ABSTRACT

The study was carried out to analyze the effectiveness of inventory management at LUCAS TVS , Chennai.

The first chapter contains an introduction explaining the inventory management concepts and the industrial and company profile. This chapter also introduces the objectives, need and scope of the study in a sequential manner followed by the literature review, which gives the abstract of previous researchers. The backbone of the study is the research methodology which is explained in detail including the information with regard to the statistical tools used for the study.

The second chapter deals with the data analysis which includes the tabulated forms of the responses with the corresponding percentages with suitable charts. The statistical analysis is done based on the data collected from the respondents of the organization. The statistical tools used in this study are schedule changes in working capital and ratio analysis.

The third and final chapter comprises of the findings arriving from different types of statistical analysis which are elucidated precisely for the readers to understand with ease. This chapter also contains suitable suggestions which are made on the basis of the findings of the study and ends with a proper conclusion of the project.

TABLE OF CONTENTS

CHAPTER NO.
Title Page

DESCRIPTION

PAGE NO.

Bonafide Certificate Organisation Certificate Declaration Acknowledgement Abstract

INTRODUCTION 1.1 Introduction to the study 1.2 Industry profile 1.3 Company profile

II

Need, Objective and Scope of the study 2.1 Need for the study 2.2 Objective of the study 2.3 Scope of the study

III

Literature Review 3.1 Review of literature

IV

Research Methodology 4.1 Research design 4.2 Types of data 4.3 Tools used for analysis

V VI

Data Analysis and Interpretation Summary and Conclusion 6.1 Findings 6.2 Suggestions 6.3 Conclusion Bibliography

CHAPTER 1 - PREFACE

INTRODUCTION
The project entitled A STUDY ON INVENTORY MANAGEMENT in LUCAS-TVS was carried for a period from 4th to 31st of July, 2012. This study enables to understand the various techniques that are used in inventory management. The techniques such as inventory turnover ratio, ABC analysis and EOQ have been applied in this project. Inferences are drawn using the above said techniques. 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 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 and when it is needed. 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. Inventory control is the most important function of inventory management and it forms the nerve center in any inventory management organization. Inventory is one of the main component in current assets which influences the working capital. Hence proper maintenance and control has to be made over inventory which increases the profit of the company.

COMPANY PROFILE: LUCAS-TVS

TVS Group was established in 1911 by T.V.Sundram Iyengar, one of the visionaries of the Indian industries. His ideas were years ahead of their times, three years before World War I. When the automobile was still seen as some kind of intimidating horseless carriage he had the vision to set up South Indias first ever rural bus service and over the years, this transport company became the largest of its kind in the country, legendary for its punctuality and service. In fact, the rules and regulations laid down by him later became the print for the Motor Vehicles Act. The importance given by the founder of the TQM framework even Today, T.V.Sundram Iyengars philosophy of business reflected the kind of man he was simple and stern. It was based rigidly on four concepts Quality, service, reliability and a sense of Ethics. LUCAS TVS was established in the year 1961 as a joint venture between Lucas industries, UK and the TVS group. It is a lending manufacturing of auto electrical products and diesel fuel injection equipment in India. This is QS 9000 & ISO 14001 certified company. It produces all types of Auto electrical for two wheelers. The TVS group is one of Indias largest Conglomerates. T.V.Sundaram Iyengar and Sons Limited established in 1911 are the parent and holding company of TVS groups. The combination of these two well-known groups has resulted in the establishment of a vibrant company, which has had a successful track record of sustained growth over the last four decades. It is one of Indias twenty large industries houses with twenty five manufacturing companies.

MISSION: The mission statement of the company is To be a respected supplier of global auto industry, by developing innovative products and alternative solutions of value to customers using contemporary technologies and creative skills and involvement of employees, suppliers and other partners. Through these activities the company expects to contribute to auto industry and Indian society.

