ANNEXURE II

A STUDY ON INVENTORY MANAGEMENT AT M/s BALAJI FABRICATION INDUSTRIES, RANIPET A Project Proposal (Submitted by R. Suresh Yadav, Roll No: 0701MBA0517, Register No: 68309250023)

1. NEED FOR THE STUDY

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. So, in order to understand the nature of inventory management of the organization, I took this Inventory Management as a topic for my project, to give findings and suggestions by adopting and analyzing different inventory control techniques. 1.1. STATEMENT OF PROBLEM Balaji Fabrication Industries manufactures the high pressure boilers and produces castings in the foundries and they are one of the customers to Bharat Heavy Electricals Limited (BHEL), Trichy. BHEL are planning to manufacture and test the new series Turbo Generator of 600 MW rating. So requested Balaji fabrication Industry to deliver an generator which be installed in the North Chennai Thermal Power Project.
1.2. OBJECTIVES OS THE STUDY

Ensure a continuous supply on the new raw materials on the insulated chiller compartment which solved the water leak problem and supplies to facilitate uninterrupted production.

Maintain sufficient finished good for smooth sales operation and efficient customer services Inventory Management help to reduce market handling cost The product must helps to utilize people and equipment reasonably

1.3. PROFILE OF THE COMPANY

Balaji Fabrication Industries is of the leading supplier for BHEL, Trichy. The Company is located in Ranipet and there primary objective is to manufactures high pressure boilers and produces castings in the foundries 2.
REVIEW OF LITERATURE

As per the literature survey for the inventory management few papers through web were collected. From all that paper gives the following information. Jim Larry in Fundamental of Inventory Management paper describe the Inventory management is primarily about specifying the size and placement of stocked goods. It is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. From this article, it describes that this module is giving to participants the fundamentals to manage both the physical flows of products or services and the corresponding information and financial flows to optimize the different inventories and their associated costs. Geoff Relph, Witek Brzeski and Gail Bradbear in The First Steps to Inventory Management paper describes Holding inventory is often interpreted as carrying an asset but also means carrying risk in terms of obsolescence, deterioration and quality faults. In financial terms inventory impacts the balance sheet, cash flow and profit & loss accounts. Operationally inventory affects production efficiencies and on-time delivery. In his book The Goal Goldratt identifies inventory as a key component for measuring business performance in a manufacturing environment. In short, good inventory management is essential to achieving business objectives

and building competitive advantage. Yet the traditional techniques most often used to manage inventory do not always provide optimal solutions. Driven by a greater emphasis on customer service and cost control and the advent of new technologies, inventory management is rapidly moving to a higher level of sophistication. From this article, I understood that how to manage inventory both at an aggregate level and by individual part numbers. Its simplicity allows it to be a useful guide to both experienced Inventory Planners and those with little experience of inventory systems. It begins by looking at the fundamental need to achieve inventory control and how to instigate a simple 3-class management system. John Wiley & Sons in Professional Inventory Management paper describes It can be difficult to determine when stock is at the optimum level as this is influenced by numerous factors including batching policies, the work centre capability, safety policies and production methods. This paper is the second in a series of three that looks at the alternative options available to optimize inventory held at an aggregate and part level by considering the steps necessary to move towards inventory optimization. The intent of these papers is to provide a guide to enable managers within manufacturing industries to advance their organization to the next level. Cannella S., Ciancimino E in Multi-Item Inventory Control paper describes that the deals with the problem of optimally coordinating the replenishment in a multi-item stock-keeping environment. The K-Curve Methodology represents a way to classify all items into a given number of classes with a common order frequency. Our theoretical investigation of the K-Curve Methodology shows that this methodology does not achieve an optimal grouping of the items with respect to the cost function considered in most articles. From this article, it decsribe that in order to advance their organization to the next level. It is assumed that inventory is under control and the basics discussed in the previous paper First Steps to Inventory Management have been established using the ABC system. The main part of this paper focuses

