Professional Documents
Culture Documents
About Areva
About Areva
Particulars Page
INTRODUCTION TO THE PROBLEM
• A Background of the task undertaken
• The scope
OVERVIEW OF THE COMPANY
• History Of Areva T & D
• Vision and mission of the company
METHODOLOGY
Advantages & Disadvantages of data collection Methods
PART A:- MARKETING RESEARCH
• Major customer in India
• Market Competition
• The product power transformer,Noida AREVA works
• The range of Product
• Our Area of expertise.
• Competitors
• SWOT Analysis
• Questionnaires
PART B : - STANDARD OPERATING PROCESS
• Excise & sales Tax department
• Manufacturing Department
• Purchase Department
• Planning Department
• Account Department
• Annual Report
CONCLUSION
BIBLIOGRAPHY
1
• Financial analysis of Areva T&D Naini unit in detail to understand the
contribution of the unit in Areva T&D India ltd.
• To use various kinds of financial & statistical tools to analyze the current
performance & position of the unit in detail &the company as a whole in general.
• In our study we have firstly tried to understand the business operation and
working style of Areva T&D India and then tried to study the business operation
and working of Naini unit in detail.
• Further we visited various departments in the unit under study to understand the
standard operating process followed by the company.
• With the help and reference of our project guide we interviewed various key
personnel in management of the unit.
• We were provided with a separate cabin & financial statements & other required
data to analyze the performance & position of the unit , interpret the information
available to us to reach at a position to help the department with suggestions that
could lead the unit &the company as a whole in taking important decisions in
near future.
2
To analyze the performance of the Naini Unit & to compare it with units of
similar other companies.
To analyze the financial statement of the company and give a proper suggestion
for improvement.
3
Research methodology
Research Design
Collection of data
Analysis of data
Research design
Data in a manner that aims to combine relevance to the research purpose with
economy in Procedure”
For the collection of data, I interviewed the key people of the organization.
Before going for any interview with any of the in charge of different departments of the
collecting data.
4
Data collection
• A Performa describing, the standard terms & conditions for supply of power
transformer.
• Company site.
Analysis of data
• Financial tools
• Statistical tools
5
Financial tools
. The different financial tools I have used in the project are ratios analysis, trend
analysis, comparative analysis and common size analysis. With the help of these tools I
analyzed different items of the balance sheet and profit and loss account of the company.
Statistical Tools
I have used bar graphs, tables, and pie chart to show the trend of the company and
6
ABOUT COMPANY
We have over 100 years of expertise and dedication in bringing power to people
worldwide. From rural electrification to turning the wheels of industry and facilitating the
trading of energy, we bring power to your projects.
Our products and systems serve to transmit and distribute electricity, ensure the
reliability, quality and safety of energy flows, as well as operate efficient networks
through information management.
We are present at all stages of the supply power chain, from the generator to the large
end-user, backed by a comprehensive services portfolio.
A global presence:
We are one of the world's leading T&D companies. We have over 25,000 employees
located in more than 30 countries, with a dedicated sales force serving customers in over
100 countries.
AREVA NP is the world leader in the design and construction of nuclear power plants
and research reactors, engineering, instrumentation and control, modernization,
maintenance and repair services, component manufacture and supply of nuclear fuel. The
7
jointly-owned company is headquartered in Paris, with regional subsidiaries in the U.S.
and Germany. AREVA has a 66% and Siemens a 34% stake in AREVA NP.
8
125 YEARS OF HIGH PERFORMANCE
AREVA T &D’s leading position in today’s energy market follows over 125 years of
pioneering innovation, technological expertise and unwavering commitment to
quality. From our initial
Creation in 1878 to company growing worldwide presence today, AREVA T&D has
1878:
1918:
Creation of English Electric Company Limited (Later known as GEC) in the UK.
1928:
1983:
9
1986:
1988:
1996:
1998:
2003:
10
2004:
2006:
2007:
2008:
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12
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COMPANY PROFILE WORLDWIDE
14
The AREVA group is organized around a Supervisory Board, an Executive Board and
network in more than 100, AREVA offers customers reliable technological solutions for
CO2-free power generation and electricity transmission and distribution. Company is the
world leader in nuclear power and the only company to cover all industrial activities in
this field. Our 58,000 employees are committed to continuous improvement on a daily
basis, making sustainable development the focal point of the group’s industrial strategy.
