operations and vendor management with 3 companies

7/31/2019 Operations and Vendor Management With 3 Companies

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Operations and Material Management

Project on:-

Submitted to : Submitted by:

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DECLARATION

WE Paper Project HEREBY DECLARE THAT WE HAVE COMPLETED THE PROJECT

ON Vendor Development and Evaluation IN THE ACADEMIC YEAR 2010 11. THE

INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF OUR

KNOWLEDGE.

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Summary

This report has been commissioned on behalf of Pepsi & Crompton Greaves . The directors

of the organization have commissioned a report to determine a project plan and whether the

Study is viable.

The first step is an initial plan, which shows how long the project will take by the use of the

critical path.

However, without any acceleration modus, this will be too long, so the project is not viable.

Furthermore in this report, the attention is drawn to the achievement of fulfilling the

contract by accelerating the project.

The result is, disregarding costs, the project will not be ready in time.

The last part gives recommendations where the most important one in this case will be, that

the vendor management skills and the time gap can be used more effectively for a betterresult. In addition this part contains description of additional study.

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Acknowledgements

The number of people whom we would like to thank is innumerable and the list could goon for pages, but we would like to specifically mention a few names of people who were of

prime importance to the completion of this project successfully.Firstly I would like to thank our materials management professor, Mr.

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Table of Content

Petrol Dispensing Pump Division ...............................................................23

Suction pump: ........................................................................................30Suction pump ......................................................................................... 31Pacemaker II (Rs1,10,000) ...................................................................... 33Suction pump: .......................................................................................33

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Introduction to Operations/Material Managemrntand its evolution

Material is the central item and activity of any organization. Organizations exist for

material, works for material and due to material. The main purpose of any organization isto make profit, this profit or loss is generated due to material. Every organization deals

with material whatever be the business.

As early as the nineteenth century, purchasing which is a division of logistics, was regarded

as an independent and important function by many of the US railway organizations. Thefirst book that was specifically devoted to purchasing, entitled THE HANDLING OF

RAILWAY SUPPLIES- THEIR PURCHASE AND DISPOSITION was published in

1887. Since the beginning of the twentieth century there were several movements in the

evolution of purchasing or materials management functions, as depicted below:

CLERICALWORLD WAR 2 MANAGERIAL EMPHASIS STRATEGY

(pre-1939) (1940-49) (1950-70) (1970--)

Evolution of Material Management over time

In the 1990s it became clear that organizations must have an efficient and effective purchasing

and materials function if they were to compete successfully in the domestic and internationalmarkets. The future will see a gradual shift from the predominantly defensive strategies to

aggressive ones in order to remain competitive. Organizations will take an imaginative approachfor achieving their materials management objectives to satisfy long term and short term goals.

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Objectives of Operations/Material Management:

The objectives of materials management are to buy materials and services of the rightquality, in the right quantity, at the right price, from the right source, and at the right time.

To purchase wisely involves constant search for better values that yield the best

combination of price, quality and service. The companys profits will grow by focusing onthe objectives mentioned below:

Purchase materials at low rates.

Keep the department expenses low.

Development of good suppliers.

Development of good relations with suppliers.

Development of personnel.

Development of good records.

Favorable reciprocal relations.

Participating in development of new materials and products.

Economic make or buy.

Standardization.

Product improvement.

Interdepartmental relations.

Forecasts.

Expansion of business by acquisitions.

Regulating inventory.

Cutting operating costs.

Balancing of objectives.

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Vendor Development & Evaluation:

Introduction:

The field of purchasing, which is a subset of materials management, centers on supplier orvendor selection. One of the major challenges for todays purchasing managers in any

industry -be it service or manufacturing-is selecting the right vendors for their components,parts and supplies. Selection of vendors includes determining the vendors and the amountof order to be placed on each vendor. Choosing the appropriate vendors is extremely

important since total quality management and customer satisfaction, are the goals of almost

all organizations. The performance of vendors has a significant impact on the productivity,

quality and competitiveness of an organization. The importance and difficulty of selectingsuppliers is complicated. According to the latest business trends, some of the important

things which need to be considered are - the increase in the value of purchased parts as a

percentage of total revenue for manufacturing firms; growth in imported parts and supplies;and the increased rate of technological change accompanied by shorter product life-cycles.

High technology firms purchase materials and services up to 80% of their total product

costs. Japan purchases up to 40%more supplies and materials for their automobileindustries compared with their counterparts in the United States and Europe. Most

organizations typically spend 40% to 60% of the revenue of their end products on

purchased parts. Selection of vendors based on quality, price, delivery, service and capacity

generally ensures buyer satisfaction.

The initial purchase price of an item is only one element of the total cost. There are other

associated costs such as cost of establishing vendors, transportation and storage costs andcosts of receiving poor quality material. Companies try to achieve a balance between price

and quality material. Companies try to achieve a balance between price and value of a

purchased part or material during the acquisition process. Usually vendors are selected by

their ability to offer the best cost or quality package. Quality level may be specified to thevendors in a variety of ways: commercial standards, design specification, samples, market

grades, brand or trade names, functional specifications and tolerances. There are severalother additional factors that need to be considered as well while selecting vendors. One of

the pioneering research results in vendor selection by Dickson (1996) provides a

benchmark on the trends in the importance of vendor selection. The article documented the

multi-objective nature of vendor selection and ranked the importance placed on 23selection criteria by 170 industrial purchasing agents and managers.

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Summary of Dicksons (1966) findings.

Rank Factor Importance

1 Quality Extreme

2 Delivery Extreme

3 Performance history Extreme

4 Warranties and claim polices Extreme

5 Production facilities and capacity Considerable

6 Price Considerable

7 Technical capability Considerable

8 Financial position Considerable

9 Procedural compliance Considerable

10 Communication system Considerable

11 Reputation and position in the industry Considerable12 Desire for business Considerable

13 Management and organization Considerable

14 Operating controls Considerable

15 Repair service Average

16 Attitude Average

17 Impression Average

18 Packaging ability Average

19 Labour relations record Average

20 Geographical location Average

21 Amount of past business Average

22 Training aids Average

23 Reciprocal arrangements Slight

There are several methods available to select vendors and to determine the quantities to be

ordered from the selected vendors. These methods can be broadly classified into

descriptive, empirical and optimization based approaches. The descriptive methods selectvendors by evaluating the qualitative factors related to the vendors such as reputation,

expertise, organization and communications. The empirical methods evaluate vendor

characteristics through relative weighting schemes. The optimization methods minimizevarious costs associated with purchasing to meet certain requirements in terms of quality,

lead time and demand.

A vendoris a special case of a supplier where the components are sold or leased to a broad

segment of the marketplace. Vendor is not a new term for contractor. Contractors can bedirected to perform agreed-upon work within cost, schedule, and quality parameters.

Vendors do not work this way. Thus, it is important for the procuring organization to

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understand its limited ability to control the marketplace and to develop ways in which to

influence it.

CRITERIA FOR VENDOR EVALUATION

Suppliers interest in developing a partnership

Rate the suppliers delivery performance

Suppliers pricing against the market

Suppliers achievement of defect free delivery

Suppliers cost saving initiatives

Lead time against industry norm

Suppliers ability to avoid complaints

Suppliers response to quality problems

Suppliers certificate of conformity

Quality of delivery documentation

Acceptability of presentation

Efficiency of suppliers administrative system Efficiency of suppliers sales office

Suppliers looking-in procedures

Suppliers track record

Suppliers assistance in solving technical problems

Suppliers flexibility to change

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Pepsi(storage and sales department)

Introduction:

A visit to Pepsi, one of the biggest soft-drink giants, was organized as part of the scheduleof companies to be studied for their Vendor development and Evaluation processes. Out of

Pepsis many departments we visited the storage and sales department where weinterviewed Mr. Dian Pereira, who explained all the nitty-grittys of the vendordevelopment process.

