INTRODUCTION

MEANING OF INVENTORY A physical resource that a firm hold as in stock with the intend of selling it or transforming it in to a more valuable state.

INVENTORY MANAGEMENT Policies, procedures, and techniques employed in maintaining the optimum number or amount of each inventory item. OBJECTIVE Improve customer service Economies of purchasing Economies of production Transportation saving Hedge against inflation Unplanned shocks (labor strikes ,natural disaster ,surges in demand e.t.c.,) To maintain independence of supply chain

NEEDS OF HOLDING INVENTORY To act as a buffer between different operations To allow for mismatches between supply and demand rates To allow for demands that are larger than expected To allow for deliveries that are delayed or too small To avoid delays in passing products to customers

BENEFITS OF HOLDING INVENTORY To take advantage of price discounts To buy items when the price is low and expected to rise To make full loads and reduce transport costs

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TYPES OF INVENTORY
INPUTS IN PROCESS OUTPUTS Partially Completed Products and Subassemblies Finished Goods Scrap and Waste Raw Materials Purchased parts Maintenance and Repair Materials

INVENTORY POSITIONS IN SUPPLY CHAIN

Raw material

Works in Process

Finished goods

Finished goods in field

PROBLEMS WITH HOLDING INVENTORY Storage costs Interest is tie up therefore, a loss on capital Obsolete stock Less money is available for the business Prices fall on held items

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INVENTORY COST STRUCTURES

Ordering (or setup) cost Carrying (or holding) cost: Cost of capital Cost of storage Cost of obsolescence, deterioration, and loss Stock out cost Item costs, shipping costs and other cost subject to volume discounts

NEW ACCOUNTING NORMS FOR INVENTORY VALUATION The standard permits only two methods: first-in-first-out (FIFO) and weighted average cost. The controversial method of last-in-first-out (LIFO) is now not permitted. The LIFO method reasoned that in days of high inflation, inventory prices are rising, and therefore it would be inappropriate to charge the lower cost of earlier purchases. NORMS FOR INVENTORY The norms for inventory could be set by either the top management or the materials management department. The top management sets monetary limits for investment in inventories. The materials department then has to allocate this investment to the various items and ensure the smooth operation of the company .It would be worth while if the inventory norms are set by the MANAGEMENT BY OBJECTIVES concept. This concept expects the top management to set inventory norms (limits) in consultation with materials department. The Norms thus evolved should be specific and quantified. The achievement of target set is the responsibility of the Materials department.

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INVENTORY MANAGEMENT SYSTEMS

Functions of Inventory Management Track inventory How much to order When to order Prioritization Inventory Management Approach EOQ Continuous / Periodic

TECHNIQUES OF INVENTORY CONTROL

ABC Analysis Economic Order Quantity (EOQ) Stock Levels minimum, maximum, reorder level, reorder quantity Inventory Turnover Ratio Slow and Non-Moving Items Purchase, Storage and Issue Procedure Two Bin System Perpetual Inventory Records and Continuous Stock Verification Budgetary System

ABC ANALYSIS ABC Classification (Pareto Principle). ABC analysis divides on-hand inventory into three classifications on the basis of annual consumption value. A Items: very tight control, complete and accurate records, frequent review . A: 70% value, 10% items B Items: less tightly controlled, good records, regular review. B: 20% value, 20% items

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C Items: simplest controls possible, minimal records, large inventories, periodic review and reorder. C : 10% value, 70% items

IMPORTANCE
Ensures control on high value items Saves time and cost of monitoring Reduces total investment in inventory Facilitates faster decision making Better utilization of resources Better physical control of stock

ECONOMIC ORDER QUANTITY (EOQ)

EOQ minimizes the sum of holding and setup costs Q= 2DCo/Ch

D = annual demand Co = ordering/setup costs Ch = cost of holding one unit of inventory

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REORDER POINT Quantity to which inventory is allowed to drop before replenishment order is made Need to order EOQ at the Reorder Point: ROP = D X LT D = Demand rate per period LT = lead time in periods

Q SYSTEM INVENTORY CONTROL

It is based on reorder point - When inventory is depleted to ROP, order replenishment of quantity EOQ. P-SYSTEM PERIODIC REVIEW METHOD An alternative to ROP/Q-system control is periodic review method. Q-system - each stock item reordered at different times - complex, no economies of scope or common prod./transport runs. P-system - inventory levels for multiple stock items reviewed at same time - can be reordered together. higher carrying costs - not optimum, but more practical.

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STOCK LEVELS
1. Maximum Stock Level is the maximum stock level that can be held in store. Maximum Level = Reorder Level + Reorder Quantity (Minimum Minimum Reorder Period) 2. Minimum Stock Level is the level below which the stock should not be allowed to fall. Minimum Level = Reorder Level (Normal Consumption x Reorder Period) 3. Reorder Level is the level of stock at which fresh replenishment order should be placed. Reorder Level = Maximum Consumption x Maximum Reorder Period (OR) Minimum Level + (Normal Consumption x Reorder Period) 4. Average Stock Level = Minimum Level + Reorder Quantity (OR) (Minimum Level + Maximum Level) / 2 5. Danger Level is the level at which only emergency material issue is done Normal Consumption Rate x Maximum Reorder Period for Purchases. INVENTORY MEASURES Weeks of Supply Inventory Turnover (Turns) emergency Consumption x

INVENTORY TURNOVER RATIO

Inventory turn over ratio a relationship between the cost of goods sold and the cost of average inventory during a particular period of time. Formula of Inventory Turnover Ratio: INVENTORY TURNOVER RATIO = Cost of goods sold / Average inventory at cost COST OF GOODS SOLD=opening stock + purchases + direct expenses + manufacturing expenses-closing stock. AVERAGE INVENTORY AT COST= (Opening Stock + Closing Stock) DAYS OF INVENTORY = 365 / Inventory Turnover Ratio.

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SIGNIFICANCE
Indicates the speed with which inventory is consumed. A high ratio indicates fast moving stock, low ratio indicates slow moving stock.

