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					Inventory management

                         CHAPTER 1

       Before the 1950’s Finance was chiefly concerned with the issue of
various types of securities, i.e., equities and different types of preference
shares and debt instruments Finance also considered capital structure and
liquidity, but each of these primarily from the view of an external analysis.
Financial control consisted of various rules of thumb in respect of financial
analysis ratio like the gearing ratio or current ratio.

       In the 1950’s the methodology of investment appraisal received
increased attention, but the decade was especially marked by the publication
of 2 important articles. 1st was by Markowitz in 1950 and concerned the
theory of portfolio selection dealing with risky investment. This led to the
later development of the capital Asset Pricing Model that deals with the
pricing of risky asset and the relationship between risk and return.

The Second article was by Modigliani and Miller in 1958 and concerned
firm valuation and gearing. These articles were the start of the development
of a coherent theory of finance. The subject has also come to include
dividends, efficient markets and option valuation theories.
----->Financial Management -----> Stephen cooper ACCA lecturer in
Financial Management, the FACT Organization.

      Finance is one of the major elements which activate the overall
growth of the economy.
      A well knit finance system directly contributes to the growth of the
economy an efficient financial system calls for the effective performance of
financial institution, financial instruments and financial markets.
      Finance is the life blood of economic activity. Finance in a business
is what blood to human body. While in the human system, automatic
regulation of quantity and quality of blood is available no such automation is
available for business. It is therefore, essential to have adequate funds at the
disposal of the business. Funds of various types to carry out the business
smoothly without fear of losing funds. Proper composition of funds so the
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funds stream required is obtained. It also encompasses the study of financial
markets, institutions and activities of government, with stress on those
aspects relating to financial decisions of individuals and companies. In fact,
finance is also indispensable, that it is rightly said that finance is the life-
blood of an enterprise. Finance is one the basic foundation of all kinds of
economic activities.
        In present day’s economy, finance is defined as the provision of
money at the time when it is required. Every enterprise, whether big or
small or medium, needs to finance to carry on its operation and to achieve its
        Finance is one of the basic foundations for all kinds of economic
        Finance is regarded as the key or master key, which provides access to
all other sources employed in the manufacturing and merchandising
activities. However, it is true that money multiplies more money only when
it is properly managed and this can be achieved through proper planning and
        Finance is the management of the monetary affairs of a company. It
includes determining what is to be paid for raising the money on the best
terms available and utilizing available funds to the fullest extent.

       The term business finance mainly involves in raising of funds and
their effective utilization, keeping in view, the overall objects of the firm. In
a broader sense, finance includes determining what has to be paid for rising
money on the best term available and devoting the available funds to the
fullest extent.
      According to Guthman and Dougall, “Business finance can be broadly
defined as the activity concerned with planning, raising, controlling, and
administration of funds used in the business”.

      The approach to the scope and functions of financial management is
divided for purpose of exposition, into two categories:

      (a) Traditional Approach
      (b) Modern Approach

      Traditional Approach: The Traditional approach to the scope of
      financial management refers to its subjects matter in the academic
      literature in the initial stages of its evaluation as a separate branch of
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      academic study. The term “Corporation Finance” was used to
      describe what is now knows in the academic world as “Financial
      Management”. The concern of Corporation finance was with the
      financing of corporate enterprises. In other words, the scope of
      finance function was treated by the traditional approach in the narrow
      sense of procurement of funds by corporate enterprises to meet their
      financial needs.
      Modern Approach: The traditional approach was criticizes for its
      conceptual and analytical grounds by the proponents of modern or
      contemporary approach since the former neglects the process of
      allocation of capital to different assets and the problem of optimum
      combination of financial management, according to the new approach
      is concerned with the solution of problems relating to the financial
      operation of a firm, the problems like, investment, financing and
      dividend decisions.

                           FUNCTION OF FINANCE
       (a) Investment Decision: Investment decision relates to the
          selection of assets in which funds will be invested by a firm.
       (b) Capital Building: The long term investment decision is
          probable the most crucial financial decision of a firm. It relates to
          the selection of an asset or investment proposal or course of
          action whose benefits are likely to be available in future over the
          lifetime of the project.
       (c) Working Capital Management: Working capital
          management is concerned with the management of the current
          assets. It is an important and integral part of financial
          management as short term survival is a pre-requisite to long-term
       (d) Financing Decision: The financing decision of a firm relates
          to the choice of the proportion of these sources to finance to
          finance the investment requirements. It is concerned with the
          financing mix or capital structure of leverages.

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                       BENEFITS OF FINANCE
   1) Benefits of finance to business unit:
      a. Finance is the life blood of any business.
      b. Finance is the master key which provides access to all other
         resources that are employed in the production and marketing of
         goods and services.
      c. Finance is the lubricant which keeps a business enterprise moving
         and dynamic.
      d. Finance integrated the various segments of a business enterprise
         for the smooth running of the business in the direction of
         organizational goals.
      e. Finance guides and regulates investment decision and expenditure.
      f. Finance is necessary for the acquisition of the fixed assets like land
         and building, machinery, furniture etc and also for meeting the
         working capital needs of the business.
      g. Finance is helpful for modernization, diversification, expansion
         and development of an enterprise.
      h. Availability of sufficient finance with an enterprise will enable it to
         sell goods on credit on large scale.
   2) Benefits of finance to investors:
      a. The issue of a large number of securities by corporate bodies for
         raising finance has provided wide investments opportunities to the
      b. The flotation of a large number of securities by corporate bodies
         has promoted the habit of savings and investment among the
   3) Benefits of finance to society:
      a. The availability of sufficient finance provides opportunity to new
         entrepreneur to set up new business units.
      b. By contributing to the growth and development of business
         enterprises. Finance increases the employment opportunities for
         the people.
      c. By contributing the growth and development of large number of
         industrial undertakings helps the society to have a large variety of
         goods which they need.

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      d. By contributing to the modernization of industries finance
         contributes to the production and supply of quality goods at the fair
         prices to the society.
      e. Through the supply of sufficient soft loans finance contributes to
         industrial development in backward areas.
      f. Finance has contributed to the development of money market and
         capital market in the society.
    Finance management of any business firm has to set goals for and to
interpret them in relation to the objectives of the firm. Broadly there are
only two alternative objectives of financial management.

   1. Specific objectives or basic objectives:
   a. Maintain of adequate liquid assets in a firm:
    Maintenance of adequate liquid assets in a firm is ine of the basic
objectives in the financial management. The objective of liquidity implies
that financial management should ensure that there are adequate cash funds
in the hands of the firms at all times to meet its objectives.
   b. Profit maximization:
      It is considered as an important goal in financial decision making in
      an organization. Maximization is the condition of achieving the
      maximum target profit with available resources in an economic and
      efficient manner. Profit ensures maximum welfare to the
      shareholders, employees and creditors and increases confidence of the
      management of the company.
   c. Wealth maximization:
      It refers to the maximization of wealth by maximization in the market
      value of share of a company. The efficient management of an
      organization maximized the present value not only for share holders
      but also for all including employees, customers, suppliers’ and
      community at large. It is the ultimate objective of every organization.

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   2. General objectives:

      a. Balance sheet structure:
         A proper balance between the fixed and current assets is an
         important factor for efficient management of funds. This is one of
         the objectives of financial management that the size of current
         asset must permit the company to exploit the investments on fixed
      b. Liquidity:
         Liquidity refers to available cash and it is an indication of positive
         growth of a company. It is an important factor for meeting the
         short and long term obligations of a firm.
      c. Proper in planning of funds:
         Proper planning of funds include equitation funds in the best
         possible manner i.e., minimum cost of addition of funds but
         maximum returns through wise decision.
      d. Efficiency:
         Efficiency and effectiveness are very much necessary in
         controlling the flow of funds.

         The sources of finance have been classified many ways such are:-
           1. According to period
               (a)                     Short term period.
               (b)                     Medium Term Period.
               (c)                     Long Term period.

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            2. According to Ownership:
                (a) Owned capital viz share capital, retained earnings, profit
                    and surplus etc.
                (b) Borrowed capital debentures, bonds, Personnel deposits
                    loans etc.
            3. According to Sources of Finances:
                (a) Internal Sources: Ploughing back of profit, retained
                    earnings, Depreciation funds.
                (b) Preference shares etc.
                (c) External Sources: Shares, debentures, loans etc.

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            4. ACC to mode of Financing:
                (a) Security Financing: i.e., Financing through rising of
                    corporate securities.
                (b) Internal Financing: through retained earnings.
                (c) Loan Financing: through raising Long Term and Short
                    Term Loans.

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                  MEANING OF INVENTORY

      Inventories mean tangible Property held.

                 For sale in the ordinary course of business
                 In the process of Production for such sale
                 For consumption in the Production of goods or services
                  for sale in including Maintenance supplies and
                  consumable and other than the Machinery spares.
                 Inventory included raw material inventory, work in
                  process inventory and finished goods inventory.


       Inventory management is deals with adequate supply of a materials to
meet the expected demand pattern subjected to budgeting consideration.
       Inventory management usually is not the direct operating
responsibility of the finance manager, the investment of funds in inventory is
an important aspect of financial manager. Consequently, the finance
manager must be familiar with ways to control inventories effectively, so
that the capital can be allocated efficiently.
       It may be defined as the systematic location storage and recording of
goods in such a way that desired degree of service can be made to operate
steps at minimum ultimate cost.

The main objectives of inventory management are
   Investment in inventory like any other current asset involves a trade-
     off. The investment in inventory should strike a balanced between
     efficient and smooth production or sales operation and profitability.
     This is so because both excessive and inadequate inventories are not
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    Excessive investments in inventory would ensure that there are no
     shortages in production or sales operation.
    To keep material cost under control so that they contribute in reducing
     cost of production and overall cost.
    To avoid both over stocking and under stocking of inventory.
    To minimize losses through deterioration, wastages and demand.
    To maintain investment in inventory at the optimum level as required
     by operational and sales activity.
    To facilitate of data for short term and long term planning and control
     of inventory.


             Inventory is needed to regulate the flow of raw materials and
      work in progress for purchasing and finished goods for sale.
      Inventory does not earn interest, and is expensive to store, insure,
      protect and stock out costs. Therefore, inventory should b held so as
      to hold enough to operate but not too much. The inventories are
      needed for the following reasons.
      1. Avoiding Losses of Sales
             If the firm is not having enough stock of finished goods it will
      result in the loss of sales normally, unless the product is being made to
      order as per the specific requirement of the customer. In most cases,
      however, firm must be in a position to deliver goods on demand.
      2. Gaining quantity Discounts
            Suppliers of raw materials usually offer quality discounts if
      purchase are made in bulk. These discounts will reduce the cost of
      goods increase the profit when it is sales. Thus, the firm would like to
      purchase raw materials in quantities greater than their requirements.
       3 Reducing Ordering Cost
            Each time a firm places an ordered; it incurs certain expenses,
      which are called as ordering cost. Forms have to be filled, approvals
      have to be obtained, and goods that arrive must be accepted,
      inspected, and counted. Later, an invoice must be processed and
      payment made. The greater the number of orders greater is the
      ordering cost.

      4 Achieving efficient Production Runs

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             Each time a firm organized works and machine to produce an
      item, startup costs are incurred. These are then absorbed as
      production begins. Frequent setups will result in high startup costs;
      larger runs involve lower costs.
      5 Reducing risk of production shortages
            Once the production process starts all the required raw
      materials, components etc, should be made available to the production
      department without any delay.
                        TYPES OF INVENTORY
            The inventory required by any firm would depend upon the
      nature of industry. Usually there are types of investments
      1.Raw material inventory
             This consists of those basic materials that are converted into
      finished goods through the manufacturing process. The purpose of
      maintaining raw material inventory is to separate the production
      function from the purchasing function so that delays in shipment of
      raw materials do not cause production delays.
      2. Stores and spares
          This category includes those products, which are accessories to the
      main producet for the purpose of sale. Examples of store and spares
      items are bolts, nuts clamps, screws etc.
      3. Work in process (WIP)INVENTORY
         These are semi-finished products. The longer and more complex
      the production process, the greater will be WIP inventory. It helps
      separating the various operations process so that machine failures and
      work stoppages in one operation do not affect other operations.
      4. Finished goods inventory
         These are completely manufactured products awaiting sale. The
      purpose      of a finished goods inventory is to separate the
      production and sales function so that sales can occur without any
      immediate dependence on production.

                              CHAPTER II
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                         RESEARCH DESIGN
       Research design is an arrangement of condition for collection and
analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure. The research design is the conceptual
structure with in which research is conducted; it constitutes the blueprint for
the collection, measurement and analysis of data.
“A study on inventory management and control”
      The concept of study on inventory management and control is to
understand the system and procedure of inventory management and control
at HMT machine tools limited. Is confined with reference to “HMT
Machine Tools Limited”
      An organization requires managing and controlling the level of its
      inventory. Inventory forms a major part of its working capital.
      Company’s operating efficiency depends upon the effective
   To understand the management and control procedure on inventories
     in “HMT machine tools limited”
    To know the methods adopted in the management and valuation of
     inventory in HMT.
    To know the documents used in stores department.
    To provide suggestion if any for their effective functioning.

