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C OWYEWYS
YHE WEED FOR IWVEWYORY
YHE WEED FOR COWYROL
FIWAWCE FOR IWVEWYORIES
VHAY IS IWVEWYORY COWYROL
YHE YECHWIQUES
YHE YYPES OF IWVEWYORIES
ABC AWALYSIS OR SELECYIVE IWVEWYORY
COWYROL
YHE YVO BIW SYSYEM
MAX MIWI SYSYEM
ECOWOMIC ORDER QUAWYIYY
SAFEYY OR BUFFER SYOCK
FSW/VED AWALYSIS
CASE SYUDIES
USV
AVOW CYCLES BHUSHAW
SYEEL CO.

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AGKNOWLEDGEMENT

It hereby gives us great pleasure to

submit our frst project on MATERIALS
MANAGEMENT.
We would like to thank our
prof. P.M. RAO for giving us such a good
project.
We would like to thank all others who
have directly or indirectly helped us in
making this project. We also gained some
knowledge from this project. We would be
looking for such projects in future.

YHE WEED FOR IWVEWYORY

The ordinary dictionary meaning of inventory is 'a list of goods an estate

contains'. In industry, inventory means 'stock of goods'. It may mean raw
materials, work-in-progress, maintenance materials, processed and semiprocessed materials, oils, fuels and lubricants as well as fnished and semifnished goods. They may be either in solid, liquid or gaseous form, required
for future use, mainly in the production process as in the case of fnished
goods for re-sale. In any case, it is an idle resource having an economic value
awaiting conversion, consumption or re-sale. Thus inventories are held
primarily for some transaction. 'Today's inventory is tomorrow's production'.
In case of production inventory, generally there is a time-lag between the
recognition of the need and fulfllment of that need. This time-lag; which is
technically called 'leadtime', is due to the time required for ordering,
processing and time needed by the vendor for actual delivery of the
materials. Gonsequently, leadtime greatly infuences holding of the volume
of inventory. Had it been so that materials were readily available right on
placing orders, there would have been no need for holding inventory. The
second element is that inventories are held as a precautionary measure for
increases in both leadtime and consumption rate. Also, there are reasons for
holding inventory as a matter of speculation, because prices may
subsequently go up or the material may become scarce in the future. This is
however, not 'of so much importance for our purpose. Finally, inventories
also serve to decouple materials from consumption at successive stages of
production operations.

YHE WEED FOR COWYROL

We have already seen how important it is to improve upon the return on
capital, that is, proft margin. But there are obvious limitations such as
competition in the business world. One way of improving the proft margin is
to turn inventories into saleable products with less investment and as quickly
as possible so that higher sales targets can be achieved and more profts
made with less investment. In other words, a high inventory to sales turn
over ratio is necessary to achieve an improvement over return on capital.
The inventory-turnover ratio can be defned as the gross sales revenue to
average inventory held during a year. This ratio is too low in India. While it
is roughly about E:1 in India, it is about 1Z to 18 in the USA on an
average. The same is about 7 in West Germany and about b to 8 in the
UK.
An RBI study on 700 Joint Stock Gompanies shows the following investment
structure:
Raw Materials and Inventories . Rs. b00
crores Plant and Machineries . Rs. 540
crores
The above fgures show higher capital outlay in raw materials and
inventories than in plant and machinery. A constant attempt should be
made to reduce investment in inventories. If a modest
5 per cent reduction is possible, that would mean release of 1m extra
amount of investable funds for other productive purpose. The overall picture
is gloomier. It has been variously estimated that in India about Rs. 15,000
crores is blocked in immovable inventory of which about Rs.Z,500 crores is

blocked in dead inventories. One wonders whether a developing economy

can afford to block so much money in an idle resource.

