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A STUDY ON INVENTORY MANAGEMENT IN LUCAS-TVS PVT LTD, CHENNAI.

A PROJECT REPORT Submitted by

T.V. BABU RAJ (Reg. No. 1065712)

In partial fulfillment for the requirements for the award of the degree IN MASTER OF BUSINESS ADMINISTRATION OF ANNA UNIVERSITY OF TECHNOLOGY Submitted to DEPARTMENT OF MANAGEMENT STUDIES SAKTHI MARIAMMAN ENGINEERING COLLEGE [Affiliated To Anna University Approved by AICTE] NARAYANASWAMY NAGAR, 55, THANDALAM, CHENNAI– 602 105 August-2011

BONAFIDE CERTIFICATE

This is to certified that this project report titled ”A STUDY ON I INVENTORY MANAGEMENT IN LUCAS-TVS PVT LTD,CHENNAI” is the bonafide work of Mr. T.V. BABU RAJ (Registration Number: 1065712) who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

Mr. C. Ganesan Internal Guide

Dr. SITA NEELAKANTAN Head of the Department

Submitted to Project and Viva Examination held on ____________

Internal Examiner

External Examiner

DECLARATION

I hereby declare that the project entitled ”A STUDY ON of requirements for the award of the degree of MASTER

INVENTORY OF BUSINESS

MANAGEMENT IN LUCAS-TVS PVT LTD, CHENNAI”. submitted in partial fulfillment ADMINISTRATION, to ANNA UNIVERSITY OF TECHNOLOGY is my original work and not submitted for the award of any other degree, diploma or other similar title or prizes.

Date: (T.V. BABU RAJ) Place

ACKNOWLEDGEMENT .

RAMACHANDRAN for having granted permission to do the project work. My thanks to all of them with whom I had interacted. My most sincere thanks are due to my respected HOD Dr.MURUGAN. I wish to thank my beloved parents.GANESAN who has given his valuable suggestions and guidance for successful completion of this project.N.M.I express my sincere thanks and sense of gratitude to my respected Chairman Thiru.E.VIJAYA BHASKAR RAJU for extending his support to complete my project report. I am indebted to Mr. Mr.RADHAKRISHNAN. senior students and those who have helped me directly or indirectly to complete the project work successfully.SITA NEELANKANTAN who has given her valuable suggestions and guidance for successful completion of this project. It’s with real pleasure that I record my indebtedness to my Principal Dr.A. for their guidance and cooperation in the completion of the project work. I wish to thank our department staff Mrs.KAVITHA.A.K.P.R. Mr.K.C.GOKULAKRISHNAN. Mr. Mr. Mr. I am obligated to all the respondents without whom I could not have completed this survey. for having granted permission to undergo this project and extended his valuable guidance as and when required. friends.IYYAPPAN. My sincere thanks to my internal guide. .EMPERUMAN Personal officer of Lucas-tvs pvt ltd company.

TABLE OF CONTENTS CHAPTER PARTICULARS PAGENO .

5 Tools for Analysis 4 5 DATA ANALYSIS AND INTERPRETATION FINDINGS SUGGESTIONS AND CONCLUSION .3 Constraints and limitations 3.5 Objectives of the study 1.2 Research Gap RESEARCH METHODOLOGY 3. 1 Type of project 3.NO List of tables List of charts Abstract INTRODUCTION 1.2 Objectives of the study 3 3.3 Identified problem 1.1 Introduction 1 1.1 Review of literature 2.2 Company Profile 1.6 Scope of the study 1.4 Data collecting method 3.7 Deliverables LITERATURE SURVEY 2 2.4 Need for study 1.

5.3 Conclusions APPENDIX Bibliography LIST OF TABLES CHART NO 4.2 Suggestions and Recommendations 5.2 4.1 Summary of findings 5.3 TITLE Economic Order Quantity ABC Analysis Inventory Turnover Ratio PAGE NO .1 4.

1 4.LIST OF CHARTS CHART NO 4.2 4.3 TITLE Economic Order Quantity ABC Analysis Inventory Turnover Ratio PAGE NO .

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goods in process and finished goods all represent various forms of inventory. The investment in inventories constitutes the most significant part of current assets/working capital in most of the undertaking. It serves as a link between production and distribution process. a considerable amount of funds is required to be committed to them. Raw materials. Each type represents money tied up until the inventory leaves the company as purchased products.ABSTRACT Every organization need inventory for smooth running of its activities. The project work was undertaken was intended as “LUCAS-TVS LTD”. A firm neglecting the management of inventories will be jeopardizing its long run profitability and may fail ultimately carriers a favorable impact on the company’s profitability. Thus it is very essential to have proper control and management of inventories. The empirical study conducted about inventory is an analytical research covering year 2006-2010. Because of the large size of the inventories maintained by firms. Suggestions. In the last part findings. It is therefore absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investments. about the . conclusions are given for the analysis have been used for analyze the financial soundness of the company. Padi. The study consists of ABC analysis and the bin card system of the last 5years to know performance of the company. 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.

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Inventory control is the most important function of inventory management and it forms the nerve center in any inventory management organization. It is comprised of a series of processes which provide an assessment of the organisation’s inventory.1 INTRODUCTION Inventory control is vitally important to almost every type of business. 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. An inventory management system is an essential element in an organization. Inventory control is the activities that maintain stock keeping items at desired levels. inventory control focus on material control. . The fundamental reasons 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. In manufacturing since the focus is on physical product.CHAPTER-1 1. A proper balance must be struck to maintain proper inventory with minimum financial impact on the customer. MEANING OF INVENTORY MANAGEMENT: 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. whether product or service oriented.

