Professional Documents
Culture Documents
Shruti Sinha
Shruti Sinha
Shruti Sinha
REPORT
ON
ANALYSIS OF OPERATIONAL EFFICIENCY
TATA MOTORS LIMITED.
Submitted for partial fulfilment for the award of degree
Of
BACHELORS OF COMMERCE
Of
NETAJI SUBHAS UNIVERSITY, JAMSHEDPUR
SESSION-2021-24
Supervised by External Guide Supervised by Internal Guide:
Name: Nirbhay Singh Name: CA Abhishek Upadhyay
Designation: Accountant Designation: Assistant Professor
Department: Finance Department: Department of commerce
Submitted by:
Shruti Sinha
Roll no: 2107074
Registration no: NSU2107074
DEPARTMENT OF COMMERCE
NETAJI SUBHAS UNIVERSITY
POKHARI, JAMSHEDPUR
I
DECLARATION
I the undersigned solemnly declare that the report of the Winter Training work entitled
“Analysis of operational efficiency”, is based my own work carried out during the course
of my study under the supervision of Mr. Nirbhay Singh.
I assert that the statements made and conclusions drawn are an outcome of the project work.
I further declare that to the best of my knowledge and belief that the project report
does not contain any part of any work which has been submitted for the award of any
other degree/diploma/certificate in this University or any other University.
II
CERTIFICATE BY THE ORGANIZATION
III
CERTIFICATE OF THE INTERNAL GUIDE
This is to certify that the report of the project submitted is the outcome of the project
“Analysis of operational efficiency”, carried out by Shruti Sinha bearing roll no. 2107074
& registration no. NSU2107074 carried under my guidance and supervision for the award
of degree in Bachelors of Commerce of Netaji Subhas University, Jamshedpur, Jharkhand,
India.
.
(Signature of Internal Guide)
Name: CA Abhishek Upadhyay
Designation:Assistant Professor
Department: Department of
commerce
Netaji Subhas University
Pokhari, Jamshedpur
IV
CERTIFICATE BY THE EXAMINERS
Submitted by
Shruti Sinha, Roll no. 2107074, Registration no. NSU2107074 has been
examined by the undersigned as a part of the examination for the award of
degree of Bachelor of Commerce (Hons.) of Netaji Subhas University,
Jamshedpur, Jharkhand.
Name & Signature of Internal Guide: Name & Signature of External Guide:
FOWARDED BY:
ACADEMIC HEAD,
DEPARTMENT OF COMMERCE
V
ACKNOWLEDGEMENT
Acknowledgment is not merely a ritual, but also an expression of deep indebtedness to all
those who have helped me in the completion of my project. It is a matter of great pleasure
to thank everybody who helped me complete my final research project successfully.
Without them it would not have been possible.
I am ineffably indebted to Mr. Nirbhay Singh (Accountant, Tata Motors Ltd.) for
conscientious guidance and encouragement to accomplish this project. I am extremely
thankful and pay my gratitude to my faculty CA Abhishek Upadhyay for her valuable
guidance and support on completion of this project.
I extend my gratitude to Netaji Subhas University, Jamshedpur for giving this opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards my parents and
members of family, who has always supported me morally as well as economically.
At last but least the gratitude goes to all my friends who directly or indirectly helped me
to complete this project report. Any omission in this brief acknowledgement does not
mean lack of gratitude.
VI
PREFACE
As per the curriculum of B.com (Hons.), I had to undergo through a project study. I
approached Mr. Nirbhay Singh for this purpose and got an opportunity to prepare a report
on analysis on operational efficiency of TATA MOTORS. LTD. In this report I have put
my best efforts to compile the data to the highest level of accuracy and give my views to
best of my judgement.
This project is focuses on aspects of the organization’s operations. This report aims to
dissect the operational efficiency of Tata Motors, focusing on key areas such as
inventories,the procure-to-pay cycle, the cash-to-order cycle, and the scrap management
system.