OTHER TECHNIQUES
Two Bin System Bin has two parts, the smaller one for reorder stock level and the other for the remaining material. Issues are made from the larger bin, fresh order placed when it become empty, material used from smaller bin till replacement received and filled. Periodic Inventory System Physical stock taking done periodically, requiring shut down. Records then physically reconciled. Perpetual Inventory System Records updated at every receipt and issue. Done using bin cards and stores ledger. Continuous stock taking done by random checks of the bin cards and stores ledger .

JUST-IN-TIME INVENTORY
Just in Time Inventory is the minimum inventory that is necessary to keep a system perfectly running. With just in time (JIT) inventory, The exact amount of items arrive at the moment they are needed, Not a minute before OR not a minute after. To achieve JIT inventory, Managers should Reduce the Variability Caused by some Internal and External Factors. Just In Time (JIT) is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand , "just-in-time" means that raw materials are received just in time to go into production, manufacturing parts are completed just in time to be assembled into products, and products are completed just in time to be shipped to customers.

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The result has been a substantial reduction in ordering and warehousing

costs, and

much more efficient and effective operations. In a just in time environment, the flow of goods is controlled by a pull approach. Under just in time system you don't produce any thing, any where, for any body unless they ask for it some where downstream. Inventories are evil that we are taught to avoid

MATERIALS REQUIREMENTS PLANNING (MRP) Materials Requirements Planning is a process that references several key business activities as well as information across business including all levels in the Bill of Materials, sales forecasts, sales orders and inventory. We can determine exactly what and when materials are required, in order to produce the most timely and competitively priced products and services for customers. Computerized ordering and scheduling system for manufacturing and fabrication industries, it uses bill of materials data, inventory data, and master production schedule to project what material is required, when, and in what quantity. MRP phases orders for dependent-demand items (such as raw materials, components, parts) over a period to synchronize flow of materials and in in-process inventories with production schedules. It also computes and tracks effect of hundreds of variables such as new orders, changes in various capacities, overloaded production centers, shortages, and delays by suppliers, and feeds financial data into the accounting system. APGCMS, Rajampet 9

In contrast to just in time inventory (a demand-pull production system), MRP is a plan-push system, and in contrast to advanced planning system (a forward scheduling system) it is a backward-scheduling system

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INDUSTRY PROFILE OVERVIEW OF HYDRAULIC INDUSTRY

The Indian hydraulic industry had its beginning in the sixties and the main objective behind establishing this industry was to provide substitutes for imported machinery. Hydraulic machinery from a long time is used in heavy engineering industries (extensively like shipping, power driven machine tools, automobiles, etc.). While there has been a continued overall growth in the oil hydraulic products business due to large variety of specialized products to meet specific individual applications, volume growth in individual products has been very low. With low volumes and high development costs concerning tooling, casting and forging, the industry has not been able to adopt modern production methods Current production technology in use is largely dictated by production volumes, quality requirements and costs .Most of the manufacturers, with exception to some (who have installed dedicated SPM's and CNC Machines for the manufacture of components), are currently using general purpose machines with special tooling and some special purpose machines for specialized products

GROWTH RATE
Growing investments in every sector and the Capital Goods Index which has shown a growth rate of 13.6% in FY08 are projecting a high positive image over the demand for hydraulic machinery. Demand for hydraulic machinery for FY07 was projected to be around 253.9mn which is growing at a compounded annual growth rate (CAGR) of 11.99% from 2004 till 2007 There is a good demand for hydraulic machinery but the Indian manufacturing base is yet to come up with a suitable technology base to manufacture heavy duty hydraulic systems.

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The Indian Infrastructure Industry is witnessing rapid growth 2004-2007

Global Engineering & Construction Spending Growth Other Countries Hongkong India Aus Mexico Korea Spain Brazil U.K France Italy Germany China Japan USA 0.00% 2.50% 4.20% 5.00% 10.00% 4% 2.50% 2.90% 2.80% 6.80% 4.70% 6.00% 4.80% 4.60% 6.80% 4.20% 6.10% 8.20% Other Countries Hongkong India Aus Mexico Korea Spain Brazil U.K France Italy Germany China Japan USA

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MANUFACTURER OF HYDRAULIC COMPONENTS:

S.NO COMPANY PRODUCTS MANUFRACT 1 BEML -URED Pumps Motors Cylinders 2 Dynamatics Limited Mobile Values Gear Pumps Mobile Valves 3 4 Escorts Herion Limited Power Packs Valves Herion Werke KG, Dowty, UK Bangalore, India COUNTRY

Power Packs Germany G.L. Rexoth Industries Pumps, Motors, Ahmedabad, Limited Valves Cyclinders Power Packs Hyderabad, India Accessories Pumps Valves Motors Power Packs Pumps Motors Cylinders Mobile Vaks Hydraulic Cylinders Pumps Valves Accessories Motors Pumps, Motors, Valves Cylinders Power Packs Calcutta, India Belgam, India India

Hagglunds Dension Ltd

L&T Ltd., Earth Moving Machinery & Hydraulic Division. Oscar Equipment Pvt. Ltd. Polyhydron Pvt. Ltd.

Bangalore, India

7 8

9 10

Sai Industies Limited Vickers Systems International Ltd

Bangalore, India Mumbai, India

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11

YukenlndiaLtd., Bangalore

Steering Unit Pumps, Motors, Valves . Cylinders Power Packs Accessories Cylinders, Marine Hydraulics Hydraulics Marine Cylinders

Bangalore, India

12 13

VelJan Hydrair Ltd. L&T Limited

Chennai, India Bangalore

COMPANY PROFILE WIPRO LTD

Wipro Ltd has started in early 1940s They started with vegetable oil later in 1980s they went on for production hydraulic equipment, soaps, lightning there revenues are 400 mn. APGCMS, Rajampet 14

Later in 1980s they enter into manufacturing of PC, Medical systems. With the globalization of Indian economy in 1991 Wipro gained advantage and entered into Consolidation of IT Business into software, Global R&D and Personal Products. As a result Company Revenue has increased to 18$ Billion, Net profit goes to 2$ Billion. In the year 1998 to 2008 Wipro entered into Global IT, BPO, Consultancy and FMCG. During this Period Company has Acquired Acquisitions in 7 countries its Revenues goes to 200$ billions and PAT goes to 22$ billion. There was an Consistent Growth of 25% in Revenues and 30% Growth in Net Income and 25% Market capitalization Based on Compound Average.

