keltron project
TRANSCRIPT
A PROJECT WORK ON
THE EFFICIENCY OF SUPPLY CHAIN MANAGEMENT OF
IT PRODUCTS IN KELTRON
Submitted in partial fulfillment of the requirements
for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Of Mahatma Gandhi University
Submitted by
J. JAYAKRISHNAN
Under the guidance of
Mr. Romel Stephen
June - July 2011
DC School of Management and Technology
Pullikkanam, Vagamon, Idukki 685503
Tel: 04869 – 248322, 248323
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DECLARATION:
I hereby declare that the project report titled “ The efficiency of supply chain management of IT
products in Keltron” undertaken in ‘Keltron, Thiruvananthapuram’ submitted to Mahatma
Gandhi University is a record of the original work done by me and no part of it has been
submitted earlier for any Degree, Post Graduation or similar of any other university or
institution.
Place: Pullikkanam Signature:
Date: Name: J JAYAKRISHNAN
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Certificate from the Company
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ACKNOWLEDGEMENT
First of all, I thank the God Almighty for his blessings to complete my Project
successfully.
I would like to express my heartiest gratitude to Mrs. Betty John, DGM of keltron
TVM, . Kerala State Electronics Development Corporation Limited for giving me an
opportunity to associate myself in the organization and to carry out my project in Keltron.
I would like to thank our Director Brig. Ashok Kumar for giving me an opportunity to
undergo this project. I would also like to extend my gratitude towards my course co-ordinator
Mr. Umesh Neelakandan and project guide Mr. ROMEL STEPHEN, Faculty, DCSMAT for
his guidance, constant interest and encouragement which has enabled to complete my project
successfully.
I would also like to express my special thanks to all the department heads that I have
visited for their support, information, co-operation, advice to complete my project and would
also give my sincere thanks to all the staff and the members of KELTRON ,Trivandrum,
In addition, I express my affection to my beloved parents, friends & all my colleagues for
providing support throughout the study.
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CONTENTS
Serial No. Title Page No.
1 Title of the project 1
2 Declaration 2
3 Acknowledgement 4
4 Executive Summary 6
5 Industry Profile 11
6 Company Profile 14
7 Design Of Study 30
7 Literature Review 34
8 Data Analysis and Interpretation 58
9 Findings and Suggestions 92
10 Conclusion 97
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EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
INTRODUCTION
KELTRON:
Keltron is India’s first and the largest electronics corporation in the State sector.
Keltron has been a catalyst in making electronics work in almost every aspect of
our daily life, since 1973. Today, we live in a technology-driven world where
speed, flexibility, intellectual capital development, and networks have become the
basis of value creation - as connectivity and interactive technologies pervade all
business activity. In this technology-driven environment, Keltron finds the
assimilation, adoption and integration of technology in creating innovative
solutions as the very basis of survival. Keltron's success has been in making
technology work rather than inventing it. Keltron has been a catalyst in making
electronics work in almost every aspect of our daily life, since 1973. Keltron's
strength lies in the stable foundation and experience built over the years, its strong
human capital, its nation-wide network and its agility to adapt itself to change.
With over a 30-year long track record as a manufacturer of sophisticated electronic
devices and systems, Keltron presents itself in the global market as a one-stop-shop
for manufacturing, system integration, and after-sales-support in India.
Recently, Keltron has added to its repertoire, a set of knowledge services to foster
greater global competitiveness for Indian industry as well as to ensure quicker
innovation; and an independent division for project consulting to extend the
benefits of its large knowledge capital in the form of comprehensive solutions to
customers in several market segments worldwide.
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HISTORY
KELTRON’S history is a saga of innovation in electronics. From being a pioneer
in 1973, to the role of a trend-setter today, Keltron has been the catalysis for the
development of electronics industry in Kerala. The tag line launching a State-
owned electronics enterprise, more than a quarter century ago, read “spearheading
an electronics revolution in Kerala”. It was an experiment by Government of
Kerala to transform the laid-back, picturesque Kerala State known for its spices,
natural beauty, Kathakali and the Onam boat races, to an arena for industrial and
technological development. That was how Keltron was born. Within five years of
its inception, Keltron had set up a production centre in every district of the State.
More than 5,000 people were engaged directly or indirectly by Keltron for the
manufacture of electronic goods. The model of a State-owned electronics
corporation was so successful that several other States in India followed suit;
launching their own electronics corporations. A quarter century later, Keltron after
having contributed substantially to the industrialisation of the State, set about
transforming Trivandrum, the capital city of Kerala, into one of the major
electronics hubs of the country. Today, the city is home to Technopark, the
internationally known technology park where thousands of talented men and
women participate in the development of a burgeoning information technology
industry. Thus Keltron has in effect triggered a revolution that still keeps churning
out its benefits to individuals and institutions in different parts of the world,
continuing in its quest to innovate products and processes that would add further
value to life and to the industry.ANYTHING is possible. But then, only few things
really happen. Keltron has been making things happen since 1973 starting with
spearheading an electronics revolution in the country to being the most sustainable
electronics corporation in the state sector. A strong infrastructure, enterprising
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team of people, innovative operational methods, accent on quality and customer-
orientation are the core competencies of the organization which has made things
happen all these years. Large Pool of Experienced Technical Man power Keltron’s
expertise in high quality manufacturing is the direct result of the highly skilled,
multi-disciplinary team of graduate engineers, project managers and a skilled work
force with a proven track record in complex precision manufacturing. Currently,
Keltron employs a work force of 2000 of which 400 are Engineers who possess
extensive hands-on experience in technology integration and adoption, high-tech
manufacturing operations and in managing turn-key projects. Quality and
reliability of KELTRON products have been endorsed over and over by the large
customer base and ISO 9000. By forging strategic alliances with world leaders,
KELTRON is poised to maintain a global presence and keep itself abreast of
current technologies.
Man power at Space Electronics section has been specially trained at Indian Space
Research Organization (ISRO) in high-reliability soldering, harnessing and QC.
Keltron also provides technical manpower to major organisations like ONGC and
VSSC, and collaborators like Hitachi, Japan. Country-wide Sales Network
Keltron has an All India Sales Network in place with full-fledged Marketing
Offices in Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Ahmadabad
and Trivandrum to provide the quickest possible service to customers. Technology
Support At the moment, Keltron has an arrangement with C-DAC, a research and
development organization under the Government of India, which is located in the
Keltron campus, for technology development and adaptation. An in-house research
and department facility along with a full-fledged Knowledge Centre is in the
pipeline and will be implemented shortly. Strong Infrastructure and Manufacturing
Experience Since its inception in 1973, Keltron’s forte has always been high
quality manufacturing. During the past 30 years, Keltron has churned out a whole
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range of electronic products, electro-mechanical and high precision modules and
sub assemblies for different industry segments. Over the years, Keltron has built up
a strong infrastructure spread over 7,00,000 sq ft of built-up area. Equipped with
computer-based facility for system design & engineering, and software
development tools for embedded systems, Keltron today is fully geared to offer
integrated manufacturing solutions.
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INDUSTRY PROFILE
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INDUSTRY SCENARIO
The present position of electronics and IT hardware industry has been clearly
depicted in the report of the national task force on information technology and
software development (Part II). Excerpts from the report: “The past and existing
policy frame work brought about a high degree of uncertainty discouraging
investments in a frequently changing duty regime; with duty on inputs often more
than that on finished goods; with cumbersome and counterproductive
import/export procedure which impeded the velocity of business. This predictably
led to decline in value addition in the hardware industry and eventually to the
closing down of many of the units.
Based on the recommendations of the Task Force the Government of India
announced some incentives to this Industry and more investment friendly
legislation and duty/tax concessions are expected in due course.
The total electronic equipment production in India will reach US $32 billion in
2011, compared to US $14 billion in 2006, a compound annual growth rate
(CAGR) of 18 percent. Semiconductor consumption in India will more than double
from US $2.8 billion in 2006 to US $7.2 billion in 2011. The growth in electronic
equipment production is being bolstered by the rapidly growing demand for
electronics equipments in India.
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There is wide scope for improving the situation by harnessing and consolidating
the resources and creating a very conducive environment for growth in this high
tech filed. The government having convinced the necessity of putting the sector
under thrust area has initiated steps towards this. Keltron the leading Public sector
undertaking with sufficient infrastructure has to play a key role towards this
objective.
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COMPANY PROFILE
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COMPANY PROFILE
KERALA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD.
(KELTRON) was incorporated in the year 1972 and started commercial activities
in 1973. The organization was set up as the first electronics industry in Kerala
with the objective of promoting developments in the electronics field.
Manufacturing units were set up in various parts of the State and Marketing
Offices throughout India. Subsidiary companies were also started. Main units
manufacture electronic equipments and systems, where as subsidiary companies
manufacture components.
Corporate office of KELTRON (Keltron House) is situated at Information
Technology software & hardware products Vellayambalam in the heart of
Trivandrum city. Keltron has got four manufacturing units, one unit exclusively
for dealing with Information Technology products& software, five Subsidiary
Companies and seven Marketing offices.
It is a technology driven enterprise that manufactures and markets electronic
components, equipments and system for communication defence, industrial and
home appliances. In a state characterized by a shy capital investment culture in the
industrial sector, the Company assumed the role of an entrepreneur and setup its
own manufacturing units and marketing offices. In its developmental role, it
organized setting up of tiny units in the co-operative sector for assembly of
consumer electronics products, developed small entrepreneurs in the ancillary
sector and promoted joint sector units in the State even with industry majors like
Tata Group, Best & Crompton etc. The company established a good brand image
for consumer Electronic Products and Professional Equipments.
The registered office is Keltron house at Vellayambalam in Thiruvanathapuram.
From within the four walls of drawing room to the vast expanse of an international
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airport, from the deep oceans to the realms of outer space, there is a KELTRON
product in the form of an innovative solution.
The corporation has weathered through extreme changes in the economic and
commercial environment, from highly restrictive government policies involving
tedious and time consuming licensing procedures during its infancy, to the present
liberalized policies. Several Corporations even in Private Sector in Consumer
Electronics and a number of State Level Electronics Companies like UPTRON
closed down in this process of transformation. Even after the span of 25 years of its
existence, Keltron is still the major company in this State in the Electronic sector.
Though it is in loss for the last ten years, its surviving slowly with efficient
management. But still, miles to go.
Today, Keltron products remain as icons of technology brought to benefit the
people continuing in its quest to bring benefits of frontier technology to its
customers. Keltron has forged strategic alliances with world leaders in trade.
Keltron have repositioned itself as a total solutions provider in Electronics.
With the synergy of highly skilled manpower and assured access to frontier
technology, Keltron braces itself as a provider of innovative solutions meeting the
future needs of its customers. More than offering employment opportunities to
people, Keltron has trained and nurtured many high caliber managers and technical
hands who have in turn enlarged the horizons of a developmental process that it
had initiated years ago.
