A PROJECT REPORT ON

“A Study of Inventory Management in Linamar India Pvt Ltd”

SUBMITTED BY

SHUBHAM GADILKAR

MBA-SEMESTER-III

ACADEMIC YEAR 2021 – 2022

UNDER THE GUIDANCE OF

PROF.SUPRIYA ZARGAD INTERNAL

GUIDE

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

PUNE UNIVERSITY

MASTER OF BUSINESS ADMINISTRATION (MBA)

THROUGH

PROGRESSIVE MODERN COLLEGE OF BUSINESS MANAGEMENT

SHIVAJINAGAR,PUNE-411021

Declaration
 I, the undersigned KRUSHNA DHOKCHAULE, declare that the Project Report titled as,
“A STUDY OF INVENTORY MANAGEMENT IN LINAMAR INDIA PVT LTD”,
submitted by me for PUNE UNIVERSITY of Master of Business Administration (M.B.A.) is
the original record of the project work carried out by me during the period from 21st OCT
2021 to 25st DEC 2021, under the able guidance of PROF.SUPRIYA ZARGAD

Date:

Place: Pune. MBA, Semester III

Roll No.
Acknowledgement

At the start, I would like to express my sincere gratitude to Dr.YOGESH DESHPANDE, my

project guide from P.E.S, Pune – 411021 for successful completion of the project in partial
fulfillment of Master of Business Administration (M.B.A.) under his guidance to allow me to
work on such an interesting subject. He provided me proper and correct direction for
completion of project work. His continuous guidance during the course of project helped me
in channelizing my efforts, quite appropriately.

I am also thankful to Mr.SANDESH WAGH, LINAMAR INDIA PVT.LTD. for the

guidance given and cooperation extended for carrying out the project.

I am also thankful to all the people in the organisation and friends who have helped me to
conclude the contents of the project in a decent and presentable manner.

Date: ADITYA LACHAKE

Place: Pune. MBA, Semester III

Roll No.
Table of Contents

Chapter Title of the Chapter Page No.

No.

Executive Summary 5

1 Introduction 6-8

2 Literature Review 9-19

3 Industry and Company Profile 20-30

4 Research Methodology 31-32

5 Data Analysis and Interpretation 33-43

6 Findings and Suggestions 44-45

7 Conclusions 46

8 Limitations 47

Bibliography 48
EXECUTIVE SUMMARY

The study was conducted at LINAMAR INDIA PRIVATE LIMITED, Chakan, Pune.
The study is about Inventory Management at Linamar India.

This is an essential topic because for every manufacturing concern or organisations

associated with offering goods inventory is an essential part. The Company has its own
manufacturing plant and store in Chakan only so, it was easy to study and understand about
the inventory management in the organisation. The company is into manufacturing
automotive components. The company is a subsidiary of foreign

There are various methods to study inventory management like, EOQ,

safety stock, FSN analysis, just in time inventory technique (JIT), ABC technique, HML
technique, VED technique, Inventory Turnover ratio, regression analysis, trend analysis etc.
Here, the study was conducted with the help of inventory analysis techniques like, EOQ
analysis, safety stock levels, ABC analysis, Inventory turnover ratio and analysis of various
types of stocks like:

o Raw material

o Work in Progress

o Finished Goods

After the analysis it was easy to understand that company had

maintained proper inventory and is going strong. The company has made profits in the past
three years. The company is also planning to expand its business soon.

The analysis is done through various charts, graphs and tables which make
the analysis even easier to understand but, there were also some limitations in the study. The
study is concluded with the help of various conclusions and recommendations.
 CHAPTER-I
INTRODUCTION

Financial Management is concerned with the duties of the financial manager in the business
firm. Financial managers actively manage the financial affairs of any type of business, namely
financial and non-financial, private and public, large and small, profit seeking and non-profit.
They perform varied tasks such as, budgeting, financial forecasting, cash management, credit
administration, investment analysis, funds management and inventory management.

Every organization needs inventory for smooth running of its activities. It serves
as a link between production and distribution processes. The investment in inventories
constitutes the most significant part of current assets/working capital in most of the
undertakings. Thus, it is very essential to have proper control and management of inventories.
The purpose of inventory management is to ensure availability of materials in sufficient
quantity as and when required and also to minimize investment in inventories. Raw materials,
goods in process and finished goods all represent various forms of inventory. Each type
represents money tied up until the inventory leaves the company as purchased products.
Because of the large size of the inventories maintained by firms, a considerable amount of
funds is required to be committed to them. It is therefore absolutely imperative to manage
inventories efficiently and effectively in order to avoid unnecessary investments. A firm
neglecting the management of inventories will be jeopardizing its long run profitability and
may fail ultimately. The reduction in excessive inventories carries a favorable impact on the
company’s profitability.

The study starts with an introduction to inventory management, Company’s

profile, its Vision & Mission, Achievements and also the need for study, review of literature
and objectives are set out for the study. Research methodology, Data analysis &
Interpretation, Findings and Suggestions of the study follow.