BUSINESS UNITS
IT, BPO, R&D Services, Consulting Services Wipro Technologies IT & Business IT Services & Process Europe & Japan Products for India, Services for US, ME & APAC IT, BPO, R&D Services, Consulting Services Wipro InfoTech Wipro Care Personal Care, Baby Care & Wellness Products; Domestic & Institutional Lighting; Furniture Consumer Wipro Infrastructure Engineering Precision Engineered Hydraulic Products & Solutions for Infrastructure & Revenue contribution: 69%

Consumer & Infrastructure

Intuitional Market

Revenue contribution: 18

Revenue contribution: 7%

related industries Revenue contribution: 6%

Second largest independent Hydraulic Cylinder manufacturer in the world Annual revenue of USD 300 million for the year 2007-08 Preferred suppliers for global OEMs 8 State-of-the art manufacturing locations across India, Finland & Sweden More than 1200 committed and skilled manpower Catering to customers across continents for various applications 15

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HISTORY
1976 1980 1986 1989 1995 2002 2006 2008 Pioneered Hydraulic Cylinders for industrial segments Developed HC for Mobile applications Entry into Construction Equipment applications Launched truck Hydraulic components Commenced Exports to Japan & Thailand #1 Hydraulics solutions provider in India Acquired Hydrauto Group Europe Started Wipro Water acquiring Aquatech

SPIRIT OF WIPRO
ACT WITH SENSITIVITY UNYIELDING INTEGRITY INTESITY TO WIN Respect for the individual Thoughtful and responsible Delivering on commitments Honesty and fairness in action Make customers successful Team, Innovate, Excel

OBJECTIVES
Infrastructure as an enabler: World-class Scalable Secure with built-in Risk Mitigation checks With built in Redundancy reduce manufacturing cost, ensure good quality and comply with strict regulations (TREAD, CAF, ISO 14000. NATURE OF BUSINESS CARRIED Wipro Infrastructure Engineering (formerly Wipro Fluid Power) Head office located at Bangalore Started at 1976. It provides solutions ranging from Precision Engineered Products to value added Services for customers in industries that serve the core infrastructure sector - ranging from Construction, Mining, Agriculture and Power to Steel Plants and Ports. WIN delivers precision-engineered hydraulic cylinders, APGCMS, Rajampet 16

components and solutions & truck hydraulics components to OEMs globally in the infrastructure and related industries. In 2008 Company has recently entered water treatment business and provides Ultra pure water treatment systems and solutions for various industries.

MISSION
To continuously maximize the companys wealth by manufacturing and marketing best quality engineering products that will go into daily life

VISION
To achieve global leadership in the Hydraulic Cylinder business, with a market share of 15%, by 2013 To build the business for Ecological Sustainability so as to be amongst the top 3 global players, in the chosen segments, by 2013 QUALITY

To carryout, undertake, and implement all its requirements for manufacture of safe goods on on-going basis To implement ISO9001 and ISO14001 fully in all aspects/operation. Implementing of Six sigma concept. Superior plating corrosion resistance - CASS 9.5 Cylinder level cleanliness-NAS level 7 Well-equipped metrology Lab and special-testing devices Robust vendor Quality system and selection process

GLOBAL REACH Finland Sweden

Skelleftea Ostersund Bispgarden Ljungby APGCMS, Rajampet

Pernio INDIA Bangalore Hindupur Chennai

17

Unique

advantage

of

manufacturing

Customer locations Manufacturing facilities

locations in Asia and Europe Dealers in more than 10 countries for Truck Hydraulics Strategic Sourcing & Manufacturing

OWNERSHIP PATTERN
The current Chairman, Managing Director and majority stake owner is Azim Premji, who has headed the software and hardware divisions Mr Anurag Behar is the chief executive of wipro infrastructure engineering. He has led Wipro Infrastructure Engineering to a remarkable growth trajectory - the business has grown from $30m to over $300m in four years

ANURAG BEHAR CHIEF EXECUTIVE WIE

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Major Shareholders of WIPRO

% of Shares Held by all Insider and 5% Owners % of Shares Held by Institutional & Mutual Fund Owners % of float Held by Institutional and Mutual Fund Owners Number of Institutions Holding Shares 82% 2% 11% 89%

Status of WIE
Industry Location Headquarters Type Status Company Size Website Mechanical or Industrial Engineering Hindupur Bangalore Area,India Public Company Operating Subsidiary 200 employees http://www.wiporoinfra.com

KEY EXECUTIVES
Mr. Azim Hasham Premji , 64 Chairman, Chief Exec. Officer, Managing Director and Member of Compliance Committee Mr. Suresh C. Senapaty , 53 Chief Financial Officer, Exec. VP of Fin., Exec. Director and Member of Admin./Shareholders & Investor Grievance Committee Mr. Suresh Vaswani , 50 Co-Chief Exec. Officer of IT Bus., Exec. Director, Member of Admin./Shareholders & Investor Grievance Committee, Pres of Global IT Service Lines - Wipro Technologies and Pres of Wipro Infotech Mr. Girish S. Paranjpe , 52 Co-Chief Exec. Officer of IT Bus., Exec. Director and Pres of Banking, Fin. & Insurance Vertical - Wipro Technologies Mr. Anurag Behar , 41 Chief Exec. Officer of Wipro Infrastructure Engineering and Corp. VP of Community Initiatives

