A STUDY ON THE EFFECTIVENESS OF MATERIAL REQUIREMENT REQUIREMENT PLANNING P LANNING IN PURCHASE P URCHASE DEPARTTMENT IN SIMPSON & CO LTD. By
KISHORE.P (Reg.No.31709631047) A
PROJECT REPORT Submitted to the
FACULTY OF MANAGEMENT STUDIES In
partial fulfillment of the requirements For the award of the degree Of
MASTER OF BUSINESS ADMINISTRATION IN FINANCE AND SYSTEMS
St. JOSEPH¶S COLLEGE OF ENGINEERING, CHENNAI ANNA UNIVERSITY CHENNAI 600 025 AUGUST 2010
ST.JOSEPH¶S COLLEGE OF ENGINEERING (Affiliated to Anna University) JEPPIAAR EDUCATIONAL TRUST JEPPIAAR NAGAR, RAJIV GANDHI ROAD, CHENNAI-119
BONAFIDE CERTIFICATE
Certified that this project report titled ³A STUDY ON THE EFFECTIVENESS OF MATERIAL REQUIREMENT PLANNING IN PURCHASE DEPARTMENT IN SIMPSON & CO LTD´ is the bonafide work of KISHORE.P Reg.no.31709631047
who carried out the project work under my supervision. Certified further, that to the best of my knowledge the work reported herein does not from part of any other project or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
DR. S.SUDHA
DR. JAYASREE KRISHNAN
M.B.A., PhD.
B.Sc., M.B.A., PhD.,
INTERNAL GUIDE
HEAD OF THE DEPARTMENT
Department of Management Studies
Department of Management Studies
St.Joseph¶s College of Engineering
St.Joseph¶s College of Engineering
Chennai-600 119.
Chennai-600 119.
ST.JOSEPH¶S COLLEGE OF ENGINEERING (Affiliated to Anna University) JEPPIAAR EDUCATIONAL TRUST JEPPIAAR NAGAR, RAJIV GANDHI ROAD, CHENNAI-119
BONAFIDE CERTIFICATE
Certified that this project report titled ³A STUDY ON THE EFFECTIVENESS OF MATERIAL REQUIREMENT PLANNING IN PURCHASE DEPARTMENT IN SIMPSON & CO LTD´ is the bonafide work of KISHORE.P Reg.no.31709631047
who carried out the project work under my supervision. Certified further, that to the best of my knowledge the work reported herein does not from part of any other project or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
DR. S.SUDHA
DR. JAYASREE KRISHNAN
M.B.A., PhD.
B.Sc., M.B.A., PhD.,
INTERNAL GUIDE
HEAD OF THE DEPARTMENT
Department of Management Studies
Department of Management Studies
St.Joseph¶s College of Engineering
St.Joseph¶s College of Engineering
Chennai-600 119.
Chennai-600 119.
ACKNOWLEDGMENT
First and foremost, I thank Almighty God for the strength and blessings showered, for successfully completing the project. I would like to express my gratitude and extent my best wishes to all people who guided, inspired and motivated me during dur ing this project. I express my sincere gratitude to the management of ST.JOSEPH¶S COLLEGE OF ENGINEERING for having provided me an opportunity to do my master degree in their esteemed college. My sincere thanks and profound sense of gratitude goes to our respected Chairman Thiru. Jeppiaar, M.A., B.L., for his sincere endeavor in educating us in his premier institution andI also take this opportunity to thank Dr. BabuManohar M.A., M.B.A., Ph.D., honorable director of the esteemed institution. My heartfelt thanks to our Principal Jolly Abraham M.E., Ph.D., I am exceedingly grateful to the Head Of the Department Dr. Jayasree Krishnan B.Sc, M.B.A., PhD., for providing me necessary facilitates to complete this project work, and for guiding me throughout this project without her valuable help & support, this project work would have never been possible. I take this opportunity to acknowledge the help, guidance and co-operation received from the company DIEMENSIONAL SECRUTIES PVT LTD, Chennai for providing me an opportunity oppo rtunity to do this project in their organization.
TABLE OF CONTENTS
S.NO
TITLE
PAGE .NO
CHAPTER 1 INTRODUCTION 1.1
Industry Profile
1
1.2
Company Profile
3
1.3
Need for the Study
4
1.4
Scope for the Study
5
1.5
Objectives for the study
6
1.6
imitation Limitation
7
1.7
What is MRP?
8
1.8
Material requirement planning system
12
1.9
Various Processes
13
of the study
CHAPTER 2 LITERATURE REVIEW 2.1
Review of Literature
32
CHAPTER 3 RESEARCH METHODOLOGY 3.1
Type of research
33
3.2
Research instrutment
33
3.3
Questionnaire design
33
3.4
Sampling design
34
3.5
Data collection
34
3.6
Period of study
34
CHAPTER 4 FINDINGS AND SUGGESTION 4.1
Findings
34
4.2
Suggestions
36
4.3
Conclusion
38
Bibliography
39
Annexure
40
TABLE .NO
LIST OF FIGURES
PAGE. NO
1.9.1
Diagram showing purchase module
12
1.9.2
Diagram showing Purchasing general process
16
1.9.3
Diagram showing RFQ and quotation process
17
1.9.4
Diagram showing purchase requisition process
18
1.9.5
Diagram showing blanket agreement process
21
1.9.6
Diagram showing blanket release process
22
1.9.7
Diagram showing amendment process for blanket purchase and release
23
1.9.8
Diagram showing receipts
24
1.9.9
Diagram showing GI rejection
26
1.9.10
Diagram showing line rejection
27
1.9.11
Diagram showing outside processing
29
1.9.12
Diagram showing internal requisition
30
ABSTRACT
The study was undertaken to determine ³EFFECTIVENESS OF MATERIAL
REQUIREMENT PLANNING (MRP) IN PURCHASE DEPARTMENT IN SIMPSON & CO Ltd., Chennai.
