executive summary

Rajagiri Business School

Executive Summary


The project deals with the detailed study about the Finished Goods Inventory at Apollo

Tyres Ltd, Perambra. The company at Perambra unit has been facing the problem of having

excess inventory of tubes and flaps when compared with tyres. The Perambra unit produces only

tyres and they acquire tubes from their own subsidiary company named Classic Auto Tubes,

Pune and flaps from approved suppliers. The allotment of tubes and flap to the Perambra unit is

done at Head Office level and at times these incoming stocks exceed the required level of

inventory at the plant. This leads to the situation where there is excess stock of tubes and flaps at

the warehouse and results in stock being held idle.

The company should take proper control over the finished goods inventory and in the

transfer of tubes and flaps from company’s own subsidiary tube plant and other suppliers so as to

avoid the excess inventory. The tyres are being produced based on the monthly production plan

which is given from the Head Office. The possible combinations of tubes and flaps for the tyres

produced were analyzed and the actual stock of tubes and flaps stored in the company were

observed. Based on the monthly production plan the actual requirement of tubes and flaps are

known. The disparity in the level of inventory stored and actual required level were found out.

An information system can help to overcome this problem. Information system is created

using Excel and by entering the tyre stock detail the system will displays the actual requirement

of tubes and flaps. Managers or the person who operates the system can take a decision about the

number of tubes and flaps required to be stored in order to opitmise the finished goods inventory.


Introduction


This project has been done on “Management Information System for Optimising

Finished Goods Inventory” in Apollo Tyres Ltd, Perambra. It is the mother plant of Apollo and

it has the reputation of being the 6th fastest growing company in the world because of the goal

orientation and clear vision of the top level management. Vehicle transport has become a part of

our day to day activities. The growth of transport sector has become linked to economic

development of a nation. Tyre thus plays an important part in economic development.

Inventory for any manufacturing or business firm is an important part that needs

attention. The actual reason why people keep inventory is to protect themselves from the day to

day fluctuations in the market. The uncertainty of the future is the fear that makes people to hold

on or save something for the future. The concept of inventory in any industry is also the same. So

it is like higher the inventory, the less chance of noticing any of the fluctuations. So it actually

means keeping an inventory avoids from any of the fluctuations from being any kind of

immediate problem for the company or firm.

Inventory helps the firm to sail smoothly and continue with the day to day activities. It is

similar to boat sailing in high tide instead of low tide. In high tide the rocks in the water won’t be

seen and the sailor can sail smoothly. In low tide the rocks are visible and if the sailor is not

careful he may end up in sinking his boat.

According to Motorola’s Six Sigma the very concept of inventory is waste. Why do they

consider so? Since keeping a higher inventory will always help in smoothening the company’s

activities; why inventory is considered to be waste? The reason is simple. Stocking of Raw

materials for predetermined period involves investment. That much money of the firm is being

locked in those materials. So the same money that could be used in other productive purposes is

being used to store materials as safety for emergencies that may happen for future. Keeping a

high inventory is blocking the firm’s working capital. It is due to this reason inventory is

considered to be a waste. It is based on this concept that systems like Just-in-time have arisen;

where materials arrive in the right moment, when it is needed for production.


Industry Profile


There was a time when a tyre used were a piece of rubber placed at four corners of one’s

vehicle. But the scenario is quite different now. Tyres now hide chips in their bellies. The key

milestone in the history of tyres is the invention of the wheel by the Sumerians 5000 years ago it

was refined over the ages. In 1946 R.W.Thomson invented the pneumatic tyres of modern age

and by this the tyre industry has grown to one of the largest industries in the world. Most modern

technologies like steel radial tyres have added a lot in tyre industry and now it is experiencing

rapid improvement with the advent of more and more technologies. A tyre is an annual round

shaped part made up of elastic material forced by textile material and tightened by metal rings.

Geometrically it is a torus, mechanically a pressure container, chemically a composition of long

chain macro molecules usually different types of rubber, chemicals, fabrics etc. which holds air

that carried the load of the vehicle with which it is attached to.

International Scenario

The world tyre industry is worth around US$ 85 billion. The industry is marked by the

presence of around half a dozen major players who together occupy 70% of the world market

share.

Market Share (International) Table 1

COMPANY MARKET SHARE

Michelin

Bridgestone

Goodyear

Pirelli

Continental

Sumitomo

Yokohama

Kumho

Others

20.1%

18.4%

16.9%

10.1%

04.9%

03.9%

03.5%

01.7%

20.5%

Source: CRISIL


Indian Tyre Industry

The Indian tyre industry dates back to 1930 when multinationals like first one Goodyear

and Dunlop entered the market. MRF, Premier and CEAT at various locations in the country

carried out the domestic production of the tyres.

The tyre industries were classified under three heads. The first generation industries viz,

Dunlop and firestone (new Bombay tyre international limited) were setup in the last 30’s and

early 40’s. The second generation companies then come up in 60’s are MRF Tyres, CEAT,

Goodyear Tyres and Premier Tyers. The third generation companies that were setup in 70’s are

JK Tyres, Vikrant Tyres, Apollo Tyres and Modi Rubber.