Need for vendors:

The storage and sales department generally appoints vendors to provide for the logistics

and transportation facilities. Vendors are primarily appointed forflex printing. Besides this

they also appoint vendors for provision of caps, t-shirts, gifts etc. As far as the sales andstorage department is concerned no specific rules are followed in the selection of vendors.

The vendor selection process is purely need based. As and when the need arises they select

vendors for the allotted jobs. Hence there is no specified limit to the number vendors to beappointed.

Vendor selection process:

Vendor selection is a critical and crucial decision that is to be taken by the company. Thus

there are many factors to be considered while selecting the vendor. The quality of vendors

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also reflects the reputation of the company and for this purpose Pepsi follows a very

stringent selection and evaluation method.

One of the main criterions while selecting a vendor is Cost. The one who offers the bestprice is chosen. Some of the other factors are credibility of the vendor in the market and the

quality of their products. A consistent and efficient after-sales service is also an important

attribute considered for the selection procedure. Once the vendor is selected and the orderis placed, the products received are inspected and checked in order to avoid any defective

pieces.

Inventory level and lead time:

Generally very few vendors come into the picture when it is the sales and storage

department. Thus when circumstances arise where a huge order is to be placed, the job ismostly split up among two or more vendors. This is done in order to ensure that even if one

vendor is unable to provide them with the material, they can procure the materials from the

other vendors.Another important aspect to be considered is the level of inventory. It is ensured that the

level of inventory is neither too high nor too low. Stock outs generally dont take place.

There is always a 10%-20% lead time provided.

Vendor relationship:

Vendor relationship can be variable or on a long-term basis. As far as Pepsi is concernedthey believe that there is a very high risk and cost involved in maintaining a long- term

relationship with the vendors. Since vendor development is purely need-based, vendors are

appointed on contract basis.

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crompton greaves

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CROMPTON GREAVES

Introduction:

Crompton Greaves is India's largest private sector enterprise in the business ofmanufacturing and marketing products related to the generation, transmission, distributionand utilization of power. It also executes turnkey projects.

From power systems to industrial systems & consumer products to digital

telecommunications, people at Crompton Greaves are constantly designing, producing and

marketing high technology electrical products and services that span the distance from needto fulfillment.

We visited the Vikhroli plant of Crompton greaves India ltd. and met Mr.Vasant Kulkarni,

the asst. buyer.

Need for vendors:

Crompton greaves on a whole produces many different products like motors, heavy

machines, etc. all of which contain many high precision parts. For all of this it becomes

cost effective for CG to outsource the production of some of these parts, therefore the need

for vendors comes in. One of the examples of parts they outsource is ball-bearings, as it is avery high precision product and for producing it would require incurring huge capital costs

of the machines required to manufacture it.

Vendor selection process:

Selection of vendors is a very important process for any company, as the ultimate quality of

the products the company manufactures depends on the quality of the inputs. There arespecific guidelines for the selection of vendors, laid down by the company, which are to be

followed by the buyers while selecting vendors. In general the major factors considered arefirstly quality, then cost and also factors like the service provided by the vendor. As and

when the materials are required an order is placed for the product. Depending on the

product, the vendor selection process is undertaken. For example, the high precision

products are purchased only from specific vendors, as for the other parts quotations areinvited and the most appropriate vendor is given the contract.

There is no specific limit on the number of vendors to be used for a given product;

therefore the company generally outsources the contract to more than one vendor as asafety measure.

Levels of inspection and vendor evaluation:

The design department reviews the materials coming in before the materials are actually

used in the production procedure. If the specifications of the product do not meet the

necessary requirements the following actions are taken depending on the product:

1) The respective vendor is asked to rework on the part to meet the specifications; or

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2) The part is accepted with or without correction by concession; or

3) It is re-assigned for alternative applications; or

4) Rejected as unsuitable.

This process is referred to as non-conformity review and disposition.

Depending on the performance over a period of time a vendor is given preference over

others in future selections.

Stock out, lead-time, inventory:

The inventory levels in the company are monitored efficiently so as to maintain the leveleffectively. Stock outs of necessary products are very rare. The company has a specific

policy of maintaining a specific amount of lead-time, therefore when the stocks reach a

certain inventory level the order for the products is generated and the level is retained.


In CG the relationship of a vendor with the company is dependent on the buyer dealingwith that specific vendor. The company as such does not maintain any specific codes to be

followed as far as relationships with vendors is concerned, but the proprietorship suppliers

get preferential treatment as the number of suppliers is limited, and the parts are of highprecision.

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B.E.S.T

(Brihanmumbai electric supply and transport)

{T-1 engineering department.}

B.E.S.T

(Brihanmumbai Electric Supply and Transport)[T1 engineering department]

Introduction:

The Bombay Electric Supply and Transport Company were municipalized and came to be

known as Bombay Electric Supply & Transport Undertaking. The Undertaking has

completed 50 years of its municipalisation on 7th August, 1997.

At present, there are 3380 buses carrying 45 lakhs passengers daily on 335 routes. Specialtransport arrangements are made and extra buses under various action plans are operated

during the year on various social/ religious occasions. The undertaking also pays special

attention to operate extra buses to clear the stranded passenger traffic on account ofdislocation of railways, heavy rains and similar such events. The undertaking also operates

extra buses on Saturdays, Sundays and Holidays to clear the excursion traffic at various

picnic points.

We visited the Dadar office of BEST and spoke to Mr. Prabhu, the Deputy MaterialsManager (T1 engineering department).

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Need for vendors:

As previously mentioned BEST has 3380 busses on the road, these busses are wholly

owned by BEST. There are about 3500 spare parts purchased by the BEST from differentvendors. BESTs engineering department, gets the parts from different vendors and gets

them assembled to have a whole working bus. The BEST also has a work shop at all of its

27 large depots where the busses halt for repairing and other servicing works, thus

requiring vendors for the regular supply of spare parts.

Vendor selection:

BEST is a municipal corporation controlled body, therefore there is no specific system for

selecting vendors. There are corporation laid down guidelines which guide the department

to the selection of the right vendor. The BEST follows the tender system of vendorselection. Tenders are invited for different parts of their inventory whenever required. If the

purchase indent (a requisition for materials whenever they fall below a certain level.) is

above Rs.50000, a print advertisement inviting tenders from different vendors is placed. Ifthe purchase indent is below Rs.50000, the tenders are invited from only those vendors

who are previously known to have supplied that specific kind of product. These tenders areposted on the notice board outside the office of the materials manager. Competitors have to

submit their respective tenders to the materials manager within a stipulated time. Such atender is called a casual tender.

This rule does not apply for proprietary vendors/suppliers, i.e. the vendors who have the

sole authority to supply specific materials by a previous agreement.

The most important factor of selection of a vendor has traditionally been cost, but in recentyears as the quality of service has come under immense scrutiny, attention is also being

paid to the quality of the materials being procured.

Levels of inspection and vendor evaluation:

At BEST the incoming materials are inspected only at one level, i.e. when they come infrom the vendors. The Inspecting Officers do the inspection at the store of the BEST. The

method of inspection is that of selecting random samples from the incoming materials and

testing them for stability and also performing various chemical and mechanical tests

wherever necessary. Once the product is approved only then is it used on the busses. If therespective products do not meet the required specifications, they are flatly returned to the

vendor for rework and modification to meet the specifications or if this is not possible, the

materials are returned to the vendor who has to supply the whole lot again.

BEST is an organization where bureaucracy and politics play a major role in the day to dayworkings, therefore there is not much practical scope for vendor evaluation and processes

such as these. But the organization does have annual checks on their regular

suppliers/vendors, grading them or blacklisting them from time to time.