           The importance of study is to analyze the
            maintenance/management and control of inventory.
           This study helps to find out consumption of materials in
            production process.
           The study is intended to hold the stores department in HMT in
            improving their functions.

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            SCOPE OF THE STUDY

                o The study is conducted on inventory management of
                  HMT Machine Tools ltd.
                o It gives an idea about the inventory management
                  techniques and tools and control methods followed by
                o The entire inventory management can be understood in
                  proper manner.

                  The word inventory management refers to any kind of
                  resources having economic value and is maintained to
                  fulfill the present and future needs of any organization.
                   The data of the study was collected with the help of
                   discussion with the guide and also the reference of
                   records maintained in the department.
                   SOURCE OF DATA
            The source of data for study is basically classified into primary
            and secondary data
            1. Primary data:
               It is study through the discussion with the guide allotted and
               through the records maintained by the company.

            2. Secondary data:
               It is connected through text book, reference book,
               and internet website.
                    The study is limited to time constraints.
                    The collection of primary data is very limited.
                    It is only adjust to the local branch of the

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                              COMPANY PROFILE


      H.M.T. is one of the leading public sector companies, in India, HMT I & II
Bangalore plant was inaugurated in 1953 by PANDIT JAWAHARLAL NEHRU; it has
16 manufacturing units spread over 10 states, 24 divisions and 29,000 employees in 10
different states.

       DR.S.M.Patil started HMT limited as a Hindustan Machine Tools Limited on 7th
February 1953 in technical and financial collaboration with the DERLIKON
MACHINE TOOLS WORKS of Switzerland. The first product produced by HMT was
lathe on 6 th October 1953.Then the government of India bought the shares held by
Derlikon thereby transforming HMT as a Government undertaking.

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         HMT Limited, the pioneer in Machine Tools Industry in India and
  manufacturers of a diversified range of products has incorporated “HMT MACHINE
  TOOLS LIMITED” as its fully owned subsidiary on 9th August 1999.

  “HMT MACHINE TOOLS LIMITED” (HMT-MTL) is a Multi unit, Multi
   location, Multi technology Company manufacturing a wide variety of “STATE-
   OF-THE-ART” Machine Tools.
  Comprehensive Customer Support services including Application Engineering,
   Customer Training and after sales service.
  The best of products in terms of technology, productivity and cost effectiveness
  All manufacturing units of HMT Machine Tools are ISO9001 certified.


         HMT limited, the pioneer in machine tools industry in India and manufacturers of
a diversified range of products has incorporated “HMT MACHINE TOOLS LIMITED”
as it’s fully owned subsidiary on 9th August 1999.

        “HMT MACHINE TOOLS LIMITED” (HMT-MTL) is a multi unit, multi
location, multi Technology Company manufacturing a wide variety of “STATE-OF-
THE-ART” machine Tools. HMT-MTL has its manufacturing units at five locations with
each unit specialized in a particular family of Machines. The sales and service network is
spread across the length and breadth of the country. As leading manufacturer of Machine
Tools in India, HMT-MTL provides the best of products in terms of technology,
productivity and cost effectiveness.

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Corporate Vision

    To be a leading GLOBAL ENGINEERING CONGLOMERATE Focused on
      CUSTOMER DELIGHT in our fields of Endeavour.
Corporate Mission

    To establish ourselves as one of the world’s premier companies in the engineering
      field having strong international competitiveness.

    To achieve market leadership in India through ensuring customer satisfaction by
      supplying internationally competitive products and services.

    To achieve sustained growth in the earnings of the group on behalf of

Quality Policy


    TOTAL CUSTOMER SATISFACTION through Quality Goods and Services

    COMMITMENT of management to Quality

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    To create a CULTURE amongst all Employees towards TOTAL QUALITY



        HMT is contributing to significant capacity established in Bangalore. HMT is to
         Focus for major automotive ventures such as Ford, Hyundai, Toyota, Volvo,
Skoda, Ashok Leyland, Hindustan motors and TVS, where there is consistent demand for
machine tools in south India. HMT Machine Tools Ltd would be investing Rs.180 Crores
of total packages of Rs.723 crores given by the center for its revival and aim to double its
turnover to 500 in the next five years.

        The company’s optimism stems from the prospect of accessing working capital
freely after setting off its debts and reducing costs through a fresh voluntary retirement
scheme and increased production and productivity from the replacement of its over four
decades old plant that would be place soon.

        The revival package has infused new life into the ailing HMT, which once guided
the prospects of the manufacturing sector through its indigenous machine tools. For the
long term, HMT Machine Tools would be seeking joint venture partners.

       The immediate goal was to regain its old glory through an initial sustained
growth. The efforts to increase the turnover would be accelerated in the niche products
with higher value. The company hoped to rationalize the number of products and focus
on only high tech and high value to derive higher margins.

         Also by reducing the staff strength by 1000 from the level of 4300 and freeing
itself from the huge annual debt servicing through an Rs.90 crores interest burden would
put HMT Machine Tools back on its keel soon. With its edge in the strategic sectors like
defense and nuclear, HMT Machine would eyeing in the mass market for companies for
the automotive sectors and the CNC systems.

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                            PRODUCT PROFILE

Our Business Domain

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                             HMT PRODUCTS

                                  MACHINE TOOLS

   BEARINGS                           TRACTORS                  WATCHES

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        HMT is synonymous with excellence in precision engineering in India. HMT is
built on a strong foundation of technical know – how acquitted from world leaders in
RINO BERADI, FRITZ WEMER PEGARD. Today HMT Machine Tools expertise has
been developed to such an extent that HMT can design and develop any kind of
machines. From simple lathe to multi – station transfer lines, from stand –alone CNC
machine to flexible manufacturing systems (FMS) leading to factory automation HMT’s
broad range of machine tools covers.

       General – purpose machines and CNC machines are produced to meet the
application needs of every engineering industry.

   1. Computer Networking Control (CNC) machines.
   2. Turning machines.
   3. Milling machines.
   4. Drilling machines.
   5. Grinding machines.
   6. Boring machines.

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   7. Broaching machines.
   8. Special purpose machines.
   9. Other products:
          Metal forming.
          Die costing and plastic machinery.
          Printing machines.
          Food processing machines.
          Tractors.
          Quartz watches.
          Bearings.
          Précising ball screw.
          Recondition.

                        STRUCTURE OF HMT

                                        GM (MBX)

            DGM               JGM                            GM (P)
           (CNC)              (PSB)                       PRODUCTION

                                                                        GM (F)
                             DESIGN                       QUALITY &
        SALES             DEVELOPME                      INSPECTION
        ENGG.                   NT                         JGM (QI)         21
        JGM(S)           Mother Theresa Institute of Management
                            JGM (DD)
  Inventory management


SECURITY                                       ENGG.
TRAINING                                    SUBCONTRACT
 CANTEEN                                    COMP’R & MIS
JGM (HRM)                                      JGM(E)

                                              PLANT                              TRAIL &
SCREW                    (MFG)               SERVICE
 TOOL                    JGM                                                    SERVICING
ROOM                                         DGM (PS)                             SPARES
                                                                                 DGM (TS)
            PROGRESS             ASSEMBLY
                                                              Y JGM (F)
            AGM (PR)              JGM (AY)

                                          HOSPITAL CMO                    MATERIAL &
                                                                           JGM (M)

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                                 General Manager

                              Joint General Manager

                             Deputy General Manager

                            Assistant General Manager


                                   Deputy Manager



                                    Junior Superior


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HMT Machine Tools Ltd has one of the best infrastructural facilities.

In the Manufacture of Machine Tools

    Spread over 500 acres of campus including residential township.
    CNC Machines for Metal Cutting & Metal Forming.
    CNC Coordinate Measuring Machines.
    Heat Treatment Facilities.
    Precision Measuring & Inspection Facilities
    Facilities for calibration of Measuring & Testing equipments

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                        ACHIEVEMENT/ AWARDS

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YEAR          AWARD                                       INSTITUTED BY

1970-71       Excellence Performance in Exports           Govt. of Mysore
1971-72       Outstanding Export Performance              Govt. of Mysore
1971-72       Outstanding Export Performance              EEPC
1975-76       National Award for Outstanding Export       Ministry of Commerce
1982-83       Ministry of Commerce                        EEPC
1982-83       Meritorious Performance in the field of     Ministry of Commerce
1983-84       Export Excellence                           EEPC
1984-85       Export Excellence                           EEPC
1984-85       Meritorious Performance in the field of     Ministry of Commerce
1985-86       Export Excellence                           EEPC
1986-87       Export Excellence                           EEPC
1987-88       Export Excellence                           EEPC
1995-96       Regional 'Top Exporters Shield'             Engineering Export
                                                          Promotion Council,
1996-97       Regional 'Top Exporters Shield -Project     Engineering Export
              Exporters'                                  Promotion Council,
1997-98       All India Trophy for Highest Exporters      Engineering Export
                                                          Promotion Council, Kolkata
1998-99       Regional Trophy for Highest Exporters in    Engineering Export
              the Group - Services Exporter               Promotion Council,
                                                          Southern Region, Chennai
2001-02       Regional Trophy for Highest Exporters in    Engineering Export
              the Group - Services Exporter               Promotion Council, Kolkata
2002-03       Regional 'Top Exporters Shield'             Engineering Export
                                                          Promotion Council,
2002-03       All India Trophy for Highest Exporters      Engineering Export
                                                          Promotion Council, Kolkata
1990          National Award for R&D Efforts in           Dept. of Scientific and
              Industry - 1990 in the Mechanical           Industrial Research
              Industrial Sector
1990-91       Best Productivity                           National Productivity
2001          Best Products at IMTEX – 2001               CMTI - PMT Trust Award

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    HAL
    BHEL
    TVS


    Micrometrics-Turning centre& grinding machines.
    Perished- Ghazi bad– Grinding machines.
    HEC (Heavy Engineering Corporation- heavy duty lathe.
    ACE designers at Bangalore - turning center, Machining centers.
    LMW –turning and drill tap centers.
    TAL –PUNE – spam.
    JYOTHI –turning center& machining center.
    ASKAR MICRON- Mysore –turning centers.
    WIDIA- Bangalore- spam.
    Kirloskar - Mysore.

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Workflow model (End to End):


                       Sales / Marketing


                       Material Planning

                        Progress Report

                        Manufacturing                       Inspection

                           Assembly                         Inspection

                          Machine Trials


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        After India Independence, government of India formulated the five year plans.
The second five year plan laid more emphasis on industrialization. This was the HMT the
time when HMT come into existence to meet the needs for machine tools for diverse
applications in India. It was the early post independence era that, HMT began is a small
way to meet big commitment “To manufacture mother machines to build modern
industrial India”.
        HMT was conceived by the government of India in 1949 and was incorporated in
1953, with the objectives of producing a limited range of machine tools, required for
building an industrial edifice for the country. The growth of the company into a multi
product organization can be phase into different years.

The Indian machine tool industry was previously treated as an art bound tradition with
narrowing specialized companies taking their technical findings as trade secret, creating
hindrances to its development and at times resulting in duplication of work.

But today the tool industry tells another story altogether the consumption of machine
tools is a derived demand. The trend in the consumption of machine tools largely depends
on the end users and their demand for the products.

The recent past has witnessed a tremendous surge in demand from the automobile and
consumer’s durable industry, the largest consumers of machine tools; as a result the
machine tools market is on high growth mode.
Going by the upward movement of the growth graph, it can be seen that the emerging
trends have focused mainly on exports, colorations and the increasing emphasis on
software in CNC machine.

The demanding accuracy and complex requirement of the aerospace sector in addition to
tricky requirement from ordnance, automotive, telecommunications and others such
industries have provided moving spirit and motivating force for development and
charging trends in machine tool industry.

Thus in line with the import profile of major global imports and India competency, the
focus for HMT should be on CNC machine tools, plastic processing, presses, metal
forming equipment, sewing machine, EDM’s, cut-off machine, cutting tools and

Major points to be concentrated is work an meeting global technology standards

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         Technology

         Crucial and vital role of science and technology

         Necessary for constant awareness of technology to meet any condition and

HMT’s growth for being a leading machine tool company in India

         Concentrating for growth in exports

         Working for making innovations in technology.

HMT Machine Tools Ltd has harnessed and adapted technology to innovate a range of
machine tools. A market leader in the market machine tool industry with 43 percent
productions share in the country, it was HMT that pioneered the concept of CNC
technology in India.

                          MCKINSEY’S 7’s FRAMEWORK:

The McKinsey’s 7’s model is a widely used framework used for viewing the inter-
relationship of strategy formulation and implementation. It helps manager to focus on the
importance of linking the chosen strategy to a variety of activities that can affect the
importance of the strategy. Originally developed as a way of thinking more broadly about
the problems of organizing effectively, the 7’s provides a tool for judging the “Do
ability” of strategies.

