PROJECT REPORT

INVENTORY MANAGEMENT
AT
HERO MOTOCORP LTD- , HYDERABAD
MASTER OF BUSINESS ADMINISTRATION

Submitted by

(Student Name)

HT NO: 21WJ1E****

Under the Guidance of

Mr. K. SANDEEP REDDY

ASSISTANT PROFESSOR

School of Management studies

GURUNANAK INSTITUTIONS TECHNICAL CAMPUS

(Autonomous)
 PAGE
CHAPTER CONTENTS
NO.
INTRODUCTION
 Objectives of the study

CHAPTER - I  Need for the study

 Scope of the study

 Research Methodology

CHAPTER - II REVIEW OF LITERATURE

CHAPTER -
COMPANY PROFILE
III
CHAPTER -
THEORETICAL FRAMEWORK
IV
DATA ANALYSIS &
CHAPTER - V
INTERPRETATION
 Findings
CHAPTER -
 Suggestion
VI
 Conclusion
Annexure / Questionnaire
INDEX
 CHAPTER – I
INTRODUCTION
INTRODUCTION
Financial managers actively manage the financial affairs of any type of business. They perform
such varied task, as budgeting, financial forecasting, cash management, investment analysis and
inventory management. The term inventory refers to the stock file of the products a firm is
offering for sale and the components that make up the product.
Inventory is composed of assets that will be showed in future in the normal course of the
business operations.
Three forms of inventory are:

1. Raw materials
2. Work in Progress (Semi finished goods)
3. Finished goods

Inventory management is a very important function that determines the health of the supply
chain as well as impacts the financial health of the balance sheet.
Every organisation constantly strives to maintain optimum inventory to be able to meet its
requirements and avoid over or under inventory that can impact the financial figures.
Inventory management requires constant and careful evaluation of external and internal factors
and control through planning and review.
Most of the organisations have a seperate department or job function called inventory planners
who continuously monitor, control andreview inventory and interface with production,
procurement and financial departments.
Inventory Management Techniques
Managing inventory,if it isn’t done properly it could cost company to a great extent. Inventory
management grows more and more complicated with increase in sales volume and diversification
of product.
 1.STOCK REVIEW

Stock review is a regular analysis of stock versus projected future needs. This can be
done through a manual review of stock or by using inventory software.
2. ABC ANALYSIS

This is a popular way to analyse the inventory. Under this method, inventory is
classified into 3 categories, such as A, B, C.

3.VED ANALYSIS
VED Analysis represents classification of items based on criticality , such as Vital,
Essential and Desirable
4. SDE ANALYSIS
SDE Analysis is based on problems of procurement namely:
Non Availability, Scarcity, longer lead time.
5.JUST IN TIME
The objective of just in time method is to increase the inventory turnover and at the
same time reduce the inventory holding cost.

Inventory control is vitally important to almost every type of business, whether product or
service oriented. Inventory control touches almost every facets if operations. A proper balance
must be struck to maintain proper inventory with the minimum financial impact on the customer.
Inventory control is the activities that maintain stock keeping items at desired levels. In
manufacturing since the focus is on physical product, inventory control focus on material
control.
“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 reason 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.
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. An
Inventory Management System is an essential element in an organization. It is comprised of a
series of processes, which provide an assessment of the organization’s inventory.
Inventory generally refers to the materials in stock. It is also called the idle resource of a
company. 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.
It also refers to the stockpile of the products a firm would sell in future in the normal course of
business operations and the components that make up the product.
Inventory is a detailed list of those movable items which are necessary to manufacture a product
and to maintain the equipment and machinery in good working order.
Inventory can be termed the sum of the value of raw materials, fuels and lubricants, spare parts,
maintenance consumables, semi-finished and finished goods, bearings at any one time. In large
companies inventory much of the current assets. The business has about 15 to 30% of inventories
in total assets. Inventories consist of assets that are sold as part of normal business operations.
The assets that companies store as inventories are raw materials, work in progress, and finished
goods.
Inventory management is a systematic approach to sourcing, storing, and selling inventory—
both raw materials (components) and finished goods (products).
In business terms, inventory management means the right stock, at the right levels, in the right
place, at the right time, and at the right cost as well as price.
As a part of your supply chain, inventory management includes aspects such as controlling and
overseeing purchases — from suppliers as well as customers — maintaining the storage of stock,
controlling the amount of product for sale, and order fulfillment.
Naturally, your company’s precise inventory management meaning will vary based on the types
of products you sell and the channels you sell them through. But as long as those basic
ingredients are present, you’ll have a solid foundation to build upon.
Small-to-medium businesses (SMBs) often use Excel, Google Sheets, or other manual tools to
keep track of inventory databases and make decisions about ordering.
WHAT IS INVENTORY MANAGEMENT?
Inventory management refers to the process of ordering, storing and using a company's
inventory. This includes the management of raw materials, components and finished products, as
well as warehousing and processing such items.
For companies with complex supply chains and manufacturing processes, balancing the risks of
inventory gluts and shortages is especially difficult. To achieve these balances, firms have
developed two major methods for inventory management: just-in-time (JIT) and materials
requirement planning (MRP).

HOW INVENTORY MANAGEMENT WORKS

A company's inventory is one of its most valuable assets. In retail, manufacturing, food service
and other inventory-intensive sectors, a company's inputs and finished products are the core of its
business. A shortage of inventory when and where it's needed can be extremely detrimental.
At the same time, inventory can be thought of as a liability (if not in an accounting sense). A
large inventory carries the risk of spoilage, theft, damage or shifts in demand. Inventory must be
insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply
destroyed.
For these reasons, inventory management is important for businesses of any size. Knowing when
to restock inventory, what amounts to purchase or produce, what price to pay—as well as when
to sell and at what price—can easily become complex decisions. Small businesses will often
keep track of stock manually and determine the reorder points and quantities using Excel
formulas. Larger businesses will use specialized enterprise resource planning (ERP) software.
The largest corporations use highly customized software as a service (SaaS) applications.
Appropriate inventory management strategies vary depending on the industry. An oil depot is
able to store large amounts of inventory for extended periods of time, allowing it to wait for
demand to pick up. While storing oil is expensive and risky—a fire in the UK in 2023 led to
millions of pounds in damage and fines—there is no risk that the inventory will spoil or go out of
style.
IMPORTANCE OF INVENTORY MANAGEMENT:
Inventory management is to maintain a reasonable amount of something for a given financial
investment to meet demand. Inventory takes into account on the one hand the cost control of the
inventory and on the other hand the size of the inventory. The management of investments in
inventories is an essential component of current assets. An efficient inventory controlling system
will decide What to buy When to buy How do I buy? Size of the purchase And where to buy
(suppliers) The main purpose of inventory management is to ensure it Required amount of
availability of raw materials Minimize investment in stocks Maintain adequate stock levels that
are not excessive or under-stocked. INVENTORY CONTORL Inventory Control is the system
designed to control inventory investment. These include inventory planning and decision making
in terms of quantity and time of purchase, stock fixing, inventory maintenance, and continuous
inventory.
NEED FOR THE STUDY

 Every organization needs inventory for smooth running of its activities. Effective
inventory management helps organization to reduce the cost of operations.
 Helps in identifying the stock to order at right time. Thus, it is very essential to have
proper control and management of inventories.
 The purpose of inventory management is to ensure availability of materials in
sufficient quantity as and when required and also to minimise investment in inventor
So, in order to understand the nature of inventory management of the organization, I
took this Inventory Management as a topic for my project, to give findings and
suggestions by adopting and analyzing different inventory control techniques.
SCOPE FOR THE STUDY

 To give plan to the company what to order, when to order and how much to order.
 It is useful for deciding operating policy & volume of inventory.
 It helps to develop the policies for the executives in inventory.
 It helps the company what items goods are categorized.
 Project helps to deal with forecasting in inventory.
OBJECTIVES OF THE STUDY

1. To understand various concepts of inventory management.

2. To know the inventory control techniques followed by Hero Moto Corp.
3. To evaluate the performance of inventory management in Hero Moto Corp.
4. To study the trends of inventory in Hero Moto Corp.
RESEARCH METHODOLOGY

Research is a process in which the researcher wish to find out the end result for a given problem
and thus the solution helps in future course of action. The research has been defined as “A
careful investigation or enquiry especially through search for new facts in branch of knowledge”

RESEARCH DESIGN
The research design used in this project is Analytical in nature the procedure using, which
researcher has to use facts or information already available, and analyze these to make a critical
evaluation of the performance.

DATA COLLECTION
Primary Sources
 Data are collected through personal interviews and discussion with Finance-
Executive.
 Data are collected through personal interviews and discussion with Material
Planning- Deputy Manager.

Secondary Sources
 The data are collected from the annual reports maintained by the company for the past six
years viz., 2019-2023.
 Data are collected from the company’s website.
 Books and journals pertaining to the topic.
TOOLS USED IN THE ANALYSIS

 Economic Order Quantity.