The first Indian company Dunlop Rubber company was incorporated in 1926. The tyre

industry is growing rapidly and today its turnover is 1, 50,000 million and earning an income of

Rs.3500 crore per annum for exports. If you consider the total cars that exist in the market and

the new cars that arrive in India; you can see that there exists a vast potential for tyre industry in

India. But the tyre industry is highly sensitive to market fluctuations. Most of the raw material

involved in the production of tyres like rubber and other petrochemicals etc have highly

fluctuating prices. The raw materials constitute 70% of the cost of production. So tyre industry

has to adapt itself to these volatile fluctuations.

The tyre industry has witnessed a CAGR of 11% over the last decade mainly fuelled by

the strong growth in the domestic auto industry. The tyre industry’s growth is dependent on

many factors like agricultural and industrial performance of the economy, the transportation

needs and the production of vehicles. The tyres produced consist of a combination of natural

rubber and synthetic rubber. The combination of both generally in terms of natural rubber to

synthetic worldwide is 30:70, but in Indian context it is 80:20. That’s why natural rubber

constitutes 25% of the total raw material cost of the tyres.

The industry is highly capital intensive, as it requires around Rs 4 billion to setup a radial

tyre plant with a capacity of 1.5 million tyres and around Rs 1.5-2 billion for a cross ply tyre

plant of a capacity to manufacture 1.5 million tyres.


The profitability of the industry has high correlation with the prices of key raw materials

such as rubber and crude oil as they account for more than 70% of the total costs. The raw

material to sales ratio in the industry is around 65%.The industry has high entry barriers because

of its capital intensive nature and low operating margins. With demand increasing at a steady

pace, the industry is expected to go through a consolidation phase.

The industry is dominated by four players viz MRF, Apollo Tyres, JK Indutries and

CEAT and enjoys more than 70% of the total market share. The fortunes of the industry are

linked to the trend in the domestic auto industry, rethreading, trend in road transportation and

spending on road infrastructure. The companies have lined up further expansion plans to meet

the increasing demand.

Market for tyres can be broadly classified or segmented into 3 categories.

Original Equipment Manufacture

Replacement Market

Export Market

The major segments are Truck, Bus and Car tyres. Value share of truck and bus segment

is about 73%. Replacement market forms largest segment about 58%, OEM is about 22% and

export market for about 5%.

Indian Tyre Industry in 2008-09 Table 2

Industry turnover Rs.22500 crores

Total number of companies 43

Industry capacity utilization Estimate of 89%

Major players MRF, JK, APOLLO Tyres and CEAT

Source: www.apollotyres.com/corporate


Salient Features of Indian Tyre Industry

Adaptability and Absorption

Exports

Innovations

Indigenous and ready availability

Technology progression

Wide product range for diverse usage

Self sufficiency and vibrant marketing setup

Indian Scenario

Indian tyre industry comprises 12 major companies, 13 minor companies and 34 minor

plants manufacturing low technology products such as small tubes and flaps. There are top

players in this field having 69% of market share.

Market share (India) Table 3

COMPANY MARKET SHARE

MRF

JK

APOLLO

CEAT

BIRLA

GOOD YEAR

OTHERS

23%

14%

21%

16%

6.0%

10%

10%

Source: CRISIL


Ranking of Indian Tyre Companies on the Basis of Production Table 4

1. MRF TYRES LIMITED

2. APOLLO TYRES LIMITED

3. CEAT TYRE LIMITED

4. JK TYRES LIMITED

5. GOOD YEAR TYRES LIMITED

6. BIRLA TYRES LIMITED

Source: CRISIL

Sector Trends

Cross ply tyres has been used in India for several decades. In these tyres, the ply cords

run across each other or diagonally to the outer surface of the tyre and nylon tyre cords are used

as the reinforcing medium. These tyres can be rethreaded twice during their life time and are

hence preferred by Indian transport operators who normally overloaded with double the capacity.

Moreover one also has to content with suspensions and bad road conditions. No wonder, 95% of

the tyre used in India is cross plies.

Radial tyres have their cords running rapidly from bead at 90 degrees angles to the rim or

along the outer surface of the tyre. The reinforcing mediums used in these are polyester, nylon,

fiberglass and steel. Hence these tyres are 40% more expensive than cross plies. But they have a

longer life and provide lower fuel consumption. The unhealthy condition of the Indian roads has

resulted in radial tyre accounting for only 5% of the tyre industry as against a global trend of

60% with two-third of all major tyre manufacturers being reserved for radials, this is a real cause

for concern.

Outlook

Globally the OEM segment contributes only 30% of the tyre exports and the balance

from the replacement market. In India, the scenario is quite different. Nearly 85% of the total

tyre demanded in the country is for replacement. This has placed the re-traders in a better

position than the tyre manufacturers. Re-trading is booming over the tyre industry as a colossal

threat.


Indian tyre exports cater to over 40 countries. Over 30% of the country’s exports are

going to the US. As far as exports are concerned, the demand in the export market is a function

of factors such as exchange rate of domestic currency against US Dollar, the export benefits to

the Indian tyre industry, Cost competitive of other major exporting countries and the subsidies

granted by respective governments.

The exports and the average exports prices of bus, truck and LCV tyres from India are

under threat from the cheaper Chinese exports. The improved performance of Chinese tyres

coupled with 40-50% lower prices is threatening the market share of Indian companies in the

export market. The industry is also facing severe threat of dumping of cheap tyres from South

Korea. Another threat to the industry is the price of its raw materials. Most of which are

petroleum by products. Carbon, synthetic rubber and nylon tyre cord are offshoots of

petrochemicals. Thus the future of the industry will swing with the supply of crude oil.