One of the main areas of the project is the analysis part, where the data is
analyzed & interpreted, to find out how the inventories were managed. Some of the tools
used in inventory are:
Economic Order Quantity
Safety Stock
ABC Analysis
FSN Analysis
 Inventory Turnover Ratio.
And then conclusions, limitations & scope for further study were discussed

Inventory control is vitally important to almost every type of business, whether

product or service oriented. Inventory control touches almost every facet of operations. A
proper balance must be struck to maintain proper inventory with the minimum financial
impact on the customer. Inventory control is the activity that maintains stock keeping items
at desired levels. In manufacturing since the focus is on physical product, inventory control
focus on material control.

Inventory management is the integrated functioning of an organization dealing with

supply of materials and allied activities in order to achieve the maximum co-ordination and
optimum expenditure on materials. Inventory control is the most important function of
inventory management and it forms the nerve centre in any inventory management
organization. An Inventory Management System is an essential element in an organization.
It is comprised of a series of processes, which provide an assessment of the organization’s
inventory.
NEED TO HOLD INVENTORY

TRANSACTION MOTIVE: This refers to the need of maintaining inventory to facilitate

smooth production and sales operations.

PRECAUTIONARY MOTIVE: Precautionary motive for holding inventory is to provide a

safeguard when then actual level of activity is differ than anticipated. This inventory serves
when there is a unpredictable changes in the demand and supply forces.

SPECULATIVE MOTIVE: This motive influences the decision to increase or decrease the
levels of inventory to take the advantage of price fluctuations.
CHAPTER-II

LITERATURE REVIEW

GENERAL KEY CONCEPTS

Inventory: Inventory means physical stock of goods, which is kept in hands for smooth and
efficient running of future affairs of an organization at the minimum cost of funds blocked in
inventories. The fundamental reason for carrying inventory is that it is physically impossible
and economically impractical for each stock item to arrive exactly where it is needed, exactly
when it is needed.

TYPES OF INVENTORIES

A manufacturing firm generally carries the following types of inventories:

Raw Materials.

Bought out parts.

Work-in-process inventory (WIP).

Finished goods inventories.

Maintenance, repair and operating stores.

Tools inventory.

Miscellaneous inventory.

Goods in transit.

Goods for resale.

Scrap Material.

REASONS FOR HOLDING INVENTORY

To stabilize production.
To take advantage of price discounts.
To meet the demand during the replenishment period.
 To prevent loss of orders.
To keep pace with changing market conditions.
COSTS ASSOCIATED WITH INVENTORY

Production cost.
Capital cost.
Ordering cost.
Carrying cost.
Shortage cost.

INVENTORY CONTROL

The main objective of inventory control is to achieve maximum efficiency in

production & sales with minimum investment in inventory.

Inventory control is a planned approach of determining what to order, when to order

and how much to order and how much to stock, so that costs associated with buying and
storing are optimal without interrupting production and sales.

BENEFITS OF INVENTORY CONTROL

The benefits of inventory control are:

• Improvement in customers’ relationship because of the timely delivery of goods and

services.

Smooth and uninterrupted production and hence, no stock out.

Efficient utilization of working capital.
Economy in purchasing.
Eliminating the possibility of duplicate ordering.

PRINCIPLES OF INVENTORY CONTROL

Inventory is only created by spending money for materials and the labour and
overhead to process the materials.
Inventory is reduced through sales and scrapping.
Accurate sales & production schedule forecasts are essential for efficient purchasing,
handing & investment in inventory.
Management policies which are designed to effectively balance size and variety of
 inventory with cost of carrying that inventory are the greatest factor in determining
inventory investment.
Forecasts help determine when to order materials. Controlling inventory is
accomplished through scheduling production.
Records do not produce control.
Control is comparative & relative, not absolute. It is exercised through people with
varying experiences and judgment rules & procedures establish a base from which the
individuals can make evaluation and decision.

With the consistent practices being followed, inventory control can become
predictable and properly related to production and sales activity.

INVENTORY CONTROL – TERMINOLOGIES

• Demand:
It is the number of items required per unit of time. The demand may be either
deterministic or probabilistic in nature.

• Order cycle:
The time period between two successive orders is called order cycle.

• Lead time:
The length of time between placing an order and receipts of items is called lead time.
 • Safety stock:
It is also called buffer stock or minimum stock. It is the stock or inventory needed to
account for delays in materials supply and to account for sudden increase in demand due
to rush orders.

• Inventory turnover:
If the company maintains inventories equal to 3 months consumption. It
means that inventory turnover is 4 times a year i.e., the entire inventory is used up and
replaced 4 times a year.

INVENTORY COST RELATIONSHIP

There are two major costs associated with inventory. Procurement cost and carrying cost.
Annual procurement cost varies with the numbers of orders. This implies that the
procurement cost will be high, if the item is procured frequently in small lots. The annual
procurement cost is directly proportional to the quantity in stock. The inventory carrying cost
decreases, if the quantity ordered per order is small. The two costs are diametrically opposite
to each other. The right quantity to be ordered is one that strikes a balance between the two
opposition costs. This quantity is referred to as “Economic Order Quantity”.

