inventory manage ment

8/4/2019 Inventory Manage Ment

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CONTENT PG NO SIGNATURE

DECLARATION

ACKNOELEDGEMENT

CORPORATE PROFILE

COMPANY PROFILE

HISTORY

BOARD OFDIRECTORS

LITRATURE SURVEY

RESARCH

METHODOLOGY

MICRO ANALYSIS

MACRO ANALYSIS

CONCLUSIONRECOMMENDATION

QUESTIONNAIRE

LIMITATION

BIBLIOGRAPHY


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DECLERATION

I GIRIJA SHARMA, student of M.B.A 3rd

SEM AT

NGFCET hereby declare that I have completed my research

report on the topic titled INVENTORY MANAGEMENT OF

HONDA, as a compulsory part of my course curriculum.

The information provided in the report is original and has notbeen copied from anywhere.

This report is not submitted to any other university/institute

for the award of any other degree/diploma.

GIRJA SHARMA


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ACKNOWLEDGEMENT

NO MAN IS COMPLETE IN KNOWLEDGE BUT SINGLE

RAY OF KNOWLEDGE CAN BE HELPFUL TO MAN.

The research on INVENTORY MANAGE MENT OF HONDA,has

been given to me as part of the curriculum in Two-Years Masters

Degree in Business Administration.

I have tried my best to present this information as clearly as possible

using basic terms that I hope will be comprehended by the widestspectrum of researchers, analysts and students for further studies.

I have completed this study under the able guidance and supervision

ofMr.ANIMESH SINGH;I will be failed in my duty if I do not

acknowledge the esteemed scholarly guidance, assistance and

knowledge. I have received from them towards fruitful and timely

completion of this work.

Mere acknowledgement may not redeem the debt I owe to myparents for their direct/indirect support during the entire course of

this project.

GUIDANCE IS THE BEST IN THE WAY PROGRESS.

I also thankful to my friend who helped me a lot in the completion

of this project.

GIRIJA SHARMA


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OBJECTIVES OF THE RESEARCH

1. To understand the inventory system

2. To analyze the need of inventory in the organization .

3. To know which inventory system is providing better services.

4. To analyze manufacturing services of cars.

5. To study the behavioral factors of inventory .

6. To suggest various factors to improve inventory management.


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Corporate profile and divisions

Honda is headquartered in Minato, Tokyo, Japan. Their shares trade on the Tokyo Stock Exchange

and the New York Stock Exchange, as well as exchanges in Osaka, Nagoya, Sapporo, Kyoto,Fukuoka, London, Paris and Switzerland.

The company has assembly plants around the globe. These plants are located in China, the United

States, Pakistan, Canada, England, Japan, Belgium, Brazil, New Zealand, Indonesia, India, Thailand,Turkey and Per. As of July 2010, 89 percent of Honda and Acura vehicles sold in the United States

were built in North American plants, up from 82.2 percent a year earlier. This shields profits from theyens advance to a 15-year high against the dollar.[8]

Honda's Net Sales and Other Operating Revenue by Geographical Regions in 2007[11]

Geographic Region Total revenue (in millions of )

Japan 1,681,190

North America 5,980,876

Europe 1,236,757

Asia 1,283,154

Others 905,163

American Honda Motor Company is based in Torrance, California. Honda Canada Inc. is

headquartered in the Scarborough district of Toronto, Ontario, and is building new corporateheadquarters in Markham, Ontario, scheduled to relocate in 2008;

[12]their manufacturing division,

Honda of Canada Manufacturing, is based in Alliston, Ontario. Honda has also created joint venturesaround the world, such as Honda Siel Cars and Hero Honda Motorcycles in India,

[13]Guangzhou

Honda and Dongfeng Honda in China, and Honda Atlas in Pakistan.


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Current market position

With high fuel prices and a weak U.S. economy in June 2008, Honda reported a 1% sales increase

while its rivals, including the Detroit Big Three and Toyota, have reported double-digit losses.Honda's sales were up almost 20 percent from the same month last year. The Civic and the Accord

were in the top five list of sales.[14][15]

Analysts have attributed this to two main factors. First, Honda'sproduct lineup consists of mostly small to mid-size, highly fuel-efficient vehicles. Secondly, over the

last ten years, Honda has designed its factories to be flexible, in that they can be easily retooled toproduce any Honda model that may be in-demand at the moment.

Nonetheless, Honda, Nissan, and Toyota, were still not immune to the global financial crisis of 2008,

as these companies reduced their profitability forecasts. The economic crisis has been spreading toother important players in the vehicle related industries as well.

[16][17]In November 2009 the Nihon

Keizai Shinbun reported that Honda Motor exports have fallen 64.1%.[18]

At the 2008 Beijing Auto Show, Honda presented the Li Nian ("concept" or "idea") 5-door hatchbackand announced that they were looking to develop an entry-level brand exclusively for the Chinese

market similar to Toyota's Scion brand in the USA.[19]

The brand would be developed by a 5050joint-venture established in 2007 with Guangzhou Automobile Industry Group.

[20][21]

Following the Japanese earthquake and tsunami in March 2011 Honda announced plans to halveproduction at its UK plants.

[citationneeded]The decision was made to put staff at the Swindon plant on a 2

day week until the end of May as the manufacturer struggled to source supplies from Japan. It'sthought around 22,500 cars were produced during this period.

Leadership

y 19481973 Soichiro Honday 19731983 Kiyoshi Kawashima

y 19831990 Tadashi Kumey 19901998 Nobuhiko Kawamoto

y 19982004 Hiroyuki Yoshinoy 20042009 Takeo Fukui

y since 2009 Takanobu Ito

ProductsAutomobiles

For a list of vehicles, see List of Honda vehicles.


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2008 Honda Accord (USA spec)

Eighth Generation Honda Civic (Asian Version)

Honda's global lineup consists of the Fit, Civic, Accord, Insight, CR-V, and Odyssey[disambiguationneeded]

.

An early proponent of developing vehicles to cater to different needs and markets worldwide, Honda's

lineup varies by country and may feature vehicles exclusive to that region. A few examples are thelatest Acura TL luxury sedan and the Ridgeline, Honda's first light-duty uni-body pickup truck. Both

were engineered primarily in North America and are exclusively produced and sold there.

The Civic is a line of compact cars developed and manufactured by Honda. In North America, theCivic is the second-longest continuously running nameplate from a Japanese manufacturer; only its

perennial rival, the Toyota Corolla, introduced in 1968, has been in production longer.[22] The Civic,along with the Accord and Prelude, comprised Honda's vehicles sold in North America until the

1990s, when the model lineup was expanded. Having gone through several generational changes, theCivic has become larger and more upmarket, and it currently slots between the Fit and Accord.

Honda increased global production in September 2008 to meet demand for small cars in the U.S. andemerging markets. The company is shuffling U.S. production to keep factories busy and boost car

output, while building fewer minivans and sport utility vehicles as light truck sales fall.[23]

Honda produces Civic hybrid, a hybrid electric vehicle that competes with the Toyota Prius, and alsoproduces the Insight and CR-Z.

Its first entrance into the pickup segment, the light duty Ridgeline, won Truck of the Year fromMotor

Trendmagazine in 2006. Also in 2006, the redesigned Civic won Car of the Year from the magazine,giving Honda a rare double win of Motor Trend honors.


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It is reported that Honda plans to increase hybrid sales in Japan to more than 20% of its total sales infiscal year 2011, from 14.8% in previous year.

[24]

Five of United States Environmental Protection Agency's top ten most fuel-efficient cars from 1984 to

2010 comes from Honda, more than any other automakers. The five models are: 20002006 HondaInsight (53 mpg-US/4.4 L/100 km; 64 mpg-imp combined), 19861987 Honda Civic Coupe HF (46 mpg-

US/5.1 L/100 km; 55 mpg-imp combined), 19941995 Honda Civic hatchback VX (43 mpg-US/5.5 L/100 km; 52 mpg-imp mpg combined), 2006 Honda Civic Hybrid (42 mpg-US/5.6 L/100 km;

50 mpg-imp combined), and 2010 Honda Insight (41 mpg-US/5.7 L/100 km; 49 mpg-imp combined).[25]

The ACEEE has also rated the Civic GX as the greenest car in America for seven consecutive

years.[26]

Motorcycles

This section needs additional citations for verification. Please help improve this article byadding reliable references. Unsourced material may be challenged and removed. (May 2010)

For a list of motorcycle products, see List of Honda motorcycles.