The biggest threat will be from global majors like Bridgestone and Michelin, which

control 36% of the global tyre market. The vast growth potential of the Indian market is

becoming them towards India. The industry is driven more by volume than by margins and each

of the big five in the global tyre industry; Continental, Michelin, Goodyear, Pirelli and

Bridgestone generate an annual tyre production equivalent to the total demand of the Indian

market. These MNC have deep pockets and can easily withstand losses for 2-3 years; there

financial muscles also permit them to invest in R&D, which is beyond the average Indian tyre

manufacturer.

Details of the Competitors

MRF

A leading company in the tyre industry, MRF Ltd. boasts of an enviable track record. The

company has continued in the same vein and has been posting excellent results, notwithstanding

the winds of recession blowing across the economy. Performance of the company has been

commendable in light of the fact that the user industry is facing a slowdown. The company has

benefited from better productivity and operational efficiency. The company caters to a host of

impressive clients. It has signed on to be the sole supplier for auto giants like General Motors,

Fiat and Ford in India. The company is also renowned for its exports, which have also been


witnessing positive growth. The company has recently entered the radial tyre segment and has

met with positive response. The performance of the company could further improve with the

revival of the auto industry. Thus, MRF Ltd. can be expected to retain its position in this

segment. However, investors can move out of the scrip, considering the outlook for the industry

as a whole.

CEAT

Being the second largest selling brand in India with a market share of 16%, CEAT caters

primarily to the replacement market. Due to the strong growth in the OEM sector, the share of

the replacement market in the total revenue of the company has fallen. However, the production

growth in the automobile sector over the past few years should provide a boost to the

replacement market in the coming years and CEAT could be a major beneficiary thereof. With

the advent of multinationals like Goodyear, Michelin, Bridgestone and Continental, a major

shakeout in the industry is imminent and the same could result in CEAT, which is already

operating on thin margins, being hived off as a joint venture with Goodyear, in collaboration

with which CEAT has already promoted South Asia Tyres for manufacturing radial tyres in

India. With a modest track record on the financial front, the forthcoming may not be

encouraging.


Company Profile


Apollo Tyres Ltd is US$ 1.2 billion, high performance company that makes India’s most

reliable tyres. Apollo is built around the core principles of creating shareholder value through

reliability in its products and dependability in its relationships with its stakeholders. The

company has a network of over 4000 dealerships in India, of which over 2500 are exclusive

outlets under the brand name ‘Apollo Tyre World’. In South Africa, it has over 900 dealership,

of which 190 are Dunlop Accredited Dealers. The history of Apollo as a company goes back to

the early seventies, when hard-nosed MNCs and Indian tyre majors dominated the tyre industry.

Despite incurring heavy losses in the initial years, mainly due to the fact that all tyre majors in

those days had high production capacities as compared to the market demand, Apollo came back

as a strong player backed by strong production and marketing strategies. Thanks to its state-of-

the-art technology, goal-oriented people and clear, adventurous vision of the top management,

Apollo is today, a name to reckon with, not just in the nylon, but also in the radial tyre segment.

It has got nearly 6364 employees.

Apollo Tyres Ltd is incorporated and registered in the year 1972. The commercial

production process started on March 1977. The corporate office of Apollo Tyres Ltd situated in

Gurgaon, Haryana and the registered office at Cochin, Kerala.

During the first stage, it had faced losses. But since 1982, the controlling power came to

Onkar S Kanvar, son of Raunaq Singh. A team under Onkar worked hard and their strategic

policies helped Apollo Tyres to reach this position. Since 1982 Apollo Tyres has been started to

making profit. Now Apollo Tyres is the market leader in the truck tyre segment, with 30%

market share.

The Perambra unit has the production capacity of 308 tonnes per day in 2010. The

Perambra plant provides employment to 2500 regular workers and around 1500 contract

workers. The growth rate of last 5 year has been 29%. The main competitors of Apollo Tyres Ltd

are MRF, CEAT, JK Tyres. Apollo Tyres had acquired Dunlop Tyres International Ltd, South

Africa in 2006. The first tyre introduced in India was Dunlop Tyres. It is one of the pioneering

tyre manufactures in the world.


Financial Year 2009-2010(April-March) vs. Financial Year 2008-2009

The revenues of the company have gone up from Rs.903.26 crore in Q3FY09 to Rs.1323.43

crore in Q3FY10 showing an increase of 46.52%. The operating profits also increased by 289%

from Rs.52.66 crore same quarter last year to Rs.205.10 crore in Q3FY10. The net profit of the

company increased from Rs.5.51 crore in Q3FY09 to Rs.102.03 crore in Q3FY10 showing a

growth of 1751%. Operating profit margin increased from 5.83% in Q3FY09 to 15.50% in

Q3FY10 and the Net Profit Margin increased from 0.61% to 7.71% in Q3FY10. The EPS of the

company rose from Rs 0.11 in the same quarter last year to Rs.2.02 in Q3FY10, Rs.6.85 (TTM

standalone).