 Stock Review
 ABC Analysis.
 FSN Analysis.
 Inventory turnover ratios
LIMITATIONS OF THE STUDY
 The entire analysis applies only to Hero Motocorp Ltd, Hyderabad
 The study takes into account only the quantitative data and the qualitative aspects were not
taken into account.
 The assumption made in the EOQ and Safety stock formulas restrict the use of the formula.
In practice, unit cost, lead time, requirements of inventory items are not accurately
predictable. Rate of consumption varies in many cases. As such application of the formula
often becomes a difficult and complicated matter.
 ABC analysis is not one time exercise and items are to be reviewed and re-categorized
periodically.
 CHAPTER – II
REVIEW OF LITERATURE
REVIEW OF LITERATURE

According to Marvin B. Lieberman and Lieven Demeester (2010) in his article titled
“Inventory reduction and productivity growth: Linkages in the Japanese automotive industry”
published in Management Science has said that JIT production suggests a causal link between
work-in-progress inventory and manufacturing productivity. In numerous case studies, such a
connection has been described but never tested statistically. Historical data for 52 Japanese
automotive companies are used to evaluate the inventory-productivity relationship. It is found
that firms increased their productivity rank during periods of substantial inventory reduction.
More detailed tests suggest that inventory reductions stimulated gains in productivity.

The authors Moon & Ilkyeong(2021) published their paper in Interfaces titled “Inventory
Management and Production Planning and Scheduling” which is the third version of Decision
Techniques for Stock Control and Manufacturing Preparing released in 1979 and 1985. Bob
Pyke became a coauthor for this version and performed a key part in composing significant up-
dates of several sections, such as those on supply-chain management, multi-echelon stocks, just
in time, and ERP (enterprise source planning). In addition, the writers have included worksheet
applications for each section as additional components to improve the audience and usefulness
for learners in business applications, and for experts.

As per the authors Jackson, Duncan (2021), “TradeBeam and Global eXchange Services
Partner to Provide Collaborative Inventory Management and Interoperability for Automotive
Industry”, in Business Wire says that TradeBeam is a Global Trade Management software and
services company providing solutions that streamline global trading processes for enterprises and
their partners. TradeBeam's solutions provide import and export compliance, inventory
management, shipment tracking, supply chain event management and global trade finance
solutions such as open account and letter of credit management. TradeBeam has over 3000
customers with users in over 100 countries worldwide.
Krishna, L Sivarama, Janardhan, G RangaRao, C S P (2021) in their article “Web Integrated
Decision Support System for Machine Scheduling and Inventory Management”, was published
in IUP Journal of Operations Management tells about stock management symbolizes the process
of managing stocks of completed products, semi-finished products and raw elements by a
company so as to reduce the total stock cost. The first level contains the development of a
organizing program with make span minimization as the primary objective. The second level
contains the development of the stock management program and creating it with the organizing
program. The third level contains creating the program web permitted, so that it provides the
flexibility of assigned creating choices to your selection makers.

According to Snehalgavi (2010) in her article titled “It Outsourcing in Indian Automobile
Industry” in Business & Economy says Outsourcing is the act of delegating an organization’s
internal activities and to some extent the right to decisions to the third party (service vendors) as
per specified in the contract. Outsourcing is a tool, in which the vendor is responsible for certain
jobs outsourced by a company, in return of a price for the goods or service provided by it. This
option is exercised majorly because to cut operation costs of a company and focus on its core
competencies. It is basically a contract between two companies or concern in which one is
getting its business process outsourced from another company offering such services.

According to Martin, Benjamin Robert (2022) in his article titled “Findlay Automotive group
selects first look for pre- owned inventory management needs”, in PR Newswire With 15 brands
including Toyota, Honda, Chevrolet, Cadillac, Saturn, Land Rover, Saab and Volkswagen,
Findlay will utilize the First Look product suite to guarantee the right balance between pre-
owned inventory and demand, and ensure that trades are given the best appraisals. In addition to
the inventory management tool, and trade analyzer, Findlay will use the First Look Search
Engine to allow its dealers to instantly search more than 30 online marketplaces to identify the
best vehicles that meet that dealerships pre-owned inventory needs.
As per Koumanakos, Dimitrios P. (2020) in Business Wire titled “Hitachi Automotive
Improves Efficiency and Inventory Control with Geac's System 21” says that Hitachi America,
Ltd. has streamlined production, reduced accounting costs and improved supply chain
management using Geac's System21 software solution. Hitachi Automotive implemented three
System21 modules in 1998 - financials, manufacturing, and customer service and logistics -
across its three locations in Kentucky, Detroit and Los Angeles. In September 2002, the
company will renew its maintenance contract with Geac(R) for three years.

According to Cachon, Gérard P Olivares, Marcelo (2020), “Drivers of Finished-Goods

Inventory in the U.S. Automobile Industry”, in Management Science says Automobile
manufacturers in the U.S. supply chain exhibit significant differences in their days of supply of
finished vehicles. The objective in this research is to measure for this industry the effect of
several factors on inventory holdings. We find that two factors, the number of dealerships in a
manufacturer's distribution network and a manufacturer's production flexibility, explain
essentially all of the difference in finished-goods inventory between Toyota and three other
manufacturers: Chrysler, Ford, and General Motors.

As per Moozakis, Chuck (2021), “Honda Automates Web Financing -- Network will let dealers
apply for funds online and will eventually support inventory management” in Internet Week says
that financing unit of American Honda Motor Co. next month will begin rolling out its Dealer
Financial Information Network (DFIN), a Web system that will help its 3,000 dealers obtain
financing for inventory in real time. Currently, dealers purchasing inventory from Honda need to
apply for financing through American Honda Finance Corp. or another bank. Typically,
approvals take several days.

According to the aticle “Study of vendor-managed inventory practices in Indian industries” by

Borade, Atul B; Bansod, Satish V. (2022) in Journal of Manufacturing Technology Management
says that in the global economy, vendor-managed inventory (VMI) is gradually becoming an
important element of supply chain management strategy of organizations. Recently, Indian
industries, both large and small, have started adopting VMI for their supply chains. The purpose
of this paper is to investigate apparent differences among large and small industries in terms of
objectives, drivers, obstacles and impacts of VMI in Indian context. A survey was conducted to
examine organizational objectives, strategic drivers, obstacles and affected operations pursuant
to VMI adoption.

According to Matson, Jack E; Matson, Jessica O (2020), in “Just-in-time implementation

issues among automotive suppliers in the southern USA” published in Supply Chain
Management speaks that Purpose - The purpose of this paper is to provide insight into the major
supply chain issues of the automotive manufacturing industry in the southern USA.
Design/methodology/approach - This paper is based on the results of a survey of automotive
suppliers in Tennessee and Alabama. The survey focused on supply chain issues and
demographics, specifically on 20 JIT-related problems and 100 company characteristics.
Findings - Identifies the extent of JIT implementation in Tennessee's and Alabama's growing
automotive industry and the general characteristics of the companies that use JIT.

Abhijeet Singh and Brijesh Kumar (2022) Hero Honda Motors Ltd, is running a program
called Good life Passport to Relationship Reward, with an objective to create an innovative
environment for interaction between Hero Honda and its customers. Members of this program
are given a magnetic card in which all information is stored and this card is swiped when using
any service at a showroom or workshop and it works like a loyalty benefit card.

Abhijeet Singh (2022) Tata Motors uses a customer relationship management and dealer
management system (CRM-DMS) which integrates one of the largest applications in the
automobile industry, linking more than 1200 dealers across India.CRM DOS has helped Tata
Motors to improve its inventory management, tax calculation and pricing. This system has also
proved to be beneficial to dealers because it has reduced their working capital cost.

Arvind Saxena (2022) Director and Board member (marketing and sales), Hyundai Motor India
(HMIL) “No company in automobile sector can fight competition on price. Companies need to
have the right product, distribution, CRM and after sales service network to grow.
Biswajit Mahanty and Virupaxi Bagodi (2018) The success of two wheeler manufacturers in
India depends on the competitive advantage gained by them through after sales service and
providing and maintaining customer satisfaction in the face of rapid changes in technology is a
difficult task, which can be overcome by timely addition of capacity and upgrading of technical
manpower and focusing on the CRM programs.

Biswajit Mahanty and Virupaxi Bagodi (2019) More than 55 million two-wheelers are moving
on Indian roads. Accordingly, two-wheeler service sector should have generated revenue
amounting to INR 100,000 million per year, but in reality, this has not been realised in the
organised service sector, the Indian two-wheeler service industry has not considered servicing as
a line of business and providing conveniently reliable services is most important in two-wheeler
services in India to capture the market.

Biswajit Mahanty and Virupaxi Bagodi (2020) It is an era of customer delight for the two
wheeler industry and the conventional measures implemented by the service organizations tend
to be inadequate to attract customers persistently.

Kevin Keller(2022) Caterpillar has become a leading firm by maximizing the total customer
value with the help of effective CRM , best after sales service in the industry and better trained
dealer. This allows the firm to command a premium price of 10% to 20% higher than
competitors such as Volvo, Komatsu etc.