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Mission:
With nearly 2000 employees working all over India, KELTRON carries the
effulgent light of mission to bring the benefit of technology to the common man
and thereby contribute to the development of the Society.
Policy:
KELTRON’s policy to establish a set of standards and to provide
uncompromised quality in whatever it does, keeps it abreast of current
technologies in the Electronics and IT industry.
Vision:
Keltron management’s CORPORATE VISION as the company enters the 21st
century is:
To be a world-class, growth-oriented electronics corporation specialised in
providing quality, market-focused products, services and cost-effective system
solutions to a large clientele.
To attain leadership position in the knowledge industry by training and
utilizing the rich knowledge capital available in Kerala, and creating a wide
technology horizon for the development of knowledge wares and intelligent
systems.
To emerge as a strong and self-reliant business enterprise with customer focus,
profit orientation, and professional outlook.
To build up Keltron as a model PSU in the Sunrise Technology sector of
Electronics & IT.
To function as the backbone of electronics industry in the state
To continue to play the role of nodal agency of government for accelerating the
growth of development of this core industry in the state.
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Manufacturing facilities located in Kerala, India
Manufacturing capability: Four fully equipped production facilities of over
500000 sq.ft.area.
ISO 9001:2000 certified.
A regular supplier of custom products to the Departments of Defence and
Space to Government of India since 1980
Fully fledged Marketing Offices in eight metropolitan cities of the country:
Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad, Ahmadabad and
Thiruvananthapuram Customer Support.
Customer support Centers in all the Districts of Kerala State and also in
eight metropolitan cities of the country : Mumbai, Delhi, Chennai, Kolkata,
Bangalore , Hyderabad, Ahmadabad and Thiruvananthapuram.
Land & Built-up area KSEDC owns around 106 Acres of Land and 67,000 Sq.m. of built-up area at thefollowing locations.
Location Land(In Acres) Built-up Area(In Sq.m)
Keltron H. O. 8.1 6500
Keltron IT Business Group, Vellayambalam, Trivandrum In above 6900
Keltron Equipment Complex, 17 15300
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Karakulam, Trivandrum *
Keltron Communication Complex, Kulathur, Trivandrum * 431 6253
Keltron Controls, Aroor, Alleppey * (Near Cochin) 16 11400
Transmission Equipment Unit, Mudadi, Calicut 13.3 1121
Keltron Component Complex , Kalyassery, Kannur* 10.9 10721
Keltron Resistors, Kalyassery, Kannur Inabove 588
Keltron Magnetics, Kalyassery, Kannur 1.35 432
Keltron Crystals, Kalyassery, Kannur 1.81 1296
Keltron Electro Ceramics, Kuttippuram, Malappuram * 20 2237
ISO 9001: 2000 certified
The KELTRON GROUP comprises the holding company, Kerala State
Electronics Development Corporation Limited and ten subsidiary and associate
companies turning out more than hundred different types of products. These
products are marketed through a strong sales and distribution network spanning the
entire country.
Subsidiaries:
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Keltron Component Complex Ltd.
Keltron Crystals Ltd.
Keltron Resistors Ltd.
Keltron Automation Systems.
Keltron Electro Ceramics Ltd.
Keltron Rectifiers Ltd.
Keltron Counters Ltd.
Product Range:
Process Automation Systems
Communication Products
Information Display & Security Systems.
Traffic Management Systems.
Satellite/ Board Casting Equipment.
Office Automation Equipment.
Power Electronics Products.
Strategic Electronics Products.
Electronics Components.
Home Electronics Products.
Information Technology.
All India Presence through Branches at:
Delhi
Mumbai
Calcutta
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Ahmadabad
Hyderabad
Bangalore
Chennai
Trivandrum
PRODUCT PROFILE
a) Manufacturing of Electronic Exchange of various capacities with Technical
knowhow from C-DOT.
b) Manufacturing Modules for Indian Space Research Organization (ISRO)
with their know-how
c) Trading of IT products
d) Manufacturing of Electronic systems based on design documents
Supplied by customers.
PRINCIPLE PRODUCTS
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COMMUNICATION PRODUCTS
Electronic Private Automatic Branch Exchanges. (EPBAX)
Rural Automatic Exchanges.
512 Port SBM RAX
KAT 2000 Advanced Terminal for Office Automation
Main Automatic Exchange (MAX) up to 40,000 lines
Optical Line Terminating Equipment
TRAFFIC MANAGEMENT SYSTEM
Pedestrian actuated Traffic Controller
Traffic Signal Controller
Vehicle Actuated Traffic Controller
IT PRODUCTS
Computers, Peripherals and accessories
Software packages
Customized /dedicated software solutions
Networking solutions LAN/WAN/Intranet
OFFICE AUTOMATION
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Attendance data management systems (ADAMS)
Calculators
Fax machines
Modems
Railway ticketing machine
Overhead Projectors
Electronic Components
Aluminium Electrolytic Capacitors
Motor Start Capacitors
Metallised Plastic Film Capacitors
Ceramic Disc Capacitors
Carbon/Metal Film Resistors
Piezo Electric Quartz Crystals
N T C Thermistors
Power Diodes
Electro mechanical &
Electromagnetic Counters
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Printed Circuit Boards
Satellite/Broadcasting Equipment
Radio Networking Terminals
TV Receive Only Terminals (TVRO)
Direct Reception Systems (DRS)
TVRO Signal Generators
Stereo Consoles
Announcers Consoles
Switching Consoles
Mixing and Dubbing Consoles
Monitoring Amplifiers
Equalized Line Amplifiers
Graphic Equalizer
Power Electronic Products
Uninterruptible Power Supply System (UPS)
Rectifiers
Battery Chargers
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High Capacity Voltage Stabilizers
AC&DC Distribution Boards
Strategic Electronic Products
Processor Based Ground Mine
Sonobuoys
Ship Control Systems
Echo Sounder
EM Log
Sonar Simulators
Navnet
Expandable Bathy Thermographs
Home Electronic Products
Television Receivers
Audio Equipment
Home Inverters
Energy Meters
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The focus areas of the company are:
Information Technology
Keltron is dealing in Computer Hardware, standard Software and associated
Peripherals. The Software Group offers customized software solutions to
Government departments, Local self Government Institutions, Co-operative
banks, and various other Customers.
Keltron also offer IT Training, Network Services, Web services etc. Having
expertise in all the functional domains (Hardware, Software, Web Services,
Networking etc) the Government of Kerala has recognized KELTRON as a
Total IT Solution Provider in the year 2002.
Components
Keltron Component Complex Limited markets its products under the brand
name “KELTRON”of its parent Company. It has a state of the art manufacturing
facility with sophisticated automatic machines from Japan and Europe . It has
the capability to produce all types of Aluminium Electrolytic Capacitors which
conform to national and international standards. The manufacturing technology
is constantly upgraded by R&D Centre of the Company which has the
recognition of the Department of Scientific & Industrial Research, Ministry of
Science & Technology, Govt. of India. The Company's Quality system has been
conferred with the ISO 9001 accreditation by M/s KPMG
Knowledge Services
Keltron offer some of the most innovative, career-relevant courses through IT
Education centers. KELTRON started IT Education Centers all over the State
from the point of view of establishing a school of excellence in Information
Science and Technology .It is a premier institution which equips students with
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the cutting edge technology as per the market requirement. KELTRON's IT
Education & Training program reflects changes in technology and applications.
The carrier programs are designed in such a way as to meet the tremendous
demand for the computer professionals in India and abroad.
Strategic Electronic
Strategic (Defence) Electronic Products as well as Space Electronics Products
fall under this category. Special Product Group caters to the requirements of
Defence sector mainly Indian Navy. The space electronics section of the unit has
a dedicated setup to meet the specialised and sophisticated requirements of
ISRO in Electronic assembly and testing for their projects PSLV, GSLV and
Satellites INSATs, GSATs, Etc
Surveillance Technology
The products under this category are Surveillance Systems, Access Control
Systems, Attendance Data Management systems etc and Keltron’s Security
Systems Group is manufacturing these products.
The group had a vide range of customers from all over India like AIR, Door
Darshan, International Airports, TELCO, Hindustan Motors, Ordinance
Factories, Parliament House, PM’s Residence, ONGC Platforms etc
Control System
Solutions using various types of ID Cards (SMART Cards, RFID Cards, Bar
Coded Cards etc) for different applications (Voters’ Identity, Employee Identity,
Traders Identity, Beneficiary Identity, Vehicle Detection & Identification,
Driving License, Electronic Number Plate for vehicles, Ration Cards tec) are
offered by the ID Card Project (IDCP) Group of Keltron. It is the State Level
Agency (SLA) for Election Department in Kerala .
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Power
Keltron is in the Power Electronics Sector and manufacturers Battery chargers,
Inverters and UPS system with technology developed by in-house R&D as well
as with technology outsourced from M/s ABB Switzerland and C-DAC
Trivandrum. The Power Electronics Group of KELTRON was the first in the
country to design and develop 500KVA & 600 KVA UPS qualifying seismic
parameters.
Traffic Systems
KELTRON Traffic Controllers are installed all over India in places ranging
from Srinagar to Trivandrum and Gandhinagar to Imphal. Some of the major
cities covered by KELTRON system besides Delhi are Ahmedabad, Bhopal,
Jaipur, Nagpur, Bangalore, Mangalore, the twin cities of Hyderabad &
Secunderabad, Gorakhpur, Kanpur, Chennai and Calcutta. Keltron’s LED
stacked signal display units are a viable solution to the energy crisis in the form
of low power consuming, maintenance free traffic signaling systems. We have
successfully developed Solar Powered Road Warning Blinker and Signal
System and GPS based controllers.
Control System
Keltron is in the Control & Instrumentation sector since 1979. Our C & I
package includes System Design, Engineering, Manufacturing, Field Erection &
Commissioning and Project Management of Process Control and & Power Plant
Automation Systems. They are capable of executing Turnkey projects.
KELTRON is also in the business of Pneumatic Actuators using Power
Cylinders since 1979. KELTRON’s Pneumatic Actuators are in service in
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almost all the Thermal Power Plants, Captive Power Plants, and Steam
Generating Units of various Process Plants etc.
Major projects / Installations
Turnkey Analogue Control & Instrumentation Systems for Major Thermal
Power Plants in India for customers like Gujarat Electricity Board,
Maharashtra State Electricity Board, NTPC, TNEB etc.
Computer based Data Acquisition Systems and Digitial Control Systems
at various power plants for customers like DVC, TNEB, APSEB, Neyveli
Lignite Corporation, UPSEB etc.
Automatic Fare Collection and Ticket Issuing System for Metro Tube
Railway at Calcutta.
