National Institute of Industrial Engineering

Vihar Lake, Mumbai – 400087

SUMMER PROJECT REPORT

ON
“Welspun USA Inventory Planning”
Undertaken at

Welspun India Limited

Submitted for the partial fulfillment of

Post Graduate Diploma in Industrial Engineering

By:
Subham Kumar Burnwal
Roll No.- 1801109

Under the guidance of:

Prof. D. K. Srivastava Mr. Neelesh Srivastava

Professor Assistant Vice President
OB and HR Supply Chain Management
NITIE Mumbai WGBL, Mumbai
 CERTIFICATE OF PROJECT COMPLETION

This is to certify that Mr. Subham Kumar Burnwal, student of 48th Batch of Post Graduate
Diploma in Industrial Engineering (PGDIE) of National Institute of Industrial Engineering (NITIE),
Mumbai has successfully completed his Summer Project titled:

“WELSPUN USA Inventory Planning”

at Welspun India Limited (WIL), Mumbai during the period April 01, 2019 to May 31, 2019 under the
guidance of faculty guide Prof. D. K. Srivastava and company guide Mr. Neelesh Srivastava.

We appreciate the efforts put by him and wish him a bright and prosperous future. Based on the
professional work done by him, this report is being submitted for the partial fulfilment of Post
Graduate Diploma in Industrial Engineering (PGDIE).

Prof. D. K. Srivastava Mr. Neelesh Srivastava

Professor Assistant Vice President
OB and HR Supply Chain Management
NITIE Mumbai WGBL, Mumbai

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 CERTIFICATE OF ORIGINALITY

This is to certify that the Projects titled as “WELSPUN USA Inventory Planning” has been carried out
by me at Welspun India Limited, Mumbai under the guidance of Prof. D. K. Srivastava,
Professor Organizational Behavior and Human Resource, NITIE, Mumbai and Mr. Neelesh
Srivastava, Astt. General Manager, Advanced Textiles, WIL from April 01, 2019 to May 31,
2019.

Based on the professional work done by me, I am submitting this report for the partial fulfilment
of Post-Graduation Diploma in Industrial Engineering (PGDIE) at NITIE, Mumbai. This report has
not been published and submitted to any other institute or university.

Subham Kumar Burnwal

Roll No. 1801109
PGDIE-48
NITIE, Mumbai.

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 ACKNOWLEDGEMENT

Welspun Limited is one of the largest and most respected companies in India's private sector. I
take this opportunity to extend my sincere thanks to Welspun India Ltd (WIL) for offering me a
unique platform to gain exposure and garner knowledge in the field of Supply Chain.

I also wish to extend my sincere and heartfelt gratitude to my mentor Mr. Neelesh Srivastava,
Assistant Vice President, Supply Chain Management, WIL, for guiding, supporting and
encouraging me during the stint of the project. I also wish to thank Mr. Saranik Ghosh,
independent consultant to Welspun India Limited (WIL), an Alumni of NITIE whose insights and
expertise in the subject of Supply Chain and its application in the industry was of immense help
for the development and execution of the project. I also, wish to extend my thanks to the SCM
team – Sanjay, Akshay, Kashyap, Deepika, Aditya, and Shruti under the leadership of Dayesh
Bharnuke for providing me with the necessary data and valuable inputs from time to time.

I would like to thank the HR team at WIL for making schedules, submitting project proposals,
provision of company facilities, IT facilities and any kind of support that was needed by me. I can
say with conviction that I have immensely benefited from the prestigious association as a summer
intern with them.

Last but not the least, I extend my heartfelt gratitude to Prof. D. K. Srivastava, my faculty guide,
for having made my summer internship a great learning experience with his guidance, and
support.

Subham Kumar Burnwal

PGDIE-48
NITIE Mumbai

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 EXECUTIVE SUMMARY

ABOUT THE COMPANY:

Welspun India Limited is amongst the top home textile manufacturers in world. With its two arms as
Welspun Global Brands Ltd., India and Welspun USA of the parent company Welspun India Limited
(WIL). It tries to fulfill the demands of customers across the world through collaborative efforts of
demand planning, forecasting, inventory management, marketing, sales and HR, etc.

NEED OF THE PROJECT:

In the competition driven market volatility and aggressive competitor environment, customer
satisfaction becomes very challenging. The objective of the project is to validate the current inventory
norms for Finished Goods (FG), and make necessary amendments based on the principles of inventory
management. High Seasonality leads to Space constraints during Season and short product life cycle
adds to the criticality of situation. Hence, a scientifically optimized and mathematically backed
optimized inventory norm was of crucial importance to the organization.

OBJECTIVE OF THE PROJECT:

• Inventory Norms for all articles (SKUs)
• Classification of SKU based on ABC, and Coefficient of Variance (CV) (XYZ)
• Liquidation plan for aged and old inventory
• Template format, for data capturing for aggregation and multi-echelon models of inventory
optimization.