FIWAWCE FOR IWVEWYORIES

Like their counterparts all over the world, Indian industries also performance
their inventories primarily through bank credit. Banks extend credit by way
of advance against inventories. It is generally made available under pledge
or hypothecation. As a matter of fact, full value of inventories is not
advanced. A margin is retained by the bank and the borrower is required to
meet the fnancial requirements of inventory through internal resources.
Margins, however, vary widely depending upon many factors which are
taken into account by the bankers while they extend credit. Large portions
of working capital of many companies are sunk in inventories and banks
generally provide the working capital requirements. Traditionally, organized
industrial sector of the economy accounts for more than 50 to b0 per cent of
the total bank credit. The quantum of bank credit for industries has always
been on the increase. As such, inventory fnancing has becoming a very
important part of credit planning for the banking system in India.
The Reserve Bank of India, in order to regulate and control bank credit, from
time to time issues policy directives to commercial banks. As for example,
banks are required to maintain a statutory reserve in the form of cash. The
liquidity ratio of cash to demand and time liabilities are periodically reviewed
and varied in order to control credit. The Variable Reserve Ratio (VRR), as it
is called, is a powerful tool in the hands of RBI for controlling credit and

money supply in the country. The RBI also lowers or increases lending rates
to commercial banks for such purposes. Over and above, it also exercises
selective

credit control for a large number of commodities and recommends a

minimum margin to banks for advances and loans. For others, banks are left
free to advance loans and credits at their discretions. In July .1974, RBI
appointed a study group to frame some guide lines for hank credit to
industries. The committee headed by the then Ghairman of the Punjab
National Bank, Sri Prakash Tandon, recommended three methods of fnancing
inventories.
(a) Firstly, the borrowing organisation is expected to fnance Z5 per cent of the
working capital requirements from its own internal resources.
(b)Secondly, the borrowing organisation is required to fnance to the extent of
at least Z5 per cent of its current assets from its own internal resources.
(c) Thirdly, the borrowing organisation is expected to fnance its 'core current
assets'.
The implication is that individual borrowing organisations will need to take
care to minimize their current assets. They must reduce inventory and will
try to increase the inventory-turnover ratio .in order to maintain a steady
fow of funds and liquidity. They will have to streamline procedures to cut
administrative and internal leadtimes. This in turn requires an analytical
approach to inventory control, fow of information, documentation,
organisational restructuring and delegation of fnancial powers for smooth
fow of materials, to, through and out of an organisation. Thus, inventory
control has assumed great importance to industries.

VHAY IS IWVEWYORY COWYROL

The simplest language, inventory control may be said to be a planned
method whereby investment in inventories held in stock is maintained in
such a manner that it ensures proper and smooth fow of materials needed
for production operations as 'well sales, while at the same time, the total
costs of investment in inventories is kept at a minimum. From the above
defnition it follows that a comprehensive inventory control system must be
closely coordinated with other planning and control activities, such as,
(planning, capital budgeting, sales forecasting, including production
planning, production scheduling and control. This impinges on a wide range
of operations, operating decisions and policies for production, sales and
fnance. The fnance controller of a company regards inventory as a
necessary evil, since it drains off cash which could he used elsewhere to
earn some profts. The marketing manager always wants enough of ready
stock of fnished goods inventories in order to give better customer service
to ensure the company's goodwill and would not like to see a sales
opportunity lost for want of saleable ready stock. The production manager
does not want an out-of. Stock condition for which production might be held
up. It will, therefore, he seen that everyone- has some objectives which arc
connecting in nature. The basic problem is, therefore, to strike a balance
between operating efficiency and the costs of investment and other
associated costs with large inventories, with the object to keep the basic
conficts at the minimum while optimizing the inventory holding.

YHE YECHWIQUES
Some of the techniques which will follow include methods of fxing purchase
quantities, setting of order points and safety stocks. The decisions as to
which item to make when and to keep inventories in balance requires
application of a wide range of techniques from simple graphical methods to
more sophisticated and complex quantitative techniques. Many of these
techniques employ concepts and tools of mathematical and statistical
methods and make use of various control theories from engineering and
other felds. They arc primarily aimed at helping to make better decisions
and getting people involved and follow a wise policy. As such, they are far
from academic exercises only.
However, making decisions more intelligently and making actions follow
these decisions is not easy. Thus while these quantitative techniques have
taken much out of the decision-making managers what was being done
through bunch or intuitive judgment, real business acumen demands that
these must be blended with practical business sense. It is an axiomatic truth
that these techniques alone cannot turn bad judgement into good ones
simply because they are exact. However, before focusing our attention on
such techniques, let us frst attempt to analyze different types of inventories