History of Apollo Tyres Ltd

Apollo Tyres Ltd was registered and incorporated in 1972. The license was first given to

ruby rubber works to start a tyre factory at changanassery. In 1975 Raunaq group of companies

under chairmanship of Mr.Raunaq Singh purchased the license from Ruby Rubber works. It is

one of the flagship companies of the Raunaq Group. The unit at Perambra in Thrissur has been

enjoying the status of mother plant of Apollo Tyres Ltd. A new milestone of Apollo tyres laid

down by the collaboration with Michelin Company as Michelin Apollo Tyres Ltd in pune.

The company has started its operation in 1977 with commercial production of tyres, tubes

and flaps with licensed capacity of 4 lakhs tyres and an initial outlay of Rs 36 crores. At the

initial stage there was repeated lockouts and labour unrest. These problems were solved by

changing work force, introduction of new machineries and reducing man power. Trade unions

contribute a lot for solving problems related to production. The Govt. of India ministry of power

recognized in energy conservation and management on 14th December 2003 at New Delhi by the

honorable Union minister for power.

Vision

By giving total satisfaction to the customers and increasing share value, acquire a

predominant position in the Indian tyre industry, and to become a well known player in the

International Tyre manufacturing industry.


Company Profile

Incorporated & Registered 1972

Year of establishment 1975

Business Manufacturing and marketing

Automobile tyres, tubes and flaps

Commercial production started 1977, March

Installed capacity (1977) 54 tonnes/day

Present capacity 308 tonnes/day

Revenue 898.427(USD in Millions)

Head office 7 Institutional Area, Sector – 32

Gurgaon, Haryana – 122001, India

www.apollotyres.com

Affiliated factories S. Kumar- Indore

TCIL- Kolkata

Stallion- Hyderabad

Chairman and Managing Director Mr. Onkar S Kanvar

Chief Operational Officer Mr. Neeraj Kanwar

Company Secretary Mr. P. N. Wahal


Difference between radial and cross ply tyre

Tyres are basically of two types – cross-ply and radial. In cross-ply tyres, nylon or rayon

tyre cords are arranged diagonally across. In radial tyres, polyester, nylon, fiberglass or steel

cords are arranged perpendicular to the circumference. Radial technology is an improvement

over cross ply. Radial tyres are long lasting and have lower incidence of flats. Radial tyres are

10-15% costlier compared to the cross-ply ones. They can be differentiated on the type of belt

used – fiberglass, steel and nylon. Worldwide, steel belted radials are most popular owing to

their supervisor performance. Radial tyres provide certain advantages like better vehicles control

and road holding, longer life and lower fuel consumption. Within the tyre industry the trucks and

buses ( T & B) segment, which accounts for more than 70% of sales is most critical.

Production standard

Apollo Tyres Ltd was following QS 9000 till 2006. Presently Apollo Tyres Ltd has been

following TS 16949, an internationally accepted standard.

Objectives

Strong brand equity

High volume, high market share, cost effectiveness in all segments

High quality technologically superior products

Competitive advantage

Consistent production through harmonious industrial relation

Achievement of customer delight through bench marketing global practices by efficient

parameters

Quick response for market needs

Become market or business focused through forward looking agents.

High consumer loyalty

Strengthen supply chain management

To enhance companies shareholders value


Milestones

1972 – The company’s license was obtained by Mr. Mathew T Marattukalam, Jacob Thomas and

his associates.

1974 – The company was taken over by Dr.Raunaq Singh and his associates.

1975 – April 13, Perambra plant foundation stone was laid down.

1976 – Apollo Tyres Ltd was registered.

1977 – Plant commissioned in Kerala with 49TPD capacities.

1982 – Manufacturing of Passenger Car Radial Tyres in Kerala.

1991 – The second plant commissioned in Baroda.

1995 – Acquired Premier Tyres Ltd. in kerala.

2000 – Exclusive Radial capacity established at Baroda.

2003 – Radial Capacity expanded to 6600 tyres per day.

November 17, Joint Venture with Michelin

2004 – Launch of Apollo Acelere- ‘ H’ speed rated car radials.

2005 – April 13, Perambra Plant completes 30 years

2006 – January 30, Dunlop South Africa is acquired; it has crossed 3000 crore mark.

2008 – Announced a Greenfield manufacturing unit in Chennai, Tamil Nadu with initial capacity

of 213 tonnes.

2009 - Apollo acquired Vredestein Banden BV in the Netherlands which has a high end passenger car tyre manufacturing facility and extensive access to the European market.

Turnover of Apollo Tyres Ltd in consecutive years Table 5

YEAR TURNOVER (in crores)

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2656.81

3002

3234.25

3576.31

3929.81

4367.25

Source: Annual Report (ATL)


Manufacturing units

Perambra

Baroda

Pune

Kalamassery

Chennai

Core values

The one word that symbolizes all that company believe is, CREATE

C – Care for Customers

R – Respect for Associates

E – Excellent through Team work

A – Always Learning

T – Trust Mutually

E – Ethical Practices

Apollo’s key differentiators

Superior product quality

Committed marketing team

Quick response to market need

High consumer loyalty

Product segmentation in truck tyre

Strong brand quality

The company provides safety and health for its workers. For this it facilitates Full time

doctor, Ambulance, Dispensary, Medical checkup etc. the company also provides eco friendly

surroundings and a free work practice.


