Professional Documents
Culture Documents
Inventory Mangement BHEL (Theoritical Concept)
Inventory Mangement BHEL (Theoritical Concept)
Submitted by:
Mrs. S. ANAND
AO, Finance Deptt. (BHEL)
Ranipur, Haridwar
(Uttarakhand)
VIKAS MALIK
M.B.A (IIIRD SEM)
B.C.E.T
LUDHIANA (PUNJAB)
115
PREFACE
There has been a great flux in the subject matter of financial
management . About three- decade ago , the scope of financial was
restricted to the raising of funds whenever needed & little
significance used to the financial decision & problem solving. The
modern thinking in the financial management gives great
importance to management decision making policies. Today
financial manager occupies a key position in top management and
plays a dynamic role in solving complex management problem.
The basic purpose of this project is to have a through and deep
understanding of financial position of the firm .A number of books
had been consulted for writing theory; data had been collected from
the balance sheet and other source.
I have tried to minimize the printing mistake and put the contents in
short & crisp. I welcome the critical suggestion and any mistake
found in the project.
115
ACKNOWLEDGEMENT
Behind every study there stands a myriad of people whose help and
contribution make it successful. Since such a list will be a prohibitively long, I
may be excused for important omissions.
The guidance, help and co-operation of my supervisor Mrs S. Anand AO,
Finance Deptt. BHEL, Hardwar is gratefully acknowledged with profound
gratitude.
115
DECLARATION
I hereby declare that the study entitled INVENTORY MANAGEMENT in
the context of H.E.E.P. BHEL being submitted by me in the partial fulfilment
of the requirement for the award of MASTERS IN BUSINESS
ADMINISTRATION is a record of my own work. The study was conducted
at Finance Department, H.E.E.P. BHEL.
The matter embodied in this project report has not been submitted to
any other University or Institution for the award of degree This project is my
original work and it has not been presented earlier in this manner . this
information is purely of academic interest.
115
115
115
COMPANY'S OBJECTIVES
BUSINESS OBJECTIVE:
GROWTH:
To ensure a steady growth by enhancing the competitive edge of BHEL in
existing business, new areas and International operations so as fulfill national
expectations from BHEL.
PROFITABILTY:
To provide a reasonable and adequate return on capital employed, primarily
through improvements in operational efficiency, capacity utilization and
productivity, and generate adequate internal resources to finance the
company's growth.
115
CUSTOMER FOCUS:
To build a high degree of customer confidence by increasing value for his
money through international standards of product quality, performance and
superior services.
PEOPLE-ORIENTATION:
To enable each employ to achieve his potential, improve his capabilities,
perceive his role and responsibilities participate and contribute positively to
the growth and success of the company. To invest in human resources
continuously and be alive to their needs.
TECHNOLOGY:
Achieve technological excellence in operations by development of
indigenous technologies and efficient absorption and adaptation of imported
technologies to suit business needs and priorities, and provide the competitive
advantage to the company.
115
IMAGES:
To fulfill the expectations, which stakeholders like Govt. as owner,
employees, customers, ant the country at large have from BHEL.
115
VISION:
Earlier:
"A world class, innovative, competitive and profitable engineering enterprise
providing total business solution".
Now:
"A world class engineering enterprise committed to enhancing stake -holder
value".
world
class
takes
care
of
innovation
profitability
and
competitiveness
Providing total business solutions is the action part and hence taken to
mission statement.
The main objective of mission is to such an extent that every stake holder
prefers to be associated with BHEL in BHEL would be his preferred
destination.
115
MISSION:
Earlier
To be the leading Indian engineering enterprise providing quality products
systems and services in the field of energy, transports, industry infrastructure
and other potential area.
Now:
To be an Indian multi-national engineering enterprise providing total business
solution through quality products systems and services in the field of energy
industry , transportation, infrastructure and other potential area.
115
VALUES
Earlier
Meeting commitments made to external and internal customers.
Foster learning creativity and speed of response
Team playing
Respect for dignity and potential for individuals.
Loyalty and pride in the company
Zeal to excel
Integrity and fairness in all matters
Now:
Strike adherence to commitments
Foster learning, creativity and team work.
Ensure speed of response
Respect for dignity and potential for individual
Loyalty and pride in the company
Zeal to excel and zest for change
Integrity and fairness in all matters
Most of them have been rephrased.
115
"Zest for change" has been added as change has been integral with success
and the rate at which change is needed is very high compared to earlier
period.
