OPERATIONS MANAGEMENT

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A
PROJECT REPORT
ON
INVENTORY AND FORECASTING
AT
JHADAO ICONS IN AMRAVATI






Amratanshu Mehra 11DCP008
Nishant Puri 11DCP029
Parth Moondhra 11DCP032
Rajath Ravikumar 11DCP037
Taranpreet Chhabra 11DCP049
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Table of Contents

COMPANY PROFILE ................................................................................................ 3
JADHAO ICONS .................................................................................................... 3
Facilities: ................................................................................................................. 3
Material handling Facilities ..................................................................................... 3
Profile Of Industry ................................................................................................... 3
Plant layout:- ........................................................................................................... 4
Departments of the company: .................................................................................. 4
PROJECT OBJECTIVE .............................................................................................. 5
Objective Of The Project ......................................................................................... 5
DATA ANALYSIS & INTERPRETATION ................................................................ 5
Economic Order Quantity (EOQ) ............................................................................. 6
Sales For The Year 2009 & 2010 ............................................................................. 8
Forecasting for 2011 ................................................................................................ 9
APPENDIX ............................................................................................................... 12
FORMULAE USED .............................................................................................. 12
REFERENCES ...................................................................................................... 13










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COMPANY PROFILE
JADHAO ICONS


Facilities:
The company provides various facilities such as Milling, Boring, Drilling, and Turning,
Facing on fully automated and computerized machines. Below is the list of all machines.

01) VMC (Vertical Machine Center) = 05 nos
02) HMC (Horizontal Machine Center) = 01 nos
03) CNC Turning Center = 04 nos
04) CNC Universal Milling Machine = 02 nos
05) Plano Miller Machine = 02 nos
06) Horizontal Boring Machine = 02 nos
07) Radial Drilling Machine = 12 nos
08) Tapping Machine = 01 nos
09) Key Way Machine = 01 nos
10) Band Saw machine (PLC Operated) = 01 nos
11) Thread Rolling Machine = 01 nos

Material handling Facilities

1) EOT Crane 5 Tons = 1 Nos
2) EOT Crane 3 Tons = 3 Nos
3) JIB Crane 1 Tons = 3 Nos
4) Hydraulic Pallet Trolley 2.5 Tons = 2 Nos
Profile Of Industry
Jadhao Icon is a manufacturer of all types of ginning machine which is located in
M.I.D.C. Amravati. They produce following products on demand
1) Gear Box
2) Front Cover
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3) Frame
4) Swing leaver
5) Connecting rod
6) Beater arm
7) Clutch
8) Rail
9) Eccentric shaft
10) Con. Housing
11) Gear Blanks etc.

Apart from above mentioned products there are regular production of orderly basis
products like parts of Gun, parts of bomb ordered by ordnance factory.
A company which believes in thought we have no arguments with competitors who
charge less. But use redies what their product and service is worth.
In this company about 100 workers work with quality consciousness production. They
produce quality products to provide best service to the customers.

Plant layout:-
Plant layout is a very important feature in todays industries. It is arrangement of the
desired machine and equipment of the plant established in a way which will permit the
easiest flow of material at lowest cost and with the minimum handling in processing
product from the receive of raw material to the dispatch of the finished product.

Departments of the company:
1) CNC Machine shop
2) Quality control departments
3) Account section
4) Production departments
5) Purchasing departments
6) Store departments

The turnover of the company is 13 crores.







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PROJECT OBJECTIVE

Objective Of The Project
To calculate the yearly EOQ and total minimum inventory cost.
To analyze the yearly economic order quantity in order to reduce the inventory cost.
To forecast the monthly sales data of the year 2011.
To calculate the forecasting accuracy.



DATA ANALYSIS & INTERPRETATION

Economic order quantity is the level of inventory that minimizes total inventory holding
costs and ordering costs. It is one of the oldest classical production scheduling models.
The framework used to determine this order quantity is also known as Wilson EOQ
Model or Wilson Formula.
EOQ applies only when demand for a product is constant over the year and each new
order is delivered in full when inventory reaches zero. There is a fixed cost for each order
placed, regardless of the number of units ordered. There is also a cost for each unit held
in storage, sometimes expressed as a percentage of the purchase cost of the item.
We want to determine the optimal number of units to order so that we minimize the total
cost associated with the purchase, delivery and storage of the product.
The required parameters to the solution are the total demand for the year, the purchase
cost for each item, the fixed cost to place the order and the storage cost for each item per
year. Note that the number of times an order is placed will also affect the total cost,
though this number can be determined from the other parameters.
Underlying assumptions
- The ordering cost is constant.
- The rate of demand is known, and spread evenly throughout the year.
- The lead time is fixed.
- The purchase price of the item is constant i.e. no discount is available
- The replenishment is made instantaneously; the whole batch is delivered at once.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A
common misunderstanding is that the formula tries to find when these are equal.)

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Economic Order Quantity (EOQ)
It is also called as re-ordering quantity or economic lot size. It is the most economical
quantity to be ordered under normal conditions.
EOQ is the order size for some particular inventory item that results in lowest total
inventory cost for the period consisting of inventory ordering cost & investment carrying
cost.