AREVA’s businesses help meet the 21st century’s greatest challenges: making energy
available to all, protecting the planet, and acting responsibly towards future
generations.
15
SIMPLIFIED LEGAL ORGANIZATION CHART
16
VISION AND MISSION OF COMPANY:
Vision:
At AREVA to make the highly profile of company at to create the brand name of whole
words. Its best performance product for tranmission and distribution.
Mission:
At AREVA you’ll face new and exciting challenges every day as you support the needs
of our customers. But there’s also a bigger picture to your career. Our businesses help to
meet the needs of the great endeavors of the 21st century – making energy available to
all, protecting the planet, and acting responsibly for future generations. It’s a vision that
includes innovating cleaner, safer, and more attainable energy to drive economies,
develop cultures, and deepen life experiences.
Brand Essence:
AREVA participated in the last two America's Cup races and is still as committed as ever
to helping the French team win. This year, AREVA is sponsoring the French Match
Racing Team consisting of five crews of talented, seasoned sailors from a variety of
backgrounds selected by the French Sailing Federation. This is the first French team to
have been formed specifically for match racing. The team will participate in this year's
prestigious World Match Racing Tour (WMRT), an international championship of ten
match races held at various locations around the world.
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T&D DIVISION:
18
20
The AREVA T&D division supplies products, systems and services for electricity
transmission and distribution. They are used to regulate, switch, transform and dispatch
Electric current in electric power networks connecting the power plant to the final
user.AREVA T&D products and solutions play an essential role in electricity network
reliability, quality and safety. The division's customers are electric utilities as well as the
oil, mining and metals, wind energy, paper and glass, transportation, and power
engineering industries. This division consists of the four following business units:
(A) PRODUCTS
The Products business unit designs, manufactures and delivers a complete range of
products covering every stage of electric power transmission and distribution. The
business unit's specialized equipment is used for:
• High voltage power transmission (52 kV-800 kV): conventional equipment, insulated
substations, instrument transformers and power transformers;
• medium voltage primary and secondary power distribution (3 kV-52 kV): compact
transformer substations, distribution transformers, circuit breakers, switchgear,
engine starting cells and lightning arrestors;
The business unit operates production units in 25 countries on six continents. The group
serves more than 30,000 customers around the globe. The key strengths of the Products
business are its research and development expertise, its understanding of changing
customer requirements, quality management, and optimized production site operations.
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(B) SYSTEMS:
The Systems business unit offers turnkey projects and grid management systems.
Customers turn to the Systems business unit for substation engineering experience,
electric power supply system expertise, command of advanced technologies, and project
management know-how. The business unit's main customers are power companies and
industrial groups that use large quantities of electricity. The unit offers:
• High voltage and medium voltage substations; power electronics for direct-current
substations and systems to increase existing grid capacity and quality;
• Operating systems for transmission and distribution networks;
• Electric power market management systems.
The Systems business unit's key strengths are technology and applications expertise,
particularly power electronics, know-how in real-time electric current management, and
partnerships with suppliers.
(C) SERVICES:
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• Repair services, spare parts and product start-up services;
• Electrical substation upgrading and refurbishing;
• Information technology support for grid management systems and safety/control
products.
The key strengths of the Services business unit are a keen understanding of its customers
and the T&D products they use, the ability to supply products and related services, quick
turnaround times, and project management expertise.
(D) AUTOMATION:
The Automation business unit answers to demand for fully integrated energy
management networks. The business is built around three main activities: automation and
information systems, automation products and application and support services. The
business unit supplies equipment and information technology systems, including
computerized power management systems used to operate power transmission networks,
determine customer needs and regulate the flow of power from power plants to the
distribution network.
In particular, the business unit provides Information Systems solutions for deregulated
energy industry applications, large information technology control systems (SCADA)
and telecommunications equipment for power lines. The Automation business unit also
provides equipment for power networks and substation protection, control and
monitoring.