115
BHEL AN OVERVIEW
115
115
115
Manish Gupta
Director
Shekhar Datta
Director
Raman Singn Sidhu
Director
WHOLE-TIME FUNCTIONAL DIRECTORS
SK Jain
Director (HR)
Ramji Rai
Director (ER&D)
AK Mathur
Director (IS&P)
K Ravi Kumar
Director (Power)
CS Verma
Director (Finance)
COMPANY SECRETARY
NK Sinha
115
PRODUCT PROFILE
115
Electrical Machines
Piping Systems
Power, Distribution and Instrument Transformers
Switch Gear
Control Gear
Distributed Digital Control for Power Stations
Bus Ducts
Rectifiers
Porcelain Insulators, Ceralin
INDUSTRY SECTOR
115
Simulators
115
115
1. ELECTRO CONSULT
ITALY
2. ABB
SWITZERLAND
3. BEEHTEL
USA
USA
5. GENERAL ELECTRIC
USA
6. RAYTHEON
7. WESTINGHOUSE
8. CNMI & EC
9. SANGHAI ELECTRIC CO
USA
USA
CHINA
UK
10.GEC-ALSTHOM
UK
11.ELECTRIM
POLAND
12.FRANCO TOSI
FRANCE
13.FUJI
JAPAN
14.HITECHI
JAPAN
115
15.MITSUBISHI
JAPAN
16.TOSHIBA
JAPAN
17.ROLLS ROYCE
GERMANY
SIEMENS
GERMANY
B.H.E.L. IN INDIA
# REGIONAL OFFICES (POWER SECTORS)
***********************************
1. NOIDA (NORTHERN REGION)
2. KOLKATA (EASTERN REGION)
3. NAGPUR (WESTERN REGION)
4. CHENNAI (SOUTHERN REGION)
# BUSSINESS OFFICES
*******************
1. BANGLORE
2. BHUBANESHWAR
3. CHANDIGARH
4. CHENNAI
5. GUWAHATI
6. HARIDWAR
7. JABALPUR
8. JAIPUR
9. KOLKATA
10. LUCKNOW
11. MUMBAI
12. NEW DELHI
13. PATNA
14. RAIPUR
15. RANCHI
16. SECUNDERABAD
17. THIRUVANANTHAPURAM
18. VADODARA
115
# MANUFACTURING UNITS
***********************
HEAVY ELECTRICAL EQUIPMENT PLANT
HARDWAR DIVISION.
TRANSFORMER PLANT
JHANSI DIVISION.
ELECTRONICS DIVISION,
BANGLORE.
115
BANGALORE.
INSULATOR PLANT,
JAGDISHPUR.
# SERVICE CENTRES
******************
1.
2.
3.
4.
5.
6.
7.
8.
CHANDIGARH
KOLKATA
NAGPUR
NOIDA
PATNA
SECUNDERABAD
VADODARA
VARANASI
DOMESTIC:1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
19)
20)
21)
22)
23)
24)
25)
26)
27)
28)
29)
30)
31)
32)
33)
34)
35)
115
115
115
25-Jul-2007
BHEL
to set up
ecofriendly
Cogeneratio
n power
plant at
IOCs
Gujarat
Refinery
; Wins
Rs.4,310
Million
EPC
contract
against
115
Internati
onal
Competit
ive
Bidding
19-Jul-2007
BHEL BHELs Participative Culture Pays Rich Dividends;
set to
Employees Improvement Projects Rewards Scheme
become Leads to Savings of Rs.1,770 Million in 2006-07
sole
supplier
in the
world
for highrating
Disc
Insulator
s for 800
kV Ultra
High
Voltage
Direct
Current
Transmis
sion
Lines9Jul-2007
3-Jul-2007
BHEL
bags
ICWAI
National
115
Award
for
Excellen
ce in
Cost
Manage
ment
2006
29-Jun-2007
Union
Minister
for
Heavy
Industrie
s and
Public
Enterpris
es
reviews
power
projects
under
executio
n by
BHEL
in
Maharas
htra;
Move
aimed at
expeditin
g
commiss
115
ioning in
view of
critical
power
situation
in the
state
25-Jun-2007
BHEL
once
again
outbids
Chinese
company
; Wins
Rs.1,060
Million
contract
for
Turbo
Blower
Package
from
RINL
18-Jun-2007
BHEL
bags
Rs.1,390
Million
order for
supply
115
of
Transfor
mers
13-Jun-2007
BHEL A STAR
PSU
12-Jun-2007
BHEL
WORKS
24x7 TO
MEET
NATION
S
POWER
AGEND
A
2-Jun-2007
BHELs
globalisa
tion
thrust
gets
recogniti
on;
EEPC's
Top
Export
Award
conferre
d on
BHEL
115
for the
17th
consecut
ive year
30-May-2007
BHEL
EXCEL
S ON
ALL
COUNT
S;
BHEL's
Turnover
surges
29%;
Net
jumps
44% to
Rs.24,15
0
Million
in 200607
21-May-2007
BHEL's
power
generatin
g sets
achieve
all-time
high
PLF &
115
generatio
n;
substanti
ally
boost
country's
power
generatio
n in
fiscal
2006-07
14-May-2007
BHEL
to invest
Rs.32,00
0
Million
on
Expansio
n drive
to meet
the
countrys
Power
forecast
in the
Eleventh
Plan
10-May-2007
BHEL
sets
sights on
115
becomin
ga
US$10
Billion
company