DELIVERABLES OF THE PROJECT:

• Monthly Inventory norm and classification report
• Liquidation report for aged and old inventory
• Monthly report for aggregation
• Template for data capturing for multi echelon

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TABLE OF CONTENTS
CERTIFICATE OF PROJECT COMPLETION ...............................................................................................1
CERTIFICATE OF PROJECT COMPLETION ................................................... Error! Bookmark not defined.
CERTIFICATE OF ORIGINALITY ..............................................................................................................2
ACKNOWLEDGEMENT .........................................................................................................................3
EXECUTIVE SUMMARY ....................................................................................................................4
1 COMPANY BACKGROUND ............................................................................................................8
1.1 ABOUT WELSPUN GROUP:....................................................................................................8
1.1.1 GROUP OVERVIEW: ......................................................................................................8
1.1.2 WELSPUN VISION & MISSION: .......................................................................................9
1.2 ABOUT WELSPUN INDIA LIMITED (WIL): ................................................................................9
1.2.1 COMPANY OVERVIEW:..................................................................................................9
1.2.2 LEADERSHIP OF WIL:................................................................................................... 12
1.2.3 HISTORY:.................................................................................................................... 12
1.2.4 KEY MILESTONES: ....................................................................................................... 12
1.2.5 KEY DIFFERENTIATORS: ............................................................................................... 13
1.3 ABOUT ADVANCED TEXTILES: ............................................................................................. 14
1.3.1 INDUSTRY OVERVIEW: ................................................................................................ 14
1.3.2 PRODUCTS: ................................................................................................................ 14
2 PROJECT: .................................................................................................................................. 15
2.1 TITLE: ................................................................................................................................ 15
2.2 OBJECTIVE:........................................................................................................................ 15
2.3 NEED AND SIGNIFICANCE: .................................................................................................. 15
2.4 DELIVERABLE: .................................................................................................................... 16
2.5 SCOPE: .............................................................................................................................. 16
2.6 LITERATURE REVIEW: ......................................................................................................... 16
2.6.1 THEORY INVENTORY MANAGEMENT ........................................................................... 16
2.6.2 REVIEW SYSTEM: ........................................................................................................ 16
2.6.3 FORMULA, CALCULATIONS AND ASSUMPTIONS ........................................................... 16
2.6.4 CYCLE SERVICE LEVEL: ................................................................................................. 17
2.7 METHODOLOGY:................................................................................................................ 17
2.7.1 ORIENTATION AT THE CORPORATE OFFICE................................................................... 18
2.7.2 DATA ASSIMILATION:.................................................................................................. 18

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 2.7.3 EVALUATION AND OPTIMIZATION ............................................................................... 21
2.7.4 SKU SEGMENTATION .................................................................................................. 23
2.7.5 CONCEPT VALIDATION ................................................................................................ 24
2.8 RESULTS: ........................................................................................................................... 26
2.8.1 INVENTORY MANAGEMENT ........................................................................................ 26
2.8.2 SKU SEGMENTATION .................................................................................................. 26
2.9 RECOMMENDATIONS:........................................................................................................ 27
2.9.1 FREQUENCY FOR NORM REVISION............................................................................... 27
2.9.2 SUGGESTIONS FOR NORM STANDARDIZATION, PROMOTION, AND LIQUIDATION .......... 28
2.10 BENEFITS:.......................................................................................................................... 29
2.11 KEY LEARNINGS: ................................................................................................................ 29
2.12 FUTURE SCOPE: EVOLUTION OF INVENTORY STRATEGY ....................................................... 30
2.13 THE WAY FORWARD: ......................................................................................................... 31
2.14 LIMITATIONS: .................................................................................................................... 31
3 ACADEMIC CONTRIBUTION:....................................................................................................... 31
4 DEMONSTRATION OF WELSPUN VALUES .................................................................................... 32
5 BIBLIOGRAPHY .......................................................................................................................... 33
6 REFERENCES:............................................................................................................................. 33

LIST OF FIGURES:
Fi gure 1: Welspun Group Businesses.................................................................................................................................................. 8
Figure 2: Welspun Group Businesses .................................................................................................................................................. 9
Fi gure 3: WIL Overview ..................................................................................................................................................................... 10
Fi gure 4: Home Textile Ma rket Composition.................................................................................................................................... 10
Fi gure 5: WIL Brands & Li censes ....................................................................................................................................................... 11
Fi gure 6: WIL Businesses ................................................................................................................................................................... 11
Fi gure 7: Key Differentia tors ............................................................................................................................................................. 13
Fi gure 8: Assignment Letter.............................................................................................................................................................. 15
Figure 9: Inventory Management ..................................................................................................................................................... 16
Figure 10: Periodic Review Policy...................................................................................................................................................... 16
Fi gure 11: Inventory Mana gement ................................................................................................................................................... 17
Fi gure 12: Wa rehouses of Welspun USA .......................................................................................................................................... 19
Fi gure 13: Sta ges of the process followed Source: Internet ................................................................................................ 21
Fi gure 14: Stages for optimi za tion and anal ysis ............................................................................................................................... 22
Fi gure 15: Graph showing ABC classifica tion a cross SKUs of WUSA Wa rehouse at Ohio ................................................................ 27
Fi gure 16: Evolution of Inventory Stra tegy (Source:Link) ................................................................................................................. 30