> ECONOMIC ORDER QUANTITY

MEANING

A decision about how much to order has great significance in inventory management. The
quantity to be purchased should neither be too small nor too big because costs of buying and
carrying material are very high. Economic order quantity is the size of the lot to be purchased
which is economically viable. This is the quantity of material which can be purchased at
minimum costs. Generally economic order quantity is the point at which inventory carrying
costs are equal to order costs. In determining economic order quantity it is assumed that cost
of managing inventory is made up solely of two parts i.e., ordering cost and

carrying cost. The cost relationships are shown in below figure.

FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY (EOQ)

Economic Order Quantity

Annual Total Cost

Costs

Annual Inventory Carrying Cost

Annual Ordering Cost

Q* Economic Order Quantity

 > SAFETY STOCK
MEANING

The economic order quantity formula is developed based on assumption that the
demand is known and certain and that the lead time is constant and does not vary. In actual
practical situations, there is an uncertainty with respect to the both demand as well as lead
time. The total forecasted demand may be more or less than the actual demand and the lead
time may vary from estimated time. In order to minimize the effect of uncertainty due to
demand and lead time, a firm maintains safety stock, reserve stocks or buffer stocks.

The safety stock is defined as “the additional stock of material to be maintained in

order to meet the unanticipated increase in demand arising out of uncontrollable factors”.

In simple terms safety stock saves the organisation in any kind of emergency situation.

Because it is difficult to predict the exact amount of safety stock to be maintained, by

using statistical methods and simulation, it is possible to determine the level of safety stock to
be maintained.

DETERMINATION OF SAFETY STOCK

If the level of safety stock is maintained is high, it locks up the capital and there is a
possibility of risk of obsolescence. On the other hand, if it is low, there is a risk of stock out
because of which there may be stoppage of production. When the variation in lead time is
predominant, the safety stock can be computed as:

Safety Stock= (Maximum Daily Usage * Maximum Lead Time Days) - (Average Daily
Usage* Average Lead Time Days)
SAFETY STOCK

The service level of inventory thus depends upon the level safety stocks. Larger the safety
stock, lessen the risk of stock out and, hence, higher service level. Sometimes higher service
levels are not desirable as they result in increase in cost, thus, fixing up a safety stock level is
critical. Using past date regarding the demand and lead time data, reliability of suppliers and
service level desire by management, safety stock can be determined with accuracy.

> ABC ANALYSIS

MEANING
The inventory of an organization generally consists of thousands of items with varying prices,
usage rate and lead time. It is neither desirable nor possible to pay equal attention of all items.
ABC analysis is a basic analytical tool which enables the management to concentrate its
efforts where results will be greater. The concept applied to inventory is called
as ABC analysis.

Statistics reveal that just a few items account for bulk of the annual consumption of
the material. These few items are called A class items which hold the key to business. The
other items are known as B & C items, which are numerous in number but their contribution
is less significant. ABC analysis thus tends to segregate the items into three categories A, B &
C on the basis of their values. The categorization is made to pay right attention and control
demanded by items.

FEATURES OF ABC ANALYSIS

A Class (High Value) B Class (Moderate Value) C Class (Low Value)

1. Tight control on Moderate control Less control
stock levels
2. Low safety stock Medium Large
3. Ordered frequently Less frequently Bulk ordering
4. Individual posting in Individual Collective posting
stores
5. Weekly control Monthly control Quarterly control
reports
6. Continuous effort to Moderate efforts Minimum efforts
reduce lead time
ADVANTAGES

This approach helps the manager to exercise selective control & focus his attention
only on few items.
By exercising strict control on A class items, the material manager is able to show the
results within a short period of time.
It results in reduced clerical cost, saves time and efforts and results in better planning
and control and increased inventory turnover.
ABC analysis tries to focus directly on effort based merit of the items and, thus,
becomes an effective management control tool.

FSN ANALYSIS

All the items in the inventory are not required at the same frequency. Some are required
regularly, some occasionally and some very rarely. FSN analysis classifies items into fast
moving, slow moving, and non-moving items.

The FSN classification system is extremely helpful in distributing spare parts which are kept
near the dispensing are having items which belong to the fast-moving category. The items
which fall into the non-moving category can be discontinued if the further scope of use is not
expected. As companies in production for a long period have a specific percentage of non-
moving spare parts which are usually disposed off at regular intervals. Selling the spare parts
or reusing the same can be a gain in the capital which can be used for other uses.

> INVENTORY TURNOVER RATIO

Kohler defines inventory turnover as “a ratio which measures the number of times a
firm’s average inventory is sold during a year”.
 A higher turnover rate indicates that the material in question is a fast moving one. A
low turnover rate, on the other hand, indicates over-investment and locking up of working
capital on undesirable items.

Inventory turnover ratio may be calculated in different ways by changing the

numerator, but keeping the same denominator. For instance, the numerator may be materials
consumed, cost of goods sold or net sales. Based on any one of these, the ratio differs from
industry to industry.

Stock turnover is measured in terms of the ratio of the value of materials consumed to
the average inventory during the period the ratio indicates the number of times the average
inventory is consumed and replenished. By diving no. of days in a year by turnover ratio, the
number of days for which the average inventory is held, can be ascertained.

Comparing the no. days in the case of two different materials, it is possible to know
which is fast moving & which is slow moving. On that basis, attempt may be made to reduce
the amount of capital locked up, and prevent over-stocking of slow moving items.

