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Operations and Material Management

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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.

CERTIFICATE

SIGNATURE OF PROJECT GUIDE

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 better result. In addition this part contains description of additional study.

Preface Material and Operation is of prime importance in any organization, no work can be done without the required materials, be it the small paper slips where an impromptu list is made or an planned layout of positioning of different complex machines is prepared everything requires materials. In this project of ours we hope to incorporate in a very brief but substantial manner the importance of vendor development and evaluation in any organization. We hope that this project of ours helps every aspiring Materials Manager, or the students who on their road to other goals are forced to encounter this very topic in their broad curriculum. The topics that are briefly covered in this project are vendor development, vendor evaluation, vendor-buyer relationship, history of materials management, etc.

Acknowledgements

The number of people whom we would like to thank is innumerable and the list could go on 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.

Table of Content Introduction to Operations/Material Managemrnt and its evolution .... 8 Objectives of Operations/Material Management: ............................ 9 Vendor Development & Evaluation: ............................................ 10 Pepsi ................................................................................... 13 (storage and sales department) ................................................ 13 crompton greaves .................................................................. 15 B.E.S.T ................................................................................ 18 (Brihanmumbai electric supply and transport) ............................. 18 {T-1 engineering department.} ................................................. 18 Factors responsible for the selection of vendors. ......................... 21 MATERIAL MANAGEMENT ......................................................... 23 LARSEN&TUBRO ..................................................................... 23 Petrol Dispensing Pump Division...............................................................23 THE COMPANY. ................................................................... 23 The Production Process. .......................................................... 26 Suction pump:........................................................................................30 Suction pump.........................................................................................31 Pacemaker II (Rs1,10,000)......................................................................33 Suction pump:.......................................................................................33 STANDARD APPLICATION OF PRODUCTS (SAP) ...................... 35 Quality Control ...................................................................... 35 Order change management ...................................................... 40 Project management in R&D ..................................................... 43 Content Management .............................................................. 45 Inventory Control ................................................................... 50 ABC Analysis ..................................................................... 52 Materials ............................................................................. 53 Management& Operations ........................................................ 53 Aditya Constructions .............................................................. 53 BIBLIOGRAPHY ...................................................................... 65

Introduction to Operations/Material Managemrnt and 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 is to 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. The first 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: CLERICAL WORLD 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 international markets. 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 approach for achieving their materials management objectives to satisfy long term and short term goals.

Objectives of Operations/Material Management: The objectives of materials management are to buy materials and services of the right quality, 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 on the 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.

Vendor Development & Evaluation: Introduction: The field of purchasing, which is a subset of materials management, centers on supplier or vendor 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 amount of 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 selecting suppliers 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 automobile industries 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 and costs 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 the vendors in a variety of ways: commercial standards, design specification, samples, market grades, brand or trade names, functional specifications and tolerances. There are several other 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 23 selection criteria by 170 industrial purchasing agents and managers.

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Summary of Dicksons (1966) findings. Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Factor Quality Delivery Performance history Warranties and claim polices Production facilities and capacity Price Technical capability Financial position Procedural compliance Communication system Reputation and position in the industry Desire for business Management and organization Operating controls Repair service Attitude Impression Packaging ability Labour relations record Geographical location Amount of past business Training aids Reciprocal arrangements Importance Extreme Extreme Extreme Extreme Considerable Considerable Considerable Considerable Considerable Considerable Considerable Considerable Considerable Considerable Average Average Average Average Average Average Average Average 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 select vendors 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 minimize various costs associated with purchasing to meet certain requirements in terms of quality, lead time and demand.