Michael Cusumano, Steve Kahl and Fernaando Suarez (2021) in their research paper “A theory
of services in product industries”, has concluded that in many product oriented industries,
services have become increasingly important. In case of automobiles, many automakers generate
the vast majority of their profits from a service activity closely tied to their product activity. The
automobile industry overall generates a large portion of its profits from other product-related
service activities such as insurance and repairs. The authors argued that despite the seeming
importance of services, there is not much theory to help researchers or practitioners explain the
conditions under which services matter in product industries. The general view that emerges
from the services literature is that services tend to become important for manufacturing firms
once their industries reach a mature stage.

Bike-Sharing Systems (BSSs) allow individuals to rent abicycle at automatic rental stations
scattered around a city,use them for a short journey, and return them to any otherstation in that
city. As of December 2022, some 238 citiesaround the world have deployed such systems and
currently53 are in planning (MetroBike LLC, 2022). For a review ofthe history of BSSs and
current trends, see DeMaio (2021).Bike-sharing programs encourage residents to use bicycles as
an environmentally sustainable and socially equi-table mode of transportation. Such programs
also serve tocomplement other modes of mass transit systems by modesharing. In addition to
these transportation functions, amunicipal BSS may yield revenue for a city in the frame-work of
a compliance carbon offset market (Capoor andAmbrosi, 2021).

Milind Bade (2021) GM-Marketing, Bajaj Auto, has mentioned that Bajaj Auto Limited is
currently trying to move the industry from a commuter to a biker mindset and at present the
focus of the company is on keeping the sub brands and the mother brand different and the main
motive behind establishing individual brand is to create differentiation which would help Bajaj
auto, as an organization to develop relationship easily with its customers.

Oyama (2012) Honda Motor wants to be number one in the Indian market and the company
wanted 30% of Honda’s global sales to come from Indian operations by 2022. HMSI have had
issues related to production in the past with most of its models having the longest waiting period
in the country, this reduced in Honda’s penetration in the rural market, which is less than a third
of Hero Moto Corp.

Pawan Chabra (2011) Nowadays every second bike sold in the premium segment is a pulsar and
this shows the dominance of Bajaj in the Indian market place, this was possible because the
company has been regularly making the alterations to make the motorbike look fresh at all times
and Bajaj today holds over 50% market in the premium segment (for FY 2010-2011) followed
by a distant second largest player Honda Motorcycle & scooter India with a 19% market share.
Pawan Chabra (2011) has mentioned that the death knell off Bajaj’s scooters business was
sounded when the company officially stopped the production of its flagship Chetak in December
2002, to get cracking on its ambition of becoming a credible motorcycle brand manufacturer, the
company invested big in R&D and product development, but the company faced challenges in
the sales and distribution because their dealers had little idea how to sell motorcycles, so the
entire dealership network was trained to sell motorcycles.
 CHAPTER III
INDUSTRY PROFILE
 INDUSTRY PROFILE

The second highest populated country in the world, India, comprises of a lot of middle and lower
class segment. With transportation still being a challenge in India, a lot of people in these
segments look forwards to the 2-Wheeler Industry in India. This industry includes various
vehicles like Motorbikes, scooters, and mopeds, which come in a varied range from affordable to
classy bikes.

In today’s article of Market Forensics by Trade Brains, we’ll be discussing the 2-Wheeler
Industry in India and will also look into the different investment options in this industry for
people planning to become a stock investor along with the consumer. Let’s get started.

History of 2-Wheeler Industry in India

The 2-Wheeler Industry in India entered the manufacturing course in the early 1950s when
Automobile Products of India (API) started manufacturing scooters in India. In 1948, Bajaj Auto
began importing Vespa scooters in India. In 1960, Bajaj started a shop to manufacture scooters in
India in collaboration with Piaggio of Italy. The collaboration ended in 1971.

Even the motorcycles segment also started with three manufacturers viz Enfield, Ideal Jawa, and
Escorts. In the ’80s the market for two-wheeler motorbikes opened up and it buzzed the market
by storm. It resulted in the expansion in the market where TVS Suzuki and Hero Honda occupied
the top two spots in the Indian motorcycles segment. Since then throughout the last four decades,
we have seen splendid growth in the Indian two-wheeler segment year on year basis. Moving
forward from starting in the 1950s to the current time, India is the largest market for the two-
wheeler segment right now.

(a) Few Factsheet on the Global and Indian 2-Wheeler Industry

Before we move forward, here are a few interesting facts on the Global and 2-Wheeler Industry
in India:
 The total sales volume of two-wheelers in India in 2025 was 21.2 million units and it is expected
to grow to about 25 million units by 2025.
 The total number of Motorcycles, scooters, and mopeds are expected to increase to 63 million
units by 2025 and at a CAGR growth of 3.7%.
 China is the second-largest two-wheeler market and it is expected to grow at a CAGR of 5.8%.
Currently, the annual consumption (16.3 million units) in China and is second only to India (19
million units)
 The US two-wheeler market is expected to maintain a growth rate of 2.9 percent by 2025.
 By 2025, Japan is likely to experience decent growth in the two-wheeler segment and, its market
is expected to have a volume of 3.9 million units by 2025.
 During the times of Pandemic (COVID-19), the global market has seen a decline in the overall
production and sales, and the ripple effect of the same in the coming few quarters cannot be
discounted.

(b) Current Scenario of 2-Wheeler Industry in India

The rise of the two-wheeler segment in India has been a growth story in itself. The increase in
the purchasing power of both the urban and semi-urban markets and to add to that, the low cost
of ownership of two-wheelers have been the major growth drivers for this segment.
 The sales of the Indian two-wheeler industry experienced a decline of 18% over the previous
year in FY 2022. The overall sales volume was 17.5 million units. However, with the easing in
the wrath of the Pandemic (COVID-19) and also with an increase in the manufacturing PMI, to
an all-time high level in the past decade, the worst seems to be behind us. And this can also be
judged from the fact that the overall increase in the volume of sales of two and three-wheeler
vehicles has been on a rise. Here are a few other facts:

 The top Motorcycle sellers for the year so far have been Hero MotoCorp (sold 4.4 million units),
Honda (2.79 million units), TVS (1.63 million units), and Bajaj (1.47 million units).
 The first two quarters of this year saw a massive contraction in overall sales.Q1 reported a
decrease in sales by over 24% and Q2 reported a decline in sales by more than 72%.

(c) Government Initiatives to boost 2-Wheeler Industry in India

Amma Bikes Scheme, the government initiative to entail working women in Tamil Nadu, a
subsidy of 50% (up to Rs. 25,000) on the purchase of a two-wheeler. And owing to this the two-
wheeler sale in the state has gone up considerably.
However, the initiative to convert all the bikes under 150cc (approx. 88% market share of overall
two-wheeler production) into electric bikes has faced a lot of dissent and criticism. The aim is to
convert all the bikes to electric by 2025. This transition is expected to have bearing on the
business of the companies manufacturing two-wheelers.
 Impact of BS-VI on 2-wheeler industry
Before ending this article, let us also look at the impact of the BS-VI introduction on the 2-
wheeler industry in India.
Significant changes have been made in BS-VI norms effective from April 1, 2022. Owing to this
and the COVID-19, the overall production has declined to nearly half. The following points
highlight the impact:
 The cost of insurance has gone up owing to an increase in the price of owing two-wheeler
 The increased cost of manufacturing the vehicles has been passed on to the consumers and which
has led to an increase in the price of two-wheelers. The prices have gone up nearly 20%.
 The production has also taken a hit because of the transition in the norm from BS-IV to BS-VI.
COMPANY PROFILE
Hero MotoCorp Limited is the world's largest manufacturer of two-wheelers. The company has
four manufacturing facilities namely Dharuhera and Gurgaon in Haryana, Haridwar in
Uttarakhand and Neemrana in Rajasthan. The company is based in New Delhi, India. The
company offers a range of bikes starting from CD Dawn, CD Deluxe, Splendor Plus, Splendor
NXG, Passion and Passion Pro. The 125 cubic centimeter segment offers Glamour, Super
Splendor and Glamour F1.

It also has an offering called Achiever in 135 cubic centimeter segment. In the 150 cubic
centimeter and above the company offers brands like Hunk, CBZ X-treme, Karizma and the
Karizma ZMR. It also offers a 100 cubic centimeter scooter, Pleasure. Hero MotoCorp Limited
was incorporated in the year 1984 with the name Hero Honda Motors Ltd. The company was
established as a joint venture company between Honda Motor Company of Japan and Hero
Group. In the year 1983, they signed a joint collaboration agreement and formed the company.

The joint venture between India's Hero Group and Honda Motor Company, Japan has not only
created the world's single largest two wheeler company but also one of the most successful joint
ventures worldwide. In the year 1985, the company commenced their commercial production at
Dharuhera plant in Haryana and introduced their first motorcycle, CD 100 in the market. In the
year 1989, they launched the new motorcycle model, Sleek in the market and in the year 1991,
they introduced new motorcycle model, CD 100 SS in the market. In the year 1995, the company
introduced their extraordinary product, Splendor in the market. In the year 1997, the company
inaugurated their second manufacturing facility at Gurgaon in Haryana.