By examining these facets, we gain insights into how Tata Motors optimizes its processes,
minimizes waste, and enhances overall performance. As we explore the intricate interplay
between financial management and operational effectiveness, we uncover strategies that
drive success in the automotive industry
VII
INDEX
DECLARATION ..................................................................................................................................................................... II
CERTIFICATE BY THE ORGANIZATION ........................................................................................................................ III
CERTIFICATE BY INTERNAL GUIDE............................................................................................................................... IV
CETRIFICATE BY THE EXAMINERS .................................................................................................................................. V
ACKNOWLEDGEMENT..................................................................................................................................................... VI
PREFACE ............................................................................................................................................................................. VII
CHAPTER 1 COMPANY PROFILE.........................................................................................................................................1
HISTORY ..........................................................................................................................................................................2
TATA MOTORS ...............................................................................................................................................................4
GOALS AND OBJECTIVES ...........................................................................................................................................6
ORGANIZATIONAL STRUCTURE ................................................................................................................................7
PRODUCTS AND SERVICES OFFERED .......................................................................................................................8
VISION, MISSION AND VALUES OF THE COMPANY............................................................................................. 10
SWOT ANALYSIS OF TATA MOTORS LTD .............................................................................................................. 12
CHAPTER 2 PROCURE TO PAY ......................................................................................................................................... 14
INTRODUCTION .......................................................................................................................................................... 15
BENEFITS OF PROCURE TO PAY ............................................................................................................................. 15
TYPES OF PROCUREMENT ........................................................................................................................................ 17
STEPS OF PROCURE TO PAY .................................................................................................................................... 18
CHAPTER 3 ORDER TO CASH........................................................................................................................................... 21
INTRODUCTION .......................................................................................................................................................... 22
BENEFITS OF PROCURE TO PAY ............................................................................................................................. 23
STEPS OF PROCURE TO PAY ....................................................................................................................... 24
ACCOUNTING ENTRIES ............................................................................................................................... 26
CHAPTER 4 SCRAP MANAGEMENT SYSTEM ................................................................................................................... 28
INTRODUCTION .......................................................................................................................................................... 29
BENEFITS OF SCRAP MANAGEMENT SYSTEM ..................................................................................................... 29
TYPES OF LOT .............................................................................................................................................................. 31
STEPS OF SCRAP MANAGEMENT SYSTEM ............................................................................................................ 33
CHAPTER 5 INVENTORIES ................................................................................................................................................ 37
INTRODUCTION .......................................................................................................................................................... 38
INVENTORY VALUATION METHODS .................................................................................................................... 38
TYPES OF DIVISIONS IN TATA MOTORS.............................................................................................................. 39
INVENTORY VALUATION ACCOUNTING STANDARD 2 .................................................................................... 41
FINISHED GOODS PORTION IN A COMPANY ...................................................................................................... 42
CHAPTER 5 CONCLUSION ................................................................................................................................................. 44
CONCLUSION ............................................................................................................................................................... 45
BIBLIOGRAPHY ........................................................................................................................................................... 46
VIII
CHAPTER 1
COMPANY
PROFILE
1
CHAPTER 1
COMPANY PROFILE
1.1 HISTORY
1. Founding and Early Years (1945-1954) Tata Motors traces its roots back
to 1945, when it was established as the Tata Engineering and Locomotive
Company (TELCO). Initially, TELCO’s primary focus was on
manufacturing locomotives for India’s burgeoning railway network.
However, visionary leaders within the Tata Group recognized the need to
diversify and explore new avenues. They envisioned a future where Tata
Motors would play a pivotal role in shaping India’s automotive landscape.
The early years were marked by challenges and perseverance. Tata Motors
faced resource constraints, technological limitations, and a nascent market.
Yet, the spirit of innovation burned bright. The company’s commitment to
quality and excellence laid the groundwork for what was tocome.
2. The Daimler-Benz Joint Venture (1954) in 1954, Tata Motors took a
momentous step by forming a joint venture with Daimler-Benz of
Germany. This strategic partnership marked a turning point for the
2
Company. It enabled Tata Motors to set up India’s first heavy vehicle
manufacturing facility in Jamshedpur. The facility was specifically
geared towards producing Daimler Lorries, which soon became a familiar
sight on Indian roads. This move not only bolstered Tata Motors’
manufacturing capabilities but also laid the foundation for its future growth.
The collaboration with Daimler-Benz brought advanced technology,
engineering expertise, and global best practices to Indian soil. It was a
marriage of tradition and modernity—an alliance that would shape the
destiny of Tata Motors.
3. Expanding Horizons (1960s-1980s) Throughout the 1960s and 1970s,
TataMotors continued to expand its product portfolio. It ventured into the
production of buses, trucks, and other commercial vehicles. The iconic Tata
407, introduced in the late 1980s, became a game-changer. This light
commercial vehicle (LCV) set new standards in efficiency, reliability, and
versatility. Its success resonated with fleet operators, small businesses, and
entrepreneurs across India. The Tata 407 was more than a vehicle; it was a
symbol of progress. It carried goods, dreams, and aspirations. From bustling
cities to remote villages, the 407 became an integral part of India’s economic
fabric.
4. The Indica Revolution (1990s) The Tata Indica, launched in 1998, was a
watershed moment. It was India’s first indigenously developed passenger
car. The Indica’s affordability, fuel efficiency, and spaciousness appealed to
a wide audience. Tata Motors’ foray into passenger cars signaled its
ambition to compete not only domestically but also on the global stage.
TheIndica was more than a car; it was a statement—a testament to Indian
engineering prowess. It captured hearts and opened doors for millions of
families, providing mobility and freedom.
5. Global Expansion and Acquisitions (2000s) In the early 2000s, Tata
Motors made bold moves on the international stage. It acquired Daewoo
Commercial Vehicles Company in South Korea, further strengthening its
global presence. This acquisition allowed Tata Motors to tap into advanced
technology and expand its product offerings. The acquisition of Daewoo
wasa strategic chess move. It positioned Tata Motors as a global player,
transcending geographical boundaries. The Daewoo trucks, now bearing the
Tata badge, roamed highways from Seoul to Santiago. The Tata Nano,
touted as the world’s most affordable car, was launched in 2009. While it
faced challenges, it showcased Tata Motors’ commitment to innovation and
its determination to address the needs of budget-conscious consumers. The
Nano was more than a car; it was a marvel—a testament to frugal
3
engineering. It sparked conversations about affordability, accessibility, and
aspiration.