on the development of options available for managers to improve inventory performance, for example, the introduction of coverage, extending inventory analysis to six or more classes and considering the use of the calculation of safety stock. In this review Mr. VIJAYARAMAN .R, who as done the project about A report Inventory at WOIL, 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 organizations inventory. The Inventory Management System also aids the organization in achieving its goals and objectives with the primary focus on adding value for the customers. The management of inventory adds value for customers (quality, speed, flexibility, and cost), and this is the primary consideration of the Operations Management System. Inventory management is possibly one of the richest areas of operations management, with many tools and techniques available to help managers run their processes as effectively as possible. In this project he made an analysis for Export Oriented Units (EOU) and fixing norms for Coffee Maker, Coffee Grinder, Grind Mill & Micro Oven. After finishing analysis he compares between the Suggested norms and Existing norms. He also made an analysis of Washing Machine and their norms for different classification of Washers at WOIL. Finally he used correlation with Statistical Tools. He also classified EOUs & Washers products with ABC Classification.

3.1

PRIMARY OBJECTIVE

To study on how the INVENTORY MANAGEMENT concept resolving this problem at M/s BALAJI FABRICATION INDUSTRIES, RANIPET

To find out effective means of Inventory management followed this path with focused strategies for improving corporate minimize the cost of inventories, minimize the holding days of inventories, and the maintain the flow of production.

I will be involved discussing with the manufacture team to better assesses the true potential of the company and its ability to achieve sustainable results from this potential.

To find out the company has enough potential if it leverages its resources to its fullest. By reengineering their internal process to increase the efficiency by inventory of the company can achieve significant results that will keep their BHEL happy.

3.2

SECONDARY OBJECTIVES

To identify optimum level of inventory to minimizes the cost. To identify the safety stock level for various components. To classify the various components based on its value and movements. To identify inventory requirement of the company for the next year.

METHODOLOGY

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 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 and the process flow chart given below

Problem Identified

Literature survey & review of the problem under study

Preparation of model from the data collected

Collection of both primary and secondary data

Presenting the findings

Fig -1 Methodology of flow chart

4.1 DATA COLLECTION

4.1.1 Primary Data 1. 2. 3. Data are collected through questioners and discussion with Production Team Data are collected through feasible study and discussion with Finance- Executive. Data are collected through feasible study and discussion with Material Planning- Deputy Manager. Secondary Data 1. 2. The data are collected from the annual reports maintained by the Company for the past three years Data are collected from the companys website.

3.

Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS 5 Economic Order Quantity. ABC Analysis. FSN Analysis. LIMITATIONS The entire analysis applies only to M/s BALAJI FABRICATION INDUSTRIES, RANIPET The study takes into account only the quantitative data and the qualitative aspects were not taken into account. The assumption made in the EOQ and Safety stock formulas restrict the use of the formula. In practice, unit cost, lead time, requirements of inventory items are not accurately predictable. Rate of consumption varies in many cases. As such application of the formula often becomes a difficult and complicated matter. ABC analysis is not one time exercise and items are to be reviewed and re categorized periodically. 6 EXPECTED DELIVERABLES Report on 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.

Report on The ABC system is a widely used classification technique to identify various items of inventory for purposes of inventory control. On the basis of unit cost involved.

Reports on All the items in the inventory are not required at the same frequency. Some are required regularly, some occasionally and some very rarely. FSN classifies items into Fast moving, Slow moving and Nonmoving.

REFERENCES

Chrisman, I.J.,(2001) Basic Production Techniques for small Manufactures, Production and inventory Management Journal, Third Quarter, 48-63, 1985. Donald W. Fogarty (1983), Inventory management and Overage Inventory 81- , p 163-171. 82 Geoff Relph, Witek Brzeski and Gail Bradbear (1990) Advanced Inventory Management Professional Inventory Management In the third and final paper., 163-171 Adam, Everette, Jr. and Ronald J. Ebert,(1995) Inventory Management: Concepts, Models and behaviors, 5ed., Prentice-Hall of India, New delhi, 2001 M Y Khan P K Jain Financial Management 4th edition Tata McGraw Hill. R.S.N. Pillai V. Bagavathi Management Accounting S Chand & Co. Martand Telsang Industrial Engineering & Production Management S Chand & Co.

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