A vendor is 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 be directed 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 schedule of companies to be studied for their Vendor development and Evaluation processes. Out of Pepsis many departments we visited the storage and sales department where we interviewed Mr. Dian Pereira, who explained all the nitty-grittys of the vendor development process. Need for vendors: The storage and sales department generally appoints vendors to provide for the logistics and transportation facilities. Vendors are primarily appointed for flex printing. Besides this they also appoint vendors for provision of caps, t-shirts, gifts etc. As far as the sales and storage 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 be appointed. 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 best price 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 order is 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 is mostly 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 concerned they 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 of manufacturing and marketing products related to the generation, transmission, distribution and 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 need to 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 a very 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 are specific 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 are firstly 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 are invited 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 a safety 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 level effectively. 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. Vendor relationship: In CG the relationship of a vendor with the company is dependent on the buyer dealing with 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 high precision.

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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. Special transport 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 of dislocation 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 Materials Manager (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 different vendors. 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 vendor selection. 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. If the 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 are posted 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 a tender 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 recent years 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 in from 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 the respective 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 day workings, 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 is touched. The only way of increasing any lead-time is by producing the purchase order as quickly as possible.

Vendor relationship: 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 and capacities. 3. Price. 4. Technical capabilities. 5. Financial position. 6. Procedural compliance. 7. Communication system. 8. Reputation and position in the industry. 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 is defective? 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 ill lead 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?

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 construction services. Today the focus is on turnkey projects demanding innovative technology. The company has 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 pumps per 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

VISION L&T shall be a professionally-managed Indian Multinational, committed to total consumer 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

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 full flow. 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 to maximum 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 burn off. 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 80degree Celsius. 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.

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 the reading is taken. b.) Digital height gauge It is used to check the heights of the bolts with the help of an overnier micrometer c.) Gauge Used to check the heights of the components: 1.) Go-gauge If the go-gauge fits in to the bolts and nuts properly then the size of the component is correct. 2.) No-go gauge If 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 a delivery 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.

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 coalescing pad 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 surface finish .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 surface finish. 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.

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 the customers 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.

Manufacturing Expenses Rs.Lakhs Description Budget 2003-04 Related 571.0 20.0 10.0 19.0 24.0 87.0 52.0 0.0 (6.0) 25.0 18.0 51.0 19.0 11.0 75.0 3.0 54.0 20.0 1053.0 (5.0) 0.0 1048 (43.0) 104.0 1109.0 40.0 1069 Budget 2004-05 660.0 34.0 14.0 73.0 3.0 124.0 59.0 0.0 (33.0) 72.0 27.0 195.0 19.0 11.0 115.0 0.0 51.0 25.0 1449.0 (5.0) (24.0) 1420 (50.0) 110.0 1480.0 0.0 1480 Cum Mar-04 749.9 28.2 10.2 20.8 7.8 48.1 39.0 0.0 (22.4) 24.7 18.3 16.7 13.5 7.0 79.4 0.0 0.0 82.5 1123.6 (14.6) (23.7) 1085.2 (26.5) 104.2 1162.9 6.0 1157 Act Jun-04 46.8 3.3 1.1 (10.8) 0.7 1.8 2.8 0.0 (5.5) 6.0 2.3 35.8 0.2 0.6 12.0 0.0 0.0 4.1 101.5 0.0 (2.0) 99.5 (4.2) 9.2 104.5 0.0 104 Cum Jun-04 167.8 8.5 3.2 (17.2) 0.9 5.4 4.5 0.0 (15.8) 17.9 6.8 37.1 0.7 1.1 23.1 0.0 0.0 10.8 254.9 (3.5) (6.0) 245.4 (12.5) 27.5 260.4 0.0 260 Variance +/(2.8) 0.0 0.3 35.4 (0.2) 25.6 25.6 0.0 7.5 0.1 (0.0) 11.7 4.1 1.6 5.7 0.0 12.8 (4.6) 107.4 2.3 0.0 109.6 0.0 (0.0) 109.6 0.0 109.6

Personal Exp. Traveling & Conveyance Power & Fuel Indirect Material Office Running Exp Repairs & Maintenance R & D Expenses Process Development Int & Ins on WC Int Dep & ins on FA Floor Space Charges Tools Material Adjustments Rejection, Rework&Reli Freight & Octroi. HIRE CHARGES PGM Expenses Other Exp, Rent Total Expenses Less: Scrap Recoveries Gross Expenses Less:duplication Add:allocation Net Mfg Expenses Debit to SBU1 Net Mfg Expenses

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

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) 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. 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 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.