Among
the various systems which are available, the most sought after or probably the
highly opted ones are the material requirements planning (MRP). This study explores the reasons why organizations chose to use these systems, the problems and benefits derived from the MRP/ERP systems, and the characteristics of the types of companies that have benefited from the use of MRP-type systems. It also figures out the factors which make the MRP effective so that its benefits are utilized to the maximum. The study reveals what factors will cause the effective functioning of the MRP during its usage. While most ompanies use MRP or ERP computer system in manufacturing functions this study will loosely refer to these computer systems as ³MRP- type´ or simply ³MRP´ systems.
The study undertaken strikes to procure an insight about the effectiveness of the MRP in purchase department in simpson & co ltd. The population consisted of employees of the purchase department and size of population includes 20 employees. The questionnaire were provided to 20 employees of the purchase department. Based on the feedback, the required study was carries out.
A
major finding of the study is that the employees were
comfortable with the major part of the MRP system and just needed few additional features for better working.
1.1. INDUSTRY PROFILE
The automotive industry designs, develops, manufactures, markets, and sells the world's motor vehicles. The automotive industry is one of the most important economic sectors by revenue. The Automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2009.In 2009, India emerged asAsia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile
market
which
attracted
significant India-specific
investment
by
multinational automobile manufacturers. In February 2009, monthly sales of passenger cars in India exceeded 100,000 units.
India has emerged as one of the world's largest manufacturers of small cars.
According
to New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several
automobile
companies
like
hyundai
Motors, Nissan, Toyota, Volkswagen and Suzuki. In 2008, Hyundai Motors alone exported
240,000 cars made in India. Nissan
Motors plans to export 250,000 vehicles manufactured in its India plant by 2011.[8] Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. 1
In September 2009, Ford Motors announced its plans to setup a plant in India with an annual capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian market and for export. The company said that the plant was a part of its plan to make India the hub for its global production business.[11] Fiat also announced that it would source more than US$1 billion worth auto components from India.
The automotive industry is no stranger to change. Many of the changes occurring in the global marketplace today - tightened credit markets in a capital-intensive industry, declining consumer confidence, increased government involvement - are the most recent manifestations of this reality. The combination of these new realities with familiar industry challenges such as volatile raw materials costs and fuel prices, tighter regulations, capacity and sourcing challenges and the need to satisfy consumer demand for cleaner, greener cars, have combined to create a business environment that has had a profound effect on the global automotive industry.
2
1.2. Company profile
In 1840, Mr. Simpson, a Scotsman, foresaw potential in developing India as a major centre for building coaches and carriages. With a little spirit he nudged his dream and Simpson & Co was born. Simpson became a pioneer in railway coaches, motor cars, steam passenger buses, public service vehicles... India's Road Transport Industry was ushered into a new era. Simpsons became the first to recognise the potential of diesel as a fuel, and self started the diesel era in the country in 1951.
And
in 1955, Simpsons became the first Indian
Company to indigenously manufacture diesel engines for surface transport vechicles. Simpsons is the first Indian Company to indigenously manufacture diesel engines for surface transport vechicles.
SIMPSONS WORK POLICY:
³It is our policy to attain and maintain leadership in the market. We serve by providing
products and services which meet and exceed customer satisfaction ,expectation and statutory and regulatory requirements with emphasis on continual improvement in all our procees and with total commottment and involvement of all employees´
PRODUCTS AND SERVICES:
Agriculture A pplication
Engines
Gensets A pplication Engines Industrial A pplication Engines Marine A pplication Engines Vehicular A pplication Engines
3
1.3. Need for the study
The need for the study is to find out the effectiveness and usefulness of the materials requirement planning which is used in Simpson & co ltd. It brings out an overall idea of how effective is the materials requirement planning for production activity. With other automotive companies coming out with new options to attract customers with main concern on time and quality, the challenge of retaining the existing customers and satisfying the same has become a top reference. The main need for carrying out this study is to find out how much useful is the materials requirement planning for employees working in Simpson & co ltd. How the materials requirement planning helps them to carry out the work effectively without any hitches and error. What can be done in order to make the materials requirement planning more effective so that the raw materials come on time, the manufacturing process goes on smoothly and the engines are delivered on time to the customer. .
4
1.4. SCOPE OF THE STUDY
The study reveals the employees preference, their needs, that is what they need in order to make the material resource planning effective, how the material resource planning can be effectively used in other departments of the company also. The number of respondents includes only employees of purchase department. The study also covers the employees awareness about materials resource planning and how to use them, factors influencing them to use material resource planning and their most preferred options in material resource planning. To maintain uniform levels in all levels of purchase department and also to communicate effectively to vendor.
5
1.5. OBJECTIVES
Primary Objective: To understand how material resource planning process is implemented in the company and to find out how effectively it is used.
Secondary Objective: To bring out the features of materials resource planning.
To find out how effectively purchase can be done.
To find out what enhancements are required to improve the material resource planning.
To find out the whether the information available in the MRP system is relevant for making decisions.
To find out whether MRP software is reliable.
6
1.7. LIMITATIONS OF THE STUDY
This study focuses only on the employee base of Simpson & co ltd. in Anna salai
plant Chennai and it is about the effectiveness of the material requirement planning used in the plant.
The study does not provide a reliable source for judging the employee suggestion
as it covers only 20 employees from the over all population.
7
1.6. MATERIAL REQUIREMENT PLANNING
Materials requirements planning (MRP) is the logic (software system) for determining the number of parts, components, and materials needed to produce a product.
MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced. Based on imputed FIXED LTs
Dependent demand drives MRP.
Example of MRP Logic and Product Structure Tree: Given the product structure tree for ³A´ and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed.
