of its functioning. It has derived its functioning principles out of an
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undaunted partnership with the homemakers and thus a slogan of “You and whirlpool,
the world's best homemaker” dots its promotional campaigns. The products are
engineered to suit the requirements of ‘smart, confident and in-control' homemaker
who knows what she wants. The product range is designed in a way that it employs
unique technology and offers consumer relevant solutions.
Whirlpool of India engaged a real life celebrity couple Ajay Devgon & Kajol
to endorse the brand who symbolise the values that brand stands for. Their
relationship represents what the Whirlpool brand has always epitomised in its
advertising through the years- A relationship based on equality, love and romance.
Achievements
Whirlpool came to India on the crest of a long trail of achievements and has
since furthered this record. By end-1999, Whirlpool became the largest selling
appliance brand in the country. A couple of years later, it also became the largest
exporter of home appliances from India. In the course of this growth and
development, Whirlpool has also achieved immense brand equity in the Indian
market. Whirlpool has successfully established new rules of marketing and branding
in the home-market sector. Its rivals have adopted the new practices, but the
Whirlpool brand stands out to the extent that authoritative surveys reported it to be the
most preferred brand in refrigerators and washing machines in 2003. (Mill ward
Brown Brand Track).
Whirlpool of India exports to more than 50 high-value markets in Asia and
other parts of the world as well. Its products are customized to the local standards and
different needs of each of these markets. These qualities of Whirlpool are exemplified
in its Indian sales as well. The company has set up a highly equipped product
development centre in Pune, which provides global design services to three other
Whirlpool research and development facilities based in Brazil, Italy and the US.
Indeed, the Indian operations of Whirlpool are a very important contributor to its
global vision of "Being in every home, everywhere". In washer products, Whirlpool
was again the first to come out with a Combimatic – a single tub semi-automatic
washing machine that did away with the hassle of shifting clothes from one tub to
another.
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Recent Developments
Leveraging its leadership position in the domestic appliances industry, as
the ‘homemaker’, Whirlpool has also successfully launched air conditioners and
microwave ovens, customizing them to Indian conditions. As part of its ongoing
expansion and diversification in the Indian market, Whirlpool is also incessantly
adding to its own substantive understanding of the Indian customer – particularly
the motivations, needs and desires of the ‘homemaker’. Through this approach,
Whirlpool will further expand its promise of offering innovative, technology-
driven solutions for Indian homes.
Promotion
Whirlpool's promotion strategy has introduced unique values in the home
appliance market. As recently as the early 1990s, most consumer durables were
promoted just as desirable accessories, and the purchase decision crystallized through
the male breadwinner in the Indian family. Whirlpool’s promotions broke new ground
with reference to each of these longstanding premises in the Indian consumer market.
Whirlpool created its marketing position around the tagline, ‘You and
Whirlpool – the world’s best homemakers’. Based upon this premise, Whirlpool’s
promotions encouraged and helped women to consciously identify themselves as the
real homemakers in the family. These encouraged women to take pride in their
homemaking roles, facilitated by Whirlpool. This strategy also took Whirlpool to the
core of every home, as envisaged in the mindset of customers; thereby enabling
instant connection with the brand. In the process of establishing such an emotional
connects with the customer, Whirlpool’s promotions have also generated memorable
campaigns. Foremost among these is the ‘Whirlpool, Whirlpool….’ audio refrain,
which is the hallmark of all audio-visual communications for this brand. Whirlpool
has also created many memorable taglines for specific products, such as ‘Ice, ice
baby’ for refrigerators.
It changed the media trend for consumer durables advertising in India,
which hitherto was heavily skewed towards print. Whirlpool was the first home
appliance brand to orient its promotions towards television advertising. The core of
Whirlpool’s communication has remained constant over the years.
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Brand Values
Whirlpool stands for ideas and innovations that focus on the genuine needs
of customers in modern societies, and creates enabling solutions that are more
efficient and durable than those provided by any other home appliance brand. To
this end, Whirlpool genuinely abides by its promise of being a ‘Partner in
homemaking’, in modern society; with eternal commitment and loyalty to its
customers.
Whirlpool launched the world’s first top-loading automatic washer soon
after World War II. In the ensuing years, this product became the standard for all
home appliance manufacturers. Whirlpool’s technological and innovative expertise
with food preservation and refrigeration technologies has led to its sustained
involvement in the US space programme over the decades. It created the system
that enabled astronauteat diverse kinds of food in zero gravity conditions in the
Gemini, Apollo and Skylab projects.
Board Of Directors:
Arvind Uppal (Managing Director)
Shazhard Aakthr
Core Competencies:
Innovation: Unique and compelling solutions valued by our customers and aligned to
our brands create competitive advantage and differentiated shareholder value.
Operational Excellence (OPEX): A methodology for solving problems & continuous
improvement of products & processes through pursuit, acquisition, and utilization of
knowledge using critical thought and planned experimentation helps us achieve
operational excellence.
Customer Excellence: Excelling the customer expectation from the company, its
brands, products and services are a three-step process. The three steps are: Know a
customer, Be a customer, Serve a customer.
Knowing a customer helps us know who our customers are, how to treat them, how
we add value, and what the drivers of brand loyalty are. This way we are better able to
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customize products for them and recommend the right product to solve problems.
Being a customer is important to share customer knowledge and insights, drive
actions based on customer insights, be passionate about our brands and customer
loyalty and provide a positive voice for our brands. We show empathy for customers
and seek to resolve their problems by creating consistent customer touch-points, with
our endeavor always being to provide unique solutions for the customer
Transformation Systems
Whirlpool is transforming into a completely customer-centered company
where the customer lies in the core of every of our functions. This focus has arrived as
direct consequence of our core competency of customer excellence. It allows us to
build Customer Loyalty. The transformation is made up of five elements:
Market leadership through customer loyalty
Innovation
Diversity with inclusion and core competencies
Passion for customer excellence
Operational excellence
The elements of the transformation hold the promise of making Whirlpool a growing
company and thereby increasing value for our shareholders. The five elements are the
basis for describing our strategy internally and guide the development of our plans
and initiatives. Whirlpool has swiftly moved from being a World Class Manufacturer
to a World Class Marketer using the brand-building framework. We are dedicated to
creating unique branded solutions that build customer loyalty and achieve brand
excellence.
Table 1.1
Customer Excellence
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About WOIL:
3 Manufacturing locations
5 Regional Offices and 18 Branches
3000 Employees
53000 Share holders
Whirlpool Investment: $ 150 M (Rs 700 crores)
82.33 % Ownership of Whirlpool Corporation
23.5% of the market in refrigerators and washing machine
Whirlpool launched world’s first “top-loading” washer.
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Know a Customer Be a Customer Serve a Customer
Know our brands and products Buy and use our products Recommend our products
Know the drivers of loyalty Think deeply about our
products
and services
Show empathy for
customers and seek to
resolve problems
Know the customer’s data base
History
Share customer knowledge
and insights
Create consistent
customer touch points
Know how to recommend the
right product and solve problems
Drive actions based on
customer
insights
Provide unique solutions
for the customer
Know how the customer views
my job
Be passionate about our
brands
and customer loyalty
Take a customer- facing
job rotation
Know who our customers are,
how to treat them and how we
add value
Provide a positive voice for
our brands
Build strong relationship
with customers to
reinforce their decisions
Exports to more than 50 high-value markets in Asia and other parts of the
world as well
Product development centre in Pune, which provides global design services to
3 other Whirlpool R & D facilities based in Brazil, Italy and USA
Manufacturing facility in India, packs off a new appliance for retail
distribution every 30 seconds
Journey of WOIL
1987: Whirlpool and Sundaram Clayton of India enter in to a Joint venture to
form TVS Whirlpool Ltd
1995: A majority control is acquired in TVS Whirlpool Ltd and Kelvinator of
India is acquired
1996: Kelvinator of India and Whirlpool washing machine ltd combined to
form WOIL
1999: WOIL crosses the mile stone of 1 million in the sale of appliances
2000: WOIL become India’s largest selling refrigerator brand
2000: Second largest washing machine brand.
2001: Started making profit
2004: Sales turnover of 1200 crores
2006: Sales turnover of 1274 crores.
Mission Statement
We will be demanding of ourselves
So as to care for our consumers
Like no other brand does.
We will Serve with pride in every Indian home and Bring prosperity to our
Investors
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We will
Dare to change
The standards of our industry and be the Envy of our competitors.
We will be
Leaders in Home Appliances
Which all others will start to emulate.