Also, they introduced new motorcycle model, Street in the market. In the year 1999, they
launched Hero Honda CBZ, the first 150cc motorcycle in the Indian two wheeler industry. In the
year 2001, the company introduced new models, Passion and Joy in the market. In the next year,
they introduced new models, Dawn and Ambition in the market. In the year 2003, the company
launched new motorcycle models namely, CD Dawn, Splendor+ and Passion Plus in the market.
Also, they launched Hero Honda Karizma, the industry's first 223cc motorcycle. In the year
2004, they introduced new models, Ambition 135 and CBZ* in the market. During the year, they
renewed the joint technical agreement with the Honda Motors Company, Japan. In the year 2005,
the company launched Super Splendor, CD Deluxe, Glamour and Achiever in the market. In the
year 2006, the company forayed into scotter segment and launched 100cc gearless scotter,
Pleasure in the market. In the year 2007, the company launched Splendor NXG, CD Deluxe,
Passion Plus and Hunk in the market.

During the year 2007-08, the company commissioned their third plant at Haridwar in
Uttarakhand with an initial installed capacity of 500,000 units. This plant had lean manufacturing
and practices that ensure efficiency. During the year, the company launched new models
(including variants) including Splendor NXG, Hunk, New Super Splendor, New Passion Plus,
Commemorative Splendor+ and a refreshed version of Pleasure. During the year 2008-09, the
company increased the installed capacity of Motorised 2 wheelers upto 350CC engine by
1800000 Nos to 5200000 Nos. Also, they launched eight models: Passion Pro (100 cubic
capacity-4 Stroke), CBZ-Extreme (150 cubic capacity - 4 Stroke), Pleasure New Aesthetics,
Splendor NXG (Self Start), CD Deluxe (Self Start), Glamour FI, Glamour (Carb) and HUNK
Special Edition. Also, they launched new motorcycle model, Karizma - ZMR in the market.
During the year 2009-10, the company increased the installed capacity of Motorised 2 wheelers
upto 350CC engine by 200000 Nos to 5400000 Nos. The company launched nine new models
during the year.

During the year 2010-11, the company launched six new models including variants of existing
models successfully. They refreshed Glamour and Glamour FI. They introduced the New Hunk,
Super Splendor and Splendor Pro. The company launched the new upgraded versions of CBZ
Xtreme and Karizma. Also, they breached the landmark 5 million figure cumulative sales in a
single year. During the year, the Indian Promoter Group of the company, which comprised of
Hero Investments Pvt Ltd (HIPL), Bahadur Chand Investment Pvt Ltd (BCIPL) and Hero Cycles
Limited (Hero Cycles) re-aligned the shareholding in the company, following a family
agreement. As a result, Hero Cycles transferred its shareholding in the company to HIPL on May
28, 2010. As a result of these transactions, the Indian Promoter Group of the company now
comprises of HIPL and BCIPL owned and controlled entirely by the Munjal Family headed by
Brijmohan Lall Munjal.

Also, during the year, the Indian Promoter Group and Honda Motor Co Ltd, Japan (Honda)
entered into a Share Transfer Agreement (the Agreement) on January 22, 2011. As per the terms
of the Agreement, Honda had agreed to transfer its entire shareholding of 26% in the Company
to the Indian Promoter Group, bringing an end to the joint venture between the two promoter
groups of the company. The acquisition was completed on March 22, 2011 and the shares held
by Honda were transferred to the Indian joint venture partner.

In addition to the Agreement, the Indian Promoter Group and Honda also entered into a License
Agreement on January 1, 2011. As per this agreement, Honda has given to the company, the
right and license to manufacture, assemble, sell and distribute certain products and their service
parts under their Intellectual Property Rights.
Formation of the new company
The name of the company was changed from Hero Honda Motors Limited to Hero MotoCorp
Limited on 29 July 2011. The new brand identity and logo of Hero MotoCorp were developed by
the British firm Wolff Olins. The logo was revealed on 9 August 2011 in London, to coincide
with the third test match between England and India.

Hero MotoCorp can now export to Latin America, Africa and West Asia. Hero is free to use any
vendor for its components instead of just Honda-approved vendors.

On 21 April 2014, Hero MotoCorp announced its plan on a 254 crore (equivalent to 327 crore or
US$46 million in 2021) joint venture with Bangladesh's Nitol-Niloy Group in the next five years
to set up a manufacturing plant in Bangladesh. The plant started production in 2019 under the
name "HMCL Niloy Bangladesh Limited". Hero MotoCorp owns the 55% of the manufacturing
company and rest 45% is owned by Niloy Motors (A subsidiary of Nitol-NiloyGroup Hero also
updated its 100cc engine range in 2014 for 110cc bikes except Hero Dawn.
Vision
The story began with a simple vision – the vision of a mobile and an empowered India, powered
by its bikes. Hero MotoCorp Ltd., company’s new identity, reflects its commitment towards
providing world class mobility solutions with renewed focus on expanding company’s footprint
in the global arena.

Mission
Hero MotoCorp’s mission is to become a global enterprise fulfilling its customers’ needs and
aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts
its customers into its brand advocates. The Company will provide an engaging environment for
its people to perform to their true potential. It will continue its focus on value creation and
enduring relationships with its partners.

Strategy
Hero MotoCorp’s key strategies are to build a robust product portfolio across categories, explore
growth opportunities globally, continuously improve its operational efficiency, aggressively
expand its reach to customers, continue to invest in brand building activities and ensure customer
and shareholder delight.
Manufacturing
Hero Honda bikes are manufactured across three globally benchmarked manufacturing facilities.
Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in
northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state
of Uttarakhand.

Technology
In the 1980’s the Company pioneered the introduction of fuel-efficient, environment friendly
four-stroke motorcycles in the country. It became the first Company to launch the Fuel Injection
(FI) technology in Indian motorcycles, with the launch of the Glamour FI in June 2006. Its plants
use world class equipment and processes and have become a benchmark in leanness and
productivity.
 Hero MotoCorp, in its endeavor to remain technology pioneer, will continue to innovate and
develop cutting edge products and processes.

DISTRIBUTION
The Company's growth in the two wheeler market in India is the result of an intrinsic ability to
increase reach in new geographies and growth markets. Hero MotoCorp's extensive sales and
service network now spans over to 5000 customer touch points. These comprise a mix of
authorized dealerships, service & spare parts outlets and dealer-appointed outlets across the
country.

SUPPLY CHAIN MANAGEMENT

As the Company prepares to produce a wider range of products, efforts are being taken to align
the supply chain and prime up its supplier base. During the year, the Company kick-started the
process of migrating its existing brands to the new brand. The exercise is expected to be
completed during 2019-20.
During the year, the Company also commenced the process of working with its vendors to
develop new parts. The Company’s Supply Chain Management function is built on three planks:
 Cost
 Quality
 Sustainability
Tracking inventory cost effectively and efficiently is known to be a key source of competitive
advantage in the automobile industry. Hence, it comes as no surprise that cost leadership is the
Company’s prime focus area. Continual pressure on margins forced the Company and its supply
chain partners to find innovative and alternate ways to combat inflation. Considerable attention
was given to managing component inventory in the system, with double-digit growth in
inventory turnover. To align HR processes with the supply chain, top two HR consulting firms in
India are working with supply chain partners. The exercise is aimed at improving robustness of
people processes and resulting in a direct impact on quality, cost, productivity, delivery and
reliability. The move will enable supply chain partners move to the next orbit of operational
excellence. The Company initiated more than 30 quality improvement projects with supply chain
partners to provide better quality products to customers.

BRAND
The new Hero is rising and is poised to shine on the global arena. Company's new identity "Hero
MotoCorp Ltd." is truly reflective of its vision to strengthen focus on mobility and technology
and creating global footprint. Building and promoting new brand identity will be central to all its
initiatives, utilizing every opportunity and leveraging its strong presence across sports,
entertainment and ground- level activation.

EXPANSION
Yet, there is no denying the fact that Honda is already proving to be a serious adversary. At the
time of its split with Hero, it only had one plant in Haryana which was churning out 1.6 million
bikes/scooters annually. Since then, the company has added Rajasthan, Karnataka and Gujarat to
its expansion plans. In the following weeks, its capacity will reach 4.6 million units and,
following the commissioning of the Gujarat facility, this will be close to six million units.

This remarkable buildup will happen in the next 18 months which means Honda will quickly
bridge the gap with Hero unless the latter manages to replicate this kind of a feverish pace. By
the end of 2019-20, Honda is targeting 40 per cent of the market and is likely to take the top slot
very soon thereafter.
ORGANISATIONAL CHART OF HERO MOTO CORP.

Board of Directors
Name of the person Nature of the Office

Mr. Sunil Kant Munjal Non-Executive Director

Mr. Suman Kant Munjal Director

Mr. Paul Edgerley Non-Executive Director

Mr. Pradeep Dinodia Director

Gen. (Retd.) V. P. Malik Director

Mr. Analjit Singh Director

Dr. Pritam Singh Director

Mr. M. Damodaran Director

Mr. Ravinath Director

Dr. Anand C.Burman Director

DIRECTORS
Founder Director and Chairman : Dr. BrijmohanLall Munjal
Managing Director and CEO : Mr. Pawan Munjal .
Dr. BrijmohanLall Munjal
Mr. Munjal is the founder Director and Chairman of the Company and the $3.2
billion Hero Group. He is the Past President of Confederation of Indian Industry (CII), Society of
Indian Automobile Manufacturers (SIAM) and was a Member of the Board of the Country's
Central Bank (Reserve Bank of India). In recognition of his contribution to industry, Mr. Munjal
was conferred the Padma Bhushan Award by the Union Government.