CCTV System with more than 50 CCD Cameras and associated control
equipment at Indian Parliament House, New Delhi.
Store and Forward Message Switching System (SFMSS) for Indian
Telecom Network at major telegraph exchanges in Southern India.
Message Switching System for Indian Navy.
On-line issue of Voter Identity Cards for the entire electorate of over 20
million voters in the state of Kerala - with immediate issue of cards at their
respective booth - using state of the art technology, being done for the first
time in the country.
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Micro processor based Card Attendance Systems in major industrial
establishments like TELCO, and also various research institutions.
Major Defence Electronics Projects for the Indian Navy.
DESIGN OF STUDY
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DESIGN OF THE STUDY
STATEMENT OF THE STUDY
The project work is titled as “Efficiency Of SUPPLY CHAIN
MANAGEMENT of IT products in Keltron, Trivandrum”.
It is intended to analyze comprehensively and understand thoroughly the
various SUPPLY CHAIN services, working and functions of “Keltron,
Trivandrum” in order to gain more knowledge regarding SCM aspects of business
in a manufacturing company.
SCOPE OF STUDY
Analyze the supply chain management of IT products in Keltron. To find out the problems in supply chain management and suggest some
solutions.
OBJECTIVES
Study the supply chain management in KELTRON Ways to improve the efficiency of supply chain management Analyze the procedures involved in various stages of supply chain Study and analyze operations, suppliers, purchase, inventory and quality
management. Is there any possibility for product diversification.
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RESEARCH METHODOLOGY
Methodology may be a description of process, or may be expanded to include
a philosophically coherent collection of theories, concepts or ideas as they relate to
a particular discipline or field of inquiry
Methodology may refer to nothing more than a simple set of methods or
procedures, or it may refer to the rationale and the philosophical assumptions that
underlie a particular study relative to the scientific method. For example, scholarly
literature often includes a section on the methodology of the researchers.
RESEARCH-PERIOD: A period from 1st June, 2011 to 25th July, 2011.
RESEARCH-PLACE: Conducted a study on functioning of KELTRON
SOURCES OF DATA AND INFORMATION
The collected data and information are from the internal organization report and
websites. The two sources of information are:-
1. Primary data
o Face to Face Interview
o Direct Observation
2. Secondary data
o Brochures and Catalogues of the Company
o Official Reports
o Website of the Company
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LIMITATIONS
Any work cannot remain untouched with the limitations. This project work is not
an exception and following were the limitations of the study:-
Time was a limiting factor during the study.
Only a percentage of total employees were interviewed.
The workers were very busy in their work and had a little time available
for interview or conversation.
Some core data could not be collected due to confidentiality policies of the
company.
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LITERATURE REVIEW
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REVIEW OF LITERATURE
Definitions of Supply Chain Management
Supply chain management is a cross-function approach including managing the
movement of raw materials into an organization, certain aspects of the internal
processing of materials into finished goods, and the movement of finished goods
out of the organization and toward the end-consumer. As organizations strive to
focus on core competencies and becoming more flexible, they reduce their
ownership of raw materials sources and distribution channels. These functions are
increasingly being outsourced to other entities that can perform the activities better
or more cost effectively. The effect is to increase the number of organizations
involved in satisfying customer demand, while reducing management control of
daily logistics operations. Less control and more supply chain partners led to the
creation of supply chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among supply chain partners,
thus improving inventory visibility and the velocity of inventory movement.
Supply chains encompass the companies and the business activities needed
to design, make, deliver, and use a product or service. Businesses depend on their
supply chains to provide them with what they need to survive and thrive. Every
business fits into one or more supply chains and has a role to play in each of them.
The pace of change and the uncertainty about how markets will evolve has made it
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increasingly important for companies to be aware of the supply chains they
participate in and to understand the roles that they play. Those companies that
learn how to build and participate in strong supply chains will have a substantial
competitive advantage in their markets.
The term “supply chain management” arose in the late 1980s and came into
widespread use in the 1990s. Prior to that time, businesses used terms such as
“logistics” and “operations management” instead. Some definitions of a supply
chain are offered below:
“A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products
to customers.”—from Ganeshan and Harrison at Penn State University in their
article ‘An Introduction to Supply Chain’.
“A supply chain consists of all stages involved, directly or indirectly, in fulfilling a
customer request. The supply chain not only includes the manufacturer and
suppliers, but also transporters, warehouses, retailers, and customers
themselves.”— from Chopra and Meindl in their book Supply Chain Management:
Strategy, Planning, and Operations.
“A supply chain is the alignment of firms that bring products or services to
market.”—from Lambert, Stock, and Ellram in their book Fundamentals of
Logistics Management.
Some definitions of supply chain management are as follows:
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“Supply chain management is the coordination of production, inventory, location,
and transportation among the participants in a supply chain to achieve the best mix
of responsiveness and efficiency for the market being served.”—from Essentials of
supply chain management. (John Wiley & Sons)
“The systemic, strategic coordination of the traditional business functions and the
tactics across these business functions within a particular company and across
businesses within the supply chain, for the purposes of improving the long-term
performance of the individual companies and the supply chain as a whole.”—from
Mentzer, DeWitt, Deebler, Min, Nix, Smith, and Zacharia in their article Defining
Supply Chain Management in the Journal of Business Logistics.
A general overview of Supply Chain
The participants in a supply chain are continuously making decisions that
affect how they manage the five supply chain drivers. Each organization tries to
maximize its performance in dealing with these drivers through a combination of
outsourcing, partnering, and in-house expertise. In the fast-moving markets of our
present economy a company usually will focus on what it considers to be its core
competencies in supply chain management and outsource the rest. This was not
always the case though. In the slower moving mass markets of the industrial age it
was common for successful companies to attempt to own much of their supply
chain. That was known as vertical integration. The aim of vertical integration was
to gain maximum efficiency through economies of scale.
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In the first half of the 1900s Ford Motor Company owned much of what it
needed to feed its car factories. It owned and operated iron mines that extracted
iron ore, steel mills that turned the ore into steel products, plants that made
component car parts and assembly plants that turned out finished cars. In addition,
they owned farms where they grew flax to make into linen car tops and forests that
they logged and sawmills where they cut the timber into lumber for making
wooden car parts. Ford’s famous River Rouge Plant was a monument to vertical
integration—iron ore went in at one end and cars came out at the other end. Henry
Ford in his 1926 autobiography, Today and Tomorrow, boasted that his company
could take in iron ore from the mine and put out a car 81 hours later.
This was a profitable way of doing business in the more predictable, one-
size-fits-all industrial economy that existed in the early 1900s. Ford and other
businesses churned out mass amounts of basic products. But as the markets grew
and customers became more particular about the kind of products they wanted, this
model began to break down. It could not be responsive enough or produce the
variety of products that were being demanded. For instance, when Henry Ford was
asked about the number of different colors a customer could request, he said, “they
can have any color they want as long as it’s black.” In the 1920s Ford’s market
share was over 50 percent but by the 1940s it had fallen to below 20 percent.
Focusing on efficiency at the expense of being responsive to customer desires was
no longer a successful business model.
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39
Globalization, highly competitive markets, and the rapid pace of
technological change are now driving the development of supply chains where
multiple companies work together, each company focusing on the activities that it
does best. Mining companies focus on mining, timber companies’ focus on logging
and making lumber and manufacturing companies focus on different types of
manufacturing from making component parts to doing final assembly. This way
people in each company can keep up with rapid rates of change and keep learning
the new skills needed to compete in their particular business. Where companies
once routinely ran their own warehouses or operated their own fleet of trucks, they
now have to consider whether those operations are really a core competency or
whether it is more cost effective to outsource those operations to other companies
that make logistics the center of their business. To achieve high levels of operating
efficiency and to keep up with continuing changes in technology, companies need
to focus on their core competencies. It requires this kind of focus to stay
competitive.
Instead of vertical integration, companies now practice “virtual integration.”
Companies find other companies who they can work with to perform the activities
called for in their supply chains. How a company defines its core competencies and
how it positions itself in the supply-chains it serves is one of the most important
decisions it can make.
There is a difference between the concept of supply chain management and
the traditional concept of logistics. Logistics typically refers to activities that occur
within the boundaries of a single organization and supply chains refer to networks
of companies that work together and coordinate their actions to deliver a product to
market. Also traditional logistics focuses its attention on activities such as
procurement, distribution, maintenance, and inventory management. Supply chain
40
management acknowledges all of traditional logistics and also includes activities
such as marketing, new product development, finance, and customer service.
In the wider view of supply chain thinking, these additional activities are
now seen as part of the work needed to fulfill customer requests. Supply chain
management views the supply chain and the organizations in it as a single entity. It
brings a systems approach to understanding and managing the different activities
needed to coordinate the flow of products and services to best serve the ultimate
customer. This systems approach provides the framework in which to best respond
to business requirements that otherwise would seem to be in conflict with each
other.
Taken individually, different supply chain requirements often have
conflicting needs. For instance, the requirement of maintaining high levels of
customer service calls for maintaining high levels of inventory, but then the
requirement to operate efficiently calls for reducing inventory levels. It is only
when these requirements are seen together as parts of a larger picture that ways can
be found to effectively balance their different demands. Effective supply chain
management requires simultaneous improvements in both customer service levels
and the internal operating efficiencies of the companies in the supply chain.
Customer service at its most basic level means consistently high order fill rates,
high on-time delivery rates, and a very low rate of products returned by customers
for whatever reason. Internal efficiency for organizations in a supply chain means
that these organizations get an attractive rate of return on their investments in
inventory and other assets and that they find ways to lower their operating and
sales expenses.
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Supply Chain Decisions
We classify the decisions for supply chain management into two broad categories
-- strategic and operational. As the term implies, strategic decisions are made
typically over a longer time horizon. These are closely linked to the corporate
strategy and guide supply chain policies from a design perspective. On the other
hand, operational decisions are short term, and focus on activities over a day-to-
day basis. The effort in these type of decisions is to effectively and efficiently
manage the product flow in the "strategically" planned supply chain.
There is a basic pattern to the practice of supply chain management.
Each supply chain has its own unique set of market demands and operating
challenges and yet the issues remain essentially the same in every case. Companies
in any supply chain must make decisions individually and collectively regarding
their actions in five areas. The five areas of decisions are as follows:
1. Location Decisions
The geographic placement of production facilities, stocking points, and sourcing
points is the natural first step in creating a supply chain. The location of facilities
involves a commitment of resources to a long-term plan. Once the size, number,
and location of these are determined, so are the possible paths by which the
product flows through to the final customer. These decisions are of great
significance to a firm since they represent the basic strategy for accessing customer
markets, and will have a considerable impact on revenue, cost, and level of service.
These decisions should be determined by an optimization routine that considers
production costs, taxes, duties and duty drawback, tariffs, local content,
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distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and
Trafton [1995] for a thorough discussion of these aspects.) Although location
decisions are primarily strategic, they also have implications on an operational
level.