6. Landmark Achievements (2010s) Tata Motors embraced sustainability and
electric mobility. It introduced electric vehicles (EVs) like the Tata Tigor
EV and the Tata Nexon EV, contributing to India’s sustainable mobility
goals. These EVs combined performance with environmental
consciousness. The Tigor EV and Nexon EV were more than cars; they
werecatalysts for change. They whispered of a cleaner, greener future—a
futurewhere zero emissions would be the norm. The Tata Tiago and Tata
Altrozgained popularity in the hatchback segment. Their safety features,
modern design, and competitive pricing resonated with buyers. The Tiago
and Altrozwere more than hatchbacks; they were companions—faithful
and reliable. They navigated city streets and winding highways, carrying
dreams and memories.
7. Future Prospects and Ongoing Innovations Tata Motors continues to
invest in research and development, focusing on EVs, connected
technologies, and autonomous driving. The Tata Nexon EV and the
upcoming Tata Altroz EV exemplify this commitment. The recent revival
ofthe iconic Tata Safari, a legendary SUV, evokes nostalgia while
embracingcontemporary features. It symbolizes Tata Motors’ ability to
blend heritage with modernity.
4
Over the years, Tata Motors expanded its product range to include various
segments:
Tata Motors has a global presence, with manufacturing and vehicle plants in India
(including locations like Jamshedpur, Pantnagar, Lucknow, Sanand, and Pune) and
international facilities in Argentina, South Africa, the United Kingdom, and
Thailand. The company also operates research and development centers in India,
South Korea, the United Kingdom, and Spain.
5
Total equity: ₹93,093 crore (approximately US$12 billion).
Number of employees: 91,811.
Tata Motors also has several subsidiaries and joint ventures, including Jaguar
Land Rover (known for British luxury vehicles) and Tata Daewoo (which focuses
on South Korean commercial vehicles). Additionally, Tata Motors collaborates
with Hitachi (Tata Hitachi Construction Machinery) and Stellantis (a joint venture
producing vehicle parts for Fiat Chrysler and Tata-branded vehicles).
Tata Motors is listed on the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE). It holds a place in the BSE SENSEX and NIFTY 50
benchmark indices. As of 2019, Tata Motors ranks 265th on the Fortune Global
500 list of the world’s largest corporations.
6
Delivering superior financial returns: Ensuring sustainable
profitability and growth.
Driving sustainable mobility solutions: Focusing on eco-
friendly transportation options.
Exceeding customer expectations: Providing high-quality
products and exceptional service.
Creating a highly engaged workforce: Encouraging employee
satisfaction and commitment.
4. Alternate Propulsion Systems:
o Tata Motors actively works on alternate propulsion systems,
including zero-emission technology (especially in electric vehicles).
They are committed to environmental responsibility and reducing
their carbon footprint.
In summary, Tata Motors strives to innovate, create value for customers, and
operate responsibly while remaining competitive in the ever-evolving automotive
industry.
7
They are responsible for product development,
production, and market positioning within their
respective divisions.
o The Matrix Structure allows for cross-functional collaboration, as well
as specialization within each division. It ensures that both functional
excellence and divisional performance are balanced.
2. Flat Organizational Structure:
o Tata Motors maintains a relatively flat structure, promoting easy
interaction between different levels within the organization.
o Benefits of a flat structure include faster communication, streamlined
decision-making, and reduced bureaucracy.
o The company’s leadership encourages open dialogue and
collaboration across departments.
3. Customer-Centric Approach:
o Under the leadership of the Managing Director, Guenter Butscheck,
Tata Motors has emphasized a prime customer focus.
o The flat structure facilitates quicker responses to customer needs and
market dynamics.
o By staying close to customers, Tata Motors aims to enhance product
offerings and overall satisfaction.
4. Agility and Purpose:
o Tata Motors envisions a future of sustainable, connected, and efficient
mobility.
o Their organizational structure reflects agility, purposefulness, and
empathy.
o The company adapts swiftly to industry changes, technological
advancements, and evolving customer preferences.
8
o Notable models include the Tata Nexon, Tata Altroz, Tata Harrier,
and the all-electric Tata Nexon EV.
2. Electric Vehicles (EVs):
o Tata Motors is at the forefront of the EV revolution. They offer a
lineup of electric vehicles that prioritize zero emissions, quieter
drives, and connected mobility.
o The Tata Nexon EV is a popular electric SUV, showcasing their
commitment to cleaner transportation.
3. Commercial Vehicles (CVs):
o Tata Motors rules the roads with its robust CV portfolio. Their
commercial vehicles are designed for various applications, from intra-
city transport to long-haul logistics.
o Trucks and buses by Tata Motors are known for their reliability,
durability, and performance. No terrain is too challenging, and no load
is too heavy for these workhorses.
4. Luxury Vehicles:
o Tata Motors brings global luxury brands to Indian consumers. These
vehicles define modern luxury and are steeped in a rich legacy of
timeless designs.
o Jaguar and Land Rover, both part of Tata Motors’ portfolio, offer
premium SUVs and luxury cars that cater to discerning buyers
worldwide.