by 2012;
Unveils
Strategic
Roadma
p to
further
accelerat
e growth
moment
um
30-Apr-2007
BHEL
identifies
overseas
business
as major
growth
plank;
Targets
Sevenfold
increase
in
overseas
business
by 2012
27-Apr-2007
115
BHEL
employe
es win
maximu
m
number
of Prime
Minister'
s Shram
awards
16-Apr-2007
BHEL
Doubles
R&D
spend,
Trebles
Turnover
from
Products
develope
d inhouse to
Rs.25,10
0
Million
in just
two
years
29-Mar-2007
BHEL
establish
es fourth
World-
115
class
Centre
of
Excellen
ce;
Aimed at
Consolid
ating
Strength
s in
Crucial
Technolo
gy Areas
22-Mar-2007
Power
Stations
equipped
with
BHEL
Equipme
nt set
new
benchma
rks; Win
Maximu
m
Meritori
ous
Producti
vity
Awards
15-Mar-2007
BHEL
115
establish
es stateof-theart
Instrume
nt
Calibrati
on
Centre
for
enhancin
g
precision
and
accuracy
of
testing
of
thermal
sets
8-Mar-2007
BHEL
awarded
MoU
Award
for
Excellen
ce in
Performa
nce by
the
Prime
Minister
115
27-Feb-2007
BHEL
pays alltime
high
125%
interim
dividend
for fiscal
2006-07
26-Feb-2007
BHEL
outbids
Europea
n MNCs
and
Indian
majors;
Bags
World
Bankfunded
400 kV
Turnkey
Substatio
n
contract
in
Maharas
htra
115
23-Feb-2007
BHEL
Commis
sions
250 MW
Thermal
Unit in
Maharas
htra; Six
Million
units of
Power to
be added
to the
State
Grid
Takes
BHEL
sets tally
in
Maharas
htra to
88% of
installed
thermal
capacity
10-Mar-2007
First
BHELbuilt 500
MW set
marks
two
115
decades
of
Establish
ment of
Technolo
gy for
500 MW
sets in
India
8-Feb-2007
BHEL
demonstr
ates its
Internati
onal
Competit
iveness;
Secures
Order
for 520
MW
Hydro
Electric
Project
in
Himacha
l Pradesh
6-Feb-2007
Equipme
nt
performa
115
nce pays
rich
dividend
s;BHEL
wins
Mega
Contract
for
equipme
nt to
generate
1500
MW of
power in
Maharas
htra
1-Feb-2007
BHEL
once
again
outbids
Chinese;
Wins
turnkey
order for
Asian
Develop
ment
Bankfunded
Project
in
Banglad
esh
115
30-Jan-2007
BHELs BHEL wins mega turnkey contract for 2x500 MW
power Mejia TPS
generatin
g sets
achieve
record
generatio
n in first
nine
months
of 200607
24Jan2007
8-Jan-2007
BHEL BHEL to set up eco-friendly Co-generation power plant
bags
at Haldia Refinery
Rs.3,800
Million
Renovati
on &
Moderni
sation
contract
from
PSEB
21Dec2006
7-Dec-2006
115
BHEL
commiss
ions 600
MW
Western
Mountai
n Gas
Turbine
Power
Project
in Libya,
on
turnkey
basis
4-Dec-2006
CMD,
BHEL
Honoure
d
27-Nov-2006
BHEL
writes
another
success
story;
Gets
third
consecut
ive
Captive
Power
Plant
115
order
from
Hindusta
n Zinc
16-Nov-2006
BHEL
becomes
the first
PSU to
win the
CIIExim
Business
Excellen
ce Prize
24-Oct-2006
BHEL
showcas
es
technolo
gical
strengths
at
'Powerge
n India
&
Central
Asia
2006'
23-Oct-2006
BHEL
pays all-
115
time
high
145%
dividend
for fiscal
2005-06
12-Oct-2006
BHEL
wins
Rs.9,500
Million
highestvalue
captive
power
plant
order
5-Oct-2006
BHEL
achieves
significa
nt
breakthr
ough
with first
commerc
ial order
for
indigeno
usly
develope
d first-
115
of-itskind in
the
world
Controll
ed Shunt
Reactor
20-Sep-2006
BHEL
wins
Rs.12,24
0
Million
contract
for
2x250
MW
Harduag
anj TPS
18-Sep-2006
BHEL
& its
employe
es win
two
National
Safety &
three
Vishwak
arma
National
Awards
115
5-Sep2006
31-Aug-2006
Three
Manufac
turing
Plants
and Two
Power
Sector
Division
s bag the
CIIExim
commen
dation
for
business
excellen
ce.
1-Sep-2006
Mr.
C.P.
Singh
appointe
d as
Director
(Enginee
ring,
115
Research
&
Develop
ment),
BHEL.
29-Aug-2006
BHEL
on
expansio
n drive
to meet
countrys
power
capacity
addition
plans.
23-Aug-2006
BHEL
holds
Conclav
e of
Liaison
Officers
& SC/ST
Welfare
Associati
ons.
