`

A PROJECT REPORT ON INVENTORY MANAGMENT AT SEIMENS LTD SUBMITTED TO:

SGM ENGLISH MEDIUM COLLEGE OF COMMERENCE AND MANAGMENT
AFFILICATED TO SADAR PATEL UNIVERSITY VALLABH VIDHYANAGAR PREPARED BY: VRUSTI RAO TYBBA EXAM SEAT NO: YEAR: 2011-12

Index

Preface
In 21st century, the world is changing very fast. Many new products, services, inventions are coming day by day. Some of them are beneficial to the world and vice-versa. We are coming across many new theories and implementation of machineries. Any serious thinking on contains and emerging issue of modern business suggested that basis pillar through, which the student of management can learn and understand the between theoretical knowledge and practical knowledge. Through it the student can know that how to apply their mind in the real business with the help of management theories, concept and philosophies to become successful in the business world.

I have visited the industry in order to set the practical knowledge about which, I have study in the management lectures. This will ensure that as a student of management, I have known true picture of the industry in the training period.

I have prepared this report so far as my knowledge is concern. This report reflects what I have seen, gained and come to know from industry during the training at SIEMENS.

ACKNOWLEDGMENT
I express our sense of gratitude to our SADAR PATEL UNIVERSITY, for his precious encouragement to enable us to carry out our training successfully. I am very thankful to Mr. Kandarp Brahmbhatt (Manager in Engineering department, Siemens India Ltd, Baroda) who gave me this opportunity to take training in this reputed organization. Also give my thanks to organization project guide Ms. Sapna Mam and finance department guide Ms. Rasmi Mam for the valuable support to the completion of the project. I am expressing our profound thank to all those who helped in making this project much needed moral support and encouragement is provided numerous helps. I am also thankful to my college guide DR Kamini Shah for his guidance.

Declaration
As a part of BBA curriculum, we are requiring to understand the dissertation in the Third year .This project has been fully prepared in pursuit of our eagerness and enthusiasm to explore the new emerging horizons of finance. In this project I have tried my best to gather the information specifically about the company project for manufacturing and have underwent the analysis that too with best of our efforts and under stability about the subject. This project contains the basic information as well as financial implication and general overview of the organization. DatePlace-VVNagar

Introduction
At Siemens, we continually strive to create a safe working environment by being responsive, caring and committed to the various needs governing the security and well being of employees. Skill orientation and training programs also form a major part of various educational initiatives that Siemens undertakes to empower its employees in case of emergency. On the other hand, well defined guidelines, investment in green technologies and environment complaint regulations ensure that as a responsible corporate citizen, we are dedicated towards a sustainable planet. Siemens has always considered safety and environment one of its key focus areas and has always strived to make continues improvement in these two aspects. The highlight of 2008-2009, was the standardization of international standards for certification. During this year, the transformer, Switch-board and Aurangabad incit.Breaker factories have implemented Safety Management System as per international Standard OHSAS 18001.Their factories are now certified by OHSAS 18001 through external auditors. At Siemens, environment concerns have always taken precedence, hence all our factories at Kalwa Aurangabad and Nasik have certified for international standard ISO 14001 for environment protection concrete efforts were made towards natural resources conservation. For example, a Sewage Treatment Plant was at Kalwa works and the switchgear factory started pilot Rain Water Harvesting Project. The treatment and collected water is currently used for Flushing and Gardening. There have been no accidents reported at Kalwa Switchgear factory, GAO works, Nasik works and Baroda works. The numbers of total accidents at all our production units of reduced by 29%.

History
Coupling innovative concepts and visionary ideas with a far-sighted willingness to take entrepreneurial risks in the interest of achieving enduring success, our company founder put Siemens on track to become what it is today: a global provider of leading-edge technologies. And its this same pioneering spirit the spirit that made Werner von Siemens a trailblazer in electrical engineering in his day thats enabled our company to grow and prosper for 160 years. In 1855, it was Siemens that implemented the first major project in the history of telecommunications: a telegraph line between Finland and the Crimea, which transmitted information over a distance of several thousand kilometers. In 1874, it was Siemens that linked Europe to North America via a transatlantic cable. And today, its Siemens that has supplied the wind turbine for the worlds first floating wind farm, off the coast of Norway. Since floating turbines can be positioned with little regard to geographic factors, this truly pioneering project is creating undreamt-of opportunities for exploiting wind power on the high seas. A pioneer of our time this is our vision. To realize it, were continually rekindling our spirit of innovation to open up new perspectives for our company. Our innovative products and solutions are positioning us to tap new markets in which we can capture leading positions. This is our longstanding approach and particularly when the going gets tough our obligation. As Werner von Siemens noted back in 1857, In critical situations, decisive and vigorous action is nearly always the best strategy.