It is also called the idle resource of a company. Even if the item is partially assembled or is considered a finished goods to the supplier. WORK-IN-PROCESS Work-in-process(WIP) is made up of all the materials. chemicals. petroleum. ball bearing. items such as nuts and bolts. However. TYPES OF INVENTORIES A manufacturing firm generally carries the following types of inventories: RAW MATERIALS Raw materials are inventory items that are used in the manufacturer’s conversion process to produce components. assemblies. paper. They also may be objects or elements that the firm has purchased from outside the organization. Inventories represent those items which are either stocked for sale or they are in the process of manufacturing or they are in the form of materials which are yet to be utilized. subassemblies or finished products. the purchaser may classified it as a raw material if his or her firm had no input into its production.Inventory generally refers to the materials in stock. raw materials are commodities such as minerals. Inventory is a detailed list of those movable items which are necessary to manufacture a product and to maintain the equipment and machinery in a good working order. casters. Typically. parts (components). wheels. wood. and subassemblies that are being processed or are waiting to be processed within the system. . seats. This generally includes all materials from raw materials that have been released for initial processing up to material that has been completely processed and is awaiting final inspection and acceptance before inclusion in finished goods. paint. and even engines may be regarded as raw material if they are purchased from outside the firm. These inventory items may be commodities or extracted materials that the firm or its subsidiary has produced or extracted. steel and food items. key stock.

sent to distribution centers. or held in anticipating of a customer order. sold to retailer. and MRO goods inventory. employ freight consolidates to pool their transit inventories coming from various location into one shipping source in order to take advantage of economies of scale. this can greatly increase the transit time for these inventories. Therefore. finished goods inventory is the stock of completed products. decoupling inventory. and casters. These goods have been inspected and have passed final inspection requirements so that they can be transferred out of work-inprocess and into finished goods inventory. such as automobile manufactures. sold to retailer. FINISHED GOODS A finished good is a completed part that is ready for a customer order. Of course. but will now discuss each in more detail. Sometimes this is referred to as pipeline inventory. frames. such as speculative inventory. safety inventory. finished goods can be sold directly to their final user. Merchandise shipped by truck or rail can sometimes take days or even weeks to go from a regional warehouse to a retail facility. We already have briefly discussed some of the implications of a few of these inventory types. Any item that does not have a parent can be classified as finished good. and from the fact that there is some transportation time involved in getting from one location to another. sold to wholesalers. From this point. Some large firms. buffer inventory. and seasonal inventory. These types include transit inventory. hence an increase in the size of the inventory in transit. By looking at the rolling cart product structure tree example one can determine that the finished good in this case is a cart. legs. anticipation inventory.Any item that has a parent but is not a raw material is considered to be work-in-process. cycle inventory. A glance at rolling cart product structure tree example reveals that work-in-process in this situation consists of tops. leg assemblies. Some of these also are know by other names. BUFFER INVENTORY . Inventories can be further classified according to the purpose they serve. TRANSIT INVENTORY Transit inventories result from the need to transport items or materials from one location to another.

anticipation inventory allows them to build up when demand is low(also keeping workers busy during slack times) so that when demand picks up the increased inventory will be slowly depleted and the firm does not have to react by increasing production time(along with the subsequent increase in hiring. inventory is sometimes used to protect against the uncertainties of supply and demand. the firm has avoided both excessive overtime due to increased demand and hiring costs due to increase demand.e. These inventory are referred to as safety stock. allowing the firm to maintain a constant level of output and a stable workforce. This tactic is commonly used by retailers. Christmas. a seasonal increase in demand.. if ever. ANTICIPATION INVENTORY Oftentimes. firms will purchase and hold inventory that is in excess of their current need in anticipation of a possible future event. make the customer wait until the next order cycle. or the back-to-school season). Such events may include a price increase. It also could be possible that while passing through the . or even an impending labor strike. Obviously. at Halloween. This process is sometimes called “smoothing” because it smoothes the peaks and valley in demand. It also has avoided layoff costs associated with production cut-backs. the idling or shutting down of facilities. DECOUPLING INVENTORY Very rarely. Therefore. This occurs because the firm suffer fewer “stock outs” (when a customer’s order cannot be immediately filled from existing inventory) and has less need to backorder the item. the better the customer service the greater the likelihood of customer satisfaction. or even worse.As previously stated. one machine may process parts several times faster than the machines in front of or behind. and other associated labor costs). the higher the level of buffer inventory. who routinely build up inventory months before the demand for their products will be unusually high(i. Generally. if one walks through the plant it may seem that all machines are running smoothly at the same time. cause the customer to leave emptyhanded to find another supplier. In fact. training. will one see a production facility where every machine in the process at exactly the same rate. the better the firm’s customer service. Yet. For manufactures. as well as unpredictable events such as poor delivery reliability or poor quality of a supplier’s products. Safety stock or buffer inventory is any amount held on hand that is over and above that currently needed to meet demand. or worse.