20-Sep-2006
BHEL
bags
Rs.12,24
0
115
Million
contract
for
2x250
MW
Parichha
TPS.
10-Aug-2006
BHEL
bags
EEPC's
Top
Export
Award
for the
16th
consecut
ive year
11-Aug-2006
CMD,
BHEL
honoure
d with
Distingui
shed
Fellow
Award 2006.
3-Jul-2006
BHEL
wins
Rs.8,420
Million
115
contracts
for two
Power
Projects
in
Rajastha
n.
10-Jul-2006
BHEL
proves
internati
onal
competit
iveness;
wins
contract
for 250
MW
Thermal
Power
Plant
from
Tata
Power
Compan
y
20-Jul-2006
BHEL
once
again
wins
contract
115
in
Ethiopia,
beating
Chinese
compani
es
1-Aug-2006
BHEL
to set up
490 MW
Power
Plant for
NTPC at
Dadri
27-Jul-2006
BHEL
commiss
ions 500
MW
thermal
set at
Vindhya
chal
STPS
29-Jun-2006
BHEL
bags
contracts
for two
Projects
in
Afghanis
tan.
115
26-Jun-2006
BHEL
once
again
beats
Chinese;
Wins
contract
for
ADBfunded
Project
in
Banglad
esh.
22-Jun-2006
BHEL
bags
contracts
for two
Hydro
Power
Projects
from
APGenc
o.
12-Jun-2006
BHEL
bags
major
order for
110.6
MW
115
Captive
Power
Plant.
5-Jun-2006
BHEL
bags
order for
Lift
Irrigatio
n
Scheme
in
Andhra
Pradesh.
18-May-2006
BHEL
achieves
Rs.11,51
0
Million
turnover
through
products
develope
d inhouse.
9-May-2006
BHEL
secures
singlelargest
export
115
order for
transfor
mers
from
Egypt.
5-May-2006
BHEL's
power
generatin
g sets
achieve
all-time
generatio
n; boost
country's
power
supply in
fiscal
2005-06.
10-Apr-2006
BHEL
wins
Rs.12,00
0
Million
order for
Lignite
Based
Power
Project.
20-Feb-2006
115
BHEL
commiss
ions
Indias
largest
SolarDiesel
Hybrid
Power
Plant in
Lakshad
weep.
14-Feb-2006
BHEL
secures
USD
457
million
turnkey
contract
for 500
MW
Power
Plant in
Sudan.
9-Feb-2006
BHEL
to set up
90 MW
Captive
Power
Plant in
West
115
Bengal.
2-Feb-2006
BHEL
commiss
ions 110
kWp
stand
alone
Solar
Power
Plant in
Sunderb
ans.
16-Jan-2006
BHEL
machine
s to
power
Bhilwara
Groups
3rd
Hydro
Power
Plant.
12-Jan-2006
BHEL
bags
EEPC's
Top
Export
Award
for the
15th
115
consecut
ive year.
2-Jan-2006
BHEL
writes
another
success
story;
equipme
nt
performa
nce pays
dividend
s;
machine
s to
power
Asia's
largest
CPP.
SALIENT ACHIEVEMENTS:
Played pro-active role in arranging interaction of TBG
professionals with UPCL in the area of Transmission business.
Insured speedier response to customer queries.
115
Joint inspection
115
Verification of bills
Payment follow up
Collection of payment
NCES
115
BHEL AT A GLANCE
(Financial Information)
115
21401
18739
14.2
8323
7182
15.9
Employee (Nos.)
43636
42124
3.6
4430
3736
18.6
2859
2415
18.4
Dividend
746
600
24.4
Dividend Tax
127
93
36.8
1986
1722
31.7
Total Assets
29352
22280
31.7
Net Worth
10774
8788
22.6
95
89
6.3
0.01
0.01
0.0
220.1
179.5
22.6
- Earnings
58.4
49.3
18.4
1810
1657
9.2
Value Added
Retained Earnings
Total Borrowings
Debt : Equity
(US $ in million)
Turnover
5419
4344
24.8
1122
866
29.5
724
560
29.3
115
Y
Year 2007-08
High
Low
y
Year 2006-07
High
Low
Year 2005-2006
High
Low
April
2593.80
2145
2444
2200
830
755
May
2922.50
1351
2485
1600.10
950
789.25
June
1544
1301
2046
1531.20
897.5
832
July
1899
1520.10
2067
1730.25
1039
841.5
August
1900
1540
2307.90
2026
1144
971
September
2089.20
1856
2414.70
2185.25
1244
1060
October
2750
1970
2498
2259
1318
1080
November
2925
2380
2556.50
2367
1498.5
1115.05
December
2870
2348
2668
2232
1489
1316
January
2626
1800
2595
2105
1815
1185
February
2366
1850
2572
2107
2050.5
1780
March
2235
1765
2321.35
1940
2280
1990
"Share price information data is provided for information only and is not
intended for trading purposes. BHEL shall not be liable for any errors or
delays in the information provided, or for any actions taken in reliance
thereon."