1.2.2 Convincing solutions to tremendous challenges The global financial and economic crisis poses huge challenges for governments and companies around the world challenges that require convincing answers and long-term solutions. The current crisis didnt catch us unawares. On the contrary, wed done our homework and introduced timely measures that will now enable us not only to get through this difficult period but also to emerge from it even stronger than before. We began identifying marketspecific forward-looking trends and drawing the strategic consequences early on. A few years ago, we geared our portfolio to four megatrends: demographic change, urbanization, climate change and globalization. These trends are already influencing the way we live today, and their impact will increase substantially in the decades to come. By bundling our business activities into the three Sectors Industry, Energy and Healthcare, we also set the stage for capturing leading positions in attractive growth markets. In addition, we adapted our management structure to the requirements of our revised portfolio by implementing the most comprehensive company reorganization in 20 years. For example, the CEO principle that we introduced for our top three management levels ensures that the responsibilities for all our business activities are clearly defined the basic prerequisite for achieving a lean, rapid-response organization. To further foster our employees motivation, sense of personal responsibility and entrepreneurial commitment, we began offering our entire workforce from non-management personnel to members of our Managing Board greater opportunities to share in our companys success. To ensure our competitiveness, we launched programs to boost the efficiency of our administrative and procurement processes. And these programs have proved successful as the cost reductions weve achieved demonstrate. In other positive developments, we settled the lawsuits against our company quickly and successfully. We also set up compliance structures and processes that are now the benchmark for companies everywhere in the world. In

short, we took action even before the crisis hit to make our company faster, more efficient and more customer-centric. Today, were an integrated technology company organized into three Sectors and a large number of Regional Companies, which are grouped, in turn, into 17 Regional Clusters. Our businesses are supported worldwide by efficient IT and financial solutions. Our innovations are providing high-tech solutions to the challenges of our day. And our excellent employees, innovative strength, worldwide presence and strong brand identity are making us a trusted partner to our customers even in challenging times. In keeping with the tradition inaugurated by Werner von Siemens, were convinced that if youre not going forward, youre going backward. The current financial and economic crisis is offering a world of opportunities that we intend to rigorously exploit. Our goal is to achieve profitable long-term growth and outpace our competitors. But to reach this goal, three key conditions must first be fulfilled:

A focus on innovation- and technology-driven growth markets

SIEMENS
THE PIONEER IN ENERGY EFFICIENCY

Worldwide presence A strong local partner to our customers

INDUSTRIAL PRODUCTIVITY INTELLIGENT INFRASTRUCTURE SOLUTION

Joining forces to consistently outperform our competitors

[Fig.1]

Leading Market Position Sustainability- Guiding Principle Responsible-Excellent-Innovative

1. A focus on innovation- and technology-driven growth markets Our activities must be oriented toward innovation- and technology-driven markets with long-term growth potential markets in which we also aim to be a leading global player. Today, roughly two-thirds of our revenue is generated by businesses that are No. 1 or No. 2 in their markets. Why do we attach such importance to these leadership positions? Because only if were a market leader can we achieve the profit margins needed to weather tough times. Experience has shown that size alone is not enough to ensure sustainable profitability. Only a company thats a technology trailblazer can successfully expand its business over the long term. Thats why we intend to keep making large investments in research and development and in green and energy-efficient technologies, in particular. Todays innovations give us the resources we need to develop the innovations of tomorrow. 2. Worldwide presence A strong local partner to our customers Serving our customers as effectively and quickly as possible, all around the globe this is the second key enabler of profitable long-term growth. We have to keep expanding our local presence to ensure that we can respond rapidly to changing market requirements. After all, market proximity is not something that can be created at company headquarters. It can only be cultivated by maintaining close customer relationships and a strong local presence. Thats why we make sure that were always where our customers and markets are and where growth is strongest. This is particularly vital in view of the increasingly noticeable shift in the balance of economic power. According to current forecasts, by 2030, economic growth in todays emerging countries will be twice as fast as in the industrialized nations. The economies of the BRIC countries Brazil, Russia, India and China are expected to grow three times as fast as those of their more industrialized counterparts.