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 Strategic planning refers to the management processes in organization, which help the
management to determine the future impact of change and take current decision to reach
the designed future. Consultant at MCKINSEY Company a well known management
consultancy firm in the US developed the 7’s framework the end of 70’s to diagnose the
cause of organizational problems and to formulate programs for improvement.

According to Waterman and Tom peters, who the consultants at Mckinsey and company,
organizational change is not simply a matter of structure although structure is a
significant variable in the management change. Again, it is also not simple relationship
between strategy and structure although strategy is also critical aspect. In their view,
effective organizational change may be understood as a complex relationship between
strategy, structure, style, skills, staff and super coordinated goals. The framework
suggests there are multiplicities of factors that influence organizational ability to change
and it is proper mode of change.






Strategy: actions a company plans in response to or anticipation of changes in its
external environment.

Structure: Basis for specialization and co-ordination influenced primarily by strategy
and by organization size and diversity.

Systems: formal and informal procedures that support the strategy and structure (Systems
are more powerful than they are given credit).


Style: The culture of the organization, consisting of two components:

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Organizational culture: the dominant values and beliefs, and norms, which develop over
time and become relatively enduring features of organizational life.

Management style: more a matter of what managers do than what they say: how do
company’s managers spend their time? What are they focusing attention on?

Symbolism: The creation and maintenance (or sometimes deconstruction)of meaning a
fundamental responsibility of managers.

Staff: The human resource management- processes used to develop managers,
socialization processes, ways of shaping basic values of management cadre, ways of
introducing young recruits to the company, was of helping to manage the careers of

Skills: The distinctive competences – what the company does best, expanding or shifting

Shared values: Guiding concepts, fundamental ideas around which a business is built be
simple, usually stated at abstract level, have great meaning inside the organization even
though outsiders may not see or understand them.

Strategy: A set of decisions and actions aimed at gaining a suitable competitive

Structure: The organizational chart and associate information that shows who reports to
whom and how tasks are both divided up and integrated.

Systems: The flow of activities involved in the daily operation of a business
including its core process and its support systems.

Style: How managers collectively spend their time and attention how they use symbolic
behavior. How management acts is more important then what management says.

Staff: How companies develop employees and shape basic values.

Skills: An organization’s dominant capabilities and competencies.

Shared values: Commonly held beliefs, mindsets, and assumptions that shape how an
organization behaves its corporate culture.

For better understanding of the model of organization change, let us look at each of its
dimensions, as being most organization discussion does-with structure. The activities are
classified and based up on the job profile. The managers perform the various functions of
the concerned departments.

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                             FINANCE DEPARTMENT:

        Any business for the matter whether large or small, profit motive is considered to
be a financial concern and its success or failure to a large extent depends on its financial
decisions. Efficiency of the organization is brightened only when there is efficient
management of its finance.

Functions of finance department:

       Finance is the lifeblood of every organization. Finance becomes the basic
foundation for all the kind of economic activities. Efficiency of the organization is
brightened only when there is efficient management of its finance.

The various functions of finance department are:

     Planning of funds
     Acquisitions of the fund
     Allocation Funds
     Investment decisions
     Dividend decisions
     Recording of the transactions
     Preparing of financial statements
     Evaluation of financial performance
     Arranging for internal as well as external audit.

Various sections under finance department:

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This section mainly deals with the purchases. There is inland purchase and imports in the
company. The payment for purchases is made by this section. The purchase department
gives the quotation for goods. When the order is accepted by the company, the purchase
department will send the purchase order to IBS. The material inward slip is received by
IBS from the stores. The IBS also receives the invoices or bills from the suppliers.
        After receiving the Material Inward Slip and invoice, the IBS officer will check
all the bills and verify it and make the payments. The officer will verify the vouchers,
sign and the vouchers are sent to cash section for payment.

Objectives of IBS
      To see the entire material brought in is accounted properly.
      Payment is realized only when the supplier supplies the materials or components.
    To see that the central value added tax, excise duty are accounted properly.

                                     WORK FLOW IN IBS

                                          PURCHASE ORDER

                                    ACCOUNTS DEPARTMENT

         PREPARATION OF                                                       IBS - BILLS
           INWARD SLIP



                                         PREPARE REPORT

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        Outward billing section is also known as Centralized Billing Section. In OBS the
customers deal with making payment to the company. When the customer of HMT wants
the finished product produced by the company, the customer will raise the purchase
order. The company will accept the order given by the customer and prepare a delivery
voucher which includes consignee name, quality, designation of material, spare parts,
price, goods carrier, notes details, parties name and address, PAN no., ECC no., service
tax sales tax etc. will be furnished.
It also deals with sale of machinery, spares, accessories, CNC, foundry, casting,
reconditioning, repairs, maintenance etc. and filing of statutory returns is also undertaken.

OBS Activities
   1. Accounting of customer’s payment towards advances, outward bills balance
   2. Preparation of sales journals and statement at the end of month.
   3. Preparation of ledgers which contains information about deposits, withdrawals
   4. Preparation of invoices along with the delivery voucher and purchase order.
   5. Letter of credit is also made in case of credit sales to the outsiders, when the bank
         guarantees for advance payment, security deposit etc.
         Wage section is the section, which deals with the employee’s benefits and other
activities with regard to company services towards the employees. It is the section, which
helps to keep a better relation between union and management. It deals with any grade
and handles the task of basic pay, DA, HRA etc.
Functions of wages section:
   i.     Time keeping                                vi. pension
   ii.    Salary payment to employee’s        vii. Income tax
   iii. Incentives payment                    viii. LIC
   iv.    Provident Found (PF)                        ix. Advances
   v.     Dearness Allowance (DA)             x. Medical payment
         Cash section is one of the important sections in finance department. This
department handles all cash dealings. It generates funds for the company and utilizing the
funds through proper investment.

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Cash section deals with
    Payments made by cheque are collected and deposited to bank.
    Receipts and payments of cash
    The activities through UCO bank, local UCO branch, Punjab national bank
    Preparation of petty cash book.
Booking section
    It undertakes the issue of cheques towards various payments to suppliers, statutory
    bodies, salaries to PS group. This section operates the bank accounts by the
    authorized joint signature identified by the head office.
Cash Receipts
     Receipt vouchers are received by cash section from OBS in three copies and the
    copy is:
         1. Retained by cash section
         2. Given to the concerned section
         3. Given to the customer
Cash Payments
Payment vouchers are received by cash section from IBS in three copies and the copy is:
         1. Sent to concerned section
         2. Given to supplier
         3. Retained by cash section
Cash section should submit its report on quarterly basis for auditing. Every month end,
the reconciliations are checked in cash section and employee salary is credited to the
employee’s saving bank account under cash section.
       The main function of this section is to consolidate all the activities of other sections
such as IBS, OBS, wages etc and arriving at the trial balance, preparing P&L account and
balance sheet, reports and budgeted statement.
In this section, there are three types of audit done. They are as follows:
   1. Internal audit
   2. Statutory audit
   3. Government audit.

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                       HUMAN RESOURCES DEPARTMENT

       HRM is planning organizing, directing and controlling of the procurement
development, compensation integration and maintenance of people for people for the
purpose of contribution to organization, individual and social goals.
HR needs to be given a strong emphasis, as it is the quality of human factor in his
organization, which determines its effectiveness


    To attract and retain best available young talent in the country in engineering and
       other areas like finance, marketing and personal.

    To maintain effective coordination between HRM and other departments.

    HRM department helps in motivating the employees in attaining individual goals
       and in retune will lead to attain the organizational goals.

    A qualified applicant for specific type of job.

    To ensure the above objectives by eras of a systematic scheme of centralized
       recruitment this will be regular and effective.

    To create a cadre of executive to take up higher assignment and top position of the

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                        Various Departments under HRM

       Training needs area identified of the basis of organizational analysis, job analysis
and manpower analysis. Training programmed, training methods and course content are
to be planned on the basis of training needs.
       The training programmers commonly used in HMT includes both on-the-job
training like apprentice training, job instruction, job rotation and in off the ob method it
includes lecture method, audio visual and programmed.

                        TYPES OF TRAINING IN HMT
   A. In House Training: -This type of training is given in unit level. Unit chief and
      human resource department can assess the training.

   B. Induction Training Programmers: - The training is given to fresher on the basis
      of entry level.

   C. External Training Program: - The training is given to supervisor and executive
      based on the need.

   D. Apprenticeship Training: - As per direction of the government of India and
      apprenticeship act, training is given to graduate apprentice technician trade. After
      training programmer 60% of actual spent during training period.

       The following expenditure will be considers for calculating the compensation to
be paid as contractual obligation. Training allowance include PAN, Adhoc relief, DA,
HRA and CCA, training cost traveling and daily allowance if any paid during the training
period cost of medical treatment infamy.

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       Promotion shall be made in accordance with a new system of channels of
promotion eight such channels have been introduction. These channels are structured on
attendance, performance, appraisal, induction levels. Career paths of the career
experience requires at each level to progress and the growth limits, each channels broadly
these channels, semiskilled skills acquired through Experience, skills acquired with
qualification inputs, technical and administration acumen required for the job.

Welfare department

       HMT provides number of amenities to its employees in addition to meeting the
statutory obligations under various labor organizations.

The Welfare Amenities Include:

       Transport facilities are provided to employees for commuting between residence
and factory and vice versa. Company has fleet of around 8 buses besides vans and cars.

       Canteen is managed by welfare department, provides break fast services before
commencement of shift besides lunch services during hour and coffee/tea/bread at the
work shop of employees with hygienic preparation.

       A self contained township with modern facilities has been provided for the benefit
of employees. There are around 1676 houses of various types for allotment to employees
and allotment is based on seniority and grade eligibility.

       A 200 bed hospital with all modern facilities is established in the township to take
care of the medical needs of employees residing township and surrounding areas. In
addition the company has recognized leading hospitals of Bangalore for availing
impatient treatment for self and family.

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       Company provides uniform cloth to its employees once in two years. In addition a
pair of shoes and socks or chapels is given to male and female employees respectively.

       Company has established a school in the township for the benefit of employee’s
children residing in township and surrounding areas.

        Safety training programs for executives supervisors and works to avoid

        All machinery`s are examined periodically to ensure safe working.

        Six safety committees constituted to discuss safety related problem and to take
           correctives measures for prevention of accidents.


Performance appraisal is a great asset in the development of the human resource in an
organization. It helps assess its managerial strength and weakness.


   1. To know the performance base of the company to the employees, to ensure an
       objective assessment of employees performance and potential on this performance

   2. To establish an objective based on differing levels of performance and to identify
       with potential to grow in the organization.

   3. To counsel the employees appropriately then to realize their full potential in line
       with the complain objectives and goals.

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                            Planning department

Function of planning department

Received order or documents from design departments
Drawings were being observed and study there to choose the material type and to note the
sequence of operation.
Sequence of operation layouts tools of machineries.
Send the approved letter and details to the production department for the production of
Methods Planning
Planning of materials – under this the production planning department plans about the
relative materials which were required to be used in the production department. It also
checks the availability of equipments.
Planning of tools- in this process the planning department take decision regarding the
tools which will be used on the process of production.
Planning of machineries- this is the process of planning where they plan about the
machines required for production purpose.

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                               PURCHASE DEPARTMENT

  The functions of purchase department in HMT are decentralized and each unit is
  responsible for procurement of its requirement based on the approval annual operation
  plans subject to quarterly review based order or market feedback.

  Purchasing Procedure:
  Following is the procedure involved in the purchase of materials.
 Indent                                         GM’s sanction for purchase
 Material purchase requisition                  Placement of order
 Circulation of enquiries                       Confirmation of order
 Requisite of offers                            Follow up
 Comparative statement                          Receipt at stores
 Recommendations for procurement                Preparation of material inward slip
 Proposed for purchase                          Inward inspection
 Financial concurrence

  Functions of purchase department:
       To ensure enquires/ tenders analyses the quotations received and prepare
           comparative statement with a view to obtain competitive prices to HMT.

       To submit application for import clearance and obtain technical license
           whenever applicable.
       To promote the right type of material at the right time.

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                     SALES & MARKETING DEPARTMENTS

       HMT Machine Tools limited, Bangalore has Sales Department with 9
employees working in the department. It does not have a marketing department in the
complex. HMT marketing office is a different department, which is located nearby to
the main complex. Sales department is directly under the GM.

         Heads of Sales Engineering/Sales Execution Sections shall be responsible in
their respective areas. Heads of Sales shall be responsible for the overall activities. Each
individual employee shall be responsible with the scope of resources available to him to
implement and maintain Quality Systems and Quality Policy requirements.