Inventory control and lead time:

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The BEST Corporation follows the perpetual inventory system, thus maintaining a

stipulated supply of the essential materials required. Thus implying that they have a certain

pre-determined benchmark set, by which the purchase indent is raised when this level istouched. The only way of increasing any lead-time is by producing the purchase order as

quickly as possible.


BEST does not maintain any kind of long-term relationship with any vendor, except with

the proprietary suppliers. Very rarely the same vendor is approached for a specific kind of

work. Although during the course of business transactions the relationship between the

vendor and the buyer is absolutely formal.

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Factors responsible for the selection of vendors.

1. Performance history

2. Production facilities andcapacities.

3. Price.4. Technical capabilities.5. Financial position.

6. Procedural compliance.

7. Communication system.

8. Reputation and position in theindustry.

9. Desire for business.

10. Management and origin.11. Operating controls.

12. Repairs service.

13. Attitude.14. Impression.

15. Packaging ability.

16. Labor relations record.

17. Geographical location.18. Amount of past business.

19. Training aids.

20. Reciprocal arrangements.

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Questions

1. Is there a limit on the max no. of vendors to be used for a given method?

2. What is the vendor selection method that your company undergoes?

3. Which is the most important thing in the selection of a vendor? Availability, lead time,quantity, price?

4. How much of the revenue of the end products is spent on purchased parts?

5. What are the contingency plans taken incase the material received from the vendor isdefective?

6. Emphasis has now swung to prevention of defective rather tan their detection.your

views.

7. Levels of inspection.8. Are salvaged & reworked parts inspected again?

9. How is defective material segregated and what are the arrangements for disposal of those

materials?

10. What quality control procedure is used for incoming suppliers?11. What action is taken incase of a stock out or an emergency requirement?

12. By getting the suppliers involved in the product development process, do you think it illlead to innovation?

13. What kind of a relationship do you share with your suppliers? - Variable or long term?

14. Is it necessary that the suppliers should be of ISO certified one?


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MATERIAL MANAGEMENT

LARSEN&TUBRO Petrol Dispensing Pump Division

THE COMPANY.

Larsen & Tubro is Indias fourth largest company in the private sector. For more than

five decades L&T has held leadership position in designing, manufacturing, installing plant

and equipment for vital industries-food, chemical, petrochemical, fertilizer, cement, steel,nuclear and thermal power generation. L&T also supports Indias space programme by

manufacturing rocket motor casings.

L&Ts range of activities includes shipping, manufacture of switchgear, petrol pumps,

valves, electronics, computer peripherals, cement and a comprehensive range of constructionservices.

Today the focus is on turnkey projects demanding innovative technology. The companyhas spent half a century developing the expertise. Its strength lies in its largely diversified

range of products and services, the commitment of its people and its ability to absorb

technology from collaborations worldwide.L&T has been manufacturing petrol pumps for 25 years. Thousands of L&T petrol pumps

serve motorists on Indias roans and highways. These pumps are installed at the worlds

highest service station at Leh, Ladakh (India) at 3658 meters. This installation has the unique

distinction of being featured in the Guinness Book of World Records.Over 8,000 petrol pumps have been exported to several countries. They are used by

leading companies like SHELL, BP, CALTEX, TOTAL.

Around 1,000- 1,500 pumps of each type are manufactured per month and 12,000 pumpsper annum. The volume of production is 5 crores per month and around 80-90 crores per

annum.

The Mission

The companys mission is to provide Equipment, Sales and Services for dispensing

petroleum products to oil industry, distributors and consumers in India and abroad.They shall retain their market leadership and grow by providing the best value for money to

their customers through:

Enhanced product reliability

Prompt after sales service

Faster introduction of state-of-art product

Effective communication


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VISION

L&T shall be a professionally-managed Indian Multinational, committed to totalconsumer satisfaction and enhancing shareholder value.

L&T-ites shall be an innovative, entrepreneurial and empowered team constantly

creating value and attaining global benchmarks.L&T shall foster a culture of caring, trust and continuous learning while meeting

expectations of employees, stakeholders and society.

Design

The products are designed and manufactured to meet stringent requirements such as power

fluctuations, extreme temperatures, humidity and dusty atmosphere. Sophisticated advanced

techniques are used in manufacturing and assembly.The integrated manufacturing activities are covered by ISO 9001 and ISO 14001

standards.In-house R&D set-up develops new products/features indigenously, which meets

customers requirements. The laboratories provide support in testing raw

material/components.

Components

Mechanical:

Motor: HP, continuous rating, flameproof motor

with thermal protection.

Suction Unit: Vane type, positive displacement pump.

: Suction Head 3.5 Meters: Standard or Heavy Duty

Metering Unit: 4 Piston positive displacement Pump

with split drop accuracy.

Electronics: Microprocessor based Electronic Register.

Volume Display: LCD Display (on both sides) Five/Six

digits with floating decimal.

Optional Components:

Automatic Nozzles

Swivel Joint

Sight flow indicator


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Standard Features

The standard Duty versions have a delivery rate of minimum 45 liters per minute at full

flow.

The Heavy Duty versions have a delivery rate of minimum 80 liters per minute at fullflow.

Meter is made of die cast aluminium and the cylinders have seamless stainless steel

liners to provide a consistent accuracy between delivery rate of minimum 5 l.p.m. up tomaximum rating.

Motor of minimum HP flameproof single phase suitable for operation between 180

to 250 V. in-built Thermostat protection is provided to safeguard against motor burnoff.

Nozzle body is made of aluminium with brass spout suitable for standard /heavy duty

hoses. It has in-built anti-milking check valve to prevent unauthorized draining.

Double braid hose confirming to IS 2396 fitted with reusable couplings at both ends.

In case of electronic display, the LCD sizes are 1 for volume and sale display and for Rate display.

The electronic components are of industrial grade suitable for operation at 80degreeCelsius. The devices are immune to CMOS latch up problems. PCBs designed to

withstand 2kV EFT.

For better reliability, gold plated dual contacts and flat cables are used.

Sheet steel fabricated components undergo extensive pretreatment and painting

process.

The petrol pump mainly consists of motor, suction unit, meter, sump, solenoid valve and

pressure reducing valve.


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The Production Process.

The various production processes existing in the company are:

1.Inspection and testing of parts

Before assembling all the parts are sent for inspection. There are 3 main machines for

inspection

a.) OPTO-MET

In this machine the component to be tested is placed on it . Then light is paced and thereading is taken.

b.) Digital height gauge

It is used to check the heights of the bolts with the help of an overnier micrometer

c.) GaugeUsed to check the heights of the components:

1.) Go-gaugeIf the go-gauge fits in to the bolts and nuts properly then the size of the component is

correct.

2.) No-go gaugeIf the no go gauge does not enter the component then the size of the component is correct.

If it fits into the component then the component is big

in size.

2.) Assembly line

After inspection and testing of all the parts they are assembled to make the metering unit

and the suction unit. 1.) Metering unit

The metering unit is the heart of the petrol pump. This meter is the most widely used

gasoline pump meter in the world .One reason for the popularity is the antifriction ring on the

pistons. These rings protect Teflon pistons and stainless steel liners and guarantee longer life.The meter valve is ground and lapped on both the surface to achieve split drop accuracy.

The simplicity of calibration, effected by an easily reached calibrating wheel, remains

unmatched .The dry calibrating facility permits instant predetermined as small as milliliters in adelivery of 20 liters. The cam of the meter is specially designed for uniform acceleration of the

pistons. This reduces wear on the moving parts.

The meter measures up to the highest standards in split-drop accuracy.


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2.) Suction unit and air separator.

