INVENTORY MANAGEMENT IN

SHIPBUILDING COMPANY

PRESENTED BY

AKSHAY MANJAREKAR [16 - A]

Company Profile Mazagon Dock Ltd. situated at Dock Yard Road.

It is one of the leading shipbuilding and offshore fabrication yards in India.

It was established in the 18th century .

It was incorporated as a Public Limited Company in 1934.

Taken over by government in 1960 & is now a PSU of the Government of India.

Company’s ActivitiesInvolved in Building

Commercial projects

Offshore platforms Commercial vessels

Naval projects

Warships Submarines

Defining Inventory It is an idle stock of physical goods that contain

economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

Types Inventory Raw materials inventory

Work in process inventory

Finished goods inventory

Inventory Management To maintain inventory at appropriate level to avoid

excessive or shortage of inventory because both the cases are undesirable for business.

Other Objectives:

To keep investment in inventory at optimum level. To minimize carrying cost of inventory. To minimize inventory ordering costs.

Costs of Holding Inventories1. Material Cost: This include the cost of purchasing

the goods, transportation and handling charges less any discount allowed by the supplier of goods.

2. Ordering Cost: This includes the variables cost associated with placing an order for the goods. The fewer the orders, the lower will be the ordering costs for the firm.

3. Carrying Cost: This includes the expenses for storing and handling the goods. It comprises storage costs, insurance costs, spoilage costs, cost of funds tied up in inventories etc.

Techniques of Inventory Control Economic Order Quantity Technique (EOQ)

ABC system of control

Economic Order Quantity Technique

It is that size of the order which gives maximum economy in purchasing any material and ultimately contributes towards maintaining the materials at the optimum level and at the minimum cost.

Economic order quantity =

• A = Demand for the year • Cp = Cost to place a single order • Ch = Cost to hold one unit inventory for a year

ABC system of control The ‘A’ group will include more expensive items with high

investment and it will require more intensive control.

The ‘B’ group will consist of the items accounting for the next largest investment.

The ‘C’ group will consist of a large number of items of inventory accounting for small investment.

CATEGORY NO. OF ITEMS VALUE

A 5% 70%

B 25% 20%

C 70% 10%

Data Analysis

ITEM MAXIMUM STOCK LEVEL

ORDER LEVEL SAFETY STOCK LEVEL

ARGON CYINDERS 45 20 10

STEEL SHEETS 150 60 30

PAINTS 100 45 20

STEEL PIPES 200 90 50

PETROL/DIESEL (LITRES)

5000 1800 1000

Data Analysis

Data Analysis

Data Analysis

Data Analysis

Data Analysis

Conclusion Proper Inventory management system is followed

using SAP.

The firm follows inventory control techniques such as A-B-C technique EOQ Analysis which is quite effective.

Storage facility in Mazagon Dock Ltd. is quite large and up to the mark.

Findings Mazagon Dock Ltd. Faces the problem of

competition from private companies.

There is no proper sequence & acknowledgement board for certain items in store department. It is not good when external auditing held in company.

Organization has no record of wastage items. It is not good for operating profit of the company.

Recommendations The new recruits and less experienced employees

should be given proper training on related SAP modules.

Proper work division should be done so that employee knows what work is assigned to them. Sometimes during my training period I noticed that in the goods receipt process because of lack of coordination there confusion as to who do it.

The paper work should be reduced and computerization should be increased for more successful working.

References Website

en.wikipedia.org/wiki/MDL www.mazagondock.gov.in/ www.google.com

Books Inventory manual - stores (Mazagon dock Ltd.) Essentials of inventory management - Max Muller