Product Structure Tree for Assembly A
D2
E1
D3 8
F2
Lead Times B 2 days C 1 day D 3 days E 4 days F 1 day
Demand Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares)
First, the number of units of ³A´ are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of ³A´ in the 9th day to receive them in the 10th day.
Day:
1
2
3
4
5
6
7
A Required Order Placement
8
9
10 50
50 L
LT = 1 DAY
Next, we need to start scheduling the components that make up ³A´. In the case of component ³B´ we need 4 B¶s for each A. Since we need 50 A¶s, that means 4x50 B¶s. Back the schedule up for the necessary 2 days of lead time.
9
Day: 1 A Required Order Placement B Required Order Placement
2
3
4
5
6
7
8
9
20
50 200
10 50
20
LT A=
2
Spares
B(4)
D(2)
200
C(2)
E(1)
D(3)
F(2)
Finally, repeating the process for all components, we have the final materials requirements plan
LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1
Day: 1 A Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement
2
3
4
5
6
7
8
9
10 50
20 20
50 200
200 100
55 20
400
55
400
20
200
100 300
300
200 200 200
10
Types of Time Fences
Frozen ± No schedule changes allowed within this window.
Moderately Firm ± Specific changes allowed within product groups as long as parts are available.
Flexible ± Significant variation allowed as long as overall capacity requirements remain at the same levels.
Moderately Firm
Frozen Capacity
Flexible Forecast and available capacity
Firm Customer Orders 1
Weeks
11
2
13
1.7. Material Requirements Planning System
Based on forecasts & customer orders a Material Requirements Planning system: ± Creates schedules identifying the specific parts and materials required to produce end items. ± Determines exact unit numbers needed. ± Determines the dates when orders for those materials should be released, based on lead times.
Purchase Module 12
1.8. VARIOUS PROCESSES Introduction: Purchasing in Simpson can be classified as OE components, Tools and Machine Spares, Consumables, PMD Components , Branch local items , Engine job work (Cummins) and Capital Items. Purchasing includes all activities starting from Raising Indents, A pproved Supplier List, Sourcing rules, RFQ, Quotation, Creating,
Amending
and canceling Purchase
Orders(Standard, Blanket agreements and Blanket release), managing the Suppliers and conducting analysis of purchase activities. Purchasing
activities
are
done
at
Annasalai
,Sembiam,
Pmd,
Cummins
(CUB),Bangalore,Hyderabad,Trichy,Ooty organizations. Depending on the type of Purchase items the Purchase Orders may be classified into Standard Purchase order for OE components, Tools & M/C spares consumables,Capital Items. Blanket Purchase order for OE Components Standard Purchase Order for Imported items.(Volvo, Tools & M/C spares and others) Purchase Order for Outside Processing The Detailed procedures followed in various Purchase departments are given below: 1.OE Components :
The Requirement is derived from Engg Department (New Components, Marketing Department (Sales Plan) and consolidated through MRP to arrive at the actual Purchase requirement. For New development components the engineering drawing is sent to vendor development department with ECO to develop new vendors. They in turn get the quotation from multiple suppliers and based on selection criteria vendors are short Listed. For the New Vendors quotation is created and attached to
ASL.The
Standard Purchase
Order is created for getting sample items. The sample item is inspected assembled and tested by production and quality departments. Once it is fully approved, the STA department approves and implement the ECO. From that point onwards regular procurement and production is started. For regular item the component price is amended
after price negotiation with retrospective effect. For SSI suppliers the ED rates are also amended in quotation based on the supplier turn over. Quotation are maintained at organization level which means a vendor will have three quotation for supplying the same item to three different locations. 2.Tools,M/C spares and Consumables:
Purchase requirements
is received from various MFG departments through
Purchase indents(Manual).Tools are procured for old line, New Line and SJ3 line in the shop floor.The production plan determines the tool requirement and planning is based on tool life(For New line,SJ3) or min Max (Old
Line).
M/C spares and consumables are
procured on need basis as and when required by the shop floor. Both tools and M/C spares can be either stocked or directly consumed. Quotations are created for all the items based on market price and price amendments are carried out as required. 3.P.M.D Purchase:
The part sale during the previous year forms the basis of requirement in P.M.D department. The vendor base for O.E. components and P.M.D purchases are one and the same, but the quotation price for parts department will be higher than OE rate. Price amendments are similar to O.E.Components 4.Kits / Labour only engines Purchases: .
Engine components are received as KIT assemblies from Cummins ± B5.9 and assembled in Simpsons. The kits are received thru 57F4 excise form and returned as finished engines. Labour invoice is prepared for the same. 5.Capital Purchases:
Capital item purchase for plant and machinery and special projects are controlled by Projects department. The process for imports is similar to Volvo Purchase. The purchases are not integrated to F.A. Module in E.R.P currently.
14
Asset
PURCHASE SETUP ± ORGANIZATION WISE Activity ASP SMP Types Of Purchase 3 3 OE Tools/Spare / 3 3 Consumable s 3 3 OSP 3 3 Imports Types of Purchase Documents Blanket PO 3 3 , Release thru MRP Standard PO 3 3 Inter Plant Transfers STV 3 3 Purchasing Hierachy 3 3 Hierarchy Supplier Master Maintenance 3 3 Item Catalog 3 3 ASL
Sourcing Rule Tax - Item Category
PMD
Branch
KMP
3
3
2
2
2
Only Consumable s
2
2
2
3
2
2
3
2
2
3
3
3
3
3
2
3
3
2
3
3
2
3
2
2
3
3
3
2
2
3
3
3
3
3
Note :Tax Category is defined at IMO organization level.