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MAJOR CUSTOMERS IN INDIA:-
• Kribhco
• ACC
• Birla Cement
• Century Cement
• L&T
• Western Collieries
• Eastern Coalfield
22
• Oil and Natural Gas Corporation
• HPCL
• Cochin Refinery
• Reliance Textiles
• ABB
• TC Engineers
• POIL
• Indian Railways
• HINDALCO
• Ashok Leyland
• GRIDCO
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MARKET COMPETITION:-
a) ABB
b) BHEL
c) CGL
d) EMCO
e) BBL
f) Siemens
g) Crompton Greaves
h) TELK
i) L&T
j) SCHINDER
k) ECE
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l) T&R
The power transformer-manufacturing unit at Noida works. India belongs to the Tower
Transformer Business that is a part of the power Transmission & Distribution Sector
(T&D), which was part of the ALSTOM.
• Distribution Transformers.
26
25
EXPORTS
Zimbabwe Brazil
China Myanmar
Argentina Australia
Bangladesh Bhutan
Malaysia Nigeria
Kenya Iran
Columbia Croatia
Greece Malawi
Nepal Uganda
Vietnam Canada
France UK
Libya Tanzania
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OUR AREAS OF EXPERTISE:-
AREVA T&D's technologies and expertise ensure higher safety, reliability and
capacity of power grids around the world.
We provide global solutions to industrial partners in their need for flawless energy and
to utilities in their mission to supply energy to people around the world.
27
• Network consulting: - Asset management, refurbishment and spare-part
solutions to manage electrical installations in a secure and efficient way
throughout their lifecycle.
28
History of AREVA at Naini is not so long. As AREVA has taken over Naini T&D
division from ALSTOM in 27 September 2005 as well as the following division of India:
• Kolkata.
• Chennai.
The Naini site is one of AREVA T&D’s successful and highly developed power
transformer production plants. Globally, we have factories and technical centers
dedicated to power transformers in nine countries spread across four continents.
Incorporated in 1957, the Naini transformer factory has more than 50 years of excellent
operating experience in manufacturing power and distribution transformers.
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The range of products at Naini Works:
At present Naini Works has the capacity to manufacture 6000 MVA Power transformer
annually. The power transformer-manufacturing unit at Naini works, Allahabad, India
belongs to the Tower Transformer Business that is a part of the power Transmission &
Distribution Sector (T&D), which was part of the ALSTOM.
• Power Transformers.
• Distribution Transformers.
The Naini unit plant was set up in 1957 and today it can provide up to 400kv
transformers. At present, the units for power transformer in India are located at one place,
Naini, Allahabad.
The range:
• Power transformers up to 315 MVA 3 phase & 600 MVA 3 phase bank, 400 kV
class.
• Single-phase trackside Transformer for Railways.
• Transformers for Locomotives.
• Scott connected Transformer up to 200 kV.
• Rectifier Transformers.
• Shunt reactors of coreless and gapped core type.
• Current limiting series reactors.
• Arc furnace transformers.
The unit has a well-maintained private railway siding, which allows consignments
weighing upto180 tones to be dispatched by Rail wagon. Road dispatches are affected
through special low bed trailers that are provided by dedicated transporters and can
handle consignment weights up to 250 tones.
The efficiency of transformers is rated from 96% to 99% if the user takes the
proper care, 25 years is generally is the normal transformer life.
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SWOT ANALYSIS
STRENGTH
• HUMAN RESOURCE
The employee strength of the Company stands at around 3,500 as on December 31, 2007.
During the year under review, hiring quality work force and retention of talent posed a
serious challenge to the Company, and this was carefully addressed. AREVA`s HR team is
sufficiently geared up to meet these challenges.
• TECHNOLOGICALLY STRONG
AREVA is fully equipped to face the technological challenges of the T&D market and has
various solutions in its portfolio to address most of the segment.
• BRAND VALUE
• EXPANSION
Capacities of the manufacturing plants are being continuously increased to meet the
increased demand of the market.
One-on-one meetings with the investor community and web based interactive sessions to
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• STRONG FINANCE AND ACCOUNTING SERVICES
Finance Shared Service Centre at Chennai, in each location, the accounting and controlling
team is being segregated with clearly defined responsibilities. The accounting team
emphasizes strict implementation of various accounting standards with the implementation
of Internal Controls to foster best practices. The controlling team concentrates on profit
optimization actions to boost profitability growth. Both accounting and controlling processes
are aimed at becoming benchmarks in world class finance.