Net sales
Inventory turnover ratio =
Avg. inventory

No. of days in a year

Inventory velocity =

Inventory turnover ratio

KEY CONCEPTS (as per Linamar)

Production Inventory refers to production parts inventory and would include Raw Material,
Work in Progress and Finished Goods. Production Inventory does NOT include consumable
and maintenance inventories.
Consumable Inventory includes any tool that touches the part during the manufacturing
process.
Maintenance Inventory is deemed to be any spare part in inventory with a per unit cost of at
least $100 CAD.
Free-Issued Inventory - any inventory that is supplied to the entity, either by a supplier or a
customer, that will be further manufactured or used in the production process at no cost to the
entity (if the entity pays for freight, insurance, duties etc. it would still be considered free-
issued inventory.)

Standard Costing – applies only when determining the cost of inventory transactions for the
income statement. It is a predetermined estimate of what a part should cost. Studies of past
and estimated future cost data should provide the basis for calculating this cost.

Work in Progress (WIP) is defined as a partially completed manufactured part which will
include a material cost and the applicable labour and overhead costs applied to date.
CHAPTER-III

INDUSTRY PROFILE & ORGANIZATION (COMPANY) PROFILE

Automotive Industry

Automobile industry is the business of producing and selling self-powered vehicles,

including passenger cars, trucks, farm equipment, and other commercial vehicles. By
allowing consumers to commute long distances for work, shopping, and entertainment, the
auto industry has encouraged the development of an extensive road system, made possible
the growth of suburbs and shopping centres around major cities, and played a key role in the
growth of ancillary industries, such as the oil and travel businesses. The auto industry has
become one of the largest purchasers of many key industrial products, such as steel. The large
number of people the industry employs has made it a key determinant of economic growth.

Indian automobile industry

INTRODUCTION

The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per
cent year-on-year to 4.02 million units (excluding two wheelers) in 2017. It was the 7th
largest manufacturer of commercial vehicles in 2017.
The Two Wheelers segment dominates the market in terms of volume owing to a growing
middle class and a young population. Moreover, the growing interest of the companies in
exploring the rural markets further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Overall automobile exports from India grew at 6.86 per cent CAGR between FY13-
18. In addition, several initiatives by the Government of India and the major
 automobile players in the Indian market are expected to make India the leader in two
wheelers and four wheeler market in the world by 2020.

MARKET SIZE

Overall domestic automobile sales increased at 7.01 per cent CAGR between FY13-18 with
24.97 million vehicles getting sold in FY18.
The auto industry is set to witness major changes in the form of electric vehicles (EVs), shared
mobility, Bharat Stage-VI emission and safety norms. Electric cars in India are expected to
get new green number plates and may also get free parking for three years along with toll
waivers@. Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in
2017-18. Premium motorbike sales in India crossed one million units in FY18.

INVESTMENTS

In order to keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months. The industry has
attracted Foreign Direct Investment (FDI) worth US$ 18.413 billion during the period April
2000 to December 2017, according to data released by Department of Industrial Policy and
Promotion (DIPP).
Some of the recent/planned investments and developments in the automobile sector in India
are as follows:

Ashok Leyland has planned a capital expenditure of Rs.1, 000 crore (US$ 155.20
million) to launch 20-25 new models across various commercial vehicle categories in
2018-19.
Mahindra & Mahindra (M & M) is planning to make an additional investment of
Rs.500 crore (US$ 77.23 million) for expanding the capacity for electric vehicles in its
plant in Chakan.

GOVERNMENT INITIATIVES

The Government of India encourages foreign investment in the automobile sector and allows
100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -

The Government of Karnataka is going to obtain electric vehicles under FAME

Scheme and set up charging infrastructure across Bengaluru, according to Mr.R V
Deshpande, Minister for Large and Medium Industries of Karnataka.
The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the
country for introduction of electric vehicles (EVs) in their public transport systems
under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric
Vehicles in India) scheme. The government will also set up incubation centre for start
-ups working in electric vehicles space.
Energy Efficiency Services Limited (EESL), under Ministry for Power and New and
Renewable Energy, Government of India, is planning to procure 10,000 e-vehicles
via demand aggregation, and has already awarded contracts to Tata Motors Ltd for
250 e-cars and to Mahindra and Mahindra for 150 e-cars.
The government is planning to set up a committee to develop an institutional
framework on large-scale adoption of electric vehicles in India as a viable clean
energy mode, especially for shared mass transport, to help bring down pollution level
in major cities.

The automobile industry is supported by various factors such as availability of skilled labour
at low cost, robust R&D centres and low cost steel production. The industry also provides
great opportunities for investment and direct and indirect employment to skilled and
unskilled labour.
Indian automotive industry (including component manufacturing) is expected to reach Rs
16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers are expected to grow 9
per cent in 2018.
Exchange Rate Used: INR 1 = US$ 0.015 as of March 1, 2018

SWOT ANALYSIS OF AUTOMOBILE INDUSTRY

Strengths:

1. Evolving industry: Automobiles represent freedom and economic growth. Automobiles

 allow people to live, work and travel in ways that were unimaginable a century ago. An
automobile provides access to markets, to doctors, to jobs. Nearly every automobile
trip ends with either an economic transaction or some other benefit to the quality of
life.
2. Continuous product innovation & technological advancement : With the advent of
E- vehicles & alternative fuel such as Shell gas, CNG and others, Automobile
Companies are increasing R & D expenditure to drive the next phase of growth through
use of renewable sources of energy which may be solar, wind etc.
3. Growth shifting to Asian markets: Although American & European market is the
pulse of this Industry, but the focus is shifting to developing markets like China, India
& other Asian nations because of the rise in disposable income, changing lifestyle &
stable economic conditions.
4. Increasing demand of VFM vehicles: Intense competition in the matured/developed
markets has forced automobile manufacturers to target developing economies. But
these developing economies have high demand for VFM products (value for money).
In the automobile industry, VFM products would be fuel efficient, high mileage
vehicles because majority of customers in these nations prefer vehicles for commuting.
On the other hand, developed nations need is of vehicles for interstate travelling and
high speed vehicles suitable for long route with high engine power.
5. Increase in demand of luxury commercial vehicles: Companies like VOLVO,
Daimler/Chrysler and Bharat Benz are betting high & are targeting the developing
nations due to increase in demand of Luxury public transportation system.
6. Manufacturing facilities in Asian nations to control cost : In order to control cost &
to manage shrinking margins automobile companies like Harley, Volvo, Bharat Benz
etc. are building their manufacturing facilities in developing nations like India, China
because these nations have cheap workforce, are high in resources & are nearer to
developed economies. These are classic conditions of an emerging market.

Weaknesses:

1. Cars recalled: Controversies relating to recalling vehicles on account of some technical

dis-functionality or non-abidance to govt. led rules is becoming very common.
2. Bargaining power of consumers: Over the last 3-4 decades the automobile market
has shifted from demand to supply market. Availability of large number of variants,
Stiff
 competition between them, and long list of alternatives to choose from has given power
to customers to choose whatever they like.
3. Growth rate of Automobile industry is the in the hands of the government due to
regulations like excise duty, no entry of outside vehicles in the state, decreasing number
of validity of registration period & volatility in the fuel prices. These factors always
affect the growth of the industry.

Opportunities:

1. Introducing fuel-efficient vehicles: Optimization of fuel-driven combustion engines

and cost efficiency programs are good opportunities for the automobile market.
Emerging markets will be the main growth drivers for a long time to come, and hence
fuel efficient cars are the need of the hour.
2. Strategic Alliances: Making strategic alliances can be a smart strategy for Automobile
companies. By using specialized capabilities & partnering with other companies, they
can differentiate their offerings.
3. Changing lifestyle & customer groups: Three powerful forces are rolling the auto
industry. Shift in consumer demand, expanded regulatory requirements for safety and
fuel economy, and the increased availability of data and information. Also with the
increase in nuclear families there has been increase in demand of two-wheelers &
compact cars and this will grow further.
4. Market expansion : Entering new markets like Asian & BRIC nations will result in
upsurge in demand of vehicles. After these markets, other markets are likely to emerge
soon.
5. OEM priorities: Given the increase in electronic content, OEMs need to collaborate
with suppliers and experts outside the traditional auto industry. Accomplishing this will
require changes in the way OEMs function. OEMs will be looking to their top
suppliers to co-invest in new global platforms & this will be the driving force in the
future.

Threats:

I. Intense Competition: Presence of such a large number of players in the Automobile

industry results into extensive competition, every company eating into others share
leaving little scope for new players.
 II. Volatility in the fuel Prices: At least for the passenger segment fluctuations in the fuel
prices remains the determining factor for its growth. Also government regulations
relating the use of alternative fuels like CNG. Shell gas is also affecting the inventories.
III. Sluggish Economy: Macroeconomic uncertainty, Recession, un-employment etc. are
the economic factors which will daunt the automobile industry for a long period of
time.
IV. High fixed cost and investment in R & D: Due to the fact that mature markets are
already overcrowded, industry is shifting towards emerging markets by building
facilities, R & D centres in these markets. But the ROI out of these decisions is yet to
be capitalized.

COMPANY PROFILE

LINAMAR INDIA PRIVATE LIMITED OVERVIEW

 Linamar India Private Limited is a Private limited Company incorporated on
26th August 2013. It is classified as Subsidiary of Foreign Company, Linamar Corporation
and is registered at Registrar of Companies; Pune.Linamar Corporation operates in many
countries like France, Germany, China, Canada, Hungary and U.S.A. Linamar India’s parent
company that is Linamar Corporation Is also listed in Canada Stock Exchange.

Linamar India Private Limited always works with the tag line “POWER TO
PERFORM” and “ONE TEAM ONE LINAMAR”

Linamar India’s authorized share capital is Rs. 55, 00, 00,000 and its paid up
capital is Rs.22, 90, 00,000.It is involved in Manufacturing of special purpose machinery.
The company completed its 5th year on 26th August 2018.It works on 3 core concepts:
Customer, Employee, and Financial.

Linamar India Private Limited's Annual General Meeting (AGM) was last
held on 30th September 2017 and as per records from Ministry of Corporate Affairs (MCA),
its balance sheet was last filed on 31 March 2017.

Directors of Linamar India Private Limited are:

Amitava Sinha
Roger Brent Fulton
Dale Schneider.