15
Purchasing General Process:
Vendor
Manage e Manage
isi ion isi ion £
¡
¢
e ¡
£
¢
Manage Q o Manage Q £
¢
¢
Manage Domes i Manage Domes ro remen
a ions o a ions £
£
£
£
¤
£
£
¤
¥
Manage Impor s Manage Impor s £
i ¤
£
¢
ro ¤
¥
remen £
¢
Manage e Manage
¤
eip s e eip s
Manage e Manage
£
£
£
¤
rns e rns ¢
£
¢
Ex erna En i y §
§
§
¨
Finan ia s ¤
Ex erna §
¨
©
ro ess
¦
Non-Apps
The purchasing activity is decentralized and managed at
ASP,
SMP and PMD locations
independently. The vendor base may be common or different across the different locations. There is a separate approval hierarchy for each organization with approval limits clearly defined. The components purchased will be of the following types: 1.OE Components 2.Tools 3.Machinery Spares 4.Consumables 5.Capital Items
16
PMD parts Imported items The buyers are allocated for each vendor/item at the Organization/Item master level and the approval rules for Blanket order, Blanket Release, Standard PO and Purchase requisition is configured. The quotations for ASP/SMP plant are managed at
ASP
material control department
while PMD quotations are managed by themselves. There is no approval hierarchy for Quotations.
RFQ and Quotation Process (OE-New component Development)
RFQ Process for OE - For New Component
Development
New Componen Deve oped by & D based on s omer re iremen
Crea e
FQ for Se e ed Vendors
Crea e I em in er and Assign o re evan Inven ory rgn.
Mas
rin FQ Do men for se e ion ri eria
Crea e e eip for aymen
Crea e a s andard for he samp e prod (No for a S pp iers)
EC
rea ed by &D
New
Vendor
Che k if Vendor is exis ing or New Vendor re ired
Forward he EC o STA Dep . wi h Drawing & send no ifi a ion o rod ion Dep .
Exis ing
Crea e a
Crea e New S pp ier Code
STA dep . o ana yze and se e he Vendor
Ge Q o a ion from Vendor, Nego ia e ri e and e es o provide a Samp e
Crea e en ry in ASL wi h s a s New
Ge Samp e I ems(wi ho re eip ), Inspe ed, es ed and assemb ed by Q a i y Dep .
Samp e omponen a ep ed - In ima ion o he s pp ier for reg ar prod ion
17
o a ion
Description:
The Current RFQ process is used only for Newly developed components. The development of the vendor/item is outside the system and the quotation is finalized based on the vendor quality and terms and conditions. For existing items the Quotation is maintained organization level for all the vendors. It is updated during price revision or tax changes and is used in MRP process to raise blanket agreement and also in Standard PO thru Catalog.
Purchase Requisition process (Tools and M/c Spares)
Man
a Inden rea ed by on erned Depar men
"
$
Ana yze Vendor and he I em
B yer onso ida es a re isi ion an i y o rea e a sing e order
PO
#
#
Dep .
"
#
$
$
#
%
"
%
$
$
"
#
$
Exis ing !
Che k for Exis ing / New I em o be Pur hased
#
Ana yze he Quo a ion and fina yze vendor
$
#
$
New
Crea e Quo a ion
Crea e a New I em (May be Inven ory I em / DIre Debi )
Ex erna En i y (
'
'
Ex erna Pro ess
'
#
(
'
Crea e S andard PO
)
e uiremen sen o Prospe ive Vendors
&
%
Non-Apps Do )
#
umen '
Quo a ion re eived from Vendor
#
18
Description:
Two types of materials are purchased under Tools and Machinery spares. One is stockable and another one is direct debits ( issued to works as a expense). Purchase Requisition of Oracle is not currently used. The Manual Purchase requisition is collected and pooled into a single Standard Purchase order.This is done for Machine Spares/Tools/Consumables,Asset and Capital Items and Contractual Purchase. The possibility of using Purchase requisition in Oracle A pps has to be explored. A new approval hierarchy would be required in that case.
1. BLANKET AGREEMENT :
A
blanket agreement is released every 6 months from ASP/SMP/PMD plants to all the
vendors for components purchase. This is based on the sales/production plan from the marketing department. The total value of purchase is approved thru the Finance committee and a Purchase Order is printed and sent to all suppliers. The actual process is done in MRP module and is explained in detail in the process flow chart attached above. The sourcing rule is used extensively in the process and the latest quotation is picked up for each vendor and updated in the Sourcing rule which is picked up by the MRP process. The machine shop at ASP and SMP plants cater to the assembly line of both the plants. The production requirement of the other plant is fed into MRP and Internal sales orders are generated for transfer of material.
19
2. BLANKET RELEASE : Blanket release is done every month, based on the firm sales plan from marketing department
This forms the daily delivery schedule for the supplier and a daily
requirement statement is sent to all the suppliers with reference to the b lanket agreement. For blanket release process, the blanket agreement number is updated in the Sourcing rule thru a concurrent program and MRP is run to generate releases.