WEAKNESS
Even after adapting new IT enabled processes there are number of paper works carried out in
AREVA which is a bottle neck in its functioning.
AREVA has heavily experienced staff but they are not well versed with IT applications.
The prime customers for the company are SEB in the MV switchgear segment. They don't
pay the dues on time making the company lose interest cost on the due amount.
OPPORTUNITY
The increasing requirement of High Voltage Substations provides a good opportunity for the
growth of our Turnkey Systems, Products, Automation and Service businesses.
Power Grid is also planning to scale up the voltage level of the Transmission Network in the
country to 800kV DC by 2010 and to 1200kV AC by 2012. This will provide a significant
opportunity for companies engaged in the manufacture of high technology equipment.
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Areva`s upcoming manufacturing facilities at Varodara, Hosur and Padappai will enable
Areva to meet the needs of the growing market in the future.
Areva is the first to have launched the construction of a local manufacturing facility for High
Voltage Gas Insulated Switchgears.
THREATS
A delay in funding, results in a further delay in the award of projects. During the previous
year, we observed a delay of several months for projects earmarked under World Bank
financing. Several large 765 kV substations & HVDC are to be implemented in the 11th
plan. A delay in such projects would have an impact on the planned growth of AREVA.
A rise in raw material costs, especially metals may put a strain on margins. The price of
copper, the main raw material required by your Company has increased substantially during
the last year.
Future IPOs of private sector power projects, if not completed on time, may affect the growth
of the T&D business.
• Further, any unforeseen slowdowns affecting the growth of the Indian economy, may
33
Standard Operating Process
FUNCTIONS OF DEPARTMENT AT AREVA T&D
The Levy
Excise duty is the single largest source of revenue for central government in India.
Authority to impose excise duty by government has been given by article 246 of
constitution and at entry no-84 of list no i (union list) and entry no 51 of list no ii (state
list).under this authority constitution bifurcates alcoholic liquors opium and narcotics
from other goods and duty is levied on these products by state government called as state
excise duty. Central excise is a tax on act of manufacture or production while sales taxis
a tax on act of sale of goods. For manufacture of all the goods duty is levied by central
government called central excise.
At present the rate of excise duty for most of the product is @8% + educational Cess @
2% of ED + secondary & higher educational Cess @ 1% of ED except some items such
as petroleum products where the rate of ED is still 14%.
Registration
Every manufacture / First and second stage dealer of dutiable excisable goods desiring to
issue Cenvetable invoices is required to take a central excise registration. However if a
manufacturer is SSI and his yearly clearance is less than Rs. 90 lacs then he is not require
to get himself registered with central excise (Rule 9 of Central Excise Rules 2002).
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Procedure for Registration
Valuation-
The Excise duty is payable on “transaction value” which means the price actually paid or
payable for the goods, when sold , and includes in addition to the amount charged as a
price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by
reason of, or in connection with the sale, whether payable at the time of the sale or at any
other time, including, but not limited to, any amount charged for, or to make provision
for, advertising or publicity, marketing and selling organization expenses, storage,
outward handling, servicing, warranty, commission or any other matter; but does not
include the amount of duty of excise, sales tax and other taxes, if any, actually paid or
actually payable on such goods.
Invoice-
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Under rule 11 of Central Excise Rules2002, The excisable goods will generally be
removed from a factory under cover of an INVOICE. The invoice shall be serially
numbered in triplicate and shall contain the registration number, address of the concerned
Central Excise Division, name of the consignee, description, classification, time and date
of removal, mode of transport and vehicle registration number, rate of duty, quantity and
value, of goods and the duty payable thereon.
Before making use of the invoice series, in each financial year the serial numbers of the
same shall be intimated to the Superintendent of Central Excise having jurisdiction.
Excise Procedure-
Removal of Goods, Payment of Duty & Assessment As per rule 6, and assesses shall
himself assess the duty payable on the excisable goods and under rule 12 submit
following returns:-
(1) ER-1- Monthly return to be submitted by tenth of every month for production ,
clearance, duty payable and duty paid for previous month( annexure-3).