In terms of economic performance, the emerging countries are continually narrowing the gap to the industrialized world.

3. Joining forces to consistently outperform our competitors The third key enabler for outperforming our competitors is, quite simply, to be better than they are. And were getting an edge by offering innovative products, solutions and services, cooperating with strong partners and gearing our value chain to efficiency. To beat our competitors, we have to know their strengths and weaknesses. This applies not only to our longstanding competitors but, above all, to ambitious new players in emerging countries. We take shortcomings at our company very seriously. Rather than downplaying them, we address them rigorously to improve our own performance.

Board of Directors
Deepak S Parekh Dr Armin Bruck Sunil Mathura Ajay Jain Chairman Managing Director Executive Director Vice president and Company Secretary

BankersCitibank Detsche Bank HDFC Bank LTD Standard Chartered Bank State Bank of India

AuditorsSR Batlibio &Associates

Cost AuditorsR Nanebhaoy&co

COMPANY PROFILE

The Siemens Group in India has emerged as a leading inventor, innovator and implementer of leading edge technology enabled solutions operating in the core business segments of Industry, Energy, and Healthcare. The groups business is represented by various companies that span across these various segments .Siemens brings to India state of Art technology that adds value to customers through a combinations of multiple high and technologies for completer solutions. The Group has the competence and capability to integrate all products, systems and segments by undertaking complete projects such as Hospitals, Airports and Industrial Units.

The Siemens Group in India comprises of 22 companies, providing direct employment to over 17000 persons. Currently, the group has 18 manufacturing plants a wide network up of Sales and Services offices across the country as well as over 500 channel partners. Today, Siemens with its world class solutions plays a key role in Indias quest for developing modern infrastructure.

Vision
At Siemens we have a clear vision of what we stand for and our goals are answering the worlds toughest questions helped us to become a pioneer in energy efficiency, industrial productivity, affordable and personalized health care and intelligent infrastructure solutions .This success story would not have been possible without our firm believe in our care values .This is what Siemens is all about.

Mission
On the basis of our forward looking technology and solutions we respond to the most challenging questions of our time in the industry. Energy and Healthcare sectors, with support from IT solutions and services. Our wide range products and solutions are designed with the environment in mind and engage with the subject of climate change.

Objectives
Zero reportable Accident achieved for year 2008-2009.Continuously achieved for last three years. Mock Drill on site emergency plan successfully conducted in September 2009. Zero accident achieved for October 2009 for first time for factory &explanation site. First internal audit for ISO 1400-2004&OHSAS18001:2007 was conducted in November 2009. Trees plantation &Environment Talk conducted on 5th June on the occasion of the World Environment Day.

For the first time in the companys 163-year history, a U.S. president has visited a Siemens factory. On APRIL 2010, during his tour of the Midwest, Barack Obama made a stop at the plant manufacturing components for wind power generation in Fort Madison in the U.S. state of Iowa.

Finance Department

TOPIC
Inventory Management Introduction about Inventory
Inventory is generally defined as stock at a particular location.

Traditionally inventory for a manufacturing business is classified as raw materials, work-in-progress, finished goods and MRO (Maintenance, Repairs and Operating supplies). For retail and distribution businesses, majority of the inventory can be labeled as finished goods. For service industries, majority of the inventory can be labeled as consumables. Effective inventory management plays a critical role in the smooth and efficient running of any business. Reducing excess inventory and investing in the right inventories lead to improved customer service, increased inventory turnover, reduced costs and increased profitability. Inventory Constitute significant part of current asset.

On an average approximately 60% of current assets in Public Limited companies in India. A considered amount of fund is required. Improper inventory management affects long term profitability and may fail ultimately. 10 to 20% of inventory is reduced without any adverse effect on production and sales by using simple inventory planning and control.

Objectives 1)
Maximizing Customer Services: Inaccurate customer
forecasts, a multitude of changes to the original customers order and an overall lack of accounts management are major causes of poor customer services performance in terms of on time delivery not suppliers and not purchasing. The result is excessive inventory, which ultimately leads to inventory write offers, high product cost and lower margins. There is a basic principle of inventory. The larger the forecast error ,the higher the desired customer service level and more inventory that must be carried.