Honda is the largest motorcycle manufacturer in Japan and has been since it started production in

1955.[27]

At its peak in 1982, Honda manufactured almost 3 million motorcycles annually. By 2006

this figure had reduced to around 550,000 but was still higher than its three domestic competitors.[27]

During the 1960s, when it was a small manufacturer, Honda broke out of the Japanese motorcycle

market and began exporting to the U.S. Taking Hondas story as an archetype of the smallermanufacturer entering a new market already occupied by highly dominant competitors, the story of

their market entry, and their subsequent huge success in the U.S. and around the world, has been thesubject of some academic controversy. Competing explanations have been advanced to explain

Hondas strategy and the reasons for their success.[28]

The first of these explanations was put forward when, in 1975, Boston Consulting Group (BCG) wascommissioned by the UK government to write a report explaining why and how the British motorcycle

industry had been out-competed by its Japanese competitors. The report concluded that the Japanesefirms, including Honda, had sought a very high scale of production (they had made a large number of

motorbikes) in order to benefit from economies of scale and learning curve effects. It blamed thedecline of the British motorcycle industry on the failure of British managers to invest enough in their

businesses to profit from economies of scale and scope.


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2004 Honda Super Cub

The second explanation was offered in 1984 by Richard Pascale, who had interviewed the Honda

executives responsible for the firms entry into the U.S. market. As opposed to the tightly focused

strategy of low cost and high scale that BCG accredited to Honda, Pascale found that their entry intothe U.S. market was a story of miscalculation, serendipity, and organizational learning in other

words, Hondas success was due to the adaptability and hard work of its staff, rather than any longterm strategy. For example, Hondas initial plan on entering the U.S. was to compete in largemotorcycles, around 300 cc. It was only when the team found that the scooters they were using to get

themselves around their U.S. base of San Francisco attracted positive interest from consumers thatthey came up with the idea of selling the Super Cub.

The most recent school of thought on Hondas strategy was put forward by Gary Hamel and C. K.

Prahalad in 1989. Creating the concept of core competencies with Honda as an example, they arguedthat Hondas success was due to its focus on leadership in the technology of internal combustion

engines. For example, the high power-to-weight ratio engines Honda produced for its racing bikesprovided technology and expertise which was transferable into mopeds. Honda's entry into the U.S.

motorcycle market during the 1960s is used as a case study for teaching introductory strategy atbusiness schools worldwide.

Power equipment

Production started in 1953 with H-type engine (prior to motorcycle).[29]

Honda power equipment reached record sales in 2007 with 6,4 million units.[30] By 2010 (Fiscal yearended 31 March) this figure had decreased to 4,7 million units.

[31]Cumulative production of power

products has exceeded 85 million units (as of September, 2008).[32]

Honda power equipment includes:

Engine

TillerLawn mower

Riding mowerTrimmer


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MowerBlower

SprayerHedge trimmer

SnowthrowerGenerator, welding power supply

PumpsOutboard engine

Inflatable boatElectric 4-wheel Scooter

Compact Household Cogeneration Unit

Engines

This section requires expansion.

Honda Outboard motor on a pontoon boat

Honda engines powered the entire 33-car starting field of the 2010 Indianapolis 500[33]

and for the fifth

consecutive race, there were no engine-related retirements during the running of the Memorial Day

Classic.[34]

Honda, despite being known as an engine company, has never built a V8 for passenger vehicles. In thelate 1990s, the company resisted considerable pressure from its American dealers for a V8 engine

(which would have seen use in top-of-the-line Honda SUVs and Acuras), with American Hondareportedly sending one dealer a shipment of V8 beverages to silence them.

[35]Honda considered

starting V8 production in the mid-2000s for larger Acura sedans, a new version of the high end NSX

sports car (which previously used DOHC V6 engines with VTEC to achieve its high power output)and possible future ventures into the American full-size truck and SUV segment for both the Acura

and Honda brands, but this was cancelled in late 2008, with Honda citing environmental andworldwide economic conditions as reasons for the termination of this project.

[36]

Robots


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ASIMO at Expo 2005

ASIMO is the part of Honda's Research & Development robotics program. It is the eleventh in a line

of successive builds starting in 1986 with Honda E0 moving through the ensuing Honda E series andthe Honda P series. Weighing 54 kilograms and standing 130 centimeters tall, ASIMO resembles a

small astronaut wearing a backpack, and can walk on two feet in a manner resembling humanlocomotion, at up to 6 km/h (3.7 mph). ASIMO is the world's only humanoid robot able to ascend and

descend stairs independently.[37] However, human motions such as climbing stairs are difficult tomimic with a machine, which ASIMO has demonstrated by taking two plunges off a staircase.

Honda's robot ASIMO (see below) as an R&D project brings together expertise to create a robot thatwalks, dances and navigates steps. 2010 marks the year Honda has developed a machine capable of

reading a users brainwaves to move ASIMO. The system uses a helmet covered withelectroencephalography and near-infrared spectroscopy sensors that monitor electrical brainwaves and

cerebral blood flowsignals that alter slightly during the human thought process. The user thinks ofone of a limited number of gestures it wants from the robot, which has been fitted with a Brain

Machine Interface.[38]

Aircraft

Main article: Honda HA-420 HondaJet

Honda has also pioneered new technology in its HA-420 HondaJet, manufactured by its subsidiary

Honda Aircraft Company, which allows new levels of reduced drag, increased aerodynamics and fuelefficiency thus reducing operating costs.

[citationneeded]

Solar cells

Honda's solar cell subsidiary company Honda Soltec (Headquarters: Kikuchi-gun, Kumamoto;

President and CEO: Akio Kazusa) started sales throughout Japan of thin-film solar cells for public andindustrial use on 24 October 2008, after selling solar cells for residential use since October 2007.

[39]


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Mountain bikes

See also: Honda RN-01 G-cross.

Honda has also built a Downhill racing bike, known as the Honda RN-01. Honda has taken on several

people to pilot the bike, among them is Greg Minnaar. The team is known as Team G Cross Honda.

The key feature of this bike is the gearbox, which replaces the standard Derailleur found on mostbikes.

Motorsports

Honda has been active in motorsports, like Motorcycle Grand Prix, Superbike racing and others.

[edit] Automobile

See also: Honda Racing F1.

Rubens Barrichello driving for Honda

Honda entered Formula One as a constructor for the first time in the 1964 season at the German GrandPrix with Ronnie Bucknum at the wheel. 1965 saw the addition of Richie Ginther to the team, who

scored Honda's first point at the Belgian Grand Prix, and Honda's first win at the Mexican Grand Prix.1967 saw their next win at the Italian Grand Prix with John Surtees as their driver. In 1968, Jo

Schlesser was killed in a Honda RA302 at the French Grand Prix. This racing tragedy, coupled withtheir commercial difficulties selling automobiles in the United States, prompted Honda to withdraw

from all international motorsport that year.

After a learning year in 1965, Honda-powered Brabhams dominated the 1966 French Formula Twochampionship in the hands of Jack Brabham and Denny Hulme. As there was no European

Championship that season, this was the top F2 championship that year. In the early 1980s Honda

returned to F2, supplying engines to Ron Tauranac's Ralt team. Tauranac had designed the Brabhamcars for their earlier involvement. They were again extremely successful. In a related exercise, JohnJudd's Engine Developments company produced a turbo "Brabham-Honda" engine for use in IndyCar

racing. It won only one race, in 1988 for Bobby Rahal at Pocono.

Honda returned to Formula One in 1983, initially with another Formula Two partner, the Spirit team,

before switching abruptly to Williams in 1984. In the late 1980s and early 1990s, Honda powered carswon six consecutive Formula One Constructors Championships. WilliamsF1 won the crown in 1986


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and 1987. Honda switched allegiance again in 1988. New partners Team McLaren won the title in1988, 1989, 1990 and 1991. Honda withdrew from Formula One at the end of 1992, although the

related Mugen-Honda company maintained a presence up to the end of 1999, winning four races withLigier and Jordan Grand Prix.

Honda debuted in the CART IndyCar World Series as a works supplier in 1994. The engines were far

from competitive at first, but after development, the company powered six consecutive driverschampionships. In 2003, Honda transferred its effort to the rival IRL IndyCar Series. In 2004, Honda-

powered cars overwhelmingly dominated the IndyCar Series, winning 14 of 16 IndyCar races,including the Indianapolis 500, and claimed the IndyCar Series Manufacturers' Championship,

Drivers' Championship and Rookie of the Year titles. In 2006, Honda became the sole engine supplierfor the IndyCar Series, including the Indianapolis 500. In the 2006 Indianapolis 500, for the first time

in Indianapolis 500 history, the race was run without a single engine problem.[40]

During 1998, Honda considered returning to Formula One with their own team. The project wasaborted after the death of its technical director, Harvey Postlethwaite. Honda instead came back as an

official engine supplier to British American Racing (BAR) and Jordan Grand Prix. Honda bought astake in the BAR team in 2004 before buying the team outright at the end of 2005, becoming a

constructor for the first time since the 1960s. Honda won the 2006 Hungarian Grand Prix with driverJenson Button.