Naturally. MRO GOODS INVENTORY Maintenance. repair. janitorial supplier. one notice several machines are under repair or are undergoing some form of preventive maintenance. . The cost of efficiency must be weighed against the cost of carrying the excess inventory so that there is an optimum balance between inventory level and coordination within the system. held inventory in an effort to reach this minimization point. or MRO goods. result from this process. cushioning the system against production irregularities. but ordering/setup costs decrease. Hence. CYCLE INVENTORY Those who are familiar with the concept of economic order quantity(EOQ) know that the EOQ is an attempt to balance inventory holding or carrying costs with the costs incurred from ordering or setting up machinery. When large quantities are ordered are or produced. cycle inventory results from ordering in batches or lot sizes rather than ordering material strictly as needed. but the cost of ordering/setup increase since more orders/setups are required to meet demand. uniform. inventory holding/carrying costs decrease. Cycle inventories. A balance can be reached that will allow the plant to run relatively smoothly without maintaining an absurd level of inventory. sometimes called lot-size inventories.plant. a decoupling inventory that serves as a shock absorber. Examples of MRO goods include oils. lubricants. Even so. are items that are used to support and maintain the production process and its infrastructure. Usually. excess material is ordered and consequently. gloves. The more inventories a firm carries as a decoupling inventory between the various stages in its manufacturing system. The reason for this is the existence of an inventory of parts between machines. this does not seem to interrupt the flow of work-in-process through the system. As such it “decouples” or disengages the plant’s dependence upon the sequential requirements of the system. These goods are usually consumed as a result of the production process but are not directly a part of the finished product. logic would dictate that an infinite amount of decoupling inventory would not keep the system in peak form. the less coordination is needed to keep the system running smoothly. coolants. When the two costs are equal (holding/carrying costs and ordering/setup costs) the total cost (the sum of the two costs) is minimized. Conversely. inventory holding costs are increased. and operating supplier. when lot sizes decrease.

As such.5 million in 2009. growing 16- . Inventory exists in various categories as a result of its position in the production process (raw material. copier paper. The authors formally define it as the minimum amount of inventory necessary to maintain a process throughput of R. According to recent reports. decoupling inventory.33 million every year. expressed as Theoretical Inventory=Throughput*Theoretical Flow time In this equation.7million units in 2010. with annual sales exceeding 8. and key stock. theoretical flow time equals the sum of all activity times (not wait time) required to process one unit. Even office supplies such as staples. the purpose of each seems to be that of maintaining a high level of customer service or part of an attempt to minimize overall costs.. OVERVIEW ABOUT INDUSTRY The Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17. and finished goods) and according to the function it serves within the system (transit inventory. bolts.e. buffer inventory. Therefore. tools. THEORETICAL INVENTORY Theoretical inventory is a measure of this inventory (i. and toner are considered part of MRO goods inventory. WIP will equal theoretical inventory whenever actual process flow time equal theoretical flow time.packing material. screws. nuts. anticipation inventory. It is the world’s second largest manufacturer of motorcycles. it represents the minimum inventory needed for to flow through the system without waiting). shim stock.5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2. pens and pencils. with an annual production of more than 3. cycle inventory. India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world. India passenger car and commercial vehicle manufacturing industry is the seventh largest in the world. and MRO goods inventory). work-in-process.

18 percent to sell around three million units in the course of 2011-12. In 2009. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people. According Manufacturers. Kolkata with Hindustan Motors.7 million automotive vehicles were produced in India in 2010 (an increase of 33. Fiat and Force Motors having assembly plants in the area. also known as the “Detroit of India” with the India operation of BMW. This may present its own set of opportunities and threats.. Gurgaon and Manesar in Haryana are hubs where all of the Maruti Suzuki cars in India are manufactured. . Halol with general Motors. South Korea. Mahindra and Tata motors. Aurangabad with Audi. Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country. Skoda. annual car sales are projected to increase up to 5million vehicles by 2015 and more than 9million by 2020. The order of the industry arise from the bottom of the supply chain i. Mercedes Benz. Hyundai and Nissan headquartered in the city. The chakan corridor near pune. behind Japan. Commercial vehicles and three share about 9% of the market between them. The Indian Automotive Industry is manufacturing over 11million vehicles and exporting about 1. from the consumers go through the automakers and climbs up until the third tier supplier. Ford. the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation’s roads.e. and Thailand. The supply chain of this industry in India is very similar to the supply chain of the automotive industry in Europe and America. Volkswagen. By 2050. Chennai accounts for 60 percent of the country’s automotive exports. As of 2010.9%) making the country the second fastest growing automobile market in the world. Maharastra is another vehicular production hub with companies like general motors. India is a home to 40 million passenger vehicles and more than 3. A chunk of India’s car manufacturing industry is based in and around Chennai. Ahmedabad with the Tata Nano plant. The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. India emerged as Asia’s fourth largest exporter of passenger cars.5 million every year.