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LIST OF TABLES:
Table 1: Key Milestones of WIL......................................................................................................................................................... 13
Table 2: Project Master Plan ............................................................................................................................................................. 18
Table 3: Raw SAP dump sales da ta ................................................................................................................................................... 19
Table 4: Raw SAP dump sales da ta * ................................................................................................................................................. 20
Table 5: Raw SAP dump sales da ta * ................................................................................................................................................. 20
Table 6: SKU Level Inventory Report................................................................................................................................................. 21
Table 7: SKU Level demand data....................................................................................................................................................... 22
Table 8: SKU Level demand data....................................................................................................................................................... 23
Table 9: Cri teria for the decision of ABC and XYZ classifi ca tion ....................................................................................................... 23
Table 10: SKU segmenta tion for inventory management ................................................................................................................ 24
Table 11: SKU wise exis ting norm vs . cal cula ted compa rison for Costco (Sumner)......................................................................... 24
Table 12: SKU wise existing norm vs. calculated comparison for Costco (Norfolk) .......................................................................... 25
Table 13: SKU wise exis ting norm vs . cal cula ted compa rison for Costco (Ohio).............................................................................. 25
Table 14: Cus tomer wise WOS norm ................................................................................................................................................ 26
Table 15: Arti cle wise Inventory norm da ta cal culated – Enti re peri od vs . every si x months ......................................................... 27
Table 16: Percenta ge of SKUs wi th AVG % ....................................................................................................................................... 28
Table 17: Arti cle wise Inventory norm da ta – calculated (Standa rd) vs . Agreed norm and Actual ................................................. 28
Table 18: Indi ca tor Diagra m.............................................................................................................................................................. 29
Table 19: Templa te for Mul ti Echelon inventory optimiza tion model ............................................................................................. 31
Table 20: Demons tra tion of Welspun val ues.................................................................................................................................... 32

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1 COMPANY BACKGROUND
1.1 ABOUT WELSPUN GROUP:
1.1.1 GROUP OVERVIEW:

The Indian textile industry is one of the largest in the world with a massive raw material and textile
manufacturing base. As a US$3 billion company, Welspun group is one of the India’s fastest growing
conglomerates (Sheth, 2016). Registered at a CAGR of 30% over the last decade. It is an amalgamation
of expertise, resources, opportunities and engineering excellence started in 1985.

Welspun is a fully integrated player within the Pipes, Plates & Coils and Home Textiles sector, while it also
has a presence in the other business verticals such as Steel, Infrastructure and Energy. As a globally
recognized leader in the fields of Line Pipes and Home Textiles, Welspun Group has captured a strong
foothold in more than 50 Countries, it employs over 25,000 people and has as many as 100,000+
shareholders. Its marquee client list includes most of the Fortune 100 Companies operating in Oil & Gas
and Retail sectors. Among the group’s subsidiaries are Welspun USA, Welspun Tubular LLC, Welspun
Middle East and Welspun UK.

Welspun’s manufacturing base sits in its core facilities at Anjar, Gujarat, while other units are diversified
in different parts of India with one plant each in USA and Saudi Arabia. Welspun is in the process of
opening a manufacturing facility in Telangana.

Textiles
(WIL)

Pipes Welspun Steel

Group
(WCL) (WSL)

Infra
(WEL)

Fi gure 1: Welspun Group Businesses

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 Fi gure 2: Welspun Group Businesses

1.1.2 WELSPUN VISION & MISSION:

Vision: Delight our customers through innovation and technology, achieve inclusive and sustainable
growth to remain eminent in all our businesses.

Mission:

By 2020, we aim to be amongst:

the top 2 value creators in each of our businesses
the top 10 most respected Indian brands
the top 50 Groups in India in terms of market value

1.2 ABOUT WELSPUN INDIA LIMITED (WIL):

1.2.1 COMPANY OVERVIEW:

Welspun India Limited is a textile company based in Mumbai. It is the world’s largest manufacturer of
home textiles. It is Asia's largest integrated and the second largest Terry Towel producer in the world [2]. It
exports more than 94 per cent of its home textiles products to more than 50 countries. It exports more
than 68 per cent of its production to the US, 23 per cent to Europe and the balance to Middle East,
Australia, Mauritius. It supplies to 17 out of the top 30 retail chains in the world [2].

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 Fi gure 3: WIL Overvi ew

Welspun is proactively involved in a highly developed CSR program which focus on the three ‘E's -
Education, Empowerment & Health and Environment. With an aim to give back to the society, the
company has driven an entire campaign to empower the underprivileged and establishing a sustainable
business model that takes care of the environment. The social activities aren’t just limited to high profile
projects, in fact every Welspun-ite is encouraged to contribute to the community in any small way they
can.

The home textiles business is flourishing in US and Europe, both comprising a third each of total home
textiles market.

Fi gure 4: Home Textile Market Composition

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US market provides following advantages:

• US is a large and homogenous market making it a more attractive market to target first
• While US is a level playing field, Europe provides preferential tariff rates to some competing
countries
WIL owns following brands and licenses:

Fi gure 5: WIL Bra nds & Li censes

Apart from home textiles, Welspun India has ventured into Advanced textiles, Smart textile & Flooring
Solutions.

Home
Textiles

Advanced
Textiles

WIL
Smart
Textiles

Flooring
Solutions

Fi gure 6: WIL Businesses

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1.2.2 LEADERSHIP OF WIL:

Mr. B.K. GOENKA – Chairman

Mr. RAJESH R. MANDAWEWALA– Managing Director
Mrs. DEEPALI GOENKA – Chief Executive Officer & Joint Managing Director
Mr. ALTAF JIWANI – Chief Financial Officer
Mr. SHASHIKANT THORAT – Company Secretary
Mr. A. K. JOSHI – Director Operations, Anjar, Welspun India Ltd.