It was announced on 5 December 2008, that Honda would be exiting Formula One with immediateeffect due to the 2008 global economic crisis.

[41]The team was sold to former team principal Ross

Brawn, renamed Brawn GP and subsequently Mercedes GP.[42]

Honda became an official works team in the British Touring Car Championship in 2010.

[edit] Motorcycles

Main article: Honda Racing Corporation

Honda RC212V raced by Dani Pedrosa

Honda Racing Corporation (HRC) was formed in 1982. The company combines participation in

motorcycle races throughout the world with the development of high potential racing machines. Its


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racing activities are an important source for the creation of leading edge technologies used in thedevelopment of Honda motorcycles. HRC also contributes to the advancement of motorcycle sports

through a range of activities that include sales of production racing motorcycles, support for satelliteteams, and rider education programs.

Soichiro Honda, being a race driver himself, could not stay out of international motorsport. In 1959,

Honda entered five motorcycles into the Isle of Man TT race, the most prestigious motorcycle race inthe world. While always having powerful engines, it took until 1961 for Honda to tune their chassis

well enough to allow Mike Hailwood to claim their first Grand Prix victories in the 125 and 250 ccclasses. Hailwood would later pick up their first Senior TT wins in 1966 and 1967. Honda's race bikes

were known for their "sleek & stylish design" and exotic engine configurations, such as the 5-cylinder,22,000 rpm, 125 cc bike and their 6-cylinder 250 cc and 297 cc bikes.

In 1979, Honda returned to Grand Prix motorcycle racing with the monocoque-framed, four-stroke

NR500. The FIM rules limited engines to four cylinders, so the NR500 featured non-circular, 'race-track', cylinders, each with 8 valves and two connecting rods, in order to provide sufficient valve area

to compete with the dominant two-stroke racers. Unfortunately, it seemed Honda tried to accomplishtoo much at one time and the experiment failed. For the 1982 season, Honda debuted their first two-

stroke race bike, the NS500 and in 1983, Honda won their first 500 cc Grand Prix WorldChampionship with Freddie Spencer. Since then, Honda has become a dominant marque in motorcycleGrand Prix racing, winning a plethora of top level titles with riders such as Mick Doohan and

Valentino Rossi .

In motocross, Honda has claimed six motocross world championships. In the World EnduroChampionship, Honda has captured six titles, most recently with Stefan Merriman in 2003 and with

Mika Ahola in 2007 and 2008.

In observed trials, Honda has claimed three world championships with Belgian rider Eddy Lejeune.

Electric and alternative fuel vehicles

2009 Honda Civic GX hooked up to Phill refueling system


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Top: Brazilian flexible-fuel Honda Civic. Below: U.S. Honda Civic Hybrid.

2010 Honda Insight hybrid electric vehicle (Second generation).

Honda FCX Clarity hydrogen fuel cell vehicle


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COMPANY PROFILE

Honda In India

Honda Siel Cars India Ltd., (HSCI) was

incorporated in December 1995 as a joint

venture between Honda Motor Co. Ltd., Japanand Siel Limited, a Siddharth Shriram Group

company, with a commitment to providing

Hondas latest passenger car models and

technologies, to the Indian customers. The total

investment made by the company in India till date is Rs 1620 crores in Greater Noida

plant and Rs 784 crores in Tapukara plant.

HSCIs first state-of-the-art manufacturing unit was set up at Greater Noida, U.P in

1997. The green-field project is spread across 150 acres of land (over 6,00,000 sq. m.).

The annual capacity of this facility is 100,000 units. The companys secondmanufacturing facility is in Tapukara, Rajasthan. This facility is spread over 600 acres

and will have an initial production capacity of 60,000 units per annum, with an

investment of about Rs 1,000 crore. The first phase of this facility was inaugurated in

September 2008.

The companys product range includes Honda Jazz, Honda City, Honda Civic and

Honda Accord which are produced at the Greater Noida facility with an indigenization

level of 77%, 76%, 74% and 28% respectively. The CR-V is imported from Japan as

Completely Built Units. Hondas models are strongly associated with advanced designand technology, apart from its established qualities of durability, reliability and fuel-

efficiency.

Honda Jazz


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Honda India launches new Jazz with advanced features, Price starting at Rs. 5.50 lakh.

Honda Jazz is the companys first offering in the premium compact car segment. The

Jazz is a segment-defining car that has won accolades and adoration all over the world.

Widely acclaimed for its dynamic styling, spacious interiors, versatile utility andremarkable performance, the Honda Jazz brings added fun and excitement to the driving

experience.

The Jazzs dynamic performance is achieved by four-cylinder 1.2-liter i-VTEC engine,

featuring Programmed Fuel Injection that delivers maximum output of 90 PS (66 kW)

@ 6,200 rpm and Torque of 110 Nm (11.2 kg-m) @ 4800 rpm while giving impressive

fuel economy of 16.1 km/l, as per ARAI test data. Safety of passengers and pedestrians

is a top priority for Honda and all safety equipment is standard across all variants. The

Jazz practicality has been enhanced with three-mode Magic Seat

configuration toachieve multiple seating and cargo-carrying configurations for long or tall objects in

addition to the standard five-passenger mode. The Honda Jazz is available in three

variants - Honda Jazz, Jazz Select and Jazz X.

The new Jazz exudes a sporty, bold, strong and commanding presence with its new

stylish front grille, newly designed aerodynamic front bumper, new headlights

with silver & black matt finish and new design 15 inch silver alloy wheels. The

sporty rear of the new Jazz gets further enhanced with the new rear chrome garnish

(in Jazz Select) and new rear bumper.

The new advanced interior creates a superior and refined atmosphere. The plush new

beige black interior (in Jazz and Jazz Select) and new Amber coloured

stereoscopic dials for superior visibility gives the car a richer feel. The versatile

interiors of the new Jazz comes with the newly introduced Rear reclining seats for

ensuring super back seat comfort during long drives.

Honda City

Honda's all-new Third Generation Honda City was launched in September 2008. It

comes with a completely new design, new engine, spacious cabin and equipped with

various active and passive safety features. The company has also launched the 1.5 V

MT & AT version of the City in September 2009. The new Honda City is available as

SMT, VMT and VAT. Additionally, all the variants is available in 2 attractive types


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Elegance and Inspire.

The all new Honda City achieved milestone sales with 50,000 units sold within one year

of its launch. Since its launch in the country in 1998, Honda City has been a best sellerin the premium car segment.

The all new Honda City has bagged several awards including 3 Car of the Year and the

prestigious ICOTY (Indian Car of the Year) 2009. The model made a clean sweep in

the viewers choice category winning all 3 awards announced by NDTV Car India &

Bike India Awards, UTVi Autocar Awards and CNBC TV 18 Overdrive Awards. These

awards truly exemplify the experts as well as the customers admiration and trust in the

product.

Honda Civic

The Civic is Hondas largest selling model globally and is now sold in approximately

160 nations and regions worldwide. Honda Civic was launched in India in July 2006

which became a runaway success and was also awarded the Indian Car of the Year in

2007.

The new Civic was launched in September 2009 with more aggressive and sportier

look. The new V grade Civic juxtaposes Hondas advanced technology with striking

design. The new Curved 5 Point Metallic Front Grille and restyled Front Sporty

Bumper add to a pulsating and aggressive appeal of the car. The introduction of stylized

Dark Smokey Headlights & Crystalline Octagonal Tail Lights enhances the

contemporary look of the car. New Civic is available in 3 variants SMT, VMT &

VAT.


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Honda Accord

The Honda Accord was first introduced in India in year 2003. HSCI launched the 8th

generation Honda Accord in India in May 2008. The Honda Accord is available in 2.4L

and 3.5L V6 engine.

The 2.4L comes in three types in both Automatic and Manual transmission Accord

2.4, Accord 2.4 Elegance and Accord 2.4 Inspire. The All-new Accord comes with 5-

speed Manual Transmission and 5-speed Automatic transmission with Paddle shift, to

give the exhilarating experience of F-1 racing. The AT now has Shift Holding System which

avoids unnecessary gear shifting on winding roads and helps in hassle free drive.