Tata Motors is leading the commercial vehicle segment with a market share of about 64% Maruti Suzuki is leading the passenger vehicle segment with a market share of 46%. the industry has been volatile. The power to levy taxes and duties is distributed among the three tiers of government. India’s increasing per capita disposal income which is expected to rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the industry. Over the past few years. which burned on the augmentation in demand of cars. Hyundai motor India and Mahindra are focusing expanding their footprint in the overseas market. Utilizing manufacturing plants to . further investment in new technology will help the industry be more competitive. Bajaj Auto in itself is occupying about 58% of the three wheeler market. In 2008-2009. Investment in the technology by the producers has been high. Currently. However. the barriers to enter the Indian automotive sector are high and these barriers are study. System suppliers of integrated components d subsystem have become the order of the day. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. The cost structure of the industry is fairly traditional but the profitability of the motor vehicle motor vehicle has been rising over the past five years. Having quality manpower. Consumers are very important of the survival of the Motor Vehicle manufacturing industry. limited accessibility to new technology and soaring competition. with a high cost of developing production facilities. Note that. Hero Honda Motors is occupying over 41% and sharing 26% of the two wheeler market in India with Bajaj Auto. infrastructure improvements. Steel is the major input used by manufactures and the rise in price of steel is putting a cost pressure on manufacturers and cost is getting transferred to the end consumer. the rate of change in technology has been medium.Interestingly. the level of trade exports in this sector in India has been medium and imports have been low. and raw material availability also play a major role. like Tata Motors and Maruti Suzuki have material cost of above 80% but are recording profits after tax of about 6% to 11%. Major players. and capital efficiency. labor flexibility. On the other hand. customers sentiment dropped. The level of technology change in the Motor vehicle Industry has been high but. The key to success in the industry to improve labor productivity. India has a well developed tax structure.

The turnover of Lucas-TVS and its divisions is US $233 million during 2003-2004. dynamo regulators. which has dad a successful track record of sustained growth over the last three decades. with its excellent facilities. ignition systems. and fan motors and alternators. With the automobile industry in India currently undergoing phenomenal changes. dynamos.optimum level and understanding implications from the government policies are essential in the Automotive aHaving Industry of India. jeep. LUCAS-TVS Limited. One of the top ten automotive component suppliers in the world. diesel engine and aerospace industries. Lucas Varity was formed by the merger of the Lucas Industries of the UK and the Varity Corporation of the US in September 1996. . and automotive lighting products. The combination of these two well-known groups has resulted in the establishment of a vibrant company. Incorporating the strengths of Lucas UK and the TVS group. after market.3 billion. 1. LUCAS-TVS. jeeps. Lucas TVS has emerged as one of the foremost leaders in the automotive industry today. is fully equipped to meet the challenges of tomorrow. India. to manufacture Automotive Electrical Systems. The company designs manufacturers and supplies advanced technology systems. manufactures and supplies automotive electrical systems. headlamps.TVS was set up in 1961 as a joint venture of Lucas Industries plc. blower. develop. design. Uk and TV sundaram Iyengar & Sons (TVS). products and service to the worlds automotive. commercial vehicles. Lucas TVS reaches out to all segments of the automotive industry such as passenger cars. wiper. tractors. The company offer starter. TVS is one of India’s twenty large industrial houses with twenty-five manufacturing companies and a turnover in excess of US $2. along with its subsidiaries. two-wheelers and off-highway vehicles as well as for stationery and marine applications.2 COMPANY PROFILE INTRODUCTION Lucas. Its products are used in passenger cars and commercial vehicles. tractors.

earth moving equipment and genets. The company soon branched out into the manufacture of light commercial vehicles (LCVS) and agricultural tractors. Cars were still a major luxury. commercial vehicles and scooters. India’s robust economic growth led to the . cars were imported directly. Lucas-TVS Limited offers its products through a network of branches and outlets serving customers in the United states/European markets…. Several Indian automotive manufacturing such as Tata Motors. Following economic liberations in India in 1991. the Indian automotive industry has demonstrated sustained growth as a result of increase competitiveness and related restrictions. In the 1980s. a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. After 1970. expanded their domestic and international operations. but the growth was mainly driven by tractors. and stationary and marine applications. in 1947. Embryonic automotive industry emerged in India in the 1940s. the automotive industry started to grow.two-wheelers. but in very small numbers. automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands. Following the independence. Following the economic liberations in 1991 and the gradual weakening of the license. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. and began assembly of Jeep cj3A utility vehicles under license from Willis. and off-highway vehicles. However. a number of Indian and multi-national car companies launched operations. A number of foreign firms initiated joint ventures with Indian companies. the growth was relatively slow in the 1950s and 1960s due to nationalization and the license raj which hampered the Indian private sector. Japanese manufacturing entered the Indian market ultimately leading to the establishment of maruti Udyog. Maruti Suzuki and Mahindra. Until the 1930s. Mahindra and Mahindra was established by two brothers as a trading company in 1945. HISTORY The first car ran on India’s roads in 1897. Since then. the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry.

values. Congestion of Indian roads.7% and with only 10% of Indian households owning a car in 2009 (whereas this figure reaches 80% in Switzerland for example) this progression is unlikely to stop in the coming decade. In February 2009. Uniting these multiple business is a common ethos of quality. VISION • • • To be the supplier of choice of all leading vehicle manufacturers in India. These companies operate in diverse fields ranging from twowheeler and automotive component manufacturing to automotive dealership. the TVS Group employs a total workforce of around 25. by developing innovative products and solutions of value to customers through creative skills and involvement of employees.000 charting a steady growth in terms of expansion and diversification. To achieve global recognition for its innovative approach to products and solutions.further expansion of its domestic automobile market which has attracted significant Indiaspecific expansion of its domestic automobile market which has attracted significant Indiaspecific investment by multinational automobile manufactures. this renowned business conglomerate remains faithful to its core ideals of trust. customer service and social responsibility. To be a recognized OE supplier in Asia Pacific and Middle East markets. will likely be the limiting factor. service and ethics.000 units and have since grown rapidly to a record monthly high of 182992 units in October 2009. MISSION To be a respected supplier in the global auto Industry.00. founded in 1911 in TamilNadu. supplier and dealers and use of contemporary technology. From 2003 to 2010. India. car sales in India have progressed at a CAGR of 13. monthly sales of passenger cars in India exceed 1. more than market demand. Today. The TVS Group is India’s leading supplier of automotive components and one of the country’s most respected business groups. finance and electronics. TVS GROUP The TVS Group traces its origin to a rural transport services. . it currently comprises around 43 companies. With a combined turnover of more than USD 5 billion.