Suction unit and air separator combine efficiency with durability. The two plus points

add up to total efficiency, which has been proved for years. The compact design allows plenty

of space all around for accessibility and easy maintenance. The unique feature is the coalescingpad of woven stainless steel wire, which guarantees effective air separation. The suction

capacity of the pump is maintained even after the blades are subjected to slight wear, since a

self-sealing action of the blades ensures consistent performance.Easy accessibility to stainless steel wire filter facilitates routine maintenance. The

lip seal prevents leakage from the shaft bearings. Carbon blades can be replaced without

removing the suction.

The jig holds the components well. The hand grinder is used to give a surface finish

to the components. It has around 20,000 rpm .The lathe machine is also used to give a surfacefinish .It is also used to change diameters. At different speeds the lathe machine can be used for

knurling and threading.

Computerised Numerical Control (CNC) Machine

The CNC machine is a horizontal machine. Before the machine is started a computer

programme is fed in it as to how the machine has to function. The component is placed on a

turret. The turret is multistationed. The component goes into the machine, the tools are placed

on it and it rotates. Then the drilling and boring is done to give the component a better surfacefinish. While the process is going on coolant is sprayed on it continuously. At a time two tools

can be drilled and bored and the whole process takes 56mins. 16 components are drilled and

bored in a day (per shift).

All the parts including the metering unit, suction unit, motor are placed in the kiosk

(frame). After assembling all the parts, thermax paint is sprayed on it. Thermax paint is a paint,which is mixed with some chemicals to avoid rusting of the components on which it is sprayed.


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3.) Packaging

After assembling the petrol pump kerosene is passed through it to check if there is any

leakage anywhere in the petrol pump and that all the parts are functioning properly. After

testing, the petrol pumps are packed and sent to the respective customers.

Different companies have different colour codes and symbols on the petrol pumps. Also thecustomers manufacture the pumps as per the order place. The company has a product layout

and the products manufactured dont serve as an intermediate product for any other industry.

Performance Plan 2004-2005

Enhance production capacity.

Initiate quality improvement drive.

Accelerate new products development and introduction plan.

Improve shop ambience.

Reduce pump thru put time to 2 days.

Performance Improvement Plan.

Auto setups for pump testing.

Reduction of pump thru put from 7days to 2 days.

Implementation of new meter assembly line. Elimination of cast iron components.

Elimination of NPT threads (National Pipe Threads).

Introduction of Viton F Grade.

Noise reduction.

Current Projects.

Prevention of water entry into motor.

Modification of sump base to avoid Rubber Seal Cracking.

Introduction of O rings in meter assembly.

Commissioning of new meter assembly line. Ordering new CNC machining center.


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Manufacturing Expenses

Rs.Lakhs

Description Budget

2003-04

Budget

2004-05

Cum

Mar-04

Act

Jun-04

Cum

Jun-04

Variance

+/-

Personal RelatedExp.

571.0 660.0 749.9 46.8 167.8 (2.8)

Traveling &Conveyance

20.0 34.0 28.2 3.3 8.5 0.0

Power & Fuel 10.0 14.0 10.2 1.1 3.2 0.3

Indirect Material 19.0 73.0 20.8 (10.8) (17.2) 35.4

Office Running Exp 24.0 3.0 7.8 0.7 0.9 (0.2)

Repairs &

Maintenance

87.0 124.0 48.1 1.8 5.4 25.6

R & D Expenses 52.0 59.0 39.0 2.8 4.5 25.6

Process

Development

0.0 0.0 0.0 0.0 0.0 0.0

Int & Ins on WC (6.0) (33.0) (22.4) (5.5) (15.8) 7.5

Int Dep & ins on FA 25.0 72.0 24.7 6.0 17.9 0.1

Floor Space

Charges

18.0 27.0 18.3 2.3 6.8 (0.0)

Tools 51.0 195.0 16.7 35.8 37.1 11.7

MaterialAdjustments

19.0 19.0 13.5 0.2 0.7 4.1

Rejection,

Rework&Reli

11.0 11.0 7.0 0.6 1.1 1.6

Freight & Octroi. 75.0 115.0 79.4 12.0 23.1 5.7

HIRE CHARGES 3.0 0.0 0.0 0.0 0.0 0.0PGM Expenses 54.0 51.0 0.0 0.0 0.0 12.8

Other Exp, Rent 20.0 25.0 82.5 4.1 10.8 (4.6)

Total Expenses 1053.0 1449.0 1123.6 101.5 254.9 107.4

Less: Scrap

Recoveries

(5.0) (5.0) (14.6) 0.0 (3.5) 2.3

0.0 (24.0) (23.7) (2.0) (6.0) 0.0

Gross Expenses 1048 1420 1085.2 99.5 245.4 109.6

Less:duplication (43.0) (50.0) (26.5) (4.2) (12.5) 0.0

Add:allocation 104.0 110.0 104.2 9.2 27.5 (0.0)

Net Mfg Expenses 1109.0 1480.0 1162.9 104.5 260.4 109.6

Debit to SBU1 40.0 0.0 6.0 0.0 0.0 0.0

Net Mfg Expenses 1069 1480 1157 104 260 109.6


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Types of Petrol Pumps

Z-LINE Fuel Dispensers (Rs 55,000)

(output: 250-300 pumps per day and around 1200 per month)

Types:

Standard Duty(Delivery rate 45 L.P.M)

Heavy Duty

(Delivery Rate 80 L.P.M)

Preset Standard Duty

Preset Dispensers

Dispensers(With submersible pump)

Suction pump:

Self-priming

Positive displacement vane pump with air separator ,bypass valve and suction strainer. Rate of delivery: 45 L.P.M minimum, at full flow (std.duty)

Rate of delivery: 80 L.P.M minimum, at full flow (heavy duty)

Suction lift: 3.5 meters.

Motor (For suction pump):

HP flameproof with 180-250 volts, 50Hz operating band

Class F insulation, Thermostat protection

Emergency hand drive provided for non-preset pumps.

Meter: Four piston positive displacement metering unit

Accuracy +-0.25% between 5 L.P.M and full flow

Calibration range-500ml to +100ml for 20 liters in steps of 5 ml

Hose:

Double braided, petrol resistant, antistatic

-std.duty

1- heavy duty

Nozzle:

Spout sizes 13/16 , 1 Optional-Auto cut-off nozzle

Totaliser:

Mechanical seven digits (minimum)

Electronic Register:

Liquid Crystal Display

Five/Six digit sale display-1 high


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Five/Six digit volume display-1 high

Four digit rate display-3/4 high

Battery back up.

Self diagnostic

Preset: Volume/Sale preset

Sixteen key keypad

Panelling:

CR/HR steel sheets

Sixteen key pad

Operating Environment :

Temperature: -10 degree Celsius ~+50 degree Celsius

Relative humidity: 5%~ 95%

Multi-Product Dispensers.(Rs2.5 lacs)

Types:

Two product/Four hose-two display

Two display

Three product/ six hose-two display

Quad-single/Four Display

Oil mix

Suction pump Self-priming

Positive displacement vane pump with air separator ,bypass valve and suction strainer.

Rate of delivery: 40 L.P.M

Minimum, at full flow (std.duty)


Minimum, at full flow (heavy duty)

Suction lift: 3.5 meters.

Motor (For suction pump)


Class F insulation, Thermostat protection.

Meter:

Four piston positive displacement metering unit



Hose:


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Double braided, petrol resistant , antistatic

-std.duty

1- heavy duty

High Hose System.

Nozzle: Spout sizes 13/16, 1

Preset/Auto cut-off nozzle

Totaliser:

Mechanical seven digits

Electronic twelve digits.

Electronic Register :

Backlit Liquid Crystal Display

Six digit sale display-1 high

Six digit volume display-1 high

Four digit rate display-3/4 high

Battery back- up.

Self-diagnostic feature for trouble shooting and maintenance

Preset:

Volume/Sale preset

Sixteen key keypad or four push button type.

Panelling:

CR/HR steel shits Long lasting stowing enamel painted.