Major Competitors
1. Hydroline Products Pvt Ltd: APGCMS, Rajampet 19

Hydroline Products is a modern company specializing exclusively in oil hydraulic equipment - filters and tank mounted (reservoir) accessories 2. L&Ts Heavy Engineering Division (HED): L&T's (HED) has established a reputation for quality products in the market. Its strong engineering capabilities are supported by manufacturing facilities. 3. Poclain Hydraulics: Poclain Hydraulics as a unique leader and trendsetter in the mobile machinery industry 4. Rexroth: Agricultural machinery use Rexroth hydraulics, wind farms use Rexroth transmissions and building sites where excavators and bulldozers are at Rexroth pumps and valves work with global state- of-the-art

INFRASTRUCTURAL FACILITIES
WIE strives towards improvement, constantly benchmarking against global standards in manufacturing. Its machinery is geared up to produce Cylinders for a vast range of applications. Some of the machinery used include Skiving and Roller Burnishing, Friction Welding, Induction Hardening and Piston Shrink fitting machines, Mechanized assembly and automated testing facilities. Innovative sourcing methods and a robust vendor base compliment manufacturing efforts to deliver on-time to customers. Highly trained and skilled manpower compliment the high productivity machines to scale up production to meet the growing global demand. Wipro believes in individual growth and overall development. Potential is recognized and opportunities for further learning are provided. Training programs are on par with latest manufacturing practices and developments taking place in and around the world to empower you as a professional in the ever changing world of manufacturing practices

ACHIEVEMENTS
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NASSCOMs

Technology Innovation Award 2006 for its remote

infrastructure hub (Global Command Centre) Global MAKE Award (Most Admired Knowledge Enterprise) for 2005, 2007 & 2008 Business Worlds Innovation for India Award Informaticas Innovation Award for Best Partnership

QUALITY CERTIFICATION
ISO 20000 certification for IT Service Management standards ISO 27001 certifications for Information Security practices including physical safety & security

FUTURE GROWTH &PROSPECTUS

WIN has a bright future as investments of up to $492 billion is required by 2011-12 for infrastructure projects as per a Planning Commission estimation WIN has been impacted by the sharp global slow down in investment in multiple sectors , driven by the credit crunch and economic uncertainty The fundamentals of the sectors remain intact, Infrastructure is the key sector being targeted across India China and US for revival of economies

WORK FLOW MODEL

Material procurement Cutting Rough Turning Turning Drilling Milling APGCMS, Rajampet 21

Welding Grinding Electro plating Brushing End operations Assembly Testing Polishing Dispatching

7-S Framework of McKinsey

The 7-S Framework of McKinsey is a management model that describes 7 factors to organize a company in an holistic and effective way. Together these factors determine the way in which a corporation operates. The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981 born at a. It appeared also in "In Search of Excellence" by Peters and Waterman, and was taken up as a basic tool by the global management consultancy company McKinsey. Since then it is known as their 7-S model APGCMS, Rajampet 22

The model consists of seven elements. Those seven elements are distinguished in so called hard Ss and soft Ss, the hard elements (grey circles) are feasible and easy to identify. They can be found in strategy statements, corporate plans, organizational charts and other documentations. The four soft Ss however, are hardly feasible. They are difficult to describe since capabilities, values and elements of corporate culture are continuously developing and changing. Therefore it is much more difficult to plan or to influence the characteristics of the soft elements. Although the soft factors are below the surface, they can have a great impact of the hard structures, strategies and systems of the organization.

1. SUPER ORDINATE GOALS

Super ordinate goals refer to a set of values and aspirations, often unwritten that goes beyond the conventional formal statement of corporate objectives. Properly articulated, can provide a strong basis of stability to an organization in a rapidly changing setting by providing a basic meaning to people working in the organization. APGCMS, Rajampet 23

2. STRUCTURE
Structure refers to the organizational arrangements for performing the tasks and activity. Wipro Infra Structure engineering is having functional organization.

ORGANIZATION STRUCTURE:CHAIRMAN MANAGING DIRECTOR

PRODUCTION ENGINEERING

PRODUCTION DEPT

QUALITY DEPT

MARKETING

FINANCE DEPT DEPT

HR

DEPT

Maintaince Prod planning

Executives

Supervisors

Executives

Accts.

Exe

Finance Function:
The finance department has assigned the responsibilities of managing the cash flow in such a manner that it would ensure that the organization will have the means to carry out its objectives as satisfactorily as possible and at the same time meet its obligation. Thus matters like cash budget, forecasting is of great significance. In Wipro infrastructure engineering. Finance department is headed by Mr. RAJAREDDY , he has vast experience in handling of that department. Mr. RAJAREDDY

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ACCOUNTANTS

Accounting Software
Wipro Infrastructure engineering. is using SAP Package for its effective accounting system.

Asset Accounting
Depreciation of assets is done through Diminishing balance Method.

Taxes
The company is enjoying the Tax benefits of 10years as Wipro infrastructure engineering is located at industrial area.

Capital Structure
Wipro infrastructure engineering is a subsidiary of wipro ltd. Company raised 86% of capital through equity shares owned by wipro ltd. Remaining 14% of capital raised through longterm loans.

Sources of Short Term and Long Term Funds:

All the necessities of the funds are taken care by the corporate office located in Bangalore.

Credit Period
Normally credit period allowed is 30 days, 45 days and 90 days. The payment period allowed for the suppliers is 60 days.

SWOT Analysis
STRENGTHS: There is a whole year of supply of raw material throughout the year and also production capacity is also fully utilized Wipro infrastructure engineering also enjoys the benefit of tax holiday and tax deferment of location at industrial area. Adopting Japanese principles such as six sigma and kaizhan to improve the quality of products. WEAKNESS:APGCMS, Rajampet 25

Availability of the skilled labor & employees because of location in rural areas. Sometimes lack of labor in Rainy Seasons. Because in rainy seasons most of the labor prefer to work in agricultural lands.