Vision Statement
The pervasive vision of Whirlpool is, “Every Home, everywhere, with pride,
passion and performance”, rests on the pillars of innovation, operational excellence,
and customer-centric approach and diversified talent. These are embedded within our
business goals, strategy, processes and work culture. Be it our products that are the
result of innovation and operational excellence to meet every need of our consumers
or the people behind these products that come from a wide spectrum of backgrounds,
everything we do features a distinct Whirlpool way
Product Categories of Whirlpool Present in India are as follows:
The four product categories are:
Refrigerators
Washing Machine
Air Conditioners
Microwaves
Unique Feature of WHIRLPOOL: The 6th Sense Technology
A Various Products Available in the Market …
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Table 1.2
Refrigerators
Direct Cool Frost Control Frost Free
Genius Royale | 180 L
Genius Premier | 180 L
Genius Supreme | 180 L
Fusion Maxigerator | 310 L
Fusion 27 Premier | 260 L
Fusion 24 Royale | 230 L
Fusion 24 Premier | 230 L
Fusion 21 Royale | 200 L
Fusion 21 Premier | 200 L
Iceberg 340Elite 340 L
Iceberg 340 Dlx 340 L
Iceberg 310 Elite 310L
Iceberg 310 Dlx 310 L
Delight 30 Dlx 280 L
Delight 30 Elite 280 L
Delight 26 Elite 250 L
Delight 26 Dlx 250 L
Delight 23 Elite 220 L
Delight 23 Dlx 220 L
Delight 23 Classic 220 L
Table 1.3
Washing Machines
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Semi Automatic Fully Automatic Horizontal Axis
Whitemagic H 70 | 7 kg
Whitemagic S 70 | 7 kg
Whitemagic Super-Soak | 6.2 Kg
Whitemagic E 65 | 6.2 Kg
Whitemagic S60-Buzz | 6 Kg
Whitemagic SI 60 | 6.2 Kg
H 65 | 6 Kg Ltrs
F-65 | 6 Kg
FP 65 | 6 Kg
FP 60 DLX | 6 Kg
FP Splash | 5 Kg
Sensation EX | 6.5 Kg
Sensation EM | 6.5 Kg
Table 1.4
Air Conditioners
Split Window
Magic Cool 200Qcs | 2 ton
Magic Cool 150Qcs | 1.5 ton
Magic Cool 150EL | 1.5 ton
Magi Cool 100 EL | 1 ton
Magic Cool 150EM | 1.5 ton
Table 1.5
Microwaves
Manufacturing Facilities in India
Whirlpool has invested heavily in its manufacturing facilities in India. While
the factories in Faridabad and Pondicherry have been upgraded to meet the
exacting world class standard of Whirlpool, the one under the construction at
Ranjangaon, Pune will set the standards as one of the world’s front runners in
environmental sensitive and eco-friendly manufacturing units.
Faridabad
The refrigerator facilitated at Faridabad in Haryana manufactures direct cool.
Refrigerators ranging from 165 liters to 310 liters. Infusion of technology and up
gradation of machinery along with streamlining of processed has enhanced the
plant capacity from 7,00,000 units to 8,50,000 units annually. Whirlpool’s focus at
this plan in on manufacturing refrigerators that are made to suit Indian conditions
and requirements, while matching Whirlpool global quality standard.
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Convection Grill Solo
Magi Cook MT 22C | 22 Ltrs
Magi cook 30C Feast | 30 L
Jet Chef Elite | 30 L
Magi cook 23C Treat | 27 Ltrs
Jet Chef Magnum | 30 L
Magi Cook MT 22GSi | 22 Ltrs
Magi Cook MT 27 G | 27 Ltrs
Magi Cook 22G | 18 Ltrs
Magi Cook Plug Grill | 18 Ltrs
Magi cook 20S | 20 L
Pondicherry
The washer’s facility at Pondicherry, manufacturer’s semi automatic and
automatic washers. Constant feedback from consumers has resulted in improved
product quality and styling, leading to an improved market share. This unit was
awarded the coveted ISO 9001 certification in 1994 and ISO 14001 certification in
1996.
Ranjangaon
A state of art gallery for the manufacturers of the Global No Frost refrigerator
at Ranjangaon near Pune, this Rs. 300 crore plant built to exacting world-class
standards, underlines Whirlpool’s commitments to India. It has been designed in
accordance with the ecological and environmental criteria that have become such
a concern in today’s scenario the world over.
Market Share in the Last Fiscal Year
The market share for the period April 2010– March 2011
Category Share (in %)
Refrigerators 34.3
Washers 27
Microwave 3
Company’s Turnover
Whirlpool of India’s net sales for the period April 2010 -March 2011 stood at
Rs. 3000 crores with a 'Profit before Interest, Depreciation and Tax' of Rs. 14.57
crores. Company witnessed a growth of 40% (Approx.) in net sales over the same
period last year.
Whirlpool of India, PondicherryWhirlpool of India, Pondicherry
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Whirlpool of India Limited is a fully owned company by Whirlpool
Corporation, USA Head quarters at Benton Harbor, Michigan USA. Whirlpool
Corporation is the worlds leading manufacturers and marketer of home appliances.
Washing Machines, Dryers, Dish Washers, Refrigerators, Freezers, Cookers,
Microwave Ovens, Room Air Conditioners, Small kitchen Appliances, etc.
WOIL, washer unit, Pondicherry was the first manufacturing venture of the Whirlpool
Corporation, USA, the world’s largest manufacturer of home appliances. In 1987, this
unit was formed as a joint venture with M/s Sundaram Clayton limited, a TVS group
companies and was named as TVS Whirlpool Limited. This unit is located on a 100
acre sprawling area manufacturing automatic and semi automatic washing machine.
This unit is certified ISO 9001 facility by UL. It has also been cleared for “S” mark
certification from Japanese Quality standards for Exports to Japan after our facility
approval.
In WOIL, washer unit has 12 departments comprising of 225 employees. Out of
which 85 is management, executives and rest 140 are production operators. The
various departments in the company are:
Table 1.6
Departments
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About the Unit…
450 Crores turn over
Assembly of washing machines and small appliances like coffee maker,
Microwave oven etc
Capacity to produce 10lakhs units a year
Today WOIL target 8lakhs units per annum
5% of the total volume is exported
A “UL” certified unit.
100% EOU unit
First plant in Thirubhuvanai Village
About Working Environment…
Best pay master in Pondicherry
Excellent collaborative working relationship
Highly flexible and committed union team
In the last 14 years no single minute line stoppage
Always on a Win-Win relationship.
Recognition and Rewards
The employees in Whirlpool are given recognition based on their
performance. The types of recognition given vary for White Collars (WC) and Blue
Collars (BC). The following figure gives an idea about this.
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Administration Department
Human Resource Department
Material Planning Department
Process Engineering Development
Plant Maintenance Department (PMD)
Medical Department
Finance Department
Production Department
Stores Department
Regional Technology Center(RTC)
QualityAssuranceDepartment(QAD)
Procurement Department
Figure 1.1 Types of Recognition
1.3.22 WOIL Enduring Values:
* RESPECT
*INTEGRITY
* SPIRIT OF WINNING
* DIVERSITY
*TEAM WORK
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Company is shown by a flat organisation structure as below:
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Fig
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Project in the background of the Company
With regard to Whirlpool’s Inventory, an awareness level in implementing a
system for their Inventory management was predominant due to the increased
difficulty in orderly execution of their Inventory transaction. The major problem with
Whirlpool’s Inventory system was the lack of exact inventory norms and huge
investment in inventory. Another constraint is limitation of space. Hence, it was
essential to put a inventory system in place with the constraint treated as a part of the
system so as limit the drawbacks.
On this basis the project has been carried out at Whirlpool Of India Ltd.,
Pondicherry to frame out a system for fixing up of optimal inventory norms and
orderly execution of aggregate Inventory, which includes raw materials used by the
company The project also helps in knowing the amount of inventory to be kept or
needed for manufacturing of a particular model of washing machine just by giving its
model number.
SCOPE OF THE PROJECT
The study is limited to parts dealt by eight buyers.
LIMITATION OF THE PROJECT
The duration of the project is limited to 6 weeks
The data used were secondary data.
23
OBJECTIVES OF THE PROJECT
Primary objective:
To maintain optimum level of inventory.
Secondary objectives:
To fix the optimum inventory norms.
To find out the share of each component and its validity in the total inventory.
Summary
The above-mentioned chapter deals with introduction on Inventory control and
importance of Inventory management in the highly competitive manufacturing sector.
It discusses on the history, structure and profile of the organization. The chapter then
deals with the objectives set out and the project in the background of the company.
24
CHAPTER 2
25
LITERATURE REVIEW
Market
The home appliances market, euphemistically called the 'white-goods sector'
has expanded greatly in the past two decades, with especially accelerated growth
since the latter half of the 1990s. Within this broad sector, refrigerators are the largest
segment, followed by washing machines. By dint of its clear market leadership in
these two segments, Whirlpool can justly claim itself to be the best-known home
appliance brand in India.
