abb
TRANSCRIPT
INDUSTRIAL TRAINING REPORT AND
ANALYSIS OF THE COMPANY
ASEA BROWN BOVERI, BANGALORE
SUBIMITTED IN PARTIAL FULFILLMENT OF THEREQUIREMENTS OF THE
MBA DEGREE OF BANGALORE UNIVERSITY
BYBHAVANA A
REGISTRATION NO.: 02XQCM6016
M.P.Birla Institute of ManagementAssociate Bharatiya Vidya Bhavan
Bangalore-5600012001-2003
AT
SUBMITTED IN PARTIAL FULFILLMENT OFTHE REQUIREMENTS OF MBA PROGRAM
OF BANGALORE UNIVERSITY
BYBHAVANA.A02XQCM6016
M.P.BIRLA INSTITUTE OF MANAGEMENTASSOCIATE BHARATIYA VIDYA BHAVAN
# 43, RACE COURSE ROADBANGALORE
Student Declaration
I hereby declare that the internship report titled “Industrial Training
Report and Analysis of the Company ,ABB (Asea Brown Boveri),
Bangalore” submitted to Bangalore University in partial fulfillment of the
requirements for the award of the degree of Masters of Business
Administration, is my original work and not submitted for the award of any
other degree/ diploma/ fellowship or other similar titles or prizes.
Place: Bangalore
Date: 15-12-2003
(BHAVANA A)Registration #: 02XQCM6016
GUIDE’S CERTIFICATE
This is to certify that the internship report titled “Industrial Training
Report and Analysis of the Company, ABB (Asea Brown Boveri)
Bangalore” has been prepared by Ms. BHAVANA A, bearing registration
number 02XQCM6016, under my guidance. This has not formed a basis for
the award of any Degree/Diploma by Bangalore University or any other
university.
PLACE: BANGALORE
DATE: 15-12-2003
PROF. B. SRINIVASAN (Internal Guide)
Acknowledgement
At the very outset, I take this opportunity to express my sincere regards and
gratitude to every individual linked with my Project Work..
I would like to thank Mr. N.S.Malavalli, Principal, M P BIRLA
INSTITUTE OF MANAGEMENT for giving me an opportunity to
undertake the study.
I take the privilege to thank Mr.Gopal Krishna B S, Finance Executive,
ABB India and Mr. Ananthanarayanan, , Business Controller, ABB for
giving me an opportunity to take up the study.
I am grateful to Mr. H K Aravind for his insightful guidance and support
in completion of the project.
I would also like to thank staff of ABB, Peenya for sharing their valuable
knowledge with me.
Last but not the least, I wish to express my gratitude to all those who have
lent a helping hand, directly or indirectly, for the successful completion of
the project.
(BHAVANA A)
CONTENTS
Company Profile 1History 2Business Focus 3ABB India 4Business Segments 6Product Profile 9Vision & Mission 11ABB & Technology 14ABB & Global Research 15Environmental Policy of ABB 16Social Policy of ABB 17A Financial Overview 18Organization Structure 22Personnel Policy 41Systems 42Project Undertaken 43Conclusions & Recommendations 59
List of Charts & Graphs
i. ABB Network in India 5
ii. Revenue 18
iii. Profit 19
iv. Return on Capital Employed 20
v. Employee & Productivity 21
vi. Organization Structure-Overview 22
vii. Organization Structure-CEO 23
viii. Organization Structure-CFO 24
ix. Organization Structure-Business areas 25
x. Organization Structure-ABB India 27
xi. Organization Structure-Capacitors Unit 30
COMPANY PROFILE
ABB is a global automation ad power technology company, in business for morethan 100 years. The history of ABB goes back to the late 19th century and is along and illustrious record of innovation and technological leadership in manyindustries. Having helped countries all over the world to build, develop andmaintain their infrastructures, ABB has in recent years shifted from large-scalesolutions to alternative energy and the advanced products in power andautomation technologies that constitute its Industrial IT offering.
ABB’s entire global organization is built around their main customer group inorder to serve individual customers more efficiently and create more value forthem.
ABB operates in more than 120 countries and has office in 87 of those countriesto give its global and local customers the support they need to develop andconduct their business successfully.
HISTORY
1883-Ludvig Fredholm established Elektriska Aktiebolaget in Stockholm asmanufacturers of Electrical Lighting and Generators.
1890-Elektriska Aktiebolaget merges with Wenstroms and Granstroms ElektriskaKraftbolag to form Allmanna Svenska Elektriska Aktiebolaget, latershorterned to Asea.
1891-Charles E.L. Brown and Walter Boveri established Brown, Boveri & Cie(BBC) in Baden, Switzerland, which was the 1st company to transmit High-Voltage AC Power.
1932-Asea builds the world’s largest Self-Cooling Transformer and expands fanbusiness by acquiring AB Svenska Flaktfabbriken
1988-Asea and. BBC merges to form ABB (Asea Brown Boveri Ltd.) one of thelargest Electrical Engineering Companies in the world.
ABB’S BUSINESS FOCUSA new simpler ABB – Simplification of structure for enhanced operational
efficiency, cost rationalization and core competency focus.
ABB is a leader in Power and Automation technologies that enables utility andindustry customers to improve performance while lowering environmental impact.The ABB Group of Companies operates in more than 100 countries and employsabout 139,000 people.In 2002, ABB simplified its organizational structure with the key objective oflevering its domain expertise and building on a clear Market Leadership in Powerand Automation Technologies. This reorganization will enable the company toserve its utility and industry customers across the value chain with our world–class products, systems and solutions, faster and more efficiently.