Where should facilities for production and inventory storage be located? Where are
the most cost efficient locations for production and for storage of inventory?
Should existing facilities be used or new ones built? Once these decisions are made
they determine the possible paths available for product to flow through for delivery
to the final consumer.
2. Production Decisions
The strategic decisions include what products to produce, and which plants to
produce them in, allocation of suppliers to plants, plants to DC's, and DC's to
customer markets. As before, these decisions have a big impact on the revenues,
costs and customer service levels of the firm. These decisions assume the existence
of the facilities, but determine the exact path(s) through which a product flows to
and from these facilities. Another critical issue is the capacity of the manufacturing
facilities--and this largely depends the degree of vertical integration within the
firm. Operational decisions focus on detailed production scheduling. These
decisions include the construction of the master production schedules, scheduling
production on machines, and equipment maintenance. Other considerations include
workload balancing, and quality control measures at a production facility.
What products does the market want? How much of which products should be
produced and by when? This activity includes the creation of master production
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schedules that take into account plant capacities, workload balancing, quality
control, and equipment maintenance.
3. Inventory Decisions
These refer to means by which inventories are managed. Inventories exist at every
stage of the supply chain as either raw materials, semi-finished or finished goods.
They can also be in-process between locations. Their primary purpose to buffer
against any uncertainty that might exist in the supply chain. Since holding of
inventories can cost anywhere between 20 to 40 percent of their value, their
efficient management is critical in supply chain operations. It is strategic in the
sense that top management sets goals. However, most researchers have approached
the management of inventory from an operational perspective. These include
deployment strategies (push versus pull), control policies --- the determination of
the optimal levels of order quantities and reorder points, and setting safety stock
levels, at each stocking location. These levels are critical, since they are primary
determinants of customer service levels.
What inventory should be stocked at each stage in a supply chain? How much
inventory should be held as raw materials, semi-finished, or finished goods? The
primary purpose of inventory is to act as a buffer against uncertainty in the supply
chain. However, holding inventory can be expensive, so what are the optimal
inventory levels and reorder points?
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4.Transportation Decisions
The mode choice aspect of these decisions are the more strategic ones. These are
closely linked to the inventory decisions, since the best choice of mode is often
found by trading-off the cost of using the particular mode of transport with the
indirect cost of inventory associated with that mode. While air shipments may be
fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile
shipping by sea or rail may be much cheaper, but they necessitate holding
relatively large amounts of inventory to buffer against the inherent uncertainty
associated with them. Therefore customer service levels, and geographic location
play vital roles in such decisions. Since transportation is more than 30 percent of
the logistics costs, operating efficiently makes good economic sense. Shipment
sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of
equipment are key in effective management of the firm's transport strategy.
How should inventory be moved from one supply chain location to another? Air
freight and truck delivery are generally fast and reliable but they are expensive.
Shipping by sea or rail is much less expensive but usually involves longer transit
times and more uncertainty. This uncertainty must be compensated for by stocking
higher levels of inventory. When is it better to use which mode of transportation?
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5. Information Decisions
This involves the decisions regarding:
—How much data should be collected and how much information should be
shared? Timely and accurate information holds the promise of better coordination
and better decision making. With good information, people can make effective
decisions about what to produce and how much, about where to locate inventory
and how best to transport it.
The sum of these decisions will define the capabilities and effectiveness of a
company’s supply chain. The things a company can do and the ways that it can
compete in its markets are all very much dependent on the effectiveness of its
supply chain. If a company’s strategy is to serve a mass market and compete on the
basis of price, it had better have a supply chain that is optimized for low cost. If a
company’s strategy is to serve a market segment and compete on the basis of
customer service and convenience, it had better have a supply chain optimized for
responsiveness. Who a company is and what it can do is shaped by its supply chain
and by the markets it serves.
Processes involved in supply chain
Production
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Production refers to the capacity of a supply chain to make and store products. The
facilities of production are factories and warehouses. The fundamental decision
that managers face when making production decisions is how to resolve the trade-
off between responsiveness and efficiency. If factories and warehouses are built
with a lot of excess capacity, they can be very flexible and respond quickly to wide
swings in product demand. Facilities where all or almost all capacity is being used
are not capable of responding easily to fluctuations in demand. On the other hand,
capacity costs money and excess capacity is idle capacity not in use and not
generating revenue. So the more excess capacity that exists, the less efficient the
operation becomes. Factories can be built to accommodate one of two approaches
to manufacturing:
1. Product focus—A factory that takes a product focus performs the range of
different operations required to make a given product line from fabrication of
different product parts to assembly of these parts.
2. Functional focus—A functional approach concentrates on performing just a few
operations such as only making a select group of parts or only doing assembly.
These functions can be applied to making many different kinds of products. A
product approach tends to result in developing expertise about a given set of
products at the expense of expertise about any particular function. A functional
approach results in expertise about particular functions instead of expertise in a
given product. Companies need to decide which approach or what mix of these two
approaches will give them the capability and expertise they need to best respond to
customer demands. As with factories, warehouses too can be built to accommodate
different approaches. There are three main approaches to use in warehousing:
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1. Stock keeping unit (SKU) storage—In this traditional approach, all of a given
type of product is stored together. This is an efficient and easy to understand way
to store products.
2. Job lot storage—In this approach, all the different products related to the needs
of a certain type of customer or related to the needs of a particular job are stored
together. This allows for an efficient picking and packing operation but usually
requires more storage space than the traditional SKU storage approach.
3. Cross docking—An approach that was pioneered by Wal-Mart in its drive to
increase efficiencies in its supply chain. In this approach, product is not actually
warehoused in the facility. Instead the facility is used to house a process where
trucks from suppliers arrive and unload large quantities of different products.
These large lots are then broken down into smaller lots. Smaller lots of different
products are recombined according to the needs of the day and quickly loaded onto
outbound trucks that deliver the products to their final destination.
Inventory
Inventory is spread throughout the supply chain and includes everything
from raw material to work in process to finished goods that are held by the
manufacturers, distributors, and retailers in a supply chain. Again, managers must
decide where they want to position themselves in the trade-off between
responsiveness and efficiency. Holding large amounts of inventory allows a
company or an entire supply chain to be very responsive to fluctuations in
customer demand. However, the creation and storage of inventory is a cost and to
achieve high levels of efficiency, the cost of inventory should be kept as low as
possible.
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Inventory management is primarily about specifying the shape and percentage of
stocked goods. It is required at different locations within a facility or within many
locations of a supply network to proceed the regular and planned course of
production and stock of materials.
The scope of inventory management concerns the fine lines between replenishment
lead time, carrying costs of inventory, asset management, inventory forecasting,
inventory valuation, inventory visibility, future inventory price forecasting,
physical inventory, available physical space for inventory, quality management,
replenishment, returns and defective goods and demand forecasting.Balancing
these competing requirements leads to optimal inventory levels, which is an on-
going process as the business needs shift and react to the wider environment.
Inventory management involves a retailer seeking to acquire and maintain a proper
merchandise assortment while ordering, shipping, handling, and related costs are
kept in check. It also involves systems and processes that identify inventory
requirements, set targets, provide replenishment techniques, report actual and
projected inventory status and handles all functions related to the tracking and
management of material. This would include the monitoring of material moved
into and out of stockroom locations and the reconciling of the inventory balances.
Also may include ABC analysis, lot tracking, cycle counting support etc.
Management of the inventories, with the primary objective of
determining/controlling stock levels within the physical distribution function to
balance the need for product availability against the need for minimizing stock
holding and handling costs.
There are three basic decisions to make regarding the creation and holding
of inventory:
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1. Cycle Inventory—This is the amount of inventory needed to satisfy demand for
the product in the period between purchases of the product. Companies tend to
produce and to purchase in large lots in order to gain the advantages that
economies of scale can bring. However, with large lots also comes with increased
carrying costs. Carrying costs come from the cost to store, handle, and insure the
inventory. Managers face the trade-off between the reduced cost of ordering and
better prices offered by purchasing product in large lots and the increased carrying
cost of the cycle inventory that comes with purchasing in large lots.
2. Safety Inventory—Inventory that is held as a buffer against uncertainty. If
demand forecasting could be done with perfect accuracy, then the only inventory
that would be needed would be cycle inventory. But since every forecast has some
degree of uncertainty in it, we cover that uncertainty to a greater or lesser degree
by holding additional inventory in case demand is suddenly greater than
anticipated. The trade-off here is to weigh the costs of carrying extra inventory
against the costs of losing sales due to insufficient inventory.
3. Seasonal Inventory—This is inventory that is built up in anticipation of
predictable increases in demand that occur at certain times of the year. For
example, it is predictable that demand for anti-freeze will increase in the winter. If
a company that makes anti-freeze has a fixed production rate that is expensive to
change, then it will try to manufacture product at a steady rate all year long and
build up inventory during periods of low demand to cover for periods of high
demand that will exceed its production rate. The alternative to building up seasonal
inventory is to invest in flexible manufacturing facilities that can quickly change
their rate of production of different products to respond to increases in demand. In
this case, the trade-off is between the cost of carrying seasonal inventory and the
cost of having more flexible production capabilities.
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Location
Location refers to the geographical setting of supply chain facilities. It also
includes the decisions related to which activities should be performed in each
facility. The responsiveness versus efficiency trade-off here is the decision whether
to centralize activities in fewer locations to gain economies of scale and efficiency,
or to decentralize activities in many locations close to customers and suppliers in
order for operations to be more responsive. When making location decisions,
managers need to consider a range of factors that relate to a given location
including the cost of facilities, the cost of labor, skills available in the workforce,
infrastructure conditions, taxes and tariffs, and proximity to suppliers and
customers. Location decisions tend to be very strategic decisions because they
commit large amounts of money to long-term plans. Location decisions have
strong impacts on the cost and performance characteristics of a supply chain. Once
the size, number, and location of facilities is determined, that also defines the
number of possible paths through which products can flow on the way to the final
customer. Location decisions reflect a company’s basic strategy for building and
delivering its products to market.
Transportation
This refers to the movement of everything from raw material to finished
goods between different facilities in a supply chain. In transportation the trade-off
between responsiveness and efficiency is manifested in the choice of transport
mode. Fast modes of transport such as airplanes are very responsive but also more
costly. Slower modes such as ship and rail are very cost efficient but not as
responsive. Since transportation costs can be as much as a third of the operating
cost of a supply chain, decisions made here are very important. There are six basic
modes of transport that a company can choose from:
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1. Ship which is very cost efficient but also the slowest mode of transport. It is
limited to use between locations that are situated next to navigable waterways and
facilities such as harbors and canals.
2. Rail which is also very cost efficient but can be slow. This mode is also
restricted to use between locations that are served by rail lines.