Growing incomes and consumerist trends of an opening economy have given a
fillip to the demand for modern home appliances and the white-goods sector has
attracted a huge proliferation of brands, both Indian and multinational. Yet, this sector
has been characterised by cut-throat competition, with many brands witnessing
fluctuating and floundering fortunes. The market leaders have been operating on
razor-thin margins even as they have had to constantly innovate their product offering
and improve their marketing. Whirlpool has shown a steadfast robustness. By 2000
Whirlpool had become India's largest selling refrigerator brand and the second largest
washing machine brand, with approximately a quarter of the total market share in
these categories (Source: ORG Retail Audit). Significantly, Whirlpool has continued
to build upon this lead steadily. With total sales amounting to nearly Rs. 12.5 billion,
it commands a 23.5% share of the market in refrigerators and washing machines
(ORG Retail Audit).
Inventory
The term inventory has meaning far beyond the usually accepted raw
materials, WIP, Stocked components and finished goods related to a company’s
products. For effective control, all items required for manufacture must be included in
the planning and control activities. These obviously include tools, fixtures, gages,
cutters, testing equipments and similar devices employed in the production processing
operations. Supplies such as lubricants, grinding materials, cleaning and sterilizing
26
compounds and fuels must be part of the formal inventory plan. Inventory has real
value only when it is flowing through operations.
Inventories constitute the most significant part of the current assets of a
large majority of companies in India. Because of the large size of the inventories
maintained by firms, a considerable amount of funds is required to be committed to
them. It is therefore imperative to manage inventories efficiently and effectively in
order to avoid unnecessary investments. A firm neglecting the management of
inventories will be jeopardizing its long run profitability and may fail ultimately. It
is possible for a company to reduce its inventories to a considerable degree of 10-
20 per cent without any adverse effect on production and sales by using inventory
planning and control techniques. The reduction in excessive inventories carries a
favourable impact on the company’s profitability.
In analyzing the performance of profit making organization, financial and
business analysts have developed a variety of financial ratios; many may also
apply to inventory management. They have been used as the basis for developing
inventory model as well.
Return On Asset (ROA)
Ratio of Profit before Tax (PBT) as a % of Total Assets less cash
ROA = Operating Profit
Total Assets
Inventories are assets and reducing investment in inventories can have a
beneficial effect on ROA
Inventory Turn over Ratio
The annual cost of goods sold divided by the cost of inventory has always been
considered a measuring stick for inventory management.
Inventory T/O Ratio = Annual Cost of Goods sold
Cost of inventory
Importance Of Inventories
The three important reasons for holding inventories are:
27
* Transactions motive
It emphasizes the need to maintain inventories to facilitate smooth production and sales
operations.
* Precautionary motive
It necessitates hold of inventories to guard against the risk of unpredictable changes in
demand and supply forces and other factors.
* Speculation motive
It influences the decision to increase or reduce inventory levels to the advantage of
price fluctuations.
Over investments in inventories results in unnecessary tie-up of the firm's funds and
loss of profit, excessive carrying costs and risk of liquidity. Under investments in
inventories results in production hold-ups and failure to meet delivery commitments.
Efforts should be made to place an order at the right time with the right source to acquire
the right quantity, at the right price and quality.
A Glance through Whirlpool Washers…
Semi Automatic
Whitemagic H 70 | 7 kg
Features
28
RS 9400-9700
1-2, 1-2 Handwash System
Agitronic Soak
Castors
2-year Warranty
End of Cycle Buzzer
Hot wash
Water Level Selector
Electro-Mechanical Controls
340 W Wash Motor
Multiple Wash Programs
150 W Spin Motor
Rust Proof Plastic Base
Aqua Shower
7 Kg Capacity
Water Inlet Hot/ Cold
See Thru Window (wash side & spin side)
29
Whitemagic S 70 | 7 kg Features
1-2, 1-2 Handwash System
Agitronic Soak
Castors
2-year Warranty
Water Level Selector
Electro-Mechanical Controls
340 W Wash Motor
Multiple Wash Programs
150 W Spin Motor
End-of Cycle Buzzer
Rust Proof Plastic Base
Aqua Shower
7 Kg Capacity
See Thru Window (wash side & spin side)
30
Water Inlet Hot/ Cold
Sparkle | 6.5 Kg
Features
31
1-2, 1-2 Handwash System
Agitronic Soak
Castors
2-year Warranty
6.5 kg Capacity
340 W Wash Motor
Multiple Wash Programs
150 W Spin Motor
End of cycle buzzer
Lint Filter
Stylish Looks
Aqua shower
Up to 30% water saving
Stain wash
32
Rs 7825-8125
Whitemagic Super-Soak | 6.2 Kg
Features
1-2, 1-2 Handwash System
Agitronic Soak
Castors
2-year Warranty
End of Cycle Buzzer
Water Level Selector
Electro-Mechanical Controls
6.2 Kg Capacity
340 W Wash Motor
Multiple Wash Programs
33
150 W Spin Motor
See Thru Window (only wash side)
Water Inlet Cold
Rust Proof Plastic Base
Verve | 6.5 Kg
Features
34
Rs 7490-7790
Agitronic Soak
Castors
2-year Warranty
6.5 kg Capacity
340 W Wash Motor
Multiple Wash Programs
150 W Spin Motor
End of cycle buzzer
Lint Filter
Stylish Looks
Impeller Wash ystem
35
36
Whitemagic S60-Buzz | 6 Kg
Features
Rs 7625
Whitemagic E 65 | 6.2 Kg
Features
Castors
2-year Warranty
End of Cycle Buzzer
Water Level Selector
Electro-Mechanical Controls
6.2 Kg Capacity
340 W Wash Motor
Multiple Wash Programs
150 W Spin Motor
See Thru Window (only wash side)
Water Inlet Cold
Rust Proof Plastic Base
Rs 7100
Whitemagic Si 60 | 6.2 Kg
Features
37
Rs 6600
Castors
2-year Warranty
End of Cycle Buzzer
Water Level Selector
Electro-Mechanical Controls
6.2 Kg Capacity
340 W Wash Motor
150 W Spin Motor
See Thru Window (only wash side)
Water Inlet Cold
Rust Proof Plastic Base
2 Wash Programs
Figure 2.1 Semi Automatic Washers
Fully Automatic
38
Rs 10740
Splash | 5 Kg
Features
1-2, 1-2 Handwash System
Agitronic Soak
Double Rinse
Castors
2-year Warranty
4 Wash Programs
Plastic Wash Tub
Water Storage
Agipellers & Aquashowers
Water Saver
3 dispensers for Detergent, Bleach and Softener
5 Kg Capacity
Speedy Cycles
39
Delicate Spin
RS 12625
FP 60 DLX | 6 Kg
Features
6 kg Capacity
Agitronic Soak
Memory Backup
Castors
2-year Warranty
Superb Powerful 575 W Motor
4 Wash Programs
Plastic Wash Tub
40
Water Storage
Speedy Wash Program
F-65 | 6
Kg
Feature
s
41
Rs 18175-
18775
H 65 | 6 Kg
Features
StainWash System
Sixth Sense Technology
Customized Wash Programs
6 kg Capacity
Powerful 575 W Motor
1-2, 1-2 Handwash System
8 Preset Wash Programs
Stainless Steel Wash Tub
Agitronic Soak
Double Rinse
Digital Display
Memory Backup
Child-Lock
Castors
2-year Warranty
Rs15600-
16200
StainWash System
Sixth Sense Technology
Customized Wash Programs
6 kg Capacity
Powerful 575 W Motor
1-2, 1-2 Handwash System
8 Preset Wash Programs
Stainless Steel Wash Tub
Agitronic Soak
Low Spin Speed
Double Rinse
Digital Display
Memory Backup
Child-Lock
42
Castors
43
Figure
2.2 Fully
44
Rs 22990
Sensation Elite | 6.5 Kg
Features
Child-Lock
6.5 kg Capacity
Dirt Level Programs
Eco Wash
Dry Tap protection
Water Level Selector
Auto Restart
Hotwash- cold to 95 deg C
Number of Wash Programs (> 100)
Stain Wash ( 10 types of stains)
Lowest water Consumption at 8.5lt per kg
Anti Crease Cycle
Delay Wash
Pedestal ( Optional)
End of cycle buzzer
Automatic Wash
Rs 19990
Sensation Deluxe | 6.5 Kg
Features
6.5 kg Capacity
Dirt Level Programs
Adjustable Installation
Water Level Selector
Auto Restart
Hotwash- cold to 95 deg C
Lowest water Consumption at 8.5lt per kg
Anti Crease Cycle
29 Wash Programs
45
Sensation Classic | 6.5 Kg
Features
46
Rs 18990
6.5 kg Capacity
Dirt Level Programs
Adjustable Installation
Water Level Selector
Auto Restart
Lowest water Consumption at 8.5lt per kg
Anti Crease Cycle
29 Wash Programs
Hot Wash-45 deg C
Horizontal Axis
Inventory Management
47
If a management objective of either increasing or decreasing inventory
level is to be set, the goal should be positive effect in ROA. To apply ROA concept
to inventory decisions, specific incremental changes should be examined.