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) 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. Optional 3 phase motor. 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 Totaliser: Mechanical seven digits Register

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%

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 SAP NetWeaver, 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 specific needs 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 can visualize, 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 documents that 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 designed to 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, sets a priority, and dispatches the notification to a suitable processor (expert).

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 are controlled and the deadlines are monitored. Once the corrective tasks have been processed, the solution has to be approved by the author of the notification. Feedback to other interested parties may be required. After this feedback has been given, the notification can be completed.

Value Potentials Up to 60% reduction of time delay*

Business Benefits Quick, easy, and transparent problem notification Problems efficiently transferred to expert Web-enabled process Assignment for all relevant documents Increased quality Reduced cost of failure Online problem documentation

Up to 100% reduction of paperwork*

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

Mobile inspections It shows how the inspection planner, the inspector, and the quality manager work together, 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 created manually or automatically (for example, goods receipt inspections and inspections during production). The inspector normally uses personalized worklists to get all the inspection lots he or she is responsible for. The mobile results recording function provides support when performing 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 which inspections, 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 the usage decision. For this purpose, they use a special worklist. The usage decision has significant 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.

Value Potentials Up to 30% cost reduction for inspection planning*

Business Benefits Efficient inspection planning using mass processing tools or cross-system transfer tools

Up to 50% reduction of hardware Handheld device (PDA) instead of workstation costs for inspectors* Up to 20% improved user efficiency Direct allocation of responsibilities Personalized worklists Ease of use

Up to 60% reduced appraisal costs

Paperless document Results recording without system access Recording of data only once Avoiding human data recording through electronic data transfer

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 goods inspection 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 selection variant 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 its system.

Value Potentials

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

Up to 35%* Up to 30%* Up to 60%* Up to 33% Up to 48% Up to 35%

Reduced effort involved in sending certificates Simpler results recording Reduction in the number of returns Existing master data can be used Early information on the quality No recording needed Can decide at an early stage whether to accept or reject the lot

New product development To work efficiently in all phases of the new development process a powerful and integrated 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 data that 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 layout information 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 every single 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 Feature and 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 and the 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 structure to the concept or design structures, through to the released product structure. This released product structure is checked one last time by the product engineerr before it is finally handed over to manufacturing.

Value Potentials

Business Benefits 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% Step by step engineering allows flexible processes where content is reduced redesign added according to progress Up to 30% Structuring of features and requirement, functions and concepts in early

reduced costs foe design phases ensures quality from the beginning- and thats where the interfaces major part of the costs of the product is Order change management Traditional change management processes can influence only planned procurement elements such as planned orders. As soon as production is released and really started it cant be 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 of production.

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 change of 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 product occur, 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 the rework is reduced via this controlled and efficient mechanism.

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.

Value Potentials

Business Benefits Product structure management and variant configuration can be used to set up configurable product structures

Up to 100% reduced integration costs* Up to 100% reduced costs for order creation* Up to 100% reduced time for BOM creation*

Customer-specific product structure is directly used for planning and production New order can be created directly by the customer via the web Customer-specific product structure is determined automatically 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 minute changes

Up to 50% reduction in order change cycle OCM processes can be done in the background as time long as no user decision is needed Goods movement according to changes can be done automatically

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 and product 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 parallel processing 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 can support 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 secure processes. 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 capabilities of 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. So product 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 new product introduction.

Value Potentials Up to 30% reduced design cycle times* Up to 50% more precise procurement of components* Up to 20% reduced time for routing creation*

Business Benefits Product structures are immediately available for process enineering - no information islands Assignment of components to specific operations in the routing for advanced scheduling capabilities 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 product and 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. A comprehensive 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 SAP PLM 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 is lost 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

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 outof-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 can be 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 if prototyping and testing activities are part of R&D projects.