3. Pipelines can be very efficient but are restricted to commodities that are liquids
or gases such as water, oil, and natural gas.
4. Trucks are a relatively quick and very flexible mode of transport. Trucks can go
almost anywhere. The cost of this mode is prone to fluctuations though, as the cost
of fuel fluctuates and the condition of roads varies.
5. Airplanes are a very fast mode of transport and are very responsive. This is also
the most expensive mode and it is somewhat limited by the availability of
appropriate airport facilities.
6. Electronic Transport is the fastest mode of transport and it is very flexible and
cost efficient. However, it can only be used for movement of certain types of
products such as electric energy, data, and products composed of data such as
music, pictures, and text.
Someday technology that allows us to convert matter to energy and back to matter
again may completely rewrite the theory and practice of supply chain management.
Given these different modes of transportation and the location of the
facilities in a supply chain, managers need to design routes and networks for
moving products. A route is the path through which products move and networks
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are composed of the collection of the paths and facilities connected by those paths.
As a general rule, the higher the value of a product (such as electronic components
or pharmaceuticals), the more its transport network should emphasize
responsiveness and the lower the value of a product (such as bulk commodities like
grain or lumber), the more its network should emphasize efficiency.
Information
Information is the basis upon which to make decisions regarding the other
four supply chain drivers. It is the connection between all of the activities and
operations in a supply chain. To the extent that this connection is a strong one,
(i.e., the data is accurate, timely, and complete), the companies in a supply chain
will each be able to make good decisions for their own operations. This will also
tend to maximize the profitability of the supply chain as a whole. That is the way
that stock markets or other free markets work and supply chains have many of the
same dynamics as markets.
1. Coordinating daily activities related to the functioning of the other four supply
chain drivers: production; inventory; location; and transportation. The companies
in a supply chain use available data on product supply and demand to decide on
weekly production schedules, inventory levels, transportation routes, and stocking
locations.
2. Forecasting and planning to anticipate and meet future demands. Available
information is used to make tactical forecasts to guide the setting of monthly and
quarterly production schedules and timetables. Information is also used for
strategic forecasts to guide decisions about whether to build new facilities, enter a
new market, or exit an existing market.
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Within an individual company the trade-off between responsiveness and
efficiency involves weighing the benefits that good information can provide
against the cost of acquiring that information. Abundant, accurate information can
enable very efficient operating decisions and better forecasts but the cost of
building and installing systems to deliver this information can be very high. Within
the supply chain as a whole, the responsiveness versus efficiency trade-off that
companies make is one of deciding how much information to share with the other
companies and how much information to keep private. The more information about
product supply, customer demand, market forecasts, and production schedules that
companies share with each other, the more responsive everyone can be. Balancing
this openness however, are the concerns that each company has about revealing
information that could be used against it by a competitor. The potential costs
associated with increased competition can hurt the profitability of a company.
Participants in the Supply Chain
In its simplest form, a supply chain is composed of a company and the suppliers
and customers of that company. This is the basic group of participants that creates
a simple supply chain. Extended supply chains contain three additional types of
participants. First there is the supplier’s supplier or the ultimate supplier at the
beginning of an extended supply chain. Then there is the customer’s customer or
ultimate customer at the end of an extended supply chain. Finally there is a whole
category of companies who are service providers to other companies in the supply
chain. These are companies who supply services in logistics, finance, marketing,
and information technology.
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In any given supply chain there is some combination of companies who
perform different functions. There are companies that are producers, distributors or
wholesalers, retailers, and companies or individuals who are the customers, the
final consumers of a product. Supporting these companies there will be other
companies that are service providers that provide a range of needed services.
Producers
Producers or manufacturers are organizations that make a product. This
includes companies that are producers of raw materials and companies that are
producers of finished goods. Producers of raw materials are organizations that
mine for minerals, drill for oil and gas, and cut timber. It also includes
organizations that farm the land, raise animals, or catch seafood. Producers of
finished goods use the raw materials and subassemblies made by other producers
to create their products.
Producers can create products that are intangible items such as music,
entertainment, software, or designs. A product can also be a service such as
mowing a lawn, cleaning an office, performing surgery, or teaching a skill. In
many instances the producers of tangible, industrial products are moving to areas
of the world where labor is less costly. Producers in the developed world of North
America, Europe, and parts of Asia are increasingly producers of intangible items
and services.
Distributors
Distributors are companies that take inventory in bulk from producers and
deliver a bundle of related product lines to customers. Distributors are also known
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as wholesalers. They typically sell to other businesses and they sell products in
larger quantities than an individual consumer would usually buy. Distributors
buffer the producers from fluctuations in product demand by stocking inventory
and doing much of the sales work to find and service customers. For the customer,
distributors fulfill the “Time and Place” function—they deliver products when and
where the customer wants them.
A distributor is typically an organization that takes ownership of significant
inventories of products that they buy from producers and sell to consumers. In
addition to product promotion and sales, other functions the distributor performs
are inventory management, warehouse operations, and product transportation as
well as customer support and post-sales service. A distributor can also be an
organization that only brokers a product between the producer and the customer
and never takes ownership of that product. This kind of distributor performs
mainly the functions of product promotion and sales. In both these cases, as the
needs of customers evolve and the range of available products changes, the
distributor is the agent that continually tracks customer needs and matches them
with products available.
Retailers
Retailers stock inventory and sell in smaller quantities to the general public.
This organization also closely tracks the preferences and demands of the customers
that it sells to. It advertises to its customers and often uses some combination of
price, product selection, service, and convenience as the primary draw to attract
customers for the products it sells. Discount department stores attract customers
using price and wide product selection. Upscale specialty stores offer a unique line
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of products and high levels of service. Fast food restaurants use convenience and
low prices as their draw.
Customers
Customers or consumers are any organization that purchases and uses a
product. A customer organization may purchase a product in order to incorporate it
into another product that they in turn sell to other customers. Or a customer may be
the final end user of a product who buys the product in order to consume it.
Service Providers
These are organizations that provide services to producers, distributors,
retailers, and customers. Service providers have developed special expertise and
skills that focus on a particular activity needed by a supply chain. Because of this,
they are able to perform these services more effectively and at a better price than
producers, distributors, retailers, or consumers could do on their own.
Some common service providers in any supply chain are providers of
transportation services and warehousing services. These are trucking companies
and public warehouse companies and they are known as logistics providers.
Financial service providers deliver services such as making loans, doing credit
analysis, and collecting on past due invoices. These are banks, credit rating
companies, and collection agencies. Some service providers deliver market
research and advertising, while others provide product design, engineering
services, legal services, and management advice. Still other service providers offer
information technology and data collection services. All these service providers are
integrated to a greater or lesser degree into the ongoing operations of the
producers, distributors, retailers, and consumers in the supply chain.
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DATA ANALYSIS AND INTERPRETATION
58
DATA ANALYSIS AND INTERPRETATION
In order to analyze the problems or issues involved in the supply chain
management of it products in Keltron, first let us have a general overview of
ITBG and a detailed study of the procedures for various processes involved in it.
About ITBG
Information Technology Business Group (ITBG) is one of the major units of Keltron
and is situated at Vellayambalam. The unit was established in the year 1999 to
cater to the IT hardware requirements of Governments departments of Kerala state.
The capabilities were later on expanded to meet any requirements in the area of
Information Technology including software development, not only to Government
departments of Kerala but also to meet requirements in Government/ private
sector anywhere in India. IT business group is the largest division in KELTRON
having various business in the information technology domain like sales and
support of computer and peripherals, development of software, networking, web
internet services, training etc. Each functional unit of ITBG is known as strategic
business unit SBU. The different SUBs are IT Products ITP, Web service Group
WSG, Software Group SWG, IT training, etc.
Strategic Business Units (SBU)
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Information Technology Business Group comprises of four Strategic Business Units
1. ITP (Information Technology Products)
2. SWG (Software Group)
3. CSG (Customer Service Group)
4. ITT (Information Technology Training)
Function of SBUs is
1. Sales and marketing
2. Execution of projects
3. Customer support
4. Annual maintenance contract.
1. Information Technology Products (ITP)
The strategic Business unit identifies the made of customers in the area of
Information Technology, finalizes the configuration, submits suitable proposals
to satisfy the needs and delivers the products. Keltron being a Total
Solution Provider to the Government of Kerala, ITP deals mainly with
Government departments, special project of Government like IT@ School project
etc.
Product Range
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1. Computers (Desktop, Laptop, Server).
2. Printers (Dot-matrix, line printers, Heavy duty, Inkjet/ Laser)
3. Scanners
4. Projectors
5. Camera
6. Networking products
Major Customers of ITP
1. IT@ School
2. Government Secretariat Department
3. Directorate of Higher Secondary Education
4. Technical Education Directorate
5. Kerala State IT Mission
2. Software Group (SWG)
The main objective of setting up this unit is to provide automation solution to the
Government of Kerala. The software development team mainly concentrates on
open source technologies such as php, postgresql, AJAX, java script etc. Main
operations are citizen centric services aiming at poor people.
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Product Range
1. Lottery Information System
2. Court cases monitoring solution & Law Information Management System
3. Complete Automation
4. Inventory modules for package management of launch vehicles PSLV, GSLV
5. Laboratory Management and Report Generation Software
Major Customers of Software
1. Lottery Department, Kerala
2. Law Department, Govt. of Kerala
3. Industries Department
4. Kerala Khadi and Village Industries Board, Trivandrum
5. Shops Welfare Board, Govt. of Kerala
3. Customer Service Group (CSG)
Installation of the products supplied by ITP and servicing of the same are carried
out by this group. The group also enters into Annual Maintenance Contracts with
various customers after the expiry of the warranty period.
Major Customers
1. Various schools and colleges throughout Kerala
2. Kerala State Electricity Board
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3. Kerala Water Authority
4. Power Works Department
4. Information Technology Training (ITT)
The Strategic Business Unit was set up in order to provide different types of
training to the staff of various government departments, school and college
students etc mainly in the latest developments of the IT field.
Keltron knowledge centers come under this group and various courses are
conducted in these centers also.
Organization chart of ITBG
Supply Chain Management in keltron
Supply Chain Management (SCM) systems are suites of different supply
chain applications. An SCM system could be an integrated suite that contains
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GM
ITBG
PLANNING PURCHASE FINANCE SBU’s STORE QC
ITP-NWG
SWG
CSG
ITE
advanced planning and scheduling, transportation planning, demand planning, and
inventory planning applications. SCM systems rely on ERP or relevant legacy
systems to provide them with the data to support the analysis and planning that
they do. These systems have the analytical capabilities to support strategic level
decision making.
