Inventory Mgt Ppt Final Aman Seminar (3)

7/31/2019 Inventory Mgt Ppt Final Aman Seminar (3)

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It Was Established in 1954, Goetze (India) Limited

(GIL) is joint venture between the Anil Nanda group

and Federal Mogul, a global supplier of quality

products and solutions to automotive industry. Goetze(India) Limited was established in 1954 as a joint

venture with Goetze-Werke of Germany.

Goetze-Werke of Germany is now owned by Federal-

Mogul Corporation, a $6.3 billion global companyand one of the leading manufacturers of automotive

components in the world.


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Manufacturer of pistons and piston rings in India.

Federal-Mogul has been creating value through

innovation and leading technology for more than

100 years. Today, the company is a key player inthe global marketplace, serving industries that

range from automotive and commercial vehicles

to railroad and aerospace. Customers know they

can rely on Federal-Moguls quality excellence inproducts, trusted brands and creative solutions.


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This company started with a bold idea and over time

grew into a FORTUNE500 company with a global

workforce thousands strong. The Federal-Mogul team

has celebrated countless victories and worked hard toovercome the inevitable challenges.


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Inventory management- Every enterprise needs

inventory for smooth running of its activities. it

serves as a link between production and distribution

processes. there is generally a time lag between therecognition of need and its fulfillment. the greater

the time lag, the higher the requirement for inventory.

the unforeseen fluctuations in demand and supply of

goods also necessitate the need for inventory.


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The Transaction motive

The Precautionary motive

The Speculative motive


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Four kinds of inventories may be identified:

Raw material

Work in process

Stores and spares Finished goods


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Category A - items contain high value items andimportant material directly linked with production. Itincludes one product i.e. CIMSTAR MB62C.

Category B- It includes items, which are directly linkedwith production but are having less value than items. Itincludes three products i.e. SERVO SYSTEM 68,HYPSIN EP-68, Cutting oil, Arc light.

Category CIt includes items products such as ,kerosene oil, power oil, servo system 121, servo CUS,quenching oil, preventing oil etc.


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In stores computers are being used to store maximum, minimum, re-order levels of each item. Recently the firm has started using JITtechnique.

The purchases of FMGIL are centralized and authority lies with the

purchase department. No body is allowed to make purchase himself,directly. For purchasing purpose a meeting is held at held office inwhich planning is done on basis of last years consumption. Majorpurchase is done by head office but local purchase is also for certainitems. Procedure of acquiring inventories starts with the receipt ofmaterial. When the material reaches the main gate it needs to be

inspected and only after inspection of invoices materials is sent tothe store department. Then the material is inspected and is approvedor rejected as the case may be.


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ABC CLASSIFICATION

SDE CLASSIFICATION

GOLF CLASSIFICATION

FSN CLASSIFICATION


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51.RAW MATERIAL 42.FOUNDARY FLUXES, OILS AND LUBRICANTS 63.PACKING MATERIALS 54.GRINDING 55.DRILL 76.CUTTER 57.CARBIDE TOOLS 60.BEARING 62.CIVIL AND PIPE FITTING MATERIAL

83 RUBBER PRODUCTS 64.NUTS, BOLTS, WASHERS & SPACERS 65.HAND/INSPECTION TOOLS 66.WELDING AND FIRE FIGHTING MATERIAL


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Determination of stock level

1.minimum level of stock

2.Re ordering level

3.Maximum level4.Danger level

Economic order quantity

Inventory turnover ratio

JIT inventory control system


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INVENTORY TURNOVER RATIOInventory turnover ratio also known as stock velocity isnormally calculated as sales/average inventory or costof goods sold/average inventory. It would indicate

whether inventory has been efficiently used or not. Thepurpose is to see whether only the required minimumfunds have been locked up in inventory. Inventoryturnover ratio indicates the number of times the stock

has been turned over during the period and evaluatesthe efficiency with which a firm is able to manage itsinventory.


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Inventory turnover ratio = cost of goods soldAverage inventory

Cost of goodssold

72,331.21 85,828.60 1,06,045.58

AverageInventory

10,033.13+9,135.37/2

9,135.37+10,564.05/2

10,564.05+13,920.16/2

Inventoryturnover ratio 7.5 times 8.7 times 8.6 times


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The inventory turnover ratio is quite good andimproving.

The ratio increased from 7.5 to 8.6 times which

indicates efficient management of inventory.

More frequently the stocks are sold.

Lesser amount of money is required to finance the

inventory.


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The following methods can be adopted to value the raw material: First-In-First-Out (FIFO):When a firm adopts the FIFO method

to price its raw material, the issue of material from the storeswill be in the order which it was received. Thus the pricingwill be based on the cost of material that was obtained first.

Last-In-First-Out (LIFO): In the LIFO method, the materialissued will be priced based on the material that has beenpurchased recently.


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Inventory conversion period indicates time taken for clearing the stock as itmeasures the velocity of conversion of stock management of inventory

because more frequent the stocks are sold the less amount of money is

required to finance the inventory and vice-versa.

Inventory Conversion Period =

Number of working days

Inventory turnover ratio


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No ofworking days

365 365 365

Inventoryturnover

ratio

7.5 times 8.7 times 8.6 times

Inventoryconversionperiod

48 days 41 days 42 days


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1. Less inventory conversion period is better because morefastly, we will convert our inventory into sales, there will be

less chance of obsolescence and paying of over-stocking

cost.

2. Inventory conversion period is the part of cash conversioncycle. If this period is very high, it will increase the time to

complete the cash conversion cycle. It means, there will be

more liquidity risk in that level of inventory.


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1.To know the functioning of the inventories and

understand the system of procurement of

material , its receipt , inspection and its issuing.2. To analyze the inventory control techniques used by

company.

3 .To understand the accounting and valuation of raw

material


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Secondary data-It is mainly based upon annual

reports , magazines , office reports, and variouspublished documents of Federal mogul goetze India

ltd.


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1. MIS reports prepared on regular basis by

Finance Department to manage inventory leveland review of slow and non moving items by all

concerned agencies

2.Mostly all work done with sap software. anyother software is not used by federal employers.


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3. The various items in raw material are stored atdifferent locations instead of one central location

according to suitability of their use near to the

respective departments. But same are controlled (i.e.

received, recorded ) from one central location that is

from main gernal store.

4.The contract with suppliers for supply of raw

material is decided in advance at the beginning of theyear & factory receives material at that very price all

throughout the year.


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Earlier company was using wood boxes for packingfinished goods, which were quite safe, and a proper

transportation. But now the company is using

cardboard boxes for packing yet company has reduced

the weight of packing material per box. But quantity of

rejected finished material in inventory has increased.

So company should give attention to improve packing

material to maintain its reputation and reducing cost of

inventory.


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The company should have independent materialengineering department or material-planning

department, which should plan about material

requirement, purchases, planning of production.


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Limited time.

Lack of comparative data for interfirm comparison.


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Inventory Mgt Ppt Final Aman Seminar (3)

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