The Honda Accord V6 3.5-liter comes with Electric Sunroof and additional luxury

features for enhanced exterior styling. The 3.5L i-VTEC engine features an advanced

Variable Cylinder Management (VCM) system that switches between six-, four-, and

three-cylinder combustion depending on the driving conditions and thereby delivering

maximum power of 275 PS during six cylinder operation and impressive fuel economy

in VCM mode while cruising.

The new 8

th

generation Honda Accord has also won the UTVi Autocar Best Luxury Caraward in 2009.

Honda CR-V

The Honda CR-V is sold as a Completely Built Unit (CBU) import and is available on

confirmed order basis for the customers. The Honda CR-V was first introduced in India

in July 2003. It went on to become the segment leader since its launch winning several

awards for itself. The all new 3rd generation CR-V was introduced in India inNovember 2006 which offered its customers a distinctive combination of the comfort

of a sedan with the thrills of a SUV. Honda CR-V was adjudged the SUV of the Year

by NDTV Profit Car & Bike and Overdrive and also won the Best Drivers Car award

by CNBC TV-18 Autocar Auto Awards in 2007.

Honda launched a refreshed version of the 3rd generation CR-V in November 2009.The


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new Honda CR-V offers its customers a distinctive combination of refined styling and

high quality. The Honda CR-V is available in 2.0 L - MT 2WD and 2.4L MT /AT Real-

time 4WD.

Sales Network

Honda Siel Cars India has a strong sales and distribution network spread across the

country. The network includes 127 facilities in 79 cities. HSCI dealerships are based on

the 3S Facility

(Sales, Service, Spares) format, offering complete range of services toits customers.


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History of Honda group

From a young age, Honda's founder, Soichiro Honda (,Honda Sichir) had

a great interest in automobiles. He worked as a mechanic at a Japanese

tuning shop, Art Shokai, where he tuned cars and entered them in races. A

self-taught engineer, he later worked on a piston design which he hoped to

sell to Toyota. The first drafts of his design were rejected, and Soichiro

worked painstakingly to perfect the design, even going back to school and

pawning his wife's jewelry for collateral. Eventually, he won a contract with

Toyota and built a factory to construct pistons for them, which was

destroyed in an earthquake. Due to a gasoline shortage during World War II,

Honda was unable to use his car, and his novel idea of attaching a small

engine to his bicycle attracted much curiosity. He then established the Honda

Technical Research Institute in Hamamatsu, Japan, to develop and produce

small 2-cycle motorbike engines. Calling upon 18,000 bicycle shop owners


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across Japan to take part in revitalizing a nation torn apart by war, Soichiro

received enough capital to engineer his first motorcycle, the Honda Cub.

This marked the beginning of Honda Motor Company, which would grow a

short time later to be the world's largest manufacturer of motorcycles by

1964.The first production automobile from Honda was the T360 mini pick-

up truck, which went on sale in August 1963.[10]

Powered by a small 356 cc

straight-4 gasoline engine, it was classified under the cheaper Kei car tax

bracket.[citationneeded]

The first production car from Honda was the S500 sports

car, which followed the T360 into production in October 1963. Its chain

driven rear wheels point to Honda's motorcycle origins.[citationneeded]


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BOARD OF DIRECTORS OF HONDA GROUP

President and

representative director

Takanobu lto

Executive president and

representative director

Koichi kondo

Senior Managing director Akio hamada

Senior Managing dirctor Testuo humura

Senior Managing

director

Tatsilhrio oyama

Senior managing director Fumunishiko ilte

Managing director tomohikokanwanbe


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Managing director Kensake hagen

Director Mobuo kuruyanagi

Director Tokeo fukuji

Director Hiroshi kobayushi

Director slominekawa

Director Tekaji yamada

Director Yoichi hojo

Director Tsuno tanai

Director Masahiro yashida

Director Seiji kuraishi


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INTRODUCTION TO THE

TOPIC


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LITRATUTR SURVEY

INTRODUCTION

Maintaining good inventory management principles will ensure the efficient and timely deliveryof high quality inventory data. To do this an inventory management system needs to be established

and should include:

1. a clear inventory process so that key activities and resources can be focused towardsdelivery deadlines and delivery quality;2. institutional arrangements: clearly defined roles and responsibilities for delivering the

inventory to specified time and quality standards;3. a quality frameworkto ensure that the data is fit for purpose.

An outline inventory management system is presented in Figure 1-1. This illustrates theimportance of establishing roles and responsibilities for the delivery of the inventory as well as a

QA/QC framework that ensures the quality of the inventory process and the inventory outputs.This chapter provides guidance on how to ensure that this complicated process results in an

inventory submission that is fully compliant with the reporting requirements of the Conventionand its protocols (ECE/EB.AIR/80) (1).

DataProviders

Inventory CompilerNationalAuthority

(3)Deliver data

(4)Estimate

emissions(5)

Draft reports

(6)ReportRaw data Compilation

DataData

DataData

Emissions Dissemination


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(1)Request

inventory(2)

Requestdata

I n v e n t o r y M a n a g e r

Lessons learned &

Improvement Review

Prioritisation of

Improvements

Data Collection

Inventory Compilation

Consolidation

Reporting

Data Quality Review

Arrangements Laws, Contracts, MoUs, Job DescriptionsRoles Inventory Compilers, Data Providers, Experts, Stakeholders,

Responsiblities Report to Conventions, Manage Inventory Process,

Institutional Arrangements

Figure 1-1 Aspects of Inventory Management

All of this is basically a management task. It is good practice to ensure that the overall process ismanaged by an explicitly appointed Inventory Manager, which can either be an individual or a

formally established committee. The inventory manager is responsible for the inventory process:(1) The European Union, on behalf of the Member States, is a Party to the Convention and a signatory

to variousprotocols. Various legal instruments within the EU require Member States to report the information it

needs to theEuropean Commission to report to the Long-Range Transboundary Air Pollution (LRTAP) Convention forthe EUas a whole


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NEED FOR INVENTORIES

WHAT PURPOSE IS SERVED BY INVENTORIES?

Before answering this question, a distinction is drawn between Process or Movement inventories

and organisation inventories.

PROCESS or MOVEMENT inventories are required because it takes time to complete a

process/operation and to move products from one stage to another. The average quantity of such

inventories would be-

Average output of the process Time required for the

(or average usage at the end * process(or time required

of the movement) in movement)

ORGANISATION inventories are maintained to widen the latitude in planning and scheduling

successive operations. Raw materials inventory enables a firm to decouple its purchasing and

production activities to some extent. It provides flexibility in purchasing and production.

IN-PROCESS inventory provides flexibility in production scheduling so that an efficient schedule

and high utilisation of capacity may be attained. Without work in process inventory, a bottleneck at

any stage in the production process renders ideal the machines and facilitates at subsequent stages.

This results in delay and idle facilities.


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FINISHED GOODS inventory enables a firm to decouple its production programme and marketing

activities so that desirable results may be achieved on both the fronts. If adequate finished goods

inventory is available; the marketing department can meet the needs of customers promptly,

irrespective of the quantity and composition of goods flowing out of the production line currently. By

the same token the volume and composition of current output from the production line may be

determine somewhat independently of the volume and composition of the current off take in the

market.

Thus a firm may establish a programme of inventory monitoring and control consisting of the

following elements:

1. Exercise of vigilance against imbalance of raw materials and work-in-progress which tends to limit

the utility of stocks.

2. Vigorous efforts to expedite completion of unfinished production jobs to get them into salable

condition.

3. Active disposal of goods that are surplus, obsolete, or unusable.

4. Shortening of production cycle.

5. Change in design to maximise the use of standards parts and components, which are available off-

the-shelf.

6. Strict adherence to production schedules.

7. Special pricing to dispose of unusually slow-moving items.

8. Evening out of seasonal sales fluctuations to the extent possible.


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PURPOSE OF INVENTORY

MOVEMENTS

ORGANISATION IN-PROCESS

FINISHED GOODS


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Criteria For Judging The Inventory System

While the over-all objectives of the inventory system is to minimise the cost to the firm

the risk level acceptable to the management, the more proximate criteria for judging the

are:

Comprehensibility

Adaptability

Timelines


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COMPREHENSIBILITY -

Inventory system range from the utterly simple to the complex ones. Irrespective of how simple

or how complex a system is, regardless of whether it is automated or manual, it should be clearly

understood by all affected parties. The system must be properly explained to all concerned

people so that its purpose, logic and rationale are transparent. This generates enthusiasm for the

system and enhances its credibility. Otherwise it is likely to be perceived as a mysterious Black

box of dubious value.