PROCEDURES IN SUPPLY CHAIN MANAGEMENT OF IT PRODUCTS
1. PROCEDURE FOR OPERATIONS MANAGEMENT
(PLANNING & REALIZATION OF PROCESSES AND PRODUCTS)
Purpose
To ensure proper planning for the purchase/realization of required products as per
the specifications within the target date and execution of Customer Orders
pertaining to IT Products (Hardwares- Computers & Peripherals).
Scope
All Customer Orders received and executed by ITP.
Procedure
Planning of Processes and Products
a. Receipt of Customer Order and Release of Purchase Indent.
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Based on Customer orders received from ITP (MKTG), Order Acceptance (OA)
(R-1) is prepared. OA acts as the key document for all the activities for execution
of Customer Orders.
Based on OA, Purchase Indent (R-2) is issued to Purchase Department for
procurement. OA Number holds an over riding priority over the PI No and hence
the same is considered as the Reference No for all purposes. OA register (R-3) is
maintained which includes order details, execution details and collection details.
HOD Planning evaluates criticality of OA based on the priority of customer and
total order value.
Operational Planning and Control Register (R-4) is maintained as soft copy to
monitor the prompt execution of order and payment collection.
Target date mentioned in the Purchase Indent does not act as the realistic date
(either date mentioned by the customer or delivery schedule mentioned in the offer
is the expected date of purchase) owing to the fact that the same is preponed and
indicated for pressurizing suppliers through Purchase Department.
b. Follow up for Purchase and Realization of Products
Based on the criticality status assigned (R-4), follow up is carried out with the
Purchase Department for the timely delivery of products as against the Order
Acceptance /Purchase Order.
In case of delay, Planning Department evaluates (R-4) the reasons and proposes
appropriate corrective action (R-4) based on the severity of the delay with respect
to the purchased products in the order execution process.
Execution of Orders
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a. Receipt of Products
On receipt of products accepted vide Goods Receipt Cum Inspection Report
(GRCIR) from Stores, Despatch Billing Advice (R-9) and Delivery Challan (R-10)
are prepared by Planning and forwarded to Stores, QA and Finance Departments.
Based on Despatch Billing Advice, Finance Department prepares Invoice.
b. Acceptance of Products with Deviation
Those products having minor variations from the stipulated specifications
/tolerance limit are accepted with deviation by QA Department based on the
Acceptance with Concession Report (R-25) approved by Head (ITBG) after
concurrence with Account Executive and Head (ITP).
Despatch
a. General
Despatch Billing Advice (R-9) and Delivery Challan (R-10) are prepared by
Planning and forwarded to Stores, QA and Finance Departments. Products along
with copy of the Invoice/ Delivery Challan are delivered to the customer
(consignee located at different areas) by Stores and acknowledged copies of
Delivery Challan /Invoice received/collected by Stores is forwarded to Planning
Department.
b. Direct Despatch to Customer site
Heavy products such as Generator, Air Conditioners, High capacity UPS etc./bulk
quantity of products will be supplied directly to customer from supplier vide our
Delivery Challan issued to the supplier as instructed in the Purchase Order in
consultation with Planning. On receipt of the acknowledged copy of the Delivery
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Challan from the supplier, Despatch Billing Advice will be raised for
regularization.
c. Partial Despatch
In some other cases, part of the ordered products has to be despatched for meeting
the customers immediate requirements. Delivery Challan is generated for the
interim despatch and will be regularized by raising Despatch Billing Advice once
the supply is completed. In this situation, a Proforma Invoice (R-11) is prepared
and forwarded to Stores for transportation purpose. Proforma Invoice is also used
for part payment purpose.
Installation of Products
Planning Department ensures prompt completion of installation by Customer
Support Group in co ordination with Stores Department as against Delivery
Challan/Invoice. In case of emergency, Planning Department instructs Customer
Support Group for installation through Installation Advice. (R-16)
Sales Reversal
Any product which is sold but not accepted by the customer due to reasons like
order cancellation, Model changes etc is to be returned through Sales Reversal
Advice (R-12) generated by Planning Department, received by Stores and
inspected by QA. Subsequently the same is accounted in the Stores along with
GRCIR. Stores forward Sales Reversal Advice and GRCIR to Finance Department
through Planning Department for raising Credit Note (FIN/R-1).
Credit Advice
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Adjustments related to difference in the amount indicated in the Invoice are done
through Credit Advices (R-13), initiated by Planning Department and accounted
through Credit Notes at Finance Department.
Receipt of Payment
On completion of installation by CSG / ASO/ Supplier, installation certificate
(CSG/R-2) evidences for installation will be collected and the same along with
Invoice are forwarded to customer through Marketing Department for realization
of payment.
Payment Realization
Cheque/DD/Cash received at Planning Department is recorded in the Collection
Register (R-14) and forwarded to Finance Department through Payment
Forwarding Advice (R-15). The stamped receipt of the payment received from
Finance Department is forwarded to customer.
4. Precautions
a) It is very essential to ensure that sufficient lead-time is available for arranging
products to deliver to customer against their delivery schedule as specified in the
order. If sufficient time is not available, it is necessary to take up with customer for
delivery extension or waiving LD Clause.
b) To ensure products are available in Stores before raising Despatch Billing
Advice/Delivery Challan.
c) To ensure that the despatched products are delivered by courier/our
representative to the customer and obtain acknowledgement.
d) To ensure installations are completed and installation certificates are collected
before submitting Invoice to customer.
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e) To ensure the specifications of products in the PI are one and the same as that
specified in the customer order. On the other hand, deviation in this regard from
customer is obtained before effecting despatch.
f) Amendments, if any from the original offer are to be identified and intimated to
Marketing Department, before raising Purchase Indent.
g) To ensure sufficient margin is available on products indented to Purchase. If
not, the low/negative margin products may be brought to the notice of Marketing
Department for taking up with customer for enhancing the price, as required.
h) To ensure all payments are properly and systematically followed up with
Marketing Department and simultaneously entered in the debtor statement.
Procedure for operations management (KITBG /PLG/P-2) illustrates the
methods to ensure proper planning for the realization of required products and
related services are covered in this procedure. Suitable control measures are
established & implemented so that planning can monitor and confirm that products
as per specifications are delivered to the customers with in the target date. Receipt
of payment after installation of the product supplied, and generation of data sheet
for Management information System also form part of planning activities.
2. PROCEDURE FOR PURCHASING
KITBG ensures that purchased product conforms to specified purchase
requirements. The type and extent of control applied to the supplier and the
purchased product are dependent upon the effect of the purchased product on
subsequent product realization or the final product. The organization evaluates and
selects suppliers based on their ability to supply product in accordance with the
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organization’s requirements. Criteria for selection, evaluation and re-evaluation are
established. Records of the results of the evaluations and necessary actions arising
from the evaluation are maintained.
Purchasing Information
Purchasing Information describes the product to be purchased, including, where
appropriate
a. requirements for approval of product, procedures, processes and equipment.
b. requirements for qualification of personnel, and
c. quality management system requirements
KITBG establishes and implements inspection or other activities necessary for
ensuring that purchased product meets specified purchase requirements.
Preservation of product
KITBG preserves the product during internal processing and delivery to
the intended destination in order to maintain conformity to requirements.
As applicable, preservation includes identification, handling, packaging,
storage and protection. Preservation also applies to the constituent parts of a
product.
3. PROCEDURE FOR MATERIALS (STORES) MANAGEMENT
Purpose
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This procedure addresses the receipt, acceptance, and issue/despatch of
products/spares.
Scope
Products include computers, peripherals, service spares, networking goods,
softwares, consumer goods etc.
3. Procedure
Inward of Products/Materials
a. Receipt of products/ materials
Consignments arrived from various suppliers as per our Purchase Orders (PUR/R-
5) are received at Stores. Consignments are received at Stores as direct supply,
through lorry or by courier (N-1).
Consignments are received along with Invoice/Bill, Delivery Challan, Lorry
Receipt, Courier docket details etc as applicable (N-1). Verification is carried out
with respect to Purchase Order (PUR/R-5) versus the supplier
Invoice/Bill/Delivery Challan for quantity/make. Receipt status is indicated by
affixing a sticker having Purchase Order No: and date of receipt on it, in the
Inward Section. These stickers are affixed on each individual product/material
except for small items for which stickers are affixed on lot basis. A control
number in serial order with date is put on each Supplier document as indicated in
the Consignment Arrival Note (R-1). Consignment Arrival Note is distributed to
Planning, Purchase, Sales and QA as a first Information Report. Control No:
provides identification and traceability for receipt status of product/ material.
b. Acceptance of Products/Materials
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After completing the quantity verification as against the Control No, Purchase
Order No, Invoice/ Delivery Challan, details are entered in the GRCIR Register
(R-2). Simultaneously Goods Receipt cum Inspection Report (R-3) is prepared
including Control No, Purchase Order No, Product specification, quantity etc.
Shortage / excess if any, specification variation (visual) etc is indicated in the
GRCIR (R-3).
Then the products along with GRCIR are offered to QA for inspection.
The acceptance / rejection status of products/materials are identified through the
status indicated by QA in the GRCIR along with product serial number.
c. Accounting of Products/Materials
The accepted Products/Materials are accounted in the Bin Card (R-6) along with
GRCIR No./ Store Credit Note/ Store Return Note and quantity.
d. Rejected Product/materials
Stores receive rejected products/materials along with GRCIR (R-3) accompanied
with rejected tag (QA/R-3-B). Stores enter the details in the Rejection Register (R-
4) specifying GRCIR No: and rejected quantity.
The rejected products/materials are put in a rack, which is located separately. The
rejected product/material is sent back to the supplier on receipt of rejection return
note (PUR/R-13), from Purchase through Delivery Challan/Gate pass (R-5- Gate
Pass-part A- Returnable, part B- Non Returnable).
e. Sales Reversal
In some instances, materials once dispatched and not accepted by the customer are
received back at stores due to various reasons; such as order cancellation, Model
changes etc. When such materials are received at stores, store will inform
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planning/sales and Sales Reversal Advice (PLG/R-12) is collected from Planning
Department. GRCIR is prepared with reference to the Invoice (PLG/R-11) and
sales Reversal
Requisition (PLG/R-12) and accounted on completion of inspection.