Value Potentials

Business Benefits New product development can be triggered using advanced tools, e.g. portfolio management

Up to 20% reduced product development time* Up to 30% reduced Project Set Up Time*

All phases of development projects are supported from concept through to planning and execution to the closing of a project, New projects can be set-up quickly by using templates and graphical 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 All kinds of predefined reports allow effective project controlling date accuracy* regarding progress, costs, budgets, schedules and resources Baselining of project versions enables tracking the history of projects

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 content into 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 values exceeding 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 data routing. 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 search for 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

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 used throughout 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 themselves for 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 regular procurement 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 compliance Higher sales volume

Plan driven procurement

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 typically production-planning systems. Even small changes in dates and quantities can impact critical elements, such as production schedules, transport logistics, and just-in time inventory levels. Because enterprise planning and production systems, the Plan-Driven Procurement scenario with SAP 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 inventory management. The supplier sends the company an Advanced Shipping Notification (ASN) and ships the goods. 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 Increased customer satisfaction Higher efficiency

Reduced process cycle time Increased transparency Increased customer satisfaction

Sourcing With SAP SRM qualified suppliers are invited to submit their proposals. The company then compares 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. The company 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 purchasing and 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 also attach 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 the best 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 the previous bidding process.

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 live auction 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

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 RFxs via 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 Strategic Sourcing Global Spend It shows how SAP SRM supports spending analysis across a heterogeneous system landscape. 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, the company 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 from heterogeneous 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.

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 savings potential 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 chain planning 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 paradigmbreaking 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-onassets (ROA) performance.

Value Potentials Up to 40%* Up to 4 %* Up to 18 %* Up to 20 %

Business Benefits More accurate forecast Increased service to distributor Reduced inventories Reduced planning / deployment costs Reduced replenishment cycle Simplified, exception-based process

Up to 8% Inventory Control

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 any given 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 are supplied 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 7-8 months in advance. The company follows the method of Kitting 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 way they 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 it further 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.

ABC Analysis Since 1100 parts are used to manufacture one petrol pump, the company has classified in to A, 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 Very strict control Bulk ordering for 6-8 months Weekly control statements Rigorous value analysis Maximum follow-up and expediting As many sources as possible for each item

B- items: Moderate Value

C , D , E items : Low consumption value Loose control Frequent ordering or weekly deliveries Quarterly control statements Minimum value analysis Follow-up and expediting in exceptional cases Two reliable sources for each item Rough estimates for planning

Moderate control Once in three months Monthly control statements Moderate value analysis Periodic follow-up Two or more reliable sources

Accurate forecasts in materials Estimates based on past data planning on present plans Minimization of waste, obsolete and surplus (review every 15 days) Maximum efforts to reduce lead time

Quarterly control over surplus Annual review over surplus or and obsolete items obsolete material Moderate Minimum

Quantity and cost on materials (per month)

Category A B C

Quantity 150 units 2000 units 5000 units

Cost (approx.) 90 lakhs 100 lakhs 110 lakhs

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

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)

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.

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 and submitted 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 be called for accordingly.

The materials used and the rates for new constructions are Cement Rs. 165/bag (50 kg) Sand Rs. 2,500/100 cubic feet Bricks Rs. 2,500/1,000 bricks