5. Defence Vehicles:
o Tata Motors also manufactures defence vehicles for military and
security forces. These include specialized trucks, troop carriers, and
armored vehicles.
o Their commitment to safety and reliability extends to these critical
applications.
6. Financial Services:
o Tata Motors provides financing options for vehicle purchases.
Whether it’s leasing or loans, they ensure that customers have
convenient ways to own their dream vehicles.
7. Innovation and Technology:
o Tata Motors invests significantly in research and development
(R&D). They focus on cutting-edge technologies, safety
enhancements, and sustainable solutions.
o Their innovations drive the future of mobility, making cargo and
passenger transportation safer, smarter, and greener.
8. Global Sales Network and Customer Service:
9
o With a presence in more than 125 countries, Tata Motors has a global
sales network. They connect with customers across diverse markets.
o Their customer service network ensures that vehicle owners receive
timely support, maintenance, and genuine spare parts.
2. Mission:
10
o Tata Motors’ mission is deeply rooted in their commitment to
innovate mobility solutions with passion. They recognize that
mobility plays a crucial role in enhancing the quality of life for
people across the globe. Whether it’s a daily commute, a long road
trip, or the movement of goods, Tata Motors aims to create vehicles
and technologies that positively impact society. Their mission extends
beyond mere transportation; it encompasses safety, sustainability, and
convenience.
3. Values:
o Integrity: Tata Motors operates with unwavering integrity. They
uphold fairness, honesty, and transparency in all interactions. Their
actions withstand public scrutiny, and they prioritize ethical conduct.
o Teamwork: Collaboration is a cornerstone of Tata Motors’ success.
They believe that diverse perspectives, combined with collective
effort, lead to better outcomes. Whether it’s within their teams or in
partnerships with other organizations, teamwork drives progress.
o Accountability: Tata Motors takes responsibility seriously. They hold
themselves accountable for their actions, decisions, and outcomes.
This sense of ownership ensures that they continuously improve and
learn from both successes and failures.
o Customer Focus: Tata Motors places the customer at the center of
everything they do. Understanding customer needs, preferences, and
pain points guides their product development, marketing, and service
strategies.
o Excellence: Mediocrity has no place at Tata Motors. They strive for
excellence in every aspect of their business. Whether it’s product
design, manufacturing processes, or customer service, they aim for the
highest standards.
o Speed: Agility and responsiveness are critical in a dynamic industry.
Tata Motors values speed in decision-making, product development,
and adapting to market changes. Being nimble allows them to seize
opportunities and address challenges promptly.
11
1.7 SWOT ANALYSIS OF THE COMPANY
Strengths:
Weaknesses:
Opportunities:
12
2. Global Market Penetration:
o The company has the opportunity to further expand its global
footprint.
o Entering new markets and strengthening existing ones can drive
growth.
3. Electric Vehicle (EV) Market:
o With increasing interest in EVs, Tata Motors can leverage its
expertise in this area.
o Developing more EV models and infrastructure can position them as
leaders in sustainable mobility.
Threats:
1. Intense Competition:
o Tata Motors faces fierce competition from both domestic and
international players.
o Staying ahead requires continuous innovation and differentiation.
2. Economic Volatility:
o Economic fluctuations impact consumer spending and demand for
automobiles.
o Tata Motors must navigate economic uncertainties effectively
3. Regulatory Changes:
o Evolving regulations related to emissions, safety, and technology can
pose challenges.
o Adapting swiftly to comply with changing norms is essential.
13
CHAPTER 2
PROCURE TO PAY
14
CHAPTER 2
PROCURE TO PAY
2.1 INTRODUCTION
If you operate any kind of business, whether it’s traditional, digital, or hybrid, you
need to know about the procure-to-pay process and the automated solutions that
can help you manage it. Every business, company, or organization has a dynamic
need for goods, services, or products. The procurement department or team is
responsible for identifying requirements, browsing through the vendors or
suppliers, and purchasing the items or products. Although this sounds easy, the all-
embracing procurement process needs strategic planning, heavy documentation,
and strict procedure or process following. Outdated procurement solutions are
expensive, inflexible, and inefficient. Still, most organizations continue to ‘make do’
with their old-fashioned procurement management software.
The procure-to-pay process, also known as purchase-to-pay and P2P, refers to a
series of steps that organizations follow to manage the acquisition of goods and
services from external suppliers. The process of linking purchasing and accounts
payable systems to increase efficiency is known as procure-to-pay. It exists within
the larger procurement management process and involves four key stages:
15
2. Reduce invoice processing costs by up to 80%
An automated P2P process, with digitized P2P procurement, reduces the
processing cost when the repetitive tasks are automated through software or
automation. An efficient procure-to-pay cycle averts duplicate orders, cost
turnovers, overpaying, or errors in payment processing.
16
2.3 TYPES OF PROCUREMENT
Goods Procurement
Definition: Goods procurement involves acquiring physical entities (products or
materials) for use in a business. These entities can be either finished products (such
as machinery or electronics) or raw materials (like steel, wood, or plastic).
Examples:-
Services Procurement
Examples:
17
IT Services: Outsourcing IT support, software development, or system
maintenance.IT support services for troubleshooting technical
issues.Software development by an external agency.