Simplification is done in the following manner – 7 Divisions to 3 Divisions 13 Business Areas (Automation Technology) to 6 Business Areas 7 Business Areas (Power Technology) to 6 Business Areas
Strategy- Build on our leadership in power and automation technologies for utilityand industry customers.
Culture- Shared Intentions- “our ABB”, open communication and dialogue, fastdecisions, execution, disciplined culture, acting in the overall interest of ABB.
Structure-Slimmer structure reduces complexity and reflects focused portfolio.
People- Leadership based on respect for values, trust and accountability – saywhat we mean, mean what we say.
ABB INDIA
“Thinking Global, Acting Local”
ABB in India serves utility and industry customers with the complete range ofABB’s offerings. The company has a vast installed base, extensive localmanufacturing at 8 units and a countrywide marketing and service presence. Asa strategic thrust to our standard products business, ABB has developed anational channel partner network, which ensures geographical reach andpenetration for our products and services.
In order to leverage India’s intrinsic technology strengths and the vast pool ofhighly qualified software professionals, ABB has set up a dedicated global R&DCenter in Bangalore, which focuses on software development and Industrial ITdevelopment and deployment. It also helps maintain and support a range ofsoftware intensive products and acts as a partner for ABB R&D centers as wellas business areas within the group.
3200 employees 8 manufacturing facilities 25 marketing offices 4 service centers 3 training centers
3200 employees 8 manufacturing facilities 25 marketing offices 4 service centers 3 training centers
BUSINESS SEGMENTS OF ABB
ABB has streamlined its divisional structure to focus on two core businesses:Power Technologies and Automation Technologies. ABB is a recognized globalleader in all its businesses
The businesses of the ABB Group is organized into 3 Business Segments, whichare as follows- ABB Power Technologies serves electric, gas and water utilities as well as
industrial and commercial customers, with a broad range of products,systems and services for power transmission, distribution and automation.ABB is the World’s largest supplier in the field of Power Transmission.ABB has the widest global presence and the most complete product rangeavailable. The Power Transmission Segment provides Products andServices like Air and Gas Insulated Switch Gear Products Solution and High Current Systems Power Transformers and Reactors Products and Solutions for Power Cables High Voltage Direct Current Systems.
ABB also provides a complete range of equipment for Power Distribution, fromTransformers and Switchgears to complete Distribution Systems. It providesproducts for distribution of Electrical Energy including Medium-VoltageSwitchgears, Apparatus and Prefabricated Factory Assemblies. It also providesSolutions and Systems for Distribution of Energy to Rural, urban and Industrialconsumers as well as for Airport Installations.
ABB Automation Technologies blends a robust product and serviceportfolio with end-user expertise and global presence to deliver solutionsfor control, motion, protection, and plant integration across the full rangeof process and utility industries.ABB’s Automation Business Segment provides a wide variety of products,systems used in almost all industries as well as solutions for particularapplications and industries. It provides Automation Power Products likeDrives, Motors and Power Electronics, Instrumentation and ControlProducts like Field Devices for Sensing, Controlling and Actuating,Analyzers, Metering Equipment, Control and Information Systems, DieselEngine Supercharges etc..
ABB Oil, Gas and Petrochemicals supplies a comprehensive range of
products, systems and services to the oil- and gas-industries, fromonshore and offshore exploration technologies to the design and supply ofproduction facilities, refineries and petrochemicals plants. ABB serves as a supplier and business partner for Oil, Gas andPetrochemicals Companies. World’s Fossil Reserves are finite. But theywill not run out in the foreseeable future if we use them wisely and replacethem with renewable energy sources wherever possible. Advanced,innovative technology is required to make their use sustainable.
ABB provides such technology for all parts of the Oil and Gas Industries,Onshore and Offshore, as a supplier of Equipment and Systems, TurkeyProjects, Services and Technology Licensing. ABB’s offer of PetroleumIndustries include- Refineries Gas Processing Plants Sub-sea production Systems Petrochemical Plants Offshore Drilling Equipment Floating Production Systems
PRODUCT PROFILE
Product Guide: Building Systems and Services Control Systems High Voltage Capacitors Instrumentation
o Actuators and Positioners
o Analytical Instruments
o Control Valves
o Flow Measurement
o Interface Products
o Pressure and Level
o Measurement
o Process Control
o Recorders and Indicators
o Temperature measurement
Low Voltage Products Medium Voltage Products Motors and Drives Oil and Gas Robotics Transformers Valves and Actuators
Service Guide: Asset Assessment Consulting
o Eutuch Process
o Solutions
Environmental Services Installation and Commissioning Maintenance and Field Services Optimization Performance Services Spare Parts and Repairs Training Financial Services
VISION AND MISSION
Vision:To be as the most capable and reliable partner while build futurecompetitiveness.
We want our customers to become “Front Runners”
We want to become “Main Partners” on the road to Excellence, by offeringInnovative, “Best in Class” level products and services by fostering thegrowth of resources that will play responsibility roles in the companieswithin the ABB Group.
Mission Statements:
We supply competitive, top-market level Consultancy Service.
We support change projects including the implementation step and gettingthe planned results.
We optimize all companies Processes.
We promote Know-how at International level.
We sustain the implementation of “Global Process”.
We foster the growth of resources that will play managerial roles.
Values:We create value:
By making our customers more competitive in a networked world.