Sectional heads and their subordinates shall have requisite authority to fulfill their
responsibility. Preventive measures for product/process and Quality Systems non-
conformities shall be identified and implemented through designated channels. During
the absence of Head of Sales, the Unit Chief decides as to who shall be in charge of
these functions.
In HMT MBX sales department deals mainly with the following activities:
   1. Sales Engineering
   2. Sales Execution

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Sales Engineering:
       Sales engineering prepares the Annual operation plan (AOP) for Sales based on
the Marketing Forecast/ Past Trend. Sales Engineering plans and controls the activities
such as submission of offer to customer and converts them into orders. On receipt of
order, co-ordinate internally to build machines and to ensure delivery of the machine to the
customer. It has a direct inter phasing activity with Design and Development, machine
Tool Marketing and Customer.
Sales Execution:
       Sales Execution activities start with receipt of order. On receipts of order they
co-ordinate to build Machines / Procure / Manufacture and to ensure delivery of the
machine to customer. It has direct interaction with Design in case of special machine to
customer. It has direct interaction with Design in case of special execution based on
specific customer requirement. Sales Execution also has interred phasing with Machine
Tool Marketing and Customer.
      Purchase Order

      Check list for scrutiny of Purchase Orders

      Special Execution Schedule

      Conversion Note

   Induction of man power
    Competition
    Packaging
    Government policy
    One side approach


       Marketing department of Machine Tool division and Tractor division is headed
by the General Manager and Deputy General Manager respectively and assisted by the
following staff. Sharing the chain of responsibility of the respective departments

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              Marketing Network, Sales & Service Network

                      Marketing Division

                        Regional & Zonal Offices

Marketing Network

      Wide marketing network manned by qualified & trained sales & service
      Service outlet at customer doorsteps in major industrial locations.
      Customer training programs on Mechatronics in addition to regular machine-
       oriented training for machine tools.
      Manufacturing Units supplement customer support for tooled-up and high
       technology machine tools.
      Specialized components, jigs & fixtures to suit customers specific/ special
       application needs

Marketing Division:

      Wide marketing network manned by qualified & trained sales & service
      Service outlet at customer doorsteps in major industrial locations.
      Customer training programs on Mechatronics in addition to regular machine-
       oriented training for machine tools.
      Manufacturing Units supplement customer support for tooled-up and high
       technology machine tools.

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      Specialized components, jigs & fixtures to suit customers’ specific/ special
       application needs.

                           PRODUCTION DEPARTMENT
       Production is the process of converting the raw materials into finished products.
       HMT has been designed & built using modern production engineering
techniques. It has a flow production technique employed all stages to ensure high
quality at low cost. The plant is equipped with special purpose production units, test
equipment and mass production machinery. HMT follows batch production.
       The production department of HMT MBX is very vast. However this
department consists with the production of components, and that is all related to
different machines tools, so it consists with lot of functional heads under the
department. Under this department the divisions that are working.
   HTC division means High Technical Center. As most of operations were done
through computer numerically controlled machines, so it is very well known as the high
technical center. There are 50 employees working under this division. This division
consists of two types of machines, i.e.
   1. Vertical machine
   2. Horizontal machine
Vertical machines function vertically, i.e. all kinds of drilling, milling, shaping, etc is
done through in vertical direction. In HMT there are 3 vertical machining centers are
available in HMT division. These vertical machining centers are produced by HMT for
in house manufacturing. In HMT there are 2 imported vertical machines, named as
Oerlikon Sirius HM4-MCT. These machines are the precision milling systems. These
machines brought from Switzerland.
       The specialties of the machines are they can use Horizontal machines are the
machines, which were doing the operation horizontally. There are 8 vertical machining
centers are available in HMT. There is one imported horizontal machine is also
available, which is imported from England and known as KTM machines. The size of
horizontal machine table is 760 x 760.

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 There are 3 CNC machines, which are available, which are involved in plain milling
on the components. There is another important machine, which has been imported from
Germany called as Wald rich Cobourg. In all these is involved in 9-meter job. These 3
machines were used particularly in big components 3 Wald rich Cobourg machines are
there, out of which 2 were involved in 6-meter job and another one is.
Tool room is nothing but a store house of all kind of tools, which were used during the
milling, grinding, spinning, turning etc, at the of production. The tools normally fitted
to the machines so that it can be able to give a required shape and size to prod
Rounds are the section where the machining of components with round shape is being
done. It may be of 10 to 700 die meters. There are 35 employees working under rounds
division. Basically this section produces the round shaped components. To carry out
there is some different kinds of machines were being used, via;

               Cylindrical grinding
               Internal grinding
               Radial grinding
               Keyway milling
               Scooting machines
               Turret machines

       There are some different machines which were also being used to produce the
components, such as Hinumerik 3100, HMT gildemisies, sinumeric system as well as
there are 4 turning centers, 2 turning centers, 2turninr mill centers etc. these
components were being sent to automobile, defense sectors as well as for in house use
       Non-Round Division is just the opposite of the round division as round division
involved in production of round shape products, as same like that non- rounds division
involved in production of round shape products. There are 16 employees working under
the non-round division.

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       Gear division produces the components, which were used for house production
of 31 machines working together, and to handle all these types of function there are 22
employees were working.
       The capacity of this division is;
   Capacity = 7.5 working hours X number of men X number of days. Planning is
   done through Reichleqknoeler machine, which is imported            from Germany and
   Hydraulic machine, which is imported from USA. There are 2 planning machines,
   as well as there are 6 milling, 3 drilling and 2 surface grinding machines.

       HMT’S Die casting machines carters to wide range of applications. From simple
components to high precision industrial components, these machines take care of most
die casting needs. HMT offers a range of nine models with locking forces ranging from
80 to 1100 tones to cover a wide range of pressure die casting of aluminum and zinc
components built to high standards, these machines are subject to stringent performance
testing using advanced testing devices to ensure productivity and reliability.

Salient features
               Machines include digital setting of die closing / opening and ejector
               Flying piston type accumulator
               Individually adjustable speeds and pressures
               Large adjustable opening stroke and programmed logic control.
This division produces two kinds of machines;
               Die casting machines
               Injection molding machines
     The Die-casting and injection moldings machines are mostly used by automobiles
industry, which includes two wheeler and four wheelers, electrical engineering, home
     The injection moldings machines were used in some industries where they
produces the speedometer, dash boards used in automobile, home appliances, electric
plugs and pins.
The machines, which were used, for production of die casting and injection
moldings machines are
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          Radial drilling (360 movement)
          Boring machines (3 meters)
          Turning machines (internal threading)
       After all the functional activities of the die casting and injection molding
machine, they were assembled together as a group assembly, parts assembly, and then
the final i.e., the complete machines is being manufactured. In this department there
were 150 employees were working.
       Spindle division involved with the production of different types of spindles. In
this division there are 19 workmen and 4 staffs were heading this unit.
       There are different kind of machineries involved such as, turning, milling mills,
keyway milling, thread milling, drilling, cylindrical grinding, internal grinding, spine
grinding, centre grinding, CNC turning etc.

       Assembly selection involved with the assembly of different parts and
components, so that it can build a complete machine. In this section the machine tool
parts were being assembled together to give a complete shape to product or machine. In
this division there were almost 100 employees were working.
Assembly is the last function for producing a product, so it consist a lot procedures and
operations. Due to this a large amount of manpower is required. The painting work of
machines is also done here, but it also having a separate department. After the assembly
of components, they were put together and fitted and being inspected. However, this is
about the assembly division.


       HMT’s Ball screw division is the first to indigenize production of precision ball
screws. This unit was started on 1989 with collaboration with Zees, Germany. Ball
screws are used in machine tools to convert rotary motion to linear motion and vice
versa. Ball screw is a machine tool component for translating rotary motion to linear
movement used for present day CNC machine tools.

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        Ball screws are high value added machine tool components with good marketing
and value addition is as high as 89%. Present capacity of machine tool HMT, ball screw
division is around 6% as per ball screws marketing requirement.

        All over there were nearly 90 customers are dealing with this ball screw, such
as: ACE, L&T, TISCO, TELCO, BEL, BML, BHEL, CNC India, HAL, Godrej,
Kirloskar, Tata motors, Mahindra, Wipro, Rail Factory, Mitsubishi, Rifle Factory.
        To produce these components there are different kinds of machine are available
which were used in this division are keyway milling, gear cutting, radial drilling, CNC
thread milling, straightening machine, internal grinding, surface grinding, vertical
drilling, heat treatment machines, cylindrical grinding machines, thread grinding
machine, CNC milling machine etc.

        Foundry is the place where they put the raw materials or scarp into the Furnace
and according the frames size they produce the components. There may be of big or
small size. These components are normally of heavy parts. There will be 1400 degree
Celsius, it is the largest foundry in south Asia and it has the capacity to molt 5.5 tons,
and silicon sand brought from the Godavari river basin from AP.
        Cooling period 36 hours in 20 degree Celsius. The wage grade people were
working in this division. In foundry the first procedure is to make the frame of a
product by which they can produce the required component. After the production of the
component they cut it on to different sizes and then send it to the shop floor for further

        Inspection is one of the important activities, which is done at the time of
production of a particular component and at the final production of a machine. The
inspection is done after each and every process of a product, so that no error can arise in
later period.
Things used for inspection purpose
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       Micrometer                                          Extension depth gauge

       Verifier

        Maintenance section is very important as for as plant is concerned. The
maintenance is varied from machines to machines because all machines were having
different features and different functional qualities.
Process of maintenance
   Putting the machine into operation

   Refreshing the axis

   Manual operations

   Job operations

   Traverse in increments

   Traversing to machine home position

    Maintenance of CNC is done by considering all the factors such as general, voltage
stabilizers, CNC systems, switches, electrical cabinet, drives, AC servo motors, F/B
devices etc. these all services were done on every quarterly, monthly or yearly. The
preventive maintenance may be of daily, 200 hours, 500 hours, 1000 hours, 2000 hours,
4000 hours, 800 hours it is also done for electrical also. Safety precautions are on general
and housekeeping, operation and services and maintenance.
    The products manufactured in this unit are:
        a) Gear manufacturing machines(Gear hobblers)
        b) Redial drilling machines and column drilling machines
        c) Fine boring machines
        d) Heavy duty lathes
        e) Grinding machine
        f) Turn mill centre(CNC)
        g) Single and multiple spindle automatics
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       h) Chuck metric machines
       i) Ball screws
       j) Special purpose machines
       k) Drill tap centre

Manufacturing facilities:
    Experienced design and latest facilities
    Up-to-date tool room and inspection facilities
    Machine shop to manufacture small and heavy components
    Facilities for assembly and retrofitting of heavy machine tools
    Heat treatment facilities
    Foundry with facilities to produce heavy, medium and small castings of both
       ferrous and non-ferrous alloys with facilities like pattern shop, fettling shop and
       metallurgical laboratory
    Material testing laboratory
As any other organization, basic skills should be present with all the employees like
communication, decision making, leadership etc... Training is one of the most important
activities in MTB which is not given to the employees but also to the students and the
customers. Training period varies in accordance with the degree the candidate is having.
Here, it is assumed that the candidate is updated with the theoretical aspects. The training
centre at Jalahalli trains different kinds of trainee in varying capacities. It is well equipped
with highly technical machines.

Training is given at various levels of grades:
GRADE: 1 ITI Machines operator (fitter, turner, grinding, mechanist, electrical)
GRADE: 2 Diploma holders (eligible for promotion at officer grade)
GRADE: 3 Management candidates for officer grade.

Company is following top down hierarchy. In administrative matter the company is
following Top- down hierarchy. The participative management is the managerial style of
HMT; participative management is a pre- requisite for the industrial democracy.

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    SYNERGY from participation
    The improved communication of the organization activities amongst level of the
    The real participation by casting aside the collective bargaining and the interest-
       related issues.
    Optimum level of production and improved productivity
    The general awareness about the cost-control and its effective practice.
    The industrial democracy with a participative managerial style of functioning.
    The improved optimum utilization of the 4M’s i.e., Man, Money, Machinery and
    Improvement in qualitative and quantitative results.


       In order to effectively compete in an increasingly open market, where each
manufacturer of machine tools specializes in a particular family of machines, the company
has developed a comprehensive business strategy which aims at profitably growth of the
company’s market share in key growth segments and to maintain its leadership position in
the Indian machine tools industry, the company intends to pursue continued growth over
the medium term by:
    Integration production and increasing productivity through efficient use of existing
    Cost reduction measures.
    Increased research and development.
    Exploiting its large domestic sales and support network to increase market share.

System followed by any one department is as follow:

                          Mother Theresa Institute of Management
Inventory management

The important component of working capital in inventory; inventory refers to the stock of
goods yet to be sold by business firm. It is desired as the stock of goods a firm is offering
for sale and components that make up the goods. In other words, inventory includes raw
materials, working progress and finished goods.


    To provide continuous supply of raw materials for production
    To reduce the wastage and to avoid loss of breakage and deterioration
    To meet the demand for goods of ultimate consumers on time
    To provide right materials at right time and at right place
    To avoid excess and inadequate storing of materials


Punishment for misconduct:

Punishment may be imposed by the disciplinary authority based on the gravity of the

Major punishments:

      Withholding of increment with or without cumulative effect for more than 6
      Reduction to a lower grade or post to lower stage in the same grade (pay scale)
      Dismissal from service.

Standing orders:

All factories of HMT have independent standing orders framed and certified under the

industrial employment act. A company level committee is working on the finalization of

common standing orders applicable to all the units of the company.