Product profile Table 6

Products Brands

Truck

Apollo Loadstar Super Hercules Loadstar Super Loadstar Super Gold XT 7 XT 7 Haulug XT7 Gold XT-9 XT-9 Gold

Champion Champion DXL Champion Gold Amar Amar Deluxe Amar Gold Amar AT-Rib

Kaizen 50 L 36 L Commando XDT

27 L 77 R 99 R Plus

Light Truck

Loadstar Super Amar Deluxe Amar Gold XT-9

XT-9 Gold Duramile Milestar Champion

Passenger Car

Car Radials Tube Type (Amazer XL

Quantum) Tubeless Radials

4x4 Radials Hawkz Storm

Amazer XL

Alloy Wheels Haste Torque Nirvana Frost Quest

Inspire Slay Multispoke Sphere Cinco


Tubeless Radials Acelere Amazer XL

Hawkz

Conventional Tyres (Bias Tyres) Car Armour Panther

Jeep Gripper Maha Trooper

Farm

Pure Cultivation Segment Sarpanch Krishak Super

Pure Haulage Segment Powerhaul

Mixed Application Bias Segment Krishak Premium

Mixed Application Radial Segment Farmking

Jeep Gripper Maha Trooper


Organization chart


Research Design and Methodology


Problem Statement

Apollo Tyres Ltd is a public limited company and the study focuses on the tyre

manufacturing plant of the Perambra unit. As the part of globalization, modernization and

liberalization, the present market becomes more competitive. Due to this every organization tries

to reduce its cost and to increase its quality to acquire market. But Apollo Tyres Ltd, Perambra

has been facing a problem with the finished goods inventory. There has been a lot of difference

in the numbers of tubes and flaps stored in the Finished Goods Stores when compared with the

tyres. This study has been carried out to look into this problem.

Significance of the Study

The inventory system which is being followed in Apollo Tyres Ltd is a fairly robust one.

The problem in the warehouse due to excess inventory leads to increase various costs. The

company should take proper control over the finished goods of the company and in the transfer

of tubes and flaps from the company’s own subsidiary tube plant. There is a scope of reducing

the excess inventory and there by handling cost by developing an efficient management

information system.

Title

“Development of Management Information System for Optimising Finished Product Inventory at

Apollo Tyres Ltd, Perambra”

Objectives of the Study

Primary Objectives

1) To determine the requirement of tubes and flaps for optimum inventory.

2) To ensure adequate inventory levels by avoiding over-stocking and under-stocking of

inventories.

Secondary Objectives

1) To know the various functions or activities of Finished Goods Stores department.


Scope of the Study

The study was conducted in Apollo Tyres Ltd, Perambra which is called as the Mother

plant. The time frame of the project was from 05th April 2010 to 31st May 2010. The study has

been strictly concentrated on the operations of the store. In this the main area of study was on

Finished Goods Stores and the problems faced by them.

Research Design

The type of research is exploratory.

Methods of Data Collection

1. Primary sources

2. Secondary sources

Primary sources

Primary data was collected from management and staff of Finished Goods Stores

department by direct interview and observation.

Secondary sources

Secondary data were collected from company profile, annual report for five years and

internet.

Limitations

1) The study was that it was restricted to the finished goods stores alone.

2) The information system generated was in Microsoft Excel. However there is a possibility

of generating the information system by using separate software.

3) The information system is built on the basis of monthly production plan which is called

as ‘ticket’. Little modification is required in the information system for every month as

the ‘ticket’ may change for each month.

4) Some of the information pertained to the project was available only at the Head Office.


Analysis and Interpretation


The study pertained to the finished goods stores of Apollo Tyres Ltd at Perambra. A

finished goods store is an area set aside into which all the items after production and final

inspection required for sale or distribution are received, where they are housed for safekeeping,

and from which they will be issued as required. All the tyres after final inspection are transferred

to the warehouse cage. From the warehouse cage they are transferred to the loading bay for

dispatch or they are transferred to the finished goods store (FGS) for the storage. FGS is the

place where all the tyres, tubes and flaps are stored for future sales. Finished goods inventory for

any manufacturing or business firm is an important aspect that needs attention. The actual reason

why people keep inventory is to protect themselves from the day to day fluctuations in the

market.

Apollo Tyres Ltd, Perambra has a well functioned finished goods store department to

effectively de-link operations from marketing so that operational efficiencies are maximized

without causing any sales opportunity loss.

Finished goods stores hierarchy

Figure 9

Division Head-Commercial

Group Manager - FGS

Associate ManagerSenior Officer

Executives Executives Executives Executives

Senior Officer

Division Head - SCM


The FGS follows First In First Out system (FIFO). That means the first batch of tyres

which is taken to the warehouse for storing has to be taken first for dispatch. The objective of

this system is to reduce the age of tyres when it reaches the final customers. Also this system

allows proper handling of the tyres while it is at FGS. The system ensures the quality of the tyres

is not degraded due to storage

For the FIFO system to be implemented, finished goods store is split into small zones.

Each zone is provided with location number. The different zone is based on fast moving, slow

moving and non moving items. Each zone is having a cost allocated to it for the tyres to stack or

unstuck. Fast moving tyres are stored in front. Slow moving tyres are taken to rear zones.

Separate areas are provided for tubes, flaps, small tyres and OE tyres. By doing this size wise,

location wise, month wise analysis and report generation is possible at ease.

