Inventory Control & Management

ADA PROJECT
Submitted by: S. Bhardwaj Ravi Bhaskar Shamindra Mukherjee Akanksha Malhotra Rishika Goel Mukesh Agarwal 10DM- 128 10FN- 090 10FN- 138 10HR- 002 10HR-029 10FN-062

TATA Motors
Indias largest automobile company: Established in 1945 Employee strength of 25,000 Revenues of Rs. 1,23,133 crores Plants at Lucknow, Jamshedpur, Pune, Sanand and Pantnagar. Product Line: Commercial, Passenger and Defence & Security vehicles. TATA Motors produces Trucks and Buses in its Lucknow plant. There are three models produced: LPT, LPO, LP

Sourcing of Components
Component Sourced from Lead Time 4 - 8 days 7-15 days Price/ unit (Rs.) 2,00,000 50000

Aggregates
Cabins Chassis Tires Wiring Harness

Jamshedpur
Pune Jamshedpur China Faridabad

4 - 8 days
30-45 days 1-2 days

42200
12500 10500

 Each vehicle requires different number of the above components Each of the components have different lead times

Scheduling is done monthly

Objectives
I
II
Using sales data, forecast the demand for different models of Trucks/Buses for the next month. To minimize the inventory cost by calculating the optimum quantity of various components required to meet the forecasted demand
Sensitivity analysis of EOQ of components for different lead times

III

Data Collection

Sales & Production data for 3 different models.

Cost data, lead time, no of units required for each component

Transportation cost for each component

Cost of equity, cost of debt, obsolescence cost etc.

Methodology
I. Forecasting:
I. Use the data available for 9 months II. Forecast data using weighted moving averages for LP, LPO and LPT.

II. Using the forecasted demand, calculate the demand for various components:
I. Component required= (Model i)*(No. of units for Model i)

Calculation of EOQ
Calculation of Ordering cost:
Transportation cost

Calculation of Holding cost:

Holding cost= cost of capital+ other holding and obsolescence cost

Use EOQ model (Excel modules) to calculate EOQ, total holding cost, total ordering cost, total purchasing cost and Reorder point

Sensitivity Analysis
The lead time of each component has a range within which it varies. We calculate the Reorder Point for each lead time using Data Tables. After a particular lead time, the ROP becomes greater than the EOQ which will lead to stock-outs. Thus the company should look at past data to determine the actual order quantity (may be greater than EOQ).