VISION: Dominant supplier of rotating electrical products to Indian industry. Significant supplier of customized motors to specific nonautomotive applications in India. Supplier to global car and commercial vehicle manufacturers. Customer delight and employees pride to build LUCAS-TVS brand. Sales turnover of 4000 Crores ( USD 800 Millions) by 2015 and achieve stakeholders expectations

LUCAS-TVS GROUP:
LUCAS-TVS auto electrical ( L-TVS) DELPHI-TVS Diesel fuel injection equipments ( DTVS) INDIA NIPPON ELECTRICALS LTD (INEL) IJL India Japan lighting (IJL) LUCAS INDIA SERVICE After market operations (LIS) Electronic ignition system

BRANCHES:
The company has branches in five places namely PADI (Chennai), REWARI, PONDICHERRY, CHAKAN and UTTARKHAND.

PRODUCTS:
Starter motor Alternator Wiper motor Blower/ Fan motor Small motor Ignition

PRODUCT RANGE:
Gear reduction Starter motor Direct drive starter motor External fan alternator Internal fan alternator Front wind shield wiper motor Rear wind shield wiper motor Electronic/Mechanical distributor.

CUSTOMERS:
CAR/ UTILITY VEHICLES: General motors Fiat motors Hyundai motors Ford motors Maruti udyog Mahindra Renault Tata motors

LCVS/CV: Swaraj Mazda Ashok Leyland Eicher motors Tata motors

Mahindra & Mahindra

TRACTORS: Escorts TAFE John deere Mahindra Gujarat tractors

ENGINES/EARTH MOVERS: Greaves cotton Cummins India Tata Cummins Simpson & co

TWO / THREE WHEELERS: Yamaha motor Bajaj auto Royal Enfield TVS motor

INDUSTRY PROFILE:
The Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17.5 million vehicles (including 2wheeled and 4 wheeled) and exports about 2.33 million every year. It is the world's second largest manufacturer of motor cycles. India's passenger car and commercial become the sixth largest passenger vehicle manufacturing industry is the seventh largest in the world. According to recent reports, India emerged as Asia's fourth largest exporter of passenger cars behind Japan, South Korea, and Thailand. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nations road. A chunk of India's car manufacturing industry is based in and around Chennai, also known as the " Detroit of India" with the India operations of ford, Hyundai, Renault and Nissan headquartered in the city and BMW having an assembly plant on the outskirts. Chennai accounts for 60 per cent of the country's automotive exports. Gurgaon and Manesar in Haryana are hubs where all of the Maruti Suzuki cars in India are manufactured The Chakan corridor near Pune, Maharashtra is another vehicular production hub with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat and Force Motors having assembly plants in the area. Ahmadabad with the Tata Nano plant, Halol again with General Motors, Aurangabad with Audi, Skoda and Volkswagen, Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country.

The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about 1.5 million every year. The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about16%. Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people.

The supply chain of this industry in India is very similar to the supply chain of the automotive industry in Europe and America. This may present its own set of opportunities and threats. The orders of the industry arise from the bottom of the supply chain i. e., from the consumers and go through the automakers and climbs up until the third tier suppliers. However the products, as channeled in every traditional automotive industry, flow from the top of the supply chain to reach the consumers.

With a high cost of developing production facilities, limited accessibility to new technology and soaring competition, the barriers to enter the Indian Automotive sector are high. On the other hand, India has a well-developed tax structure. The power to levy taxes and duties is distributed among the three tiers of Government. The cost structure of the industry is fairly traditional, but the profitability of motor vehicle manufacturers has been rising over the past five years. Major players, like Tata Motors and Maruti Suzuki have material cost of about 80% but are recording profits after tax of about6% to 11%.

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%. Hyundai Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors is occupying over 41% and sharing 26%. Of the two wheeler market in India with Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler market. The key to success in the industry is to improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilizing manufacturing plants to optimum level and understanding implications from the government policies are the essentials in the Automotive Industry of India.

Both, Industry and Indian Government are obligated to intervene the Indian Automotive industry. The Indian government should facilitate infrastructure creation, create favourable and predictable business environment, attract investment and promote research and development. The role of Industry will primarily be in designing and manufacturing products of world-class quality establishing cost competitiveness and improving productivity in labour and in capital. With a combined effort, the Indian Automotive industry will emerge as the destination of choice in the world for design and manufacturing of automobiles.