(4) ER-6- Monthly return to be submitted by 10th of every month for receipt and
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Tendering Department Process-
ISO
Manufacturer’s Association)-
38
IEEMA issue prices of raw materials every month. The price quoted is based on the cost
of raw material and labor cost as on the date of quotation. In case of any change in price,
then supplier give additional bill on the name of price variation. It is a liability of
customer to pay that bill. It may increase or decrease. In both cases details must be given.
Price variation is calculated according to following formulae-
Where,
Co=Average LME settlement price of copper wire bars, two months prior to the date of
tendering
ISo=Wholesale price index no. for iron and steel, three months prior to the date of
tendering
Wo=All India average consumer price index no. for industrial workers as published by
labor bureau , Ministry of Labor, Government of India, three months prior to the date of
tendering
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MANUFACTURING
Different steps are involved in manufacturing are shown in this flow chart-
Core cutting
Coil winding
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Core building
Tanking
Testing
Dispatch
MANUFACTURING
Manufacturing plays vital role in supply chain system. It completes with the help of
many steps and these steps are interrelated to each other. In manufacturing one step act as
supplier for other step and other step act as customer for previous step so, manufacturing
proceed in a specific manner. Manufacturing of specific job will be completed in two to
three month. Different manpower involves in different steps of manufacturing. Various
steps of manufacturing are describe as follows-
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Core cutting and core assembly-The basic raw material is core. It is made up of Cold
Rolled Grain Oriented steel (CRGO), also known as lamination. CRGO purchased from
A.K.Steel Corporation Butler U.S.A. . Laminations are cut according to design given by
customer. These sheets are of 0.23 to 0.35mm in thickness. These laminations are
assembled in such a manner that there are no gaps between joints of two consecutive
sheets. The entire assembly is done on a frame with the help of a tie rod and core bolts.
The entire core assembly is lifted and is used; mainly Meter cut line is used for giving
specific shape.
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Coil winding- The winding are design to ensure high short circuit withstand capability,
uniform surge voltage distribution and effective heat dissipation are critical to
transformer reliability. Winding are made on layer setting winding machine vertical as
diameter and length is used as base for winding disc and layer winding are manufacturing
according to design requirement. Complete set of low voltage, high voltage and tap
winding are assembled at this stage. Moisture content in insulating material of winding
assembly is removed by oven (winding autoclave) and before assembly winding are
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Core and coil assembly- The component produced in coil winding and core assembly
stage is then taken into core coil assembly stage. The core assembly is vertically placed
with the foot plate touching a special assembly platform. The top yoke of the core is
renamed and the winding are assembled with core. Special core is given to electrical
connections of leads and tap changes. All the necessary joints are made secured by
Vacuum drying- The active part can absorb moisture during assembly process;
therefore, a final drying process is carried out in a completely automated vapors phase
drying plant. This ensure through and uniform drying resulting in a clean and dry core
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Tanking – The core coil assembly after drying and the tank supplied by the fabrication
department are taken into tank up stage. C ore coil assembly is placed into tank after
complete trimming and tightening procedure and properly locked up. Fitting like drain
values, high voltage and low voltage bushing, conservator, oil level indicator and
INSPECTION
vendors.
product development.
Final-inspection- This type of inspection is done when product is finally developed and
TESTING
Testing laboratory Designed following the most modern concepts of high voltage
technology available, in the testing laboratories all transformer and reactors are subjected
to the routine tests and measurement specified and accordance with IEC (International
specification. These routine tests may be complemented by type and special tests, which
are carried out at the customer’s request or as part of an internal sampling procedure to
45
Testing on reactor-
• Magnetizing Current
• Flash Test
• Reactant Measurement
• Noise Level
• Vibration
• Impulse Test
Special tests-
46
• Zero Phase Sequence Test (relay trip)
MANUFACTURING PROCESSES
CORE CUTTING
The cold rolled, grain-oriented silicon steel (GOS) lamination are cut by microprocessor-
controlled slitting and cropping machines with an extremely high dimensional accuracy.
CORE BUILDING
Core laminations are carefully assembled and built-up erected on a specially made core
building platform, avoiding any unnecessary mechanical stresses.