Finished goods stores have got a storage policy to keep the finished product clean and

safe. As per the storage policy smaller tyres (passenger and light truck) should be stored in the

inner area due to security reasons. Rear tractor and export tyres should be stacked in the outer

temporary shed. When stock exceeds storage capacity, first rear tractor and then unpacked tyres

to be removed to open areas. Tyres with highest waiting time is to be stored in high cost zones.

Fast moving tyres (waiting time less) to be stored in low cost zones. Tyres which are six months

and more old must be segregated and kept in separate storage zones.

The objectives of the finished goods stores are:

To maximize tyre dispatch

To minimize material handling cost

To minimize storage cost

To ease the process flow in FGS

To ensure FIFIO management

To maximize planned storage (to achieve 80% planned storage and 20% unplanned

storage)


FGS process flow chart

Figure 10

Tyre From Production

Warehouse Cage

Counting of Tyres

If Tractor, Export,

OE, Passenger

Tyres

YesIf OE Tyre Yes

OE Tyre Inspection

Packing

Storage

No

Storage LOADING

Packing

Tube and Flap Storage

Light and Heavy Truck Tyres

No


FGS has got multiple roles as a store, assembling centre and a distribution centre.

FGS as a store

FGS fulfills the role of store such as receiving the tyre from final inspection, accounting, and

storing the tyres in the warehouse etc.

FGS as an assembling center

FGS functions as an assembling unit where tyres, tubes and flaps are assembled and packed.

FGS as a distribution center

FGS dispatches materials to RDCs, DEPOS, C&F agents, OEMs, AIL, and also carries out direct

exports.

The functions of finished goods stores

Receipt of Finished Goods

All finished goods after final inspection are kept at the transferring area in each shift. The

staff of final finishing will prepare a finished goods transfer note in triplicate, which will be

countersigned by the staff of FGS/TTF. After verification, finished goods transfer-note will be

serially numbered and have the following details.

Material code

Description

Quantity

The original copy of the transfer- note will be issued to the central excise wing after entering

the details in stock statement, duplicate will be given back to production as their file copy and

triplicate will be issued to production planning. One staff each from production and FGS/TTF

will separately verify the quantity, size ply rating of the finished goods and compare against the

entry in transfer-note.


Receiving of Tubes and Flaps

Tubes are mainly supplied by company’s own subsidiary tube plant and sometimes from

outside suppliers. Flaps are supplied by outside suppliers. The suppliers of tubes are:

Classic Auto Tubes, Pune

Excel Rubbers Ltd, Hyderabad

Agarwal Tubes Ltd, Ahmadabad

The suppliers of flaps are:

Vilas Polymers, Hyderabad

Bhagavati Ltd , Ahmadabad

Nagappa Rubber Factory, Coimbatore

FGS on receiving the material will first prepare GR (Goods Receipt). For tubes supplied

by Pune plant material will get directly updated in stock on preparation of GR. For tubes and

flaps supplied by outside suppliers after GR preparation stock will appear in Quality Inspection

till it is cleared in SAP by QA. On acceptance by QA stock will get updated.

Assembling Tyres, Tubes and Flaps (TTF)

Upon receipt of goods for TTF, FGS shall prepare brought-out goods receipt report

(BGRR) and it shall be forwarded to the heads of QA department. QA department shall organize

for sampling and inspection of the goods received. Upon acceptance/rejection the consignment,

QA department will return the BGRR with status of inspection marked. A consignment of goods

shall be used for the packing after obtaining approval for the use from QA department. In case a

consignment is rejected, the same shall be tagged as “Rejected” by the QA department.

Packing

HDPE ( High Density Ply Ethylene) bags containing tubes and flaps shall be identified

with the month of production. Tyre, tube and flaps shall be packed as a set, as per the

specification applicable for domestic supply.


Handling and Storage

Finished goods store is fully covered and protected from sunlight and rainwater. The

floor is cleaned to remove dust. Proper passage is left for access for periodical inventory. All the

tyres to be stored are rolled from transferring area to stores and stored size-wise. A stock

statement is made as of the closing of the day. After preparing the stock statement, finished

goods transfer notice handed over to factory excise wing for recording and filing.

Removal of Finished Goods

The finished goods required for dispatch kept at the transferring area, after preparing the

transferring-notes, will be removed to the loading bay and balance will be removed to stores for

storage, after completing packaging for required item.

Distribution of Finished Goods

Marketing co-coordinator gives dispatch schedule on day-to-day basis. Marketing

coordinator arranges the destination to which trucks are required one day in advance. Load slips

are prepared as per plan made. Store-man will keep the loads as per the load slips at the loading

bay. Staff of FGS/TTF security and representatives of the transporters will check the load, kept

separately size, ply and quantity.

After checking the load slip will be signed by the staff and given for preparing transport

documents and finished goods will be loaded on to the Lorries.

Procedure

Clean the inside of the tyre properly and insert the tube and flap inside the tyre. Inflate

the tube carefully up to the pressure just sufficient to hold the tube inside the tyre. Ensure that the

tube does not come out from the assembly.

The technical department plays a very crucial role in the organization. It is basically an

R&T (Research and Technology) department. Technical department is mainly concerned with

improving quality of tyres by methods like reduction in curing cycles, reducing tyre shape

problems etc. Technical coordination meeting take place once in every 5 months. The technical

coordination committee will consist of members from marketing field also.