Shared value:

     To be a leading GLOBAL ENGINEERING CONGLOMERATE focused on
        CUSTOMER DELIGHT in our fields of Endeavour.
     To maintain quality leadership in all over products and services.
     Total customer satisfaction through quality goods and services.
     Commitment of management of quality.
                           Mother Theresa Institute of Management
Inventory management

     To create a culture amongst all employees towards total quality concepts.
     Total quality through performance leadership.



    Well established R & D team sufficiently experience Development of precision and
      high technology CNC products, sub systems etc…
    Well established manufacturing auxiliary facility like captive, foundry, tool room,
      high technology machine tools, heat treatment etc...
    HMT Machine Tools has good quality image in India and abroad.
    Business-oriented progressive management, receptive to new ideas and
    Proven experience in offering component oriented special purpose machine and
      metal forming presses built to international standards.
    Good Brand Image. First reputed Machine Tool in India.


    Due to wide product range, limited CNC products, low market potential and
     conventional machine tools.
    Delay in implementing new systems.

    Delay in commercialization of new products and low priority for product up
    Facilities are inadequate for pre/after sales services, delay in deliveries.
    Surplus manpower in some divisions.
    It is facing financial crisis and has been incurring losses since 1993.
    Wide gap in communication.
    Immediate planning and execution id not carried out.

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Inventory management


    Bulk requirement of machine tools like high speed/ automated processes, forgoing

      lines for defense production.

    Increased export requirement for HMT’s range of metal cutting and metal forming

      tools in countries like Africa and high technology CNC machines by advanced

      countries like USA.

    Renovation and up gradation of machine tools.

    Availability of bank financing.


    Increased competition for general purpose machine and special purpose machine

      even from small/ medium scale manufacture.

    Govt. policies on liberalization will intensify competition with new entrants into the


    Increased input cost, power shortage etc... Resulting in erosion of profitability.

    Direct marketing by foreign machine tool manufacturers in India through their own

      selling set-ups.

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                               LEARNING EXPERIENCE

        As this is HMT Machine tools limited. It operates on a systematized shift
arrangement from morning to evening. But the real practical knowledge for the student is
only through corporate exposure. In plant training gives this opportunity to the student to
expose himself to the working of the company and helps him to be prepared for his second
        I have done summer project at HMT Machine Tools Ltd. The learning experience
which we had in HMT Machine Tools Ltd was a wonderful experience. I came to know
how the theoretical information was learnt in the classes had to be implemented in practice
in plant training. But it was a good learning experience for us to understand various
departments and their style of functioning.

        It was the time for me to explore my knowledge and go much deeper into the
subject. It was a first time experience for me to work in an organization culture where I
interacted with different types of people.

        During our in plant training, I was able to study various aspects of the organization
practically. I acquired the knowledge of various procedures adopted by the company. I was
able to understand the classification of various departments and the duties and
responsibilities of each department. The company has different departments such as
Marketing, Finance, Human resources, Commercial and product and service etc… the
communication in the company is through paper.

        I could learn how to behave in an organizational environment, i.e., while interacting
with the colleagues and other people.
        I came to know how the organization structures, its flow of authority and delegation
of responsibility reflects the efficieny and productivity of the firm, the organization flow
chart gives a clear picture and understanding about the functioning of a company.

                            Mother Theresa Institute of Management
Inventory management


       Every enterprise needs inventory for smooth running of its activities. It serves as a
link between production-distribution processes. There is generally, a time lag between the
recognition of a need and its fulfillment. The greater the time lag, the higher recruitments
for inventory. The unforeseen fluctuation in demand and supply of goods also necessitate
the need for inventory. It also provides a cushion for future for fluctuations.
       The investments in inventories constitute the most significant part of current
assets/working capital in most of the undertakings. Thus, it’s very essentials to have proper
control and management of inventories. The purpose of inventory management is to ensure
availability of material in sufficient quantity as and when required and also to minimize
investment in inventories.
       Prior to declaration to new economic policy, the Indian firms used to follow
traditional inventory methods such as – annual stocktaking and perceptual inventors
control. Through these methods served limited purposes even now we find many corporate
houses follow these methods because they are simply and can be easily implemented.
       However during post liberalization era, the companies were compelled to change
their methods of inventory management because of QCD constraints, hence we find them
using new methods of inventory control and management in order to complete the
challenges of global competition.
       No business can exists without carrying inventory, whether it is a local grocery
store, a hotel, a hospital, a manufacturing organization or whatever. The main function
inventory holding is that it uncouples supply from demand thereby making capacity
planning, communication and organization of resources more efficient.
       Inventory constitutes the most significant part of any company’s current assets;
they constitute approximately 60% of the current assets in public limited companies.
Because of the large size of inventories maintained by firms, a considerable amount of
funds is required to maintain them. It is, therefore absolutely imperative to manage
inventories efficiently and effectively in order to avoid unnecessary investment.

                             Mother Theresa Institute of Management
Inventory management


The various forms in which inventories exists in a manufacturing company are:

    Raw materials are those basis inputs that are converted into finished products
       through the manufacturing process. They are purchased and stored for future
    Work – in – process inventories are semi-finished manufacturing products.
    Finished goods inventories are those completely manufactured products, which are
       ready for sale. Stocks of finished goods facilitate smooth marketing operations.
       Thus inventories serve as a link between the production and consumption of goods.


       The question of managing inventories arises when the company holds inventories.
A company should maintain adequate inventory of materials for a continuous supply to the
factory to ensure an uninterrupted production. Maintaining inventories involves tying up of
the company’s funds and storage and handling costs. If it is expensive to maintain
inventories then question arises why companies maintain inventories.
There are three general motives:
      Transaction motive emphasizes the need to maintain inventories to facilitate
       smooth production and sales operations
      Precautionary motive necessitates holding of inventories to guard against the risk of
       unpredictable changes in demand and supply forces and other factors
      Speculative motive influences the decision to increase or reduce inventory level to
       take advantage of price fluctuations.
   Inventory management covers a large number of issues including fixation of minimum
levels, determining the size of issues including fixation of minimum levels, determining
the size of inventory to be carried, deciding about the issue price policy, setting up receipt
storage facility, keeping cheek on obsolescence and setting up effective information system
with regard to the inventories. However, a management inventory involves two basic

                            Mother Theresa Institute of Management
Inventory management

      Maintaining a sufficiently large size of inventory for effective and smooth
       production and sale operation.
      Maintaining and minimum investment in inventory to minimize the direct indirect
       costs, associated with holding inventory to maximize the profit ability.


       Inventory should neither be excessive nor inadequate. If inventories were kept at a
high level, higher interest and storage costs would be incurved. On the other hand, a level
of inventories may result in under utilization of capacity and lower sales. The objective of
inventory management is therefore to determine and maintain optimum level of investment
in inventories, which help in achieving the following objectives.
   a. Ensuring a continuous supply of materials and fuels to depots facilitating
       uninterrupted services.
   b. Maintaining sufficient stock of raw materials in period’s of short supply.
   c. Minimizing the carrying cost.
   d. Keeping investment in inventories at the optimal level.
       Inventory control is a critical aspect of successful management. The necessity of
effective inventory management is being increasingly realized in industrial and non-
industrial organization both in India and abroad. This realization has come about because
of increasing complexity of the task of managers and administrators. Because of high cost
involved in inventories, their proper management and control assume considerable
importance. In fact, the management of inventory is given such an importance, that, it is
often treated synonymous with material management.
       Effective inventory management can contribute a lot to the productivity and
profitability of the company. There are number of areas in which cost leaks exist and one
such major one is the area of materials i.e. inventory. A nationwide study of this area
reveals that a manufacturing firm on an average loses more than 1% of its profit on account
of non-availability of materials in spite of high inventory investment.
       Inventory management involves the development and administration of policies,
systems and procedures, which will minimize total costs relative to inventory decisions and
related functions such as customer service requirements, production scheduling,
purchasing. Inventory management is broad in scope and affects a great number of
activities in a company’s organization. It relates to inventory policies and overall systems.

                           Mother Theresa Institute of Management
Inventory management

       To ensure qualitative and efficient work of the company, inventory policy,
purchase policy, materials management policy and quality assurance policy, the entire
function has to been divided into various sub-functions like material management,
purchase, stores and accounts department.

                                DESIGN OF THE STUDY


       A study on “INVENTORY MANAGEMENT” with reference to “HMT

Statement of the problem

       Recent studies have shown that in many manufacturing companies the inventory
investment can range from 20 to 35% of its total investment capital. Inventory
management must have as its aim the reduction and control of that investment in inventory.
       The company’s operating efficiency is well understood with effective management
of inventory. This is essential because never too much capital has to be invested on idle
stock of inventory and at the same time the organization should not run with shortage of
materials. Hence, the inventory management, which includes right purchase of materials,
storing, pricing, controlling, etc. is very significant. The over all profitability position of
the company is much dependent upon the inventory management.

       In this study an attempt is made to understand the inventory management of HMT
Machine Tools Limited, which is one of the market-leading participants in the machine
tools. An attempt is also made to ascertain drawbacks if any, in the inventory management
and to suggest suitable remedies for the same.

                            Mother Theresa Institute of Management
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                           RESEARCH METHODOLOGY


       The methodology involves collection of data from primary and secondary sources.
The data so collected id subjected to analysis using the necessary tools that are relevant.
Inference is drawn incorporating both quantitative and qualitative data available at the
research disposal. Based on inferences, conclusions are drawn and recommendations are
made to enhance the study on inventory management of HMT machine Tools Limited,
Bangalore complex. The relevant to the study was collected through both primary and
secondary data.

Primary Data

       It is nothing but discussion with higher authorizes and various managers regarding
the procedures of receiving and issuing to stock and other functions performed by them in
the organization and personal visits to the stores department. An interview schedule also
helped in the collection of data.

Secondary Data

       Secondary data was collected from magazine, journals, HMT official website,
records of the company and annual reports.

Reference period:

        The reference period is for five years, i.e., 2005-06 to 2009-10. For clear and
detailed picture of the study, five-year information is necessary.

                           Mother Theresa Institute of Management
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    To know the overall effectiveness of inventory management in HMT Ltd.
    To study the methods of inventory control in HMT-MBX.
    To study the materials stored.
    To know how the procurement of material is done.
    To study the inventory valuation in HMT-MBX.
    To suggest a remedial measure for better decision making by the organization.


                                 Financial statements are prepared for the purpose of
presenting a periodical review of report by the management in business and result achieved
during the period under review. It reflects a combination of recorded facts accounting
conventions and personal judgments.

       Financial analysis helps in assessing the financial position and profitability of the

                          Mother Theresa Institute of Management
Inventory management


        A study was conducted in “HMT-MBX Ltd” to analyze the above-mentioned
functions in brief and inventory control in detail. Maintaining optimum level of inventory
is the difficult task for the organization. Is to be maintained in such a way that neither
excessive nor in sufficient. Excessive investment on inventory leads to blocking of funds,
shortage of inventory effect production process this study highlights problem in
maintaining of optimum level of inventory.

Limitations of the study

     Inventory is more involved in the data financial performance of the company
      however all relevance financial area could not be made available to the researcher.
      This to some extent would limit the conclusions arrived at by the research.
     Time was major constraint so research study could not be made in depth.
     The confidentially of some facts and figures.
     The constraints limit is the scope of the study.
     A detailed analysis of all items was not possible.

                           Mother Theresa Institute of Management
Inventory management

                             REVIEW OF LITURATUER


        Inventory control techniques are mainly followed by control organizations within
the frame work of one of the basic inventory models like

           1. Fixed order quantity system or 'Q’ system
           2. Fixed order period system ‘P’ system
       These techniques represent the operational aspect of inventory management and
help realize the objectives of inventory control and inventory management. Several
techniques are there which is used according to convenience of the technique
               What should be stressed however is the need to cover all the items of
inventory and all stages that means from the point of receipt from supplier to the point of

The techniques in inventory control are as following

   1. ABC(always better control)classification
   2. HML(High, Medium, Low)classification
   3. VED (Vital, Essential, Desirable, Easy) technique.
   4. SDE (Scarcsem, Desirable, Easy) technique.
   5. FSN (fast, Medium, Non-moving) technique.
   6. EOQ (Economic Order Quantity) analysis.
   7. Maximum and Minimum system
   8. Two-bin system.
   9. JIT (just-in-time) technique
   10. MRP (Materials Requirements Planning).

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1. There should be proper cooperation and coordination between various departments
   viz., purchasing inspection, storage costs department etc.
2. Purchasing of stocks or other materials should be centralized under the control of a
   competent manager.
3. There must be adequate planning of materials requirements and also the classification
   of materials with their appropriate codes.
4. There should be effective planning control on stock in terms of physical storage
   through satisfaction control procedures.
5. The storing of materials and issuing also should be planned properly so that there will
   be delivery of materials upon requisition to departments in the right time they are
6. Accurate records should be maintained so that the issues and utilization of stocks in
   production can be controlled.
7. Maximum minimum and reorder levels of stocks should be fixed
8. There must be a system of regular reporting regarding purchasing of materials, issuing
   and storage to the management.
9. The system of internal audit and internal check and maintenance must be very effective
   and efficient.