Management normally sets an ROA rate for incremental investment in the
inventories that are common to all facilities. Each decision for an inventory
reduction opportunity should be governed by the rate of return on the net asset
change.
In the context of inventory management the firm is faced with the problem of
meeting two conflicting needs
To maintain a large size of inventory for efficient, smooth production and
sales operation.
To maximize the profitability the company has to maintain a minimum
inventory.
Inventory management is the active control program, which allows the
management of sales, purchases and payments. A complete Inventory Management
Control system contains the following components:
Inventory Management Definition
Inventory Management Terms
Inventory Management Purposes
Definition and Objectives for Inventory Management
Organizational Hierarchy of Inventory Management
Inventory Management Planning
Inventory Management Controls for Inventory
Determining Inventory Management Stock Levels
Introduction to Inventory Management
48
Raw materials, goods in process and finished goods all represent various
forms of inventory. Each type represents money tied up until the inventory leaves the
company as purchased products.In a literal sense, inventory refers to stocks of
anything necessary to do business. These stocks represent a large portion of the
business investment and must be well managed inorder to maximise profits
Definition Of Inventory Management
Inventory management is primarily about specifying the size and placement
of stocked goods. Inventory management is required at different locations within a
facility or within multiple locations of a supply network to protect the regular and
planned course of production against the random disturbance of running out of
materials or goods. The scope of inventory management also concerns the fine lines
between replenishment lead time, carrying costs of inventory, asset management,
inventory forecasting, inventory valuation, inventory visibility, future inventory price
forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecasting.
Systems and processes that identify inventory requirements, set targets,
provide replenishment techniques and report actual and projected inventory
status.
Handles all functions related to the tracking and management of material.
Include ABC analysis , lot tracking Cycling support etc.
Management of the inventories, with the primary objective of determining,controlling
stock levels within the physical distribution function to balance the need for product
availability against the need for minimizing stock holding and handling costs
Employing Good Principles Of Inventory Management
In the business world, not everyone follows good principles that aid in their
success. However, the principles of inventory management cannot be ignored if you
expect to maintain a quality business with a good reputation for always being able to
assist a customer. Employing good principles is the best way to profit in any industry
because it keeps you afloat in a world of chaos and madness. Principles maintain
organizational quality and responsibility to a project, aspects that are most important
in inventory management.The following inventory management principles should be
understood clearly to maintain proper inventory.
49
First, how much inventory to have on hand to ensure continuity of supply in
the event of an uncharacteristic increase in either demand and/or lead time
should be determined. This quantity of inventory is called the safety stock.
There is no universally used formula for determining safety stock quantity,
Second, when to reorder materials for inventory is to be known. Generally,
this point in time is determined when the quantity of materials in stock
decreases to a certain level, called the reorder point. The reorder point is
determined by the formula:
ROP=SSQ+(QUDxALT)Where,
ROP=ReorderPoint
SSQ=SafetyStockQuantity
QUD = Quantity Used Daily
ALT = Average Lead Time (in days)
Third, you must know how much to order. A complex mathematical
equation determines the Economic Order Quantity, or EOQ. The equation
recognizes the tug of war between acquisition costs and inventory carrying
costs: when you order bigger quantities less frequently, your aggregate
acquisition costs are low but your inventory costs are high due to higher
inventory levels. Conversely, when you order smaller quantities more often,
your inventory costs are low but your acquisition costs are higher because
you are expending more resources on ordering. The EOQ is the order
quantity that minimizes the sum of these two costs.
Cleanliness and Organisation
The principles of inventory management are simple and easy to follow, if you simply
make it a point to do so. For example, one of the top priorities in inventory
management is to maintain a clean, organized warehouse in which all items are
properly stored and labeled. This is important for several reasons. First of all,
cleanliness is important for you and your staff, as well as for any products you store.
Organized storage and labeling allows you to easily locate and order, pull, or stock
any item in your warehouse without a long, difficult search.
50
Stock Rotation
If you employ good principles of inventory management, you’ll be certain to
rotate your stock, selling through older stock before delving into new shipments. This
will assure that you always have fresh product and don’t lose money by having to
write off old items that were never sold or used. It also means that, again, none of
your items appear as though they’ve been in the warehouse untouched for years
because they won’t have time to build up dust and dirt to a significant degree.
Tracking
Keeping careful track of all of the items in your warehouse is one of the best
principles of inventory management. How can you possibly sail smoothly and run an
efficient department if you don’t know part numbers and quantities you have in stock
or where they may be located in your warehouse?
For inventory control to work at its best an organization must consider the
costs of acquisition, carrying, ordering, and stock out, the organization must also
look at its reordering system, its budgeting for inventory, insurance and forecasted
demand. Both excessive and inadequate inventories are not desirable. Therefore,
the concept of just in time is introduced.
Just In Time
The JIT or zero inventory concept has become a subject discussion in Production
and Inventory Control circles. The management approach emphasises minimizing
the set-up cost and start-up costs. The investment theory of EOQ has been
enhanced by JIT approach. In practice, instead of ignoring EOQ, the JIT principle
suggests that management concentrates its efforts on reducing the set-up costs.
JIT technology has a larger impact on forecasts and accuracy. The
reduction of lead time due to smaller lot sizes and zero inventory for receiving,
WIP and assembly protection may be as much as 2/3 rd. it has always been the
longer lead time that adversely affects forecast accuracy as well as directly
affecting the amount of safety stock needed for any given level of customer
service.
In the content of inventory management the firm is faced with the problem of meeting
two conflicting needs:
51
To maintain a large size of inventory for efficient and smooth production and sales
operations.
To maintain a minimum investment in inventories to maximise profitability
Successful Inventory Management
Successful inventory management involves balancing the costs of inventory
with the benefits of inventory. Many small business owners fail to appreciate fully the
true costs of carrying inventory, which include not only direct costs of storage,
insurance and taxes, but also the cost of money tied up in inventory. This fine line
between keeping too much
Inventory and not enough is not the manager's only concern. Others include:
Maintaining a wide assortment of stock -- but not spreading the rapidly
moving ones too thin;
Increasing inventory turnover -- but not sacrificing the service level;
Keeping stock low -- but not sacrificing service or performance.
Obtaining lower prices by making volume purchases -- but not ending up with
slow-moving inventory; and
Having an adequate inventory on hand -- but not getting caught with obsolete
items.
The degree of success in addressing these concerns is easier to gauge for some than
for others. For example, computing the inventory turnover ratio is a simple measure
of managerial performance. This value gives a rough guideline by which managers
can set goals and evaluate performance, but it must be realized that the turnover rate
varies with the function of inventory, the type of business and how the ratio is
calculated (whether on sales or cost of goods sold).
The Purchasing Plan
One of the most important aspects of inventory control is to have the items in
stock at the moment they are needed. Thus, buying requires advance planning to
determine inventory needs for each time period and then making the commitments
without procrastination. Part of your purchasing plan must include accounting for the
depletion of the inventory. Before a decision can be made as to the level of inventory
to order, you must determine how long the inventory you have in stock will last. For
instance, a retail firm must formulate a plan to ensure the sale of the greatest number
of units. Likewise, a manufacturing business must formulate a plan to ensure enough
52
inventories are on hand for production of a finished product. In summary, the
purchasing plans details:
When commitments should be placed;
When the first delivery should be received;
When the inventory should be peaked;
When reorders should no longer be placed; and
When the item should no longer be in stock.
Well planned purchases affect the price, delivery and availability of products for sale.
Raw Materials and Purchased parts
When raw materials, part or component is to be purchased, the question of how much
to receive in any one delivery is critical and fundamental to inventory management.
An effective material control system has to:
1. Ensure availability of materials for production.
2. Reduce wastage of Raw materials
3. Achieve economy of buying and storage cost
4. Reduces pilferage, theft, obsolescence and other material losses.
5. Avoid excessive investment in stock
6. Help in maintaining perpetual inventory system to furnish information to
Management regarding materials.
7. Help in ascertaining values of jobs, processes and orders.
Controlling Inventory
To maintain an in-stock position of wanted items and to dispose of unwanted
items, it is necessary to establish adequate controls over inventory on order and
inventory in stock. There are several proven methods for inventory control. They are
listed below, from simplest to most complex.