YYPES OF IWVEWYORIES
Inventories may be classifed as under:(1) Raw materials and production inventories:
These are raw - materials, parts and components which enter into the
product Direct during the production process and generally form part of the
product.
(2) In-process inventories:
Semi-fnished parts, work-in-process and partly fnished products formed at
various stages of production.
(3) M.R.O. Inventories:
Maintenance, repairs and operating supplies which are consumed during the
production process and generally do not form part of the prod.uct itself (e.g.
POL, Petroleum products like petrol, kerosene, diesels, various oils and
lubricants, machinery and plant spares, tools, jibs and fxtures, etc.)
(4) Finished goods inventories:
Gomplete fnished products ready for sale.
Inventories may also be classifed according to the function they serve, such
as,
(a) Movement and transit inventories:
This arises because of the time necessary to move stocks from one
place to another. The average amount can be determined
mathematically thusI=S x T
Where, S represents the average rate of sales (say, weekly or monthly
average) and
T the transit time required to move from one place to another, and I the
movement inventory needed.
As for example, if it takes three weeks to move materials to aware house
from the plant and if the warehouse sells 110 per week, then the average
inventory needed will be 110 units x E weeks = EE0 units. In fact, when a
unit of fnished product is manufactured and ready for sale, it must remain
idle for three weeks for movement to warehouse. Therefore, the plant stock
on an average must be equal to three weeks' sale in transit.

(b) Lot-size inventories:

In order to keep costs of buying, receipt, inspection and transport and
handing charge slow, larger quantities are bought than are necessary for
immediate use. It is common practice to buy some raw materials in large
quantities in order to avail of quantity discounts.

(c)Fluctuation inventories:
In order to cushion against unpredictable demands these are maintained,
but they are not absolutely essential in the sense that such stocks are
always uneconomical. Rather than taking what they can get, general
practice of serving the customer better is the reason for holding such type of
inventories.
(d) Anticipation inventories:
Such inventories are carried out to meet predictable changes in, demand. In
case of seasonal variations in the availability of some raw materials, it is of
inventory and also to some extent economical to build up stocks where
consumption pattern may be reasonably uniform and predictable. of the
types of inventories discussed above, the Lot-size, Fluctuation and
Anticipation Inventories may be said to he 'Organization Inventories'. As
more of these, basic types of inventories are carried into stock, less
coordination and planning are required. Also less clerical and administrative
efforts are needed and greater economies can be obtained in handling,
manufacturing and dispatching. But the difficulty is that gains are not
directly proportional to the size of inventories maintained.
As the size increases, even if they are efficiently maintained, handled and
properly located, gains from additional stock become less and less prominent
The cost of warehousing, obsolescence and capital costs associated with
maintenance of large quantities grow at a faster rate than the inventories
themselves. As such, the basic problem is to strike a balance between the
increase in costs and the decline in return rom holding additional
inventories. Striking a balance in a complex business situation through
intuition alone is not easy. Gosts, and to be sure, the balancing of opposite
costs, lie at the heart of all inventory control problems, for which cost
analyses are necessary to which we shall turn in this chapter now.
As has already been said that even a typically medium-size industrial
organization may use 10,000 to 15,000 different items which are carried in
inventory. Initial planning and subsequent control of such inventories can
only be accomplished on the basis at knowledge about them. Gonsequently,
the starting point in inventory management and control is the development
of a stores catalogue, which is more or less comprehensive and complete in
all
respects. All inventories should be fully and carefully described and a code
number should be allotted. Similar items should be grouped together and
standard codifcation should be adopted.