OBJECTIVES OF THE STUDY:

Primary objective To study on Inventory Management at LUCAS-TVS.

Secondary objectives To classify the inventory scientifically and to exercise control over important items by way of used items. To identify optimum level of inventory which minimizes the cost. To analyze the efficiency of inventory management of Lucas TVS Ltd. To avoid over stocking and under stocking of inventory.

NEED OF THE STUDY:

To eliminate cumbersome handling of materials in Lucas-TVS. To distinguish the different types of inventory and know how to manage their quantities. To maintain accurate inventory. To introduce the benefit of ABC analysis to Lucas-TVS. To recommend a formation of inventory that helps to reduce unwanted burden.

SCOPE OF THE STUDY:

To give plan to the company regarding what to order, when to order and how to order. It helps to deal with forecasting in inventory. It helps to develop policies by the management regarding inventory.

It helps the company to categorize the goods which facilitates easy control.

RESEARCH METHODOLOGY:

RESEARCH is a systematic and objective process of identifying formulating the problem by setting objective. METHODOLOGY is defined as the study of methods by which we gain knowledge. It deals with cognitive processes imposed on research by the problems arising from the nature of its subject matter.

RESEARCH DESIGN:

ANALYTICAL RESEARCH:

In analytical research the researcher has to use factors or information already available and analyse these to make a critical evaluation of the material. This method used for the project involves an analytical research which has been carried out with respect to the existing system in the company and a critical evaluation of the same is made.

DATA COLLECTION:

SECONDARY DATA: The secondary data for the study has been collected from the sources like, STORES STOCK BOOK SALES AND PURCHASE JOURNALS ANNUAL REPORT

TOOLS AND TECHNIQUES USED IN THIS STUDY:

The tools and techniques used for this analysis are as follows:

a. Ratio Analysis b. ABC Analysis c. Economic Order Quantity d. Trend Analysis

LITERATURE REVIEW:

JANET LEE (2008): Inventories constitute the most significant part of current assets for a large majority of companies in India. On an average, inventories are approximately 60 per cent of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, imperative to manage inventories efficiently, in order to avoid unnecessary investment. JONATHAN L.JOHNSON (1998): It is possible for a company to reduce its level of inventories to be considerable degree, e.g., 10 to 20 per cent, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive favorable impact on a companys profitability. BRIAN K.DOYD (2007): The purpose of inventory management is to keep the stocks in such a way that neither there is over-stocking nor under-stocking. The over-stocking will mean reduction of liquidity and starving of other inventories carries a

production processes; under-stocking, on the other hand, will result in stoppage of work.

 BERN AT DE WILLIAM (2008): He said that the main focus of inventory management is on transportation and warehousing. The decision taken by management depends on the traditional method of inventory control modules. He is also saying that the traditional method is not a cost reducing, it is much expensive. But managing the inventory is the most important work of any manufacturing unit. JOHN CHRISTIAN (2000): He said that inventory is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. Some experts distinguish supply chain management and logistics management while others consider the terms to be interchangeable.

JON SCHREIDFEDER (1992): He said that it is easy to turn cash into inventory, the challenge is to turn inventory back into cash. In early 1990s many distributor recognize that they needed help controlling and managing their largest asset inventory. But after implementing this many distributors do not feel that they have gained control of their inventory.

 WOLFE BAGBY (1996): He explains that by managing the inventory it becomes easier for the organization to meet the profit goals, shorter the cash cycles, avoid inventory shortage and improve profitability by decreasing cash conversion. Boosting financial performance is another benefit that comes from better inventory management. For this company needs to maximize the cash flow and profitability and this include keeping a watchful discerning eye on charge in supply and demand.

ASFAQUE AHMED (2004): He said that most of the manufacturing company vendors have planning and scheduling product which assume either infinite production capacity for calculating quantities of raw material and work in progress (WIP) requirements or infinite quantities of raw material and WIP materials for calculating production capacity. D.HOOPMAN (2003): He said that inventory optimization recognize that different industry have different inventory profiles and requirements. Research has indicated that solutions are priced in a large range from tens of thousands of dollars to millions of dollars. In this niche market sector price is definitely not an indicator of the quality of solutions, ROI and usability are paramount.