   The formula for computing maximum level is

   Maximum level = reorder level + reorder quantity – (minimum consumption *
   minimum reorder period)

Minimum level

        In this system when the inventory items reaches to a predetermined minimum level
it is replenished by the fresh purchases up to the predetermined maximum level the
minimum level serves as a reordering point. The fresh order is placed for that much
quantity which shows deficiency in maximum level. This level is fixed by considering the
following factors.

                          Mother Theresa Institute of Management
Inventory management

     Rate of consumption
     The time required under top priority conditions to acquire enough supplies to avoid
      a stoppage in production.

The formula for computing minimum level is

Minimum level = reorder level – (normal consumption * normal reorder period)

Reorder level
        The prescription of reorder level (ROL) is an important technique of inventory
management. It fundamentally deals with “when to order “ to replenish the inventories
reorder level is predetermined point and when the existing stock of inventories reaches this
point or falls below it the purchase action is initiated to replenish them.
        The reorder level is decided for each important item of inventory on the basis of
following considerations

     Lead time
     Average periodic consumption (daily consumption )
     Safety stock
Re-order level is decided as under

        ROL = (lead time * average daily consumption) + safety stock

Economic order quantity
        EOQ is an important technique of inventory management. EOQ prescribes the
order at which the ordering cost and the inventory carrying cost will be the minimum.
Reorder quantity is some times known as economic order quantity (EOQ) because it is the
quantity which is most economic to order. In other words, EOQ is the size of the order.
        This give maximum economy in purchase of any material and ultimately
contributes towards maintaining the materials at an optimum level and at the minimum
cost. It equates the cost of ordering with the cost of ordering with the cost of storing

Ordering cost
         It consists of the cost of paper work for placing an order like use of paper, typing
posting filling etc., the cost of the staff involved in this work in the costs incidental to order
like follow-up inspection etc., ordering costs includes
    1. Cost of placing an order with a vendor of materials

             Preparing a purchase order

             Processing payments

             Start =-up scarp generated the material

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   2. Ordering from the plant

            Machine setup

            Start-up scarp generated from getting a production run started.

Ordering cost is ascertained as under

           Annual requirement (R)                     *cost per order
O.C =
                Order size

Carrying cost

        Costs incurred for maintaining a given level of inventory are called carrying cost.
They include the cost of store keeping (stationery, salaries rent, material, handling cost
etc.,) interest on capital locked up in stores, the incidence of insurance cost, risl of
obsolescence, determined and wastage of materials, evaporation etc

    Interest cost due to locking up of funds

    Cost of storage space

Total carrying cost is ascertained as under

T.C.C = average inventory * per unit carrying cost

Economic order quantity is ascertained as under

E.O.Q =              2   X Quantity required          * ordering          cost
                                 Carrying             cost

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       Effective inventory management requires an effective control for inventories.
Excess inventory holding leads to excessive carrying cost on account of interest of interest,
storage and handling changes, insurance, record keeping, inspection and the risk of
deterioration in quality and thus adversely affects the profitability of the organization.
Even through the optimum level of inventory varies from industry to industry, it is
generally considered that the value of inventory as a percentage of annual consumption
may not exceed 33 percent and the value of finished goods to net sales may be about one
month’s sales. Managing inventory levels in an ongoing balance between the costs of
carrying extra inventory, versus the revenue losses incurred by not having enough
inventories available. A proper inventory control not helps in solving the acute problem of
liquidity but also increases profits and causes substantial reduction in the working capital
of the concern. The following are the important tools and techniques of inventory
management and control.

A.B.C. ANALYSIS :( Always better control)

An ABC analysis offers an important solution to be problem of a scientific planning and
control of inventories and is on important technique of inventory management. It is based
up on the value of different items constituting inventory. It may be concerned with several
items, raw materials, factory and office supplies, machine tools and handling equipments.
The idea underlying on ABC analysis is in recognition of the principle that some items of
inventory are more important than other. The ABC techniques enables the enterprise to
keep its investment low avoid stock out of critical items. Its objective is to reduce the
minimum stock as well as the working stock. ABC analysis underlines a very important
principal “Vital few trivial many” statistics reveal that just a handful of times account for
bulk of the annual expenditure on materials. These few items called “A” items are
numerous in numbers, and their contribution is less significant.ABC analysis trends to
segregate all items into categories, A, B and C based on their annual usage. The
categorization so made enable us to pay the right amount of attention and minimum of
effort and expenditures.

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A.B.C classification:
The following steps have been undertaken to implement ABC analysis.

      The price per unit for each purchased item is obtained.
      The total consumption value is determined by multiplying consumption quantity
         by its unit price.
        The consumption value is arrived by the above calculations for each of the items.
        The items are ranked in accordance with the total consumption value, giving first
         rank to the item with highest total value. The items are arranged in the order of
         decreasing annual consumption value.
        The ratio of total value of all items is determined.
        The list of value is divided into three groups, namely, A-high value, B-medium
         value, and C-low value. In making that division, a graph with y-axis as
         “cumulative percentage of value of inventory”, and x-axis as “percentage of
         inventory items” can be used.

F.S.N Classification:
        This classification is based on the pattern of issues from stores and is useful in
controlling obsolescence. To carry out FSN analysis, the data of receipt or the last date of
issue, whichever is later, is taken to determine the number of months, which have lapsed
since the last transaction, the items are usually grouped in period of 12 month. It is found
that many companies maintain huge stocks of non-moving items.

    If the item is ordered in all 0-12 months, the item is classified as fast-moving.
    If the item is ordered in all 12-60 months, the item is classified as slow-moving.
    If the item is ordered in all above 60 months, the item is classified as Non-moving.

In HMT Ltd, inventories that are lying in stores for more than 5 years are considered as
non-moving items. To verify the items, stock verification has to be done by the stores
department and result must be given to the inventory control department for reconciliation.

       Just in time inventory system as its name suggest, it is inventory of raw materials,
work in progress and finished goods are received in time. In order words raw materials are

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received just in time to go into production and products are complete “Just in Time” to be
shipped to customers.

                        ANALYSIS AND INTERPRETATION


           Inventory turnover or stock turnover ratio is the indicates the number of times
   the stock is turnover (i.e., sold) during the year. In other words, it is relation between
   the stock and cost of goods sold. This ratio indicates whether investments in inventory
   are efficiently used or not.
              A high inventory turnover ratio indicates brisk sales. The ratio is a measure
   to discover the possible trouble in form of over stocking or over valuation. A low
   inventory turnover ratio results in blocking of funds in inventory, which may ultimately
   result in losses due to inventory becoming absolute, or deteriorating in quality.

           The ratio is expressed as: = Annual sales /Average stock of Inventory

  Year       Annual         Average             ITR
           sales (Rs)       stock of

  2006    562190859          273911999          2.05
  2007    711049820          331128862          2.15
  2008    749145908          352167951          2.13
  2009    480030182          341860689           1.4

  2010    519415843          3.362E+09           1.5
  2011    517609558          249868315           2.1

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           From the table it is clear that inventory ratio had increased in 2006 and 2007 i.e.
   2.05 and 2.15 respectively, but slightly decreased by 0.02in 2008, 0.73 in 2009 and
   1.25 in 2010 when compared to 2009(i.e.1.4 and 0.15 in the year 2009&10

                           Inventory Turnover Ratio

             2.5                  2.15        2.13
             0.5                                                      0.15
                    2006          2007        2008        2009        2010



       From the above graph, it is Cleary shows that the inventory turnover ratio
fluctuating year over year. Inventory turnover ratio has a declining trend from 2007 which
indicates that inventory utilized efficiently without blocking of inventors in stock and
making them obsolete.

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2. Raw Material turnover ratio:

       Raw Material turnover ratio shows the ratio of turnover of inventory based raw
material consumed and average inventory. Raw material is those basic inputs that are
converted into finished product through the production process. Raw material inventories
are those units which have been purchased are stored for future productions. This ratio
shows the number of times the raw materials were replaced during a fiscal year.

The ratio is expressed as:

       Annual consumption of raw materials / average raw materials

      year                Material            Average stock of raw      RMTR
                       consumed(Rs)              material(Rs)
      2006               202988988                 54740677               3.7
      2007               258354512                 72275937              3.57
      2008               232768231                 91777764              2.53
      2009               232793494                 99709297              2.33
      2010               201583439                 88760886              2.27

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           From the above table it is clear that raw material was lying in the inventory for a
long time when we see the ratio in the year 2006 to 2007.But it has slightly come down
2008 i.e. 2.53, next year also it was low at 2.33 and 2010 also low at 2.27.

                    Raw Material turnover ratio

                       3.7       3.57

              3                                 2.53
                                                        2.33      2.27



                     2006      2007         2008       2009     2010



           From the above graph, raw material ratio has shown a decline in previous two year
giving a good sign of effective use of raw materials for the production process.

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3. Work in Progress turnover ratio

       Work in progress goods are those which are in the process of production in the
manufacturing unit. They are also called as semi finished goods.
The ratio is expressed as:

        Cost of completed works / average working progress

      year            Cost completed         Average stock of WIP     WIPTR
                       works (Rs)                    (Rs)
      2006              459700000                       159175871      2.88
      2007              644100000                       184395990      3.49
      2008              629600000                       178705152      3.52
      2009              510300000                       155556797      3.28
      2010              472800000                      3013832592       1.7

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          From the above table, in the year 2006 the WIPTR was 2.888 but in the year 2007
and 2008 It has increased to 3.493 and 3.523 respectively. Previous year the ratio 1.7.

                        work in progress ratio

             4                 3.493       3.523



                    2006       2007       2008      2009       2010



          From the above graph it is clear that work in progress ratio has declined in previous
year but it is high when compared to 2006.also this ratio was in the year 2007 and 2008.

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4. Finished goods turnover ratio:
        Finished goods are those which are read for delivery to the customers, but lying in
the inventory due to some delay of sales. This ratio indicates the average finished goods
turnover in one fiscal year.

It is expressed as:

        Cost of goods sold / average finished goods inventory.

      year              Cost of goods             Average stock of       FGTR
                          sold(Rs)                 finished goods
      2006               355433001                    61743602            5.76
      2007               217902752                    86397708            2.52
      2008               510209350                   103720829            4.92
      2009               391747173                    97118808            4.03
      2010               475825957                   951288185            0.50

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       From the above table the FGTR is changing. In the year 2006 it was 2.73, increased
to 5.76 in 2007 and decreased tremendously to 2.63 in 2007 again FGTR was increased to
5.73 in the year 2009 while in previous year it was low to 1.61.

                      Finished Goods Turnover Ratio
             3            2.52
             1                                          0.5
                   2006     2007      2008     2009      2010


       From the above graph it shows that this ratio, throughout the period of study
showed fluctuating trend, which shows that finished goods are deign in the inventory
depending on sales.

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5. Inventory to working capital ratio:
           Inventory to working capital is the liquidity ratio, which helps to measure the short
term solvency of the company. This ratio indicates that the proposition of the working
capital tied up in the inventories. As we know that inventory is a current asset and
component of working capital, this ratio shows the percentage of inventory in working

The ratio is expressed as:
           Inventory / working capital

      years               Inventory(Rs)         Working capital (Rs)        I TO WCR
      2006                  255923194                    118264769                2.16
      2007                  406334134                    184880590                2.19
      2008                  298001371                    102606769                 2.9
      2009                  385720007                    159119142                2.42
      2010                  286754600                     87208510                3.29

                              Mother Theresa Institute of Management
Inventory management


          From the above table it is clear the inventory plays a vital role in WC. It is
increasing the year 2006 to 2010 respectively.

                                       Inventory to WC Ratio

              4                                                3.28
              3                2.19                2.42

                    2006     2007      2008      2009       2010



          From the above graph it can be observed that inventory carries steep ratio in last
few years when compared to 2006 figures giving a positive indication of inventory.

                             Mother Theresa Institute of Management
Inventory management

6. Inventory holding period:

       Inventory holding period should be minimum. Number a day for which inventory is
holding is calculated by the following formula.
       Inventory holding period = inventory / annual sales * 365 days

      year            Inventory(Rs)           Annual sales (Rs)     IHP(Days)
      2006              255923194               562190859              166
      2007              406334134               711049820              208
      2008              298001371               749145908              145
      2009              385720007               480030182              293
      2010              286754600               519415843              202

                           Mother Theresa Institute of Management
Inventory management


          From the above table it is clear that IHP was more in the year 2007, 2009,2010
i.e. 208, 293 and 202.but we see that in the year 2006 and 2008 IHP was less.

                             Inventory holding period
                      250               208                          202
                      200    166
       IHP (InDays)

                            2006      2007       2008     2009      2010



          As we know that IHP should be minimum. Here in the above graph it shows that
HMT Machine tools ltd is holding inventories for longer period in the previous year. This
is due to decline in sales and other reason like change in design, order being cancelled etc.