Linamar India Private Limited's Corporate Identification Number is (CIN)

U29242PN2013FTC148587 and its registration number is 148587. Its registered address is
Plot No. 3 & 4, Gat No. 679/2/1, 679/2/2 & 679/2/3 Village Kuruli, Taluka- Khed, Pune.

Major events in Linamar India Private Limited:

Linamar “India Strategy” initiated with the decision to set up its 1st India Plant in
 Pune and site selection at Chakan 12th May,2013

Linamar India business case approval on 26th June 2013

Linamar India gets incorporated on 26th August 2013

Linamar India facility ready on 29th January 2014

Visit of Linamar CEO and COO for Progress Review of LIP on 13th May 2014

Machines and equipment in place at LIP floor June to August 2014

First shipment rolled out of LIP towards PPAP activities on 18th August 2014

PPAP for Differential Case and Output Shaft in November ,2014

Trial Production between January to May 2014

Open House on 12th May ,2015

Start of Commercial Production (SOP) at Linamar India Private Limited

Its Plant Operating Committee (POC) includes:

Managing Director : Mr.Amitava Sinha

Operations Manager : Mr.Sunil Hajare
Accounting Manager : Mr.Jitendra Prasade
Human Resource Manager : Mrs.Gayatri Taranekar
Quality Manager : Mr.Bharat Kanade
Engineering Manager : Mr.Shashank Markande
Marketing Manager : Mr.Sumit Kundu
Material Manager : Ms.Banita Pradhan
Plant Manager : Mr.Venkatesh Modala

Products
Linamar provides products that power vehicles, power motion, power work and power lives.
From the core precision metallic components used in automotive powertrains to Sky jack’s
aerial work platforms, to the agricultural products that Harvestec and OROS designs and
builds, Linamar has a diversified product line. Linamar provides core engine components
including cylinder blocks & heads, camshafts and connecting rods. For transmission,
Linamar builds differential assemblies, gear sets, shaft & shell assemblies, as well as clutch
modules. For the vehicle's driveline, Linamar is a full service supplier of gears and gear
driven systems such as PTUs and RDUs for use in all-wheel drive systems. From single
machine components to complex assemblies, Linamar is the supplier of choice for OEM
customers.

The products manufactured by Linamar are:

Differential case
Transmission Housing
Output shaft
Clutch Housing
Spline shaft
Selector Shaft
Cylinder Head
Bar Pin

Expansion and future plan of Linamar India Pvt. Ltd.:

The company is planning to open its manufacturing plants and facilities at various
places like Chennai (Tamil Nadu), Ranjangaon (Maharashtra), Dewas (Madhya
Pradesh)

The Company is also planning to open its 2nd plant in Pune (Maharashtra)

Linamar India is also planning to expand its product base to driveline and Chassis

The company is planning to increase its exports by 30% by the end of this financial
year
SWOT ANALYSIS OF LINAMAR INDIA PRIVATE LIMITED

Strengths

Excellent staff with strong knowledge of existing products

Good relationship with customers

Good internal communication

High traffic location

Successful marketing strategies

Reputation for innovation

Weaknesses

Currently struggling to meet deadlines

High rental costs

Cash flow problems

Inventory problems

Less promotions

Opportunities
 They can enter into chassis market

They can also enter driveline market

They have good chances to grow their domestic base

Growing customer base

Threats

The Company has threats in terms of its existing competitors

Competitors may come up with a better product at a lower cost

Shift of customers

Technological advancement

More competition coming in

CHAPTER-IV

RESEARCH METHODOLOGY

RESEARCH

Research is a process in which the researcher wishes to find out the end result for a
given problem and thus the solution helps in future course of action. The research has been
defined as “A careful investigation or enquiry especially through search for new facts in
branch of knowledge”

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

To analyse the efficiency of Linamar India Private Limited, in inventory management.

SECONDARY OBJECTIVE

To identify optimum level of inventory which minimizes the cost

To identify the safety stock level for various components
To classify the various components based on its value and movements

RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using,
which researcher has to use facts or information already available, and analyze these to make
a critical evaluation of the performance.

DATA COLLECTION

Primary Sources

• Data is collected through personal interviews and discussions with Finance Executives.

Secondary Sources

The data are collected from the annual reports maintained by the company.
Data are collected from the company’s website.
Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS

Economic Order Quantity

Safety Stock
ABC Analysis
Inventory turnover ratios
 PERIOD OF STUDY

The period of study at Linamar India Pvt.Ltd. was three months that is June-August, 2018.

CHAPTER-V

DATA ANALYSIS AND INTERPRETATION

I. ECONOMIC ORDER QUANTITY (EOQ)

MEANING

Economic Order Quantity is the Inventory management technique for determining optimum
order quantity which is the one that minimizes the total of its order and carrying costs.