The Board of Directors of Hero MotoCorp at its meeting held on 26 October 2018 approved an
investment of up to Rs 205 crore, in one or more tranches, for approximately 26-30%
shareholding in Ather Energy Private Limited. Ather is a Bangalore-based technology start-up
engaged in the business of designing and manufacturing smart Electric Vehicles (EV) and
associated charging infrastructure. On 10 November 2018, Hero MotoCorp unveiled its new
Dawn 125 motorcycle at the EICMA Motorcycle show in Milan, Italy.

As part of Hero MotoCorp's market-specific product strategy, the Dawn 125 motorcycle has
been developed specifically for the Africa region. On 12 January 2019, Hero MotoCorp launched
new Glamour motorcycle in Argentina, its first-ever global launch of a new product outside
India. On 3 April 2019, Hero MotoCorp announced that the company clocked its highest-ever
sales in a financial year at 66,63,903 units in FY 2019 compared to 66,32,322 units it had sold in
the previous fiscal (FY 2018).

In May 2019, Hero MotoCorp commenced commercial production at the second global
manufacturing facility in Bangladesh. On 3 October 2019, Hero MotoCorp announced that it has
set a new global benchmark in the two-wheeler industry, surpassing the seven lakh sales mark in
any month. Riding on robust demand for its range of two-wheelers, the company registered its
highest-ever sales for any month, despatching 720,739 units in September 2019. On 11 October
2019, Hero MotoCorp announced that it has set a new global record, clocking 2 million unit sales
in Q2 September 2019.

Hero MotoCorp sold 20,22,805 units of two-wheelers in Q2 September 2019, recording 11%
growth over the corresponding quarter in the previous fiscal. On 7 November 2019, Hero
MotoCorp unveiled the Xpulse Concept motorcycle as a world premier at the EICMA annual
trade show in Milan, Italy. On 21 December 2019, Hero MotoCorp unveiled three new
motorcycles - the 125cc Super Splendor, the 110cc Passion PRO and the 110cc Passion XPRO -
to further augment its dominant leadership in the domestic market. On 22 December 2019, Hero
MotoCorp announced that it will be increasing the ex-showroom prices of its motorcycles by
about Rs 400 per model with effect from 1 January 2020 to partially off-set rising input costs.
Hero MotoCorp surpassed the landmark seven million units in cumulative sales in a calendar
year in 2019. The company sold a record 7,207,363 units of two-wheelers in the calendar year in
2019.

The Company sold over 78.21 lakh vehicles during the financial year 2020-21, the highest by
any two-wheeler company in the world. During FY 2021-22, the Company's sixth manufacturing
facility in Chittoor District in the state of Andhra Pradesh was commissioned with Phase I
installed capacity of 0.4 million units. The total Phase I investment is approximately Rs 700
crore out of total projected investment of Rs 1,600 crore in setting up the manufacturing facility.
Transition from BSIV to BSVI emission norms has been successfully accomplished well in time
across all platforms in FY 2021-22.

As on 31 March 2022,the Company has 6 subsidiaries including step down subsidiaries and 2
associate companies and regularly monitors the performance of these companies. During the
year, the Company's wholly-owned subsidiary, HMCL (NA) Inc. which had invested in Erik
Buell Racing, Inc. was dissolved and thus, Erik Buell Racing, Inc. also ceased to be the associate
of the company. The XPulse 200 awarded Indian Motorcycle of the Year 2022 by media houses
and also awarded Tourer Bike (upto 250cc) of the Year 2022 by Flywheel Auto Awards.
Investment in Ather Energy - Electric is widely recognized as one of the most exciting areas in
emerging mobility space. In 2018, Hero MotoCorp invested in Ather Energy, a two-wheeler
electric vehicle company which went on to launch multiple products.

As a follow up, Hero MotoCorp participated in other investment rounds. In July 2022, the
Company invested Rs 84 crore in Ather Energy, taking up its shareholding in the company to
34.58%. Subsequently, in November 2022, Hero MotoCorp again invested in Series D round in
the Electric Vehicle startup. In October 2022, the Company signed a distribution agreement with
HarleyDavidson (H-D), under which the Company will sell and service H-D motorcycles, and
sell parts and accessories and general merchandise riding gear and apparel in India.

The Company has inducted 11 dealers of Harley-Davidson into its own distribution network.
Starting 01 January 2023, Hero MotoCorp Ltd. has become the distributor for Harley-Davidson
in India. Hero MotoCorp Ltd. and Harley-Davidson also signed a Licensing agreement under
which the Company will develop and sell a range of premium motorcycles under the H-D brand
name. During the FY2023, the company also entered into a strategic partnership with Gogoror
Inc. to accelerate the shift from fuel based mobility to sustainable electric mobility in India.

During FY 2020-21, the company entered into Mexico market and the footprint of the company
reached 41 markets outside India. On 04 February 2023,the company declared a special
dividendof Rs 10 per share to mark the achievement of historic milestone of achieving 100
Million cumulative production of two wheelers.

The company proactively paused its operations temporarily during the second wave at all of its
manufacturing facilities across the country, including its Global Parts Center (GPC) in Neemrana
and its R&D facility - the Centre of Innovation and Technology (CIT), Jaipur due to the
Operations escalation of Covid-19 cases across the country. The company gradually resumed its
operations from 17 May 2023 by starting single shift production at three of its plants - Gurugram
and Dharuhera in Haryana and at Haridwar in the northern hill state of Uttarakhand.

The company resumed production at all its manufacturing plants in India from 24 May 2023.
During the second quarter of FY2022, Hero MotoCorp achieved two consecutive recognitions
from the Guinness World Record for creating the Largest Motorcycle Logo' in August 2023 and
for creating the Largest Online Photo Album of People Planting Plants' in September 2023.

During the third quarter of FY2022,the company inaugurated a flagship dealership in Dubai to
expand presence in the Gulf market to 10 customer touchpoints in 5 countries.Also Partnered
 with Gilera Motors in Argentina to expand Hero's presence in the country - inaugurated a
flagship dealership in Buenos Aires under the partnership.

AWARDS & RECOGNITIONS

 Two-wheeler Manufacturer of the Year award by Bike India magazine. Adjudged the "Bike
Manufacturer of the Year" at the Economic Times ZigWheels Car and Bike Awards.
 CNBC Awaaz - Storyboard special commendation for "Effective rebranding of a new corporate
entity" by CNBC Awaaz Consumer Awards
 "Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz Consumer
Awards
 Colloquy Loyalty Awards "Innovation in Loyalty Marketing International" for Hero Good Life
 "Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion Marketing
Award of Asia Order of Merit for Hero Good Life
 Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most Trusted
Brand"
 CHAPTER-IV
THEROTICAL FRAME WORK
THEORETICAL FRAMEWORK OF INVENTORY MANAGEMENT

Every enterprise needs inventory for smooth running of activities. It serves, as a link between
production and distribution. For every process there is, generally, a time lag between the
recognition of a 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. It provides a cushion for future price fluctuations.

The investment in inventories constitutes the most significant part of current assets/working
capital in most of the undertakings. Thus, it is very essential to have proper control and
management of inventories. 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.

The investment in inventory is very high in most of the undertakings engaged in

manufacturing, wholesale and retail trade. In India, a study of 29 major industries has
revealed that the average cost of materials is 65paise and the cost of labour is 10 paise and
overheads is 15paise of a rupee, 10%is profit. It is necessary for every management to give
proper attention to inventory management. A proper planning of purchasing, handling,
storing and accounting should form a part of inventory management.

An efficient system of inventory will determine,

What to buy
How to buy
Where to buy
Where to store
There are conflicting interests of different departmental heads over the issue of inventory.
The finance manager will try to invest less in inventory because to him it is an idle
investment, where as production manager will emphasis to acquire more inventory as he does
not want any interruption in production due to shortage of inventory. The purpose of
inventory management is to keep the stocks in such a neither way that there is over-stocking
nor under-stocking. The over-stocking will mean a reduction of liquidity and starving of
other production processes whereas under-stocking, on other hand, will result in stoppage of
work. The investments in inventory should be kept in reasonable limits.

MEANING AND NATURE OF INVENTORY

There are different meanings of inventory in different languages. In accounting language it

may mean stocks of finished goods only. In a manufacturing concern, it may include raw
materials; work in process and stores, etc., to understand the exact meaning of the work
“inventory”

Inventory may include the following things:

1. RAW MATERIALS:
Raw materials form a major input into the organization. They are required to carry out
production activities uninterruptedly. The quantity of raw materials required will be
determined by the rate of consumption and the time required for replacing the supplies. The
factors like the availability of raw materials and government regulations, etc., too affect the
stock of raw materials.