                                   Mother Theresa Institute of Management
Inventory management



   ABC classification is based on value

       10% in number and 70% by value classified as CLASS A.
       10% in number and 20% by value classified as CLASS B.
       80% in number and 10% by value classified as CLASS C.
In HMT Machine Tools Limited ABC classification of items is as follows:

       A Class Items: Consumption value more than and above. Example, etc
       B Class Items: Consumption value more than but less than. Example, etc
       C Class Items: Consumption value less than Rs... Example, bolts, nuts, etc

Polices adopted by ‘A’ class items:
    ‘A’ class items account for bulk of the annual usage value, hence it is required for
       at most attention of senior level in administration and is responsible for regular
       reviewing of these items.
    The inventory control department maintains up-to-date and accurate records: It will
       be sent more frequently to the top management.
    The inventory is at minimum level.
    The purchase department maintains better vendor relations confiding with VRM
       (Vendor Relation Management).
    The concept of first in and first out is adopted.

Polices adopted by ‘B’ class items:
    The policies for these items are intermediate between ‘A’ and ‘C’ items.
    These items are ordered more frequently than ‘A’ class items.
    Stock and issue cards are maintained.

Polices adopted by ‘C’ class items:

                          Mother Theresa Institute of Management
Inventory management

        Since the items are too much value is less, the policies are aimed at reducing the
          ordering and stock keeping work to an extent possible and ensuring the
          availability at all times by stocking liberal quantities.
       Liberal quantities are kept in stock, since it does not involve much capital tie up.
       Bulk purchase is done to take advantage of quantity discounts.
       For ordering these items, a combination of review period system and 2-bit system is

                                      ABC ANALYSIS
 Type      Quantity       Rate      Inventory   Ranking  Percentage             Cumulative
                                    Value (Rs)
  1               95       8069         766562 51504825      0.4600                  0.4600
  2             8508       6054      51504825 23733679       0.2119                  0.6719
  3             1931       3683       7111949 13241796       0.1182                  0.7901
  4               98       2443         239433   8226838     0.0734                  0.8635
  5              173       7804       1350016    7111949     0.0635                  0.9270
  6             1791      13252      23733679    3135454     0.0280                  0.9550
  7              355       6525       2316198    2316198     0.0206                  0.9756
  8              361      34188      12341796    1350016     0.0120                  0.9876
  9                9      25820         232377    993269     0.0088                  0.9964
  10             128      24496       3135454     766562     0.0035                  0.9999
  11             626      13142       8226838     239433     0.0021                  1.0020
  12              42      23649         993269    232377     0.0020                  1.0040

                           Mother Theresa Institute of Management
Inventory management


          In this analysis, the quantity and rates of consumption is to be analyzed and is
   to classify the items fast moving (F), slow moving(S) and non moving (N) items. Fast
   and slow moving classification held in arrangements of stock in the stores and in
   deciding the distribution handling methods. It is found that many companies maintain
   huge stocks of non-moving items.

   Fast and Slow Moving Inventory Table:

                            Inventory summary as on 31-mar-2010

Type              Description                  Total-inventory          00-12- fast
                                              Count      Value       Count    Value
 13    Accessories                              626      8226838       127   1564821
 12    Auxiliary materials                      128      3135454        56   1823102
 07    Electrical parts                        1791     23733679       690   7826120
 04    Electrical spares                         98       239433         5      39757
 14    Foundry materials                         42       993269        39     964980
 08    Non-ferrous castings                     355      2316198        35     611030
 09    Production steels                        361     12341769       168   8962899
 01    Shop stores                               95       766562        50     548901
 02    Standard parts                          8508     51504825      3067 20519372
 10    Timber                                     9       232377         6     216687
 03    Tools                                   1931      7111949       326   1731119
 06    Mechanical spares                        173      1350013         8      13725

                         Mother Theresa Institute of Management
Inventory management

       Total                                   14117 111952397          4577    44822515

   Slow moving inventory
Type            Description                   13-24 months      25-36 months
                                            Count     Value   Count    Value
 13    Accessories                             29     369927     35    770603
 12    Auxiliary materials                     20     618836      9    256529
 07    Electrical parts                       140    3749382    143 1317059
 04    Electrical spares                        1          91     2        418
 14    Foundry materials                        3      28289      0          0
 08    Non-ferrous castings                    23     476109     58    297605
 09    Production steels                       55     718185     32    305882
 01    Shop stores                             11      68785      6     40013
 02    Standard parts                         787    2972440    850 4544383
 10    Timber                                   0           0     0          0
 03    Tools                                  158     750188    183    774036
 06    Mechanical spares                       12      20268      5      6099
       Total                                 1239    9772500 1323 8312629

            Items, which have not moved for 5 years and more than the date of lost issue,
    will be considered as “NON-MOVING ITEMS”, non-moving items list will be
    prepared the end of the year and the material register for March is printed. The surplus
    committee declares at last either the item to surplus / obsolete.
           After the approval, the stock items will be transferred to salvage stores and
   stock transfer will not be received in material account section to remove the value from
   the respective inventory accounts to the obsolescence.
   Non-moving inventory

Type                Description                 37-60 months (slow)     Above 60 months
                                                Count      Value      Count       Value
 13    Accessories                                34       377321       401     5144066
 12    Auxiliary materials                       190       217828        24      219159
 07    Electrical parts                          170      1715183       648     9125934

                          Mother Theresa Institute of Management
Inventory management

 04       Electrical spares                           2         3017       88   196150
 14       Foundry materials                           0             0       0        0
 08       Non-ferrous castings                       93       549525      146   381929
 09       Production steels                          44       971166       62  1383664
 01       Shop stores                                11        12202        1     1144
 02       Standard parts                           947       4222857    2853 19226689
 10       Timber                                      0             0       3    15690
 03       Tools                                    255       1036833    1003   2656270
 06       Mechanical spares                         6        127783      142  1182141
                          Total                   1581      9233713     5371 39532935

                 Table showing non-moving inventory value for last 4 years

                     Years                    Non-moving inventory value
                   2006-07                                68640771
                   2007-08                                69115099
                   2008-09                                63904124
      Value in

                   2009-10                                54037536

   Reason for Non-moving inventory

           Change in design of the equipment
           The sale order may be cancelled
           Change in the production pal

                             Mother Theresa Institute of Management
Inventory management

       All efforts of the management to control inventories should aim at maintaining
various components of inventory at economic levels and in proper proportions.
       In HMT Machine Tools Ltd, Inventory is divided into the following categories.
                    Raw material and components
                    Stores and maintenance spare parts
                    Tools and Instruments
                    Work in progress
                    Stock in trade
                    Material and components in transit
                    Scrap

   Table showing the % change in components of inventory from 2006 to 2007

              Inventory                         2006                      2007
                                         Value (Rs)  %             Value (Rs)  %
Raw material and components               56259639 21.98%           88292234 21.73%
Stores and maintenance spare              43575373 17.03%           70424054 17.33%
Tools and Instruments                      6784051 2.65%            11623924 2.86%
Work in progress                         157983036 61.73%          210808944 51.88%

Stock in trade                             44228574 17.28%         128566842 31.64%
Material and components in                 13557863 5.29%           12199115 3.00%
Scrap                                         382055      0.15%       506206     0.12%

Less: provision for obsolescence           66847400      -         116086789       -
                                                   23.11%                    28.56%
               TOTAL                     255923194  100%           406334530  100%

                          Mother Theresa Institute of Management
Inventory management

                              Components of Inventory 2006

                                     -23.11               21.98



                              Components of Inventory 2007

                                     28.56                  21.73

                              3                                        17.33



   Table showing the % change in components of inventory from 2008 to 2009 and 2010

                        Mother Theresa Institute of Management
Inventory management

              Inventory                          2008                     2009
                                          Value (Rs)   %           Value (Rs)   %
Raw material and components                95263294 31.97%         104155299 27.00%
Stores and maintenance spare               78708704 26.41%          61500000 15.94%
Tools and Instruments                      9834637 3.30%            11958169 3.10%
Work in progress                         146601361 49.19%          164512233 42.65%
Stock in trade                            78874816 26.47%          115361800 29.91%
Material and components in                12199115 4.09%                   0      0
Scrap                                       478992  0.16%            2000000  0.52%
Less: provision for obsolescence         123959548       -          73768494       -
                                                   41.29%                    19.13%
TOTAL                                    298001371  100%           385720007  100%

                        Inventory                            2010
                                                     Value (Rs)     %
          Raw material and components                 82258478    28.68%
          Stores and maintenance spare                46217359    16.12%
          Tools and Instruments                        9310239       3.24%
          Work in progress                           154781231      53.98%
          Stock in trade                              74894837      26.19%
          Material and components in                   1120000       0.39%
          Scrap                                         751000        0.26%
          Less: provision for obsolescence            82578544      -28.80%
                          TOTAL                      286754600        100%

          From the above, we can say that the components of inventory fluctuating during
   the study period. If we study the composition of inventory in HMT Machine tools ltd
   the major portion of its total inventory consist of work in progress and components and
   stock in trade.

                          Mother Theresa Institute of Management
Inventory management

                            Components of Inventory 2008


                          4.09                                      26.41

                          26.47                                   3.3


                            Components of Inventory 2009

                                   -19.13                 27

                        29.91                                      15.94


                            Components of Inventory 2010

                                   -28.8                  28.68


                       Mother Theresa Institute of Management
Inventory management


         The size of inventory and growth shows of the company. The effective regulation
of inventory calls for the maintenance of inappropriate level of inventory. All though
         Inventory is necessary to run a plant efficiently the excess of inventory serves no
purpose and also affects the profitability of the firm.
                Growth rate of inventory shows the ratio of current Asset as it is a part of
current Asset reflects on current ratio establishes relationship between the current asset and
current liabilities. The ability of a company to meet its short-term commitment is normally
assessed by comparing current asset whit current liabilities.

Table showing % Increase in inventory & Sales from 2005 to 2010

  Year         Inventory (Rs)             Sales (Rs)          % Increase in        % Increase in
                                                               inventory               sales
  2006            255923194               562190859
  2007            406334134               711049820                 58.77%             26.48%
  2008            298001371               749145908                 -26.66%            05.36%
  2009            385720007               480030182                 29.44%            -35.92%
  2010            286754600               519415843                 25.65%            -07.58%



             60.00%                        58.77%

                                           26.48%                       29.44%        25.65%
              0.00%           0.00%
                          2006         2007            2008          2009         2010-7.58%
            -40.00%                                                     -35.92%




                             Mother Theresa Institute of Management
Inventory management

       The graph it shows that inventory of the HMT Machine Tools Limited as increased
at high rate in the year for 2008 & 2010. The size of inventory Bares a relation with the
sales of an undertaking. The table shoes that inventory has increased considerably when
compared to increase in sales . Graph showing the growth of inventory and net sales of
HMT Machine in the changed market conditions the organization needs to focus on the
custemer satisfaction in reaching out this goal or conclusion basis the management has
toconstantly upgrade technology     product profile internal works process & Plant &
machinery in the end ultimately it is the employees who will change of the company .

       During the short period of my study various departement I found HMT a well-
structured organization capable to maintain interpersonal relationships among employees.
Employees are very experienced & very dedicated where they feel company a home.

                          Mother Theresa Institute of Management
Inventory management


       The growing competition and technological developments in this sector are having
inevitable effects on the Indian machine tool industry as a whole. The HMT machine tool
limited is facing typical problems in the emerging globalization scenario as under:

    HMT machine tool has a regular system for determining unserviceable or damaged
       stores, raw materials and finished goods.
    The unit has maintained proper records showing full particulars including
       quantitative details and situations of fixed assets.
    Materials are classified as ‘A’ ‘B’ and ‘C’ class items.
    The unit has maintained good relationship with the employer and employees.
    The unit has maintained up to date records and submitted to respective authorities.
    Inventory has been physically verified during the year by the management.
    The technology is not advanced. This is one of the reasons for low productivity.
    Most of the machines are obsolete. Thus production process is costly and time
    Bin cards are used for maintenance of stores.
    Idle time is more; there is no proper time management in HMT.
    Overhead costs are high.
    Absenteeism and inefficiency are high in the company.
    The company has not been utilizing whole installed and licensed capacity of its
       machine effectively, which has in turn resulted in production.
    Motivation of employees is less.

                           Mother Theresa Institute of Management
Inventory management


    The company should make efforts in making the whole use of installed and
      licensed capacity.
    The company should fix competitive prices for the productions in order to compete
      in the global market.
    The company should adopt modern costing systems, balance scorecard concept etc.
    The company inventory management is at moderate level. Hence effective steps
      have to be taken to see that the inventory management is made more efficient so
      that capital is blocked in inventory can be used for working capital required.
    Major part of revenue earned is spent on payment of interest: therefore measures
      should be taken to reduce the amount of credit.
    Since the company is incurring loss for the past few years, the management should
      take measures to bring such a situation under control in order to flourish in the near
    The material cost is high in the company, thus the company should make efforts to
      buy the materials at reasonable price.
    The company should update its technology so that it can beat the competitor’s price
      and also produce higher quality products.
    The company has to concentrate much on credit policy for speedy collections of
      accounts receivable.
    Suitable measures should be taken for improving shorts term solvency position,
      current ratio and working capital.
    The company should reduce inefficiency, absenteeism and idle time.
    The company should make improvement with regard to productivity.