ADAPTABILITY

The question raised in this context are:

1. Is the system responsive to change? 2. Can new products,

new situations and new requirements be handled by the system? A certain degree of flexibility

and adaptability must be desired into the system to make it versatile. Of course this cannot be

and this should not be carried too far. The system must not provide for every possible and

imaginable contingency. If it is developed with this ideal, it is likely to be a complex

monstrosity. Remember the caveat that the design of any system should ordinarily take care of

about 90% of the cases, leaving the balance 10% to be handled by hand.


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TIMELINESS -

Inventories may suffer loss in value on account of a variety of factors. The more common

sources of value decline are:

Obsolescence caused by changes in technology & shifts in consumer taste.

Physical deterioration with the passage of time.

Price fluctuation because of inherent volatility of certain commodities

Different techniques used for inventory management in( Honda siel car ltd)

PURCHASING

PURCHASING is an art. Wrong purchases increase the cost of materials, store equipments and

the finished goods. Hence it is imperative that purchases should be effectively, efficiently

performed.

METHODS OF PURCHASING

Purchasing can be broadly classified as :

1] Centralised purchasing.

2] Localised purchasing.

CENTRALISED PURCHASING :-

It is beneficial in a large organisation where manufacturing units are many. It means that a single

purchase department makes all purchases.


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ADVANTAGES OF CENTRALISED PURCHASING ARE AS FOLLOWS

1. Specialised and expert knowledge is available.

2. Advantageous due to bulk purchases.

3. The cost of purchasing can be reduced and selling price can be lowered.

4. As there is good knowledge of market-conditions, greater control can be exercised.

5. When units have to be exported, its advantageous to centralise the buying.

6. Economy and ease in compilation and consultation of results.

7. It can take advantage of market changes.

8. Investment on inventories can be reduced.

9. Other advantages include undivided responsibility, consistent buying polices.

DECENTRALISATION OF PURCHASES :-

In this each department or branch makes its own purchases. The advantages are as follows

1. Each plant may have its own particular need. This can be given special attention.

2. Direct contact can be established with suppliers.

3. The time lag between indenting and receiving materials can be reduced.


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PURCHASE PROCEDURES :-

Though different concern adopt different practices regarding details recorded, forms and records

used, routine followed for purchase of materials is usually the same. The steps may be

enumerated as follows

i. Indenting for materials.

ii. Issuing of tenders and receiving of materials.

iii. Placing of order.

iv. Inspecting stores received.

v. Receiving the stores accepted in inspection.

vi. Checking and passing bills for payment.


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PRICING OF STORES RECEIPT :-

Stores have to be valued carefully. All expenses incurred to receive and store material forms part

of the cost. The purchase price comprises of elements such as Cost of raw material/item, Sales

tax, cash discount, freight and delivery charges, etc. It will not be possible to calculate the exact

cost as some items of expenses have low value. Items can be classified as

a) Sales tax & other taxes.

b) Cash discount.

c) Trade & quality discount.

d) Joint purchase cost.

e) Extra/Spare parts.

f) Receiving, loading, inspection, storage & Material accounting charges.

g) Transport cost, freight & delivery charges..


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GENERAL OUTLINE OF PURCHASE FUNCTION

1) The transaction related to procurement of materials from the indenting stage to the payment

stage have been divided in various parts whereby each part of the work is handled

independently till the transaction is completely closed. This division of work between various

agencies operates as a system of internal check and is a vital part of the system as a whole.

2) Prescribed purchase procedure is to be followed for all purchases. A general outline of the

functions involved is as follows-

3) The authority to place indent for materials is subject to provision in the approved budget.

Indent for materials on capital account and revenue account are raised against capital budget

and purchase/revenue budget respectively. For capital items value exceeding Rs.10 Lac a

specific administrative approval is required from the head office for implementation. Indents

for project materials required for execution of capital are to be raised normally after the

detailed estimate is approved and the work sanctioned by the competent authority.

4) All purchases are to be made only by the Material Department except purchases of petty item

through imprest and by the Department Managers within the limits prescribed in Purchase

Procedure. Materials Purchase Indent should give the following information-

y Quantity in store

y Average monthly consumption since last purchase for stock items

y Max./Min. level


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y Last Purchase Order reference

y Reorder level

The Materials Department before purchasing high value items like cables, piping, flanges etc.,

should check up with other units about the availability of required material.

FUNCTIONS :

The Finance & Accounts Department is responsible for the following functions in connection

with purchase and accounting thereof:

1. Scrutiny and concurrence of purchase proposals ;

2. Advance payment to Suppliers ;

3. Pricing of Materials Receiving Report (MRR) ;

4. Passing of bills of Suppliers Received ;

5. Accounting of cash purchases made by the Material Department / Imprest Holders ;

6. Arrangement of insurance of transit risk ;

7. Maintenance of books of accounts ;

8. Sale/purchase Tax matters ;

9. Earnest money deposit / Security deposit ;

10.Bank Guarantee / Performance Guarantee


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Payment against Purchase Orders:

The terms of payment normally agreed upon the suppliers / vendors in the Purchase Order for

procurement of materials fall in one of the following categories :-

A. Advance payment to supplier.

B. Full payment or 90% to 95% payments after inspection through Bank against dispatch

documents.Full Payment / balance payment within 15 / 30 days after receipt Payment

through Letter o and acceptance of the matter.

C. Credit for imported material.


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HONDA

SIELCARS

MAINTENANCE OF BOOKS OF ACCOUNTS

Following books of Accounts/Registers shall be maintained by the Bills Section :

1. Materials Receiving Report (MRR)

2. Purchase Order Register (POR)

Material Receiving Report

Purchase Order Reister

BOOKS OF

ACCOUNTS


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PURCHASE ORDER REGISTER

No Date P.O.

Name of

party

Bill

amount

Bill No.

Amount

Date of

Dt.

Payment

Amount

Paid

M.R.R.

No Dr.

Remarks

I.D.B.


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HONDA SIEL CAR

MATERIALS RECEIVING REPORT REGISTER

MRR

No &

Date

B.Vr.

No &

Date

Name

of

Party

&

Place

P.O.

No. &

Date

Bill

No &

Date

Adv.T

o

vendor

s/Supp

liers

For

Goods

Suppli

es Rs.

P.

Ledge

r Folio

No.

tools stores Steel

1 2 3 4 5 6 7 8 9 10


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Ceme

nt

Spares Claim

s

Recov

erable

Capita

l Items

Amou

nt

Code

Rs.

P.

Others

Amou

nt

Code

Rs.

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Amou

nt

Code

Taxabl

e

Amou

nt

Form

Rs.

P.

Regist

ered

S.T.

Amt.

Rs.

P.

Delear

s

Form

S.C.

Amt

Rs.

P.

Purcha

se

Form

within

state

Unregi

stered

Dealers

SC

Amt

Rs.

P.

11 12 13 14 15 16 17 18 19 20

Gross

Amt

Rs.

P.

Partys

CST/St

Reg.

No.

Taxabl

e

Amoun

t

Rs.

P.

C.S.T.

Amt

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Other

Charge

s

Rs.

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Gross

Amt of

bill

Rs.

P.

C.

Form

No &

Date

Descrip

tion of

Goods

Remark

s

21 22 23 24 25 26 27 28 29


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STORE KEEPING

Store keeping is a service function. Store keeping is a function of receiving materials, storing

them and issuing these to workshop or department.

The stores department is under the control of a person called storekeeper. The storekeeper is a

custodian of all the items kept in the store. The stores should be spacious, well lit and well

equipped so that cost can be minimised and service can be provided effectively.

MAIN OB JECTIVES OF STORE KEEPING:

1. To protect stores against losses.

2. To keep goods ready for delivery / issue.

3. To provide maximum service at minimum cost.

4. To avoid overstocking & understocking.

5. To facilitate perpetual inventory.

DUTIES AND FUNCTION OF STORE KEEPER

The storekeeper is responsible for the receipt, storage, and issue of materials. In many concerns,

the volume and the cost of stores handled by the Stores Department are fairly high. In order,

therefore to be able to exercise effective control, the storekeeper should have a high place in the

management hierarchy.