We strive to help our customers gain competitive advantage from technology
advances and developments in their markets. We do this by creating
comprehensive industrial IT offerings that combine World Class products
and services with superior domain know-how and collaborative commerce.
By offering our employees opportunities to learn, grow and share in the
value created by their efforts .
We reward creativity, flexibility and results-oriented actions that help
make our customers successful. Through adoption of common business
processes we realize energies and creativity to focus on serving our
customers.
By achieving returns that meet or exceed the expectations of our shareholders. We generate the growth that creates investor confidence by managing for
value. The power of being close to the market and understanding how we
can create more value for our customers will generate the financial strength
needed in fast changing capital markets.
By living our commitment to sustainability .
We strive for a balance in the economic, environmental and social impact of
our business and we actively contribute to economic progress,
environmental stewardship and sustainable development in the communities
and countries in which we operate.
ABB’s strategyIn the short to medium term, this is our strategy for sustainability:
To ensure that all operating units implement environmental managementsystems and continuously improve their environmental performance; andto encourage them to set an example by going beyond mere compliancewith local environmental standards and laws
To continuously improve the eco-efficiency of all our products, systemsand services, and publish this information in environmental productdeclarations
To share the most advanced and eco-efficient technologies withdeveloping countries
To apply our social policy, including occupational health and safetypolicies, throughout the Group, and develop procedures and indicators toimprove social performance continuously
To favor and encourage suppliers who have environmental and socialpolicies similar to our own
To apply resources to common efforts that foster economic,environmental, social and educational development
To analyze and reduce the environmental impact of our transportation ofgoods and people
To use ABB’s communications resources to raise awareness ofsustainability matters, particularly among our own employees
Towards a new consensusStrategies and policies can take us some of the way. But to make real progress,we need to implement our policies and help shape the environment in which weare active.In short, it is not enough for ABB alone to place a premium on sustainability.Our customers, our suppliers, in fact, all our stakeholders must agree on thevalue of sustainability.More, we must constantly strive to transform sustainability into customer values.This is the true challenge before us. Gradually, subtly, every company,government, stakeholder and individual must come to agree that sustainablepolicies are the only acceptable policies.Sustainability is everyone’s business.
ABB AND TECHNOLOGY
ABB has been recognized as a Technology Leader for over a century, withmany pioneering breakthroughs to its credit. The company invests about 7% ofits Group’s Turnover in research and order related development, which isweaved into a fabric of its business offering. The company has an excellenttrack record when it comes to “intensity of innovation”, with around 75% of theirbusiness being based on products developed in the past five years. Theultimate aim of their technology initiatives is to make their utility and industrycustomers more competitive while reducing environmental impact.
In today’s competitive business environment, all business are seeking radicalproductivity and efficiency improvements through increased automation andintegration of manufacturing and business processes. ABB is spearheading thiseffort through its open architecture based Industrial IT platform aimed at real-time, seamless integration of plant operations and business processes acrossthe entire value chain. The company combines its knowledge of the industryand business processes with world-class products, systems and services. Thisdomain competence has been gained through years of experience acrossindustries and in all parts of the world. ABB is also “information enabling” itsproducts, which forms an integral part of the automated manufacturingprocesses of many industries.
ABB AND GLOBAL RESEARCH
ABB is unique in their approach to R&D. The work is organized via Researchlabs in Business Areas and Corporate Research Centres. Currently it has about1200 researchers and scientists working in Corporate Research Centres. Theyalso have Research Centres located in Sweden, Switzerland, Germany, Norway,Finland, Italy, 2in the US ad the latest additional is an Indian Centre, which istheir 1st Research Centre in Asia.
Combined they have over 6000 scientists and engineers working in R&D in theirDivisions and in Corporate Research Centres. All of these are working hard toinvent new technologies, which will ensure a continued successful partnershipwith their customers. Additionally, the fresh and innovative thinking arising fromsynergies with over 70 universities and research institutes is an important factorin keeping ABB a world Technology Leader.
ENVIRONMENTAL POLICY OF ABB
ABB is a signatory to the International Chamber of Commerce Business Charterfor Sustainable Development, and in 1992 adopted the 16 principles of theCharter as its group-wide environmental policy.
The 16 Principles are as follows-
o Corporate priority
o Integrated management
o Process of improvement
o Employee education
o Prior assessment
o Products and service
o Customer advice
o Facilities and operations
o Research
o Precautionary approach
o Contractors and suppliers
o Emergency preparedness
o Transfer of technology
o Contributing to the common effort
o Openness to concerns
o Compliance and reporting
SOCIAL POLICY OF ABB
ABB’s social policy was adopted in February 2001. It draws on four sources: theUnited Nations’ Universal Declaration of Human Rights, the International LaborOrganization’s fundamental principles on rights at work, the OECD Guidelinesfor Multinational Enterprises and the Social Accountability 8000 (SA 8000)standard, an auditable standard for the protection of workers’ rights developedby the Council on Economic Priorities Accreditation Agency.
o ABB in society
o Human rights
o Protection children and young workers
o Freedom of engagement
o Health and safety
o Employee consultation and communication
o Equality of opportunity
o Mobbing and disciplinary practices
o Working hours
o Employees
o Suppliers
o Community involvement
o Business ethics
A FINANCIAL OVERVIEW
5 YEAR HIGHLIGHTS OF ABB INDIA
Revenues
(Rs. In Millions)
89347934 8068
1055812006
0
2000
4000
6000
8000
10000
12000
14000
1998 1999 2000 2001 2002
Profit After Tax
(Rs. In Millions)
377.3 372
540.1653.3
813.5
0100200300400500600700800900
1998 1999 2000 2001 2002
Return on Capital Employed (%)
12.4 13.6
18.421.8
26
0
5
10
15
20
25
30
1998 1999 2000 2001 2002
Employees and Productivity
Number of Employees
Revenue per Employee (Rs. In Thousands)
4726
3606 3356 36423235
0
1000
2000
3000
4000
5000
1998 1999 2000 2001 2002
18902200 2402
2899
3711
0500
1000150020002500300035004000
1998 1999 2000 2001 2002
ORGANISATIONAL STRUCTURE
ABB is not only unique at its business front but also in its OrganizationalStructure. The Company follows Matrix Form of Organizational Structure.
