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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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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