-S-T-R-E-N-G-T-H- (S): -
115
Low cost producer of quality equipment due to cheap labour and fully
depreciated plants.
Flexible manufacturing set up.
-W-E-A-K-N-E-S-S-E-S- (W)
High working capital requirement due to its exposure to cash starved SEBs
(State electricity boards).
Inability to provide project financing.
-O-P-P-O-R-T-U-N-I-T-I-E-S- (O) :-
High expected growth in power sector (7000 MW/ p.a. needs to be added).
115
-T-H-R-E-A-T-S- (T):-
115
******
OVERVIEW OF
HEEP, HARDWAR
115
BHEL was established nearly 40 years ago to become the most important
symbol of Heavy Electrical Equipment industry in India and rank amongst the
first few in world. It is the largest heavy engineering and manufacturing
enterprise of its kind in India with well- recognized track record of performance,
making profits continuously since 1971-72. The Company achieved a turnover
of Rs.105200 Million and Profit before Tax Rs. 16060 Million. BHEL caters to
core sector of Indian economy viz.
Power Generation
Transmission,
Industry,
Transportation,
Telecommunication,
Renewal Energy Defense etc.
The wide network of BHELs, 14 manufacturing divisions, 4 Power sector
regional centers, over 150 project site and service centers and 15 regional offices
enable the company to be closer to its customer and provide them with suitable
products, system and services at competitive prices. Having attained ISO 9001,
14001certification, BHEL is now on its journey towards TQM .The Company
inherent potential coupled with its strong performance over the years has
resulted in it being chosen as on of the Navratna PSUs which enjoy the support
from the government their endeavors to become global players. with its prudent
financial management. BHEL occupies an all-important niche as evident by its
ranking by CII amongst top eight PSUs based on financial performance.
Recently in survey conducted by business India, BHEL has been rated as 7th Best
Employer in India.
115
HEAVY
ELECTRICAL
EQUIPMENT
PLANT,
HARDWAR:
Heavy Electrical Equipment Plant, Hardwar of this Multi-unit corporation with
its 7467 strong highly skilled technicians, engineers, specialists and professional
experts is the symbol of Indo Soviet and Indo German Collaboration. It is one of
the four major manufacturing units of the BHEL With turnover of 1400.25
crores and PBT of Rs. 180.35crores. HEEP is engaged in the manufacture of
Thermal and Nuclear Sets up to 1000MW, Hydro Sets up to HT Runner dia
6300mm, associated Apparatus Control gears, AC& DC Electrical machines and
large size Gas Turbine of 60-200 MW. HEEP Hardwar contributes about 44% of
Indias total installed capacity for power generation with total capacity of
Thermal, Nuclear & Hydro Sets of over 45000MW currently working at a Plant
Load Factor of 76% and Operational Availability of 86%..
HISTORICAL PROFILE:
115
KEY COMPETITORS:
Power Sector Giant of the World viz. Siemens Germany, ABB, General electric
of USA etc. are the major competitors of HEEP. All these are the MNCs and
enjoy huge financial and R&D backup.
CORPORATE CITIZEN:
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HEEP Hardwars Strategic plans and its policy & strategy are commensurate
with BHEL Corporate / strategic Plan . As first PSU to adopt Corporate Planning
as a process . Board meetings for long range development , BHEL has always
guided other PSUs in their Corporate planning
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1975
1978
1982
1993
1995
1997
1997
1998
1999
1999
1999
1999
2000
2001
2001
2001
2002
2002
2002
2003
2004
2005
BHEL bags EEPC's Top Export Award for the 15th consecutive year.
BUSINESS POLICY:
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and
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* Thermal Sets
Upto 1,000 MW
* Hydro Sets
* Gas Turbines
* Light Aircraft
Two Seater
* AC / DC Machines
5, 20,000 KW
various combinations
* Medical Equipment
Naval Guns
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The Power supplier of the country National Thermal Power Corporation, NHPC,
NPC, and other IPPs and various State electricity Boards, are the key external
customers of HEEP Hardwar. HEEP has a long standing-relationship with its
customers. Power Sector-Regions, Power Sector Technical Services and other
sister unit of BHEL are the key Internal customers. Manufactures of Casting and
Forging, ETS, Steels including alloy steels, component of the product nonferrous and insulating materials, equipment etc. are its suppliers. Some of the
key suppliers are Collaborators M/s Siemens Germany, sister unit CFFP, SAIL,
near by Ancillaries developed by BHEL etc. To further strengthen the relations,
one to one long term cooperation meetings are being held by BHEL with its 200
major suppliers on regular basis.