ECM-Executive Committee Member
Board ofDirectors
ExecutiveCommittees
Chief Executive Officer
Chairman and Chief Finance Officer
ECM For Human Resources
ECM For Automation Technologies
ECM For Power Technologies
GROUP FUNCTIONS
CEO
Reporting to CEO
Corporate Communications
Group Internal Audit
Legal Affairs and Compliance
Research and Development
CFO
EXECUTIVE COMMITTEE MEMBER FOR HUMAN RESOURCES
BUSINESS AREAS
Reporting to ECMHuman Resources
Sustainability Affairs
Reporting to CFO
Chief Information Officer
Group Controlling
Corporate Finance and Taxes
Risk Management
Finance Advisory
Investor Relations
Mergers& Acquisitions and New Ventures
AUTOMATION TECHNOLOGIES
POWER TECHNOLOGIES
Automation Technologies
Drives, Motors and Power Electronics
Low-Voltage Products and Instrumentation
Robotics, Automotive and Manufacturing Industries
Paper, Minerals, Marine and Turbo charging
Petroleum, Chemical and Consumer Industries
Control Platform and Enterprise Products
OIL, GAS AND PETROCHEMICALS
Oil, Gas and Petrochemicals
Downstream Upstream
Power Technologies
Distribution Transformers
Power Systems
Medium-Voltage Products
High-Voltage Products
Utility Automation Systems
Power Transformers
ABB INDIA
Automation Technologies
The Automation Technologies division serves customers across the industryspectrum in the automotive, chemicals, consumer, electronics, life sciences,manufacturing, marine, metals, minerals, paper, petroleum, turbo charging andutilities. ABB’s competitive edge is its unparalleled domain expertise and cuttingedge technologies which include a comprehensive portfolio comprising IndustrialIT-based measurement, control, instrumentation, process analysis, drives,motors, power electronics, robots, software, low-voltage products, fieldmaintenance and asset management services.
ABB India
AutomationTechnology
Power Technology
BusinessAreas
BusinessAreas
BusinessUnits
BusinessUnits
ABB offers complete solutions, fully integrating industrial processes that arebacked by world-class platforms. The offering includes complete electrical,process control & automation and a broad range of software applications.
We are committed to harnessing the power of information technology, Internetand e-commerce to deliver faster and more effective solutions, moving aheadalong with our customers, into the knowledge based economies of the future.
Power Technologies
The Power Technologies division serves electric, gas and water utilities as wellas industrial and commercial customers, with a broad range of products, servicesand solutions for power transmission and distribution. The portfolio includestransformers, switchgear, breakers, capacitors and cables, as well as high- andmedium-voltage applications.
ABB’s solutions facilitate the flow of electrical power from generating stations,transmitted through cross-country power lines. ABB’s distribution systems furtherhelp to bring electric power from high-voltage substations to end-users. ABBdelivers end-to-end solutions, playing a key role in electrification and energyprojects- both new and retrofit – for urban and rural utilities as well as forindustrial and commercial customers.
ABB has pioneered several technologies in India including the introduction of selfblast SF6 technology, first HVDC back-to-back converter station, first SVC, firstHVDC transmission line, first 400 kV switchyard, India’s first IPP, turnkeysubstation for the first barge mounted IPP and many more.
ABB India has also delivered several turnkey substation solutions up to 400KVfor central and state power utilities across the country and beyond. Recentinternational successes include significant orders in Syria, Bhutan and Iceland.Our focus on technological innovation helps us provide state-of-the-art productsand solutions to our customers, making them more efficient and competitive.
As part of our global optimization philosophy, ABB India’s state-of-the-artmanufacturing facility in Vadodara has been designated as a global sourcingbase for 72.5 kV outdoor circuit breakers. The Nashik unit has also been nameda global focused feeder factory for 11 kV and 33 kV outdoor vacuum/SF6 circuitbreakers, Magnetic Actuators and indoor HPA SF6 breakers. Several otherproducts and components manufactured in India are increasingly being exportedacross the world. As part of our strategic business thrust on projects andservices we have broken new ground in international markets winning significantorders, thus consolidating our position globally.
Organizational Structure ofThe Capacitors Unit
(A Business Unit under Power Technologies Division)At Peenya Factory, Bangalore.