• By 2010. Spain. is the largest manufacturer of automotive components in India. Bangladesh. Denmark. Range of alternator. Ukraine. Italy. Australia. automotive wheels and axle fasteners. The group produces auto electrical. ➢ Discrete type-3 Arm and Blades. diesel fuel injection systems. Singapore. Alternator for diesel cars. Starters for light trucks. Belgium. Type of wiping system. UK. ➢ Linkage for opposed wipe pattern. braking systems. Ireland.  BLOWER MOTORS  SMALL MOTORS  IGNITION PRODUCTS COUNTRIES TO WHOM THEY EXPORT U. sell INR 1400 crores [USD 300 Million] of products and solutions with a third to customers outside India. CAR UTILITY VEHICLES • General Motors India  ALTERNATOR  WIPER MOTOR . Egypt. ➢ Integral type. Turkey. PRODUCTS  STARTER MOTORS • • • • • Starters for passenger cars. Thailand. Malaysia. oman. with a turnover of over one billion dollars.A. Srilanka. ➢ Built in mounting frame.S. CUSTOMERS They TVS Group.

.• • • • • • • TRACTORS • • • • • • Fiat India Hyundai Motor India Ford India Hyundai Motors Maruti Udyog Mahindra Renault Tata Motors HMT SAME Escorts TAFE Mahindra & Mahindra John Deree Standard combines Indofarm • • ENGINES/EARTH MOVERS • • • • • • • • • Kiroloskar oil Engines Birla Yamaha Lombardini India Greaves Cotton Tata Cummins Simpsons & co Caterpillar India Bharath Earth Movers L&T Komatsu. 2WHEELERS/ 3 WHEELERS • • Kinetic Engineering. Yamaha Motor India.

Royal Enfield.ltd. TVS Motor Co. DETAILS OF THE AWARD YEAR IN WHICH LUCAS RECEIVED THE AWARD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Technology Award Energy conservation Award Productivity Award AU-TVS 5 star Award on 5S Hyundai Motor (100 PPM Award) Outstanding Overall Performance Superior Kaizen Award 3 Times Deming Application Prize Gold Trophy for Manufacturing Excellence Platinum Award Manufacturing Excellence Managerial Excellence in Manufacturing BIS(Rajiv Gandhi National Award) Best Vendor Award Mahindra Tractor Division (Best Quality Award) Honda (Best supplier Award) 1998-1999 2000-2001 2001-02 2002 2003 2004 2004 2004 2004-2005 2005 2004-2005 2006 2000 & 2006 2007 2007 . Hero Motors. Bajaj Auto. Mahindra & Mahindra. Honda Motor Cycles & Scooter India Pvt.NO.• • • • • • AWARDS S.

It serves as a link between production and distribution process.4 NEED FOR THE STUDY Every organization needs inventory for smooth running of its activities. It is said that.1. 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. . it is very essential to have proper control and management of inventories. “TO MAKE INVENTORY MANAGEMENT ANALYSIS OF LUCAS-TVS PRIVATE LIMITED” 1. to give findings and suggestions by adopting and analyzing different inventory control techniques. in order to understand the nature of inventory management of the organization. I took this inventory management as a topic for my project. So. ”TO ERR IS THE HUMAN” is a proverb which indicates that no one is perfect IN THIS WORLD. a problem statement refers to some difficulty.3 IDENTIFIED PROBLEM The first step while conducting research is careful definition of Research Problem. “Problem well defined is problem half solved” Basically. The investment in inventories constitutes the most significant part of current assets/working capital in most of the undertakings. which researcher experiences in the context of either a theoretical or practical situation and wants to obtain the solution for the same. Every researcher has to face many problems which conducting any research that’s why problem statement is defined to know which type of problem a researcher has to face while conducting any study. Thus.

It helps the company what items are goods are categorized. It helps to deal with forecasting in inventory. SECONDARY OBJECTIVE • • • To identify optimum levels of inventory which minimizes the cost. • • • . It helps to develop the policies for the executives in inventory. Ratios have been calculated to assess the turnover of the inventory and the period within which the turnover is recovered. ordering cost and carrying cost.5 OBJECTIVES OF THE STUDY PRIMARY OBJECTIVE • To analyze the efficiency of inventory management in Lucas TVS Ltd. Economic order quantity is assume that cost of managing inventory is made up solely of two parts i.. in order to control the average inventory. 1. To study how ABC analysis is implemented in inventory management. 1.6 SCOPE FOR THE STUDY • • • • • To give the plan to the company what to order. ABC analysis is used to compute each item’s percentage of the total inventory in terms of annual usage.7 DELIVERABLES • This study helps the company for ABC inventory system. It is useful for deciding operating profit and volume of inventory. when to order and how to order.1.e. To find inventory requirement for the next 5 years.