Operating Environment :

Temperature: -10 degree Celsius ~ +50 degree Celsius

Relative humidity:5%~ 95%

Optional features:

Safe-Break couplings, Safety shear valves.


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Pacemaker II (Rs1,10,000)

Types:

Standard Duty

(Delivery rate 45 L.P.M)

Heavy Duty

(Delivery Rate 80 L.P.M)

Standard Dual Mechanical(Deliver rate 45 L.P.M.)

Suction pump:

Self-priming

Positive displacement vane pump with air separator, bypass valve and suction strainer. Rate of delivery: 45 L.P.M

Minimum, at full flow (std.duty)


Minimum, at full flow (heavy duty)

Suction lift: 3.5 meters

Motor (For suction pump)


Class F insulation, Thermostat protection

Emergency hand drive provided for non-preset pumps.

Optional 3 phase motor.

Meter:

Four piston positive displacement metering unit



Hose:

Double braided, petrol resistant, antistatic

-std.duty

1- heavy duty

Nozzle:

Spout sizes 13/16, 1

Totaliser:

Mechanical seven digits

Register


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Veeder root three-wheel/Four wheel register.

Computing/ Non computing.

Panelling:

CR/HR steel sheets, Stainless Steel Sheath

Long lasting stoving enamel painted.

Operating Environment:

Temperature: -10 degree Celsius ~+50 degree Celsius

Relative humidity: 5%


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STANDARD APPLICATION OF PRODUCTS (SAP)

L&T uses Standard Application of Products (SAP) software to conduct its day-to-day

activities. All the materials management functions i.e. planning, sourcing, purchasing,

controlling the materials etc. is done with the help of SAP.SAP solutions are built on SAPNetWeaver, a comprehensive and integration and application platform that works with the

existing IT infrastructure. With the help of SAP NetWeaver a company can flexibly and

rapidly design, build, implement, and execute new business strategies.

SAP delivers a comprehensive suite of integrated solutions designed to meet the specificneeds and challenges of the business helping to coordinate complex projects, partner with

vendors and subcontractors and adapt new technologies.SAP supports the full range of business processes from specification to design and

manufacturing. Also there are different SAP business maps that help in this process:

The Solution Map Outlines all your business processes so the management canvisualize, plan and implement a coherent, integrated and comprehensive solution.

The Business Scenario Map Gives a detailed view

Of end-to-end processes and defines the activities,

roles, system interfaces and business documentsthat will enhance collaboration.

Quality Control

SAP software helps in quality control function of the company.

Continuous improvement

The quality notifications contained in SAP PLM Quality Management are designedto process and document problems of any type, especially those relating to poor-quality

products. This includes internal malfunction reports, as well as complaints against a vendor

or complaints from customers. They can also be used to handle positive events, such as

proposals for improvement.Usually, the author of the notification records the problem in writing. It is also possible to

attach related documents.

The notification coordinator, a person responsible for processing the notifications, is

immediately informed via workflow. The coordinator defines the type of the notification, setsa priority, and dispatches the notification to a suitable processor (expert).


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The expert investigates the problem type and location, detects the causes, and suggests

a solution. Usually, the proposed corrective actions have to be performed by other parties

responsible for the related areas. Those parties may be informed via workflow.

The cost of the tasks may be recorded by a QM order, which can be analyzed and

approved later. Each action is documented in the notification. The statuses of the tasks arecontrolled and the deadlines are monitored.

Once the corrective tasks have been processed, the solution has to be approved by theauthor of the notification. Feedback to other interested parties may be required. After this

feedback has been given, the notification can be completed.

Value Potentials Business Benefits

Up to 60% reduction of time delay* Quick, easy, and transparent problemnotification

Problems efficiently transferred to expert

Up to 100% reduction of paperwork* Web-enabled process

Assignment for all relevant documents

Increased quality

Reduced cost of failure

Online problem documentation

Up to 100% reduction of costs related, to

insufficient quality*

Deadline monitoring

Total control of all problem issues

Feedback for continuous improvement

Company-wide information available with

company database

Up to 80% reduction of repetition of

systematic defects

Proven solution

Increased customer satisfaction

Immediate reaction

Up to 40% accelerated processes Direct allocation of responsibilities


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Mobile inspections

It shows how the inspection planner, the inspector, and the quality manager worktogether, from inspection plan creation, through on-site results recording, to the usage

decision and the monitoring and benchmarking of quality

When the inspection plan is set up, different kinds of inspection lots can be createdmanually or automatically (for example, goods receipt inspections and inspections during

production).

The inspector normally uses personalized worklists to get all the inspection lots he orshe is responsible for. The mobile results recording function provides support whenperforming quality inspections in inaccessible or external locations (for example, inspections

for cracks on tankers). After allocation of the inspection lots to an inspector and the transfer

(download) to a handheld device, the inspector can record measured values, codes,nonconforming units, and the number of defects offline. When these inspections are

completed, and the results are recorded, the data can be transferred to SAP PLM QM using

a docking station. With status control, it is always possible to identify who performed whichinspections, and when. If one of the inspectors has recorded a value that represents an

exception, the quality manager is notified after the data has been uploaded.

The inspector or quality manager finally completes the inspection lot by processing theusage decision. For this purpose, they use a special worklist. The usage decision hassignificant consequences (for example, goods movements and batch and vendor evaluations).

Digital signatures ensure that a product can only be released by authorized users. After the

usage decision has been made, the quality manager monitors the data.


Up to 30% cost reduction for

inspection planning*

Efficient inspection planning using mass processing

tools or cross-system transfer tools

Up to 50% reduction of hardware

costs for inspectors*

Handheld device (PDA) instead of workstation

Up to 20% improved user

efficiency

Direct allocation of responsibilities

Personalized worklists

Ease of use


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Up to 60% reduced appraisal

costs

Paperless document

Results recording without system access

Recording of data only once

Avoiding human data recording through electronic datatransfer

Up to 50% reduced time for

approval

Speed up product availability with faster results

Increased security (digital signature)

Up to 80% reduction of repetitive of systematic defects

Up to 80% reduction of repetitive of systematic

Recording Inspection Results via Web (Concession Request)

This shows how the vendor and the customer use the business Internet to exchange

information about inspection results. The company can post the results of the goodsinspection on its homepage which can then be collected and confirmed by the vendor.

The company would like the vendor to make the inspection results available on the

Internet. The company gives the vendor access to its Internet service and creates a selectionvariant for the vendor-specific worklist.

The vendor can log in the company's Homepage, select inspection lots from the

worklist and enter the results. The inspection results are valuated in the customer's system

according to the valuation criteria. If the vendor confirms that the inspection is finished, the

inspection lot disappears from the worklist. The company makes the usage decision in itssystem.

Value

Potentials

Business Benefits

Customer wishes are taken into account regarding data to be recorded and

expenditure

Up to 35%* Reduced effort involved in sending certificates

Up to 30%* Simpler results recording

Up to 60%* Reduction in the number of returns

Existing master data can be used

Up to 33% Early information on the quality

Up to 48% No recording needed

Up to 35% Can decide at an early stage whether to accept or reject the lot


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New product development

To work efficiently in all phases of the new development process a powerful andintegrated tool is required: This is where the Product Designer from SAP PLM comes in. It

is based on integrated product and process engineering and a powerful document

management system. The enormous number of people involved and the high volume of datathat is created and has to be structured and managed, are indicators that the value potential

of using an efficient tool and sophisticated processes cannot be overestimated.

The strength of the new development process with SAP PLM is based on the concept

that all ideas, documents, structure information, early process information and early layoutinformation are collected and managed in one central tool. This starts with the initial idea

and goes right the way through to start of production, and also after SOP, if necessary. The

tool has one basic user interface, which can be extensively adapted to the needs of everysingle user.