UNIT HEAD
UNIT HTCAPACITORS
UNIT LTCAPACITORS
INDUSTRIALSOLUTIONS
CONTROLLER
LOGISTICS
SERVICE &COMMISIONING
UNIT HV CAPACITORS
UNIT HVCAPACITOR
S
MARKETINGMANAGER
TECHNICALMANAGER
PRODUCTIONMANAGER
ORDERHANDLING
CUSTOMERCLEARANCE
COMMERCIALASPECTS
QUALITYMANAGER
TECHNICALENGINEER PLANNER
INSPECTION
STOREKEEPER
SUPERVISOR
WORKERS
Marketing Department:The basic aim of the department is to meet its Order Target as per the budget.The Company has its Regional Marketing Offices spread across the Country. Theseoffices tender the prospective orders, quote as per the specifications of the relevantManufacturing Unit and bag the orders which are forwarded to the ManufacturingUnit. For Tendering, Standard Tenders are used that lists the Specialty of ABB. Thefunctions of the Marketing Department of the Business Unit include-
Order Handling o Sending orders based on enquiry
o Studying the customers need by visiting the site
o Assisting in Designing and Manufacturing
o Preparing Production and Dispatch Schedule
o Conducting Seminars for customers for Product Awareness, etc.
Customer Clearance o Getting the Drawings Approved
o Re-engineering and Follow-up
Commercial Aspects o Checking the Creditworthiness of the customer
o Getting Bank Guarantee
o Preparing Invoice
o Receivables Management on the receipt of Materials Acceptance Statement /
Materials Receipt Certificate from the customer
The Department also carries out Developmental Activities like Training, ProductDevelopment etc..
Technical Department: Quality Manager o Quality Control at the following stages
Inward Inspection- specifies the parameters for inward inspection On Process –
Material Specifications
Production Instructions
Process Modules
Work Instructions Final Inspection – with respect to Final Producto Instructs in case of Deviation in the Production Process and not involved in the day-
to-day activitieso Vendor Identification – In case of new equipments, with respect to
Sustainability Qualityo Vendor Development – Vendor Rating, every Quarter on the basis of
Delivery Rating Price Quality
Technical Engineer o Designing
o Re-engineering
o Preparing Bill of Materials (BOM)
Production Department: Planner o Prepares the Purchase Requisition along with the preferred Supplier
o Prepares the Production Schedule
o Participates in Subcontracting
Inspection o Inspects the Materials received
o Prepares Material Receipt Advice (MRA) if accepted
o Records the acceptance in the SAP system that alters the Stores Ledger
Store Keeper o Accepts the Goods against the MRA
o Issues the Materials to the Production against the Issue List
o Dispatching the Finished Goods
o Physical Stock Taking
Supervisor o Carries on Material Planning
o Issues Materials Requisition to Stores
o Issues materials for Production at Plant
o Documentation at the end of each process
o Other Activities
Supervision Operations Control Stores Data
UNIT LV CAPACITORS
LV Capacitors- a new range of solutions for quality power With accountability coming to the power distribution sector there is increased focuson enhancing operational efficiency. Applications such as motors, transformers,welding equipment, induction furnaces and lighting consume both reactive andactive power resulting in reduced availability and lower quality of power. Thistranslates into lower capacity utilization and eventually, additional capital andrunning costs.ABB with its extensive experience and the latest technology has designed anddeveloped a comprehensive range of products and solutions to improve the powerquality of low voltage networks by eliminating disturbances and improving powerfactor. ABB’s highly advanced and cost-effective solutions for improving powerquality while also reducing unnecessary costs.
The dealers of the LT Capacitors, known as ‘Channel Partners’, propagate theproducts throughout the country.
The Unit undertakes only the Marketing and Sales activities and ProjectManagement while executed by the Production Department of the HV Unit.The functions of the Unit are-
UNIT LVCAPACITORS
MARKETINGMANAGER
TECHNICALMANAGER
MANUFACTURING AND TESTING- LT CAPACITORS
MANUFACTURING AND TESTING- STATCON
Order Handling o Sending orders based on enquiry
o Studying the customers need by visiting the site
o Assisting in Designing and Manufacturing
o Preparing Production and Dispatch Schedule
o Conducting Seminars for customers for Product Awareness, etc.
Customer Clearance o Getting the Drawings Approved
o Re-engineering and Follow-up
Commercial Aspects o Preparing Invoice
o Receivables Management on the receipt of Materials Acceptance Statement /
Materials Receipt Certificate from the customer
INDUSTRIAL SOLUTIONS
The Department deals in Complicated Systems that require special engineering,usually tailored, like-
Harmonic Filters
Static Var CompensationThe Department undertakes only the Marketing and Sales activities and ProjectManagement while executed by the Production Department of the HV Unit.
Other Functions are-
INDUSTRIALSOLUTIONS
MANAGER
Techno- Commercial Offers
Negotiations with the customers
Booking the order
Systems study at the customers site
Collecting Design Data
Designing
Follow up of the order
SERVICE AND COMMISIONING
The Service and Commissioning Department is basically concerned with After SaleServices and its activities include-
Purchases Spares and Components for the customers
Regular Feedback form the customers
Assistance in the erection of the equipment
Providing Service at the Customer’s Site
Commissioning the equipments at regular intervals
SERVICE &COMMISSIONING
COMMISSIONINGENGINEER
CONTROLLER
The Controller looks after the overall business and the financial Aspects of theBusiness Unit and reports both to the Business Area Manager and the DivisionalFinance Controller. His activities are centralized for the Petty Issues, known as‘Group Service System’ or ‘GP’.
Preparation of Full Cost Module(FCM)- Before a Quotation is made, a FCM isprepared to test the feasibility of the project by considering-
o Overhead Recovery
o Gross and Net Margins, etc.