OPPORTUNITIES: Rising exports from the industry. The hydraulic manufacturing industry is one of the greater export oriented industry in India. Because of that only the exports have been raised from Rs.433 crores in 1994-95 to Rs.2012.16 crores in 200506. Promotion of New Brands effectively with introducing new varieties. The Research and Development team can work effectively in introducing new brand varieties with coming with new products of different hydraulic cylinders. THREATS: Increasing competition:- Now days due to the heavy exports in hydraulic manufacturing industry so many national and multinational companies are entering into this industry. Most of the new companies like HYVA for Trucks and Dantal for hydraulic Change of Govt. policies frequently. The government policies in this sector are not stable. They are changing regularly. So the companies should always change their policies accordingly

PRIMARY ACTIVITIES PROCUREMENT

Wipro offers multi-tier supply chain visibility through direct and indirect procurement solutions Strategic-sourcing select the right suppliers from a cost-effective viewpoint Supplier Relationship Management enable product standards and supplier quality enhancement

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Compliance and Monitoring processes to monitor quality, safety and environmental factors

REVERSE LOGISTICS
Returns management Routing of defective product from point of return to the manufacturer Warranty management Enables supplier recovery and streamlines the warranty process End of life management Reverse supply chain product utilization and compliance with disposal guidelines

DISTRIBUTION & LOGISTICS

Distribution Resource Planning This involves identification of distribution centers and locations, demand management and estimation of resources and requirements Warehouse Management This involves Cross docking, Multi-Echelon Inventory Management and RFID, to improve warehouse management Multi Channel Management Avoids cannibalization and addressing channel conflicts Logistics Planning Includes shipping solutions, freight management, warehouse picking and cross-docking

ORDERMANAGEMENT & FULFILLMENT

Quotes Contract detail validation, product configuration, pricing and discount management, freight validation, application and quote generation Order booking Validation of quote, contract and PO agreement, product configuration, pricing, payment terms and fulfillment lead time APGCMS, Rajampet 27

Order administration Order scheduling, order supply, interface with manufacturing unit, staging and pick release, and returns management Billing and collection Billing record creation, invoice creation, revenue recognition verification, commission calculation and document management

RESEARCH METHODOLOGY Need for the study

Wipro Infrastructure Engineering delivers precision-engineered hydraulic cylinders, components and solutions & truck hydraulics components to OEMs globally in the infrastructure and related industries. WIN has a continuously increasing turnover and the Inventory requirements are high. In such a scenario it APGCMS, Rajampet 28

dwells upon the management of the company to play according to the dynamics of the industry in such a way that it leads to an advantage to the company. The management should workout the optimal level of inventory, which gives an ideal trade-off between risk, return and Profitability. The optimal management of inventories is the primary objective for all the manufacturing firms. As a matter of fact, inventories have important implications for both the economic & the financial performance of the company; there fore it is widely acknowledged that an optimal inventory management policy allows companies to achieve higher profitability levels. In general terms inventory management policies should be aimed at lowering the holding costs through higher inventory rotation, but with out triggering substantial stock outs and back orders caused by demand peaks and / or lead time delays. This study is conducted to analyze the efficiency of Inventory management & Control and its impact on profitability at WIN.

RESEARCH DESIGN
Both primary and secondary data were used to obtain the required information.

Primary data.
Primary data is collected from different department managers and officers of the company.

Secondary data.
Secondary data is collected from different published sources. Collection of data through company annual reports, company manuals other relevant documents. By textbooks, journals &websites. Collection of data through the literature provided by the company. and

LIMITATIONS OF THE STUDY

Time is a factor which also reflects on the report being prepared. All the information required could not be made public by the organization. 29

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Discussions with all related officials were not possible. The study covered a wide concept, hence wide collection and coverage of information was not possible

TOOLS OF ANALYSIS
1. INVENTORY TURNOVER RATIO Inventory turn over ratio a relationship between the cost of goods sold and the cost of average inventory during a particular period of time. INVENTORY TURNOVER RATIO = Cost of goods sold / Average inventory at cost COST OF GOODS SOLD=opening stock + purchases + direct expenses + manufacturing expenses-closing stock. AVERAGE INVENTORY AT COST= (Opening Stock + Closing Stock) DAYS OF INVENTORY = 365 / Inventory Turnover Ratio. 2. RAWMATERIAL TURN OVER RATIO AVERAGE RAW MATERIAL = (Opening Raw Material + Closing Raw Material)/2 RAW MATERIAL TURNOVER RATIO = Annual Consumption / Average Raw Material. 3. WORK IN PROGRESS TURN OVER RATIO WORK IN PROGRESS TURN OVER RATIO = sales/average WIP AVERAGE WIP = (Opening WIP + Closing WIP)/2 4. FINISHED GOODS TURN OVER RATIO FINISHED GOODS TURNOVER RATIO = Sales / Average finished goods AVERAGE FINISHED GOODS= (Opening finished goods +Closing Finished goods)

OBJECTIVES OF THE STUDY To study the Inventory Management System in Wipro infrastructure engineering.

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 To study the present practices in inventory of spares and supplies and raw materials To calculate the optimum level of inventory using inventory control techniques

1. SIZE OF INVENTORY & PERCENTAGE CHANGE IN INVENTORY

Size of inventory indicates the efficiency of firm in terms of profitability. It should not be too high or too low. Its existence has to be according to sales forecast. Table no:1 APGCMS, Rajampet 31

S.NO 1 2 3 4 5

YEAR 2005 2006 2007 2008 2009

INVENTORY (Rs In Crs) 20. 55 22. 23 24.14 17. 15 108.32

CHANGE IN INVENTORY (Rs in Crs) -18. 71 1. 67 1.91 -6. 99 91.17

PERCENTAGE CHANGE IN INVENTORY -47.65 8.13 8.6 -29.0 531.63

Graph no: 1.a

SIZE OF INVENTORY 1200 1000 800 600 400 200 0

.

INVENTORY VALUE

INVENTORY 2005 2006 2007 2008 2009 YEARS

INTERPRETATION
The above table and graph depicts size of inventory in WIN over the years 2005 to 2009. Almost uniform inventory has been maintained from 2005 to 2007.In 2008 inventory size is less than previous years because WIN has been impacted by the sharp global slow down in investment in multiple sectors , driven by the credit crunch and economic uncertainity.In 2009 inventory is four times that of previous years contributing to sales.