2)

Minimizing Inventory Investment: Inventories tie up

cash that the company could use elsewhere in the business excess. In cash create a negative cash flow something that must be avoided. This is why financial people work to keep inventories as low as possible.

3) 4)

Maximum Profit: Profit can be maximized by increasing in

revenues or decreasing cost. One of the best way to do this by proper management of inventory.

Effort should be made to place an order at the right time with right source to acquire the right quantity at the right price & right quality.

Functions
1) Inventory is required to meet the anticipated demand. Customer generally does purchasing without any pre-information to the seller or producer. Many times, he is undecided about the model, make or quantity of the purchase. He would like to see the performance of all the available models. After judging his need and expenditure, he would select one piece. It is almost impossible to know how many pieces of a product would be needed each day. Therefore, inventory serves as a buffer to the anticipated demand.

2) Inventory guards against stock-out situations. There could be many exogenous factors due to which the arrival of raw material may be delayed. Inventory works as the safety stock for such situations.

3) Inventory ensures smooth flow of production process. Satisfaction of customer is dependent on the timely availability of finished goods and spareparts. Inventory plays an important role in it.

4) Inventory management is a high priority area in industry or service sector. This is due to conflicting role of inventory. For example, the salesman wants high level of inventory to keep the promises and quick delivery. On the other hand, warehousing people of the same industry will prefer lower finished goods inventory so that less storage space is needed.

Types of Inventory in Siemens

Raw material & Work in Progress
There are primarily two types of purchases in the Vadodara factory. Certain items are purchased irrespective of the customer order. Thus these are not order specific items .On purchase, these get reflected under plant stock k as raw material inventory, subsequently, when the requirement arises ,these are issued to the customer work breakdown structure which result in the inventory getting transferred is from raw material to work in progress. The second type of purchase is of items which are specific to a customer order. These are purchase directly assigned to the WBS .These generate work in progress (WIP) inventory on purchases. Thus it is necessary to analyze both the raw material inventory and work in progress inventory. The flow of items into WIP inventory is shown in figure: Since it is case of dependent demand of purchasing, most part of the purchases is by backward scheduling .Right sequencing and scheduling is important to optimize the inventory.

Purchase towards Plant stock

Work in progress

Raw material inventory

Issued to WBS

Purchase directly

Inventory

Inventory Control Technique

1) Economic purchase order quantity (How much to order). 2) Reorder level (When to order) 3) Minimum inventory or safety stock.

1) Economic purchase order quantities: In order to control inventory a decision model has been developed to determine the optimum quantity Of material to be purchased of each purchase order is placed, the company incurs certain costs. In order to minimize the costs of placing purchase orders, the company could increase the order quantity to meet the companys entire needs for the year at one time incurring only the cost of one purchase order .However, such a practice will lead to having a large average inventory of working stock, resulting in increased carrying costs. The costs of ordering and costs of carrying inventory may be summarized as follows: Costs of ordering- Preparing purchase or production orders, receiving and preparing and processing related documents. -Incremental costs of purchasing or transportation for frequent orders. -Out of pocket costs of postage, telephone, telegrams, travelling etc. -Extra costs of numerous small/production runs, overtime, setups, training etc.In addition fixed costs in form of salaries, wages of employees connected with this work in purchasing receiving misinspection and material handling department.

Costs of carrying:-Interest on investment -Losses from adolescence and deterioration, spoilage. -Storage space costs, including rent, rates, taxes, electricity etc. -Insurance in addition fixed costs in form of salaries wages etc of employees connected with his work in stores and material handling departments.
Reorder level:Lead time is the interval between placing an order and receiving delivery. If the quantity of demand during lead time is known with certainty the recorder point may be determined. If in the above example, lead time is 2 weeks and the average usage is 18 per week, the recorder point will be 18x2=36 units. The day the level of stock fall to 36 units, an order for 173units will be placed. By the are delivered the stock would be nil and on the day of delivery it will shoot up again to 173 units and so on. Minimum Inventory:If, we assumes with certainty that 18 units would be used per week .In practice, we seldom come across such a situation and demand cannot be Forecast accurately .Actually the demand may fluctuate from period and period .If, therefore the usage per week at any time goes beyond 18 units, the company will be out of stock for sometime .Hence arise the need for providing for safety stocks outs .The recorder point is interrelated with the safety stocks because as the recorder point is moved upwards ,the amount of the cushion is increased .Thus the recorder point is resultant of the demand during lead time plus safety stock .By increasing the safety allowance the reorder point is increased by the same amount .It should be noted that the economic order quantity does not come into the picture and is independent Of safety stock analysis.