Marketing Services: Engaging marketing agencies for advertising,
branding, or digital campaigns. Creating advertising campaigns.Managing
social media marketing.
18
The purchasing manager plays a pivotal role in the P2P cycle. They
meticulously review the purchase requisition, considering factors such as
urgency, budget constraints, and existing vendor relationships. Negotiations
may occur with different vendors to ensure the best terms. The requisition
can either be approved or rejected based on these evaluations. Once
approved, the next steps in the process can proceed smoothly.
6. Receipt of Goods/Services
When the vendor delivers the goods or completes the services, the receiving
department steps into the spotlight. Their role is akin to that of a meticulous
curator. They physically inspect the received items against the details
mentioned in the PO. Any discrepancies—be it damaged goods, incorrect
quantities, or deviations from specifications—are noted and resolved. The
goods receipt process ensures that the organization receives precisely what
19
was promised by the vendor. It’s a moment of truth, where paperwork meets
tangible reality.
8. Invoice Matching
The accounts payable team steps onto the stage, armed with invoices and
calculators. Their task is to match the vendor’s invoice with the PO and the
goods receipt. This meticulous reconciliation ensures that the organization
pays only for what was received and agreed upon. Any discrepancies are
resolved before processing payment. Accuracy here is paramount—it’s
where financial integrity meets operational reality.
9. Vendor Payment
Finally, the organization processes the payment to the vendor. The payment
is made based on the agreed-upon terms (such as net 30 days or other
negotiated terms). The accounts department ensures that the payment is
accurate and timely. Proper documentation is maintained for auditing
purposes. It’s the closing act of the P2P cycle, where financial transactions
complete the circle, and the vendor receives their due.
20
CHAPTER 3
ORDER TO CASH
21
CHAPTER 3
ORDER TO CASH
3.1 INTRODUCTION
The Order to Cash cycle (often abbreviated as O2C or OTC) is a critical
sequence of events in a business’s sales cycle. It encompasses the end-to-end
journey of how your business handles customer orders. It includes everything
from the moment a customer places an order to the point when the business
receives and clears the payment for that order. It has various stages, including
order entry, fulfillment, invoicing, payment processing, and cash collection.
This end-to-end process involves multiple stages, each playing a crucial role in
ensuring smooth operations and customer satisfaction.It’s not merely about
processing transactions; it’s a symphony of interconnected steps that impact
your bottom line, customer relationships, and overall growth. In summary, the
O2C cycle isn’t a backstage process—it’s a spotlight performance that impacts
your business’s success.
Advancements in technology have transformed the O2C process. Decades ago,
it was a chaotic affair involving handwritten purchase orders and faxed
invoices. Today, digital platforms and software streamline the entire cycle.
Real-time access to information allows sales teams, warehouse workers,
accounts payable, and customer service to stay informed. Workflow processing
software provides valuable data for analysis at each step, helping businesses
identify areas for improvement and optimize their operations.
In summary, the O2C process is essential for any business that sells goods. By
managing it effectively, companies can ensure timely order fulfillment,
accurate invoicing, and prompt payment collection, leading to satisfied
customers and efficient operations.O2C cycle is a fundamental business
function that impacts revenue generation, customer relationships, and overall
operational efficiency.The O2C process is a complex interplay of customer
interactions, logistics, financial transactions, and communication. Businesses
that optimize this process enhance customer satisfaction, reduce operational
costs, and maintain healthy cash flow. Remember that each organization may
customize its O2C process based on industry, scale, and specific requirements.
22
3.2 BENEFITS OF ORDER TO CASH PROCESS:-
The order-to-cash (O2C) process plays a pivotal role in the seamless functioning of
businesses across various industries. Let’s delve into the extensive benefits it
offers:
5. Scalability
As businesses grow, their order volume increases. An optimized O2C process
can handle higher transaction volumes without compromising
quality. Scalability is crucial for expanding businesses and maintaining
customer satisfaction
6. Employee Satisfaction
23
Automation takes center stage. Manual tasks—like order management,
invoicing, and revenue recognition—are digitized.Streamlined processes reduce
manual workloads for employees. When staff members can focus on value-
added tasks rather than repetitive administrative work, job satisfaction
improves. Happy employees contribute to a positive work environment and
better outcomes.
7. Profitability
By minimizing delays, errors, and inefficiencies, O2C directly impacts the
bottom line. Faster cash collection, accurate invoicing, and efficient order
management lead to increased profitability for the business.
In summary, the order-to-cash process isn’t just about transactions; it’s a strategic
driver that influences financial health, customer relationships, and overall business
success. Leveraging technology and best practices in O2C can yield substantial
benefits for organizations of all sizes.
24
prevents delays, reduces errors, and ensures smooth communication between
departments.
3. Credit Management
For business customers, purchases are often made on credit. Credit
management plays a crucial role in assessing the creditworthiness of
customers. It involves setting credit limits, evaluating payment history, and
approving repeat customers. Balancing risk and revenue is essential during
this stage.
4. Order Fulfillment and Shipping
Once an order is received, the business swings into action to fulfill it. This
involves picking the items from inventory, packaging them, and arranging
for shipping or delivery. Challenges may arise, such as managing stock
availability, coordinating logistics, and meeting promised delivery dates.