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carrying out further improvement plans and giving a structured thrust to TQM
movement
In July 2001, Units TQ Council reviewed the TQ Action Plans 2001-02 for its
effectiveness and impact on accelerating the pace of improvement and
consequent TQ Score. Executive Director laid the challenge of achieving the TQ
score of 650.With an objective to bring awareness about he CII-EXIM Business
Excellence Model amongst the Sr. Executives, the first Top Management TQM
Workshops held at Rishikesh during oct.2001Executive Director who is TQ
Assessor also, himself steered the Workshop with assistance from some
experienced TQ Assessor of HEEP. It followed by second Top Management
TQM
Workshop
steered
again
by
Ed
was
held
at
HRDC
on
viz. Trichy, Hardwar, Bhopal and Hyderabad along with Power Sector Northern
Region received the coveted CII- EXIM commendation certificates. Other
significant achievements included:
- 'IMC Ramakrishna Bajaj National Quality Award 2004' to BHEL's
Ranipet plant making it the first PSE to win this award.
- BHEL's Hyderabad plant was adjudged the 'Best Organization in
promoting Quality Circles' for the second consecutive year by QCFI
chapter convention.
For contribution to the Renewable Energy sector, the SESI2004: PVSEC
Award for Applications', was conferred on BHEL's Electronics Division, by
solar Energy Society of India.
Role of finance functionFinance function is the backbone of any organization. The finance function
plays a very critical role in the maximization of shareholders who provide the
funds to the company. This
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(ii)
(iii)
(iv)
(v)
(vi)
(vii) Scrutiny , payments and accounting of bills of carriers and insurers and
other miscellaneous claims relating to the outwards consignments.
(viii) Calculation and scrutiny of data for payments of royalties to the
collaborators.
(ix)
(ii)
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(iii)
(iv)
(v)
Payment of bills for ocean freight ,port trust dues ,custom duty,local
agents commission and clearing agents bills,transit insurance bills ,bills
of contractors for transport /handling etc. and accounting of such
payments are made at regional offices.
(vi)
(vii) Keeping account of earnest money and security deposits received from
tender and suppliers.
(viii) Adjustment of stores in transit to be made at the close of the year.
3. WORKS SECTION Works section of the company is dealing with the following functions:
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(i)
(ii)
(iii)
(iv)
(v)
(vi)
4. COST SECTION Cost- section of the company is divided into following two sections viz,
PRODUCT COST & CENTRAL COST and these deals with the following
functions :(i)
(ii)
(iii)
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(iv)
(v)
(vi)
(vii) Preparation of cost sheet of different product and their analysis for
future planning.
5. PAYROLL SECTION This section deals mainly with the following functions :
(i)
(ii)
All account work related to personal payments and disclose profit and
loss account of the company.
(iii)
(iv)
(v)
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(vi)
(vii) All account work related to personal payments and disclose profit and
loss account of the company.
(viii) Dealing with income tax authority with regard to personal taxation of
employee.
(ix)
6. BOOKS AND BUDGET SECTION This section deals mainly with the following:(i)
(ii)
(iii)
(iv)
(v)
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INTRODUCTION
TO
INVENTORY
MANAGEMENT
INTRODUCTION
115
WHAT IS INVENTORY
A companys merchandise ,raw materials, and finished and
unfinished products which have not yet been sold is called Inventory.
The term inventory management is used in two ways unit control and
value control. Production and purchase officials use this word in term of unit
control whereas in accounting this word is used in term of value control. As
investment in inventory represents in many cases, one of the largest assets
item of business enterprises particularly those engaged in manufacturing,
wholesale trade and retail trade. Sometimes, the cost of material used in
production surpasses the wages and production overheads. Hence, the proper
management and control of the capital invested in the inventory should be the
prime responsibility of accounting department because resources invested in
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inventory are not earning a return for the company. Rather, on the hand , they
are costing the firm money both in terms of capital costs being incurred and
loss of opportunity income that is being foregone.
NATURE OF INVENTORIES
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costs,
(b)
return, and
(c)
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Where,
A=Annual requirement.
O=per order cost.
C=per unit carrying cost.
WHEN SHOULD THE FIRM PLACE AN ORDER TO REPLENISH
INVENTORY?
The inventory level at which the firm places order to replenish inventory is
called reorder point. It depends on
(a) the lead time and
(b) the usage rate.
Under perfect certainty about the usage rate, the instantaneous delivery (i.e.
zero lead time, the reorder point will be equal to:
Lead-time *Usage rate +Safety stock.
The firm should strike a trade-off between the marginal rate of return and
marginal cost of funds to determine the level of safety stock.
A firm, which carries a number of items in inventory, which differ in value,
can follow a selective control system. A selective control system, such as the
A-B-C analysis, classifies inventories in to three categories according to the
value of item:
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ELEMENTS OF INVENTORY
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MANAGEMENT OF INVENTORIES
115
THE NEED AND IMPORTANCE: The need for inventory control in a manufacturing concern can
hardly be overemphasized, since in varies constitute the largest component of
working capital in most of the organizations, its needs the greatest amount of
care and attention for proper control. Its excess or inadequacy, both has
adverse effects on liquidity and profitability of a firm. Insufficient and
inefficient procedures may lead to unbalanced inventories e.g. some items out
of slick and some over slick, resulting in excessive investment. All these
insufficiencies will ultimately have an adverse effect on profits. Control
techniques, such techniques are applied for reducing the investment in
inventories, out adversely affecting the smooth running of production and
sales operation. Material Management is an integrated function of the various
sections of an organisation dealing with the supply of materials and allied
activities in order to achieve maximum coordination and optimum expenditure
on materials.