COIL WINDING
Spiral, helical, continuous, intershielded and interleaved disc windings with multiple
strands of copper conductors are our standard for power transformer.
After pre-assembly, the coils are lowered on to the core legs. After top-yoke filling, they
are clamped using a hydraulic tool that ensures uniformly simultaneous pressure to secure
the windings. The current carrying joints are made by a fully automatic crimping machine.
DRYING & IMPREGNATION
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A highly efficient vapor phase drying process, which ensures complete moisture extraction
with uniform heating at 120°c for 96 hrs, is used to coils and insulation components. In the
presence of vapor short circuits will happened.
TANKING
During tanking and final pipe assembly work, bushings and coolers are fitted onto the
transformer to prepare it for testing. Especially design, sophisticated tools and handling
equipment is employed to carry out all final assembly activities.
TESTING
The factory test laboratory is fully equipped to conduct all routine and type tests as per
national, international and in-house standards. On request, special tests such as Frequency
Response analysis (FRA) can also be conducted.
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PURCHASE DEPARTMENT
SOURCING:-
BASIC FUNCTIONS
1. Market analysis
2. Vendor mapping
3. Vendor evaluation
4. Procurement
5. Performance monitoring
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7. Strategic procurement from soc(CHINA, INDIA, COREA)
8. Rate agreements
9. Vendor development
CHALLENGES IN SOURCING
4. Quality issues
6. Inventory management
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PROCUREMENT PROCESS:-
(When rates & supplier are fixed)
PURCHASE REQUISITION
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PROCUREMENT PROCESS FOR THE MATERIAL NOT HAVING RATE
AGREEMENT
PURCHASE REQUISITION
52
PURCHASE ORDER
PURCHASE REQUISITION
PURCHASE ORDER
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• INCO Terms
• Payment terms
• Lead time
Designing will be prepared based on the following basic requirement of the customer:
This preliminary design as per specification is completed and decides and estimates
about 80% costs of copper and core. Overall costing depends upon the above analysis of
Core and Copper. Preparation of price making sheet and guarantee technical particulars
by design department, will take from two to seven days. Complete set of Tender
documents are being submitted to the customer for their review and analysis. If being L1,
and adhering to the Technical requirement of the customer, order will be placed on us.
Role of Design Department commences after getting the order. They do detail
engineering and designing of the job as per the approved GTP. This is the mutual
exercise of the Electrical and the Mechanical Team. Complete drawings in turn will be
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sending to the customer via marketing department for their approval/comment. If there is
any comment from the customer, then that comment will be incorporated after discussion
and mutual agreement with the customer. After getting the final approval from the
customer, Design department releases the drawings to the purchase department for the
procurement of the raw material and other long lead items.
Planning Department
MAIN RESPONSIBILITIES
· Statutory documentation
· Auditing
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This position will be responsible for: Management of GIS substation orders from the date
of receipt of commercially and technically clarified order to the date of final handover to
1. Project Management
2.Customer interface
Communication with the customer to clarify all technical requirements and delivery
3. Production coordination
Interface with Sourcing, SCM and Production to ensure the timely manufacturing of the
Coordinate site erection and commissioning with GIS service. Scheduling, resource
planning etc.
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SAP was founded in 1972 in Walldorf, Germany. It stands for Systems, Applications and
Products in Data Processing. Over the years, it has grown and evolved to become the world
premier provider of client/server business solutions for which it is so well known today.
The SAP R/3 enterprise application suite for open client/server systems has established a
new standard for providing business information management solutions.
SAP, started in 1972 by five former IBM employees in Mannheim, Germany, states that
it is the world's largest inter-enterprise software company and the world's fourth-largest
independent software supplier, overall. The original name for SAP was German:
Systeme, Anwendungen, Produkte, and German for "Systems Applications and Products."
The original SAP idea was to provide customers with the ability to interact with a
applications have been assembled and today many corporations, including IBM and
In 1973 the SAP R/1 solution was launched. Six years later, in 1979, SAP launched SAP
R/2. In 1981, SAP brought a completely re-designed solution to market. With the change
from R/2 to R/3 in 1992, SAP followed the trend from mainframe computing to client-
server architectures.