1.2.3 HISTORY:

Welspun India Limited was incorporated on 17 January 1985, as Welspun Winilon Mills a small texturizing
unit in a small, sleepy town in the district of Palghar, between Mumbai and Gujarat by the visionary
Gopiram Goenka. Six years down the line in 1991, Welspun Polyester India Limited went public with its
IPO and subsequently became Welspun India Limited.

In 1993 the terry towel facility was set up at Vapi, Gujarat. Legend has it that no one could believe such
superior quality towels could be made outside of Turkey. It was established to manufacture Polyester
filament yarns (PFY) and texturized yarns (PTY). In 1995, the name changed from Welspun Winilon Silk
Mills Pvt. Ltd. to Welspun India Ltd. shaping the business into its current form.

In 2000, Welspun USA was incorporated as a wholly owned subsidiary of Welspun Global Brands Limited.
With Sales, Design and Marketing based in NYC, Welspun focused on getting to know the US consumer.
Welspun USA also established a traditional distribution network in the state of Ohio.

Welspun set up its textiles and pipes division in Anjar in the year 2005, where a devastating earthquake
had left people with no means of livelihood. The plant today provides employment to 9,000 locals . In 2006
Welspun acquired Christy's of UK, a brand of towels that had the legacy of catering to none other than
the British Royal Family itself. The company now has a head office in Kamala Mills, Lower Parel, Mumbai.

1.2.4 KEY MILESTONES:

2018 Land breaking “Welspun Flooring Limited “manufacturing facility at Telangana

2017 Foray into Flooring Solutions & Smart Textiles
2016 Commissioned India’s largest spinning facility under one roof at Anjar, Gujarat
Merger of Welspun Enterprises and Welspun Projects to create stronger entity
2015 Launched shopwelspun.com & .in
Hygro branding campaign in US and launched SPUN globally
2014 Embarked upon capacity expansion and vertical integration
2012 Demerger of non-pipe business - O&G, Steel, Energy & Infra to “Welspun Enterprises”
Ranked no 1: Home textiles supplier in US by Home Textiles Today (HTT)
2010 Foray into Energy Business
Entry into Infrastructure

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 Pipes business consolidated under
Manufacturing facility in Middle East
2009 Plate cum Coil Mill
First Greenfield pipe facility overseas
2008 Global No 2 in Large Diameter Pipe Business by Financial Times, London
2006 First international acquisition of UK based towel brand ‘Christy’
Enters Oil and Natural Gas exploration
2005 Setting up of Welspun City, Anjar
2000 First international facility Welspun USA in New York
1997 Diversification into Pipes business SAW pipe unit at Dahej, Gujarat, India
1993-95 Manufacturing expansion, Terry Towel plant at Vapi, Gujarat, India
1985 Welspun is founded as a Textiles business

Ta bl e 1: Key Mi lestones of WIL

1.2.5 KEY DIFFERENTIATORS:

Fi gure 7: Key Di fferentiators

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VERTICALLY INTEGRATED PRESENCE WITH SIGNIFICANT CAPABILITIES

India Supply Vertically Integrated Facilities Across Manufacturing Chain

Chain

Cotton Spinning Weaving Processing Cutting & Sewing Logistics

v
Welspun India is backward vertically integrated. Current integration in spinning and weaving is about 70%.
Vertical integration has helped improve margins, better quality control and timely delivery to the
customers.

1.3 ABOUT ADVANCED TEXTILES:

1.3.1 INDUSTRY OVERVIEW:
Welspun ventured into Advanced Textiles with multiple nonwoven technologies. However, with inspired
imagination & sound technical competence, Welspun aspires to grow globally by adding diverse
nonwoven, weaving, knitting, coating & lamination technologies at strategic locations to offer wide range
of innovative Advanced Textiles products.

It has the following capabilities:

1. Hydro Entanglement Technology - Spunlace Nonwovens

2. Thermo-bond Technology - High Loft Nonwovens
3. Mechanical Bonding Technology - Needle Punch Nonwovens

The unique capabilities of Spun Lace and Needle Punch lines can manufacture multi-layer composites for
various applications. This advanced and innovative technology provides non-woven solutions for high-end
industrial applications such as Filtration, Acoustics, Automotive, Fire Safety, Thermal insulati on, Vibration
control, Noise control, Aero-Space, healthcare and railways. These products include specialized features
such as fire retardants, stain resistant, anti-bacterial, PET resistant, and soil resistance, among others.

1.3.2 PRODUCTS:

Disposables Durables
•Wipes •Automotives
•Wound Care •Protectives
•Hygiene •Filtration
•Drapes & Gowns •Coating Substrates

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2 PROJECT:
2.1 TITLE:
Welspun USA (WUSA) Inventory Planning

1.2. Department & Machine
1.1. Project Title
involved
Dept - Operations & Strategy
WUSA INVENTORY PLANNING
Machine - NA
Assignment Letter
Date: 8-Apr-2019
1.3.Problem description 1.4. Weekly Meeting on-
(What problem / Why is it a problem) day & time
1. Non-Standardised inventory norm
Tuesday-3 pm to 3:30 pm
2. Inventory pile-up - ageing, and old at WUSA
Friday-3:30 pm to 5 pm
3. Capital and space restricted as inventory