INVENTORY MANAGEMENT TECHNIQUES: Altogether the company deals with stock of thousands of items raising a
serious problem of how one can keep control of track of all these items also,
where it necessary to have some extent of control on each and every item.
Different types of analysis each having its own specific advantages and
purpose help in bringing a practical solution to the control of inventory.
The most important of all such analysis is the ABC analysis.
VED - analysis
SDE - analysis
HML - analysis
FSN - analysis
ABC ANALYSIS
Its a formal way of classifying inventory so that the important ones will be
given the most attention. Through this analysis the professional inventory
manager will concentrate his efforts on were they will yield the greatest
rewards. The ABC of ABC analysis refers to the classes, A, B and C into
which the inventory is divided.
A is high value items whose rupee volume typically account for 75-80% of the
value of the total inventory while representing only 10-15% of the inventory
items, the B class is lesser value item whose rupee volume accounts for 1520% the value of the inventory, while representing 15-20% of the inventory
items. The C class is low Value item whose volume accounts for 10-15% of
the inventory value but 75-80% of the inventory items.
The same degree of control is not justified for all the three classes of
items. The class of items requires the greatest attention and the class of items
the least attention. Class C items need no special calculations since of they
represent a low inventory investment. The order quantity might be a one-year
supply a periodic review once year class B items could have CODs developed
into a semi-annual review of the variables. Class of items could have EOQs
developed a review of the variables each time an order is placed. The major
concern of an ABC classification in to direct attention to there inventory items
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Percentage
inventory items
10
15
75
of Category
classes
A
B
C
of
VED ANALYSIS
115
V - stands for vital - items when out of stick or when not readily available,
completely bring the production a hault.
D - Denotes desirable items - all other items, which are necessary but do not
cause any immediate.
S.D.E ANALYSIS
Effects on production.
For developing countries and especially where certain items are in scarce
supply. This analysis is very useful.
S - Refers to scarce items, especially imported items and those which are
very much in short supply.
D - Are difficult items which are available in market but no easily available.
E - Items are those which are easily available, most local items.
HML ANALYSIS
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H - High cost
M - Medium cost
L - Low cost
FSN ANALYSIS
Materials are classified as: F- Fast moving - the items with other rates of consumption.
S - Slow moving- if less than five percent is consumed.
N - Non moving items if less than one percent of the item inventory has
been consumed in the past three months, it is termed as non-moving.
Ordering Systems115
The main problem in any ordering system is when to order and how
much to order accordingly. Main methods used for overcoming these
problems are:-
SAFTEY STOCK
The safety stock become necessary in order to avoid 'stock outs' if
the rate of consumption increased and/or the lead time gets extended from the
values considered for the replenishing systems, Thus, a simple way of
establishing the safety stock would be to find out the above two variations that
could systematize such a big amount of information. What is required then I a
upgrading on the class of information processing technology. In other words
the management are as follows.
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Determination of ordering costOrdering cost is the cost which will be incurred by concern because of
initializing or placing order for the supply of materials.
To find out the ordering cost, at first the following cost are determined for a
particular year.
1. Suitable position of administrative staff lost who have been engaged in
purchasing activities.
2. Clerical cost.
3. Depreciation on building furniture, and on office equipments.
4. Post telegraphic cost and stationary expenditure.
5. Travel and electricity expenditure.
After finding out the total expenditure of all the items, divide that particular
amount by the total number of orders placed in that particular year, which will
give the order cost in Rs.
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INVENTORY
MANAGEMENT
IN BHEL
115
In BHEL Hardwar
in manufacturing
process such as electrodes , brazing alloys, tooling etc. are usually given by
process engineering or at times by design departments.
Balance great bulk of indirect materials is made up of repair parts and
general supplies. Responsibility for specific (what?) items to be carried in
inventory rests with Works Engineering.
With respect to raw materials and purchased parts, responsibility for
determining (when?) and how much to buy is a sign to relevant product
manufacturing
i.e.
production
planning
and
material
planning
115
with
Inventory management
Purchase Department
Shipping Deptt.
Receiving Deptt.
Storing Section
Rejection Shell
115
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BHEL produces long production cycle items against the firm orders from
customers. Because of this as well as sizeable imported raw materials and
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compulsory bulk purchase of items like steel and copper in line with
availability from SAIL and MMTC, the company has to carry high level of
inventories.
NEED OF INVENTORY MANAGEMENT
Stiff competition, globalization of trade and liberalization.
Achieving, increasing and positive EVA.
Cost reduction.
Energy conservation.
Conservation of natural resources.
Better, work environment.