CONTROLLER
HT CAPACITORS LT CAPACITORS
Forecasting- This function includes Verifying the Compliance of the targets set asper the Budget by checking-
o Invoice for Order Target- The rate of converting the orders to invoice
o Receivables for Revenue Target
o Working Capital for EBIT Target
o Capital Employed for Cash Flow Target -Here the Target will be to maintain a
Positive Cash Flow The Confirmation of the Targets is reported through ‘Rolling Forecast’ to- o The Country Management every Month
o The Global Management every Quarter
Receivables Management – Although the Commercial Aspects of receivablesManagement are taken care of by the Marketing Personnel, the Controlleraims at “Reducing the Receivables and Collecting More by visiting theRegional Offices and Meeting the Customers Personally”.
Inventory Management- The Controller also participates in the InventoryManagement in the matters like, the preparation of Purchase Order toconsider
o Cash Flow Situations
o Prices, etc.
Costing- The Controller also monitors the Material Cost and the OverheadCost incurred at the Production Site for each Job.
Monthly Closure of Accounts- The Books of Accounts pertaining to theBusiness Unit are closed every month, for the purpose of Reporting. The Keyareas of Concentration, among others will be-
o Level of Work-in-progress
o Closing Inventory as per Accounting Standards
o Provision for Future Orders
o Intra and Inter Company Reconciliations
o Matching Revenues to Cost
Auditing- The Controller is also responsible to get the books audited at theBusiness Unit Level. The Audits along with the External Annual Auditincludes-
o Quarterly Audit
o Half-Yearly Audit
o Transactional Audit
o Quarterly Audit
Logistics is handled by a Single Person, whose Functional Responsibilities are asfollows- To receive Purchase Requisition from the Planner. This clearly states the Materials,
Quantity, Preferred Supplier and the Date by which the materials are required. To place the Order To ensure the procurement of the Materials in time To participate in the Vendor Development Programme
PERSONNEL POLICY OF ABB INDIA
Satisfied Customers and motivated employees are of vital importance to ABB’slong term competitiveness.
Each Employee shall- Understand his / her role Have necessary empowerment Take Responsibility Develop his / her competence- Knowledge, Will and Ability Clearly defined objectives for both the individual and the work teams shall
be the corner-stone for their activities Respect for, and confidence in, the individual shall characterize their work
environment. This must be safe and stimulating The local Unions shall be natural cooperation partners Each Manager at ABB shall continually develop his/ her Management
Skills and Leadership so as to be able to assume full responsibility for theemployees
Planning Discussions shall be held atleast once a year with eachindividual employee
The goal of their learning organization is to achieve a continuousdevelopment and provide career opportunities consistent with abilities
Ethics, equal opportunities and an open and honest exchange of thoughtsand ideas are the corner-stone of their actions
SYSTEMS
The company has a SAP system which covers the transactions relevant tobooking of order received from customers, to dispatch of finished product to thecustomer to the clearance of Accounts. Thus the system covers the areas likeorder handling, engineering, planning, purchasing, quality control, inspection,stores, manufacturing, servicing and commissioning, and accounting.
The SAP picks up data from the database and uses this data for the purpose ofthe above said departments. This system is presently fulfilling all the routinerequirements of the users.
INVENTORY MANAGEMENT PRACTICES AT ABB, PEENYA
INTRODUCTION TO SAP SYSTEM
Role of SAP System with respect to Inventory Management are- Provides information about the Stock-on-hand and helps in the creation of
Purchase Requisition. Provides details about the suppliers to the Purchase Department. Thus a
Purchase Order is raised in the system. Maintains a record of Stock-on-hand and tracks the movement of Materials. Perpetual Inventory System
PROCESS OF INVENTORY MANAGEMENT AND
THE ROLE OF VARIOUS DEPARTMENTS
The Marketing Department bags the order for the products from the customers.Once the order is obtained a mail in which the details of the order are explained,is sent to the Engineering Department. The Department also keeps track of theproject.
The Engineering Department is mainly concerned with order handling and in thepreparation of documents needed for production. The Department prepares allthe Engineering Designs with the assistance of AutoCAD Software Package. TheDesigns are sent for Customer Clearance. The necessary alterations are madein the Drawings, if required, which calls for re-engineering. The department also prepares a BOM (Bill of Materials) using the MS ExcelPackage which is later transferred to SAP. The BOM lists all the materialsrequired for the said project and the Quantity of each item. The document alsostates the Substitute Materials that can be used when the original material arenot available. A copy of BOM, enclosed with the supporting Drawings isforwarded to each of the following departments –
Planning or Purchase
Quality Control/Inspection
Stores
Production
The Planning or Purchasing Department decides the Quantity of each materialstated in the BOM with the assistance of the system which considers-* Safety Stock/Minimum Stock* Materials already ordered but awaiting receipt* Requirement of the materials by other projects* Maximum Stock Level
Thus a PR (Purchase Requisition) is raised for such articles for which the stock-in-hand is not sufficient to fulfill the requirements. If the item for which the PR israised is an earlier supplied item, the Materials Master is checked which containsa list of Suppliers with the price details. The criteria for selecting the supplier are*Price, *Quality and *Delivery Time. If the item required is a new item, the ItemSpecification is explained to the Vendor, Capacity of the Vendor is Judged,Quotations for the Products are received. Once the Supplier is selected a PO(Purchase Order) is raised which is placed with the supplier.There are three types of PO’s. They are:
1. Stock PO- for those goods that go to the Stores and are accounted in theSystem.
2. Miscellaneous or Miss PO- for those goods that go to the Productiondirectly and are not accounted in the System. This includes consumableItems like Soaps, Auxiliaries, Grease etc..
3. Subcontract PO- This is raised in case of subcontracting the order,wherein all the Raw-Materials are supplied to the Subcontractor, whocarries on only labour work on the materials.