A detailed study about the finished goods inventory was made. Apollo Tyres Ltd at

Perambra handles more than 48 different varieties of tyres, 23 different types of tubes, and 8

different flaps. The study also revealed that only tyres are manufactured by the company on the

basis of monthly production plan which is called as ‘ticket’ and it has been send from the head

office. It needs to be a tyre set which is a combination of tyre, tube and flap in order to sell them

in the market. Since the company is not producing tubes and flaps, it is supplied from their own

tube plant which is situated in Pune. The company also has some approved suppliers for the

tubes and flaps supply.

It is sufficient to store the tubes and flaps required for the number of tyres. But after

studying the finished goods inventory, it is found that there has been facing excess storage in the

number of tubes and flaps when compare with the tyres. Since the Apollo tube plant has been

facing space constraints in the warehouse, they need to supply it to the other plants immediately

after the production. Also the tube plant is supplying to few domestic customers, the plant need

to utilize its warehouse for anticipating the domestic market. Tubes from the Classic Auto Tubes

are stored in the Perambra unit which leads to excess inventory and this created the problem in

the warehouse.

The records of the details of stocks with the production, planning and control department

were analyzed and were able to observe excess stock levels of tubes and flaps. The tyres are

counted once they are manufactured and the transfer note is handed over to FGS staff. The tubes

and flaps are counted immediately after the delivery from the suppliers. Once they are counted

and verified goods receipt note are prepared and recorded by the FGS staff.

The total number of different types of tyres to be produced in a month is readily available

from the ticket where as the daily production rate for each type of tyres and the number of tubes

and flaps have to be obtained from the goods receipt note. In order to obtain the stock levels of

tubes and flaps for each month for the last one year, the goods receipt notes for the entire one

year were analyzed. Goods receipt note will consist of details such as material code, batch,

quantity and material type for different types of tyres. The tubes and flaps are intended for

different categories of tyres such as truck type, rear tractor type, light commercial vehicle type

and passenger and car type and in goods receipt note they are recorded accordingly. The sum of

tubes and flaps for all the categories will give the total stock for a day and similarly month wise


data were calculated for the past one year. The daily transfer note will give the details about day

wise tyre production and from which the production details of each month for last one year were

calculated. The last one year’s stock description is as shown:

Stock Description of Tyres, Tubes and Flaps (2009-2010) Table 7

MONTH TYRES TUBES FLAPS

April 32954 96600 42724

May 31102 86679 42373

June 26152 80958 43382

July 24865 66143 71850

August 35277 65731 63462

September 26475 69037 53320

October 40614 71911 82201

November 30400 95370 82784

December 20892 89875 64542

January 25798 109454 57462

February 28432 132251 61581

March 20050 151122 48615

So it is very well clear that in all the months, the number of tubes and flaps is

substantially more than the number of tyres and the company is unnecessarily wasting a lot of

space for the tubes and flaps storage. The project is based on the excess inventory problem and

finds a solution to it. An information system can help to overcome this problem. Managers or the


person who operates the system can take a decision about the number of tubes and flaps required

to be stored in order to opitmise the finished goods inventory.

The management information system was developed in Microsoft Excel. The company

deals with more than 48 different types of tyres, 23 different types of tubes and 8 different types

of flaps. The possible combination of tyres, tubes and flaps were analyzed first. Here the tyre,

tube, flap combination are given below.

Tyre, Tube and Flap Combination Table 8

TUBE TYRE FLAP10.00-20 16PR XT7(N)-D 20 N SUPER FLAP

10.00-20 TUBESTAR PLATINUM -D 10.00-20 16PR XT7 GOLD -D 20 N SUPER FLAP

10.00-20 18PR LOADSTAR SUPER GOLD(S) –D

20 N TSP SPECIAL FLAP

10.00-20 16PR AMAR –D 20 N FLAP10.00-20 16PR AMAR DELUXE -D 20 N FLAP

10.00-20 TUBESTAR -D 10.00-20 16PR AMAR GOLD -D 20 N FLAP10.00-20 16PR AT RIB –D 20 N FLAP10.00-20 16PR XT 100K-D 20 N FLAP