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After finishing analysis he compares between the Suggested norms and Existing norms. He also classified EOU’s & Washers products with ABC Classification. an inventory Management System is an essential element in an organization. Grind Mill & Micro Oven. and the second half covers how to evaluate it.CHAPTER-2 LITERATURE SURVEY 2. This first half part of this article covers how to find what inventory levels should be. VIJAYARAMAN. speed.1 REVIEW OF LITERATURE A REPORT ON INVENTORY MANAGEMENT BY VIJAYARAMAN In this review Mr. In this project he made an analysis for Export Oriented Units (EOU) and fixing norms for Coffee Maker. flexibility. with many tools and techniques available to help managers run their processes as effective as possible. he explains average inventory levels. He also made as analysis of Washing Machine and their norms for different classifications of washers at WOIL. It is comprised of a series of processes which provide an assessment of the organisation’s inventory. The management of inventory of inventory adds value for customers (quality. Average Inventory Levels . CHARLES ATKINSON explains inventory as inventory management topics. and cost). in this topic he explained about two parts.. A STUDY ON INVENTORY MANAGEMENT BY CHARLES ATKINSON In this review Mr.R. Inventory management is possibly one of the richest areas of operations management. Coffee Grinder. The inventory Management System also aids the organization in achieving its goals and objectives with the primary focus on adding value for the customers. and this is the primary consideration of the Operation Management System. Finally he used correlation with statistical Tools. who as done the project about a report Inventory at WOIL.

it provides a brief description for how optimal inventory levels for materials are kept. Essential. On average you should have the SS amount when you receive shipments. This is the amount that you should have remaining when the EOQ arrives.Part 1: How to Optimize Average Inventory Levels? In this part. add it to the ending inventory of a period. This essentially provides the mathematical average for a given month. Between these two average minimum and maximum values lies long-term average inventory. Next he determine Safety Stock(SS). Most methods of accounting take the beginning inventory of a period. and divide by 2. Inventory =(Beginning Inventory + Ending inventory) / 2 MEANING OF INVENTORY . Avg. This should be intuitive because safety is what you have when your shipment arrives and when the order arrives (EOQ) it gets added to the safety stock. This is the amount one should be ordering when you place orders. Inventory =(Beginning Inventory + (Beginning Inventory + Units Produced – units Sold) / 2 Or more simply: Avg. Part 2: How to assess (evaluate) Inventory levels? Average inventory can be calculated by Simplistic Method. The first thing he determines the ideal inventory levels is a material’s Economic Order Quantity(EOQ). It is clear that average minimum and maximum levels because you might not receive the EOQ exactly when you planned to and therefore may have more or less. this section can serves as a starting point for inventory managers.

So bulk buying. requires that you maintain certain amounts of inventory to use in the “lead time”. Time. Economics of scale. 1. Capital cost. The Speculative Motive which induces to keep inventories for taking advantage of price fluctuations. 3. 2. REASONS FOR HOLDING INVENTORY • • • • • To stabilize production. supply and movements of goods. from supplier to user at every stage. saving in re-ordering costs and quantity discounts etc… COSTS ASSOCIATED WITH INVENTORY • • Production cost. thus 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 time lags present in the supply chain. . Uncertainty. To keep pace with changing market conditions. There are three basic reasons for keeping an inventory. when he needs it” principle tends to incur lots of costs in terms of logistics. MOTIVES OF HOLDING INVENTORIES • • • The Transaction Motive which facilities continuous production and timely execution of sales orders. To take advantage of price discounts.Inventories are maintained as buffers to meet uncertainties in demand. The fundamental reasons 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. The Precautionary Motive which necessities the holding of inventories for meeting the unpredictable changes in demand and supplier of materials. To meet the demand during the replenishment period.Ideal condition of “one unit at a time at a place where a user needs it. movement and storing brings in economics of scale. To prevent loss of orders.

. Economy in purchasing. • Forecasts help determine when to order materials. no stock out. BENEFITS OF INVENTORY CONTROL The benefits of inventory control are • • • • • Improvements in customers relationship because of the timely delivery of goods and service. Accurate sales & production schedule forecasts are essential for efficient purchasing. Eliminating the possibility of duplicate ordering. Inventory is reduced through sales and scrapping.• • • Ordering cost. Inventory control is a planned approach of determining what to order. when to order and how much to order and how much to stock. 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. INVENTORY CONTROL The main objective of inventory control is to achieve maximum efficiency in production & sales with minimum investment in inventory. so that costs associated with buying and storing are optimal without interrupting production and sales. Efficient utilization of working capital. Carrying cost. Controlling inventory is accomplished through scheduling production. Smooth and uninterrupted production and hence. Shortage cost. handling & investment in inventory. PRINCIPLES OF INVENTORY CONTROL • • • • Inventory is only created by spending money for material and the labor and overhead to process the materials.

. INENTORY CONTROL-TERMINOLOGY  Demand It is the number of items required per unit of time. It means that inventory turnover is 4 times a year i.  Order cycle The time between two successive orders is called order cycle. The demand may be either deterministic or probabilistic in nature.• Control is comparative & relative. Records do not produce control. inventory control can became predictable and properly related to production and sales activity.  Lead time The length of time between placing an order and receipts of items is called lead time. the entire inventory is used up and replaced 4 times a year. 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 order.  Safety stock It is also called buffer stock or minimum stock. • • With the consistent practices being followed. not absolute.. It is exercised through people with varying experiences and judgment rules & procedures establish a base from which the individual can make evaluation and decision.e.  Inventory turnover If the company maintains inventories equal to 3 months consumption.

