Order Point Problem

The EOQ technique determines the size of an order to acquire inventory so as to minimize the carrying as well as the ordering costs. In other words, the EOQ provides an answer to the question: how much inventory should be ordered in one lot?

The reorder point is stated in terms of the level of inventory at which order should be placed for replenishing the current stock of inventory. In other words, reorder point may be defined as the level of inventory when fresh order should be placed with the suppliers for procuring additional inventory equal to the economic order quantity. It is based on the following assumptions: (i) constant daily usage of inventory, and (ii) fixed lead time. In other words, the formula assumes conditions of certainly.

The recorder point = Lead time in days x average daily usage of inventory 4. Safety Stock

The safety stock as the minimum additional inventory to serve as a safety margin or buffer or cushion to meet an unanticipated increase in usage resulting from an unusually high demand and or an uncontrollable late receipt of incoming inventory. The effect of increased and/or slower delivery would be a shortage of inventory. The delay may arise from strikes, floods, transportation and other bottle necks. That is, the firm would face a stock-out situation. This, in turn, as explained in

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detail below, would disrupt the production schedule and alienate the customers. The firm would, therefore, be well advised to keep a sufficient safety margin by having additional inventory to guard against stock-out situations. Such stocks are called safety stocks. The safety stock involves two types of costs: (i) stock-out, and (ii) carrying costs.

FINDING:

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Suggestion

As we study the inventory management system of Mahindra & Mahindra co.Ltd. We can give few suggestions regarding the management control which increase the production and reduce the lead time to some extend of that company-

1. Emphasis is placed on minimizing the setup time & manufacturing lead time for each limit. This is the time from when a product is ready to start on the production line to when it become a finished good producing to demand often means manufacturing small quantities on product producing small batches is economical only if setup time are small.

2. The production line is stopped if parts are absent or defective work is discovered. Stoppage creates an emergency about correcting problem that causes defective units.

3. This production limit consists of large amount of scrap which is the root cause of the manufacturing unit. So the firm should emphasis on eliminating these causes. So that wastage should not occur & that will reduce the lead time of product.

4. The reorder point is the quantity level of inventory that triggers a new order.

It equals the sales per unit of time multiplied by the purchase-order lead time.

Safety stock is the buffer inventory held as a cushion against unexpected unavailability of stock from suppliers.

Limitations:

1. All the programs are going under SAP System so there are the limitations regarding the analysis of the data without user of that company only.

2. As inventory management is the vast topic it required lot of time to

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3. Some time respondent was busy because of that information regarding project work will not available as soon as possible.

4. Non availability of data and transit or lead time is not fixed..

INTRODUCTION

Planning is the basic managerial function. It helps in determining the course of action to be followed for achieving organizational goals. It is the decision in advance what to do, and when to do, and who will do the particular task? Plan is made to achieve best results. Control in the process of checking whether the plans are being adhered to or not, keeping the record of process, comparing it with the plans and then taking corrective measure for future if there is any devotion. Every business enterprise needs the use of control techniques for surviving in the highly competitive and managing economic world. There are various control devices in use .budget are the most important tool of profit planning and control. They also act as an instrument of coordination.

A budget is a detailed plan of operations for some specific future period. It is an estimated prepared in advance of the future period to which it applies. It acts as a business parameter. It is a complete programme of activities of the business for the period covered.

According to Gordon and shilling law budget may be defined as A redetermined detailed plan of action developed plan of action developed and

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distributed as a guide to current operations and as a partial basis for subsequent evolution of performance

The chartered institute of management accountants, London, defines a budget as A financial and/or quantitative statement, prepared prior to a defined period of time, of the police to be pursued during that period for the purpose of attaining a given objective .

Different types of budget are prepared by an industrial concern for different purpose. A sales budget is prepared for the purpose of forecasting sale for the future period. A manufacturing cost of budget is prepared for forecasting the manufacturing costs. The master budget embodies forecasting the figure of profit or loss.

Control means, some sort of systematic effort to compare current performance to the predetermined plan or objective. Presumably in order to take any remedial action required this is a very general definition of term. However as the management function, it has been defined as The process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of organizations goals.

Management control process involves two separate but closely related activities planing and control. Planning means deciding what it is to be done and how it is to be done control is assuring that desired results (which may be different from the planned onces on account of change in circumstances) are attained. Budget is

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simply a plan of action hence the technique of budgetary control is an important tool of managing control.

The chartered institute of management accountants, London, defines budgetary control as The establishment of budget relating to the responsibilities of executives to the requirement of the policy, and continuous comparison of actual with budgeted results, either to secure by an individual action the objective of the policy or to provide a basis for its revision. According to the J.A.Scott, it is the system of management control and according in which all operation are forecasted and so for as possible planned ahead and the actual results compared with the forecasted with the forecasted and planned one.

In today s completive world, without proper planning and control over the expenses no company can survive. Profit can be maximized by increasing sales, which depends upon the external factor like market condition, demand, competitors etc another way to increase profit is to decrese cost (profit=sales-total cost). But for decreasing cost proper control system should be an action .with the help of proper budgetary control system maximization of wheat of shareholder is possible. And for company like m & m which comes under farm equipment sector comparison of actual with budgets and taking remedial major for division is must do job. Termined

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