The company often provides the responsible product managers with thousands of

unstructured or only partly-structured documents relating to the new product. Product

managements initial task is to handle this huge amount of information in so-called Featureand Requirement Structures. During this process phase, direct and seamless communication

between these two parties is essential and is supported by Web interfaces for occasional

users. After releasing these feature and requirement structures, and after verification , the

engineering process is started via effective cooperation between product management andthe engineering departments. Different phases are supported perfectly by SAP PLM and

step-by-step handling of the evolution is therefore no problem from the functional structureto the concept or design structures, through to the released product structure. This releasedproduct structure is checked one last time by the product engineerr before it is finally

handed over to manufacturing.


All departments affected can add content easily using web-interfaces.

Different views on one consistent structure supported

Up to 30%

reduced design

cycle times*

With the product designer all structures required throughout the

development process can be defined from the feature and requirement

structure down to the final product structure

Up to 10%

reduced redesign

Step by step engineering allows flexible processes where content isadded according to progress

Up to 30% Structuring of features and requirement, functions and concepts in early


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reduced costs foe

interfaces

design phases ensures quality from the beginning- and thats where the

major part of the costs of the product is

Order change management

Traditional change management processes can influence only planned procurementelements such as planned orders. As soon as production is released and really started it cantbe influenced any longer, so that necessary changes result in manual modifications of

running production orders.

This is true for:

Neutral or customer-specific products that have to be changed for technical reasons and

Customer-specific products that have to be changed because the customer changes his

mind

With Order Change Management these error-prone and time-consuming manual

modifications can be substituted by a smart and secure process, which reduces effort to a

minimum. The idea is to support the change process based on rules that take into account

both the current status of the affected production orders and the company-specific type ofproduction.

Therefore rules are set up to define which kind of changes are allowed, allowed with

warning or disallowed for a specific status of the production order. For example, the changeof a component might be allowed as long as the corresponding operation is released, but

disallowed as soon as it is confirmed. All these rules are finally combined in a profile and

assigned to the products.

If changes to the product structure or to the sales order of a configurable productoccur, the OCM process can be triggered and the affected production orders can be

determined. Now the actual change process is started, which is processed in different steps:

Simulation of changes

Check of changes against company-specific rules

Real change of production order if allowed

Goods movements according to changes can be done automatically

Since all steps can be done in the background, manual work is reduced to a minimum.

Only if warnings or errors come up during the check is a manual decision required about the

next steps. In addition to the reduced work, the time required for the change process and therework is reduced via this controlled and efficient mechanism.


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Nevertheless, the major benefit of OCM is increased customer satisfaction because

companies can fulfill the wishes of their customers for an extended period of time, without

increasing the delivery period.


Product structure management and variant

configuration can be used to set up configurable

product structures

Up to 100% reduced integration costs* Customer-specific product structure is directlyused for planning and production

Up to 100% reduced costs for order

creation*

New order can be created directly by the customer

via the web

Up to 100% reduced time for BOMcreation*

Customer-specific product structure is determinedautomatically

Customer-specific product structure can be

extended or modified if necessary

Up to 20% increased revenues due to

increased customer satisfaction and

competitive advantage*

Increased customer satisfaction since OCM

allows the flexible incorporation of last minutechanges

Up to 50% reduction in order change cycle

time

OCM processes can be done in the background as

long as no user decision is needed

Goods movement according to changes can be

done automatically


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Process engineering

When the new product development process is in its final phase, in which the product

structure is set up, a fast transition to production is essential for successful ramp up andproduct introduction. Efficient process engineering is key at this time, and this requires tight

collaboration between process engineering and production.

Process engineering is supported by the engineering workbench, which allows the parallelprocessing of several bills of material and routings. The tight integration of these structures

allows digital mockup (DMU) viewing of the mechanical assemblies (after conversion of native

CAD files into neutral viewing files) during the initial set up of routings. Graphical controls

allow the copying of existing operations into a new routing, using Drag&Drop. The

assignment of components to specific operations in the routing is supported in the same way.These mechanisms, together with advanced mass processing capabilities, such as the

replacement of a work center in hundreds of preselected operations within a few seconds,speed up the work of the process engineer.

Later on, the assignment of components to specific operations allows precise procurement,

especially if the production or assembly process takes several days or even weeks.

Due to the tight integration of engineering into other business processes, SAP PLM cansupport a phased release concept for both product and process structures. For example, the

product structure can be released first for process engineering, then for product costing, and

finally for material requirements planning and production. This ensures fast but secureprocesses.

Production is started as soon as product structures and process structures are released for

production, after which all relevant documents can be transferred into the production order as

well. The people in production have direct access to all documents needed to produce and

assemble the product. For the product structure, they can utilize digital mockup (DMU)viewing of the mechanical assemblies, in the same way as the process engineers in the

engineering workbench.

With access to these documents, production can easily provide feedback if things need to

optimized or changed to improve production processes. For example, the redlining capabilitiesof the integrated viewer allow the creation of electronic comments on the viewing files. This

input then can be used by engineering to trigger engineering change management (ECM).

With ECM, all objects affected by a change can be modified in one controlled process. Soproduct structures, process structures, and documents can be changed all together, resulting

in a new, consistent change status of the product, which can be used for ongoing production.

This means that collaboration is supported for continuous improvement as well as for newproduct introduction.


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Up to 30% reduced design

cycle times*

Product structures are immediately available for process

enineering - no information islands

Up to 50% more precise

procurement ofcomponents*

Assignment of components to specific operations in the routing

for advanced scheduling capabilities

Up to 20% reduced time

for routing creation*

Advanced processing via graphical browsers, e.g. copying of

existing operations or component assignment via Drag&Drop

Processing of multiple product and process structures supported,only edited parts are locked to allow simultaneous processing of

huge structures

Digital Mock-Up (DMU) viewing files and product structure,

e.g. for process engineering and production

Advanced environment for concurrent engineering of productand process structures in one workbench

Mass processes such change of workcenter or storage location

supported

Project management in R&D

When management has decided to develop a new product, triggered by internal portfolio

management or external market research, time to market becomes the crucial success factor. Acomprehensive and flexible project management tool is needed to optimize the use of resources

and the network of activities, including the interdependencies between them.

Documents are an important part of projects in R&D. They are used as input for tasks

such as specifications as well as output of designs or test protocols, for example. With SAPPLM the company assigns documents to the part of the project structure where they belong, or

to the relevant activity in the network. This ensures faster document access and higher quality.

Another important task of the project manager is the selection of appropriate resources

and the planning of resources to avoid overload. When this is done and the project is released,the different team members have to be notified about their activities, and all the information

they need has to be provided as well. This can be done automatically with workflow support.

The confirmation of an activity or milestone can trigger the next workflow tasks. At any time,team members can send project elements or documents to each other with a note. For

important documents, distribution lists can be set up, so that everybody is notified

automatically as soon as the document is changed. These mechanisms ensure that no time islost due to lack of information or communication.

As soon as work has been done on activities, team members confirm them, in order to

report progress continuously. Due to tight integration with SAP Financials, the actual costs


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are automatically posted to the project, at the same time as the actual dates are used to update

the schedule. This allows real-time controlling of the costs and budgets.

The comprehensive reporting capabilities of SAP PLM project management support out-of-the-box reporting for all aspects of a project: progress analysis (including milestone trend

analysis), cost and budget controlling, schedules, and resources. Planned and actual data canbe compared, and alerts can be sent as soon as differences become too great.

Finally, tight integration with procurement and production are an important feature.Single materials or entire bills of material are assigned to activities, in order to trigger

procurement and production from the project. All project dates are used to calculate the

procurement and production schedules. Project-specific stock is supported, as well as direct

posting of all procurement and production to the project. This is of particular interest ifprototyping and testing activities are part of R&D projects.