20
Bla k t R
Q
S
gr R
t r
R
R
Q
( r V
W
U
W
R
X
U
X
F r i d at Y
V
T
R
X
X
X
V
at S /S rga izati
/
S
V
`
Y
R
U
a
U
V
Q
Q
Y
a
R
Q
b
Q
l)
R d
Q
rga izati V
U
c
Updati f ith Quotation r ocess 3
2
0
4
0
1
5
6
or / M Marketing an Pr ocess f or the Months ( is ise and Period ise) In M P Module
7
2
3
3
6
6
6
For PMD r gn the Months equir ement is arri ed y aver aging the pr evious year actual sale ( epor t Pr ocess) D
8
9
5
@
@
ST emand f or other r gs like SMP/PM / SP ( emand or M Item) B
D
H
G
4
5
9
@
C
C
2
E
C
7
7
Loading the or ecast Plan. Input the Plan Manually using the ucket Type Period
Loading For ecast Plan Via Interf ace Pr ocess
opy the or ecast Plan as a Demand and also copy ther r ganization Demand
opy the For ecast Plan As a Demand(Without plosion)
Launch M P
Launch M P
7
A
F
7
F
D
I
P
D
@
@
Cr eate Pur chase equisition ( equisition Impor t Pr ocess) @
@
Cr eation f lanket PO Pr ocess In Pur chasing Module D
A
Pur chasing Document Open Interf ace Pr ogr am To Vice-Chair man Pur chase Or der ener ated y System With Appr oved Status Condition E
A
Populating Tax Inf or mation For lanket PO cr eated A
Summar y of FC cr eated y Cost Office H
For ar d to DF f or Appr oval I
5
Print lanket PO A
PO Tax Interf ace Pr ocess
Send Pur chase Agr eement To Vendor E
ener ate FC Statement
21
Blanket Release Bl n et Rele se Process For OE t A P/ MP/PMD Or (Process is one t Or niz tion Level)
niz tion
Updation
of ASL with Quotation Process
For ASP/SMP Actual Sales Plan given by Marketing on 20th of every month for the first fif teen days of next Month
STV Demand for other Orgs SMP/PMD/ASP
For PMD Pending Sale Order Quantity is derived for 6 months then arrive average Qty/Month (Customized Repor t)
Loading the Forecast Plan. Input the Plan Manually using the Bucket Type -Daily
Copy the Forecast Plan as a Demand and also copy Other Organization STV Demand
Loading Forecast Plan Via Interface Process
Launch MRP Process
Launch MRP
Create Blanket Pur chase Release
Create Release Process
System Generates Concurrent Blanket Release For each Item Vendorwise
Create Release Order Document
Create Vendor Schedule Statement
Send Pur chase Agreement To Vendor
22
Amendment Process for Blanket Agreement and Release
Qua tity e
g
e
gr h
f
d
h
f
h
g
h
e
g
t r f r Bla k t t & Bla k t r l a p
h
e
i
Tax Str uctur e Changes
Incr ease in Or der Value
p
r
h
h
e
r
h
h
e
h
r
Including ew Items / on Pr ocessed Item thr ough M P ( equisition cr eatged ut Blanket PO not gener ated) u
Price Amendment in Quotation
h
q
u
Quantity Amendment
t
t
v
Pr ocessed Blanket PO (Open)
Tax Change
Price amendment in Quotation
Cr eate new Release Or der f o r th eItem in the Open Blanket PO
Pr ocessed Release Or der (Open)
For war d to Appr oval Hier ar chy
Check lanket Or der or elease Or der s
Release Or der
t
Appr oved y DGM (Materials) v
Blanket For war d to next Hier ar chy
For war d to FCB f or Appr oval
Appr oved Or der
1. Rate Amendments: When there is a price revision , Quotation Price is amended with price break(for keeping history) at each organization level for a vendor/item. For Blanket order the price is applied from catalog manually and taxes are re-applied.The P.O is sent for approval when the rate is increased. For Blanket releases the existing releases cannot be corrected.
A
new release is done
through Auto create from Blanket P.O. For standard P.O catlog is re-applied and sent for approval. 2.Quantity
Amendments:
Quantity amendments are done in the blanket releases and standard P.O .No approval is required when the release value is within the blanket order value. 23
Quantity amendments are done whenever the supply schedules are not following the agreed schedules due to various reasons like line changes, insufficient supplier capacity, short supply and rejections.
Receipts Recei t r cess f r componen ts, ools, / nsumables - S , S , Spar es &
y
w
y
x
x
Receive Material at Gate
Vendor
x
x
Check all open or edrs (Blanket r elease Or ders / Standar d POs)
Cr eate Receipt G1 Document (using par ameters supplier and Item, not considering Or ders)
Sembium Material
Select PO (Match Or der quantity with supply)
If Supply Quantity is < Or der Quantity
Accept
No
Inspection of Material by Quality
Check Acceptance Status
Send to Buyer f or Quantity Amendment
Yes Check Zoom Option Send the Material f or Inspection
Reject Yes
Deliver to Inventor y (Stor es)
No
Yes
Check r eworkability / concessional acceptance
No
Yes
Stor ed in RecRejn Subinventor y
Acceptance Balance Quantity and Deliver to Stor es
Match Material Price
Is the Material to be Inspected
Dir ectly deliver to the Inventor y, Debit the consumable A/C
Save Receipt Note Down the Receipt No
Check Tax Str uctur e and Match with the Supplier Invoice
No
Cr eate r etur n to Vendor
Ready f or G1 Printing in r eceiving Section
Match Duty Value
No
Modif y the Duty Tax Value
Yes
Description :
Receipts are generated for all purchases at the SECURITYGATE of each organization/location when the material is received from the supplier. The supplier bill forms the basis for generating the receipt (GINOTE). The receipt can be for a stockable item , expense item, Inter-plant transfer or for other charges like labour / Maintenance charges etc (Amount based). The receipt is called as G1 ( before inspection) and G2 ( after inspection ) based on the inspection status.
24
Since the release number is not quoted by the supplier, the Vendor/Item is used to pick the PO lines while making receipt. The receipt quantity is checked with the PO and the appropriate line is selected. The receipt tolerance level is +/- 3 days for all suppliers, but the condition is set to µWARNING¶ only.
BILL MATCHING WITH PO: The bill is matched with the Purchase Order ( Customized µZOOM¶ option) and when there is a difference in PO Rate or Taxes it is sent to Material control department for verification by the buyers. If any PO amendment is required it is done immediately and then a receipt is made. If the Taxes alone are to be corrected, the receipt tax window is used to correct the taxes AFTER
making the receipt without amending the Purchase order.
The bill amount as per bill is entered in the customized flex-field and printed in the GINOTE for comparison purposes by the Payables department while making payment.