The Department also issues an IL (Issue List) to the stores, which is a basis onwhich the issues are made by the Stores to the Production.
The Inspection or Quality Control Department receives the goods along with theDC (Delivery Challan) and carries on a Random Sampling Test with respect tothe Physical Dimensions specified in the design enclosed to the copy of BOMissued by the Engineering Department. Incase of Chemicals/Electrical
Equipments, the Supplier, himself should test the materials in a Laboratory and acopy of the Test Results should be enclosed to the DC which usually denotesthe max./min. capacity in terms of percentage, which is cross-checked with thedesign specifications or the Planner’s orders.
If the goods received are as per the designs a MRA (Materials Receipt Advice) isgenerated in the system which alters the Stock Figures.
Whenever a MRA is prepared, the system cross-checks the Quantity of goodsreceived as against the PO. If the is any discrepancy, it alerts the user about thedifference.
The goods then move to the Stores Department where the stores personreceives the goods and verifies them against the MRA. The stock is put in therespective Bin Location. Whenever the production department requires thematerials, the stores make the necessary issues on the basis of the IL receivedfrom the Planner. Once the goods are issued, the system is again updated withthe changes.
Once the goods are issued to the Production and the Production Process iscomplete, the Production Manager issues the IO (Issue Order) to the Stores andthe Finished Goods move to the stores. The department which is also in chargeof Dispatch of the Final Product to the customer dispatches the Final Product,along with the Mounting Equipments and other accessories to the customer’ssite.
The product moves out of the factory along with the Invoice and the relevantDrawings for the Mounting and other internal connections of the CapacitorsBanks and other Manuals. This is, however backed up by Advice andConsultation for Total Implementation.
Apart from this the department also follows the Perpetual Inventory System, bytaking Physical Stocks every Quarter.
ACCOUNTING POLICIES FOR INVENTORY AT ABB
Inventories are stated at the lower of Cost Net Realisable Value
The cost of various categories of Inventories is arrived at as follows:o Stores, Spares, Raw-Materials and Components are charged at rates
determined on the Weighted Average Method.o Work-in-progress and Finished Goods are charged at Full Absorption
Costing Method based on Annual Average Cost of Production. ExciseDuty is included in the value of Finished Goods Inventory.
o Packaging Materials, Loose Tools and Consumables are charged off at
the point of Purchase.
Provision for Obsolescence is made wherever necessary.
MONITORING AND CONTROLLING OF INVENTORIES
1) Target /Maximum Stock Holding: The SAP System while raising the Purchase Requisition sees to that theTotal Value of the Inventory in the Factory should not exceed the MaximumLevel at any point of time. Here the Total Inventory includes those in Stock,on Production, already Ordered and To Be Ordered.
2) ABC Analysis: It is a Selective Approach aimed at keeping the Investment low and at thesame time avoiding stock-outs of Critical items. The high value items, interms of money value consumption get segregated for Pinpoint Control andextensive paper-work is avoided in case of low value items.ABB does this analysis in the following way:
The consumption of each of the Raw-material used at the plant isobserved over a period of time. On the basis of their usage, the totalmoney value of each of the items consumed is extrapolated for ayear.
The materials are arranged in descending order of the consumptionvalue.
The cost of each material is expressed as a Percentage of the TotalCost of the Raw-materials consumed during the last year.
The Materials constituting the first 60% by Value will form the A Classitems, the next 30% form B Class items and the Last 10% form the CClass items.
3) FSN Analysis: For the purpose of Monitoring and Controlling the Inventories, the Companyclassifies the inventory into Fast Moving, Slow Moving and Non Movingcategories.
The category is done as under-
Non Moving Items- It includes Stock which has not at all moved forthe past 6 months.
Slow Moving Items- It includes Stock which has not at all moved forthe past 3 months.
Fast Moving Items- It includes the stock which is not included in theabove 2 categories.
The FSN Analysis considers only Quantity of Stock and the Transactions (i.e.movement of Quantity of Stock) and not the Value of Stock.The Non Moving and Slow Moving Items are found at 10% each of the TotalStock.
A list of these stocks is provided to the Planner and the Engineer, who try toaccommodate these items in the Prospective Projects. Thus efforts are madeto minimize these stocks.
4) Perpetual Inventory System: The Perpetual Inventory System followed by ABB is as follows- The Stores Department does not maintain Bin cards (Quantitative PerpetualInventory) and Stores Ledger (Quantitative or Valued Perpetual Inventory).Both are maintained in the system. Each item is given a separate BinLocation and number. Details about the availability of stock and the value ofthe stock are available in the SAP system. The Stores Department has beengiven a separate Module in the SAP Package where the relevant informationabout the Stock is found. Hence this module satisfies the requirements of anefficient Perpetual Inventory System.
However, the Perpetual Inventory System is not complete without asystematic procedure for physical verification of stores. The SAP Systemrecords the balances, the correctness of which can be verified by means of
Physical Verification only. The Stores Department does Physical StockTaking in each Quarter.
INVENTORY IDENTIFICATION
It may happen that different departments may refer the same materials indifferent ways. When such a thing happens, the Purchase Department mayplace several orders on the same item and this may lead to unnecessaryblocking of funds. This problem can be avoided if only every item of Inventory isidentified in a unique way. Identifying Inventories is very important for inventoryControl, i.e. Inventories can be controlled only if they are identified. UniqueIdentification of inventory helps in avoiding confusions and duplications. It willhelp Standardization and application of Cost Reduction Techniques.