ABC AWALYSIS OR SELECYIVE IWVEWYORY

C OWYROL (SIC)
80 per cent of the income and wealth were concentrated in the hands of
about Z0 per cent of the population. This 80-Z0 relationship also holds good
in most cases of inventories where it may be found that about Z0 per cent of
the total number of items are responsible for about 80 per cent of the value.
The idea of studying such, inventory value is to fnd out 'where the money
lies'. AS this 'Z0 per cent of items, 80 per cent of value' rule holds good in
many inventory situations, high value items need more stringent control,
which may be termed 'A' class items, and the remaining ones can be
classifed as 'B' and 'c' class items according to descending order of value.
Thus, the principle of graduated control may be affected and the degree of
control may be equated with the frequency of reviews. Gontrolling tightly
means reviewing frequently, and frequency in turn tends to determine the
order quantity, A items would be reviewed frequently, and because of their
high value they will be ordered in small quantities in order to keep the
inventory investment minimum. B items will be renewed less frequently and
G items still less, The following graphical illustration will make the meaning
of ABG Analysis more clear, which is based on selective control technique.

GLASS
A
B
G
TOTAL

NO. OF ITEMS IN USE (%) VALUE (%)

Z0
80
E0
15
50
5
100
100

YHE YVO-BIW SYSYEM

One of the earliest systems of stock control is two-bin system, which is a
simple method of control exercised by two simple rules. One is when the
order should be placed, and the other is what quantity should be covered.
The following diagram shows this simple method. The bins contain, say,
mild-steel bolts and nuts. The bolts and nuts are issued from the frst bin as
and when required, and as soon as the frst bin is empty, more bolts and
nuts are ordered.
The replenishment arrives just when the second bin is empty. While delivery
is awaited, the nuts and bolts from the second bin are issued. When the
delivery arrives, then both the bins are again flled in.

BIN NO 1

Use till Bin no 1 is empty

empty

BIN NO Z

Use Bin No Z when Bin no 1 is

Such a method is appropriate only when consumption rate is constant, that

is to say, it is a deterministic system. We know from our experience what
quantity of bolts and nuts are necessary for a given period as well as we
know their rate of consumption.

M AX MIWI SYSYEM
Under this method, maximum level and minimum level are fxed. Reordering is done after a period of review and order or re-order is placed
when the quantity touches a certain level.
Suppose you have an item in inventory for which maximum is fxed at 1,000
and minimum quantity to be held in stock is Z50units. Previous experience
shows that a safety stock of Z50 units is quite sufficient. If during the past
two months consumption rate has been E00 units per month on an average,
and if the leadtime is taken to be two months time, then you will run out
soon, if either delivery is not received just after two months or if during the
subsequent months consumption rate increases. The weakness of this
system is:
(a) Stock levels are actually fxed at lower levels since managers have no time
to study inventory levels of individual items.
(b)Re-order points and safety levels once fxed are not frequently changed after
study.
(c) Delay in postings makes the records useless for control as often even a
critical item can be held up for want of posting which otherwise would
have been shown that the re-order point has been touched. Thus, we may
conclude that in any inventory management and control system, control is
exercised through various levels, and the order point and the order
quantity:
i.
ii.
iii.
iv.

Maximum level
Minimum level
Order level or re-order level or the order point
Order quantity

There are two basic control systems:

1. Periodic review system.
Z. Fixed order quantity system.
1. Periodic review system:
This is a time-bound system which requires periodic reviews of the stocklevels of all items. Here, period of review is fxed either at three months,
six months or once in a year, when requirements of all items are worked
out ,a fresh, and the quantity varies. This system works well for
production raw materials and components for which long leadtimes are
necessary.