2.1. Name(s) & Team members, and mentors 2.2. Project Pillar Leader
1. Mr. Subham Burnwal 3. Mr. Neelesh Srivastav
Mr. Amar Dhanwade
2. Mr. Dayesh Bharnuke 4. Mr. Saranik Ghosh

3. Didactical/Learning Objectives (methods/tools to be used) --

Inventory norm, Cycle Stock, Safety Stock, ABC Classification, XYZ Classification, Aggregation of Stocks, Multiechelon inventory management
4. Expected Output of the Project (at the moment of the Project Final Evaluation) - CLIT & Short stop.
Article level standardisation of Inventory norms, Classification of Inventory for better management, liquidation, data capturing for aggregation and multi-echelon in
future
5. Quantitative (long term - 4-6 weeks) Objectives of the Project (to
6. Potential Savings (Lacs/year)
be achieved with the full implementation of all countermeasures)

1. Evauate and optimize Inventory norms for all WUSA Warehouses

2. SKU Segmentation for Inventory Management
3. Liquidation plan for aged and old nventory, norms/clauses for SCM and
marketing
4. Templates for aggregation and multiechelon inventory optimization

Fi gure 8: As signment Letter

2.2 OBJECTIVE:
The objectives of the project:

1. Evaluate and optimize Inventory norms for all WUSA Warehouses

2. SKU Segmentation for Inventory Management
3. Templates for data assimilation and implementation of aggregation and multi-echelon
inventory optimization

2.3 NEED AND SIGNIFICANCE:

The inventory norm for WUSA is either based on rule of thumb or based on customer preference. The
existing inventory planning is done based on the Week of Supply (WOS) agreed upon with the customer
or by the rule of thumb. Inventory pile-up and ageing is a serious issue that is being faced by the company
today. This results in a lot of locked-up capital and space in terms of the amount of inventory held which
thus results in a higher operational cost and reduced operational efficiency.
The current project aims at evaluating and validating the current inventory norms for Finished Goods (FG),
and make necessary amendments, at the stock keeping units (SKUs) levels at all warehouses of WUSA.
The rationale behind this exercise is to ensure an optimized level of inventory stocking at the warehouses
for the reduction in the operational costs.

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2.4 DELIVERABLE:
The deliverables of the project are inventory norms ensuring an optimized level of stocks of FG inventory
at the warehouses of WUSA & consequently savings in terms of losses due to storage of excess material,
expiry of unused materials etc.

2.5 SCOPE:
Welspun India Limited (WIL) – Welspun Global Brands Ltd. (WGBL), WUSA

2.6 LITERATURE REVIEW:

2.6.1 THEORY INVENTORY MANAGEMENT
Inventory encompasses all raw materials, work in process, and finished goods within a supply chain .

Cycle inventory is the average amount of inventory used to satisfy demand between receipts of supplier
shipments. The size of the cycle inventory is a result of the production, transportation, or purchase of
material in large lots.

Safety inventory is inventory held in case demand exceeds expectation; it is held to counter uncertainty.

2.6.2 REVIEW SYSTEM:

2.6.2.1 Continuous Review System
Inventory is continuously tracked and an order for a lot size Q is placed when the inventory declines to
the reorder point (ROP). The ROP is the level of inventory which triggers an action to replenish that
inventory stock. It is a minimum amount of an item which a firm holds in stock, such that, when stock
falls to this amount, the item must be reordered.

2.6.2.2 Periodic Review System

Inventory status is checked at regular periodic intervals and an order is placed to raise the inventory
level to a specified threshold, called the Order Up-to Level (OUL). It is the maximum target level up to
which the inventory needs to be replenished.

2.6.3 FORMULA, CALCULATIONS AND ASSUMPTIONS

Fi gure 9: Inventory Ma nagement Fi gure 10: Peri odic Review Policy

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 Total lead time (Production(p) + Transit(t)) = L
Review Period = P
Standard deviation in demand = σd
Standard deviation in lead time = σL
σd is taken as 20% of lead time
Variation in demand during lead time (σdlt)

𝛔𝐝𝐥𝐭 = √(𝑳 + 𝑻) ∗ 𝝈𝒅𝟐 + 𝝈𝑳𝟐 𝒙 𝒅𝟐

Cycle stock = d x (L+P)
Safety stock = Z x σdlt
Fi gure 11: Inventory Ma nagement
Z = NormInv(Cycle service level)
𝑂𝑈𝐿 = 𝐶𝑆 + 𝑆𝑆 = 𝑑 ∗ 𝑡 + 𝑍 ∗ 𝜎𝑑𝑙𝑡 Order Up to Level = OUL
Inventory Norm = IN
𝐶𝑆 𝑑 ∗𝑡
𝐼𝑁 = + 𝑆𝑆 = + 𝑍 ∗ 𝜎𝑑𝑙𝑡
2 2

2.6.4 CYCLE SERVICE LEVEL:

It is the desired probability of not running out of stock in any one ordering cycle, which begins at the time
an order is placed and when it arrives.
We can choose one of the three service levels depending upon the type of SKU:

• High: 95%
• Medium: 90%
• Low: 85%

2.7 METHODOLOGY:

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 Planned action
Action Implemented
Action Delayed
PROJECT MASTER PLAN
Month
Main Steps Activities
Week WK-1 WK-2 WK-3 WK-4 WK-5 WK-6 WK-7 WK-8
Plan
1 Visit to Anja/Vapi 1 Orientation and plant visit
Actual