2. WORK-IN-PROGRESS:
The work-in-progress is that stage of stocks, which are in between raw materials and finished
goods. The raw materials enter the process of manufacturing but they are yet to attain a final
shape of finished goods. The quantum of work-in-progress depends upon the time taken in
the manufacturing process. The greater the time taken in manufacturing, the more will be the
amount of work-in-progress.
3. CONSUMABLES:
These are the materials, which are needed to smoothen the process of production. These
materials do not enter directly into production but they act as catalysts. Consumables may be
classified according to their consumption and criticality. Generally, consumables stores do
not create any supply problem and form a small part of production cost. There can be
instances where these materials may account for much value than the raw materials. The fuel
oil may form a substantial part of the cost.

4. FINISHED GOODS:
These are goods, which are ready for the consumers. The stock of finished goods provides a
buffer between production and market. The purpose of maintaining inventory is to ensure
proper supply of goods to the customers. In some concerns the production is under taken on
order basis. In these concerns there will not be a need for finished goods inventory. The need
for finished goods inventory will be more when production is undertaken in general without
waiting for specific orders.

5. SPARES:
Spares also form a part of inventory. The consumption pattern of raw materials,
consumables, finished goods are different from that of spares. The stocking policies of spares
are different from industry to industry. Some industries like transport will require more
spares than the other concerns. The costly spare parts like engines, maintenance spares etc.,
are not discarded after use. Rather they are kept in ready positions for further use. All
decisions about spares are based on the financial cost of inventory on such spares and the
cost that may arise due to their non-availabilityefficiency, aggressively expand its reach to
customers, continue to invest in brand building activities and ensure customer and
shareholder delight.
 CHAPTER-V

DATA ANALYSIS
AND INTERPRETATION
 DATA ANALYSES AND INTERPRETATION
The investment on raw materials over a period of 5 years from 2018 to 2023 is presented in the
following table.
1. Investment on Raw Materials:
Year Investment on Raw Material (in
crores)
2018 – 2019 3925.71
2019 – 2020 5128.75
2020– 2021 3964.26
2021 - 2022 3623.83
2022 – 2023 4088.77

Investment on Raw Material

(in crores)
2022 – 2023 4088.77

2021 - 2022 3623.83 Investment on Raw Ma-

terial (in crores)
2020– 2021 3964.26

2019 – 2020 5128.75

2018 – 2019 3925.71

0 1000 2000 3000 4000 5000 6000

Interpretation:
1) From the above table it can be understood that the inventory was recorded at 3623.83
during the year 2021-22 and it has been increased to 4088.77 in 2022-23
2) It shows that there is decrease in the inventory to the more extent of 4088.77.
3) The average inventory of HERO Moto Corp was recorded at Rs.4088.77.
4) The highest investment in inventory was recorded in the years 2019-20.
2.Trend Analysis
Trend analysis technique is applied to know the growth rate and the movement of stock
of Hero Moto Corp Ltd over the review period which is shown in the following table.
Trend Analysis Of Inventory:

Average
Year Inventory(in Trend (%)
lakhs)

2018 – 2019 436.4 100

2019 – 2020 524.93 120.28

2020– 2021 675.57 128.69

2021 - 2022 636.76 94.25

2022 – 2023 669.55 105.15

105.15
2022 – 2023
669.55

94.25
2021 - 2022
636.76

128.69 Trend (%)

2020– 2021
675.57
Average Inventory(in
lakhs)
120.28
2019 – 2020
524.93

100
2018 – 2019
436.4

0 100 200 300 400 500 600 700 800

Interpretation:
1) The investment on inventory has increased in the year 2022–23. And the last years
investment has declined continuously.
2) The trends in inventories show that inventory have been more in the year 2019-20 and
then it has shown a downward trend and again it increased to some extent.
3) The investment in inventories has been in fluctuating trend in initial years and then it rose
to 105.15% in the year 2022-23

3. Inventory Turnover Ratio:

Inventory turnover is the rate that inventory stock is sold, or used. This ratio indicates the
number of times the stock has been turned over during the period & evaluates the efficiency with
which a firm is able to manage its inventory.
A higher ratio tends to strong sales and a lower one to weak sales. This ratio is calculated by
applying the following formula.

Cost of goods sold

Inventory turnover ratio = _________________
Average inventory
Inventory turn over ration:
Cost of goods Avg.
Year Ratio
sold Inventory
2018 – 2019 13084.39 436.40 29.98
2019 – 2020 16796.90 524.93 31.99
2020– 2021 20032.81 675.57 29.65
2021 - 2022 20446.16 636.76 32.10
2022 – 2023 21727.05 669.55 32.45
 32.45
2022 – 2023 669.55
21727.05

32.1
2021 - 2022 636.76
20446.16

29.65 3 Ratio
2020– 2021 675.57
20032.81 3 Avg. Inventory
3 Cost of goods sold
31.99
2019 – 2020 524.93
16796.9

29.98
2018 – 2019 436.4
13084.39

0 5000 10000 15000 20000 25000

Interpretation:
1. From the above table it can be observed that inventory turnover ratio is 29.98 in the
year2018-19and it gradually increased to 32.45 during 2022– 2023.
2. In the year 2020-21 it is clear that the ratio is very less i.e., his stock
Is not turned into sales quickly.
3. As compared to all the years the ratio is very less in 2020 – 21.
4. The average inventory turn over ratio was recorded at 31.23 times during the
review period.
4. Inventory conversion period:
It may also be used to know theinterest to see average time taken for clearing the stocks.
It is the time required to obtain materials for a product, manufacture it, and sell it. This can be
possible by calculating inventory conversion period. This period is calculated by dividing the
number of the days by inventory turns over.
This formula may be as:
Days in a year (365 days)
Inventory conversion period = _____________________

or Inventory turnover ratio

Average inventory
Inventory conversion period = __________________ X 365
COGS

Inventory conversion period:

Year Cost of goods sold Avg. inventory Ratio ICP (Days)
2018 – 2019 13084.39 436.40 29.98 12.17
2019 – 2020 16796.90 524.93 31.99 11.40
2020– 2021 20032.81 675.57 29.65 12.31
2021 - 2022 20446.16 636.76 32.10 11.37
2022 – 2023 21727.1 669.55 32.45 11.24
 11.24
2022 – 2023 32.45
669.55
21727.1
11.37
2021 - 2022 32.1
636.76
20446.16
12.31 ICP (Days)
2020– 2021 29.65
675.57 Ratio
20032.81
Avg. inventory
11.4 Cost of goods sold
2019 – 2020 31.99
524.93
16796.9
12.17
2018 – 2019 29.98
436.4
13084.39

0 5000 10000 15000 20000 25000

Interpretation:
From the above table it can be identified the following observations:
1) The inventory conversion period was 11.09 days during the year, which indicates that the
stock has been very quickly converted into sales which mean the company is managing
the inventory efficiently.
2) The lowest inventory conversion period was recorded at 11.9 days in the year 2020-
21and the highest inventory conversion was recorded at 12.14 days in the year 2020 – 21.
3) The average inventory conversion period was recorded at 10.2 days during the review
period.
5. Percentage of Inventory over current assets:
In order to know the percentage of inventory over current assets the
Ratio of inventory to current assets is calculated and which is presented in the
Following table.
Inventory
Inventory over current assets ratio = __________ X 100
Current assets

Percentage of Inventory Over current assets:

Year Inventory Current Assets Ratio (%)

2018 – 2019 436.40 2890.46 15.09

2019 – 2020 524.93 1510.52 34.75
2020– 2021 675.57 1951.69 34.61
2021 - 2022 636.76 2884.75 22.07
2022 – 2023 669.55 2911.17 22.99

22.99
2022 – 2023 2911.17
669.55

22.07
2021 - 2022 2884.75
636.76

34.61 Ratio (%)

2020– 2021 1951.69
675.57 Current Assets
Inventory
34.75
2019 – 2020 1510.52
524.93

15.09
2018 – 2019 2890.46
436.4

0 500 1000 1500 2000 2500 3000 3500

Interpretation:
1) From the above table it can be understand that the 22.99% of inventory over current
assets ratio was showing a inclining trend for two years 2022– 2023.
2) However from the year2020 –19it is showing an increasing trend.
3) The lowest inventory over current assets ratio was recorded at 15% during the year 2018-
19and the highest inventory over current assets ratio we recorded at 34.75 % during
2010-2020.
4) The average inventory over current assets ratio was recorded at 22.99%.