Z. Fixed order quantity system:

Under this system, order quantity is fxed but the time varies. This
system recognizes the fact that each item in inventory possesses its own
characteristics and optimum order quantity requirements. Designing of
this system requires consideration of many factors, such as, price, usage
rate and other pertinent factors. Maximum and minimum levels are
determined for each inventory item and an order or re-order point is
established in between the two levels. The order point is computed in
such a manner that by the time new supplies is received, the stock
balance will fall to the minimum and it will be replenished again to the
maximum.
The major advantages are:
(i)
Each item can be procured at the most economical price
and quantity,
(ii)
Purchasing and inventory control people automatically
pay attention to the items when they need it.
Thus, in order to devise a good inventory control system, we have to
consider the following:
(a) What to order.
(b)When and how much.
The frst involves planning with due regard to production and marketing
requirements. The second has two aspects:
(i) Order point
(ii) Order or re-order quantity
Order quantity will be discussed along with safety stock or buffer stock
since subtle infuence of time in transit on .total inventory is closely
related to the safety stock provisioning to create an impact on inventory
control. At this point, it would be better to draw a distinction between
Accounting costs and operational costs. The former is based on historical
cost concept used for fnancial reporting and the latter is, by and large,
used for day-to-day decision-making and insensitive to small variations.
Accounting system typically distinguishes three types of costs, viz., direct
cost, indirect cost and overheads. As against the principles and consistency
of accounting costs, the defnition of costs in an inventory system may vary
from time to time, depending upon the length of time being planned and
other circumstances. However, the objective underlying inventory control is
to minimize the total cost of procurement, storage,
handling, distribution and other charges. Economic ordering starts with an
analysis of these various components of costs.

ECOWOMIC ORDER QUAWYIYY OR EOQ

F
ORMULA
The inventory costs may be broadly divided components:
A PROGUREMENT GOST (this includes administrative and provisioning costs.)
B. STORAGE. GOST (this includes carrying, handling, etc.)
G. STOGK-OUT GOST (this may be laid down by management according to
its policy.)
The frst two may be broken down into a number of components.
Typically they are:
A.
(i) Requisitioning
(ii) Order-placing
(iii) Processing and progress-chasing
(iv) Receiving, checking and inspection
B.
(i) Interest on capital
(ii) Expected return on capital (imputed cost)
(Hi) Warehousing (this includes insurance, lighting and other
maintenance costs).
A point of minimum cost is reached at which the ordering cost will be just
equal to the carrying cost so that the tota1 cost is minimum at that point. In
other words, neither excess quantity of material is ordered, nor too
frbquently too many orders are placed for the same material during a period
of time. We assume, however, that no stock-out or idle-time cost has to be
accounted for. Also, where quantity discounts are allowed on lot-purchases
or where there are price-breaks, this will not hold true. In such cases, linear
relationship of the unit price with purchase quantity breaks down and
distorts the formula given below as we shall presently see, When unit price
is same regardless of the quantity purchased, we can use the following
formula when we fnd that the order quantity varies in proportion to the
square root of the demand. These are indices given on scientifc basis to
order quantity, keeping in view position states of inventories, viz., the set of
costs, ordering cost and carrying cost. This is known as Economic Order
Quantity

(EOQ) or Square Root Formula developed by R.H Wilson.

EOQ or DZ = (ZQa)
G
Where Q= Annual requirements in units (estimated
demands) a = Unit cost of placing an order (in
Rupees)
c = Annual carrying cost (this is generally expressed in percent)

In determining the EOQ, this mathematical model has assumed that the
costs of managing. an inventory item consist solely of two parts:
(1) Ordering cost and
(Z) Garrying cost, ignoring the idle time or stock-out cost, which cannot be
altogether ruled out.
Ordering cost:
This is the additional cost of placing an order or re-order. Its characteristic
is that it is independent of the order size. It increases with the number of
orders and is not infuenced by the size of the order.
Garrying cost:
On the other hand, the characteristic of the carrying cost is that it increases
with the volume of inventory irrespective of the number of orders. It is
linearly related with the quantum of inventory. The cost of inventory carrying
is generally expressed as an annual percentage of the unit purchase cost.
From the above graph, it will thus be noticed that the above two costs are
opposite in nature. The former varies with the number of orders and the
latter varies directly with the volume of inventory. Thus, if purchases are
made frequently and in small lots, carrying cost can be kept low, but the
order or re-order cost will be higher. It will, therefore, be appreciated that
when the slope of the order cost curve meets the rising carrying cost curve,
that is to say, where the marginal ordering cost is equal to the marginal
carrying cost, the total minimum cost point is reached. In other words, this is
the point where we hold the optimum inventory meet this point the order
cost curve begins to rise again.