Visual control enables the manager to examine the inventory visually to
determine if additional inventory is required. In very small businesses where
this method is used, records may not be needed at all or only for slow moving
or expensive items.
53
Tickler control enables the manager to physically count a small portion of the
inventory each day so that each segment of the inventory is counted every so
many days on a regular basis.
Click sheet control enables the manager to record the item as it is used on a
sheet of paper. Such information is then used for reorder purposes.
Stub control (used by retailers) enables the manager to retain a portion of the
price ticket when the item is sold. The manager can then use the stub to record
the item that was sold.
As a business grows, it may find a need for a more sophisticated and technical form of
inventory control. Today, the use of computer systems to control inventory is far more
feasible for small business than ever before, both through the widespread existence of
computer service organizations and the decreasing cost of small-sized computers.
Often the justification for such a computer-based system is enhanced by the fact that
company accounting and billing procedures can also be handled on the computer.
Point-of-sale terminals relay information on each item used or sold. The
manager receives information printouts at regular intervals for review and
action.
Off-line point-of-sale terminals relay information directly to the supplier's
computer who uses the information to ship additional items automatically to
the buyer/inventory manager.
The final method for inventory control is done by an outside agency. A
manufacturer's representative visits the large retailer on a scheduled basis, takes the
stock count and writes the reorder. Unwanted merchandise is removed from stock and
returned to the manufacturer through a predetermined, authorized procedure. A
principal goal for many of the methods described above is to determine the minimum
possible annual cost of ordering and stocking each item. Two major control values are
used:
1) the order quantity, that is, the size and frequency of orders; and
2) The reorder point, that is, the minimum stock levels at which additional
quantities are ordered.
The Economic Order Quantity (EOQ) formula is one widely used method of
computing the minimum annual cost for ordering and stocking each item. The EOQ
computation takes into account the cost of placing an order, the annual sales rate, the
unit cost, and the cost of carrying inventory
54
Developments In Inventory Management
In recent years, two approaches have had a major impact on inventory
management: Material Requirements Planning (MRP) and Just-In-Time (JIT and
Kanban). Their application is primarily within manufacturing but suppliers might find
new requirements placed on them and sometimes buyers of manufactured items will
experience a difference in delivery. Material requirements planning is basically an
information system in which sales are converted directly into loads on the facility by
sub-unit and time period. Materials are scheduled more closely, thereby reducing
inventories, and delivery times become shorter and more predictable. Its primary use
is with products composed of many components. MRP systems are practical for
smaller firms. The computer system is only one part of the total project which is
usually long-term, taking one to three years to develop.
Just-in-time inventory management is an approach which works to eliminate
inventories rather than optimize them. The inventory of raw materials and work-in-
process falls to that needed in a single day. This is accomplished by reducing set-up
times and lead times so that small lots may be ordered. Suppliers may have to make
several deliveries a day or move close to the user plants to support this plan.
The Basics of Production Inventory Management:
Production inventory management differs from general warehouse
management because it involves the determination of how quickly to produce a
particular product. The factors involved in many cases are similar, though there are
some variances in making the final decision as to how quickly manufacturing should
push items through the production line.
They are:
Available Materials
The first concern in production inventory management is on the front end of
the process. If there is ni enough materials required for production, then one cannot
move forward in providing the products to others. So it should be made ceartain that
55
all the supplies, from raw materials to factory workers, to complete the production
process is there.
Supply and Demand
The current demand for the product on the market should be determined. Good
production inventory management occurs when one produce just enough material to
satisfy customers’ needs without overextending the production line and
manufacturing too many of any given product.There is non need to have an incredible
amount of backstock lying around, as this detracts from the net profit. On the other
hand,there should be no short supply when a large order comes in, so having a little
extra on hand is a graet idea.
Quality Control
Never simply assume that everything manufactured will be flawless. An important
consideration in production inventory management is to allow room for error. In other
words, calculate a sufficient amount of product to assume that, even with flaws that
get past quality control efforts, there is sufficient stock of the product required.
Cost Analysis
In many instances, even the best production inventory management strategies
fail in the long run due to the cost of the production process being overlooked as a
factor. It is important to maintain a cost effective production process, and this
includes making sure that the inventory is not an overwhelming factor. This comes
back to not overproducing any items that come off the assembly lines. Doing so is a
waste of time and materials, costing excess money to create. Obviously, conservation
of the materials, time, and energy consumed in manufacturing unnecessary goods is
essential to maintaining a cost effective production inventory management strategy.
Employing Effective Inventory Management in Workplace
To employ effective inventory management in the workplace, one must start at
the bottom and work way up the ladder of techniques. The first thing to consider is
how other employees who are involved in the stock and supply within the warehouse
are currently handling the inventory for which you are now responsible. Lack of
knowledge on the part of employees is one major distraction when you are attempting
to create effective inventory management systems within your department or supply
56
The following actions can help save money when you are stocking inventory
Improvement in quality or changes in specifications that would lead to savings
in process time or other operating savings;
Developing new sources of supply;
Quantity savings due to large volume, through consideration of economic
order quantity
Greater use of bulk shipments
A reduction in unit prices due to negotiations;
Initiating make-or-buy studies;
Substitution of less costly materials without impairing required quality
Application of new purchasing techniques
Summary
This chapter deals with inventory, its importance, concepts and ideas on inventory
management, its elements and techniques. The chapter gives an idea about the various
types of washers the company is manufacturing.
57
CHAPTER 3
EXISTING SYSTEM STUDY AND DATA ANALYSIS
58
Integrated Materials Management
The main activity of production system is to convert raw materials into useful
products by value addition process. The materials which are required for production
purposes are normally procured and stored in raw material ware houses and then they
are shifted to shop floor. The different functions of materials management are
material planning, Purchasing, Receiving, Stores, Inventory Control, Scrap and
Surplus disposal. For better operation of the system, these functions are to be
integrated. The integrated material management will result in the following
advantages:
Better Accountability
Better Coordination
Better Performance
Adaptability to computerized system
Inventory Control
Inventory is essential to provide flexibility in operating system. The inventory can
be classified into raw material inventory, in-process inventory and finished goods
inventory. The main functions of inventory are as follows:
Smoothing out irregularities in supply
Minimizing the production cost
Allowing organisation to cope with perishable material
WASHER CLASSIFICATION
59
Washers
Semi Automatic Fully Automatic Horizontal AxisTT
Chandini Ruby WW Splash A B
Washer Classifications
The figure shows the classification of washers at whirlpool o f India limited.
The three main classifications are Semi Automatic washers, Fully Automatic washers
and Horizontal Axis. All the three main categories are further sub-divided as follows:
The classifications of Semi Automatic Washers are as follows:
60
Classic Deluxe Elite
Deluxe Sapphire
Classifications of Fully Automatic Washers:
The classifications of Fully Automatic Washers are as follows:
Cost Tradeoffs
Our objective in inventory control is to find the minimum cost operating
doctrine over some planning horizon. All relevant cost – the cost of the item,
procurement cost, carrying cost and stock out cost. These costs can be expressed in a
general cost equation:
Total annual relevant cost = Cost of + Procurement + Carrying + Stock out
The item Cost Cost Cost
Each cost in the equation can be expressed in terms of order quantity and reorder
point for a given inventory situation. The solution method is then to minimize the
total cost. This can be accomplished graphically; by tabular analysis using trial and
error; or by using calculus, the most accurate method. Graphically, minimizing total
cost means Cost Tradeoffs. Q* is the optional order quantity.
Annual cost
Annual total cost
Annual Carrying cost
61
Semi Automatic
Twin Tub (TT) Ruby Chandini
Old Tango New TangoVerve Sparkle H 70 S 70 SI 70
Super Soak
Fully Automatic
Splash
F 65H 65FP 65FS 65FP 60FS 60 Dlx
S 60 SI 60E 65SLI 60
World Washer (WW)
Q* Annual procurement cost
Total Cost Curves
In real situation, mostly products will be with sub assemblies and components.