MODVAT CLAIM:
The MODVAT for excise duty is not claimed immediately on receipt and is done later after document verification by EXCISE department.
RECEIPT CORRECTIONS:
Receipt corrections are done where the Item code / Receipt quantity or PO Rate/Taxes are incorrect and need to be corrected before the item is inspected / delivered to subinventory. It is also done for short-shipments which is found during quality inspection. For amount based bills, there could be corrections even after delivery of items since there is no inspection of item. The pay-on-receipt process has been customized to pick the receipt only delivery and the receipt corrections are hence accounted in payables.
25
AFTER
RECEIVING TRANSACTION:
For items where inspection is required, Inspection is done by QCD department. The receiving transaction is updated with the accepted/ rejected quantity and receipt is closed. The items are delivered to Excisable and Non excisable subinventories with locator control. Rejected items go thru a second cycle of inspection and items which could be reworked are segregated and accepted again. Even though collection plans are defined for Inspection, it is not used in the system currently due to operational problems.
GI Rejection
G1
Rejection r ocess
QC Deptt. check the Quality with dimensional check sheet (taken fr om Legacy system)
Receipt (Receiving TRansaction)
Material Inspection is OK?
Yes
Accept the Quantity
No Cr eate Rejection ntr y (par tial / Full Quantity) (Quality Code not Used) Reason Code nter ed
Deliver the material to RecRejn Subinventor y (Claim Modvat on r eceipt to be taken)
Cr eate Retur n (It shows each Accepted Qty. and Rejn. Qty) (Select r etur n to Supplier)
xter nal
ntity
xter nal Pr ocess Non- Apps Document
Gener ate SRDO Gate Pass Repor t (Based on the Quality Collection Plan) Customized r epor t
Retur n to Vendor
Vendor
26
Deliver to Stor es
Line Rejection:
Line
Rejection 1. M/C Shop (Shop Floor) . ngine Assembly
Confir med by MCD Depar tment
Rejection
r ocess
Rework Is It Rework or Reject
Used in Pr oduction
Reject Scr ap Is It scr ap (machining def ect) or Vendor Def ect?
Move Stock to scr ap subinventor y
Vendor Def ect Entring the Qaulity Collection plan details of the def ect of the item (no validation fr om the r eceipt)
Move Stock to Venr ejn Subinventor y
Customized Repor t
Exter nal Entity
(Repor t taken which was accepted deliver ed, Modvat claimed Invoice paid)
Exter nal Pr ocess
Find the r eceipt number in which RTV has to be made
Non- Apps Vendor
Document
Cr eate Retur n ntr y (Select r etur n to supplier indicating excisable / non excisable in DFF)
RIDC / STORE Retur n to Vendor (CUSTOMIZED)
Payable Open Interf ace Impor t (CUSTOMIZED)
Run Debit Vendor Pr ocess
Gener ate Gate Pass f or xiting Material (Customized r epor t)
Retur n to Vendor
Description:
There are 3 types of rejections in Simpsons. G.I. Rejection Line
rejections
Store rejections G.I. Rejections are rejections where item is rejected during Quality inspection at Receiving stage.
Line
rejections occur during the assembling of engines in the Assembly
line. Store rejections happen in Central stores after stocking the items. G.I.Rejection:
For OE components purchase the suppliers are segregated into two groups. Self-certified suppliers and Not-Certified suppliers. For all non-certified suppliers, the quality control does a mandatory check of 13 parameters and items are accepted / rejected based on the results.
27
The rejected items are moved from the stores sub inventory to the rejected sub inventory and returned back to the vendors thru RTV process. The gatepass document (SRDO) for RTV has been customized to pick the rejection details from the quality collection plan. The collection plan is not integrated to receipt and is entered offline after the rejection happens and before the item is actually returned back to the vendors. The vendor is not debited in the system thru a debitnote ( in Payables) as the payment is made only for the accepted quantity. The bill transferred to payables thru Pay-on-receipt process is corrected to the extent of rejection based on the GINOTE details at the distribution level and corrected to the extent of rejection based on the GINOTE details at the distribution level and approved/paid for the accepted quantity alone.
Line rejections: Line
rejection happens at Machine shop or Engine assembly. The rejection are grouped
into R1 ( machining defect ) or R3 ( Supplier defect) based on the type of defect noticed. If it is supplier defect the item is returned to supplier and his account debited, otherwise the material is scrapped. The stock is moved from the ENGASSY / MACSHOP subinventory to the VENREJN subinventory in the system. Since a receipt is required to return the material, the latest receipt ( modvat claimed and payment also done ) from the supplier is selected based on a customized report and a RTV is entered against it. The debit-to-vendor process is customized process to create a debit note in Payables for the line rejected items. The nature of the defect is recorded for each item in the quality collection plan and the data is used to generate a Gatepass (RIDC) to return to the vendor and for monthly analysis also.
28
Store rejections:
Store rejection is booked for the entire stock of an item where a major problem is identified in the
Assembly
line and needs to be corrected immediately. The item is sent
back to the supplier thru the RTV process.
Outside Processing:
O P M nuf cturin Components / Rewor Process Outsi ers
OSP
Create OSP Item Create Resour ces Create Routings Create Alternative BOMs
for Manufacturing Components
Re uisition Impor t
Create Standard DIscrete Job (OSP Class)
Processed
in Pur chasing for IP Vendor
Find One Re uisition No. re uisition summary form
using
Create a standard PO through Autocreate
Maintain
Move
the OSP logical Subinv (for reconcilation purpose)
Invoice raised in AP
Completion Transaction
to last Operation
Transfer the stock from Nettable Inv to OSP Subinv
Select a labour rate from Quotation
Send for Approval
Inventory subtransfer to venrejn or scrap from OSP
Accepted
Approved PO Reject
Check for Acceptance / Reject
Move
to 20th Operation in IP
IP material transaction rejected uantity moved to OSP Stock Using
Reject
in
IP
Create receipt
Rejected
Quantity Moved from 20th Operation
Received at
Create, Approve 5 F(4) Despatch
Run
Ven or
Gate
Finished Product
5 f(4) Challan (customized)
Repor t
Material
Description:
Outside processing is used for machining some components like Crankshaft where the inhouse capacity is not sufficient to meet our Assembly demand or due to resource shortages at the machine shop. A
single manufactured item can have three sources , namely purchased, manufactured
and outside processed.