                           Mother Theresa Institute of Management
Inventory management


       The study carried out as a part of curriculum of MBA Sri Venkateswara University
gave me a real exposure to the operational procedures of the company. It helped me to
explore the possibility of rejuvenating the health of a company.

       HMT is a very popular name among every Indian, because of its innovation of
technology quality assurance durability affordability to its people or customer. HMT has
created the brand image that symbolizes machine tools to a manufacturer, tractors to a
farmer and watches to millions of people in India.

       Today HMT’S machine tools expertise has been developed to such an extent that
HMT can design and develop any kind of machine from simple lathes to CNC machines to
flexible manufacturing system. Today HMT is multi technology multi Product Company.

       HMT commitment to the development of machine tool technology is clearly
reflected in the fact that HMT has as many as 9 exclusively machine tool until spread
across the country.
       In the changed market condition the organization needs to focus on the customer
satisfaction, in reaching out this goal are conclusion basis the management has to
constantly upgrade technology product profile internal work process and plant and
machinery in the end ultimately it is the employees who will change the performance of
the company. Therefore motivation must find priority.

                           Mother Theresa Institute of Management
  Inventory management

                            HMT Machine Tools Ltd
                              Balance Sheet

Particulars                                Schedule      As AT        As At
                                                         31.03.2010   31.03.2009
Secured                                    1.1           107537612    74286798
Unsecured                                  1.2           142712385    138717907
HMT Machine Tools Cr A/c                                 135162149    157727765
TOTAL                                                    385412146    370732470
Gross Block                                2.1           1048523770   980176332
Less: Depreciation                                       803939747    780832916
NET BLOCK                                                244584023    199343416
Machinery & Equipment in Transit                         53053863     0
Capital Work in Progress                                 565750       12269912
Inventories                                3.1           286754600    385720007
Sundry debtors                             3.2           156213186    176227001
Cash & Bank balance                        3.3           4025465      734227
Other current assets                       3.4           2893088      3334605
Loans & Advances                           3.5           177240578    171751593
                                                         627126917    737767430
Current liabilities                        4.1           246887666    285520803
Provisions                                 4.2           293430741    293127485
                                                         539918407    578648288
Net current assets                                       87208510     159119142
HMT Machine Tools Cr A/c                5.1              0            0
Misc.Exp Net W/o:
Voluntary Retirement Compensation (DRE)                  0            0
TOTAL                                                    385412146    370732470

                         Mother Theresa Institute of Management
Inventory management

                            HMT Machine Tools Ltd
                              Balance Sheet

              Particulars                  Schedule        As AT          As At
                                                         31.03.2008    31.03.2007
Secured                                       1.1          48360386     117466409
Unsecured                                     1.2          77372895      21523084
HMT Machine Tools Cr A/c                                   99092276     164783974
TOTAL                                                     224825557     303773467
Gross Block                                   2.1         881416662     849184969
Less: Depreciation                                        764057796     749891824
NET BLOCK                                                  11735886      99293145
Machinery & Equipment in Transit                                   0         1972
Capital Work in Progress                                     4859922     19597760
Inventories                                   3.1         298001371     406334530
Sundry debtors                                3.2         199726161     215738954
Cash & Bank balance                           3.3           5368563      12664445
Other current assets                          3.4           1814869       2843456
Loans & Advances                              3.5         166658424     154980148
                                                          671569388     792561533
Current liabilities                           4.1         275409561     315284570
Provisions                                    4.2         293553058     292396373
                                                          568962619     607680943
Net current assets                                        102606769     184880590
HMT Machine Tools Cr A/c                      5.1                 0             0
Misc.Exp Net W/o:
Voluntary Retirement Compensation                                  0            0
TOTAL                                                     224825557     303773467

                        Mother Theresa Institute of Management
Inventory management

                           HMT Machine Tools Ltd
                             Balance Sheet

                Particulars                      Schedule         As AT
Secured                                              1.1          112509194
Unsecured                                            1.2          716458227
HMT Machine Tools Cr A/c                                                  0
TOTAL                                                           828967421
Gross Block                                          2.1          835215972
Less: Depreciation                                                734344879
NET BLOCK                                                         100871093
Machinery & Equipment in Transit                                       1972
Capital Work in Progress                                                  0
Inventories                                          3.1          428760832
Sundry debtors                                       3.2          276814884
Cash & Bank balance                                  3.3           14945754
Other current assets                                 3.4            4380499
Loans & Advances                                     3.5          158188613
Current liabilities                                  4.1          525032010
Provisions                                           4.2          286731720
Net current assets                                                 71326852
HMT Machine Tools Cr A/c                             5.1          407808200
Misc.Exp Net W/o:
Voluntary Retirement Compensation (DRE)                           248959304
TOTAL                                                           828967421

                              Machine Tools Ltd
                       Mother Theresa Institute of Management
Inventory management

                            HMT Profit and Loss A/c

Dr                                                                             Cr

              Particulars                    Schedule        As AT          As At
                                                           31.03.2010    31.03.2009
Sales                                           6.1          519415843    480030182
Less: Excise duty                                             36042110     46182011
Net Sales                                                   483373733    433848171
Transfer to Plant                               6.2            1187853      2157460
Other income                                    6.3           49803739    104513464
Charges Recovered                                              5333938      3398792
Inter factory Transfers Cr                                    11906192      8711211
Accretion/ (Discretion to WIP/finished          6.4          -51447965     55919864
Total                                                       500157490    608548962
Materials                                       7.1          201583439    232793494
Personnel                                       7.2          296158730    299876973
Depreciation                                                  24978777     17430105
Other Expenses                                  7.3          106736654     94276334
Interest                                        7.4           21443408      1548942
Charges paid                                                  32376377     29302958
VRS compensation W/off                                               0     29133719
Less: Expenses allocated to jobs done for       6.2            4260624      2018410
internal use
Total                                                       679016763    716284595
Profit (+)/loss (-) before prior period                     -178859273   -107735633
adjustments and extra ordinary items
Less: prior period adjustments                  7.5           -1143051    -13569643
Add: extra ordinary items (EOI)                 7.6                  0     46812125
Profit (+)/loss (-) before tax                              -180002324    -74493151
Less: provision for fringe benefits                                  0     -2494135

Profit (+)/loss (-) before tax
Transferred To Machine Tool                                -180002324     -76987286
Directorate A/c

                          Mother Theresa Institute of Management
Inventory management

                              Machine Tools Ltd
                            HMT Profit and Loss A/c

Dr                                                                             Cr
                                 Machine Tools Ltd

              Particulars                    Schedule        As AT          As At
                                                           31.03.2008    31.03.2007
Sales                                           6.1          749145908    711049820
Less: Excise duty                                             82703710
Net Sales                                                   666442198     711049820
Transfer to Plant                               6.2
Other income                                    6.3           46987145    113210940
Charges Recovered                                              1970219     13097778
Inter factory Transfers Cr                                     3084179      4752771
Accretion/ (Discretion to WIP/finished          6.4         -113926823    -36100539
Total                                                       604556918     806010770
Materials                                       7.1          232768231    258354512
Personnel                                       7.2          316328487    321435107
Depreciation                                                  14958672     16211663
Other Expenses                                  7.3           70857861    183607030
Interest                                        7.4            1372467     41169468
Charges paid                                                  31411816     39321342
VRS compensation W/off                                        70643865    246544105
Less: Expenses allocated to jobs done for       6.2            4011465      2474537
internal use
Total                                                       740129934    1104168690
Profit (+)/loss (-) before prior period                     -135573016    -298157920
adjustments and extra ordinary items
Less: prior period adjustments                  7.5           -5011629      -485725
Add: extra ordinary items (EOI)                 7.6                  0    137800534
Profit (+)/loss (-) before tax                              -140584638            0
Less: provision for fringe benefits                           -2310234       -64597
Profit (+)/loss (-) before tax
Transferred To Machine Tool                                 -142894872    -162893676
Directorate A/c

                          Mother Theresa Institute of Management
Inventory management

                           HMT Profit and Loss A/c

       Dr         Particulars                       Schedule     As AT
       Sales                                           6.1         799913006
       Less: Excise duty
       Net Sales                                                  799913006
       Transfer to Plant                               6.2                 0
       Other income                                    6.3          34460770
       Charges Recovered                                            19628884
       Inter factory Transfers Cr                                          0
       Accretion/ (Discretion to WIP/finished          6.4            555094
       Total                                                      854557754
       Less: OUTGOINGS
       Materials                                       7.1         292869759
       Personnel                                       7.2         425408432
       Depreciation                                                 22881252
       Other Expenses                                  7.3         206812263
       Interest                                        7.4          77017273
       Charges paid                                                 45951966
       VRS compensation W/off                                       51359006
       Less: Expenses allocated to jobs done           6.2           3015056
       for internal use
       Total                                                     1119284895
       Profit (+)/loss (-) before prior period                    -264727141
       adjustments and extra ordinary items
       Less: prior period adjustments                  7.5          1421860
       Add: extra ordinary items (EOI)                 7.6       1283183889
       Profit (+)/loss (-) before tax
       Less: provision for fringe benefits                                 0

       Profit (+)/loss (-) before tax
       Transferred To Machine Tool                               1017034888
       Directorate A/c

                        Mother Theresa Institute of Management
Inventory management


                Financial Management                    I.M. Panday
                Financial Management                    Prassannachandra
                Financial Management                    M.Y. Khan & P.K.Jain
                Management Accounting                   Dr. P.N. Reddy
                Advanced Accounting                     Jain and Narang






      MRT-Mr. Suresh S.Vastrad, Dept. General Manager
      Finance – Mr. Ramchandra, Dept. Manager
      Production – Mr. Abdul Gaffer, Dept. Manager
      HR - Mr. Sudhakar, AGM (External Guide)
      HR - Mrs. Ranjini Devi, Manager (External Guide)
      HR – Mr. Ravindra, Dept. Manager

                             Machine Tools Ltd

                       Mother Theresa Institute of Management
Inventory management

                            HMT Profit and Loss A/c

Dr                                                                             Cr

              Particulars                    Schedule       As AT         As AT
                                                          31.03.2011    31.03.2010
Sales                                           6.1         517609558    519415843
Less: Excise duty                                            40141768     36042110
Net Sales                                                  477467790    483373733
Transfer to Plant                               6.2                 0      1187853
Other income                                    6.3          47352332     49803739
Charges Recovered                                             5265526      5333938
Inter factory Transfers Cr                                                11906192
Accretion/ (Discretion to WIP/finished          6.4         -63733528    -51447965
Total                                                      466352120    500157490
Materials                                       7.1         210836787    201583439
Personnel                                       7.2         383470776    296158730
Depreciation                                                 31948656     24978777
Other Expenses                                  7.3          76613611    106736654
Interest                                        7.4          21008945     21443408
Charges paid                                                 37013394     32376377
VRS compensation W/off                                              0            0
Less: Expenses allocated to jobs done for       6.2            762729      4260624
internal use
Total                                                      760129440    679016763
Profit (+)/loss (-) before prior period                    -293777320   -178859273
adjustments and extra ordinary items
Less: prior period adjustments                  7.5          -1324453     -1143051
Add: extra ordinary items (EOI)                 7.6                 0            0
Profit (+)/loss (-) before tax                             -295101773   -180002324
Less: provision for fringe benefits                                 0            0

Profit (+)/loss (-) before tax
Transferred To Machine Tool                               -295101773    -180002324
Directorate A/c
                            HMT Machine Tools Ltd

                          Mother Theresa Institute of Management
  Inventory management

                                Balance Sheet

                            HMT Machine Tools Ltd
                              Balance Sheet
Particulars                                Schedule      As AT        As AT
                                                         31.03.2011   31.03.2010
Secured                                    1.1           91543275     107537612
Unsecured                                  1.2           147610260    142712385
HMT Machine Tools Cr A/c                                 -99398667    135162149
TOTAL                                                    139754868    385412146
Gross Block                                2.1           1122330059   1048523770
Less: Depreciation                                       835771614    803939747
NET BLOCK                                                286558445    244584023
Machinery & Equipment in Transit                         1            53053863
Capital Work in Progress                                 0            565750
Inventories                                3.1           212982030    286754600
Sundry debtors                             3.2           105073228    156213186
Cash & Bank balance                        3.3           2320296      4025465
Other current assets                       3.4           2351400      2893088
Loans & Advances                           3.5           177175656    177240578
                                                         499902610    627126917
Current liabilities                        4.1           300725978    246887666
Provisions                                 4.2           345980210    293430741
Net current assets                                       -146803578   87208510
HMT Machine Tools Cr A/c                5.1              0            0
Misc.Exp Net W/o:
Voluntary Retirement Compensation (DRE)                  0            0
TOTAL                                                    139754868    385412146

                         Mother Theresa Institute of Management
Inventory management

                       Mother Theresa Institute of Management

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