The development of SAP internet strategy with mySAP.com redesigned the concept of
business processes (integration via Internet). SAP was awarded Industry Week’s Best
Managed Companies in 1999.
SAP R/3 is arranged into distinct functional modules, covering the typical functions in
place in an organization. The most widely used modules are –
1. Financials (FI)
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2. Controlling (CO)
layer, or client, interfaces with the user. The application layer houses all the business
specific logic and the database layer records and stores all the information about the
structured using its own proprietary language called ABAP (Advanced Business
geared towards the creation of simple, yet powerful programs. R/3 also offers a complete
development environment where developers can either modify existing SAP code to
complete transactional systems within the SAP framework. Thus we deal with the
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various tasks and activities carried out in sales, delivery and billing. Key processes are-
Start
59
Start
Create an order
D Is t Yes
el he
iv re Outbound
e
Ite ry r any Delivery
m ele
va
nt
No PGI
Billing
Stop
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1. Creating Sales Orders-
There are various types of orders with which I have to deal such as.
a. Domestic Order
b. InterUnit
c. Export
d. Price Variance
e. Free of Charge
f. Repair
g. Spare Parts
a. Outbound Delivery
b. Picking
c. Packing
d. Goods Issue
a. Proforma
b. Invoice
C. Cancellation Document
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d. Debit Memo
e. Credit Memo
There are specific transaction codes for all the above mentioned transactions such as
VA01 for creating new sales order, VL01N for outbound delivery etc.
PAYMENT CYCLE-
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Finished product
NO
YES
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BILLS PAYABLE & RECEIVABLE
Mode of payment-
1- Cash
2- Cheque
3- Letter of credit
4- Direct payment
Letter of Credit-
A commitment by a bank on behalf of the buyer that payment will be made to the
exporter provided that the terms and conditions have been met, has verified, through
the presentation of all required documents. The buyer pays its bank to render the
obtain. It also protects the buyer since no payment obligation arises until the goods
Document Collection-
to the exporter’s bank which sends documents to importer’s bank along with
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Types of letter of credit-
1- Confirmed
2- Unconfirmed
3- Confirmed Letter
65
ACCOUNT DEPARTMENT
Dept
Copper ----- ----
66
Purchase Order (PO)
Vendor
Requisition material check by the factory gate man like- purchase order no., vehicle no.,
goods, etc.
Checking
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Checked by Quality department
Account department
Availed of CENVAT
Bills Processing
Accounting – GR/IR Dr
To Creditor A/c
Creditor Ageing
(Rs)
A ---Cr
B ---Cr
C ----Cr
D -----Cr
E -----Cr
F ------Cr
68
Creditor A/c Dr.
To Bank A/c
Sales
Invoice
5- Gate Entry
Released Entry
To Sales A/c
To Excise
Debtor Ageing
69
RATIO ANALYSIS
70
CALCULATIONS & ANALYSIS OF RATIOS
1. LIQUIDITY RATIO:
2007
= 2255686 / 1495282
= 1.51
2008
= 3340415/ 1981004
= 1.69
2009
= 3060659/2105725
= 1.453
71
2007 2008 2009
1- Liquidity is the ability of a firm to pay its short- term liability in near future.
2- If we see the figure of current ratio of the three year i.e. 2007, 2008, 2009 we
find that it is below ideal standards of 2:1.
3- The current ratio for the three consecutive years are, 1.508-
2007
1.690- 2008
1.453-2009
It shows that the liquidity position in the current year (2009) is less than previous
two years; it needs to improve its liquidity position, in the coming years.
Suggestion
The main reason for unsatisfactory liquidity position can be two either money blocked in
debtors & inventory is more than required, due to policy, or due to the effect of global
recession the orders received were still pending for execution, at the unit floor.
2007
= (255686-985774-2948)/1495282
=0.847
2008
= (3340415-1201273-4208)/1981004
= 1.077
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2009
=2005044/2105725
=0.952
As per industry standard ideal quick ratio is 1:1, but if we see the trend of this ratio of
this unit (for three year) we see a continuous improvement, i.e.
0.847:1 – 2007,
1.077:1 – 2008
0.952:1–2009
In the year 2007, the ability of the unit was not good enough, i.e. unit is not in a position
to pay of its quick liabilities thus there was a tough struggle for payment, to be made to
unit suppliers.