Plan
1 Project topic deployment, and set-up of HR, IT, Admin facilities
Actual
Orientation at Plan
2 2 Understanding of scope, definition, and theory
Corporate Office Actual
Plan
3 Charting out data requirements, meeting the relevant people for the same
Actual

Plan
1 SKU Level Data collection and cleaning - Sales and forecast
Data assimilation, Actual
cleaning and creating Plan
3 2 Cleaning Inventory data as per requirement of marketing team
first draft of the Actual
cleaned data Plan
3 SKU mapping with the involvement of marketing team
Actual

Plan
1 Calculation of Inventory norm on the post refined data
Actual
Evaluation and
Proposal for inventory optimisation through inventory aggregation at - SKU Plan
4 optimisation of 2
and Warehouse level Actual
Inventory Norm
Plan
3 Finalising the inventory norms and final closure
Actual

Plan
1 Introduction, scope definition, expectations and recommendations
Actual
SKU Segmentation
Plan
5 for inventory 2 Development and validation of segmentation model
Actual
management
Plan
3 SKU Segmentation for inventory management - Calculation and closure
Actual

1. Analyse aged and Plan

1 Analyse aged and inactive inventory - Propose liquidation plan
Inactive inventory - Actual
Propose liquidation Plan
2 Report template for inventory ageing, and liquidation
plan Actual
6
2. Data assimilation Plan
3 Report template for aggregation of inventory - article and warehouse level
template for Actual
aggregation and multi Plan
4 Report template for multi chelon inventory management
echelon Action

Ta bl e 2: Project Master Pl an

2.7.1 ORIENTATION AT THE CORPORATE OFFICE

2.7.1.1 MEETING THE TEAM
After an initial meeting with the leadership team at Welspun, for the first week I met with every
member of the supply chain team to understand their working mechanism. At the same time,
we would discuss on the various kinds of data that I would require from them to perform my
analysis.
2.7.1.2 UNDERSTANDING THE CURRENT SITUATION
Welspun Global Brands Ltd. (WGBL), with its head office in Mumbai, India works in collaboration with
Welspun USA (WUSA) for sharing information on “Demand Planning”, “Inventory replenishment policy”,
“setting up of Inventory Norms”, etc. The warehouses of WUSA can be seen in the map below.
2.7.2 DATA ASSIMILATION:
The second step was to consolidate the requirement of all the products in a single sheet. Data
consolidation feature of MS Excel was used to achieve this. The next step was the collection of data of the
following:

1. Article-wise past demand/sales data

2. Article-wise cost
3. Existing inventory norms agreed with customers
4. Site-wise transit lead time
5. Other Lead times: replenishment lead time, production lead time , procurement lead time, and
percentage variation in lead time etc.

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 6. Inventory Report

Fi gure 12: Wa rehouses of Welspun USA

1. Article-wise past demand/sales data

Ta bl e 3: Ra w SAP dump sales data

2. Article-wise cost (*LDP = Cost in dollars )

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 Ta bl e 4: Ra w SAP dump sales data*

3. Existing inventory norms agreed with customers

Ta bl e 5: Ra w SAP dump sales data*

*The norms are multiplied by a scale factor to ensure confidentiality.

4. Site-wise lead time

Ohio Norfolk Sumner
4 Weeks 4 Weeks 6 Weeks

5. Lead time and percentage variation in lead time

Production lead time = 8 Weeks

Transit lead time = 4 Weeks
Replenishment lead time = 4 Weeks
Procurement lead time = 2 Weeks

Percentage variation in lead time = 10%-15%

6. Inventory Report
Inventory report gives the inventory position of different warehouses in terms of quantity, dollar value
and week of supply (WOS), etc. this becomes a fundamental report on which all the other activities
such as forecasting, demand planning, procurement, promotion, marketing, promotion, etc. relies on.

This report is important to obtain crucial information for ABC classification, of inventory .

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 Ta bl e 6: SKU Level Inventory Report

2.7.3 EVALUATION AND OPTIMIZATION

The third step was to conceptualize a model that would automatically calculate the inventory norm based
on various parameters on demand and lead time data.

Fi gure 13: Sta ges of the process followed (Source: Internet)

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 Fi gure 14: Sta ges for optimization a nd a nalysis

STAGE 1

The table below shows the filtered and cleaned monthly data on which the principles of inventory norms
are to be applied.

Ta bl e 7: SKU Level demand data

STAGE 2

The table below shows the calculation part on the data shown above. Week of supply (WOS) calculated
above is the standard average amount of inventory per SKU, that the firm should hoard at every

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warehouse, for optimized level of customer supply without facing stockouts or demand losses. It includes
both cycle stock and safety stock.

Ta bl e 8: SKU Level demand data

2.7.4 SKU SEGMENTATION

STAGE 3

The calculation for ABC classification done for the SKUs based on dollar value and XYZ classification
done on the SKUs based on the variability, i.e. standard deviation in the demand distribution over the
time window under observation.

The criteria for classification based on ABC and XYZ is, as discussed in the table below,

Classification
ABC XYZ
A class = SKUs that contribute up to 80% of the X class = items that have standard deviation in
business demand less than 30% of the mean
B class = SKUs that contribute remaining 15% of Y class = items that have standard deviation in
the business demand less than 60% of the mean
C class = SKUs that contribute the final 5% of the Z class = items that have standard deviation in
business demand greater than 60% of the mean
Ta bl e 9: Cri teria for the decision of ABC a nd XYZ classification

The table below shows the calculation for these classification for the Welspun warehouse at Ohio.