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The duties & functions are summerised as follows-

a) Receipt of material into storage.

b) Record keeping.

c) Storage of material.

d) Maintaining storage.

e) Issuing stores.

f) Co-ordination with materials-control.

g) Ensure all transactions are posted in Bin-Card & that it is up-to-date.

h)

All items should be in its proper place.

i) Maintenance of stores at required levels.

j) Neatness in store to facilitate physical verification.

k) Co-ordination & supervision of staff in the stores department.

l) Periodical review of various scales, measuring instruments, conversion ratios, etc.

m) Protect stores from fire, rust, erosion, dust, theft, weather, heat, cold, moisture &

deterioration, etc.


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CLASSIFICATION AND CODIFICATION :

For the purpose of identification and convenience in storage and issue, each item of stores is

given a distinct name. Similar items are classified under sub-group and a number of such sub-

groups are classified under main or major groups.

Classification of stores should be accompanied with a suitable system of codification.

Codification is a procedure for assigning symbols, either numeric or alphabetic, for each item in

accordance with a proper arrangement.

ADVANTAGES OF CODIFICATION ARE:-

i. Lengthy descriptions are replaced by a simple code.

ii. It economises space in forms and reduces clerical work.

iii. Ease in identification of stores.

iv. It is comprehensive.

v. It facilitates mechanised accounting.

vi. Secrecy of description can be maintained.

vii. It ensures clarity.


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CODING

There are different types of coding, they are as follows

a) Numeric : Each item is given a number.

b) Alphabetic : Each item is denoted by a combination of alphabets. If the alphabet selected

indicates the inventory sound when it is pronounced, it is known as mnemonic system.This

helps in remembering the codes.

c) Alpha-Numeric : It is a combination of alphabets and numeric code.

d) Decimal System : It is basically a numeric system, sub-group may be indicated by decimals.

Location Code :

It is better to build location code for various items in a large store. It refers to the place or Bin

where the particular material is stored. The code helps one to find out the exact location of the

material easily.

The advantages of Location Code are as follows

COD

I

NG

Numeric

Alphanumeric

Decimal

Alphabetic


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1. Every item will have a proper place.

2. Only one item will be kept in one place.

3. Verification can be easily done.

4. Any one can locate it easily.


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HONDA SIEL CAR ,S GENERAL OUTLINE OF STORES

FUNCTION

The authority of receipt, storage and issue of all materials is centralized in the Materials

Department subject to exception permitted in certain cases. In certain cases a nominal stock of a

few consumable items can be permitted with user departments such as Maintenance, Laboratory

and Administration Department for meeting emergencies. In additional certain chemicals are

permitted to be stored in production department due to the operational needs.

The authority for storage of packing materials like bags is vested with the Bagging Department.

The Bagging Department receives the material, gets it inspected by laboratory, issued the same

for product bagging and maintains the stocks. Maintenance of the records for all quantitative

transaction of packing material is the responsibility of Bagging Department. Similarly the raw

materials are handled by the Production Department (Offsite) with all responsibilities in respect

of quantity accounting.


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FUNCTIONS OF STORES ACCOUNTING SECTION

The section deals with accounting of stores in the Finance Department performs the following

functions:

1. Accounting of receipts, issues, return and transfer of materials ;

2. Accounting of imported materials for capital works and operations/maintenance ;

3. Associating with Stores Section for Stock verification.

4. Valuation of stores item should be done on weighted average basis.


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Inventory Valuation

Objects :

Inventory has to be properly valued because of the following reasons-

i. Determination of Current Income.

ii. Determination of financial position.

iii. Computation of ratios.

Inventory Valuation of HONDA SIEL CAR

1. Stores, Spares, Packing and Construction Materials are valued at lower of cost or realisable

value based on technical estimates. Spares, which are repaired either departmentally or

through outside agencies, are taken into inventory at a nominal cost of Re. 1 each.

2. Raw materials and Stock in Process are valued at lower of weighted average cost or net

realisable value. [ According to accounting to International Accounting Standard 2(IAS

2), the estimated selling price in the ordinary course of business less cost of completion

and less costs necessarily to be incurred in order to make the sale.]

3. Finished goods are valued at lower of cost or net realizable value. Damaged stocks as

identified by the Management are valued at estimated realizable value. Closing stock of

Finished Goods is net of transit and standardization losses.


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a) The cost of stocks lying at plants is derived taking all expenses incurred at the factory

excluding those relating to the prior period, interest on long term loans, extraordinary

items of expenditure and amounts realised against insurance claims.

b) Cost of stocks lying at warehouses;

c) In respect of urea covered by Retention Price Scheme at cost of production after

adjustment of contribution to/subsidy from Fertilizer Industry Co-ordination

Committee ( FICC ).

d) Fertilizers whose prices have been decontrolled by the Government of India are valued at

cost plus freight upto the warehouses.

e) Imported Urea at procurement cost plus handling charges less remuneration received

from the Government of India.

f) Net realisable value:

g) For stocks of urea lying at plants, the retention price fixed by FICC.

h) For stocks of urea lying at warehouses, selling price fixed by the Government of India.

For fertilizers whose prices the Government of India and for Imported fertilizers has

decontrolled, the price prevalent on the date of Balance Sheet.

4. Stocks of Seeds and Chemicals are valued at lower of weighted average cost or estimated

realisable value.

5. Tools issued are written-off over a period of three years.

6. Catalyst and Resins issued at the time of commissioning the Plants are capitalised.

Subsequent issues are charged to revenue on the basis of their estimated life.


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INVENTORY CONTROL

Inventory Control is a systematic control and regulation of purchase storage and usage of

materials in such a way as to maintain an even flow of production and at the same time avoiding

excessive investment in inventories. Efficient material control reduces loses and wastage of

materials that otherwise pass unnoticed.

Inventory Control is the core ofMATERIAL MANAGEMENT. The need and importance of

inventories varies in direct proportion to the idle time cost of men and machinery, and the

urgency of requirements. If men and machinery in the factory could wait and so could customers,

materials would not lie in want for them and no inventories need be carried. But it is highly

uneconomical to keep men and machine waiting and the requirements for modern life are so

urgent that they cannot wait for materials to arrive after the need for them has arisen. Hence,

firms must carry inventory.

Because materials constitute a significant part of the total production cost of a product thus, cost

is controllable to some extent; proper planning and controlling of inventories are of great

importance.

Inventory Control is planned method of determining what to indent, so that purchasing and

storing cost is minimum without affecting the production or sales. Without proper control,

inventories have a tendency to grow beyond economic limits. Funds are tied up unnecessarily in

surplus stores and stocks, productive operations are stalled, and finances of the plant are severely


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strained. Lack of control over inventory also leads to excessive consumption and wastage, as

operatives are liable to become careless with irrational supply of materials.

Inventory controls objectives & techniques are discussed as follows:

Objectives of Inventory Control:

Scientific control of inventories should serve the following purpose

1. To provide the continuous flow of required materials, parts and components for efficient and

uninterrupted flow of production.

2. To minimise investment in inventories keeping in view operating requirements.

3. To provide for efficient store of materials so that inventories are protected from loses by fire

and theft and handling time and cost are kept at minimum.

4. To keep surplus and absolete items to minimum.

Techniques of Inventory Control

Reduction of surplus stock is an essential requirement of effective inventory control.

Various techniques of controlling the inventories are as follows

1. Min Max plan.

2. The two Bin system.

3. Order cycling system.

4. Fixation of various levels.

5. Use of perpetual inventory system & continuous verifications The ABC analysis.

6. Use of control ratios.

7. Review of slow & non-moving items.


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1. Min-Max plan: This is the

oldest method of inventory control. In this plan, analyst lays down a maximum and minimum

for each stock item. Minimum level establishes the re-order point and order is placed for

quantity of material, which will bring it to the maximum level.

2. The two Bin system: The basic

procedure is that, for each item of stock, two piles or bundles or bins are maintained. The

first bin stocks that quantity of first which is sufficient to meet its usage during the period

that elapse between receipt of an order and the placing of next order. The second bin contains

the safety stock and also the normal amount used from order to delivery date. The moment

the first bin stock is exhausted and the second the second bin is tapped, a requisition for new

supply is prepared and given to purchase department.

Since no bin-tag card is maintained, there is absence of perpetual inventory record under this

bin.

3. Order Cycling System: In this

system, quantities in hand of each item or class of stock are reviewed periodically (say

30,60,90 days). In that, if it is observed that stock level of a given item will not be sufficient

till the next schedule review keeping in view of its probable rate of depletion, an order is

placed to replenish its supply.

4. Fixation of various levels:


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Certain stock levels or fixed levels are given below-

a) Maximum level: - It

represents minimum quantity above which stock should not be held at any time. Maximum

stock = Re-order level + Re-ordering quantity (Minimum Level

consumption * Minimum Re-order period)

b) Minimum level: - It represents minimum quantity of stock that should be held at all the time.