There are several methods determining safety stock level. A rough and ready method followed by many companies is to provide a constant safety stock of say, one or two months usages requirements regardless of the item. Another Method mainly based on intuition is to have large safety stock when quantity Usage is high lead time is long or ordering schedule is frequent .Small safety Stocks can be maintained when there is low usage, short lead time of frequent ordering. Another method makes a statistical analysis of the probability of a stock out by predicting the dispersion of usage around average usage and the dispersion of lead times around the average lead time. The above discussions of inventory control are based on the two bins or constants order quantity system.

Nature of Inventory
1) Raw materialBasic inputs that are converted into finished product through the manufacturing process.

2) Work in progress- Semi manufactured products need some

more works before they become finished goods for sale.

3) Finished Goods-Completely manufactured products ready for

sale.

4) Suppliers-Office and plant cleaning materials not directly enter

production but are necessary for production process and do not involve significant investment.

Classification of Inventory -ABC Classification

-HML Classification -XYZ Classification -VED Classification -FSN Classification -SDF Classification -GOLF Classification -SOS Classification

ABC Classification Inventory in any organization can run in thousands of part numbers or classifications and millions of part numbers in quantity. Therefore inventory is required to be classified with some logic to be able to manage the same. In most of the organizations inventory is categorized according to ABC Classification Method, which is based on parent principle. Here the inventory is classified based on the value of the units. The principle applied here is based on 80/20 principles. Accordingly the classification can be as under: A Category Items of Line item 15 %& Contribute to 80% of total annual rupees spend. B Category Items Comprise 15% & Contribute to 15% of annual spend. C Category Items Comprise 70% & Contribute to 5% of usage.

XYZ Classification
On the basis of value of inventory stored Whereas ABC was on the basis of value of consumption to value

X-High value Y-Medium value Z-Least value Aimed to identify items which are extensively stocked.

HML Classification
On the basis of unit value of item. There are 1000 of Quantity @Rs10 and 1000units of RS5. Aimed to Control the purchase of raw material H-High M-Medium L-Low.

VED Classification
Mainly for spare parts because their consumption pattern is different from raw materials Raw materials on market demand. Spares parts on performance of plant and machinery

 V-Vital E-Essential D-Desirable

FSN Classification:
According to the consumption pattern combine obsolete items F-Fast moving S-Slow moving N-Non moving

SDF& GOLF Classification: Based on source of procurement S-Scarce, D-Difficult E-Easy.

Golf
G-Government, O-Ordinary, L-Local, F-Foreign.

SOS

Raw materials especially for Agriculture units. S-Seasonal, OS-OFF Seasonal.

Reasons to Hold Inventory

Meet variations in customer demand Smooth seasonal or cyclical demand Pricing Related-Temporary price discounts Hedge against price increases Take advantage of quantity discounts Process &Supply surprises Internal Upsets in parts of or our own processes. External-delays in incoming goods.

Why to control inventory?

In the simplest method, the purchase man periodically reviews the stock, perhaps visually: To see what inventory items are short supplies and places order when he thinks a minimum level has been reached or when the inventory of a particular item is exhausted. No inventory levels are kept on records .Obviously, such a method is likely to inure excessive purchasing and carrying cost on the one hand and stock out costs on the other .While excessive investment in obsolete or slow moving goods, shortage or inventory may disrupt production or sales may be permanently lost. The improve upon the visual method a reorder line may be drawn in the bin or storage area so that when stock reaches this line, order will be placed .The reorder line in the bin would be high enough to cover normal usage until the new order arrives .a variation of this method is to use the bins systems an order is placed when the working stock bin is empty. Another inventory control approach is through the perpetual inventory system. Managers are already familiar with the principles and produres of this system. Another method used to assist in the control of inventory is the ABC classification .Here the inventory items are classified into groups, usually three, according to the annual cost of the item and ranked according to the rupee value of the usage. It may however, be pointed out here that ABC analysis is not actually a control system in itself ,it shows the way to decide which items are most in need of strict control system . IT is ultimately the management who decides how best to control each class of items.