Rubble RS. 1,500/100 cubic feet Metal No. 1 Rs. 1,600/100 cubic feet Metal No. 2 Rs. 1,600/100 cubic feet Tor Steel Rs. 32,000/ton (1,000 kg) Mild Steel Rs. 30,000/ton (1,000 kg) Laborer Rs. 110/day Specialists Rs. 250/day Ceramic Rs. 350/day Electricals Rs. 120/running ft. Plumbings Rs. 100/running ft. Fittings & Fixtures Rs. 5,000/flat Paints (Int.) Rs. 3/sq. ft. Paints (Ext.) Rs. 2/sq. ft. Lobby and Passages Rs. 200/sq. ft. Miscellaneous (Taxes, Levies, Rates, Duties etc.) Rs. 100/sq. ft. Most of the materials do not require material handling or storage facilities to store them. Most of the materials can be stored in the open except cement. Cement requires storage so as to protect it from humidity. Cement when comes in contact with humidity looses its holding capability and looses it properties i.e. its grade falls. Hence, for storage of cement it is stored within closed areas such that the walls are 2 feet away from the stocks and the ceiling is a feet higher than the cement height. Also the cement is placed a feet above the flooring level. The Chemicals are available in their very own storage cans which ensure quality does not deteriorate. The usage procedure of materials is FIFO i.e. First In First Out The Basic Rates and the consumption of materials are shown below: Item No. 1 2 3 4

Name Cement Sand Bricks Rubble

Rate (Rs.) 165/Bag (50 kg) 2,500/100 cub.ft 2,500/1,000 1,500/100 cub.ft

Consumption 8,000 1,00,000 1,60,000 20,000

Value Consumption (Rs.) 13,20,000 25,00,000 4,00,000 3,00,000

5 6 7 8 9 10 11 12 13 14 15 16 17 18

Metal No.1 Metal No. 2 Tor Steel Mild Steel Labor Specialists Ceramic Electricals Plumbings Fittings Paints(Int.) Paints(Ext.) Lobby & Passages Miscellaneous

1,600/100 cub.ft 1,600/100 cub.ft 32,000/ton 30,000/ton 110/day 250/day 350/day 120/running ft. 100/running ft. 5,000/flat 3/sq. ft. 2/sq. ft. 200/sq. ft. 100/sq. ft.

25,000 25,000 120 100 1,00,000 5,000 100 20,000 4,000 200 1,00,000 50,000 3,500 20,000

4,00,000 4,00,000 38,40,000 30,00,000 1,10,00,000 12,50,000 35,000 24,00,000 4,00,000 1,00,000 3,00,000 1,00,000 7,00,000 2,00,000 2,86,45,000

TOTAL COST The ABC Analysis

Sr. No. 1 2 3 4

Item No. 9 7 8 2

Value Consumption 1,10,00,000 38,40,000 30,00,000 25,00,000

Cumulative Cost 1,10,00,000 1,48,40,000 1,78,40,000 2,03,40,000

5 6 7 8 9 10 11 12 13 14 15 16 17

12 1 10 17 3 5 6 13 4 15 18 14 16

24,00,000 13,20,000 12,50,000 7,00,000 4,00,000 4,00,000 4,00,000 4,00,000 3,00,000 3,00,000 2,00,000 1,00,000 1,00,000 35,000

2,27,40,000 2,40,60,000 2,53,10,000 2,60,10,000 2,64,10,000 2,68,10,000 2,72,10,000 2,76,10,000 2,79,10,000 2,82,10,000 2,84,10,000 2,85,10,000 2,86,10,000 2,86,45,000

18 11 70% of the cost is taken for A Items I.e. 70% of 2,86,45,000 = 2,00,51,500 Hence, Items No. 9, 7, 8, 2 fall in A Category Therefore, exact % of A Item is 2,03,40,000 / 2,86,45,000 * 100 = 71.01%

(A+B) Items together form 90% of Value Consumption [i.e. 70% + 20%] Therefore, 90% of V.C is 2,57,80,500 The value of B Items is 2,57,80,500 2,00,51,500 = 57,29,000

Hence Item No. 12, 1, 10, 17 fall in B Category Therefore, the exact cost of B Items is 56,70,000 % of B Items is 56,70,000 / 2,86,45,000 * 100 = 19.79% Balance Items are C Items

Category % A B C

Value Consumption Cost (Rs.) 71.01 19.79 9.2 2,03,40,000 56,70,000 26,35,000 % 22.2 22.2