Improved health and safety.
Enhanced public image.
STRATEGIES/MEASURES
Formation of specific group in each area to identify the wastage elements
and seek participation of all.
Identification of wastage.
Formulation of action plan to eliminate/minimize wastage.
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Review of status.
Identification of corrective actions and their implementation.
Highlighting the gains.
INVENTORY CONTROL
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declared as surplus and charged off to P& L account are put to alternative use
and issued for production or when the surplus materials already declared as
surplus are disposed of on sale .
BUT ,PSL s major function include receiving GOODS ,after the order have
been placed as per requirement by the indenter and then distribute those
received goods to different departments for conversion to finished goods .
It is regarded as its major function being basic requirement for production .
THIS is accomplished as follows under two systems;
Manual System:
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Computerised System :
1.
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ccc
Description
Dr.
xxx
7130xx
5.2.1 For accounting adjustment in the case of other nonstock/directly chargeable items,please see paragraph
4.3.7 and 7.9.1 of Stores Account Manual.
Reconcilation of Issues :
To ensure correctness , the total quantity issued in each
major category of materials per tabulation is compared
with the quantities issued report prepared by Stores
department at the end of each month. In case there is
any difference, investigations are made so as to ensure
proper reporting of issues in the monthly report.
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5.4
Irregular Balance ;
Special tabulation of PSL is obtained from computer on
irregular balances. This tabulation lists out items where
the quantity is positive but value is zero or negetive or
where quantity is nil but value is positive or
positive.All such cases are investigated and corrective
action taken every month.
5.5
5.6
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SUGGESTIONS
BENEFITS OF MODERN TECHNIQUES :
These techniques helped in following manner1) Helps in reducing carrying cost of inventory.
2) It helped in reducing the level of working capital blocked in inventory .
3) It helped in reducing the level of work of store keeping department and
inventory control department as inventory level is optimum.
4) As more concern is given on wastages it helps in reducing losses.
5) As inventory is kept at optimum level , chances of obsolescence are
decreased.
6) Ease in importing goods as , Transchart (Ministry of shipment) is
recevied.
7) Auto indenting have helped MPIC official in placing the order.
RECOMMENDATIONS
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2004-
2005-
2006-
2007-
ACT.
05
ACT.
06
ACT.
07
ACT.
08
ACT.
7639
5338
10469
11567
10375
10386
99
155
105
306
395
353
03
ACT.
2003-04
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Stores &spares
Material in
transit
Finished goods
at plant
W.I.P
Transfer in
transit
Total
Turnover
Average
inventory
Inventory to
turnover
Days of
inventory
2333
2092
1594
1848
2989
3061
1466
3819
3716
9910
8193
9705
2603
2181
1770
2454
1819
18488
23699
38585
42120
38398
36411
1413
1508
2326
2277
4823
3630
32370
39214
58976
67898
67627
65365
101335
97432
42267
45414
37915
35792
49095
33752
1.93
1.78
2.38
2.72
2.99
3.26
139
192
248
215
166
135
931
holding
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INTERPRETRATION
If we see from the above table that the days of inventory holding in
the year 2005-06 has come down to 215 days from 248days in the
previous year. Inspite of increase in turnover i.e. 164060 in 2005-06
from 140697 in the year 2004-05the days of inventory holding
decreases. This indicates that the company is using effective strategy
to bring down its inventory level. This makes very less investment
in inventory.
It is in the interest of every organization to minimize its inventory
level.
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STANDARD
INVENTORY
LEVEL
TAKING
ACTUAL
COMPARISION OF
ACTUAL WITH
STANDARD
INVENTORY
LEVEL
TAKE
CORRECTIVE
ACTIONS
ANALYSING REASON OF
VARIATION/DEVIATION
VARIATION/
DEVIATION
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115
Interpretation
By
the
graphical
representation,
we
can
easily
understand that the level of inventory is coming down but in 200506 it increases due to large amount of raw material .It comes down
because company takes some effective measures to control the level
of inventory. Those steps are following steps to control its
inventory: -
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STRATEGIES/MEASURES
Formation of specific group in each area to identify the wastage
elements and seek participation of all.
Identification of wastage.
Formulation of action plan to eliminate/minimize wastage.
Review of status.
Identification of corrective actions and their implementation.
Highlighting the gains.
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Suggestion: After analyzing the steps taken by the company there are some
suggestions to manage the Inventory
There should proper analysis of requirement of raw material.
Order should be placed according to the lead-time.
Wastage should be avoided.
There should be proper coordination between the Inventory
Department and Production Department
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BIBLIOGRAPHY
.
Intelligent stock market security by N. J. Yasaswy.
The Indian securities market by Tadashi Endo.
The Big Picture : Reflects on Our Economic Times by T.T.
Ram Mohan
Financial Accountancy by M .Y .Khan
Research methodology by C.R.Kothari
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References
www.google.com
www.bhel.co.in
www.bhelhwr.co.in
www.wickeypedia.com
www.answer.com
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