 SILVER, EDWARD A (2002): He considers a context of a population of items for which the assumption underlying the EOQ derivation holds reasonably well. However as is frequently the cash in practices there is an aggregate constraint that applies to the population as a whole. The new package include many new features to help distributors effectively managed warehouse stock. The constraint is that the existence of budget to be allocated among the stocks of the items. CHARLES ATKINSON (1998): He has explained the inventory management and assessment of inventory levels. As per this study inventory management need to address two issues, Part I. How to optimize average inventory levels. Part II. How to assess (evaluate) inventory levels.

TREVOR STANLEY (2008): Through each of these organizations are dependent on each other yet traditionally do not closely cooperate with each other. An integrated supply chain management streamlines processes and increase profitability by delivering the right product to the right place at the right time.

 DELAUNAY C, SAHIN E (2007): A lots of work has been done but now if we want to go ahead we must have good visibility upon this field of research. That is why we are focused on framework for an exhaustive review on the problem of supply chain management with inventory inaccuracies. The author said that their aim in this work is also to present the most important criterion that allow a distinction between the different type of managing the inventory. COHEN & LEE (1988): Inventory management The network of organizations that are having linkage both upstream and downstream in different processes and activities that produces and delivers the vale in form of produces and service in the hands of ultimate consumer. Thus a shirt manufactured is a part of supply chain that extends upstream through the waves of fabrics and downstream through distributors and retailers.

GANESHAN & HARRISON (2001): He said that inventory management is a system approach to managing the entire flow of information, materials and services from raw materials supplies through factories and warehouse to the end user.

CHAPTER - 2 DATA ANALYSIS AND INTERPRETATION

1.1 INVENTORY TURNOVER RATIO: Inventory turnover ratio indicates how many times the stock is rotated, on an average during a particular period, say a year. It shows the relationship between the cost of goods sold and the amount of average inventory. It is also called as stock velocity ratio.

Stock turnover ratio = Cost of goods sold Average inventory Table 1.1 showing the inventory turnover ratio for the period: (Rs. In million)

YEAR

SALES

OPENING INVENTORY

CLOSING INVENTORY

AVERAGE INVENTORY

INVENTORY TURNOVER RATIO ( in times) 7.41 6.92 6.08 6.20 6.67

2006-07 2007-08 2008-09 2009-10 2010-11

4645.56 5830.10 6519.00 7310.10 9125.66

514.41 738.68 945.57 1165.47 1191.54

738.68 945.57 1165.47 1191.54 1548.04

626.55 842.13 1055.52 1178.51 1369.79

INTERPRETATION: It is inferred that the inventory turnover ratio gradually decreases and increases every year. It is inferred that there is a high inventory turnover ratio in the 2006-07 and it indicates that the product us being sold well and there efficient management of inventory by the company.

1.2 INVENTORY TURNOVER PERIOD: The inventory turnover ratio can be related to time. The ratio can be expressed in terms of days or weeks or months. It is calculated as follows:

Inventory turnover period = Days/weeks/months in a year

Inventory turnover ratio Table 1.2 showing the Inventory Turnover Period for the period: (Rs. In million)

YEAR

DAYS

INVENTORY TURNOVER RATIO ( in times) 7.41 6.92 6.08 6.20 6.67

INVENTORY TURNOVER PERIOD (DAYS) 49.26 = 49 52.75= 53 60.03= 60 58.87= 59 54.72 = 55

2006-07 2007-08 2008-09 2009-10 2010-11

365 365 365 365 365

INTERPRETATION: It is inferred that there is a gradual increase and decrease in the Inventory Turnover Period and in the year 2008-09 it is increased to 60 days and 2009-10 it decreases to 59 days.

2. ABC ANALYSIS:
ABC analysis is a technique of selective control of inventory by classifying all items of stores into three categories namely: Category A: A few items accounting for substantial usage in term of total monetary value i.e. 10% items covering 75% value. Category B: In between items A and C i.e. 20% of items representing 15% value. Category C: Large number of items of small value i.e. 70% items covering 10% value.