New product development can be triggered using advanced tools,

e.g. portfolio management

Up to 20% reduced

product development

time*

All phases of development projects are supported from concept

through to planning and execution to the closing of a project,

Up to 30% reduced

Project Set Up Time*

New projects can be set-up quickly by using templates andgraphical interfaces

Milestones or confirmations can be used to trigger workflows,e.g. to notify responsible agents to fulfill their project-related

tasks

Up to 20% higher delivery

date accuracy*

All kinds of predefined reports allow effective project controllingregarding progress, costs, budgets, schedules and resources

Baselining of project versions enables tracking the history of

projects


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Content Management

It shows how employees of the purchasing organization can create, cleanse and manage

their own catalogs facilitating a smooth flow in the procurement process

The Content Management process starts when you import content in the form of a catalog

file into the catalog-authoring tool (CAT). Content can originate from internal or external

sources, such as suppliers, marketplaces or SAP R/3 backend systems.

The incoming content passes through a technical quality and syntax check. Customizable

filter rules are applied to exclude data that is not wanted from the import. To enhance the

flexibility and efficiency of catalog searching, you can further classify and organize the contentinto a centralized schema. SAP's Content Management provides the tools for data

categorization and enrichment and supports standards. The content is further normalized

through data transformation and the values of the product attributes are validated to cleanse

the data.

Subsequently, a workflow is triggered that manages exception handling and corrects valuesexceeding certain limits or violating specified rules.

The data can be distributed to two modules - Master Data Management (MDM) and catalog

search engine. When the cleansed data is ready for distribution, a decision is made for datarouting. If the data already exists in MDM, then it is flagged as existing and distributed

accordingly. The non-flagged data can be routed to the catalog engine.

The data can be personalized into views and variants while creating virtual catalogs. Some

examples of personalization attributes include effective data, supplier name, categories etc.

Finally the data is distributed out to the catalog search engine, where the buyers can searchfor items and create shopping carts within the procurement application.

Business Benefits

Electronic data loading saves time and money

Ensuring data integrity by validating incoming data

Personalizing catalog to meet the buying organization needs

Filter unnecessary data

Centralized classification to facilitate catalog searching and reporting

Data normalization to ensure data completeness

Value check to ensure data completeness

Workflow facilitates manual intervention for exception handling

Automatic routing of appropriate data to Master Data Management (MDM) or

catalog

Facilitation and standardization of the procurement process


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Speed up of communication via electronic document exchange

Contract management

This allows purchasers from different business units at different locations to take

advantage of common contracts for specific product categories and items that are usedthroughout the company.

A company can negotiate a contract with a supplier on the basis of an RFQ or auction, for

example. Once terms and conditions have been agreed, the strategic purchaser can create a

central contract in SAP Enterprise Buyer. The contract will then enter an approval workflow.Once the purchaser's manager has approved the contract, it can be released for the entire

business unit.

The company can inform purchasing organizations in backend systems by e-mail about

new contracts that have been released. The company can search for and register themselvesfor contracts. Once they have registered, they can take advantage of the terms and conditions

negotiated for a contract.

When the company selects a specific product from a contract, a purchase order is created,

which is then sent by EDI/XML, fax or e-mail to the supplier. At this point, the regularprocurement process starts. The supplier ships the requested goods to the purchasing

organization. The requesters complete a goods receipt, on the basis of which the supplier

creates the invoice, which is then paid by the requesting organization.

Business Benefits

Seamless integration with bidding functionality

More efficient negotiated terms

Cross enterprise contract visibility

Significant boost of productivity

Reduced administrative costs

Higher complianceHigher sales volume

Plan driven procurement


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The Plan-Driven Procurement scenario focuses on material or service requirements

that come from planning systems, such as MRP, PM or PS systems that are typicallyproduction-planning systems.

Even small changes in dates and quantities can impact critical elements, such asproduction schedules, transport logistics, and just-in time inventory levels. Because

enterprise planning and production systems, the Plan-Driven Procurement scenario withSAP SRM typically manage these costs and changes is the best solution to prevent such

incidents. A demand is created in an SAP R/3 system as a result of MRP.

Once the source of supply has been assigned using the Sourcing application in SAP

Enterprise Buyer, a purchase order can be created. This is then replicated as a copy to the

R/3 backend system for further processing, such as material evaluation and inventorymanagement.

The supplier sends the company an Advanced Shipping Notification (ASN) and ships thegoods.

An inbound delivery is created in the procurement system. When the company receives

the goods, he or she creates a goods receipt based on the inbound delivery.

There are two possible methods of invoicing:

The supplier sends an invoice to the purchaser

The purchaser sends a credit memo to the supplier

Business Benefits

Reduced process costs

Faster deployment of best source of supply

Reduced material costs

Increased transparency & compliance

Reduced purchasing process cycle time

Utilization of negotiated contracts, only

Reduced process cycle time

Less errors

Less manual measurements


Higher efficiency


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Reduced process cycle time

Increased transparency


Sourcing

With SAP SRM qualified suppliers are invited to submit their proposals. The company thencompares the results and accepts the best bid or bids. This allows company to identify the best

suppliers and minimize the costs for individual orders. The company receives an open

requirement, for example from an expiring contract or for a missing product part. Thecompany creates a bid invitation with the relevant product information. This can include, for

example, attributes, additional text for the suppliers, quantity, and delivery date of the

requested goods.

If the design engineers have not already done so, the purchase manager can create a

collaboration area within cFolders in SAP Product Lifecycle Management (PLM) to specify

details of the requested goods and to facilitate advanced collaboration between the purchasingand supply sides.

For example, the design engineers can store and update specification and design

information in this area. Once the purchase manager has entered all the required information,

the bid invitation can be published. Selected suppliers receive an e-mail that includes a link to

the bid invitation. They then create a bid stating their terms and conditions. They can alsoattach documents to the collaboration area in cFolders before finally submitting their bid.

The company receives the bid response with all the relevant information. Using SAP

Business Information Warehouse the company can compare all the bids before deciding on thebest supplier. Design engineers can collaborate once more before the bid or bids are finally

accepted.

The purchasing organization can create an order or contract out of the evaluated bidders,

or they can create a live auction involving the bidders who have been short-listed in theprevious bidding process.


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The invited suppliers receive an invitation for the live auction and can submit their bid

information within the timeframe specified by the purchaser. Once suppliers have submitted

their bid, they can monitor the competitors' bids and can react accordingly. Once the liveauction has ended, the company accepts the offer of the supplier who best suits the selection

criteria. The purchaser then creates a purchase order or contract out of the winning bid or

bids

Strategic Sourcing Global Spend

It shows how SAP SRM supports spending analysis across a heterogeneous systemlandscape. This allows strategic purchasing professionals to analyze corporate spending

across a complete enterprise.

In order to be able to assess the volume of procurement across a complete enterprise, thecompany needs to analyze spending in all purchasing systems involved. Global Spend Analysis

makes this possible using key mappings that enable unique identification of materials and

vendors in a heterogeneous master data environment.

The Global Spend Analysis scenario comprises two steps. In the first step, master data fromheterogeneous systems is mapped and these mappings are uploaded to Business Information

Warehouse (BW). Mapping information is generated for material classification schemas and

supplier master data either internally or externally using third-party services, such as Dun &Bradstreet.

Business Benefits

Accelerated purchasing process through fast and easy creation of bid invitation

Find new sources of supply, better prices using all the information you already have

Accelerate the product life cycle

Deepen your relationship with already existing suppliers by offering them easy to handle RFxsvia the web

Procure goods and services by negotiating best price and best terms

Collaborate with engineers, suppliers and purchasers to define the right product, ensure the right

deals with the right companies

Get new customers through participation at bid invitation

Less errors due to easy-to-handle collaboration possibility


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In the second step, the mappings generated in the first step are used to perform the actual

reporting activities on transactional data. The company analyzes corporate spending by

product category across the various suppliers.