Re- Carrying No. of

Serial Components Demand Order Cost/ EOQ orders
no Cost/ unit/year pe
Per year order r year

1 LD Differential 86160 5000 50 4151.14 21

case
2 HD Differential 24552 4000 40 2215.94 11
 case
3 LD Output Shaft 136992 2000 10 7402.48 19

4 HD Output 11160 1800 8 2340.89 6

Shaft
5 Spline Shaft 57600 100 2 2400 24

6 Selector Shaft 48000 100 2 2190.89 22

7 Cylinder Head 18000 12000 500 929.516 19

8 Transmission 480 2000 50 195.95 3

Housing
9 Clutch 72 1000 60 48.98 2
Housing(1)
10 Clutch 180 800 30 97.97 2
Housing(2)

ANALYSIS & INTERPRETATION:

In the above table EOQ & the no. of orders purchased per year for various components are
calculated. The calculated EOQ is compared with the no. of units of each component
purchased in the organization. It is found that, there is a variation in the EOQ & no. of units
purchased. It is understood that the company is following EOQ technique for purchasing the
material & therefore the inventory management is satisfactory, still the company can improve
its inventory system.
 I. SAFETY STOCK

MEANING

Safety stock is the minimum additional inventory, which serves as safety margin to meet an
unanticipated increase in usage resulting from an unusually high demand and an
uncontrollable late receipt of incoming inventory.

Seri Components Max. Avg. Average Max. Demand Safety

al Lead Lead Consum Consum Stock
no Time Time . .
1 LD 90 60 200 250 86160 10500
Differential
case
2 HD 90 60 70 80 24552 3000
Differential
case
3 LD Output 90 60 400 500 136992 21000
 Shaft
4 HD Output 90 60 50 70 11160 2100
Shaft
5 Selector Shaft 90 60 160 200 57600 8400

6 Spline Shaft 90 60 135 150 48000 5400

7 Cylinder Head 90 60 5 10 18000 600

8 Transmission 90 60 2 5 480 330

Housing
9 Clutch 90 60 1 3 72 210
Housing(1)
10 Clutch 90 60 2 5 180 330
Housing(2)

ANALYSIS AND INTERPRETATION:

The above table shows the calculation of safety stock .Safety stock is calculated
for each and every product. Actual demand is given for the period of one year for each
product. Maximum Lead time is taken 90 days and normal lead time is taken at 60 days. By
determining the level of safety stock the organisation gets to know how much stock it should
maintain at any given point of time in the year. Safety stocks will the help the organisation to
meet any emergency situation.

From the above table, it is clear that the organisation is maintaining sufficient
safety stock at any point of time.
 II. ABC ANALYSIS

MEANING

ABC system is a widely used classification technique to identify various items of inventory
for the purpose of inventory control. On the basis of unit cost involved, various items are
classified into 3 categories:

1. A, consisting of items with the large investment,

2. C, with relatively small investments but fairly large number of items and
3. B, which stands mid-way between category A & C.
Category A needs the most rigorous control, C requires minimum attention
and B deserves less attention than A, but more than C.
The table below shows the Classification of A, B and C items in the Organisation:

Item Number Average no of Cost per Unit Total Cost Percentage in total
units cost
1 50000 60.80 3040000 30%

2 15000 102.40 1536000 15%

3 120000 11 1320000 13%

4 10000 100.28 1002800 10%

5 55000 3.40 187000 2%

6 40000 56 2240000 22%

7 14000 48 672000 6.61%

8 400 300.20 120080 1.18%

9 50 360 18000 0.18%

10 150 176.30 26445 .026%

Total 10162325 100

Classification of items in percentage:

Classification of Items Percentage

A 67

B 23

C 10

Total 100
INTERPRETATION:

The above table shows the classification of items of the organisation in percentage. The table
shows that 67% of items form the part of A category items in the organisation, 23% of items
form the part of B category items in the organisation lastly 10% of items form the part of C
category items. It is clear that the organisation follows ABC analysis properly, but still they
can improve their inventory management.

The above figure shows ABC analysis through chart.

III. INVENTORY TURNOVER RATIO

MEANING
 This ratio is calculated to consider the adequacy of the quantum of capital and its
justification for investing in inventory. A firm must have reasonable stock in comparison to its
sales. This ratio helps the financial manager to evaluate the inventory policy. This ratio
reveals the number of times finished stock has turned over during a given accounting period.

It is calculated by dividing net sales from average inventory

Inventory Turnover Ratio = Net sales

Avg. Inventory

Inventory Turnover Ratio

YEAR NET SALES AVG. INVENTORY RATIO

(RS.) (RS.)
2015 8,44,88,723 6,62,28,318 1.27:1

2016 11,06,43,669 8,92,28,407 1.80: 1

2017 18,20,97,639 5,56,27,391 3.27:1

ANALYSIS & INTERPRETATION:

The above table shows inventory turnover ratio for past three years. The ratio is showing an
increasing trend, that is, the ratio is increasing every year because of the increase in sales.

The ratio in first year was 1.27 which rose to 1.80 in the second year and 3.27 in the
third year. Increasing trend in inventory turnover ratio denotes positive sign for the
organisation because its sales are also increasing.

IV. MATERIAL ANALYSIS

• RAW MATERIAL (CLOSING STOCK)

Raw materials are the resources used by a company to produce its finished goods and
products.

YEAR RAW MATERIAL

2015 70,15,297
2016 90,85,673
2017 1,41,73,186
ANALYSIS & INTERPRETATION:

The above table and graph shows the closing stock of raw material for three consecutive
years that is 2015, 2016 and 2017. The graph shows an increasing trend. In first year the raw
material is 70, 15,297 and in next two years it is showing an increasing trend.