The main object of the analysis is to decide guidelines for selective control over inventory. This technique ensures stricter control over a few materials which represents bulk of the cost, so that the direction of control is more cost effective.

Table 1.3 showing the list of items for ABC analysis

S NO 1 2 3 4 5 6 7 8 9 10 NAME OF THE ITEMS Spindle unit assembly (1) Limits switch Washer Screw Brush, plate, plug, switch, cover assembly Shaft link and pin assembly Pressure pad Felt washer Rubber pad Needle bearing USAGE ( in lakhs) 78.60 19.2 0.49 0.37 42.00 21.00 0.22 0.14 1.72 7.31 % OF VALUE 7.26 1.77 0.09 0.3 3.88 1.94 0.02 0.01 0.16 0.68

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

Gasket Shaft assembly Gear box Bundy tube with nut (1) Protective cover Magnet Wheel box assembly Rear mounting breaker Label Crank pin Rivet Lock nut Wiping system Thermal cut Spring clip Commutator Nozzle holder Circlip Carbon brush Yoke Bundy tube Bolt Final gear assembly Bearing pin Thrust screw Cover assembly Primary tube assembly Ferrule Spindle Bundy tube with nut (2) Brush plate cover Ball bearing Steel ball Con and bush assembly

2.02 17.14 44.48 6.00 0.73 5.41 30.43 19.39 0.78 1.46 0.56 0.58 170.41 17.14 0.19 1.87 1.31 0.76 1.32 42.71 15.00 1.19 4.08 3.14 1.17 113.44 17.87 2.35 7.37 6.00 30.62 16.56 0.76 0.68

0.19 1.58 4.11 0.55 0.07 0.50 2.81 1.79 0.07 0.14 0.05 0.05 15.74 1.58 0.02 0.17 0.12 0.07 0.12 3.95 1.39 0.11 0.38 0.29 0.11 10.48 1.65 0.22 0.68 0.55 2.83 1.53 0.07 0.06

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66

Rotatory link Self tap screw Breather plug Primary link assembly Bearing bush Link end assembly Nut Plug moulding Thrust pad Gear box assembly Switch unit Crank plate Assembly bracket Pole Screw cover plate Brush plate Spindle unit assembly (2) Armature insulator Brush plating assembly Spring washer Seal Mounting bracket assembly TOTAL

5.76 1.20 0.60 3.26 3.73 25.80 0.58 4.79 0.32 28.68 0.77 3.13 38.68 7.08 0.19 21.60 51.00 1.45 29.82 0.64 1.13 96.30 1081.75

0.53 0.11 0.06 0.30 0.34 2.38 0.05 0.44 0.03 2.65 0.07 0.29 3.57 0.65 0.02 2.00 4.71 0.13 2.75 0.06 0.10 8.90 100

A ITEMS: S NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 NAME OF THE ITEMS Spindle unit assembly (1) Brush, plate, plug, switch, cover assembly Cover assembly Spindle unit assembly (2) Gear box Mounting bracket assembly Wiping system Assembly bracket Wheel box assembly Link end assembly Brush plate cover Gear box assembly Brush plating assembly Yoke TOTAL USAGE ( in lakhs) 78.60 42.00 113.44 51.00 44.48 96.30 170.41 38.68 30.43 25.80 30.62 28.68 29.82 42.71 822.97 % OF VALUE 7.26 3.88 10.48 4.71 4.11 8.90 15.74 3.57 2.81 2.38 2.83 2.65 2.75 3.95 76.05

B ITEMS: S NO NAME OF THE ITEMS USAGE ( in lakhs) 19.2 21.00 15.00 21.60 17.87 16.56 17.14 17.14 19.39 164.9 % OF VALUE

1 2 3 4 5 6 7 8 9

Limits switch Shaft link and pin assembly Bundy tube Brush plate Primary tube assembly Ball bearing Thermal cut Shaft assembly Rear mounting breaker TOTAL