5. Customer Invoicing
After fulfilling the order, the business generates an invoice for the customer.
The invoice includes essential details like product descriptions, pricing, and
payment terms. Accuracy in invoicing is critical to avoid disputes and
maintain transparency with customers.
6. Accounts Receivable
Managing outstanding customer balances falls under this step. The accounts
receivable team tracks payments due from customers. They send reminders,
follow up on overdue invoices, and ensure timely payment collection.
Effective accounts receivable management impacts cash flow and financial
stability.
7. Payment Collections and Reconciliation
25
The business collects payments from customers based on the agreed-upon
terms. This step involves receiving payments via various channels (credit
cards, checks, electronic transfers) and reconciling them with the
corresponding invoices. Any discrepancies are resolved promptly to
maintain accurate records.
8. O2C Reporting
Metrics and data analysis play a crucial role in optimizing the O2C process.
Reporting provides insights into system performance, identifies bottlenecks,
and highlights areas for improvement. Key performance indicators (KPIs)
related to order processing time, payment cycles, and customer satisfaction
are monitored.
Remember that technology has significantly improved the O2C process, enabling
digital invoicing, real-time tracking, and centralized information management. By
effectively managing these steps, businesses can ensure smooth order fulfillment
and prompt payment collection.
1. Receive Order:
o When a customer places an order, your online order management
system (OMS) notifies you. This step involves recording the order
details, including product quantity, price, and customer information.
o Accounting Entries:
Debit: Accounts Receivable (A/R) or Trade Receivables (for
the value of the order).
Credit: Sales Revenue (for the same amount).
2. Order Fulfillment:
o Prepare the order for shipment or schedule a service appointment.
o Accounting Entries:
No specific accounting entries at this stage.
3. Order Shipment:
o Ship the goods to the customer or provide the service.
o Accounting Entries:
No specific accounting entries at this stage.
26
4. Invoice Creation and Sending:
o Generate an invoice based on the order details.
o Send the invoice to the customer.
o Accounting Entries:
Debit: Accounts Receivable (A/R) or Trade Receivables (for
the invoiced amount).
Credit: Sales Revenue (for the same amount).
5. Customer Payment:
o The customer pays the invoice amount.
o Accounting Entries:
Debit: Cash or Bank (for the received payment).
Credit: Accounts Receivable (A/R) or Trade Receivables (to
clear the outstanding amount).
6. Record Payment in General Ledger:
o Update the general ledger with the payment details.
o Accounting Entries:
Debit: Cash or Bank (for the received payment).
Credit: Accounts Receivable (A/R) or Trade Receivables (to
clear the outstanding amount).
7. Collections and Reconciliation:
o Monitor collections and reconcile any discrepancies.
o Accounting Entries:
No specific accounting entries at this stage.
27
CHAPTER 4
SCRAP
MANAGEMENT
SYSTEM
28
CHAPTER 4
SCRAP MANAGEMENT SYSTEM
4.1 INTRODUCTION
Scrap refers to waste materials that have no economic value beyond the value of
their raw materials. These materials might include metals (such as steel, aluminum,
and copper), plastics, paper, electronics, and construction debris. Essentially, scrap
is any material that is left over or discarded during manufacturing processes,
construction, or other activities.
o Scrap has the potential to generate revenue. Businesses can sell excess
materials to recyclers or scrapyards, who then transform them into new
items. This not only reduces waste but also enhances sustainability.
o For instance, construction companies might sell unused steel or
concrete, benefiting both financially and environmentally by diverting
materials from landfills.
29
o Additionally, manufacturing entities can repurpose leftover materials
within their production cycles, saving on the purchase of new raw
materials and promoting environmental sustainability through waste
reduction.
2. Resource Optimization:
30
5. Enhanced Corporate Social Responsibility (CSR):
1. Ferrous Scrap:
o Definition: Ferrous scrap refers to scrap materials containing iron (or
iron alloys) as their primary component. These materials are magnetic
and include items like old machinery, steel beams, car bodies, and
appliances.
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o Examples: Worn-out car parts, steel pipes, cast iron components, and
scrap from manufacturing processes (such as stamping or machining).
o Recycling: Ferrous scrap is highly recyclable. It is melted down in
electric arc furnaces to produce new steel products.
2. Non-Ferrous Scrap:
o Definition: Non-ferrous scrap consists of materials that do not contain
iron. These materials are non-magnetic and often have higher value
due to their unique properties.
o Examples:
Aluminum: Beverage cans, window frames, and aircraft parts.
Copper: Electrical wires, plumbing pipes, and motors.
Brass: Plumbing fixtures, decorative items, and musical
instruments.
Lead: Batteries, radiation shielding, and cable sheathing.
o Recycling: Non-ferrous metals are recycled by melting them down
and refining them for reuse.
3. Electrical Scrap:
o Definition: Electrical scrap includes materials related to electrical
systems, such as wires, cables, transformers, and circuit boards.
o Examples:
Wires and Cables: Insulated copper or aluminum wires.
Transformers: Used in power distribution.