Presently, ABB operates on a 14 character Codification System. A combinationof Numbers and Alphabets are user for coding, along with an Hyphen in the 11th
position. However, the Alphabets I,O&Q are not allowed due the risk of mixingwith 1&0.
The general norm for Coding is as follows:The Positions are filled in as follows-
1 2 3 4 5 6 7 8 9 10 11 12 13 14N A A A N N N N N N N/A N/A N/A
N – NumberA – Alphabet
Positions 1&2- Country
Position 3&4- Area of BusinessPositions 5 onwards- The codes are decided by the Business Units
The Capacitors Unit at ABB, Peenya, Bangalore follows the following criteria-Position 5- Size of the Paper used for Drawing; usually A4 or A3Positions 6 to 10- General Category of Articles- like Insulators, films, Foils etc.Position 11- HyphenPositions 12 to 14- Sub-category to the main numbers in the Positions 6 to 10.
Note: While assigning numbers in positions 6 to 10 and 12 to 14, all positionshall be filled in, including leading Zeros. (E.g. – 00001)
However, in case of Order Specific Articles the Coding will be as follows-Positions 1&2- Area of BusinessPositions 3&4-Country
The rest of the position remains the same as Standard Articles. When acomponent part numbered under this system is called up again repeatedly forother new orders, the article shall be treated as Standard Article and re-numbered according to Standard Items and the will be amended.
ANALTSIS OF INVENTORY OF ABB INDIA
Diagram No. 1
Graph Showing the Composition of Total Assets
Fixed Assets
13%
Cash & Bank
Balances25%
Inventories10%
Investments2%
Sundry Debtors
42%
Loans/Advances8%
The above graph shows that the Inventory constitutes 10% of the Total Assets.
Diagram No. 2
Graph Showing the Composition of Current Assets
Inventories12%
Sundry Debtors
49%
Cash and Bank
Balances29%
Loans and Avances
10%
The above graph shows that Inventory constitutes 12% of Total CurrentAssets.
RATIO ANALYSIS(ABB INDIA)
1. Raw-Materials Turnover Ratio = Raw-Materials Consumed / Average Raw-Materials Inventory
(Rupees in Thousands) Raw-Materials Consumed = 4,672,112 Average Raw-Materials Inventory = 654,219 Raw-Materials Turnover Ratio = 4,672,112 / 654,219 = 7.14 Times
Raw-Materials Inventory Holdings = 365 / Raw-Materials Turnover Ratio = 365 / 7.14 = 51.10 or 51 DaysIt indicates that on an average the company carries 51 days inventories.
2. Work-in-Progress Turnover Ratio = Cost of Production / Average Work-in-Progress Inventory(Rupees in Thousands)Cost of Production = 10,325,620 Average Work-in-Progress Inventory = 426,078Work-in-Progress Turnover Ratio = 10,325,620 / 426,078
= 24.23 Times
Work-in-Progress Inventory Holdings = 365 / Work-in-Progress Turnover Ratio = 365 / 24.23 = 15 DaysIt takes 15 days on an average to convert Work-in-Progress to Finished Goods.
3. Finished Goods Turnover Ratio = Cost of Goods Sold / Average FinishedGoods Inventory
(Rupees in Thousands)Cost of Goods Sold = 10,776,047 Average Finished Goods Inventory = 74,555
Finished Goods Turnover Ratio = 10,776,047 / 74,555 = 144.53 Times Finished Goods Inventory Holdings = 365 / Finished Goods Turnover Ratio = 365 / 144.53
= 2.52 or 3 DaysIt takes 3 days to convert Finished Goods to a Sale.
This ratio is not of much relevance because most of the Products in theCapacitors Segment are made to orders. So the efficiency with which thecompany converts Finished Goods to Sales is not of any significance as goodsare manufactured only when the order is obtained.
REASONS FOR PILING UP OF INVENTORIES
Some items are specific to particular projects. Customer specifications maychange in the midway of production. Such products can not be used for otherprojects and therefore lie as Non Moving Items.
The reasons identified for the piling up of Inventories- a) Some materials have to be ordered as per the Minimum Order Quantity
which may be more than what is required for the project. The excessmaterial piles up as Inventory.
b) The Planner may order for Safety Buffers because of lack of trust on thesuppliers for On Time Delivery. These Buffers pile up as Inventory.
c) Products in Stock get Out-dated and remain as unused Inventory.
CONCLUSIONS AND RECOMMENDATIONS
ConclusionDuring the project work the Inventory Management Practices at ABB is foundsatisfactory. A few conclusions where changes are needed have been drawnfrom the study. Inventory Holdings were not as per the target levels set, the reasons for
which are explained earlier. Non Moving Stock and Slow Moving Stock account for 10% each of the
total inventory which increases the carrying cost of Inventories. The products are classified into ABC categories on the basis of their
values alone. Also the categories are not considered while takingPhysical Stock.
Recommendations In case of changes in specifications made by the customer at a later date,
the items piles up in the Inventory. This should be avoided by charging thecost of the product to the customer and disposing the items immediately.
The Planner should select the best of the Suppliers considering the factorof Delivering Time, thus avoiding the Buffers pile up as inventory.
The Minimum Order Quantity Should be reduced. If the Non Moving Items that are not likely to be required for further
projects, should be sold or scrapped. Also, action must be taken toremove Slow Moving Items.
In case of Physical Stock taking, the ABC materials of stores controlshould be adopted. The product should be classified into categoriesconsidering their value as well as the Frequency of Replenishment duringa period.