ordering cost and carrying cost. ECONOMIC ORDER QUANTITY MEANING A decision about how much to order has great significance in inventory management. fixed order quantity system or fixed order period system.e. The cost relationships are sown in below figure. This is the quantity of materials which can be purchased at minimum costs.. Economic order quantity is the size of the lot to be purchased which is economically viable.Inventory Control Techniques Inventory control techniques are employed by the inventory control organizations within the framework of one of the basic inventory models. i. The quantity to be purchased should neither be small nor big because coasts of buying and carrying materials are very high. In determining economic order quantity it is assumed that cost of managing inventory is made up solely of two parts i. however. What should be stressed. from the stage of Receipt from suppliers to the stage of their use. viz. is the need to cover all items of inventory and all stages. Here some of the techniques used are the following: • • • Economic order quantity ABC analysis Inventory Turnover ratio. Inventory control techniques represent the operational aspect of inventory management and control.e. Generally economic order quantity is the point at which inventory carrying costs are equal to order costs. Several techniques of inventory control are in use and it depends on the convenience of the firm to adopt any of the techniques.. .

The concept applied to inventory is called as ABC analysis. ABC analysis thus tends to segregate the items into three categories A. The categorization is made to pay right attention and control demanded by items. Statistics reveal that just a few items account for bulk of the annual consumption of the materials.FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY(EOQ) ABC ANALYSIS MEANING The inventory of an organization generally consists of thousands of items with varying prices. These few items are called a class items which hold the key to business. It is neither desirable nor possible to pay equal attention of all items. . usage rate and lead time. ABC analysis is a basic analytical tool which enables management to concentrate its efforts where results will be greater. B & C on the basis of their values. The other items known as B & C which are numerous in number but their contribution is less significant.

Multiply each item’s annual volume of usage by its rupee value. Inventory turnover ratio may be calculated in different ways by changing the numerator. The next 65 percent of all items with the lowest rupee percentage are ‘C’ items. • ABC analysis. tries to focus and direct the effort based on the merit of the items and. thus. A low turnover rate. • It results in reducer clerical costs. the materials is able to show the results within a short period of time. thus. on the other hand. becomes an effective management control tool. INVENTORY TURNOVER RATIO Kohler defines inventory turnover as “a ratio which measures the number of times a firm’s average is sold during a year”. . indicates over-investment and locking up of working capital on undesirable items. A higher turnover rate indicates that the material in question is a fast moving one. but keeping the same denominator. Compute each item’s percentage of the total inventory in terms of annual usage in rupees. • • • • • • Advantages • By exercising strict control on A class items. Select the next 20 percent of all items with the next highest rupee percentages and designate those ‘B’ items. saves time and effort and results in better planning and control and increased inventory turnover. Select the top 15 percent of all items which have the highest rupee percentage and classify them as ‘A’ items. Determine the annual volume of usage and rupee value of each item.The following procedure is suggested for developing an ABC analysis: • List each item carried in inventory by numbers or some other designation.

The inventory turnover was measured by various tools of analysis and ratios with the help of past records. Unlike other studies. This includes various analysis and ratios regarding the inventory requirement position for the next five years. By diving no. 2. the number of days for which the average inventory is held.. The previous studies have adopted in regard to the maintenance of inventory management. The ratio indicates the number of times the average inventory is consumed and replenished. of days in a year by turnover ratio.2 RESEARCH GAP The past studies have laid emphasis on the maintenance efficient inventory management for the company.Stock turnover is measured in terms of the ratio of the value of materials consumed to the average inventory during the period. this inventory management study has offered suggestions to standardize and improve the effective maintenance of inventory department for having smooth flow of production of products. The present study focus on the overall inventory turnover of the company. can be ascertained. CHAPTER-3 .

2 OBJECTIVES OF THE STUDY PRIMARY DATA • • • To analyze the efficiency of inventory management of Lucas TVS Ltd. The research has been defined as “A careful investigation or enquiry especially through search for new facts in branch of knowledge”. “Research is a systematized effort to gain new knowledge”.RESEARCH METHODOLOGY INTRODUCTION Research is a process in which the researchers wish to find out the end result for a given problem and thus the solution helps in future course of action. 3. which researcher has to use facts or information already available. Data’s are collected from the company’s website. -Redman and Mory. Data are collected through personal interviews and discussion with Finance-Executives. analyze these to make a critical evaluation of the performance.1 TYPE OF RESEARCH The type of project used is Analytical in nature the procedure using. Data are collected through personal interviews and discussion with Material Planning Deputy manager SECONDARY DATA • • • • • • The data are collected from the annual reports maintained by the company for the report maintained by the company for the past five years 2006-2010. Books and journals are pertaining to the topic To identify optimum levels of inventory which minimizes the cost To study how ABC analysis is implemented in inventory management To identify inventory requirement for the next 5 years . 3.

It depends on the research objectives. 3. The collected data have been tabulated and analyzed in a systematic manner. The authenticity of the financial statements has been checked with the book of accounts of the company. • RESEARCH DESIGN The research design constitutes the blue print for the collection. ABC analysis is not one time exercise and items are to be reviewed and re-categorised periodically. descriptive and experimental for the present study. The research design may be exploratory. The descriptive research design is adopted for this project. measurement and analyses of data.5 DATA COLLECTION METHODS There are numerous possible sources of data. The selection of the sources of data for a particular study is important. Common source of secondary data for social science includes . The study takes into account only the quantitative data and the qualitative aspects were not taken into account. Generally the sources of data is classified into two categories • • Primary data Secondary data My research is based on Secondary data. Chennai.3. Secondary data Secondary data is data collected by someone other than the user.3 CONSTRAINTS AND LIMITATIONS • • • The entire analysis applies only to LUCAS-TVS.