Inventory Accounting includes: 1) Preparation of accurate post accounting. 2) Evaluation of purchase performance 3) Working out important management ratio live, sales to inventory consumption to inventory turnover. 4) Preparation of material budget. 5) When a material ID purchase received, inspected and placed in stores and entry is made about the purchase throughout received is simple, but the entry for the value purchase is same of the number of items like, a)Invoice price b) Sales tax/octrio c) Excise duty d) Insurance e) Freight, Handling charges etc

Evaluation of Inventory In order to control, we must evaluate performance .The first step in any system of evaluation is that lying down of standards of performance.

The reporting of inventory is mainly based on the category materials in transit and inventory of bitumen drum sheet .Chemicals category also includes all chemicals drawn from stores , but lying in plant unused .The category of consumables and spares includes all items excepting chemical and bitumen drums consumables and spares category include project leftover material and surplus material in stock. Stores in transit category constitutes mainly of 1) 2) 3) 4) L C cleared, but material not received. Lorry received, but material still lying at transporters goes down. Materials received but pending for inspection. Materials, received cleared by inspection but pending for goods receipt voucher.

How is the useful in management of inventory?

The inventory management is a supportive tool which is completely integrated into the ERP system the updating of inventory data takes place stimulanesously, so the current inventory data is available to all other ERP system modules as soon as a material movement has been recorded. With its help, material movement can be recorded immediately and with the transaction type function you can control the material movement which have to be recorded. All merchandise movement date for a product are kept in the ERP system, and so it is possible to keep chronological records of all the material movements for a given product. The inventory can be carried out either -Continuously or -On a deadline basis To take inventory an inventory list of present stock specific to the store in question must be issued .After ascertaining actual stocks with the help of stockiest; this information is recorded in the ERP.

Advantages of Inventory
Inventory is necessary for many businesses manufacturing facilities. Maintaining appropriate inventory levels is crucial, as too much inventory can be costly. An inventory management system helps to control and balance the flow of incoming and outgoing merchandise. For most businesses, a strong inventory management system is advantageous for several reasons 1)Sometimes in competition with other manufactures, delivery requirements are tight .In this situation if orders for raw materials or parts are placed after receiving customers order it may be possible to meet the demand and there required delivery data . It is therefore, advantageous to hold inventories. 2) Buying and producing material in large quantities is profitable as discount and concession are available on large quantities purchases .There is reduced cost per item of selling of machines and plant . There is also reduced clerical work and cost of placing order less frequently. 3) A good industry keeps already stock of products for immediate sale. Inventories of raw material and parts helps to replace these products faster one they are sold and disposed off. 4) There can be difficulties in procurement of raw material and parts due to unexpected strikes, shortage, power break downs or periods of high demand in relation to supply. In this case inventories may come to rescue. 5)More products can be manufactured rapidly when raw materials or parts are hold in stock.

Disadvantages of Inventory
Working capital is tied up with excess inventories interest has to be paid on capital. This increases the cost of production. At the same time there is less available cash for incoming producing investment. 1) They occupy valuable space and may require added storage space for which rent has to be paid 2) Bigger the inventories more the insurance charges to be paid for their security. 3) There will be an increased cost of handling stores and maintaining, their record. 4) There are also more possibilities of misplacements of materials, parts. 5) There is greater risk of loss due to devaluation through changes in prices in prices of manufacturing cost.

Raw material turnover ratio

Raw material turnover ratio=sales/average raw material Year sales Raw material 966723 1118464 1526726 2531516 2587551 Average raw material 728986 1042593.5 1322595 2029121 2559533.5 Raw material t/o ratio 61.31 73.64 62.38 41.08 36.22

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

44695116 76778038 82503628 83367335 92706690

Raw material is those input that are converted into finished product through the manufacturing process. Raw material inventories are those which have been purchased and stored for future production.

Interpretation:
The Raw material T/O ratio is measure of efficiency of Raw material in the whole year. In Siemens LTD, the Raw material T/O ranges from 36 to 73 times A very high Raw material T/o indicates a very Raw material usage efficiency .Siemens LTD is highly efficient in its raw material usage.