In the current year 2008, unit marked a good position. Its payment position too seems to
be improved. This could be evidenced by the improved quick ratio marked by the unit
which reached to 1,077:1 i.e. Almost was to industry standard.
In the year 2009, it was again dipped, the struggle for payments continued.
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2. ACTIVITY OR TURNOVER RATIO
2007
=2345304/985774
=2.37
2008
= 3054527/1093524
=2.79
2009
=3628765/1127473
=3.21
74
Interpretation and Analysis: (Inventory turnover ratio)
• The inventory turnover ratio shows that how quickly inventory is sold.
2007
=3657875/1269912
=2.88
2008
= 4449397/1704527
=2.61
2009
= 5002903/2073065
=2.41
75
Thus money blocked in debtors is for more period of the Time in 2009 as
compared to previous few years, thus effecting greatly on the liquidity position of the
Naini unit.
(iii) Fixed Asset Turnover Ratio = cost of goods sold/net fixed asset
2007
=2345304/589153
=3.98
2008
= 3054527/677020
=4.51
2009
= 3628765/847034
=4.28
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(iv) Inventory period= average inventory/cost of goods sold*365
2007
=990740/2545304*365
=142 days
2008
= 1099378/3054527*365
=131days
2009
= 1202438/3628765*365
=121days
2007
=2345304/760404
77
=3.08
2008
= 3054527/1359412
=2.25
2009
= 3628765/954934
=3.8
Working capital is the capital employed by the business for its daily working or
operations i.e. it is the difference between current assets and current liabilities of the
company.
Management is always interested in finding out or knowing the efficiency of working
capital in generating sales.
Thus the ratio is used for the purpose and higher the ratio is more will be the efficiency
of working capital and better it would for the company.
(a) The ratio for the 1st year under study that is 2007 was 3.08:1 i.e. net sales
achieve for the year is 3.08 times of the net working capital of the Naini unit.
(b) But in the next year i.e. 2008 the ratio reduced to 2.25 :1 i.e. net sales for this
year though increase but investment in working capital increase with a greater
pace, resulting in reducing the ratio and efficiency of working capital to
generate sales.
(c) However the ratio increased to 3.8 in 2009.
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3. EXPENSES RATIO
2007
=2317836/3657875*100
=63.36%
2008
= 3058506/4449397*100
=68.74%
2009
= 3541913/5002903*100
=70.8%
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b. Direct labor cost ratio=direct labor cost/net sales*100
2007
=35982/3657875*100
=0.98%
2008
= 27924/4449397*100
=0.63%
2009
= 34216/5002903*100
=0.684%
80
c. Direct charges expenses ratio=direct charges/net sales*100
2007
=8514/3657875*100
=0.23%
2008
= 31903/4449397*100
=0.72%
2009
= 52637/5002903*100
=1.05%
81
d. Production overhead expenses ratio= Production overhead expenses/net
sales*100
2007
=182069/3657875*100
=5%
2008
= 236014/4449397*100
=5.3%
2009
= 342788/5002903*100
=6.8%
82
e. Non production overhead expenses ratio= Non production overhead
expenses/net sales*100
2007
=152692/3657875*100
=4.17%
2008
=138116/4449397*100
=3%
2009
= 174400/5002903*100
=3.49%
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4. PROFITABILITY RATIO
2007
=1312571/3657875*100
=35.88%
2008
=1394870/4449397*100
=31.35%
2009
= 1374138/5002
=27.46%
84
Gross Profit ratio tells the profitability of the unit i.e. trading or manufacturing profit.
There is a downward trend in past three years from 2007 to 2009, it decreased from
35.88% in 2007 to 31.35% in 2008 and finally declined to 27.46% in 2009.
2007
=633681/3657875*100
=17.32%
2008
=646432/4449397*100
=14.53%
2009
= 706972/5002903*100
=14.13%
85
If we see the net profit ratio i.e. ratio of EBIT: SALES {because interest and tax
calculations are performed at Chennai (corporate office) we will find the same trend as of
gross profit i.e. decrease in all three consecutive years.
Suggestion:
Thus we suggest the management of the unit to keep an eye on the direct costs and
overheads expenses of the unit.
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