3. 4. 3. Inventory Turnover ratio. 2.1. Magazines etc. . Data are collected from the company’s website. From the annual reports maintained by the company. Books and journals pertaining to the topic. ABC analysis.6 TOOLS USED FOR ANALYSIS OF DATA • • • Economic order quantity. Data also collected from company’s Records. Brochures.

CHAPTER-4 DATA ANALYSIS AND INTERPRETATION .

35 1.32 0.09 4068.74 3100.13 5970.29 0.48 2532.40 0. Again in the year 2009 and 2010 the economic order quantity was decreased to 3100. 4550.09 4068.79 4 1 2 3 5 RANK ITEMS % VALUE CUMULATIVE % ITEMS VALUE CUMULATIVE CLASS % OF ITEMS .66 1192.47 2535.74.62.21 1322.64 1251.48 and 2532.296 0.76.75 TOTAL 0.62 4550.09 and then 2008 the economic order quantity was increased to 4068.67 893. In the year 2006-2007 economic order quality was increased to 4024.4.1 ECONOMIC ORDER QUANTITY YEARS 2005-06 2006-07 2007-08 2008-09 2009-10 EOQ 4024.74 3100.76 INTERPRETATION The above table reveals that economic order quantity for the year 2006-2010.2 ABC ANALYSIS ITEMS UNITS UNIT COST USAGE PRECENTAGE 1 2 3 4 5 4024.13 1311.62 4550. 4.

21 893.78:1 The above table shows that inventory turnover ratio for the past 5 years.9:1 7. For A class unit value is more than Rs.77 13.94.45 5077.93 11544. In the year 2008 the ratio was decreased to 7. .89:1 7.67 5970.171.100 and constitutes 65% of total components.141.13 1322.73 RATIO 9. C classes by using the ABC analysis based on unit value.79 20 20 20 20 20 20 40 60 80 100 A A B C C INTERPRETATION The above table shows the classification of the A. In the year 2006 inventory turnover ratio was increased to 9.64 1251.89:1 8.14 1311.18 AVG.380.320.01 17. B.25 constitutes 15% of total components.78 3885.02 16.3 INVENTORY TURNOVER RATIO Net Sales Inventory turnover ratio= -----------------------------Average inventory YEAR 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 INTERPRETATION NET SALES 95.67 1192.94:1 9.2 3 4 1 5 1322.60 124.INVENTORY 9598.14 2633.441.981.25-100 constitutes 20% of the total consumption and class C value is less than Rs.153.74 133. 4.12 114.59 127. for class B the unit value is between Rs.89.378.

9 and in the year 2010 the ratio is decreased to 7.78.Again in the year 2009 the inventory ratio was increased to 8. .

25-100 constitutes 20% of total items.CHAPTER-5 5. So in the year 2010 the EOQ value was decreased. B class unit value is Rs. • The inventory turnover ratio shows that increasing trend from 2006-2009 and except in the year 2010 which shows that ratio was decreased.10.e. • From the past year data shows that the inventory was increased. C classes unit value is Rs.2011. So the organization is expecting more inventories in future period i.1 SUMMARY AND FINDINGS • From the calculation of economic order quantity there is a variation in materials purchased and placing an order. . constitutes 15% of total items. This leads to the company maintains the inventories based on its unit value using this technique. • In ABC analysis the A class unit value is more than 100 constitutes 65% of total items.

2 SUGGESTIONS AND RECOMMENDATIONS • If they follow the EOQ. There should be tight control in inventories done through continuous check. 2011.e. . • Since A classes constitutes more percentage than B & C. • The company is expecting more inventories for future i. order frequently to avoid over investment of working capital.5. it will reduce the cost and to enhance the profit. • The company is requires to maintain stock levels in order to avoid stock out conditions and help in continuous production flow. The management is requires to maintain the same inventory level in the forth coming year also.

A high ratio implies good and efficient business activities . If they could properly implement and follow the norms and techniques of inventory management. .• The inventory turnover ratio indicates whether investment in inventory is within proper limit or not. Through ABC analysis we can maintain high percentage of items in inventories. From analysis we can conclude that the company can follow the Economic Order Quantity (EOQ) for optimum purchase and it can maintain safety stock for its components in order to avoid stock-out conditions & help in continuous production flow. there will be more demand for the products in the future periods. they can enhance the profit with minimum cost. Since the inventory turnover ratio shows the increasing trend. 5.3 CONCLUSION A better inventory management will surely be helpful to the company to overcome their problems and will pave way for reducing the huge investment or blocking of money in inventory. This would reduce the cost and enhance the profit. The explanatory study suggests LUCAS TVS LTD make relative high use of inventory techniques similar to the concept of inventory management. Inventory Turnover ratio requires to maintain high turnover ratio than the lower ratio. However this study provides little insight into the actual organizational processes and action that proceed are initiated by these inventory management.

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lucastvs.com  www.  R.org/inventory_control/index .inventorymanagementreview.Paneerselvam “Operations Research” Prentice hall Of India Private Ltd.inventorymanagementreview.P. Iyengar “Cost & Management Accounting” Sultan Chand & Sons.BIBLIOGRAPHY REFRENCES BOOKS  M Y Khan P K Jain “Financial Management” 4th edition Tata McGraw Hill.  S. ➢ WEB SITES  www.  Martand Telsang “Industrial Engineering & Production Management” S Chand & Co.org/inventory_basics/index www.