1.77 1.94 1.39 2.00 1.65 1.53 1.58 1.58 1.79 15.23

C ITEMS: S NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NAME OF THE ITEMS Washer Steel ball Screw Bolt Nut Pressure pad Spring clip Con and bush assembly Felt washer Ferrule Label Switch unit Final gear assembly Bearing bush Magnet Pole Commutator Primary link assembly Carbon brush Rotatory link Bearing pin Rubber pad Armature insulator Bundy tube with nut (1) Crank pin Crank plate Spindle Needle bearing Plug moulding Nozzle holder Self tap screw Screw cover plate Lock nut Spring washer Circlip Rivet Seal Protective cover Breather plug USAGE ( in lakhs) 0.49 0.76 0.37 1.19 0.58 0.22 0.19 0.68 0.14 2.35 0.78 0.77 4.08 3.73 5.41 7.08 1.87 3.26 1.32 5.76 3.14 1.72 1.45 6.00 1.46 3.13 7.37 7.31 4.79 1.31 1.20 0.19 0.58 0.64 0.76 0.56 1.13 0.73 0.60 % OF VALUE 0.09 0.07 0.3 0.11 0.05 0.02 0.02 0.06 0.01 0.22 0.07 0.07 0.38 0.34 0.50 0.65 0.17 0.30 0.12 0.53 0.29 0.16 0.13 0.55 0.14 0.29 0.68 0.68 0.44 0.12 0.11 0.02 0.05 0.06 0.07 0.05 0.10 0.07 0.06

40 41 42 43

Thrust screw Gasket Thrust pad Bundy tube with nut (2) TOTAL

1.17 2.02 0.32 6.00 93.88

0.11 0.19 0.03 0.55 8.72

INTERPRETATION: There are totally 14 items under A category. The A items deserve very strict control with weekly control reports, maximum follow up, efforts to reduce lead time, frequent ordering, accurate forecasts etc.

There are 9 items constituting B category. The B items require moderate control, monthly control reports, less frequent ordering and less accurate forecasts etc.

Finally there are 43 items under C category. Item C requires less expensive control, minimum effort, bulk ordering and approximate forecasts etc.

3. ECONOMIC ORDER QUANTITY:

EOQ refers to the quantity to be covered in a single purchase order. It is also known as reorder quantity or standard order quantity. It is determined by using the following formulae: EOQ = 2 AB CS

A = Annual consumption B = Ordering cost per order C = Cost per unit S = Carrying cost STEEL BALL: Annual consumption = 240000 units Cost of material = Rs. 11.40 Ordering cost = Rs. 50 Annual carrying cost is 10% of inventory value

2 * 240000* 50 (11.40 * 10%)

EOQ = 4588.31 units BEARING BUSH: Annual consumption = 84000 units Cost of material = Rs. 10.80 Ordering cost = Rs. 50 Annual carrying cost is 8% of inventory value

2 * 84000* 50 (10.80 * 8%) EOQ = 3118.05 units

CARBON BUSH: Annual consumption = 4800 units Cost of material = Rs. 16.81 Ordering cost = Rs. 12 Annual carrying cost is 20% of inventory value

2 * 4800* 12 (16.81 * 20%)

EOQ = 185.16 units

COVER ASSEMBLY: Annual consumption = 3000 units Cost of material = Rs. 14.52 Ordering cost = Rs. 10 Annual carrying cost is 10% of inventory value

2 * 3000* 10 (14.52 * 10%)

EOQ = 203.278 units

LIMIT SWITCH: Annual consumption = 9000 units Cost of material = Rs. 14.51 Ordering cost = Rs. 10 Annual carrying cost is 10% of inventory value

2 * 9000* 10 (14.51 * 10%) EOQ = 352.21 units

LINK END ASSEMBLY: Annual consumption =24000 units Cost of material = Rs. 9.80 Ordering cost = Rs. 150 Annual carrying cost is 30% of inventory value

2 * 24000* 150 (9.80 * 30%)

EOQ = 1564.92 units

WIPING SYSTEM: Annual consumption =12000 units Cost of material = Rs. 10.93 Ordering cost = Rs. 50 Annual carrying cost is 8% of inventory value