Limitations of the EOQ formula

However, the very restrictive nature of the assumptions made in the EOQ
formula restrains the use of the formula in many cases of practical
inventory situations. The cost-analyses on the basis
Of which the formula has been developed are merely notional rather .than
actual in some cases. In practice, unit cost of purchase of an item varies,
lead times are uncertain and also requirements or demands of inventory
items are not perfectly predictable in advance. Rate of consumption varies
greatly in many cases. As such, the Application of the formula often
becomes difficult and complicated.
Price Breaks or Quantity Discounts
In many cases, quantity discounts are allowed by frms in order to boost their
sales and it becomes preferable to purchase in some bulk quantities to avail
of the discounts. In such cases, it is only worthwhile to calculate the EOQ for
an item in order to see that if it is really proftable to order in EOQ quantity.
This will also mean that the usage rate must be steady. Again, if the, unit
cost of purchase fuctuates greatly from time to time, then the EOQ for that
particular item will also not hold good.
Leadtime variation
The formula was' also developed on the basis of invariant leadtime, that is,
the time interval between placement of an order and actual replenishment
will not vary for all practical purposes.
Often this supposition is invalid, because schedule of deliveries varies for
many reasons. Moreover, some items have longer leadtimes than others and
even for the same items, it will differ from one lot purchase to another. For
this reason also, it is difficult to use
EOQ for many times
Order or re-order Point
Thus, while EOQ tells us something about how much to order, it tells us
almost nothing about when to order or re-order, for, this depends upon the
level of inventory in question. The order or reorder point should be set at
such a level that the stock on hand plus on orders should last till fresh
supplies are received. This will require ascertaining the usage rate of that
particular item. If the rate of consumption greatly varies and there is an
upward surge in the consumption pattern suddenly, this will lead ultimately
to stock-out condition. For this reason only, for many items additional stocks

have to be maintained in order to meet unanticipated demand due to

variation in usage rate due to normal consumption and during lead times.

SAFEYY OR BUFFER SYOCK

Some additional stocks are always provided in order to meet contingencies
of unanticipated, demand due to both (a) leadtime variations usage pattern
during leadtime. This additional stock, safety or buffer stock as it is called
will, however, depend upon the service level desired on the one hand, and,
the risk of stock-out, on the other. If the rate of consumption remains fairly
constant, the suppliers' delivery times do not vary, there are no rejections
during inspection, it would have been a simple matter to place a new order
whenever stock on hand reaches the quantity equal to the lead time usage.
A hundred per cent service level can be easily .attained in such
circumstances when there will be no occasion for stock-outs as fresh
supplies would always be arriving before the existing stock out.

The EOQ was developed on the presumption that such an ideal situation
holds true and the average inventory holding during the twelve-month period
is 1/Z during the year. So, the inventory level is equal to Q or EOQ
intermediately upon receipt of the order quantity and is reduced at a
constant rate of depletion until it reaches a zero-level again. But such an
ideal situation is hard to come across. In practice, demands vary greatly,
supplies are uncertain, prices do not remain constant and a host of other
variables and seen circumstances and difficulties are experienced, which
may lead to occasional stock -out conditions. On the other hand,
unnecessary apprehension about stock shortages leads to holding of a
building up of huge stock piles. So, an inventory control system should be
provided that can absorb the shocks or bumps up and down, the system
itself not being too costly at the same time. In designing such a system, we
have already stressed the importance of service level desired by
management. Some additional stocks are kept on hand always in reserve to
avoid temporary shortages or stock-out conditions. As more and more safety
or buffer stocks are provided, this eliminates the changes of shortages and
means holding of unnecessary additional inventories. But when less are
provided, this means there are chances of occasional stock-outs and
management has to run the risk or production hold ups. Thus the
provisioning of safety stock assumes great importance in the face of
uncertainties. The following illustration depicts the situation. The problem of
determining safety stock of buffer stock is a comparatively simple matter,
where the rate of consumption fairly constant or can be accurately forecast.

At this point mill be appreciated that variations in future consumption are not
only cause of stock-outs. The variations in leadtime use ages and related
uncertainties of delivery time must also be taken into account, which make
the calculation of safety stock a complicated affair. It involves numerous
repeated trials or tests of the combined effect of variations in demand and in
leadtime useages to arrive at an ideal safety stock level.