There are two type of cost:
a) ordering cost
b) inventory carrying cost
Ordering cost are the costs of getting an item into the stores & are incurred each time
when order is placed. Such cost consist of cost of processing a purchase order, inspection
cost & general administrative overhead cost comprising salaries, stationary, rent, etc.
Inventory carrying cost are the costs which are incurred on the maintenance of materials
in the stores & include interest on capital invested in materials, obsolescence & storage
costs including rent, insurance, heating, refrigeration, lighting, salaries of store keeper,
depreciation cost etc.

I) Calculation Of EOQ On Yearly Basis


Years 2009 2010 2011
1 Co 295 320 335
2 Cc 1.1 1.25 1.4
3 D 17500 21000 24500
4 2*Co*D 10325000.00 13440000.00 16415000.00
5 d 291.67 350.00 408.33
6 p 400.00 500.00 600.00
7 (1-d/p) 0.27 0.30 0.32
8 (4)/{(2)*(7)} 34657342.66 35840000.00 36704347.83
9 EOQ (Q
opt
) 5887 5987 6058


Total Ordering Cost 877 1122 1355

Total Carrying Cost 877 1122 1355

Total Inventory Cost(min) 1754 2245 2709


Production run length 14.72 11.97 10.10

No of orders per yr 2.97 3.51 4.04

Maximum Inventory Level 1594.41 1796.00 1935.33

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Interpretation
1. EOQ is increasing year on year due to increase in demand and order carrying cost.











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Sales For The Year 2009 & 2010

(Rupees in Crores)
MONTHS 2009 2010
January 1,40,407 1,90,543
February 2.53.467 2.30,513
March 1,56,789 1,85,563
April 1,97,890 2,30,569
May 2,34,798 2,95,645
June 3,56,234 3,01,566
July 1,20,000 2,56,123
August 3,95,623 3,85,261
September 3,65,655 3,90,265
October 2,99,899 3,05,623
November 1,78,980 2,56,456
December 1,30,258 2,21,873





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Forecasting for 2011
Period
MONTHS 2009
2010 Total
1
January
140407 190543
330950
2 February 253467 230513 483980
3 March 156789 185563 342352
4 April 197890 230569 428459
5
May
234798 295645
530443
6
June
356234 301566
657800
7 July 120000 256123 376123
8 August 395623 385261 780884
9 September 365655 390265 755920
10
October
299899 305623
605522
11 November 178980 256456 435436
12 December 130258 221873 352131

Total 2830000 3250000 6080000


2011
( Seasonal )
2011
( Linear Trend Line )
| Dt-Ft|
(Seasonal)
|Dt-Ft|
(Linear Trend Line)
199768 240679 9225 50136
292139 207559 61626 22954
206650 214337
21087 28774
258626 263248 28057 32679
320185 356492 24540 60847
397060 246898 95494 54668
227035 392246 29088 136123
471356 374899
86095 10362
456287 414875 66022 24610
365504 311347 59881 5724
262837 333932 6381 77476
212553 313488 9320 91615
3670000

496817 595968



Forecast For Entire Year Column1
Slope 420000
Intercept 2410000
Y=A+Bx 3670000


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Linear Trend Line Monthly Forecasting

Period Slope Intercept
Monthly
Forecast 2011
1 50136 90271 240679
2 -22954 276421 207559
3 28774 128015 214337
4 32679 165211 263248
5 60847 173951 356492
6 -54668 410902 246898
7 136123 -16123 392246
8 -10362 405985 374899
9 24610 341045 414875
10 5724 294175 311347
11 77476 101504 333932
12 91615 38643 313488


Seasonal Factors

Column1 Column2 Column3
January S1 0.054432566
February S2 0.079601974
March S3 0.056307895
April S4 0.07047023
May S5 0.087243914
June S6 0.108190789
July S7 0.061862336
August S8 0.128434868
September S9 0.124328947
October S10 0.099592434
November S11 0.071617763
December S12 0.057916283

Method MAD MAPD
Linear Trend Line 41401.41173 15.29%
Seasonal
Adjustment 49664 18.34%

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Interpretation- Based upon the values of MAD and MAPD we can say that Linear
Trend Line technique is more accurate than Seasonal Adjusting Technique
























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APPENDIX
FORMULAE USED

c
C
D
o
C
opt
Q
2
=


2
(min)
Q
c
C
Q
D
o
C TC + =


Qopt
D
orders of No =


2
Qopt Cc
Cost Carrying =


Qopt
D Co
Cost Ordering =


) / 1 (
2
p d
c
C
D
o
C
opt
Q

=


|
|
|
.
|

\
|
+ =
p
d
Q
c
C
Q
D
o
C TC 1
2











x period for
demand for forecast
period time the
line the of slope
0) period (at intercept
: where
=
=
=
=
+ =
y
x
b
a
bx a y
n
y
y
n
x
n
x b y a
x n x
y x n xy
b

=
=
=

=

x
periods of number
: where
2
2
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REFERENCES
1) Operations Management: Processes and Supply Chains by Lee J. Krajewski and
Larry P. Ritzman, and Manoj K. Malhotra, Ninth Edition, 2010, Pearson Global
Edition.

2) Operations Management, William J. Stevenson, McGraw Hill, 9th Edition,
2007.

3) Operations Management: Producing Goods and services by Donald Waters,
Prentice Hall,2002


Websites:

1) www.google.com
2) www.jadhaogroups.com

periods of number total the n
t period for forecast the
t
F
t period in demand
t
D
number period the t
: where
=
=
=
=

=
n
t
F
t
D
MAD

=
t
D
t
F
t
D
MAPD