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 CONFIDENTIAL

Ta bl e 10: SKU s egmentation for inventory management

2.7.5 CONCEPT VALIDATION

In the tables below, we try to compare the norms currently followed with those that are calculated by the
principle of inventory management.

I have chosen Costco as one of the customers as it caters to more than 65% of the business alone.

An attempt is made to calculate the cost saving that would incur because of reduction in the quantity of
inventory held across three WUSA warehouses.

Ta bl e 11: SKU wi se existing norm vs . calculated comparison for Costco (Sumner)

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 Ta bl e 12: SKU wi se existing norm vs . calculated comparison for Costco (Norfolk)

Ta bl e 13: SKU wi se existing norm vs . calculated comparison for Costco (Ohio)

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 Total saving potential by the optimization process (from 65% of the business only) = $ 1.04 million

Total saving potential by the optimization process (from total business) = $ 1.60 million

2.8 RESULTS:
2.8.1 INVENTORY MANAGEMENT
The final WOS norm for every customer is calculated by weighted average method. The average weekly
(or monthly) demand data for all SKUs is used to assign weightages to all the different SKUs supplied to a
customer. Then cumulative weight is taken from the individual WOS data and their weights for the final
WOS norm calculation.

For example, I have used the above method to calculate the WOS norm for Costco. The agreed WOS
norm is 6 Weeks. After calculating the through the above method, it comes out as 5.9 weeks. Thus, this
also in a way validates the existing customer norms through the scientific principles of inventory
management. There are equal chances of inventory norms to vary from the agreed ones based on the
inventory norm calculation.

Ta bl e 14: Cus tomer wise WOS norm

2.8.2 SKU SEGMENTATION

The graph below showing the percentage of items that fall under respective classes A, B, or C. It can also
be concluded that class A includes only about 12% SKUs and contribute almost 80% to the business
followed by class B which includes around 22% SKUs contributing to the next 15% to the business and
the rest by class C which includes around 66% SKUs yet contributes only the last 5% to the business.

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 Fi gure 15: Gra ph s howing ABC cl assification a cross SKUs of WUSA Warehouse at Ohio

2.9 RECOMMENDATIONS:

2.9.1 FREQUENCY FOR NORM REVISION

In Welspun the volume, variety, and variability of SKUs is very high and thus results in a dynamic
situation of inventory movement. The current exercise was done to check for the frequency of
revision of inventory norms such that it stays relevant and helps prevent over-stocking of inventory
resulting in their ageing or obsolescence; or under-stocking and causing stock-outs or lost sales.

Ta bl e 15: Arti cle wise Inventory norm data ca lculated – Entire period vs . every s ix months

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For this analysis, inventory norm was calculated for running 6-month period window for comparison. The
average WOS was calculated and was compared with WOS calculated considering Entire Period.

Now, as per this calculation the higher the percentage the lesser the deviation of average WOS from the
entire period WOS.

From this analysis the following results were recorded:

Percentage of SKUs with AVG %

>=80% >=85% >=90% >=95%
74.26% 56.47% 41.34% 20.12%
Ta bl e 16: Percentage of SKUs with AVG %

This means that the percentage of SKUs with average percentage greater than 95%, which is highly
desirable is only a small fraction of 20.12%, similarly those with average percentage greater than 90% is
only 41.34%.

Thus, it can be concluded that there is a large variation in the average weekly demand of the data over a
time frame of six months.

Thus, it is recommended that the inventory norms be calculated and revised every six months.

2.9.2 SUGGESTIONS FOR NORM STANDARDIZATION, PROMOTION, AND LIQUIDATION

Ta bl e 17: Arti cle wise Inventory norm data – ca lculated (Standard) vs. Agreed norm a nd Actual

The above table shows the WOS norms agreed upon with the customer, the standard WOS norm
calculated by the theory of inventory management, as well as the actual WOS physically present in the

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warehouse. By updating this report monthly, it will be clear as to which SKUs are not able to meet the
standard norms or the agreed upon norms.

The following recommendations will be handy in scrutiny of the SKUs that overshoot the WOS norm.

Liquidation Plan* Condition (WOS) Action Taken

Leading Indicator NORM + 3 Trigger for Liquidation plan

Lagging Indicator NORM + 5 Production cut-off, till WOS reduces to 6-8 weeks
*a l ternative promotion plan
Ta bl e 18: Indicator Diagram

It might be noteworthy:
• The report needs to be updated monthly
• WOS > 12 to be penalized
• The WOS norm calculated will improve over time.

2.10 BENEFITS:
Simplicity: Just following a fixed process flow will lead to theoretically backed-up and mathematically
calculated results along with incorporating all the complexities, that could occur in the norm calculation
and revision.

Reduced inventory: Reduces chances of inventory piling up in the planning process thereby increasing the
working capital.

Reduction of Effort: The classification of inventory in terms of ABC, and XYZ will help in reduction in the
efforts of the demand planners.

Increased warehouse space: with the lot of inventories reduced, owing to optimization, there be a lot of
freed space in the warehouses.

Increased Efficiency: Reduces chances of human error in the planning process thereby increasing
efficiency.