Issue of Products/ Materials
a. Despatch of Products/Materials
Despatch Billing Advice (PLG/R-9) acts as the basic document for the despatch of
products/materials. Delivery Challan (PLG/R-10) is collected from Planning in
case of part supply and finally ratified with the receipt of Despatch Billing Advice
(PLG/R-9). Those products requiring integration/Installation of Operating
System/Software are carried out accordingly as indicated in the Despatch Billing
Advice / Delivery Challan by QA and the same is indicated on the Carton/packing
box of products, which are ready for despatch. . The despatch status of products
such as Invoice no, date, customer, quantity despatched and identification no: are
recorded in the Despatch Register (R-7).
b. Direct Supply of Materials
Products are supplied directly by the supplier at the customer premises as per
Purchase Order (PUR/R-5) instructions from Planning. Documentary evidence for
the acceptance status of the product at customer’s premises is evidenced through
the acknowledgement status indicated by the Planning Department in the copy of
supplier’s Invoice routed to Stores by Purchase Department. Regularisation of
these products/materials are carried out by preparing GRCIR after getting supplier
Invoice and corresponding customer acknowledged copy of Delivery Challan
received from the Purchase Dept. Simultaneously Bin Card (R-6) is updated. In
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some cases products are delivered at our CSG Offices located at Kochi,
Kozhikkode by the supplier for facilitating urgent delivery to the customer at
nearby areas. Such products are regularized as mentioned above after getting
supplier Invoice certified by Planning along with our DC copy and
acknowledgement letter of CSG Office.
c. Issue of Service spares / Miscellaneous Items
Service spares / Miscellaneous items are issued based on the requirements
specified vide Stores Requisition (CSG/R-9)/ Delivery Challan (PLG/R-10).
General Activities
a. Identification and traceability
After completing Inspection of a particular lot the corresponding GRCIR is
collected from QA and kept in Stores with “QA Accepted” sticker (QA/R-3-A).
These products/materials are stocked in such a way that product/materials can be
identified with Purchase Order Sticker and with QA sticker (QA/R-3-Aor QA/R-3-
B). Keltron PCs are identified with work order number and Sl.No: written on the
carton box when it received from Keltron Controls Aroor. For small parts like
service spares, cables & chords, connectors etc, stickers are affixed on cartons
containing a lot.
Materials received from QA as Store Credit or Store Return Note (SCN/SRN) are
also stocked in the same way as in the case of GRCIR. All accept
product/materials are identified with QA sticker.
b. Stock Updation & Verification
After stocking the product/materials, the receipt status is entered in the Bin Card
(R-6) by posting the accepted quantity of GRCIR/ Store Credit Note (SCN)/ Store
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Return Note (SRN). Similarly issues are entered in the Bin card by posting
issued /dispatched quantity of SR/DC/INV.
During the end of each financial year physical verification of entire stock is carried
out.
c. Material Handling
Suitable material handling equipments such as trolley, bailing machine etc, are
used depending on the type of material handled.
d. Preservation and protection
Applicable preservation and protection means for controlling humidity, pests and
fire existinguishers are made available in the stores.
Procedure for Materials (Stores) Management (KITBG / STR/ P-5) narrates the
processes involved in Stores management, starting from the receipt of products/
spares / materials up to dispatch. Offering the products to Quality Assurance
Department for inspection and receiving back the same is also covered. Method
followed for stock updation and verification is also referred.
4. PROCEDURE FOR SUPPLIER/SUBCONTRACTOR EVALUATION, RE
EVALUATION AND APPROVAL
Purpose
This procedure illustrates the methodology for carrying out evaluation, re-
evaluation and inclusion of suppliers in the approved list.
Scope
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All major purchases and services are covered in this procedure
Procedure
a. Registration of Supplier
Purchase department collects supplier registration form (R-14) from all new
suppliers prior to the release of enquiry. Also collects information on the
competency of the supplier based on capacity, experience in executing similar
orders / after sales support by collecting feedback from their customers and
regulatory /statutory registration details. Based on the information furnished in the
supplier registration form, Purchase department recommends to Head (ITBG) for
releasing enquiry. In case of proprietary products / newspaper advertisements/
recommendations from competent authorities, direct enquiries are floated without
collecting registration forms.
b. Evaluation of supplier
Based on the approval of Head (ITBG) enquiry is floated, order is released in case
of L-1, performance is monitored based on the purchase specifications and terms
and conditions. On successful compliance of the above, purchase department
recommends to Head (ITBG) for including the above supplier in the approved list.
(PUR/R-2).
c. Re evaluation of Supplier
Those suppliers whose acceptance rate (as per GRCIR)( STR/R-3) falls above 90%
/ rejection rate falls below 10 % based on quantity are recommended for retaining
in the approved supplier list (PUR/R-2).The customer feedback / after sales
support details are also considered during reevaluation. Re-evaluation is carried
out annually (April). This rating criteria is not applicable forold/ obsolete models
for which components/ spares are not readily available.
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5. PROCEDURE FOR QUALITY MANAGEMENT (QUALITY
ASSURANCE)
Purpose
The purpose of the procedure is to ensure that inspection and testing of IT and
related products, is carried out as described in this procedure.
Scope
The scope of this procedure is to carryout inspection, testing and reconfiguration
of IT Products.
Procedure
a. Receipt of products from Store
Arrival of products at stores is known from the Consignment Arrival Note
forwarded by Stores (STR/R-1). Products are received from Stores for inspection
along with Goods Receipt Cum Inspection Report (STR/R-3). GRCIR No,
Purchase Order No, Products specification and Quantity received are recorded in
the part A of GRCIR cum Inspection Register (R-1).
b. Inspection of Products
Materials are taken from Stores in batches for inspection, as applicable.
Products/Materials are inspected as per the specifications stipulated in the Purchase
Order (PUR/R-5)/ Standard specifications (N-1). Inspection Results are entered in
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the Inspection Status Registers (R-2-A for systems, R-2-B for peripherals, R-2-C
for UPS, R-2-D for miscellaneous items).
Acceptance/Rejection status and Rejection details with serial Numbers of
respective products are recorded in the Part B of GRCIR cum Inspection Register
(R-1).
i. Acceptance
Accepted products are returned to Stores with QA passed stickers (R-3-A).
Acceptance status and quantity are intimated to stores through GRCIR (STR/R-3) /
Soft copy of GRCIR (STR/R-3) in the computer.
ii. Rejection
Products/ Materials, which are not meeting the required specifications as per
Purchase Order (PUR/R-5)/ standard specification (N-1) or products/ materials
with Components failure /Physical damages etc, are treated as rejected. For
rejected products/ materials Rejection Report (R-4) is prepared and information is
given to Purchase, Planning, and Stores departments for taking immediate
corrective action and getting replacement. Rejected product is identified with
Rejection tag/sticker (R-3-B). No rework is entertained by ITBG.
iii. Accepted with concession.
Those products falling below the stipulated specification with minor deviation are
accepted with concession report based only on the recommendation from the
concerned authority. It is ensured that the above acceptance will not affect the
quality of products/configuration in any manner. These products are identified with
concession sticker (R-3-D).
iv. Monitoring and Analysis of quality performance of Inspected Products
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Monthly and cumulative performance analysis of quality of inspected products is
carried out based on the following with respect to category of products inspected
(R-8)
a. Total Quantity Inspected
b. Total Quantity Accepted
c. Total Quantity Rejected
d. Reasons for Rejection (A to E)
e. Percentage of Acceptance and rejection
f. Attribute percentage of A to E
g. Supplier wise Quality Performance
c. Reconfiguration and its Inspection
Reconfiguration of the system is carried out as per the requirements specified in
the DC (PLG/R-10)/ DBA (PLG/R-9) Configured system is inspected subsequently
and status of configuration and inspection is recorded in Reconfiguration cum
Inspection Register (R-5). Warranty period of the system is indicated using
warranty sticker (R-6) on the cabinet. The reconfigured system is handed over to
stores with DC/DBA number indicated on the carton.
d. Inspection on sample basis
Inspections of the purchased products are carried out as per quality assurance plan
(N-2). QAP specifies the population / lot size of products to be considered while
selecting the sample. Sample size to be selected and limit of acceptance incase of
normal and tightened inspection is stipulated vide QAP. GRCIR number, lot /
batch size, serial number of the sample, number of samples accepted / rejected
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reason for rejection etc in case of normal and tightened inspection is recorded in
Quality Inspection Report (R-8).
e. Inspection of products at site
In certain cases when the quantity is very high/ when customer urgently requires
the product, direct despatch to site is effected. In such cases, GRCIR is regularised
based on the receipt status indicated in the delivery challan (PLG/R-10) / Invoice
(PLG/R-11). Inspection is carried out at site during installation by CSG.
f. Control of non-conforming products and exercising corrective and
preventive actions
Those products that failed at customer’s premises during installation/ with in
warranty period are identified from (CSG-R-1 and R-14) and subjected to control
by replacement / other appropriate actions. QA analyses the root causes for the
failure and takes corrective / preventive action based on the severity of the impact
of the nonconformity on the product (CSG-R-1and R-14).
Procedure for Product development (KITBG/SWG/P-34) narrates the methodology
adopted for the development activities and stages of various software products.
Administrative activities of the project, project planning and project development
are described in this procedure.
Procedure for Product Installation (KITBG/ SWG/ P-37) addresses the installation
and related support activities of software products. Server co-location procedure
and installation activities from both development center and customer premises are
mentioned in this procedure.
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RESOURCE MANAGEMENT
KITBG determines and provides the resources needed to implement and maintain
the quality management system and continually improve its effectiveness and to
enhance customer satisfaction by meeting customer requirements.
KITBG provides and maintains the infrastructure needed to achieve conformity to
product requirements. Infrastructure includes, as applicable
a. buildings, workspace and associated utilities
b. process equipment (both hardware and software), and
c. supportive services (such as transport, communication or information systems)
PRODUCT REALIZATION
KITBG plans and develops the processes needed for the product realization.
Planning of product realization is consistent with the requirements of the other
processes of the quality management system.
In planning product realization, the organization determines the following, as
appropriate:
a. quality objectives and requirements for the product
b. the need to establish processes and documents, and to provide resources
specific to the product.
c. required verification, validation, monitoring, measurement, inspection
and test activities specific to the product and criteria for product acceptance.
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d. records needed to provide evidence that the realization processes and
resulting product meet requirements
e. the output of this planning is in a form suitable for the organization methods
of operations.
Procedure for Product development narrates the methodology adopted for the
development activities and stages of various software products.
Procedure for operations management illustrates the methods to ensure proper
planning for the realization of required products and related services are covered in
this procedure. Suitable control measures are established & implemented so that
planning can monitor and confirm that products as per specifications are delivered
to the customers with in the target date. Receipt of payment after installation of the
product supplied, and generation of data sheet for Management information
System also form part of planning activities.
Customer-related processes
Determination of requirements related to the product
KITBG determines:
a. requirements specified by the customer, including the requirements for
delivery and post-delivery activities.
b. requirements not stated by the customer but necessary for specified or
intended use, where known,
c. statutory and regulatory requirements applicable to the product, and
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d. any additional requirements considered necessary by the organization.