29
The OSP operation involves various pro cesses in four modules like INVENTORY, PURCHASE, WIP and BOM. The finished item is setup in the Item master with a special OSP definition which is used in the WIP module to create a discrete job for OSP operation. A standard P.O. is generated against the OSP vendor for the OSP item and when the finished item is received, the stock in OSP stock is reduced and finished good stock is updated. The raw material/forgings are sent to the supplier thru 57F4 do cument and the stock at the vendor is tracked thru the OSP sub inventory.The material is moved into OSP subinventory at the time 57F dispatch and material is supplied to the Supplier.When the finished product is returned from the supplier,the Material is account for in WIP pull operation.Until then there is no track of the material supplied to the supplier. There is a possibility of rejection of the processed finished goo d and there is no link between the WIP and Purchase module to raise a RTV for the casting supplier ( in case of material defect) .Internal Requisition (STV for PO,OE Modules )
S k
l
m
Maual Requisition Fr om concer n Or ganization
Is it a Bought out Or Mf g item
r ocess
Appr oval
m
n
/ E n
o
odule
Recieved fr om EDF
Bought out Send to Excise Dept For Item Price and Duty Tax Str uctur e
Mf g Send to Excise Dept To get the Assesable value of the item.Excise Dept Der vives the Price(Based on Pr oduction cost+116%)
Excise Dept finds the Latest Price Duty Thr u Repor t Pr ocess j
Attach the the assesable Attach assesable Price to the the the Price List PriceMaster to the Price List Master
Attach the the Price to the Attach Price to the Pricethe Listthe Master Price List Master
Inter nal Requisition Cr eated Inter nal Requisition in Sending Or g Cr eated in Sending Or g
Cr eate Inter nal Sale Cr eate Inter nal Sale Or der(Pur chasing) Or der(Pur chasing)
Impor t Sale Or der(OM)
Exter nal Entity
Tax Added Manually In Sale Or der Localization For m
Exter nal Pr ocess Pick Release Pr ocess
Excise Invoice Printing Pr ocess
Non- Apps Document
Ship Confir m Deliver y Pr ocess
Check Excise Invoice No in ship Confir m Localization Scr een
Excise Invoice
Description : Internal requisition is used to generate Internal Sale order (STV) for for transfer of purchased/Mfg item between ASP,SMP,PMD and KMP organization. This is done for Excisable items only.
For Non-excisable items Inter Org transfer is used. For KMP Internal sale order (STV) are generated for assembly engines. Hence all engine components are sent through STV.
For PMD, a separate bonded stock for Mfg goods items is maintained at SMP. Items are transferred to bonded sub-inventory from
ASP
and SMP. Sales is done from SMP-
bonded location, and documents are generated and sent to SMP from PMD location.
31
CHAPTER II 2.1. REVIEW OF LITERATURE
Joseph orlicky; George plossl:- Mrp is used to identify and solve specific problems in production, inventory control, purchasing, quality, information system, distribution and warehousing. Maps out all of the st rategies and techniques that affect mrp implementation which includes mrpII, just in time, total quality management. Provides enhanced coverage of master production schedule ,capacity requirements planning, and structure of bills of materials.
Heizer; render: Material resource planning (MRP) is the preferred way to Schedule production and inventory when demand is dependant. For MRP to work, management must have a master schedule, precise requirements for all components, accurate inventory and purchasing records and accurate lead lead times. Disribution resource planning(DRP) is a time-phase stock replacement technique supply chains based on MRP procedures and logic.Production should often be lot-for-lot in an MRP system, and replacement orders ina DRP system should be small and frequent, given the constraints of ordering and transportation costs. Both MRP and DRP when pro perly implemented, can contribute in aa major was to reduction in inventory while improveing customer services levels. These techniques allow the operations manager to schedule and replenish stock on a ³need to order´ rather than a simply time to order´ basis.The continuing development of MRP systems has led to the integration of production data with a variety of other activities, including the supply chain and sales. As a result we now have integrated database oriented Enterprise Resource Management Systems. These expensive and difficult to install ERP systems, when successful, support strategies of differentiation, response and costs.
32
CHAPTER III 3.RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN:
This study falls into the category of exploratory research as it is concerned with insights into and comprehension of an issue or situation. Here the issue is what is the effectiveness of mrp in the company and how effectively it is implemented. 3.2 RESEARCH INSTRUTMENT:
Questionnaire is the research instrument in this study. In this method a pre printed list of questions is arranged in sequence is used to elicit response from the employees in the purchase department. 3.3 QUESTIONNIARE DESIGN :
The structured questionnaire for the employees in purchase department was framed with following types of questionnaire open ±ended, multiple choice and ranking type of questions. 3.4 SAMPLING DESIGN: 3.4.1 Type of universe
The sample taken for this study comprises of employees of purchase department of simpsons & co ltd. Due to time constraint, it was impossible to cover the entire employees of the company. 3.4.2 Sample size
Sample size for the study has been restricted to 20 employees pertaining to purchase department of the anna salai plant. 3.4.3 Sampling technique
Sampling design chosen for the present study has been convenience sampling.
33
3.5 DATA COLLECTION
Data has been collected from the respondents by mostly meeting them personally in the company.