FSW/VED amawss
A-B-G Analysis was evolved on the principle of graduated control
stringency. The degree of control was equated with the frequency of
reviews of a given inventory record.
Gontrolling tightly means reviewing frequently, which tends to determine
order quantity.
A-items would be reviewed frequently and order in small quantities to keep
inventory investment low.
B-items less, G-items still less. But this approach does not take into account
the fact that sometimes a low-valued small item of critical nature needs as
much attention as high-valued A-class item, so that inventories also need to
be classifed according to Vital, Essential and Desirable (V -E-D), which in
essence means that stress is more on importance rather than on value.
Again, inventories may also be classifed according to Fast-moving, Slowmoving and Non-moving items in order to see the rapidity of their use and
to weed out the unnecessary ones. This is aimed at keeping the total
inventory size down and reduces investment.
Thus, selective control may be exerted under different types of classifcation
according to necessity. A single-type approach may not prove fruitful under
all circumstances.

AVOW CYCLES
SUNIL GUPTA
G.M QUALITY DEPARTMENT

Raw materials: - Tubes, Stips, rubber, Steel more than E000 R.M
Source: - Ludhiana. Some materials are
imported. They are having more than 100
models.
Almost b to 7 thousand cycles are manufactured per day.
Lead time: - 1 day and in some cases 1Zhrs.
No. of vendors: - more than 500.
They follow the principle of Kaizen
i.e.

KAI

Improvement

ZEN

Betterment

Plant location: - Labor and electricity Gheap, Easy availability of Raw

materials.
Area: 1E acres
Inventory control: -They follow Just In Time (JIT) and Zero Inventory.
On the basis of previous E-4 years sales forecast production is planned and
Raw materials are procured from suppliers.

Stores
10 stores department: Z Raw material stores, 8 fnished goods stores. BIN
GARD and online system in use.

Godification: - Alphanumerical
i.e. Rack
nos.1,Z,E.
Level A, B, G.

Unloading area or Goods receiving area

Goods received

Gounted according to the purchase requisition made

Inspected/Quality is checked

Passed on

Plant layout
The Plant is divided into zones and there are ZE zones Each Zone has a zonal head
E.g. Production department is 1 zone.

Purchase cycle
Sales is forecasted on the basis of previous E-4 years A tentative plan is made
Requisition is made to purchase department
Order is given to vendors on the basis of four grades A, B, G, D.

BHUSHAW SYEEL CO.

Plant for: - Gold rolling strips & Plain Garbon steel
A.H Sharma (Manager quality
assurance) Raw Materials: - H.R(Hot rolled) coils.
Source: - Bokaro (vertical integration), SAIL.
Godification: - Alphanumeric.
Lead time: - 15 days.
Stores: - Indenting, only 1 stores
department ABG and FSN Analysis (Electronic
cards used). A items - slow moving
B items - non moving (e.g. Hydraulic space, hydraulic
pump) G items - fast moving (e.g. Nuts, bolts, spare
parts).
BIN card, Online system (software: File compiler software), ERP (Effective
resource Planning).
Quality Dept
Use of computerized Hardness tester and
Ultimate Testing Machine (UTM):- Which measures the tensile strength load
at which the material fractures.

STEEL PROGESS
Initially there are Z mills
H.R strip/coil of barrel length-500mm & 55bmm are used.
Analysis of material

Planning
H.R splitting
Steel is passed through HGL
Then through reversible mill (to change the tension)

Annealing process
(i.e. the steel is heated for 8-10hrs at b00-700 Gelsius then soaked for 101Zhrs and then cooled)
There are 18 annealing furnaces having capacity of 40-45 tonnes.

Material is cooled
Grinding Process
(for stress
removal)
Slidding
process Gutters
process
(i.e. the steel is cut according to the customers requirement)

Skin pass/GRS process

(Steel is passed through a Rust preventing oil)

Along with GTL machine i.e. Gut To Length
machine.
Quality department
(Use of Hardness tester and
UTM) Stores Department