2 * 12000* 50 (10.93 * 8%)

EOQ = 1171.75 units

GEAR BOX: Annual consumption =9600 units Cost of material = Rs. 13.08 Ordering cost = Rs. 50 Annual carrying cost is 10% of inventory value

2 * 9600* 50 (13.08 * 10%)

EOQ = 856.70 units

BALL BEARING: Annual consumption =9600 units Cost of material = Rs. 17.02 Ordering cost = Rs. 50 Annual carrying cost is 8% of inventory value

2 * 9600* 50 (17.02 * 8%)

EOQ = 840.168 units

MAGNET: Annual consumption =9000 units Cost of material = Rs. 11.04 Ordering cost = Rs. 12 Annual carrying cost is 20% of inventory value

2 * 9000* 12 (11.04 * 20%)

EOQ = 312.77 units

INTERPRETATION:

The optimum quantity that has to be ordered are found using EOQ for the above 10 items. If the items are ordered at this level the carrying cost and ordering cost can be reduced.

4. TREND ANALYSIS

Table showing Trend analysis:

YEAR X
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 TOTAL

INVENTORY Y
738.68 945.57 1165.47 1191.54 1548.04 5589.3

x=X-2009 -2
-1 0 1 2

x 4
1 0 1 4 10

xY
-1477.36 -945.57 0 1191.54 3096.08 1864.69

Sources: Collected and compiled from Annual Report Y= a + bx

Where,

b= a=

xy / x = 1864.69 / 10 = 186.469 y / n = 5589.3 / 5

= 1117.86

Projected inventory for the year:

Y (2011-2012) = 1117.86 + 186.469 * (2012-2009) = 1677.27 Y (2012-2013) = 1117.86 + 186.469 * (2013-2009) = 1863.74 Y (2013-2014) = 1117.86 + 186.469 * (2012-2009) = 2050.21

TREND ANALYSIS:

YEARS 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

INVENTORY ( in millions) 738.68 945.57 1165.47 1191.54 1548.04 1677.27 1863.74 2050.21

INTERPRETATION:

It is inferred that the inventory has been increased gradually in the subsequent years. This can be achieved by increasing the sales and by efficient management of the company.

CHAPTER - 3 FINDINGS:
It ABC analysis A category items forms a proportion i.e. 21% of total units of inventory representing highest ratio of 76% of total value. On the other hand B category items occupies 47% of total units representing 18% of total value and C items occupies 32% of total units representing only 6% of total value. In the calculation of EOQ there is a variation in materials purchased and placing an order. So in the year 2010 the EOQ value was decreased. The inventory turnover ratio for the year 2006-2007 is 8949.94 and increased in the year 2007-2008 is 10177.58 and decreased in the year 2008-2009 is 9914.32. Again it is increased in the year 2010-2011 is 18504.82. In Trend analysis it is seen that the inventory rate increases gradually every year. The company has to concentrate on increasing the sales.

SUGGESTIONS:

It has been recommended that the company needs to maintain the inventory turnover ratio at optimum level. The total inventory of the company is high. So, the company should take the initiative for the proper utilization of the inventory It is suggested that TVS pvt. Ltd. needs to have a strict inventory control and better inventory management in relation to category A and to give nominal importance and moderate control in relation to category B and least importance in relation to category C items.

If they follow EOQ, it will reduce the cost and enhance the profit.

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. The study suggests LUCAS TVS LTD make relatively high use of inventory techniques similar to the concept of inventory management. However this study provides little insight into the actual organizational processes and action that proceed are initiated by these inventory management. If they could properly implement and follow the norms and techniques of inventory management, they can enhance the profit with minimum cost.