Circuit Boards: From electronic devices like computers and
smartphones.
o Recycling: Electrical scrap is processed to recover valuable metals
(like copper) and safely dispose of hazardous components (such as
lead or mercury).
4. Hazardous Scrap:
o Definition: Hazardous scrap includes materials that pose
environmental or health risks due to their toxic, flammable, or reactive
properties.
o Examples:
Batteries: Lead-acid batteries (commonly used in cars) contain
lead and sulfuric acid.
Mercury-containing Devices: Fluorescent bulbs, thermometers,
and switches.
Electronic Waste (E-waste): Old computers, TVs, and cell
phones.
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o Handling and Disposal: Hazardous scrap requires special handling and
disposal methods to prevent harm to people and the environment.
Recycling and proper disposal are essential.
1. Accumulation
2. Segmentation:
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components could be identified separately. This step helps streamline further
handling and decision-making.
Each batch of scrap receives a unique lot number. This identification system
allows for efficient tracking and documentation. When scrap materials are
auctioned or processed, having lot numbers ensures transparency and accuracy.
It also helps in maintaining records for compliance and auditing purposes.
If the organization plans to sell the scrap, the auctioneer needs to be informed.
The auctioneer can be an internal department or an external entity responsible
for managing scrap auctions. Communication with the auctioneer ensures that
the scrap is appropriately valued and marketed to potential buyers.
6. Inspection
The first step in the scrap management process involves inspection. During this
phase, the organization assesses the scrap materials. This assessment includes
examining the quality, quantity, and condition of the scrap. The goal is to
determine whether the material is suitable for further processing or disposal.
Inspections may involve visual checks, measurements, and documentation.
7. Auction
Once the inspection is complete, the organization may decide to auction off the
scrap. Auctions provide an opportunity to sell the scrap to interested buyers.
These buyers could be other companies, recycling centers, or individuals. The
auction process typically involves setting a reserve price, advertising the
auction, and conducting the bidding. The highest bidder wins the scrap.
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When participating in the auction, potential buyers are often required to submit
earnest money. This deposit serves as a commitment to purchase the scrap if
they win the bid. It ensures that serious buyers participate and discourages
frivolous bidding. The amount of earnest money varies and is usually a
percentage of the expected bid amount.
After the auction, the scrap disposal committee reviews the bids and evaluates
the offers. They consider factors such as the bid amount, the reputation of the
buyer, and the organization’s disposal policies. Based on these considerations,
the committee makes the final decision on whether to accept or reject the bids.
Transparency and fairness are crucial during this stage.
Once the committee approves a bid, a sales letter is issued to the winning
bidder. This letter confirms the sale and outlines the terms and conditions. It
includes details such as the scrap quantity, price, payment deadlines, and pickup
arrangements. The sales letter serves as a legal document binding both parties to
their respective obligations.
After the auction process, successful buyers are required to make payment for
the purchased scrap. This step involves settling the financial transaction. The
payment terms may vary, but typically, buyers need to remit the agreed-upon
amount within a specified timeframe. Organizations often provide payment
instructions, including bank details or payment gateways. Timely payment
ensures a smooth process and maintains transparency.
Once payment is received, buyers can proceed with the lifting of the scrap lots.
“Lifting” refers to physically collecting or transporting the purchased scrap
from the organization’s premises. Buyers need to coordinate logistics, arrange
suitable vehicles, and adhere to safety protocols during the lifting process.
Depending on the type and quantity of scrap, lifting can involve heavy
machinery, trucks, or manual labor. Proper documentation, such as gate passes
or waybills, ensures accountability.
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13. Lot Closure
The final step in the scrap disposal process is lot closure. Once all the scrap lots
have been lifted by the buyers, the organization officially closes the transaction.
This closure involves updating records, marking the lots as sold, and archiving
relevant documents. It signifies the successful completion of the scrap sale.
Organizations may conduct internal audits or reviews to ensure compliance
with procedures and to assess the effectiveness of the entire process.
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CHAPTER 5
INVENTORIES
(ACCOUNTING STANDARDS 2)
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CHAPTER 5
INVENTORIES
5.1 INTRODUCTION
Inventory refers to the collection of raw materials, work-in-progress items, and
finished goods that a company holds for production, sale, or distribution. It
represents a crucial asset for businesses, as it directly impacts revenue generation.
Effective inventory management ensures that products are available when needed,
buffers against supply chain disruptions, and meets customer demand. In summary,
inventory encompasses all tangible and intangible items a company maintains to
support its operations and fulfill market requirements.
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1. FIFO (First In, First Out): The FIFO method assumes that goods are sold in
the order they were purchased. When calculating the cost of goods sold (COGS)
and the ending inventory, FIFO uses the oldest inventory items first. This approach
aligns with the natural flow of inventory, as it reflects the actual sequence of sales.
However, one limitation is that older inventory values may not accurately represent
current market conditions.
2. LIFO (Last In, First Out): LIFO is conceptually opposite to FIFO. It assumes
that recently purchased goods are sold first. Consequently, the cost of goods sold
reflects the most recent inventory costs. LIFO can be advantageous for tax
purposes during inflationary periods, as it reduces taxable income. However, it
distorts financial statements and is not allowed under International Financial
Reporting Standards (IFRS).