80 70 60 50 raw material turnover ratio 40 30 20 10 0 2006 2007 2008 2009 2010 Column1 Column2

Raw material holding period ratio

Raw material holding period=360/raw material turnover

Year

360 days

Raw material T/O ratio

Holding period

2006-07 2007-08 2008-09 2009-10 2010-11

360 360 360 360 360

61.31 73.64 62.38 41.08 36.22

5.87 4.88 5.77 8.76 9.93

Interpretation:
This ratio indicates the time taken by the company to use its raw material usage efficiency of the company .In Siemens LTD, the raw material holding period ranges between 6 to 10 days .It shows a very high efficiency of the company in using its raw material.

raw material holding period

12 10 8 6 4 2 0 2006 2007 2008 2009 2010

raw material holding period

Inventory Turnover Ratio:

Inventory turnover ratio: Sales/Average inventory Year 2006-07 2007-08 2008-09 2009-10 2010-11 Sales 44695116 76778038 82503628 83367335 92706990 Inventory 4842246 7490509 7621143 9721971 15335216 Average inventory 4063118 6166377.5 7555826 8671557 12528593.5 Inventory T/O ratio 11 12.45 10.91 9.61 7.39

Interpretation:
The investment T/O ratio indicates the efficiency of the company in using its investment. The ratio shows how well a company uses its investment. The investment T/O of company ranges from 7 times to 12 times. The ratio shows a good usage capacity of the firm.

inventory turnover ratio

14 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 inventory turnover ratio

Inventory holding period

Inventory holding period=Inventory/sales*360 Year sales Inventory T/o Inventory ratio holding Ratio 4842246 7490509 7621143 9721971 15335216 39 35 33.5 41.98 59.55

2006-07 2007-08 2008-09 2009-10 2010-11

44695116 76778038 82503628 83367335 92706990

Interpretation:
The investment holding period shows the duration of use of inventory .It indicates what time the company takes to convert its raw material into finished. In Siemens LTD, the investment holding period ranges between 35 days. It also shows a range between 35 days to 60 days .It also shows a very high efficiency of the company. The inventory holding period of 60 days indicates that the company takes 60 days to convert its raw material into finished goods.

inventory holding period

70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 inventory holding period

Finished Good Turnover

Finished Good Turnover=Sales/Average finished turnover Year sales Finished goods turnover 1035678 1197080 1488496 1111011 2047366 Avg finished good turnover 1041074.5 1116379 1342788 1299753.5 1579188.5 Finished goods T/O ratio 42.93 68.77 61.44 64.14 58.71

2006-07 2007-08 2008-09 2009-10 2010-11

44695116 76778038 82503628 83367335 92706690

Interpretation:
The finished T/O indicates the efficiency of usage of finished goods. It shows how well a company uses it finished goods inventory .In Siemens LTD, the ratio ranges between 42 to 68 times .It shows a very high efficiency of finished goods inventory for nearly 40-68 times in a year.

finished goods T/O ratio

80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 finished goods T/O ratio

Finished goods holding period

Finished goods holding period=360days/finished good turnover year 360 days Finished goods T/O ratio 42.93 68.77 61.44 64.14 58.71 Holding period 8.38 5.23 5.85 5.61 6.13

2006-07 2007-08 2008 -09 2009-10 2010-11

360 360 360 360 360

Interpretation:
This ratio indicates the period a company takes to use its raw material its finished goods. It shows the efficiency of the company ranges between 5 to 8 days .It also shows a very high efficiency of the company.

finished goods holding periods

9 8 7 6 5 4 3 2 1 0 2006 2007 2008 2009 2010 finished goods holding periods

ERP
ERP is a solution, which -Facilitates companywide integrated information systems, covering all functional areas. -Performs core corporate activities and increase customer service augment Corporate image. ERP Definition:Software solution that addresses the enterprise needs, taking a process views of the overall organization to most the goals, by highly integrating malfunctions and under a common software platform. Why ERP? -For management to know what is happening in the company. -One solution for better management. -For cycle time reduction. -To achieve cost control & low working capital. -To be competitive for survival. -To get latest technologies. -To satisfy the customers with high expectation. In efforts to improve inventory management Siemens have invested millions in enterprise resource planning which allow employees to use one software package with a number of integrated modules rather than multiple conflicting systems with different operating platforms and formats. The ERP system is only a management tool that must be effectively applied and integrated to achieve success