• WORK IN PROGRESS (CLOSING STOCK)

Work in progress (WIP), also called work in process, is inventory that has begun the
manufacturing process and is no longer included in raw materials inventory, but is not yet a
completed product.

YEAR WORK IN PROGRESS

2015 12,52,398

2016 17,12,542

2017 20,31,439
ANALYSIS & INTERPRETATION:

The above table and graph shows the closing stock of raw material for three consecutive
years that is 2015, 2016 and 2017. The graph shows an increasing trend. In first year the raw
material is 12, 52,398 and in next two years it is showing an increasing trend.

• FINISHED GOODS (CLOSING STOCK)

Finished goods are those goods that have completed the manufacturing process but have not
yet been sold or distributed to the end user.

YEAR FINISHED GOODS

2015 98,58,923

2016 1,06,53,189

2017 4,45,70,564
ANALYSIS & INTERPRETATION:

The above table and graph shows the closing stock of raw material for three consecutive
years that is 2015, 2016 and 2017. The graph shows an increasing trend. In first year the raw
material is 98, 58,923 and in next two years it is showing an increasing trend.
CHAPTER-VI

FINDINGS AND SUGGESTIONS

It is found that the organisation is following EOQ technique. The company is

working as per the defined EOQ level. Overall the working of EOQ is satisfactory.

From the calculation of safety stock, we are able to determine how much inventory
the organisation can hold in its reserve stock per annum. Through this analysis we got
to know that the organisation is having enough stock at any point of time.

Through ABC analysis we come to know about important items in the organisation.
The company is following ABC technique of inventory management very efficiently.
There are 67% items in the A category .B category has 23% items and C category has
10% items.

The inventory turnover ratio of the organisation is satisfactory. It is according to its

standard ratio. The ratio in first year was 1.27 which rose to 1.80 in the second year
and 3.27 in the third year. Increasing trend in inventory turnover ratio denotes
positive sign for the organisation because its sales are also increasing.

In material analysis we studied about various types of materials like raw material,
WIP and closing stock. Through this analysis we got to know about company’s
inventory value for past three years. The inventory of the company increased every
year. The graph showed an increasing trend.

The overall performance of the organisation is satisfactory; this can be said because of
its prominent increase in sales. The sales have increased every year.
The can adopt more sophisticated inventory management techniques to bring more
efficiency in the organisation though the performance of the organisation is
satisfactory.

The organisation should also try to adapt more inventory management techniques
like Just In Time (JIT) inventory system. This technique will save the time of the
organisation and will also reduce the inventory holding cost in the organisation.

The organisation can also work on its Lead time management.

As the organisation is already following Lean manufacturing, now the organisation

can also try and implement different manufacturing techniques like TQM, Six Sigma
etc.
CHAPTER-VII

CONCLUSION

Inventory management has to do with keeping accurate records of finished goods that are
ready for shipment. This often means posting the production of newly completed goods to
the inventory totals as well as subtracting the most recent shipments of finished goods to
buyers. When the company has a return policy in place, there is usually a sub-category
contained in the finished goods inventory to account for any returned goods that are
reclassified or second grade quality. Accurately maintained figure on the finished goods
inventory makes it possible to quickly convey information to sales personnel as to what is
available and ready for shipment at any given time.

Inventory management is important for keeping costs down, while meeting regulation.
Supply and demand is a delicate balance, and inventory management hopes to ensure that the
balance is undisturbed. Highly trained Inventory management and high-quality software will
help make Inventory management a success. The ROI of Inventory management will be seen
in the forms of increased revenue and profits, positive employee atmosphere, and on overall
increase of customer satisfaction. Linamar India Private Limited is working towards these
goals.
LIMITATIONS OF THE STUDY

The entire analysis applies only to Linamar India Private Limited, Pune
Detailed study of all the material was not possible because of the time limit
Some of the information was kept confidential by the organisation
Study was confined only to selected components
ABC analysis is not one time exercise and items are to be reviewed and categorised
periodically

SCOPE FOR FURTHER STUDY

To give a plan to the company what to order, when to order and how much to order?
It is useful for deciding operating policy & volume of inventory
It helps to develop policies for the executives in inventory
It helps the company what items goods are categorized
Project helps to deal with forecasting of inventory
 BIBLIOGRAPHY

> REFERENCE BOOKS

M Y Khan P K Jain “Financial Management” Tata McGraw Hill

R.S.N. Pillai V. Bagavathi “Management Accounting” S Chand & Co
Martand Telsang “Industrial Engineering & Production Management” S Chand
& Co
R. Paneerselvam “Operations Research” Prentice hall Of India Private Ltd
B.M. Lall Nigam I.C. Jain “Cost Accounting” Prentice hall Of India Private Ltd
S.P. Iyengar “Cost & Management Accounting” Sultan Chand & Sons
S.P Jain and K.L Narang “Cost Accounting” Kalyani Publications

> WEB SITES

www.linamar.com
https://efinancemanagement.com/financial-analysis/inventory-stock-turnover-ratio
www.inflowinventory.com
www.kenresearch.com
www.accountingtools.com
www.syntacticsinc.com