PERCENTAGE CHANGE IN INVENTORY

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Graph no: 1.b

PERCENTAGE CHANGE IN INVENTORY CHANGE IN INVENTORY IN Rs 600 500 400 300 200 100 0 -100 2005 2006 2007 YEARS 2008 2009

INTERPRETATION
The above graph depicts percentage change in inventory in WIN over the years 2005 to 2009.In the years 2005 and 2008 percentage change is negative i.e.s -47.65 and -29, this means inventory in preceding years is higher, there fore changes are undesirable .In 2006 and 2007 the percentage changes are positive and almost similar. The percentage change is highly positive 531.63 in 2009 has positive impact on sales

2. COMPONENTS OF INVENTORY
At WIN, the inventory components are raw material, work in progress and finished goods Table no:2 Particulars 2005 2006 2007 2008 2009 33

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Raw Material (Rs in Crs) Work-inProgress (Rs in Crs) Finished Goods (Rs in Crs)

6. 04 4. 12 10. 37

11. 85 0. 22 10. 59

18. 37 1. 72 4. 02

13. 67 1. 13 2. 17

87. 20 0. 75 7. 47

Graph no: 2

COMPOSITION OF INVENTORY
1000 900 800 700 600 500 400 300 200 100 0 2005 2006 2007 YEARS 2008 2009
Millions

COMPOSITION IN Rs

RM WIP FG

INTERPRETATION
The above table and graph depicts composition of inventory over the years 2005 to 2009. The graph depicts the components of inventory in WIN and their changes over the years 2005 to 2009.

3. VALUE OF PRODUCTION AND PERCENTAGE CHANGE IN PRODUCTION VALUE

On comparing value of production with inventory, adequacy of stock i.e. whether it is under stocked or over stocked can be determined.

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Value of production = Sales + (closing stock of finished goods &closing stock of

work in progress) - (opening stock of finished goods & opening stock of work in progress) Table no:3 S. NO 1 2 3 4 YEAR 2005 2006 2007 2008 PRODUCTION VALUE (Rs in Crs) 56. 26 93. 53 106. 26 54. 18 329. 77 CHANGE IN PV (Rs in Crs) 27. 34 37. 26 12. 72 -52. 07 324. 29 PERCENTAGE CHANGE IN PV 32.45 66.22 13.6 -49 598.54

5 2009 Graph no:3.a

PRODUCTION VALUE PRODUCTION VALUE IN Rs 3500 3000 2500 2000 1500 1000 500 0 2005 2006 2007 YEARS 2008 2009
.

INTERPRETATION
The above table and graph depicts production value over the years 2005 to 2009. The production value has increased in the year 2006 and 2007.It has come down in 2008. In 2009 production value has got multiplied conveying maximum utilization of inventory.

PERCENTAGE CHANGE IN PRODUCTION VALUE

Measure the change of the value of production over time. Graph no:3.b

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PERCENTAGE CHANGE IN PRODUCTION VALUE 700 PERCENTAGE CHANGE 600 500 400 300 200 100 0 -100 2005 2006 2007 YEARS 2008 -49 2009 32.45 66.22 13.6 598.54

INTERPRETATION
The above graph depicts percentage change in production value over the years 2005-2009 .All the changes are positive. It has come down to -49 % in the year 2008 due to economic uncertainty. It has recovered to 598.54% in the year 2009 through maximum inventory utilization & production as well.

4. VOLUME OF SALES AND PERCENTAGE CHANGE IN SALES

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The better the management of assets, the larger the amount of sales. A proper balance between sales and inventory generally reflects that inventory is managed well. Table no:4 S. NO 1 2 3 4 5 YEAR 2005 2006 2007 2008 2009 SALES (Rs in Crs) 57. 65 97. 21 111. 33 56. 61 324. 86 CHANGE IN SALES (Rs in Crs) - 121.69 39. 55 14. 11 -54. 71 268. 24 SALES CHANGES IN ( % ) -67.85 68.60 14.52 -49.14 473.80

Graph no:4

PERCENTAGE CHANGE IN SALES

PERCENTAGE CHANGE 600 500 400 300 200 100 0 -100 473.8

68.6 2005 -67.85 2006

14.52 2007 YEARS 2008 -49.14 2009

INTERPRETATION
The above table and graph depicts percentage change in sales over the years 2005 to 2009.In the year 2005 and 2005 negative percentage change in sales -67.85% and -49.14% can be noticed where as in 2009 it has reached peak around 473.8% .

TURNOVER RATIOS
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It denotes the speed at which the inventory will be converted in to sales, there by contributing for the profits of the concern. When all other factors remain constant, greater the turnover of inventory more will be efficiency of its management. Further it will be higher when sales are maximum and the average when inventory is minimum.

1. INVENTORY TURNOVER RATIO

The inventory turnover ratio measures the number of times a company sells its inventory during the year.This ratio indicates the efficiency of the firm in selling its product. inventory. Cost of goods sold INVENTORY TURNOVER RATIO = -----------------------------Average inventory COST OF GOODS SOLD = 0pening Stock +Purchases +Manufacturing Expenses Closing Stock. AVERAGE INVENTORY = (Opening stock + Closing Stock)/ 2 INVENTORY HOLDING PERIOD = 360/Inventory turnover times It is calculated by dividing the cost of goods sold by the average

Table no:5 S.N O 1 2 3 4 5 YEAR 2005 2006 2007 2008 2009 COGS (Rs In Crs) 27. 21 35. 46 72. 08 40. 37 197. 58 AVERAGE INVENTORY (Rs in Crs) 11. 98 10. 48 7. 30 3. 09 9. 64 TURN OVER TIMES 2.27 3.38 9.86 13 20.48 AVERAGE DAYS IN STOCK (Days) 159 106 36 27 18