Better Planning: The use of suggested templates will help the planner to fix MOQs, lead times, planning
frequencies, etc. swiftly and with little effort and better planning.

2.11 KEY LEARNINGS:

Through the implementation of this project I got to learn:

• The theories of Inventory Management

• Classifications – ABC, XYZ, etc.
• Got hands on experience with advanced MS Excel

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 • Understood the nuances of various features of report writing in MS Word
• Used advanced presentation skills on MS PowerPoint
• Learned to manage time, work along with daily rituals, personal grooming, hygiene, and
activities.
• Learnt organizational Behavior and Effective Communication for dispersing clarity of
thoughts.
• Understood the importance of deadlines and key project milestones like, mid-reviews.
• Attended HR sessions, office trainings, meetings, etc.
• Learnt etiquettes such as – elevator etiquettes, corridor interactions, lobby interactions,
etc.

2.12 FUTURE SCOPE: EVOLUTION OF INVENTORY STRATEGY

The figure below gives complete evolution of inventory strategy. Through the incorporation of this
project and its execution, we will be able to safely pass the second stage of inventory optimizatio n which
is called Single Echelon Inventory (SEI).

Fi gure 16: Evol ution of Inventory Stra tegy (Source: Link)

Further, to transform to internal Multi Echelon Inventory (MEI) the company can begin to optimize
inventory at the plant, transit, and warehouse level. The data collection and assimilation for the same
can be done through the following template.

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 Ta bl e 19: Template for Mul ti Echelon inventory optimization model

2.13 THE WAY FORWARD:

• Implementation of these suggestions in the Master Data Management (MDM), Management
Information System (MIS), and SAP-ERP.

2.14 LIMITATIONS:
1. Due to inconsistency and raw nature of the available data it is difficult to execute any
conceptual model.
2. The implementation of suggested inventory norm requires continuous monitoring and team
effort.
3. The inventory norm needs to be implemented across all the echelons for better efficiency and
for the way forward.
4. Multi-echelon model can only be implemented if all the single echelons are optimized and there
is good amount of data availability.

3 ACADEMIC CONTRIBUTION:
While doing this project I incorporated all the concepts of Inventory Management that was taught during
the academic curriculum. Through this project I can confidently say that I understand the concepts far
better now. I know the nuances that appear during the final implementation of the concepts in the real-
world scenario. I learnt to deal with real-life variabilities in terms of data or the deviations from the theory.
Then the application of statistics and logical approximations for the implementation of the robust data
model.

Inventory Management:

• Principles of Inventory management

• Replenishment theory
• Inventory segmentation – ABC classification, XYZ classification

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 • Single Echelon optimization
• Multi-echelon inventory optimization

Business Statistics:
• Probabilistic Distributions
• Variability and Deviations handling in various parameters like – demand, lead time, inconsistency
of data, etc.

4 DEMONSTRATION OF WELSPUN VALUES

Value Instance Visible Impact / Change due to behaviour

Customer Presentation to The presentation was made clear to Mr. Madhusudan, so that
Centricity Mr. Madhusudan my deliverables are clear to him since, my deliverables is on
at WUSA WUSA inventory management

Collaboration Support from Mr. In one instance there was requirement of dump from SAP and
Subhash Dadhe SCM team was preoccupied with something, so on our request
Mr. Dadhe, helped me with the data from SAP, keeping aside his
important work, and extending the day’s work to finish his day’s
task.
Technology Biometric, IoT, • There are biometrics at the entrance that takes care of
Home the personnel data and attendance, etc.,
automation, • Home automation is an integral part of the office rooms,
the lights go of if a person forgets to switch them off.
• IoT enabled washrooms take care of the automatic
flushing, this prevents water wastage, and improves the
hygiene.
Inclusive Food delivery • A lot of people order lunch from local food vendors
Growth system whose contacts are provided by the HR, thus ensuring
that local community people also, get to run their
business via employees at Welspun.

Ta bl e 20: Demonstration of Welspun values

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5 BIBLIOGRAPHY
Asian Development Bank invests equity capital in Welspun Energy group company . (n.d.). Retrieved 6 3,
2019, from http://articles.economictimes.indiatimes.com/2014-06-
23/news/50798652_1_welspun-energy-wind-power-projects-adb

Peaceful Demonstration against Welspun Thermal Power Project in Delhi. (n.d.). Retrieved 6 3, 2019,
from Vindhya Bachao website, 18 November 2013: http://vindhyabachao.org/activities/15-
peaceful-demonstration-against-welspun-thermal-power-project-in-delhi

Sheth, C. R. (2016). A Comparative Study on Cash Flow Statements of Welspun India Ltd. and Ghcl Ltd.
Indian journal of applied research, 5(7). Retrieved 6 3, 2019, from
http://worldwidejournals.in/ojs/index.php/ijar/article/view/7099/7149

6 REFERENCES:
Books:

Operations Management: Processes and Supply Chains: Larry P. Ritzman, Lee J. Krajewski, and Manoj K.
Malhotra

Sunil Chopra, Peter Mendil, D V Kalra, Supply Chain Managemen

Links:

http://www.welspunindia.com/about-us.php

http://www.technicaltextile.net/nonwovens/spunlace/index.aspx

http://www.standardfiber.com/materials/bedding-basics/about-denier/

https://blog.arkieva.com/is-your-business-in-need-of-multi-echelon-inventory-optimization-meio/

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