Review of requirements related to the product
KITBG reviews the requirements related to the product. This review is
conducted prior to the organization’s commitment to supply of products to the
customer (e.g. submission of tenders, acceptance of contracts or orders, acceptance
of changes of contracts or orders) and ensures that
a. product requirements are defined.
b. contract or order requirements differing from those previously expressed or
resolved, and
c. the organization has the ability to meet the defined requirements
Records of the results of the review and actions arising from the review are
maintained. Where the customer provides no documented statement of
requirements, the customer requirements are confirmed by the organization
before acceptance. Where product requirements are changed, the organization
ensures that relevant documents are amended and that relevant personnel are made
aware of the changed requirements
Customer communication
KITBG determines and implements effective arrangements for communicating
with customers in relation to
a. product intimation
b. enquiries, contracts or order handling, including amendments, and
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c. customer feedback, including customer complaints.
Design and development
KITBG plans and controls the design and development of product.During the
design and development planning, the organization determines
a. the design and development stages
b. the review, verification and validation that are appropriate to each design
and development stages, and
c. the responsibilities and authorities to design and development.
The organization manages the interfaces between different groups involved in
design and development to ensure effective communication and clear assignment
of responsibility. Planning output is updated, as appropriate, as the design and
development progresses.
Design and development inputs
Inputs relating to product requirements are determined and records maintained.
These inputs include
a. functional and performance requirements
b. applicable statutory and regulatory requirements
c. where applicable, information derived from previous similar designs, and
d. other requirements essential for design and development
The inputs are reviewed for adequacy. Requirements are complete, unambiguous
and not in conflict with each other.
Design and development outputs
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The outputs of design and development are in a form suitable for verification
against the design and development input and are approved prior to release.
Design and development outputs
a. meet the input requirements for design and development
b. provide appropriate information for purchasing, production and service
provision.
c. contain or reference product acceptance criteria, and
d. specify the characteristics of the product that are essential for its safe and
proper use.
Design and development review
At suitable stages, systematic reviews of design and development are
performed in accordance with planned arrangements
a. to evaluate the ability of the results of design and development to meet
requirements, and
b. to identify any problems and propose necessary actions
Participants in such reviews include representatives of functions
concerned with the design and development stage(s) being reviewed.
Records of the results of the reviews and any necessary actions are maintained.
Design and development verification
Verification is performed in accordance with planned arrangements to ensure that
the design and development outputs have met the design and development inputs
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requirements. Records of the results of the verification and any necessary actions
are maintained.
Design and development validation
Design and development validation are performed in accordance with planned
arrangements to ensure that the resulting product is capable of meeting the
requirements for the specified application or intended use where known.
Wherever applicable, validation is completed prior to the delivery or
implementation of the product. Records of the result of validation and any
necessary actions are maintained.
MEASUREMENT, ANALYSIS AND IMPROVEMENT
KITBG plans and implements the monitoring, measurement, analysis and
improvement processes needed
a. to demonstrate conformity to product requirements,
b. to ensure conformity of the quality management system, and
c. to continually improve the effectiveness of the quality management system.
This includes determination of applicable methods, including statistical techniques,
and the extent of their use
Monitoring and measurement
Customer satisfaction
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As one of the measurements of the performance of the quality management system,
the organization monitors information relating to customer perception as to
whether the organization has met customer requirements. The method for obtaining
and using this information is determined.
Internal audit
The organization conducts internal audits at planned intervals to
determine whether the quality management system
a. conforms to the planned arrangements, to the requirements of ISO
9001:2008 Standard and to the quality management system requirements
established by KITBG, and
b. is effectively implemented and maintained
An audit programme is planned, taking into consideration the status and
importance of the processes and areas to be audited, as well as the results of
previous audits. The audit criteria, scope, frequency and methods are defined.
The selection of auditors and conduct of audits ensure objectively and impartially
of the audit process. Auditors do not audit their own work. A documented
procedure is established to define the responsibilities and requirements for
planning and conducting audits, establishing records and reporting results.
Records of the audits and their result are maintained. The management
responsible for the area being audited ensures that any necessary
corrections and corrective actions are taken without undue delay to eliminate
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detected nonconformities and their causes. Follow-up activities include the
verification of the actions taken and the reporting of the verification results.
Control of nonconforming product
KITBG ensures that product which does not conform to product
requirements is identified and controlled to prevent its unintended use or
delivery. A documented procedure is established to define the controls and related
responsibilities and authorities for dealing with nonconforming product.
Where applicable, KITBG deals with nonconforming product by one or more of
the following ways:
a. by taking action to eliminate the detected nonconformity
b. by authorizing its use, release or acceptance under concession by relevant
authority and, where applicable,by the customer.
c. by taking action to preclude its original intended use or application
d. by taking action appropriate to the effects, or potential effects, of the
nonconformity when nonconforming product is detected after delivery or use has
started. When nonconforming product is corrected it is subjected to re-
verification to demonstrate conformity to the requirements. Records of the
nature of nonconformities and any subsequent actions taken, including concessions
obtained are maintained.
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Analysis of data
KITBG determines, collects and analyses appropriate data to demonstrate the
suitability and effectiveness of the quality management system and to evaluate
where continual improvement of the effectiveness of the quality
management system can be made. This includes data generated as a result of
monitoring and measurement and from other relevant sources. The analysis of data
provides information relating to
a. customer satisfaction
b. conformity to product requirements
c. characteristics and trends of processes and products, including opportunities
for preventive action.
d. suppliers
Improvement
KITBG continually improves the effectiveness of the quality
management system through the use of quality policy, quality objectives,
audit results, analysis of data, corrective and preventive actions and
management review. KPI, colour indicators, attribute % etc established vide
objectives provide evidences for continual improvement.
Corrective action
KITBG takes action to eliminate the cause of nonconformities in order to prevent
recurrence. Corrective actions appropriate to the effect of nonconformities
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encountered are taken. A documented procedure is established to define
requirements for
a. reviewing nonconformities (including customer complaints)
b. determining the cause of nonconformities
c. evaluating the need for action to ensure that nonconformities do not recur
d. determining and implementing action needed
e. records of the results of actions taken.
Preventive action
KITBG determines action to eliminate the causes of potential nonconformities
in order to prevent their occurrence. Preventive actions appropriate to the
effects of the potential problems are taken. A documented procedure is established
to define requirements for
a. determining potential nonconformities and their causes
b. evaluating the need for action to prevent occurrence of nonconformities
c. determining and implementing action needed
d. records of the results of actions taken, and
e. reviewing the effectiveness of the preventive actions taken
Quality manual
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KITBG has established and is maintaining a quality manual ( Apex Manual) that
includes
a. the scope of the quality management system, including details of and
justification for any exclusions
b. the documented procedures established for the quality management system,
or reference to them , and
c. description of the interaction between the processes of the quality management
system.
Control of documents
Documents required by the quality management system are controlled. Records are
a special type of documents and are controlled according to the requirements of the
standard. A documented procedure is established to define the controls needed
a. to approve documents for adequacy prior to issue.
b. to review and update as necessary and re-approve documents
c. to ensure the changes and current revision status if documents are identified.
d. to ensure that relevant versions of applicable documents are available at
points of use
e. to ensure that documents remain legible and readily identifiable.
f. to ensure that documents of external origin determined by the
organization to be necessary for the planning and operation of the quality
management system are identified and their distribution controlled, and
g. to prevent the unintended use of obsolete documents and to apply suitable
identification to them if they are retained for any purpose.
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FINDINGS & SUGGESTIONS
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FINDINGS
Keltron produces high quality products but at a comparatively higher price
than its competitors.
Keltron has a very good brand image among the public due to the best
quality television sets and other consumer products.
The current system is only partially automated.
Though the NWG, ITP, CSG SBU and accounts operations of Finance group
is carried out through dedicated discrete software they are not integrated and
web based.
The planning purchase, store functions are carried out manually which is
tedious task that shows a gap between the process and operations.
The processes performed involving the retrieval of information and
identifying the goods status is time consuming.
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The KITBG does the market research and receives orders from the customers.
Once the orders are received the purchase department purchases the products at an
optimum level. Keltron warehouse by the job lot storage approach, where all the
different products related to the needs of a certain type of customer or related to
the needs of a particular job are stored together. The stock is verified on quarterly
basis. At first the order is accepted by the marketing department, planning group
raises the purchase indent then the purchase department places order to suppliers
who can deliver the goods required by the customer. On the receipt of ordered
material the stock department posted into the stock/bin card. The next step is to
deliver the material to the customer which also required posting to Bin Card
updating stock. The transportation is mainly done through the roadways and in
some cases through rails also. The store has to keep various registers of all the
transactions taking place. This demands an excess manpower and requires a lot of
time in the completion of the process.
The main problems encountered by Keltron are:
The transaction process in material management is very complex and each
process consumes a lot of time.
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The business process is lengthy and manually done. As a result of this,
managing the goods in transit, controlling the stock lacks the cent percentage
accuracy.
A lot of time is consumed in transportation since the facilities are located in
a remote area like Aroor.
There is limited scope for product diversification.
Keltron produces high quality products but at a comparatively higher price
than its competitors.
Proper actions and efforts are not made to extend the existing customer base.
There has been shortage of trained personnel thereby affecting the after sales
services.
Uncontrolled increase in the price of raw materials
Lack of promotional activities.
Long procedural delays.
Under utilization of men and machinery
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SUGGESTIONS
The company should try to use its production capacity to the maximum.
The company should try to sell its products at competitive price.
Keltron needs to automate its procedures to effectively promote, maintain and satisfy customer requirements promptly. An inhouse developed ERP like software may be implemented to integrate all business activities of Keltron.
The setting up of an R & D department would be very helpful for identifying innovative products for the development of the organisation.
New marketing strategies have to be done to attract new customers.
Keltron can develop and implement end-to-end solution with in-house
capability wherever possible and with strategic tie up in case of technological
gaps.
The manufacturing facility at Trivandrum can be used to cater to the customers between Trivandrum and Ernakulam and the existing facility at Aroor may be used to meet the customer needs of North Kerala.
Training has to be given to the service personnels to make after sales service effective.
Skilled workforce must be hired for the organization.
The past records have to be clearly and accurately maintained.
The goods have to be carefully maintained during their transition to the destination.
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Funds should be made possible for the technology up gradation.
CONCLUSION
A nation’s future and its ability to compute in the global market depend greatly
on how it generates new ideas and innovations in science and technology. Keltron
has initiated steps to manufacture and promote high quality IT products to its
consumers. Keltron being a Public sector undertaking, under the Government
of Kerala and being approved as a Total Solution Provider, customers
have more confidence on placing orders, even directly on nomination basis without
tendering. But, Keltron can be more efficient by adopting various methods as
discussed above. The supply chain management should be dealt with highly skilled
labors, thereby making use of its resources most effectively by reducing the time
consumed in delivering its products to the consumers as this can in turn bring
prosperity to the organisation.
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BIBLIOGRAPHY
www.keltron.org
Annual report of Keltron
itbgiso.keltron.in
Apex manual, Department files and other records of Keltron
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