Items No. of Items 4 4 10

55.6

A - 71.01 B - 19.79 C - 9.20 Repairs Repairs are of three types: 1. Structural Repairs 2. Replastering 3. Water Proofing In repairing the major new components used other than the standard materials are a) Polymer Rs. 175 to 200 per kg b) Epoxy Rs. 400 per kg c) Quartz Sand Rs. 3.50 per kg

The major function of Polymer, Epoxy and other chemicals is to strengthen the damaged R.C.C. (Reinforced Cement Concentrate) structure while Quartz Sand is mixed with these chemicals to increase the effect of the chemicals. Interiors The materials used here are: Plaster of Paris Tiles Flooring Material (Granite, Mosaic Tiles, Ceramic) Wooden Flooring Fall Ceiling Furniture a) Plywood b) Fevicol c) Nails, screw d) Sumica e) Polish Wood Normal polish Melamine Polish Lamination Polish

Plumbing Work 1. Galvanized iron pipe for supply of water 2. Outer Drainage pipe Asbestos cement pipe P.V.C. pipe C.I. pipe

Electrical Works a) Conduit P.V.C. pipe 1 x 18 wire Light Point 3 x 20 wire Geysers

7 x 20 wire Heavier Electrical used in main connections b) Cables c) D.P d) Plugs Armor Cables used as highly damage resistant Normal Cables used as lining Cables

e) Switches Painting a) Exteriors Cement Paint Acrylic Paint

b) Interiors Whitewash Dry distemper Oil bound distemper Oil paint Plastic paint Acrylic Paint Velvet Paint Luster Paint

Suppliers & Quality Checking Cement Since it is the most important material used in construction, cement is only bought from named suppliers like Gujarat Ambuja which provide branded sealed bags. These companies have their distributors located in areas from where these goods are procured. Paints, Plumbings are also purchased through their respective branded companies. Sand It is procured from local suppliers and its quality is judged by the Silt Content Test i.e. if 100 gms. of sand is placed in a liter of water then the silt formed at the bottom of the beaker should be less than 1% i.e. about only a gm of the sand should settle down in the form of silt. Electricals and wood for furniture etc. are also purchased from local suppliers only. Bricks the suppliers are usually local suppliers. The bricks are tested by first checking the color of the brick is red, then by dropping the brick from a height of 10 ft. and finally the bricks should not melt when water is poured on them. These are general tests which are seen while the work is done and not done in the lab.

Chemicals are purchased from specific branded companies and then are tested in a lab for the necessary quality. The Certificates for these tests are provided to the customer only when the customer or client asks for it. All the suppliers are informed about the requirements via a call and the delivery is done by the suppliers who bear the transportation costs for the materials they supply. Machines Most of the machines used are only used in new constructions. The company usually rents the machines but they have started buying the machines since they are cheaper that way.

1. Crane Crane is basically used to lift heavy


materials and building aids like bamboos to the place where they are needed. There are several types of cranes but the most used by the company is the movable crane.

2. Earth Movers and Bull Dozers These are used to move the dirt, sand and earth away from a site and is either sent else where or is used for construction if it is suitable for use in the construction

3. Cement Mixer One of the most important machines used in constructions today. They are also of two types one is the big version which is automatic with controls in it. It sits on a huge truck which is used to transport wherever it is needed. The second is the hand version small and equally movable and is used for smaller type of mixing.

4. Truck These trucks are the basic way in which the materials are transported from the suppliers to the construction site. These trucks do not require men to empty it and hence it is time saving especially when the workers are paid on a daily basis.

BIBLIOGRAPHY

Material management, by S.D. Aphale, (Vipul Prakashan).

www.cysaidaho.org

www.cglonline.com

www.bestundertaking.com

Logistics by Raja Kalishlingam.

Business logistics/ Supply chain management by Ballou (5th edition). Wild, Ray. (1980) Essentials of Production And Operations Management. London, Holt Slack, N; Chambers, S; Harland, C; Harrison, A; Johnston, R; (1995) Operations Management. London, Pitman Publishing Wisniewski, Mik. (2002) Quantitative Methods For Decision Makers. 3rd edition. England, Prentice Hall