On the basis of these analyses, the company can identify sourcing opportunities

and starts negotiations with one or more suppliers in order to realize the savingspotential identified.

Business Benefits

More efficient identification of saving potential

Cross-enterprise spending visibility

Better prices due to better volume leverage

Lower supply risk due to global supply base assessment/consolidation

Reduced stock level due to improved visibility

Collaborative planning, forecasting and replenishment

This business scenario shows how enterprises can carry out collaborative supply chainplanning activities with their business partners over the Internet. By sharing information

over the internet, the buyer and seller develop a single dynamic forecast. The result is more

accurate forecasting with lower inventory levels. These benefits save time and money.Collaborative Planning Forecasting and Replenishment (CPFR) represents a paradigm-

breaking business model that extents Vendor Managed Inventory principles by taking a

holistic approach to supply chain management among a network of trading partners. CPFR

has the potential to deliver increased sales, organizational streamlining and alignment,administrative and operational efficiency, improved cash flow, and improved return-on-

assets (ROA) performance.


Up to 40%* More accurate forecast

Up to 4 %* Increased service to distributor

Up to 18 %* Reduced inventories

Reduced planning / deployment costs

Up to 20 % Reduced replenishment cycle

Up to 8%

Simplified, exception-based process

Inventory Control


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Inventory is defined as the sum of the value of raw materials, fuel and lubricants, spare

parts, maintenance consumables, semi-processed materials and finished goods stock at anygiven point of time. Since resources are idle when kept in stores, inventory is defined as an idle

resource of any kind having an economic value.

Currently the company has 18 days of comsumption inventory. B

ut by the end of 2005 they plan to reduce it to 14 days of consumption.

Factors influencing inventory functions of the company:

Production Plan Amendments. (Planning and Scheduling)

Entry of the received material. (GR-Goods receipt)

Bill and material.

A stock is maintained mostly of the A and B category items since they are expensive. But

stock is not maintained of the C, D, E category items since they are less expensive and they aresupplied by the vendors everyday.

The company does not manufacture any parts in-house, only the assembling is done in

the factory. Around 1100 parts are required in the production of the petrol pump. The

vendors on a regular basis supply these parts. The orders are given in bulk about 7-8months in advance.

The company follows the method ofKitting i.e. for example, if the company has to place

an order of 17 parts; they place the order with only one vendor for all the parts. In this waythey have to make only 1 bill and only 1 payment. Presently the company has 78 vendors in

all. And by following this method they have reduced their procurement cost by 5 %.

In case of any defective parts, they are sent back to the respective vendor. Storage or disposal of obsolete materials is generally avoided. For example, if there is a

change introduced in the design of any part, the existing stock of the part is used and then

the new part is supplied by the supplier The company spends around Rs. 20 lakhs per annum in insurance of the materials stored

in the factory. The materials in-transit are also insured and as soon as the goods arrive at

the factory, the insurance expires. The cost on materials amounts up to 72 % of the total costs.

The company has reduced cost on materials by 9% in 2003-04 and they plan to reduce itfurther by 5% by the end of 2005.

The company spends around 2.3% of is total expenditure on materials overheads. The company has currently introduced a service team of about 200 people spread across the

country to help assist in the installation of petrol pumps in rural areas.

Special type of material-- Electronic Cards: Stored in special racks and in anti-static

packages. Around 50-60 pumps are manufactured every month.


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ABC Analysis

Since 1100 parts are used to manufacture one petrol pump, the company has classified in toA, B, C, D and E categories. The A- category items mostly consist of pumping unit, motor,

meter body, imported items etc. Since these items are expensive, they are ordered in bulk since

the vendors on bulk purchasing give high discounts.

A-items: High consumption

value

B- items: Moderate Value C , D , E items : Low

consumption value

Very strict control Moderate control Loose control

Bulk ordering for 6-8 months Once in three months Frequent ordering or weeklydeliveries

Weekly control statements Monthly control statements Quarterly control statements

Rigorous value analysis Moderate value analysis Minimum value analysis

Maximum follow-up andexpediting

Periodic follow-up Follow-up and expediting inexceptional cases

As many sources as possible

for each item

Two or more reliable sources Two reliable sources for each

item

Accurate forecasts in materials

planning

Estimates based on past data

on present plans

Rough estimates for planning

Minimization of waste,

obsolete and surplus (review

every 15 days)

Quarterly control over surplus

and obsolete items

Annual review over surplus or

obsolete material

Maximum efforts to reducelead time

Moderate Minimum

Quantity and cost on materials (per month)

Category Quantity Cost (approx.)

A 150 units 90 lakhs

B 2000 units 100 lakhs

C 5000 units 110 lakhs


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List of Vendors

Local

Crompton Greaves

Augangabad electricals

TVS Cherry

Markwell Hose Industries

Evergreen Engineering

ASCO India Ltd, Chennai

International

OPW fuelling components, USA Tank gauging system from Vedeer Root, USA

High-end product from Tokheim Corp,inc ,USA

Submersible pumps from FE Petro Ins. , USA

Above ground submersible pump from EBS-Ray Pumps Pvt Ltd, Australia

Materials

Management& Operations

Aditya Constructions


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Introduction

Aditya Construction is a private company which was started in the 1980s. They specialize in all

types of civil and plumbing work. Their earlier construction was done in and around Mumbai.

Some of their major constructions include:

1. Mehul Towers constructed during the years 1985 86 in Kandivali

2. Dheeraj Apartments constructed during 1984 85 in Dahisar area

Since, then their operations have shifted from Mumbai to Gujarat where they have done the entire

construction work over areas the size of Vile Parle and Santa Cruz. One of the best examples of

their work is the Pardi area in Gujarat developed entirely by Aditya Constructions.

Aditya constructions have also set up several residential building complexes in several cities of

Gujarat. The company has made several civic buildings all over Gujarat. Raj Hospital is a famous

hospital which has been constructed by the firm.

Several shopping malls construction contracts have also been given to the company. The company

has also taken work at highly discounted rates since the Gujarat earthquakes and is working to

rebuild the areas affected by the unfortunate incident.

Hierarchy in the Company

Owner

(Mr. Atul Desai)

1 Civil Engineer

(For each construction project)


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2 site supervisors

Labor Contractors

Aditya Constructions has their own labor contractors who find laborers for construction projects

from around the command area of the project site.

Government

Any new construction that has to be undertaken has to be first approved by the government civic

body i.e. the municipality of that particular area. The main thing that the company checks for

before moving on with the project is:

The validity of the purchase of the land which is going to be worked

Any special restrictions set by the authorities for the land area to be used for construction

Importance of that land for the local habitants

After the above requirements are satisfied the companys architect for the project is called and

asked to make a plan which is to be submitted to the civic authorities. The rules followed for the

construction of residential buildings and other civic buildings are different. The rules have been set

before hand and the architect has to get the plans passed through the proper authorities before the

actual construction work and other functions can start.

The Ownership of the land to be constructed upon has to be run a check upon by the officials and it

has to be proven whether this has been procured properly or not.


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MATERIALS

Aditya Construction

New Constructions Repairs Interiors

Exteriors Interiors

Materials requirements used for each of the above works done by the company are different. The

most common materials used are

A. Cement

B. Sand

C. Bricks

New constructions are done on a project by project basis i.e.

If the company is asked to take a contract having seven buildings to be constructed the company

work on each building is considered as one project. The designs for all the buildings are designed

and submitted to the government officials beforehand. When the officials pass the plans made andsubmitted by the each project site is appointed with a civil engineer and two site supervisors. New

Constructions include both exterior and interior works.

The Material requirements are calculated on the basis of the project requirements. They purchase

orders sent are a little below the calculated cost so that if there is excess wastage the materials can

b