Minimum level = Re-

order level (Normal consumption * Normal re-order period)

c) Danger {Safety} level: - Normal issues of stock usually stopped at this level and made only

under specific instructions. Safety stock level =

Ordering level ( Average rate of consumption * Re-order )

Or = {Maximum rate of consumption Average Rate of

consumption} * Lead-Time

d) Ordering level:- It is the level at which indents should be placed for replenishing stocks.

Order level =

Minimum level + consumption during lag period

Or = Maximum consumption * Maximum re-order period.


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5.Use of perpetual inventory and continuous stock verification:

The

perpetual inventory system records changes in materials, work-in-progress on a daily basis.

Hence managerial control and preparation of interim financial statements is easier.

The two main functions of perpetual inventory are

a) It records the quantity and value of stock in hand.

b) There is continuous stock verification of physical stock.

Perpetual inventory system is comprised of:

i. Bin card

ii. Stores ledger

iii. Continuous Stock-taking

Bin card:

A bin card is a quantitative record of receipts, issues and closing balances of items of stores.

Each item is accompanied by a separate bin card. The bin card is posted as and when a

transaction takes place. Only after a transaction is recorded, the items are received /issued.

The various levels recorded in bin card enables the storekeeper to requisition materials as and

when required.


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Stores Ledger:

It is maintained to record all receipt and issue transactions in respect of materials. The quantities

and the values are entered in the receipts, issues and balance columns. Separate sheets for each

item or continuous stores ledger may be maintained.

Stores ledger constitutes a second check on the quantity recorded in the bin card.

Bin Card Stores Ledger

a) It is a quantitative record{not a

quantitative record}

b) It is kept inside the stores

c) It is maintained by the store -

keeper

d) The postings are done before the

transactions takes place

e) Each transaction is individually posted

a) It is a record of quantity and value

b) It is kept outside the stores.

c) It is maintained by the accounts

department {centrally in the Cost

Office}

d) The postings are done after the

transactions take place.

e) Transactions may be posted periodically

and in total.


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Continuous Physical Stock Verification:

The stores account reveals what the balances should be and a physical verification reveals the

actual stock position.

Under it, the total No. of man-days available for verification is calculated. The items to be

verified per man-day are selected by classifying the various into groups depending upon the time

required. The plan is such that all items are verified in a year.

6.THE ABC ANALYSIS :With the numerous parts andmaterials that enter into each and

every industrial production, inventory control leads itself, inventory and foremost, to a

problem of analysis. Such analytical approach is popularly known as ABC (ALWAYS

BETTER CONTROL) analysis.

This plan is based upon segregation of aterials for selection control. It measures money value ie

cost significance for each material item in relation to total cost and inventory value. The logic

behind is that the management should study each item of stock in terms of its usage, lead time,

technical or other problems and its relative money value in the total investment in inventories.

Critical, i.e. high value items deserve very close attention, and low value items need to be

devoted minimum expense and effort in the task of controlling inventories.

7. USE OF CONTROL RATIOS:


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Inventory turnover ratio helps management to avoid

capital being locked up unnecessarily. This ratio reveals the efficiency of stock keeping.

INVENTORY TURN OVER RATIO IS GIVEN BY THE FORMULA

Cost of materials consumed / Cost of average stock held during the period

Where -

Cost of average stock = [Cost of opening stock + Cost of closing stock ] / 2

The inventory turn over ratio can be calculated (in days) as follows:

Days during the period / Inventory turn over ratio

This reveals the number of days for which the stocks are held.

8. Review of slow moving and non-moving items:

The money locked up in inventory is money lost to the business. If more money is locked up,

lesser is the amount available for working capital and cost of carrying inventory also increases.

Stock turn over ratio should be high as possible. Loss due to obsolescence should be eliminated

or these items used in some profitable work. Slow moving stocks should be identified and

speedily disposed of. The speed of movement should be increased. The turn over of different

items of stock can be analysed to find out the slow moving stocks.


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The percentage of slow moving

stores is given by the formula:

Slow moving stores / Total inventory

Materials become useless or obsolete due to changes in product, process, design or method of

production, slow moving stocks have a low turn over ratio. Capital is locked up and the costs

of carrying have to be incurred. Hence management should take effective steps to minimise

losses.

Internal Check

One set of documents for receipts, issues and return of materials is sent to the Stores accounting

Section/EDP Section of Finance Department. Based on these documents, priced store ledgers are

prepared for each item for stores. The material code number between Stores & Account should

be identical. The priced store ledger will provide the value of each receipt. Issue and return

transaction along with quantity accounts. The value in the priced store ledger is reconciled with

the control accounts in the general ledger. The quantity balance appearing in the priced store

ledger will serve as counter check for accuracy of Bin-card in stores which is essential for proper

functioning of


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INVENTORY CONTROL SYSTEM.

The priced store ledger is not maintained for large number of low value items such as stationery,

medicines, canteen stores, etc. In such cases, the expenditure is charged to the appropriate

expense account at the time of purchase itself. The concerned department keeps quantitative

record and the same will be produced as and when required for reference and audit purpose.

VERIFICATION OF INVENTORIES IN HONDA SIEL CAR

The officer-in-charge of stores will coordinate the job of physical verification and the Accounts

Officer in charge will render all assistance to ensure that the physical verification of inventories

is carried out as per the policy and the approved programme. The Stores Department will ensure

that the posting in the bin cards are updated before the verification of inventories is taken up.


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The inventories are classified into the following categories for the purpose of

verification:

i. Raw Material and Packing materials

ii. Stores, Chemicals and Spare parts

iii. Finished Products

I. Raw materials & Packing materials

The stocks of raw materials, packing materials and finished products are to be verified on

quarterly basis by an independent surveyor engaged by the society. No adjustment need be

carried out in the books of accounts unless the discrepancies in liquid raw materials and solid

raw materials are in excess of 1% & 5% respectively. This is as per guidelines issued by the

Head Office vied IOC dated 30th March 1976. No adjustment need be made in the Stock Register

also. If the discrepancies are in excess of the above limits, necessary adjustments are to be made

in stock registers as well as in the books of accounts.

II. Stores, Chemicals & Spare parts


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The job of physical verification of Stores, Spares, etc in stock is the responsibility of Material

Department. The Material Department will ensure that their records are updated before the

verification job is taken up.

The perpetual physical verification of stores, spares, etc to be carried out through a committee

consisting of representatives from Stores, Technical /Production & Finance Department on the

basis of ABC analysis in such a manner that a substantial part of items held in stock, especially

of high value, are checked at least ones during the year.

The percentage of physical verification should be on the following lines;

CLASSIFICATION VALUE % TO BE VERIFIED

( Rs. Per Unit ) DURING THE YEAR

A Above Rs. 50,000/- 100%

B 10,001 50,000/- 70%

C Below Rs. 10,000/- 25%


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The limits prescribed should be different for solid material and liquid material. The materiality of

the amount should be important criteria.

A quarterly report of physical verification should be submitted to Unit G.M.

The discrepancies found in physical verification should be suitably adjusted in the books of

accounts. Also list of non-moving and slow-moving items should be kept ready for the

verification of statuary auditors. A summary of same may also be sent to Head Office along with

the provisional accounts.

A team of stock verifiers will prepare a stock verification sheet {It records the result of stock

verification , which are maintained datewise so that when arranged together they give a

chronological list of items verified .}Giving the bin card balance and the physical balance of

each item covered in the stock verification. After filling up the particulars of the value and

quantity discrepancies with reference to the period stores ledger balance, the stock verification

sheets are forwarded to the Material Department for scrutiny and reconciliation and adjustment

in consultation with Finance Department. Accepted shortages are processed for the approval of

the competent authority. Excesses are taken on charge at Re. 1/- per item.

III. Finished Products

In case of finished goods also the above principle applies except that no adjustments in the

Books of Accounts are made. However, the stocks registers shall be adjusted on the basis of

actual stocks in order to replace the notional figures of stocks by more accurate estimate based

on physical verification.


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Reconciliation & Adjustment, etc

After each physical verification of movable assets and inventories, the discrepancies are to be

reconciled by the custodians of the assets/inventories and suitable adjustment action has to be

taken in consultation with the local Finance Department for the approval of competent authority

preferable within the financial year in which the physical verification has been conducted or

before closing of accounts of that financial year.

It is desirable to complete the physical verification work by March every year so that

reconciliation/adjustment action can be completed within the financial year itself.