Purchases Procedures
Siemens follows the following process of purchasing: 1) Receipt of purchasing data: The first step comprises of collecting the receipt of purchases. 2) Does a rate contract exist for item to be procured? Further, it arises a question i.e. Why is rating necessary? The answer to this is helps to analyze the capabilities of the vendors. It is seen as to what the strengths of the vendors are and whether to contract or not. For rating price are the most important criteria. Rates are decided every six months or one in a year. Main criteria of rating: a) Delivery importance laid is of 30% b)Quality-importance laid is of 30% c) Price importance laid is of 40% The vendor is approved through the rating. How can the rating be improved? It means to look for the capacity constraints .It basically means seeing as to which capacity is overloaded. What are the reasons for low rating? The reasons for low rating are strikes, riots, lockouts etc Siemens by the year 2012 aims to reach the largest of 2000 crores. A quotation is requested by the company the quotation is requested by the company then from the approved vendors. 3) Receipt and evaluation of offers, brings all suppliers offers on common base and selection of the supplier:The offers valid are then evaluated by the company. It is seen as to which offer can be taken up the company meeting their requirements. The supplier offer are then united and final conclusion is drawn i.e. a supplier is selected the best of all for the company

4) Negotiation and resolution of price: The next step is to negotiate for the price .The price may be technical or commercial. Further, the deviations if any are resolved by talks or personal means conclusion deviations if any are resolved by talks conclusions is derived which is apt for the parties .The contract is not furthered till the issues are resolved. 5) Selection of the vendor: After the supplier is selected and the issues are settled the next step is that of selecting the vendor. 6) Preparation, signing and release: After setting all the preliminary requirements a purchase order is prepared. The purchase order is prepared. The purchase order is then signed by the project manager and further it is released. Then a monthly report of the non conformance cost is given to the quality management department if there is any. 7) Inspection calls, inspection clearance and dispatch clearance. 8) Payments processing: Here the documents are forwarded to the commercial for the payment. 9) The performance of the suppliers are reviewed.

Products of Siemens

Turbines
Type of Turbines
The Steam Turbines manufactured by the factory at Vadodara are classified by the output of power that it can help to generate .The range of models is as follows: SST-600 Up to 150 MwSST-300 Up to 50Mw SST-200 Up to20 Mw SST-150 Up to 8 Mw SST-50 Up to2 Mw

Condensers
TYPE CONDENSERS
The Condensers manufactured by the factory at Vadodara are classified by the surface area and the turbines rating it can be used for the range of model is as follows: 6500 sq meter from 100 MW to 150

MW Up to 6500 sq meter from 45 MW to 100MW

Up to 2000 sq meter

from 45 MW

Findings of the Study

-It can be easily determined how much the Siemens Company can hold the inventory in reserve stock per annum. -Inventory should always be in such a way that it should avoid excess stock of inventory .It is very much important to plan, procure a sufficient level of inventory. -Inventory together with receivable and cash and bank balance constitute around 30% of the total current assets effective control of all these factors can increase the profitability of an organization. -If investment in current assets is to be reduced, the components of inventory must be rocked down being the controllable assets as compared to receivables.

Suggestions
-The company must maintain safety stock in order to avoid stock out (no inventory) conditions and helps in continuous flow. -The company is expecting more inventories for future. The management is required to maintain the some inventory trend in the coming year. -It requires maintaining high turnover ratio rather than lower ratio. A high inventory turnover rather than the lower ratio. A high ratio implies good and efficient business activities .It also indicates when their investment in inventory is within proper limit or not.

Conclusion
Every organization process has its own merits & demerits of organization is totally flow less .While undergoing the winter training at Siemens India Ltd I came across many merits and demerits of the same . I would like to highlight some of the good features of Siemens. The company has reached great heights in its field. The company gives a tough competition in its area of functioning. The company believes in maintaining a healthy and positive relationship among its employees Siemens India LTD can be defined a positive strength .They believe and value human dignity. The value freedom and teamwork in their inter personnel deals. On a whole, it was a great experience for me. I had a glimpse of the real professional and whole it was world. A learnt a lot on the whole it was worthwhile experience.