These types of products are called as Dependent items. Under such situations, the
need of Material Requirement Planning arises. MRP is a technique for determining
the quantity and timing for the acquisition of dependent items needed to satisfy master
schedule requirements. The basic inputs for MRP are as listed below:
Bill Of Material
Master Production Schedule
Economic Order Quantity
Beginning Inventory
SAP
SAP is the name of both the software company founded in 1972 under the German
name, ‘Systems, Applications, and Products in Data Processing”. It is leading ERP
software package which the company produces. This abbreviation stands for "Systems
Applications and Products." SAP software is used by major corporations in over 50
countries for financial processing and management. SAP is made up of individual,
integrated software modules that perform various organizational system tasks. There
are a number of technical reasons for which various companies are implementing
SAP. They are:
Highly configurable
Highly secure data handling
Min data redundancy
Max-data consistency
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Can capitalize on economics of sales like Purchasing, Tight-integration cross
function
There are two divisions in SAP - Technical and Functional
Technical Module: ABAP Course
Functional modules are:
FICO - Finance and Costing
MM -Material Management
PP - Production Planning
SD - Sales And Distribution
SAP R/3 is a third generation set of highly integrated software modules that perform
common business function based on multinational leading practices. It takes care of
any business enterprise however diverse in operation, spread over the world. In R/3,
system all the three servers like Presentation, Application Server and Database Server
are located at different systems.
SAPS in Inventory Management
SAP Inventory Management system allows you to manage stocks on a
quantity and value basis in order to plan, enter, check goods movements and carry out
physical inventories. Provides up-to-the-minute information on all the items needed to
produce your product and keep your manufacturing operations running smoothly.
Inventory Control maintains and provides information on inventory status. This
includes planning and costing information, inventory valuation and stock status
information for materials used by the company. The financial impact of stockroom or
warehouse activity is transmitted to the GL
User Benefit
Defines all items used to manufacture your products
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Inventory Control defines all items — from raw material to end products, even
tools, reference items, and resources - used in the manufacture of your products. You
define each item’s planning parameters, including lead times, planner/buyer
responsibility and order policy data, to use in other Fourth Shift Edition applications
for requirements planning.
Defines detailed cost data
You can define the costs added at the item level and rolled costs for materials,
labor and overhead. Costs can be defined for up to ten cost types, so you can analyze
the impact on product costs and inventory investment of using various costing
methods.
Reduces data entry time
When adding items, you only need to enter the basic information planning and
cost data can be entered later at your convenience. Using single keystrokes, you can
browse through your Item Master, add explanatory notes about an item, change
planning parameters, print item information for a selected group of items, or inquire
about an item’s components, and then return to start working on a different item.
There’s no time wasted moving from window to maintain item information.
Supports material management Inventory Control maintains inventory balances by
stocking location. Using single keystrokes, you can inquire about an item’s stock
status and inventory value, move or adjust inventory and then print a stock status
report for a selected group of items.
Automatically creates financial transactions
As you use Inventory Control to record your material movements and cost
changes, corresponding financial transactions are created for transfer to the general
ledger. In this way, your general ledger reflects actual manufacturing activities and a
complete audit trail is maintained back to the source transactions.
Provides accurate, timely inventory information
Inventory Control is the basic building block for all other manufacturing
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modules, since it maintains your item information and inventory balances. Based on
this information, Fourth Shift plans and controls all items-materials, resources, tools
and reference items-used to manufacture your products. You maintain up--
to-the-minute inventory balances by stocking location and can easily access inventory
value and stock status information
BILL OF MATERIAL
Simplifies data entry to save time and improve accuracy, while making your
engineering, scheduling and inventory control functions more efficient. Bill of
Material maintains product structure information for the materials, resources, tools,
and reference items used to manufacture your products. It helps you manage future
engineering changes by scheduling each planned change on the date on which it
becomes effective. The Bill of Material module helps reduce the time and effort
involved in maintaining product structure information. The ability to easily perform
related functions results in tremendous increase in productivity.
Benefits:
Provides a common base of product structure information
Maintain product structure information about how you manufacture your
products. Easily create or modify a single level bill of material, and then print it. A
“copy bill of material” feature enables a new bill to be created by duplicating a similar
bill of material and making appropriate changes. This feature significantly reduces
redundant data entry.
Defines how to manufacture your products
Maintain product structure information about how you manufacture your
products. Easily create or modify a single level bill of material, and then print it. A
“copy bill of material” feature enables a new bill to be created by duplicating a similar
bill of material and making appropriate changes. This feature significantly reduces
redundant data entry.
Defines how to manufacture your products
Maintain product structure information for material components, phantom
assemblies, reference items, tools and tool returns, resources and even by products
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and co-products. You can indicate whether a component is used on a per order or per
item basis to build a product, the percent of component scrap, and the lead—time
offset for issuing the component to an order. Add descriptive text about particular
parent—component relationships to provide explanations or warnings.
Tells you where items are used in products
On-line, “where used” inquiries can be used to research the effect of a pending
engineering change on other parts of your product structure, in either single-level or
multi—level where-used format.
Supports reference numbers and operation sequencing
A point of use identifier (reference number or designator) and operation
sequence identifier can be used to specify detailed manufacturing requirements, and
define multiple occurrences of a component in the same bill-of-material. You can also
use descriptive text for further explanation about each component.
Handles routing information and process requirement
Using resource components, you can define work centers, operation
descriptions, and capacity requirements for each step in a routing. Schedule planned
engineering changes affecting routings by date effectivity.
Identifies sales order configuration information
Specify a bill with options for quantity, and optional, required, and common
components within each group of components for a custom configured product. This
information is used for option selection to minimize data entry efforts during order
entry and quotations when the Custom Products module is used in conjunction with
the bill of material.
Provides information to manage engineering changes
Manage future engineering changes by scheduling each planned change by the
date on which it becomes effective. You can phase in engineering changes and
minimize excess and obsolete inventory, since your bills form the basis for production
planning and scheduling. You can also review all effective components for a bill of
material based on in and out effectivity dates you specify, enabling you to compare
bills of material at different points in time.
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Defines manufacturing requirements
Translate your master schedule, forecasts and customer orders into
manufacturing requirements. They are used to plan subassembly priorities, pick
components for orders and provide the basis for product costing.
Material Requirements Planning
Minimize your investment in inventory and increase inventory turns, while
meeting customer service objectives. Material Requirements Planning calculates and
maintains an optimum manufacturing plan based on the master production schedule,
sales forecasts, inventory status, open orders, and bills of resources. By highlighting
exception conditions and facilitating interactive analysis and decisions, it provides
powerful decision support tools to help planners take action to accomplish the
manufacturing plan and buyers to manage the purchasing plan. The system includes
the capabilities for master scheduling and capacity requirements planning.
User Benefits
Minimizes inventory investment and prevents stockouts
Minimizes excess and obsolete inventory, part shortages, expediting,
interruptions in production, and split orders by helping to ensure the right parts are in
stock when needed. By recognizing pending engineering changes, the system helps
avoid stockouts for new products and reorders for obsolete products.
Makes the planner and buyer more effective
Recommended actions are highlighted, simplifying the planner’s and buyer’s jobs.
Since recommended actions can be analyzed and implemented completely on-line, the
system reduces paper work and helps planners and buyers make better decisions.
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Handles two-level master scheduling
You can enter a production plan and the system will calculate production
forecast requirements based on your planning bill. When using Order Entry, actual
orders consume the forecast at the production plan level or master schedule level.
The remaining available-promise is used to recalculate production-forecast
requirements, which helps synchronize sales requirements with production
availability.
Calculates work center loads and capacity requirements
Calculates work center loads based on resource requirements defined in the bill of
resources. You can define work center capacity and load exceptions using the shop
floor reporting module. You can analyze how to reschedule the load by pegging to the
source of requirements.
Improves purchase planning and vendor scheduling
Provides buyers with the visibility to determine long term purchase requirements
over the planning horizon. Based on open and released purchase orders, the system
also generates a vendor schedule for each outside vendor that helps expediting and
negotiating efforts.
Simulates material and resource requirements
Simulate the impact of changes to the master schedule, forecast, orders, and
product structure on material and resource requirements, using the net change
MRP planning capabilities. With resources defined in your planning bills, you
can assess resource requirements using level-by-level MRP planning and firm
up a realistic schedule.
Product Costing
Develop accurate product costs and variances by product line, simulate the
cost impact of material and labor cost changes, and project future costs for planning
and budgeting. Product Costing provides product-costing information to assist you in
analyzing and controlling operations. It helps ensure costs are accurately developed,
and provides a flexible tool for analysis and simulation. It supports decisions
concerning projected costs, variance analysis by product line, inventory valuation and
product pricing. Using multiple methods of developing product costs, one can easily
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assess the effect of changes to material and labor costs, overhead rates, scrap and
yield, and product structure.
User Benefits
Ensures accurate development of costs
Provides a flexible tool for analysis and simulation
Helps project future costs
Provides multiple cost elements
Allows establishment of multiple cost types
Provides optimal calculation of costs
Ensures security of cost data
Purchasing
Simplifies buying decisions, purchase order creation and vendor analysis while
reducing paperwork, enabling buyers to be more effective.