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MEASURES OF EFFECTIVENESS Of HONDASIEL CAR LTD

For the purpose of monitoring the effectiveness of inventory management it is helpful to look

into the following ratios and indexes:

{All the costs are taken in Rs.}

1. Overall inventory turnover ratio =

Cost of goods sold / average total inventory at cost

PROJECT 1

{ 2282809316 + 297938656.95 + 242708223.39 } / { (

418850825.92 + 380475732.11 ) / 2}

= 2823456196 / 39966327.015

= 7.064588 Times

company position of inventory ratio is very good

PROJECT 2

{ 3011182563.69 + 92010482.07 + 110854133.36 }

/ { ( 390509315.46 + 587661312..65 ) / 2 }

= 3214047179.12 / 489085314.04

= 6.57155 Times

company position of inventory ratio is good


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2. Work-in-process inventory turnover ratio =

Cost of manufacture / average work-in-process inventory at cost

PROJECT 1

= { 2282809316 121121934.21 }/ { ( 2129382 +

2097861 ) / 2 }

= {2161687381.79 / 2113621.5 }

1022.74101 Times

company position of manufacturing is good

PROJECT 2

= { 3011182563.69 147151774.04 } / { ( 0 + 198690900

) / 2 }

= 2864030789.65 / 993454.50

= 2882.9000 Times

company position of manufacturing is very good

3. Finished goods inventory turnover ratio =

Cost of goods sold / average inventory of finished goods at cost

PROJECT 1

= 2823456196.34 / { ( 5997249.00 + 10045919.03 ) / 2 }

= 2823456196.34 / 8011584.015

= 352.4217 Times

PROJECT 2


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= 3214047179.12 / { ( 35889420.00 + 33887873.03) / 2 }

= 3214047179.12 / 34888646.515

= 92.123 Times

Company position of PLANT -1 is very good rather than PLANT -2

Average age of finished goods inventory =Average finished goods inventory at cost / average

cost of goods manufactured per day

PROJECT 1

= [ { 5977249 + 10045919.03 } / 2 ] /

[ ( 2282809316.99 + 2663875406.27 ) / ( 2 * 365 ) ]

= 8011584015 / 6776280.4482

= 1.182298 Times

PROJECT 2

= { ( 35889.42 + 33887873.03 ) / 2 } /

{ ( 3011182563..69 + 2572652727.77 ) / ( 2 * 365 ) }

= 16961881.225 / 7649089.44035

= 2.217503 Times

Company position of PLANT -1 is better than PLANT -2

4. Spare parts index =

Value of spare parts inventory / value of capital equipment.

[ Value of capital Equipment is

PLANT 1 = 742749889

PLANT 2 = 8175868498 ]


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PLANT 1

= 266126048.58 / 7427498891

= 0.03583 Times

PLANT 2

= 271039620.97 / 8175868498

= 0.03 Times

Slow moving stores / Total inventory of stores =

Value of slow moving stores is

PLANT 1 = 1.3 Cr

PLANT 2 = 9.42 Cr

Value of total inventory at the end of March 2005 is-

PLANT 1 = 295243275

PLANT 2 = 346900950]


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The factors that tend to increase the inventory are as follows:

1. Product diversification.

2. Inefficient purchase organisation. Rush purchases may be made with the result that the

materials on regular demand become surplus when received.

3. Strict production schedule or non-effective planning so that actual always trails behind the

target, resulting in excessive stocking of raw materials, components and work-in-progress.

4. Economic batch quantity having not been established.

5. Long production cycle.

6. Ineffective control on issues and consumption. Excessive wastage and spoilage require more

stock.

7. Absence of a suitable system of classification and condition.

8. Increase in the market price.

9. Reduce or slow sales.

10.Non-existence of research for simplification and standardisation of products.

Management polic The causes leading to excessive stocking in a concern should be critically

examined and suitable measures should be taken in a manner as demanded by the particular

situation.


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Material Management

Issue of Materials-

While issuing materials the following points must be noted:

a) Planning of material required.

Standards should be set for stores requirement. The Bill of Material

gives exact estimate of different items of stores required.

b) Requisition of materials.

Based on the quantities mentioned in the bill of materials, materials are

requisitioned. Materials should not be issued in excess of standards.

c) Internal audit of issues.

All issues should be audited. Any excess/shortfall in issues should be

explained and accounted for.

d) Control of wastage.

Actual wastage should not exceed the standard wastage fixed.

Wastages should be examined and any variance should be reported.

e) Issues of sundry items.

Sundry materials {also known as consumable stores or simply, stores}

may be required in the various departments for purpose other than for

direct production orders.


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Materials (Stores) Requisition note-

This is a formal written demand / request usually from the production department to the stores

for the supply of specified materials, stores, etc.

It authorises the stores keeper to issue the requisitioned materials and record the same in the bin

card.

Bills of Materials-

It is a comprehensive list of materials with specifications, material code and quantity of each

material required for a particular job, process or service. Substitute material may be used when

the original materials are not available.

It act as an authorisation to the stores department in procuring the materials and all materials

listed in the bill are sent to the production department.

Objects of Material Issues Control:

Material issues are controlled to ensure that-

i. Every issue is authorised.

ii. Every issue is correctly accounted.

iii. Every issue is properly priced.

iv. It is properly charged to costs.

v. It is reconciled with the financial books.


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Pricing of Material Issue-

When the materials are issued to the production department, a difficulty arrises regarding the

price at which materials issued are to be charged. The same type of material may have been

purchased in different lots at different times at several different prices. This means the actual cost

can take on several different values and same method of must be selected for pricing.

There are numerous methods of pricing issues. They may be classified as follows:

i. Cost Price Method

a) Specific Price

b) First-in-First-Out

c) Last-in First-Out

d) Highest-in First-Out

e) Base Stock

ii. Average Price Methods

a) Simple average

b) Weighted average

c) Periodic Simple Average

d) Moving Simple Average

e) Moving Weighted Average


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iii. Notional Price Methods

a) Standard Price

1. Current standard

2. Basic standard

b) Inflated Price

c) Market Price

1. Replacement price

2. Realisable price

Pricing of Material Returns:

Some material issued to the job may be left over. These should be returned to the stores. A

material return note is prepared in triplicate. The job should be charged correctly and materials

should not be lying around. Hence, these notes are prepared.

Material Transfer Note:

Surplus material drawn against one job can be used in another instead of transferring it to the

stores. These transfers are recorded in the material transfer note to charge individual jobs

correctly.


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Material Losses:

There is usually a difference between the input of material in a process and the output. This

difference represents loss of materials in that process which can be in the form of waste, scrap,

spoilage or defective.

Control of losses:While designing a control system, controllable & uncontrollable losses should

be distinguished. The system should determine standard levels, which can be attained. Losses

may be uncontrollable in the short-term but controllable over a period of time.

Also, it takes time to control a new process. Losses can be minimised by proper storage, proper

handling, maintenance of suitable inventory levels, etc.

A control system should calculate and report production and data regarding waste, scrap,

spoilage and defectives should be regularly collected.

The control of losses can be exercised at three levels:-

i. Occurrence: Losses are incurred due to nature of product, quality control, method of

production, etc.

ii. Recovery, handling and storage: Different types of losses should be identified at different

stages of production. Good handling and proper storage protect goods from damage, theft

and misappropriation.

iii. Disposal: To maximise sales value of waste, scrap, spoilage, etc yhe following points are to

be considered-

a) Make the goods ready for sale

b) Select the best buyer


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c) Control the quantities of losses

Physical control should be exercised over the quantities of scrap, spoilage leaving the quantities

produced, repaired and sold must be continuously reviewed.

INVENTORY MANAGEMENT PRACTICE IN HONDA SIEL

CAR LTD

Inventory levels in Honda seil cars appear to be high. The reasons cited by this

investigator are as follows-

a) It pays to keep inventories high because prices rise due to inflation.

b) Since it is a very large organisation, there is a large variety of stores.

c) Carry a large safety stock in order to avoid unreliability of vendors and poor quality of

materials supplied.

d) Purchase executives are severely penalised for stockouts and are questioned for high

inventories.

e) Fixed and standardised norms for maintenance of stocks in the stores.

f) Computerisation i.e. each & every work is managed and done through the computers.

g) Believe in developing relationship with promising vendors.

h) To avoid purchases at the time of crises (when stock becomes short) and break down in the

plant cannot be afforded, large inventory levels of critical items are maintained.


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AREAS OF IMPROVEMENT IN HONDA SIEL CAR

Inventory Management HONDA SIEL CARcan be improve

inventory manage ment

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