6. Percent of Inventory Over total current assets & fixed assets:

Inventory / Current asstes + Fixed assets

Year Inventory Current Assets+Fixed assets Ratio (%)

2018 – 2019 436.40 3531.05 12.3589301

2019 – 2020 524.93 4447.22 11.8035537
2020– 2021 675.57 5284.68 12.7835555
2021 - 2022 636.76 5308.40 11.9975882
2022 – 2023 669.55 5599.87 11.9565275
 11.9565275
2022 – 2023 5599.87
669.55

11.9975882
2021 - 2022 5308.4
636.76

12.7835555 Ratio (%)

2020– 2021 5284.68 Current Assets+Fixed
675.57
assets
11.8035537 Inventory
2019 – 2020 4447.22
524.93

12.3589301
2018 – 2019 3531.05
436.4

0 1000 2000 3000 4000 5000 6000

Interpretation:

1) From the year 2009-10 it is showing fluctuating trend but as compared to above 2
years it is increasing.
2) The lowest inventory over total assets ratio was recorded at 11.59% during the
year 2020-21and the highest inventory ratio was recorded at 12.18% during the
year average.
3) The average inventory to total assets ration was recorded at 11.59% during the
review period

7. Percentage of Inventory over current liabilities:

In order to know the percentage of inventory over current liabilities the
Ration of inventory to current liabilities is calculated and which is presented in
The following table.
Inventory
Inventory over current liabilities ratio = __________________ X 100
Current liabilities
Percentage of Inventory Over current liabilities:

Current
Year Inventory Ratio (%)
liabilities
2018 – 2019 436.40 4992.04 8.74191713
2019 – 2020 524.93 6397.47 8.2052749
2020– 2021 675.57 4610.73 14.6521267
2021 - 2022 636.76 4333.25 14.6947441
2022 – 2023 669.55 4497.43 14.8873912

14.8873912
2022 – 2023 4497.43
669.55

14.6947441
2021 - 2022 4333.25
636.76

14.6521267 Ratio (%)

2020– 2021 4610.73
675.57 Current liabilities
Inventory
8.2052749
2019 – 2020 6397.47
524.93

8.74191713
2018 – 2019 4992.04
436.4

0 1000 2000 3000 4000 5000 6000 7000

Interpretation:

1) From the above table it can be understand that the % inventory over current liabilities
ratio was showing a declining trend for two years 2019-21
2) During the year 2019-20 the ratio was it gradually decreased to 8.20 and there is a net
increase to the extent of 12.45.
3) The lowest inventory over total amounts ratio was recorded at 8.20 during the year 2019-
20.
4) The highest inventory to current liabilities ratio was recorded at 14.88 during the year
2020-21
5) The average inventory to current liabilities ratio was recorded at 14.88 during the review
period.
8. Current Ratio:
In order to know the current ratio the percentage of current assets to current liabilities is
calculated and which is presented in the following table.

Current assets
Current Ratio = _____________________
Current liabilities
Calculation of Current Ratio’s:

Current
Year Current assets Ratio (%)
liabilities
2018 – 2019 2890.46 4992.04 0.57901379
2019 – 2020 1510.52 6397.47 0.23611209
2020– 2021 1951.69 4610.73 0.42329306
2021 - 2022 2884.75 4333.25 0.66572434
2022 – 2023 2911.17 4497.43 0.64729634
 2022 – 2023 2911.17 0.64729634
4497.43

2021 - 2022 2884.75 0.66572434

4333.25

2020– 2021 1951.69 0.42329306

4610.73 Current assets
Current liabilities
Ratio (%)
2019 – 20201510.52 0.23611209
6397.47

2018 – 2019 2890.46 0.57901379

4992.04

0 2000 4000 6000 8000 10000

Interpretation:

1) From the above table it can be interpreted that the % of current assets over current
liabilities ratio i.e., current ratio was showing a fluxuation trend from year 2022-2023.
2) In the year 2009-2010 the ratio was 0.57% and has increased to 0.64% in the year
2022-2023.
3) The lowest current ratio was recorded at 2019-20 which is 0.23 % and the highest
current ratio was recorded at 0.57 % during the year 2009-10.
4) The average current ratio was recorded at 0.54% during the review period.

9. Quick Ratio:
The quick ratio is the relationship between quick to current liabilities quick assets is more
rigorous test of liability position of a firm it is computed by applying the following formula.
Quick ratio = Quick assets / Current Liabilities
Where Quick assets = Current Assets – Inventory

Current
Year Quick assets Ratio (%)
liabilities
2018 – 2019
4992.04
2454.06 0.49159462
2019 – 2020
6397.47
985.59 0.15405934
2020– 2021
4610.73
1276.12 0.27677179
 2021 - 2022
4333.25
2247.99 0.51877689
2022 – 2023
4497.43
2241.62 0.49842243

0.49842243
2022 – 2023 4497.43
2241.62

0.51877689
2021 - 2022 4333.25
2247.99

0.27677179 Ratio (%)

2020– 2021 4610.73
1276.12 Current liabilities
Quick assets
0.15405934
2019 – 2020 6397.47
985.59

0.49159462
2018 – 2019 4992.04
2454.06

0 1000 2000 3000 4000 5000 6000 7000

Interpretation:

1) From the above table it can be understand as that the % of quick assets to current
liabilities i.e., the quick ratio was 0.49% in 2009-10 and from that year it is showing
increasing trend.
2) The highest quick ratio was recorded at 0.51% during the year 2021-22 and the
lowest quick ratio was recorded at 0.15 % during the year 2019-20.
3) The average quick ratio was recorded at 0.49% during the review period.

ABC ANALYSIS

* It is based on proposition that

* Managerial items and efforts are scare and limited.
* Some items of inventory are some important than others
ABC analysis classifies various inventory into three sets or groups of priority.
The priority the most important item are classified into class - A,
Those of intermediate importance are classified as “class - B’’ and remaining items are classified
into class - C’.

ABC ANALYSIS FOR THE YEAR 2018-19:

ITEM RANK ANNUAL CUMULATIVE

CUMULATIVE
CATEGORY
CONSUMPTION
USAGE PERCENTAGE
(RS/Cr…) (Cr…) OF USAGE
WORK IN 1 25983 25983 40.43 A
PROGRESS
RAW 2 16727 42710 66.47 A
MATERIALS
FINISHED GOODS
3 10679 53389 83.09 B
MATERIAL IN 4 4719 58108 90.43 B
TRANSIT
INDIRECT 5 1187 59295 92.30 C
MATERIAL
MATERIAL WITH
6 3045 62340 97.02 C
FABRICATION
TRANSFER IN 7 1806 64146 99.83 C
TRANSIT
SCRAP ARISE &8 108 64254 100.00 C
OTHERS

A – Occupies 70% of annual consumption value i.e., 70% of 64254 is 44977.80

A + B – Occupies 90% of annual consumption value i.e., 90% of 64254 is 57828.60

Actual Value of A = 42710/64254*100 = 66.47%

B = 23.96% & C = 9.57%

 OTHERS
C

B
B
C
C
C
A
A
ANNUAL CUMULATIVE

OF USAGE

10679 53389 83.09

3045 62340 97.02

25983 25983 40.43

4719 58108 90.43

1806 64146 99.83

16727 42710 66.47

1187 59295 92.3

100
OTHERS
USAGE

64254
(RS/Cr…)

108

8
4

6
2
3

7
1

0 2 4 6 8 10 12

INTERPRETATION

Now we conclude that “Class A” occupies 66.47% of total values of them, therefore
items work in progress, raw materials and finished goods are comes underclass A category and
“Class B” occupies 23.96% after the class A percentage therefore item material in transit comes
under class B category, and lastly “Class C” occupies 9.57% with items indirect material,
material with fabrication, transfer in transit, scraps and others.
ABC ANALYSIS FOR THE YEAR 2019-20:

ANNUAL CUMULATIVE CUMULATIVE

CONSUMPTION USAGE PERCENTAGE
RAN (Rs/Cr..) (Cr..) OF USAGE
ITEM CATEGORY
K

WORK IN
1 29148 29148 38.61 A
PROGRESS
RAW
2 19656 48804 64.65 A
MATERIALS
FINISHED
GOODS
3 13017 61821 81.89 A

MATERIAL IN
4 5038 66859 88.56 B
TRANSIT
INDIRECT
5 1286 68145 90.27 B
MATERIAL
MATERIAL
WITH 6 4963 73108 96.84 C
FABRICATION
TRANSFER IN
7 2107 75215 99.63 C
TRANSIT
SCRAP ARISE
& 8 278 75493 100 C
OTHERS

A – Occupies 70% of annual consumption value i.e., 70% of 75493 is 52845.10

A + B – Occupies 90% of annual consumption value i.e., 90% of 75493 is 67943.70

Actual Value of A = 61821/75493*100 = 81.89%

 B = 8.38%

C = 9.73%

OTHERS
C
B
B
C
C
A
A
A
CUMULATIVE USAGE

5038 66859 88.56

13017 61821 81.89

4963 73108 96.84

2107 75215 99.63
1286 68145 90.27
19656 48804 64.65
29148 29148 38.61

100
OTHERS
75493
(Rs/Cr..)

278

8
4

6
2
3

7
1

0 2 4 6 8 10 12

INTERPRETATION

Now we conclude that “Class A” occupies 81.89% of total values of them, therefore
items work in progress, raw materials and finished goods are comes underclass A category and
“Class B” occupies 8.38%after the class A percentage therefore item material in transit comes
under class B category, and lastly “Class C” occupies 9.73% with items indirect material,
material with fabrication, transfer in transit, scraps and others.
ABC ANALYSIS FOR THE YEAR 2020-21:

ITEM RANK ANNUAL CUMULATIVE

CUMULATIVE
CATEGORY
CONSUMPTION
USAGE PERCENTAGE
(RS/Cr…) (Cr…) OF USAGE
WORK IN 1 33123 33123 40.65 A
PROGRESS
RAW 2 21772 54895 67.38 A
MATERIALS
FINISHED GOODS
3 4190 59085 72.52 A
MATERIAL IN 4 9198 68283 83.81 B
TRANSIT
INDIRECT 5 1546 69829 85.70 B
MATERIAL
MATERIAL WITH
6 7968 77797 95.48 B
FABRICATION
TRANSFER IN 7 3379 81176 99.63 C
TRANSIT
SCRAP ARISE &8 300 81476 100.00 C
OTHERS

A – Occupies 70% of annual consumption value i.e., 70% of 81476 is 57033.20

A + B – Occupies 90% of annual consumption value i.e., 90% of 81476 is 73328.40

Actual Value of A = 59085/81476*100 = 72.52%

B = 18712/81476*100 = 22.96%

C = 3679/81476*100 =
 OTHERS
C

B
B
B
C
A
A
A
ANNUAL CUMULATIVE

OF USAGE
33123 33123 40.65

4190 59085 72.52

21772 54895 67.38

7968 77797 95.48

3379 81176 99.63
9198 68283 83.81
1546 69829 85.7
100
OTHERS
USAGE

81476
(RS/Cr…)

300

8
4

6
2
3

7
1

0 2 4 6 8 10 12

INTERPRETATION

Now we conclude that “Class A” occupies 72.52% of total values of them, therefore
items work in progress, raw materials and finished goods are comes underclass A category and
“Class B” occupies 22.96%after the class A percentage therefore item material in transit comes
under class B category, and lastly “Class C” occupies 4.52 % with items indirect material,
material with fabrication, transfer in transit, scraps and others.
ABC ANALYSIS FOR THE YEAR 2021-22:

ITEM RANK ANNUAL CUMULATIVECUMULATIVE

CATEGORY
CONSUMPTION
USAGE PERCENTAGE
(RS/LAKHS) (RS) OF USAGE
WORK IN 1 25814 25814 35.46 A
PROGRESS
RAW 2 11646 42458 58.33 A
MATERIALS
FINISHED 3 15320 57778 79.37 A
GOODS
MATERIAL 4 10262 68040 93.47 B
IN TRANSIT
INDIRECT 5 1317 69357 95.28 C
MATERIAL
MATERIAL 6 1279 70654 97.06 C
WITH
FABRICATION
TRANSFER IN 7 2029 72683 99.85 C
TRANSIT
SCRAPS ARIS 8 111 72794 100.00 C
& OTHERS

A – Occupies 70% annual consumption value i.e., 70% of 72794 = 50955.8

A + B – Occupies 90% annual consumption value i.e., 90% of 72794 = 65514.6

Actual Value of A = 57778/72794*100 = 79.37%

 B =10262/72794*100 = 14.10%

C =4736/72794*100= 6.53%

ABC Analysis 2021-22

& OTHERS

C
B
C
C
C
A
A
A
ANNUAL CUMULATIVE

OF USAGE

1279 70654 97.06

11646 42458 58.33
25814 25814 35.46

2029 72683 99.85

1317 69357 95.28
15320 57778 79.37
10262 68040 93.47

100
& OTHERS
USAGE

72794
(RS/LAKHS)

111

8
4

6
2
3

7
1

0 2 4 6 8 10 12

INTERPRETATION

Now we conclude that “Class A” occupies 79.37% of total values of them, therefore items work
in progress, raw materials and finished goods are comes underclass A category and “Class B”
occupies 14.10 after the class A percentage therefore item material in transit comes under class B
category, and lastly “Class C” occupies 6.53% with items indirect material, material with
fabrication, transfer in transit, scraps and others.
ABC ANALYSIS FOR THE YEAR 2020-21

ITEM RANK ANNUAL CUMULATIVE

CUMULATIVE
CATEGORY
CONSUMPTION
USAGE PERCENTAGE
(RS/LAKHS) (RS) OF USAGE
WORK IN 1 18320.46
PROGRESS 18320.46 45.54 A
RAW 2 15560
MATERIALS 33880.6 84.23 A
FINISHED GOODS 3 1940 35820.6 89.05 B
MATERIAL IN 4 1567
TRANSIT 37387.6 92.9 B
INDIRECT 5 1224
MATERIAL 38611.6 95.9 C
MATERIAL WITH 6 854.11
FABRICATION 39465.71 98.1 C
TRANSFER IN 7 669.55
TRANSIT 40135.26 99.78 C
SCRAP ARISE & 8 88
OTHERS 40223.26 100 C

A – Occupies 70% of annual consumption value i.e., 70% of 40223.12 is 28156.18

A + B – Occupies 90% of annual consumption value i.e., 90% of 40223.12 is 36200.80

Actual Value of A = 28156.18/40223.12*100 = 69.99%

B = 24.42%

C = 5.59%

ABC ANALYSES FOR 2020-21

OTHERS
C
B
C
CUMULATIVE

OF USAGE

89.05
84.23
45.54

99.78
1567 37387.6 92.9
1224 38611.6 95.9
98.1

100
OTHERS
USAGE

40223.26
(RS/LAKHS)
ANNUAL

18320.46

669.55
854.11
15560
1940

88

8
4
5

0 2 4 6 8 10 12

INTERPRETATION
Now we conclude that “Class A” occupies 69.99% of total values of them, therefore items work
in progress, raw materials are comes underclass A category and “Class B” occupies 24.42%after
the class A percentage therefore items finished goods , material in transit comes under class B
category, and lastly “Class C” occupies 5.59% with items indirect material, material with
fabrication, transfer in transit, scraps and others.
 CHAPTER-VI
FINDINGS, SUGGESTIONS
&
CONCLUSION
FINDINGS

1) Over all the inventory of Hero MotoCorp Ltd is up to the mark.

2) The production during 2020-21 was 21727.05 and 20446.16 respectively which is
higher as compared to 2021-2222 which is 23586.80 and 25252.98 respectively.
3) Investment on raw material in 2021-2220is 3623.83Cr which very high as compared
to 2021-22 which is only 3964.26Cr.
4) The inventory turn over ratio shows that the stock has been converted into sales is
only 1.01 times.
5) In the year 2018-19 the stock was cleared within 11.02 days whereas it took 12.73
days in the year 2021-2222 which took more days for clearing stock.
6) Year 2020-21 is not showing sample profits. This is because of Iron prices have been
continuously under pressure due to persistent mismatch between supply and demand.
7) In purchase department for want of any item it should go through several processes.
This may include receiving indents, floating enquiries, preparation of order
processing form, preparation of purchase order and order follow up inform the
supplier. Most of the time was spent in accounts payable.
8) In this type of process, it requires more number of employees and supplier should
also wait for until the accounts are matched.
9) This process takes an input, adds value to it and provides an output to an internal or
external customer.

SUGGESTIONS

1) Though the production is higher is the year 2018-2019 0and the sales were very high
i.e., as per inventory conversion period it took 11.01 days. This shows that there is
demand for Automobile and the funds unnecessarily tied up. So, proper demand
forecasting should be done and according to that it may be manufactured.
2) The investment on raw material should be made as per the requirement. Unnecessary
investment may block up the funds.
3) Neither too high nor too low inventory turnover ratios may reduce profit and liquidity
position of the industry. So, proper balance should be made to increase profits and to
ensure liquidity.
4) The raw material should be acquired from the right source at right quality and at right
cost.
5) The process that was being used by Hero MotoCorp Ltd with the purchasing
department should undergo changes, so that, it seeks enhance the celerity of the
delivery of a product without compromising its quality by improving the utilization of
materials, labour and equipment.
6) To reduce the work, the purchasing department may enter the purchasing order into
database and did not send a copy to any one. When the merchandise arrived, the
 receiving clerk would enter the database and determine whether the order agreed with
the electronic purchase order.
If it did, payment was authorized to be made at the appropriate Time. If it didn’t
match, the order would be returned until if it is agreed by the Hero MotoCorp Ltd

CONCLUSION

1) Today business scenario inventory management is becoming very crucial part of the
organization. The system of inventory management in Hero MotoCorp Ltd very effective.
The organization is basically and assembling unit and thus inventory place a most
significant role in the decision making process. From the various calculations and figures
relating to inventory management it is clear that the inventory classification of A items are
maintain for days, as a result it reduce investment in raw material, reducing the lead time
and also the large quantity discount because the stock are kept for days.
2) In the classification of ABC items procedure is following in Hero MotoCorp Ltd has
launched the different type of card system for class C items.
3) Class A& B items are consider under the just in time philosophy as the procurement time
has been reduced up to greater extent by the proper co-ordination of buyer and supplier.
4) There is great improvement in the inventory turnover ratio from 3 years. It is increased
from 5.98 to 7.24% this position indicates that the stocks are fast moving and get converted
into sales quickly in Hero MotoCorp Ltd,
Finally we conclude that Hero MotoCorp Ltd the inventory system is very good with high
techniques.
QUETIONARIE& ANNEXURE