Graph no:5.a APGCMS, Rajampet 38

INVENTO RY TURNO VER RATIO TURNOVER RATIO IN % 25 20 15 10 5 0 2005 2006 2007 YEARS 2008 2009 2.27 3.38 9.86 13 20.48

INTERPRETATION
From the above table and graph it is clear that WINs efficiency in turning its inventories is continuously enriching. The turnover ratio of inventory is increasing consistently, this indicates raise in average investment made on inventory. The companys utilization of inventories in generating sales is maximum. The turn over ratio 20.48 highest among all achieved in the year 2009, an indicator of good inventory management. A high inventory turnover ratio indicated that the product is selling well. Graph no:5.b
INVENTORY HOLDING PERIOD NUMBER OF DAYS 200 150 100 50 0 2005 2006 2007 2008 2009 YEARS 36 27 18 159 106

INTERPRETATION
From the above graph Inventory holding period in WIN has consistently come down from the year 2005 to 2009.There fore inventory management is functioning better by clearing stock as early as possible. The company is going well.

2. RAWMATERIAL TURN OVER RATIO

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This ratio indicates the number of times the raw material is placed during the financial year. A low turnover ratio implies the excessive procurement of raw materials, where as high turnover ratio signifies proportionate usage of raw materials in the process of production. AVERAGE RAW MATERIAL = (Opening Raw Material + Closing Raw Material)/2 RAW MATERIAL TURNOVER RATIO = Annual Consumption / Average Raw Material.

Table no:6 AVERAGE RAW MATERIAL Rs in Crs 13. 37 8. 94 15. 11 16. 02 50. 43 TURN OVER (TIMES) 4.3 10.86 7.36 3.53 6.44 AVERAGE DAYS IN STOCK (Days) 84 33 48 101 60

S.NO 1 2 3 4 5

YEAR 2005 2006 2007 2008 2009

SALES Rs in Crs 57. 65 97. 21 111. 33 56. 61 324. 86

Graph no:6.a

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RAW MATERIAL TURNOVER TIMES TURNOVER TIMES 12 10 8 6 4 2 0 10.86 7.36 4.3 3.53 6.44

2005

2006

2007 YEARS

2008

2009

INT ERPRETATION

From the above table and graph WIN shows inconsistency in conversion of raw materials in to work in progress. Raw material turnover ratio is 10.86 in the year 2006, very least i.e. 4.3 in the year 2005.It is better if company places orders for raw materials according to demand. Raw material is huge in the year 2009, where as turn over is not satisfactory. Graph no:6.b
RAW MATERIAL HOLDING PERIOD NUMBER OF DAYS 120 100 80 60 40 20 0 101 48 60

84 33

2005

2006

2007 YEARS

2008

2009

INTERPRETATION
From the above graph Raw material holding period is reasonable in the years 2006 and 2007 where as in 2008 it reached peak, this conveys improper material utilization .In the year 2009 it is 60 days comparatively better. Company needs to take measures for maintaining minimum holding period.

3. WORK IN PROGRESS TURN OVER RATIO

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Work in progress refers to the parts that are between two production operations. The ratio of work in progress indicates number of times it is sold in the year. WIP turn over ratio helps in analyzing the efficiency of the firm in converting WIP in to finished goods. Sales WORK IN PROGRESS TURN OVER RATIO = ----------------------------Average WIP (Opening WIP + Closing WIP) AVERAGE WIP = -------------------------------------------2

Table no:7 SALES Rs in Crs 57. 65 97. 21 111. 33 56. 61 324. 86 AVERAGE WIP INVENTORY Rs in Crs 3. 13 1. 95 0. 75 1. 43 0. 94 TURN OVER TIMES 18. 09 49. 85 148. 44 39. 58 345. 60 AVERAGE DAYS IN STOCK (Days) 20 7 3 9 1

S.NO 1 2 3 4 5

YEAR 2005 2006 2007 2008 2009

Graph no:7.a APGCMS, Rajampet 42

WORK IN PROGRESS TURN OVER TIMES TURN OVER TIMES 400 300 200 100 0 2005 2006 2007 YEARS 2008 2009 18.09 49.85 148.44 39.58 345.6

INTERPRETATION
From the above table and graph Higher the turn over ratio of work in progress better the performance of company .The ratio is highest in the year 2009 i.e. 345.60 this is due to increase in sales .It is least in the year 2005 around 18.09 .The ratio is maximum in 2007 and 2009 due to high sales. Graph no:7.b
WO RK IN PRO GRESS HO LDING PERIO D 25 NUMBER OF DAYS 20 15 10 5 0 2005 2006 2007 YEARS 2008 2009 7 3 9 20

INTERPRETATION
From above graph work in progress holding period ranges from 20 days to 1 day. From this we can make out that among all the three components of inventory WIP holding period is shorter , it is appreciable that period has come down consistently except for the year 2008.

4. FINISHED GOODS TURN OVER

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Finished goods are goods that have completed the manufacturing process but have not yet been sold or distributed to the end user. The ratio indicates number of times that the finished goods are sold in a year. FINISHED GOODS TURNOVER RATIO= Sales / Average finished goods. AVERAGE FINISHED GOODS= (Opening finished goods +Closing Finished goods) /2 Table no : 8 S.NO 1 2 3 YEAR 2005 2006 2007 SALES Rs 57. 65 97. 21 111. 33 56. 61 324. 86 AVERAGE FINISHED GOODS 12. 06 10. 48 7. 30 3. 09 9. 64 TURN OVER TIMES 4.77 9.27 15.23 18.27 33.67 AVERAGE DAYS IN STOCK(Days) 75 39 24 20 11

4 2008 5 2009 Graph no:8.a

FINISHED GO O DS TURNO VER RATIO 40 TURN OVER TIMES 35 30 25 20 15 10 5 0 2005 2006 2007 YEARS 2008 2009 4.77 9.27 15.23

33.67

18.27

INTERPRETATION
From the above table and graph higher the finished goods turn over lesser will be the inventory The ratio is least in the year 2005 i.e. 4.77,later from 2006 to 2009 it has raised consistently .The ratio is highest in the year 2009 around 33.67 ,there fore company is successful in converting finished goods in to sales.