3. Weighted Average Cost (WAC): The weighted average cost method calculates
the average cost of the entire inventory, regardless of the order in which items were
placed. Mathematically, it can be expressed as: [ \text{Weighted Average} =
\frac{\text{Total Cost of Goods in Inventory}}{\text{Total Units of Goods}} ]
This method smooths out fluctuations and provides a simple way to determine the
average cost per unit. However, it ignores the actual flow of inventory and may not
reflect specific inventory movements.
NOTE:-Tata motors follow FIFO method.If there will be more inventory in the
company there will be cash block.
1. Foundry Division:
o The Foundry Division is responsible for casting and manufacturing
components made of metal alloys. It plays a crucial role in producing
engine blocks, cylinder heads, and other critical parts. Foundries use
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various casting techniques (such as sand casting, investment casting,
or die casting) to create intricate shapes and maintain high-quality
standards. These components are essential for the overall performance
and durability of Tata Motors’ vehicles.
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gear ratios. Whether manual, automatic, or semi-automatic,
well-engineered transmissions enhance vehicle performance,
fuel efficiency, and driving comfort.
5. Auto Division:
o The Auto Division encompasses the passenger vehicle segment. Tata
Motors produces cars, SUVs, and other personal vehicles under this
division. Their passenger vehicles cater to a wide range of customers,
from compact cars to premium SUVs. Tata Motors has made
significant strides in this segment, offering innovative features, safety
enhancements, and sustainable mobility solutions. Brands like Tata
Tiago, Tata Nexon, and Tata Harrier fall under the Auto Division.
These divisions collectively contribute to Tata Motors’ success, ensuring that the
company remains competitive in both commercial and passenger vehicle markets.
Cost vs. Net Realizable Value (NRV): When valuing inventory, companies
consider both its cost and net realizable value (NRV).
o The cost represents the original purchase price or production cost of
the inventory.
o The NRV is the estimated selling price of the inventory minus any
costs necessary to make the sale (such as transportation or marketing
expenses).
o The principle followed is that inventory should be valued at the lower
of cost or NRV.
o In other words, if the NRV is lower than the cost, the NRV is used as
the inventory value.
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provides guidelines on how to recognize, measure, and present inventory in
financial statements. It covers aspects such as:
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o Order Processing: This step involves receiving and processing
customer orders. It includes order validation, picking, packing, and
shipping.
o Shipment Tracking: Companies monitor shipments to provide real-
time information to customers. Tracking ensures transparency and
helps address any delivery issues promptly.
o Smooth Supply Chain: The ultimate goal of SFLT is to maintain a
seamless supply chain, meeting customer demands effectively while
minimizing delays and disruptions.
Remember, both IFLT and SFLT play crucial roles in ensuring product quality,
timely delivery, and overall customer satisfaction.
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CHAPTER 7
CONCLUSION
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CONCLUSION
1. Streamlining Operations:
o Operational efficiency involves fine-tuning every aspect of the
organization. For Tata Motors, this means harmonizing its intricate supply
chain, refining manufacturing processes, and optimizing distribution
networks.
o By eliminating bottlenecks, reducing redundancies, and enhancing resource
utilization, Tata Motors can achieve smoother operations and cost savings.
2. Industry 4.0 and Logistics 4.01:
o The convergence of Industry 4.0 technologies and Logistics 4.01 presents
an exciting opportunity. Tata Motors can embrace automation, data
analytics, and real-time monitoring to enhance its manufacturing processes.
o Reduced lead times, improved agility, and better decision-making await
those who embrace these transformative tools.
3. Sustainability Nexus:
o Operational efficiency aligns seamlessly with Tata Motors’ commitment to
sustainability. Efficient processes inherently reduce environmental impact.
o Whether it’s optimizing inventories, streamlining procure-to-pay cycles, or
managing scrap effectively, each step contributes to a greener future.
In my role as an intern in the finance department, I have witnessed firsthand the intricate
dance of numbers, costs, and performance metrics. My insights into inventories,
procure-to-pay cycles, order-to-cash cycles, and scrap management are invaluable. As
Tata Motors continues its journey toward operational excellence, remember that every
spreadsheet cell and financial analysis plays a part in shaping the company’s destiny.
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BIBLIOGRAPHY
Books Referred:
1. “Operations Management in Automotive Industries: From Industrial
Strategies to Production Resources Management” by Marco Gobetto.
2. “Lean Thinking: Banish Waste and Create Wealth in Your Corporation” by
James P. Womack and Daniel T. Jones.
3. “The Toyota Way: 14 Management Principles from the World’s Greatest
Manufacturer” by Jeffrey K. Liker.
4. Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy,
Planning, and Operation. Pearson
5. Industry 4.0: The Future of Productivity and Growth in Manufacturing
Industries. World Economic Forum. (2017).
6. Tata Motors Annual Reports and Sustainability Disclosures
7. Harvard Business Review
Websites Referred:
1. www.autonews.com
2. www.industryweek.com
3. www.logisticsmgmt.com
4. sloanreview.mit.edu
5. www.google.com
6. www.tatamotors.com
Other sources:
1. Investopedia
2. Wikipedia
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