User Benefits
Gives buyers more time for value-added tasks
Simplifies purchase order creation
Handles vendor item and unit of measure conversion
Provides easy buyer access to vendor information
Supports all types of purchases
Improves control over receiving activity
Improves control of accounts payable and general ledger
Improves measurement of variances
Financial Accounting
Provides clear audit trails and simplifies reporting and budgeting. General Ledger
provides a comprehensive analysis of the company’s financial position and generates
financial reports. In addition, a report writer capability gives you tremendous
flexibility in designing your own financial reports.
Define all your company's accounts and their hierarchical relationships in
chart of accounts
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Save time and prevent mistakes when entering manual journal entries with
transaction templates
Create your own set of recurrent transactions, including automatic frequency
reminders
Adjust your foreign currency accounts to the changes in your local currency
Display your accounts' balances and transactions and view all your financial
reports in any desired currency and in each detailing level
Display your reports in a comparative view between months, quarters, years,
or any other period
Define and track your budget in any currency and view a summarizing budget
report, which compares the actual versus the planned figures
Create unlimited financial reporting templates with financial reports design
Screen Shots of SAP
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Figure 3.5 SAP Easy Access
This is the initial screen. By entering the SAP code one can navigate to the
desired section. The SAP code varies from purpose to purpose.
Figure 3.6 BOM Initial Display Screen
The BOM (Bill Of Material) initial display screen, where by giving the material
code and plant level, a list of where the particular material is been used will be
displayed.
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Figure 3.7 Model Wise Display
When a specific model code is given, a list of materials used in the
particular model will be displayed level-by-level. From this, the level (whether
main level or sub level), part description, and the number of times the particular
component is been used can be found out. It gives a full description of the
particular model along with its name.
Figure 3.8 New Part Addition
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In this, addition of new parts is possible by going to changing scheduling
agreement part. Here new part additions for specific supplier can be made.
Hence, the components supplied by each supplier can be made up to date. The
name of the supplier, vendor code, purchase order number and the currency of
dealing can also be known.
Figure 3.9 Blocking of Part
In SAP, not only addition of part is possible. It is also possible to delete a particular
part and block a particular part/parts supplied by each supplier. By going into the
change schedule part , and choosing the edit icon, all these functions can be done.
This helps in avoiding confusion and having a clear and exact idea about the parts
dealt by each supplier.
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Figure 3.10 Material Display
By navigating into this section, the history of the given material will be displayed.
The details about the supplier who is handling the said material, history of purchase
order, the date, changes have been made etc will be displayed in detail.
Table 3.1
SOURCE OF DATA
The table shows the sources from where the relevant data were collected for the
project work. The part no:, its description, quantity used per washer were collected
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Store Containerization TypeContainer qtyMode of TransportVehicle Type
4
Material Planning and production
Volume per DayBuyer wise list3
ProcurementImport / IndigenousSupplier NameSupplier LocationUnit CostLead Time
2
BOMPart NoPart DescriptionQty / WasherUOM
1
SourceDetails on ItemsSl.no
from Bill Of Material (BOM) The details on the location of supplier, their name,
material cost, lead time was obtained from Procurement department. The production
schedule and the buyer wise list were gathered from Material Planning and production
department. Data on container quantity, mode of transport etc were received from
Stores department.
Table 3.2
The table shows lead time for supplier from different location, both with in
India and outside India and is expressed in days. The lead time for Class A materials,
class B materials and class C materials is also shown.
Production Pattern
Maximum Per Day production 3200 Nos
Normal per Day production 2200 to 3200 Nos
Inventory Policy
Total Inventory Cost = RM Inventory Cost+ WIP+FG Inventory Cost
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(inv in days) Nagpur
Coimbatore Bombay
Chandigar
h
Chennai Hyderabad Pune Ambala
Pondy Madurai Bangalore Goa Calcutta Imported
Classification 1 2 3 4 5 6
A 0.25 1 2 4 6 25
B 1 1 4 8 10 50
C 2 4 8 15 20 50
Production Inventory norms
Inventory Cost
Inventory Cost depends on the Inventory Policy
Major Guiding factors for Inventory Policy are:
Material classification (abc)
Supply lead time
Inventory Norms
Way Forward
Effective Material Requirement Planning
Introduction of strong performance measure indicators for material
management systems.( eg : Inventory turnover cost etc)
Implementation of new systems like Kanban, Vendor Managed Inventory
(VMI), Purchasing card (e-procurement) etc.
Figure 3.11 Buyer-Supplier Data
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The chart shows the number of suppliers with which each buyer has to deal with. The
chart shows the percentage part also. It can be seen from the figure that Buyer ‘H’
deals with maximum no: of suppliers (19) and buyer ‘B’ deals with least no: of
suppliers (3)
Table 3.3
Buyer-Supplier Data
Buyer - Supplier Data
Buyer No. of Suppliers
A 5
G B 14
C 13
D 6
B E 2
C F 5
G 5
H 19
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Figure 3.12 Buyer-No: of parts
The chart shows the number of parts each buyer in the organisation is dealing with.
The chart shows the parts dealt by eight buyers (employees of the company who are
responsible to deal with the suppliers of the specific parts.)
Table 3.4
Buyer - No. of Parts
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Buyer - No. of Parts (dealing with)
Buyer No. of Parts
A 23
B 42
C 37
D 13
E 125
F 190
G 652
H 31
Figure 3.14 Supplier-Location data
The chart shows the segmentation of suppliers with in India and out side India. The
suppliers with in India is represented as Indigenous, which constitute about 70 % and the
suppliers outside India, shown as Imported constitute about 30%.
Table 3.5
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PACKING & FINAL
WARE HOUSE
CABINET LINE
TOP/CONTROL PANNEL
BASKET
TUB
UNDER BASE
MAIN LINE 1
MAIN LINE 2
TESTING
Sound Booth
Production Lay Out
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Supplier – Location
Location Count
Indigenous 48
Imported 21
JIT STORES
MAIN LINE
HORIZONTAL AXIS
SOUND BOOTHPACKING
Figure 3.15 Production Lay Out
Production Lay Out [Ha]
Figure 3.16 Production Lay Out [Ha]
(HA- Horizontal Axis)
The figures (3.14 and 3.15) show the production lay out of washers in the
company. First figure shows the lay out for all the three categories. While the second
figure shows the lay out exclusively for Horizontal Axis washers.
Process Chart in Detail
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MAIN LINE
HORIZONTAL AXIS
SOUND BOOTH PACKING
SOUND BOOTH PACKING & FINAL
I. Under Base Assembly
1. Motor Assembly
i) Spin Motor Assembly
ii) Wash Motor Assembly
2. Break band assembly in Spin motor
3. Pulley tightening in wash motor
II. Tub Assembly
1. Bellow fixing in tub
2. Drive Assembly in tub
3. Dump valve assembly fixing
III. Basket Line
1. Balance ring and basket tightening
IV. Control Panel
1. Timer tightening in Control panel
2. Drain selector and wash spin selector
3. Hose assembly
4. Buzzer tightening
5. Wiring connection
V. Cabinet Line
1. Coil loading in de-coiler
2. Straightened
3. Punching Bench
4. Turn over
5. Boxing Station
VI. Main Line 1
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1. Under base assembly in Cabinet
2. Tightening
3. Tub insertion into cabinet assembly
4. Tub tightening with cabinet
5. Basket insertion into cabinet assembly
6. Basket tightening with spin motor and belt assembly in wash motor
7. Agitator assembly into the drive
8. Top tub and spin tub cover assembly
VII. Main Line 2
1. Control Panel assembly into the cabinet assembly
2. Wiring connection with control panel and motor
3. Front panel assembly
VIII. Testing and Packing Line
1. High Voltage checking
2. Water Testing
3. Water draining
4. Machine sound testing
6. Inspection cover testing
ABC Analysis of Inventory
There are several methods to control inventory. One method is to control the
stocked items by recording balances in the stores after each issue and receipt, termed
as Perpetual Inventory System. In the second method EOQ are fixed for each item.
(Showing normal quantities) on the basis of average consumption of each item, the
average time required for procuring the supplies and carrying cost of each item.
Maximum and minimum levels of stock of each item are also fixed.
ABC (Always Better Control) analysis or Selective Approach System is the third and
most effective technique. In this inventory are classified according to their turn over.
In fact, in inventory, only a few high valued items consume a major portion of the
total capital invested on inventory while most of the items with low usage values
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consume an insignificant part of the capital. A management should first focus its
attention to the items with high usage values and then t low usage value. It is observed
that only 5 to 10% of the items stored are of high usage value. These items utilise
about 70 to 80% of he total capital. Such items are put under A category and need
greater and constant attention. Items, which utilize about 10 to 20% of the total
investment are put under B category and are about 10 to 20% of the total items. A
large number of items say, 70 to 85% of the items utilise only 5 to 10% of the total
investment. Such items are placed in category C.