3.5.1 Source of Data Primary Data
The primary data is collected through questionnaire and discussions with company guide. Secondary Data
The secondary data is collected through company journals and websites. 3.6 PERIOD OF STUDY
The period of this project is 2 weeks includind data preparation and report preparation.
33
CHAPTER IV 4.1. Findings The major finding of the study from the analysis is that the company has received only positive response from the employees of the purchase depart ment and most of them are satisfied with the effectiveness of the material requirement planning system.
Most of the employees are in the age group between 25 to 30.
Majority of the employees in the purchase depart ment are male.
All
the employees in the purchase department are either B.E mechanical
graduates or diploma holders.
Blanket release is presently done on a daily basis.
In purchase order the rate is not enterable. It is always be selected from quotation.
There are many quotations for a single vendor that is different quotations for different items.
When rate is changed in the Purchase order the tax portion is not updated automatically.
While creating Standard Purchase Order , in the Price breakups window, the quantity is defaulted as '0' instead of '1'.
Some vendors reset their Bill (Shipment) number every financial year leading to duplicates in the system.
Excise duty accounting goes to AP Accrual Accounting.
Some of the items are not coming in the Blanket Purchase order. 34
It is found that employees find it convenient to obtain information from the MRP system.
It is also found that MRP system improves their job performance .
35
4.2 Suggestions
Presently blanket release is done on a daily basis
that is daily how much
components need to be supplied by the vendor Weekly bucket can
be
implemented as it reduces the work load and time.
In Purchase order rate is not enterable, so the rate is selected from the quotation and this needs to be implemented in oracle 12i system software. Some items are not coming in purchase order, So those items should be added and the purchase order is amended.
There should be One quotation for One vendor. The quotation may contain multiple items. However the same item should not be repeated with a different price. One quotation to be made available to both Sembiam plant and Anna Salai plant.
Tax proportion is not updated automatically, so the tax screen is to be opened and the tax portion has to be updated.
In standard purchase order the quantity is defaulted as 0, it should be changed 1,If it is not changed to '1' then the receipt value will be ZERO. For each receipt generated, the GINOTE document to be printed immediately as a concurrent request automatically.
There should be a option to re-print the GINOTE offline too. Currenty it is customized and it should be carried over to Oracle 12.1.
The employee has to enter the year as a suffix (/04) while making receipt every time. Receipt form should be customized to suffix the year for all bills automatically. 36
The step creation of Internal Sale Order, Import Sale Order,
Attachment
of taxes
can be clubbed together as a requisition set so that the work shall be reduced to high level.
Currently communication is done through phone, if electronic data interchange is implemented, all dealings and transactions will go automatically to the email of the vendor and the customer .
.
37
4.3 Conclusions
The changing patterns of communication and system needs to be analyzed periodically to serve the customers better. The study provides an insight into the major points of the employees which needs to implemented in order to make the material requirement planning effective. Now a days what customer wants is quality product and that too the product should be produced within a short spam of time. So if the material requirement planning is implemented properly and effectively, product of the desired quality will be achieved and customers will be satisfied. Thus it is found out that if material requirement planning is implemented effectively, it will reduce the work load of the employees and increases their job performance.
38
BIBLIOGRAPHY
Websites :- www.proquest.com www.google.com www.simpson.co.in y
International journal of material requirement planning
y
International journal of management
y
Journal of current issues and research in MRP
39
ANNEXURE Dear sir/madam,
I am kishore.p MBA from st.joseph College of engineering.I am doing my summer project in a title ³EFFECTIVENESS OF MATERIAL REQUIREMENT PLANNING (MRP) OF PURCHASE DEPARTMENT IN SIMPSON & CO Ltd., Chennai.´Hence I request you to spare your valuable time in answering this questionnaire. ««««««««««««««««««««««««««««««««««««
1.Name of the employee-_______________________
2.Designation-___________________________ 3.Education a)diploma
b)graduate
c)post graduate
d)school level
4. How many people work at your plant site? a)less than hundred people b)between 101 to 300 people c)between 301 to 600 people d)between 601 to 1000 people
5. Does your company currently have or is your company currently implementing a MRP (Manufacturing reqiurement planning) a)yes b)no
6. How many different unique computer application packages are currently used to monitor, schedule, plan, and report the status of manufacturing production processes within your facility or operational division?
(a) 0 (b) 1 (c) 2 (d) 3 (e) 4 7. In what year did your company first install a MRP system? ________________
8. What is the accuracy of the following types of data in your MRP-type system? 40
Poor ( 0-80 %)
Fair
Good
Excellent
Not
( 81-90 %) ( 91-95 %) (96-100%)
1.inventory record 2.BOM record 3.market forecasts 4.master production schedule 5.Production Lead Times 6.Vendor Lead Times 7.Shop Floor Control Data 8.Capacity Plan
9. Please answer the following group of questions by circling the number at the right of each question 1 = Strongly Agree (SA) 5 = Disagree Somewhat (DS 2 = Agree (A) 6 = Disagree (D) 3 = Agree Somewhat (AS) 7 = Strongly Disagree (SD) 4 = Do not Agree or Disagree (N) 1. The information available in your MRP system is relevant ± 1 2 3 4 5 6 7 for making decisions.
2. It is convenient to obtain information from your MRP system. 1 2 3 4 5 6 7 3. Your MRP software is reliable. - 1 2 3 4 5 6 7 4. You are able to do a more effective job than you would - 1 2 3 4 5 6 7 be able to do without your MRP system. 5. Using your MRP system improves your job performance.- 1 2 3 4 5 6 6. Using your MRP system improves the performance of your- 1 2 3 4 5 6 Organization. 7. Your MRP software is not dependable.- 1 2 3 4 5 6 7 8. The use of your MRP system improves the control over - 1 2 3 4 5 6 7 your organization¶s assets such as inventory, and accounts receivable.
41
7 7