ANNEXURE BALANCE SHEET AS AT 31st MARCH 2007

PARTICULARS SOURCES OF FUNDS 1.Shareholders Fund a) Capital b) Reserves and Surplus 2.Loan Funds a) Secured loans b) Reserves and Surplus 3.Deferred Tax Liabilities (Net) APPLICATION OF FUNDS 1.Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Add: Capital Work-in-Progress 2.Investments 3.Current Assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances 4.Less:Current Liabilities and Provision a) Liabilities b) Provisions Net Current Assets

RS (IN LAKHS)

RS(IN LAKHS)

986.64 13131.57 14118.51 12638.88 8332.09 20970.97 2300 37389.48

36113.48 16617.58 19495.9 2764.47 22260.37 342.36 9598.93 11867.71 132.64 0.11 4678.17 26277.56 11096.93 393.88 11490.81 14786.75 37389.48

BALANCE SHEET AS AT 31st MARCH 2008

PARTICULARS SOURCES OF FUNDS 1.Shareholders Fund a) Capital b) Reserves and Surplus 2.Loan Funds a) Secured loans b) Reserves and Surplus 3.Deferred Tax Liabilities (Net) APPLICATION OF FUNDS 1.Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Add: Capital Work-in-Progress 2.Investments 3.Current Assets,Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances 4.Less:Current Liabilities and Provision a) Liabilities b) Provisions Net Current Assets

RS (IN LAKHS)

RS(IN LAKHS)

986.64 15003.12 15990.06 17970.57 6022.22 23992.79 2586.00 42568.85

41460.46 19199.14 22261.32 3183.17 25444.49 742.36 11544.02 14353.11 83.23 0.14 5159.02 31139.52 14659.84 97.68 14757.52 16382.00 42568.85

BALANCE SHEET AS AT 31st MARCH 2009

PARTICULARS SOURCES OF FUNDS 1.Shareholders Fund a) Capital b) Reserves and Surplus 2.Loan Funds a) Secured loans b) Reserves and Surplus 3.Deferred Tax Liabilities (Net) APPLICATION OF FUNDS 1.Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Add: Capital Work-in-Progress 2.Investments 3.Current Assets,Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances 4.Less:Current Liabilities and Provision a) Liabilities b) Provisions Net Current Assets RS (IN LAKHS) RS(IN LAKHS)

986.64 16781.12 17768.06 20816.17 7919.55 28735.72 2883.00 49386.78

50149.30 22072.26 28077.04 5035.93 33112.97 742.36 16153.77 14361.10 80.51 22.60 8428.92 39046.90 23053.58 461.87 23515.45 15531.45 49386.78

BALANCE SHEET AS AT 31st MARCH 2010

PARTICULARS SOURCES OF FUNDS 1.Shareholders Fund a) Capital b) Reserves and Surplus 2.Loan Funds a) Secured loans b) Reserves and Surplus 3.Deferred Tax Liabilities (Net) APPLICATION OF FUNDS 1.Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Add: Capital Work-in-Progress 2.Investments 3.Current Assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances 4.Less:Current Liabilities and Provision a) Liabilities b) Provisions Net Current Assets

RS (IN LAKHS)

RS(IN LAKHS)

986.64 18272.18 19259.12 28376.92 9818.19 38195.11 3144.47 60598.7

57772.82 25302.66 32470.16 7767.02 40237.18 1527.36 13981.01 16283.72 94.11 0.47 7242.26 37601.57 18593.56 635.07 19228.63 18372.94 60598.70

BALANCE SHEET AS AT 31st MARCH 2011

PARTICULARS SOURCES OF FUNDS 1.Shareholders Fund a) Capital b) Reserves and Surplus 2.Loan Funds a) Secured loans b) Reserves and Surplus 3.Foreign currency monetary items Translation Difference 4.Deferred Tax Liabilities (Net) APPLICATION OF FUNDS 1.Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Add: Capital Work-in-Progress 2.Investments 3.Current Assets,Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances 4.Less:Current Liabilities and Provision a) Liabilities b) Provisions Net Current Assets RS (IN LAKHS) RS(IN LAKHS)

986.64 19049.6 20036.54 26584.08 10817.49 37401.57 36.19 3872.47

68873.57 28440.53 40443.04 2190.25 42623.29 1107.36 17141.73 19645.78 264.19 4.61 5483.08 42539.39 24405.39 517.88 24923.27 17616.12 61346.77

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