Thus by ABC analysis, management discriminates among various items of inventory
with regard to attention in control and is able to ensure the availability of the items for
production at a minimum cost. A sample curve is as follows:
Cumulative Curve of ABC Analysis
100%
90%
70%
Cu.% of cost
A B C
10% 30% 100%
Cu. % of No: of item
Table 3.6
Classification of items under ABC
Category Percentage of total items Percentage of total material cost
A 5 to 10 70 to 80
B 10 to 20 10 to 20
C 70 to 80 5 to 10
From the above classification, it is clear that ‘A’ items are of minimum quantity and
of maximum value out of total quantity and value of materials. They have to be
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controlled fully by all methods of Inventory Control from the time of purchase until
they are consumed in production. ‘B’ and ‘C’ items are of major portion of total
quantity of raw materials but having minimum capital investments. Therefore, they
are to be managed through less stringent controls.
Advantages
i. Effective control is applied on the high value items rather than concentrating
on all items. This results in reduction in value of material losses.
ii. Optimum investment in materials as minimum required quantity of ‘A’ items
with high values is purchased.
iii. Storage cost is kept at minimum amount as high value materials representing
minimum quantity are kept in stores.
The ABC classification process is an analysis of a range of items, such as products are
divided into three categories:
A - Outstandingly important
B - Of average importance
C - Relatively unimportant
as a basis for a control scheme. Each category can and sometimes should be handled
in a different way; with more attention, being devoted to category A, less to B, and
least to C.
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Figure 3.18 ABC Distribution
The chart shows the segmentation of materials into A, B and C class. The table below
gives the details on number of items constitute each class.
Table 3.7
ABC Distribution
Table 3.8
ABC Calculation
Classification % of Items % of Cost
A 257/873*100 = 29.4387 43314.44/49431.67*100 = 87.6249
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CLASS NO: OF ITEMS
A 257
B 52
C 564
B 52/873*100 = 5.9565 2062.34/49431.67*100 = 4.1721
C 564/873*100 = 64.6048 4054.89/49431.67*100 = 8.2030
TOTAL % 100 100
Figure 3.18 ABC Classification
The chart shows the cumulative percentage of cost and cumulative percentage of
items for each class (A, B, C). The table provides the calculation of the same.
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ABC Analysis Graph
100 C
80 B
Cumulative A
% of Cost 60
40
0 20 40 60 80 100
Cumulative % of items
Figure 3.19 ABC Analysis Graph
The graphical presentation shows the results derived from ABC analysis. It is
representation of points mentioned in the above table.
Summary
The existing system study was done to find out how the inventory is managed,
present inventory norms and to find out if there exists any drawbacks in the current
system. The chapter deals with the types of washers the company is manufacturing;
the advantages, user benefits and effectiveness of SAP (Systems Applications and
Products). It also deals with the data source, present inventory norms and the details
on buyers, supplier, their location, and number of parts each buyer/supplier dealing
with. It is then followed by data analysis part. One of the main areas of analysis part
was ABC analysis. The norms were fixed for each of the inventory part taken into
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account for the project. There by the inventory to be kept for the production of each
model was also arrived at.
CHAPTER 4
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RESULTS AND RECOMMENDATIONS
Norms Fixing
The inventory norms were calculated for all the components and parts dealt by
the eight buyers. The main aim of norms fixing were to in handling the whole lot of
components properly and making it available to shop floor for smooth production,
The norms fixing thus helps in achieving and maintaining an optimum inventory
level, if the norms were effectively implemented and followed properly. The
following table will give a feel on how the inventory norms were calculated.
Buyer Supplier
Vendor
Code PO No Part No. Part Description
A I 91010012 1204000652 P010618240F Motors
A I 91010012 1204000652 P010618220H Motor spin
B II 91010295 1204000711 P019034080R
Control panel assy
H 65
B II 91010765 1204000924 P0186120300
Tub – cool grey 1c –
Wm sparkle
C III 91010445 1204000741 P0186405100 Wash timer base
C III 91010445 1204000741 P018640010B Wash timer base assy
D IV 91011335 1204000757 P010111380C Tub sup.weld
E V 91010555 1204000742 P019054100B Power cord
E V 91010310 1204000816 P019111060A Escutcheon -
F VI 91010310 1204000816 P0190401200 Escutcheon - ss
G VII 91011065 1204000803 P019107020B Counter weight
H VIII 91010017 1204000709 P019101090B Front panel
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Table 4.1Table showing Calculation of
Norms
No: off Unit Category Inde/Imp Location Family Model M/C colour
1 No: Electrical Indigenous Local TT ALL Common
1 No: ElectricalIndigenous
Local TT ALL Common
1 No: ElectricalIndigenous
Domestic WW H 65 SS
1 No: Plastic Indigenous Domestic TT Sparkle/verve Cool grey1 No: Electrical Indigenous Local ALL ALL Common1 No: Electrical Indigenous Local TT Sparkle Common2 No: Steel Indigenous Imported FA WW/SPLASH Common1 No: Electrical Indigenous Domestic WW H 65 Morning blue2 no: BT Indigenous Domestic WW ALL Light grey1 No: BT Indigenous Local WW F65 SS1 No: BT Indigenous Imported HA SENSATION Common1 No: Plastic Indigenous Local WW F65,H65 Black
MT MTCLASS
LeadTime
Max Stock Sgtd.Norms
AnnualConsumption (RS)
Cumu.Ann.Cnsmp.Value
Cu.Usage %
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COST
494 A 4 1383200 2800 849505618 849505618 14.35265224405 A 4 1134000 2800 696457035 1545962653 26.11950276827.77 A 0.5 124165.5 150 63174578.63 1743011751 29.44870637338.8 A 0.5 118580 350 58262419.6 1919641123 32.4329126147.76 A 2 206864 1400 25409843.92 2621629453 44.29321601147.76 A 2 206864 1400 25409843.92 2647039297 44.72252294156.86 A 1 120458 450 18143055.04 3299627225 55.7481917486.78 A 1 26034 300 6622962.82 4795657277 81.0240682274 A 2 146520 1980 5647606 4837556620 81.7319701969.75 A 2 41850 600 5323250.25 4925735405 83.22177722131.8 A 4 67481.6 512 570166.8 5441524653 91.9361912740.2 B 2 10291.2 256 389340 5460096630 92.2499704
Formula
Maximum Stock= Suggested Norms*Material Cost
Suggested Norms=Lead Time*No: of units used*Per day Production
Annual Consumption (RS) = Annual Consumption (units)*Per unit Cost
Abbreviations
PO No: - Purchase Order Number No: of – Number of times the particular part is used in a specified model Inde – Indigenous (with in India) Imp – Imported (Out side India) M/C Colour – machine colour MT Cost – Material Cost MT Class – Material Classification Max Stock – Maximum Stock
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Sgtd Norms – Suggested Norms Cumu.Ann.Cnsmo.Value – Cumulative Annual Consumption Value Cu. Usage – Cumulative Usage in %
Results
Investments in A class items are very high.
The company, resulting in excessive inventory in hand, did not properly
follow the norms fixed.
The provisions in the SAP software can be used more effectively.
Recommendations
Investment in A class items should be minimized by purchasing goods from
the suppliers who offers higher amount of discount at a periodical basis.
The norms have to be implemented properly and thus they can try to reduce
the inventory level.
The Provisions in the SAP software should be utilized properly and from that
they should verify the stock list.
Materials should be kept in proper order and should be easily accessible by
concerned people in the production area.
Proper co-ordination should be done with the vendor and the vendor meeting
should be made in a regular interval.
Steps should be taken for quick realization of stocks.
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CHAPTER 5
CONCLUSION
A better inventory management will surely be helpful in solving the problems
the company is facing with respect to inventory and will pave way for reducing the
huge investment or blocking of money in inventory. If they could properly implement
and follow the norms and techniques of inventory management, then it will ensures
smooth availability of materials for production, Reduces wastage of Raw materials,
Achieve economy of buying and storage cost, Reduces pilferage, theft, obsolescence
and other material losses. It helps in maintaining perpetual inventory system to
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furnish information to management regarding materials, helps in ascertaining values
of jobs, processes and orders. Thus, they can maximize the turn over of the company.
References
1. Paul H. Zipkin, “Foundation of Inventory Management, McGraw-Hill International
Editions; 2000
2. B.S. Goel, S.K.Mittal, “Operations Research”, Pragati Prakashan; 2004
3. Dennis W.Mcleavery, Peter J. Billington, “Production Planning and Control”, Prentice Hall of India; 1995
4.http://www.inventorymanagement.com
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5.http://www.nextlevelpurchasing.com
7.www.whirlpoolindia.com.
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