Graph no:8.b APGCMS, Rajampet 44

FINISHED GOODS HOLDING PERIOD NUMBER OF DAYS 80 60 40 20 0 2005 2006 2007 YEARS 2008 2009 39 24 20 11 75

INTERPRETATION
From the above table and graph finished goods holding period is meant to know the number of days inventory is held idle after production process. The period is highest in the year 2005 and it has come down successfully from 2005 to 2009 & has reached 11 days. Minimum holding period indicates efficiency in inventory management.

ABC ANALYSIS

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ABC analysis is a business term used to define an inventory categorization technique often used in material management. It is also known as Selective Inventory Control. ABC analysis provides a mechanism for identifying items which will have a significant impact on overall inventory cost whilst also providing a mechanism for identifying different categories of stock that will require different management and controls When carrying out an ABC analysis, inventory items are valued (item cost multiplied by quantity issued/consumed in period) with the results then ranked. The results are then grouped typically into three bands. These bands are called ABC codes. ABC CODES "A class" inventory will typically contain items that account for 80% of total value, or 20% of total items. "B class" inventory will have around 15% of total value, or 30% of total items. "C class" inventory will account for the remaining 5%, or 50% of total items.

ABC Analysis is similar to the Pareto principle in that the "A class" group will typically account for a large proportion of the overall value but a small percentage of the overall volume of inventory.

STEP-1: FIND OUT ANNUAL CONSUMPTION VALUE OF ITEMS.

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S.NO 4 S.NO 3 1 2 2 3 6 10 4 5 6 7 8 9 10 5 7 8 9

ITEM ACV CUMULATIVE % OF CLASS ANNUAL CODE ACV CONSUMPTION ANNUAL 1580 8990389.61 8990389.61 UNIT PRICE 69.23 CONSUMPTION A ITEM CODE CONSUMPTION (Rs) VALUE IN UNITS 1400 8286987.5 17277377.11 70.08 A (Rs) 620 2094923.92 RTW0GG005000620 630 1714100.5 RTW0GB005500630 730 1459793.16 RTW0GG012501400 1700 906996.97 RTW0GG014001580 2000 885856.96 RTW0GG017002000 3020 651006.52 RTW0GGL06300730 3460 10348 RTD2CGN25003020 3120 7240.28 RTD2CGN25003460 RTD2CGN25503120 RYW0GG015001700 19372301.03 3600 21086401.53 3000 22546194.69 2750 23453191.66 3000 24339048.62 100 24990055.14 2400 25000403.14 25 25007643.42 15 10 250 581.92 571.37 90.15 3013.45 2996.8 93.7 97.32 77.46 84.3 B 2094923.92 B 1714100.5 B 8286987.5 C 8990389.61 C 885856.96 C 1459793.16 C 651006.52 C 10348 7240.28 906996.97

8855.63 99.92 608.25 99.97 26040.26 100 709.25 688.9 3627.99

STEP-2:

REARRANGE THE ANNUAL CONSUMPTION VALUE

IN DESCENDING ORDER

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STEP-3: ASSUME THE FOLLOWING BASIS FOR CLASSIFICATION

CATEGORY

% OF ACV

A B C

70% 20% 10%

STEP-4: CONSTRUCTION OF ABC ANALYSIS GRAPH % of ACV of A item = 17277377.11 / 25007643.42 =70.08 % % of ACV of B item = 22546194.69 / 25007643.42 = 90.15-70.08 =20.07 % % of ACV of C item = 100 90.15 =9.85 %

INTERPRETATION
Once ABC analysis has been done, the following guidelines can be established in respect of each category.

A Items: very tight control, complete and accurate records, frequent review. B Items: less tightly controlled, good records, regular review. C Items: simplest controls possible, minimal records, large inventories,
periodic review and reorder.

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FINDINGS
SAP, Inventory Management Software has significantly improved inventory turns, optimized the flow of goods, and has shorten routes within warehouse, improved cash flow, visibility, and decision making. The turnover ratio of inventory has increased consistently from 2005 to 2009, this indicates optimum utilization of inventory in generating sales. The turn over ratio 20.48 highest among all achieved in the year 2009, conveys that the product is selling well. The proportion of Raw material is highest among all the three. Conversion of raw material in to WIP was efficient in the year 2006 i.e 10.86, sales. In the year 2008 it is 3.53 due to reduction in sales. Work In Progress is least item of total inventory; the percentage held is high 343.18% in the year 2009. Finished goods are the second biggest item of total inventory. The turn over ratio is low 4.77 % in the year 2005, high 33.67% in the year 2009. There is reduction in number of days inventory remains idle after production All over around 3000 items exist in the company , on analyzing sample of items it was found that A items: 70.08 % value 20 % items B items: 20.07 % value 30 % items APGCMS, Rajampet 49

C items: 9.85 % value 50 % items WIN has MRP , Computerized ordering and scheduling system for manufacturing and, it uses bill of materials data, inventory data, and master production schedule to project what material is required, when, and in what quantity. WIN is planning for JIT inventory control system

SUGGESTIONS
The study reveals that the company is maintaining efficient inventory management system. Following suggestions are given to maintain and improve the existing performance, to bring down the raw material level: There should be frequent stock verification. The personal handling the stock may be probably trained with a view to reduce the preventable losses. It is better if company adopts JIT inventory control technique, so that it can avoid excess raw material holding period

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CONCLUSION
The study reveals the policies, procedures, and techniques implemented by the company in order to maintain efficient inventory management. Performance of the company in terms of inventory is great in the recent years .The inventory management should aim at procuring the raw material when the requirement arises most economical way. There is still scope for its improvement.

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BIBILOGRAPHY
Financial Management Financial Management Research Methodology Annual Reports Financial Management WIN I.M.PANDEY S.N. MAHESWARI C.R.KOTHARI WIPRO M.Y. KHAN wipro infrastructure engineering

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