10.00-20 16PR CHAMPION DXL -D 20 N FLAP

10.00-20 16PR XT9 –D 20 N FLAP10.00-20 16PR XT9 GOLD -D 20 N FLAP

10.00-20 TUBESTAR GOLD -D 10.00-20 16PR XT7 HAULUG -D 20 N FLAP10.00-20 16PR XT7 HAULUG -E 20 N FLAP

10.00-20 18PR MINE LUG -D 20 N FLAP

8.25-20 TUBE -D 8.25-20 16PR AMAR DELUXE -D 20 M FLAP8.25-20 16PR XT7 –D 20 M FLAP

6.00-16 HD TUBE -D 6.00-16 8PR MAHA TROOPER -D Nil

5.50/6.00-16 TF TUBE -D 6.00-16 8PR KRISHAK PREMIUM (N)-D Nil


340/85 R28 TUBE -D 340/85 R28 A8 12PR FARMKING -D Nil

13.6-28 TUBE -D 13.6-28 12PR KRISHAK PREMIUM -D Nil13.6-28 12PR POWERHAUL -D Nil

12.4-28 TUBE -D 12.4-28 12PR KRISHAK PREMIUM -D Nil

14.9-28 TUBE -D 14.9-28 12PR KRISHAK PREMIUM -D Nil

7.00-15 10PR AMAR (N) Nil7.00-15 TUBE -D 7.00-15 12PR AMAR (N) Nil

7.00-15 12PR MILESTAR GOLD-D Nil

7.00-16 TUBE -D 7.00-16 14PR AMAR DELUXE -D 16 N FLAP7.00-16 12PR AMAR DELUXE -D 16 N FLAP

7.50-16 TUBE -D 7.50-16 16PR AMAR DELUXE -D 16 N FLAP7.50-16 16PR MILESTAR -D 16 N FLAP

8.25 -16 TSP TUBE -D 8.25-16 18PR LOADSTAR SUPER -D 16 N FLAP

8.25-16 TUBE -D 8.25-16 16PR MILESTAR(D) -D 16 N FLAP8.25-16 16PR AMAR DELUXE -D 16 N FLAP

12.00-20 TUBE -D 12.00-20 18PR MINE LUG -D 20 RR FLAP

9.00-20 TUBE -D 9.00-20 16PR AMAR DELUXE -D 20 N FLAP9.00-20 14PR AMAR EXPRESS -D 20 N FLAP

10.00-20 KAIZEN TUBE 4.6 -D 10.00-20 18PR KZ - 50L 20 N KZN TSP FLAP

10.00-20 16PR KAIZEN 77R -D 20 N KZN FLAP10.00-20 KAIZEN TUBE -D 10.00-20 16PR KAIZEN 77R -E 20 N KZN FLAP

10.00-20 16PR KAIZEN 99R PLUS -D 20 N KZN FLAP10.00-20 16PR KAIZEN XDT -D 20 N KZN FLAP


12.4 R28 TUBE -D 12.4 R28 12PR FARM KING -D nil

420/85 R28 TUBE -D 420/85 R28 A8/A7 12PR FARMKING -D nil

F78-15 TUBE -D F78-15 8PR PANTHER –D nil

11.20 TUBE -D 11.00-20 18PR XT7 –D 20 RR FLAP11.00-20 18PR MINE LUG -D 20 RR FLAP

Based on the tyre, tube and flap combination, separate worksheets have been created for

tubes and flaps and corresponding tyres have entered in the worksheets. A separate worksheet for

monthly production plan have been created which is given by the head office at Gurgaon and

commonly known by Ticket. Ticket gives the information about the number of different types of

tyres to be manufactured for a particular month. Then a separate worksheet for tyre, tube and flap

stock position have generated so that the information system can be updated each day by simply

posting the stock statement for that particular day. The stock statement for tyres, tubes and flaps

are prepared by the FGS staff and it will be posted in SAP immediately after the handover of

transfer note from the final inspection to FGS. Separate spreadsheets are created to display the

results for Tube Summary and Flap Summary which would describe the disparity between the

optimum stock and actual stock. The front end of the information system is given below


Tube Summary Table 9

TUBE SIZEOPTIMUM STOCK

ACTUAL STOCK

EXCESS STOCK

10.00-20 TUBESTAR PLATINUM -D 4298 25502 21204

10.00-20 TUBESTAR -D 4733 6374 1641

10.00-20 TUBESTAR GOLD -D 4366 58541 54175

8.25-20 TUBE -D 1550 2632 1082

6.00-16 HD TUBE -D 0 1389 1389

5.50/6.00-16 TF TUBE -D 1060 5126 4066

F78-15 TUBE -D 2 713 711

420/85 R28 TUBE -D 199 27 -172

340/85 R28 TUBE -D 0 28 28

10.00-20 KAIZEN TUBE 4.6 -D 0 922 922

10.00-20 KAIZEN TUBE -D 1144 6304 5160

13.6-28 TUBE -D 619 5261 4642

9.00-20 TUBE -D 332 7408 7076

12.4-28 TUBE -D 386 3373 2987

14.9-28 TUBE -D 272 297 25

7.00-15 TUBE -D 378 4597 4219

7.00-16 TUBE -D 425 1223 798

7.50-16 TUBE -D 779 7713 6934

8.25 -16 TSP TUBE -D 209 5117 4251

8.25-16 TUBE -D 866 5117 4251

12.00-20 TUBE -D 0 976 976

12.4 R28 TUBE -D 0 115 115


The negative amount of excess stock represents the tubes and flaps quantities which are

below the optimum stocking level. The flap summary is also made. To cover the unforeseen

events such as strikes and vehicle breakdown, average lead time is fixed as 4 days. So we

calculated optimum stock by the equation

Optimum stock = Safety stock + (4* Daily rate)

Excess stock is calculated by subtracting actual stock from optimum stock. If found to be

negative, the manager can ask to expedite the order and if there is a large amount of excess stock,

he can tell the vendors to hold back the supply for some days.

The functions used for the design of Management Information System are

i. VLOOKUP

This function will copy the required item quantity from specified spreadsheet to

the required sheet otherwise it becomes tedious to look for individual item

quantities.

ii. CONCATENATE

This function merges the tyre code and batch code into one cell.


Findings and Suggestions


On studying the finished goods stores department of Apollo Tyres Ltd, it was found that:-

1. There has been a lot of difference in the numbers of tubes and flaps stored in the

Finished Goods Stores when compared with the tyres.

2. Though the quality is an important aspect, the tubes and flaps are not rechecked for the

quality once they are stored.

3. It has been found that the stocks of tubes are greater than flaps. This is due to the space

constraints in the tube plant; the company stores its tubes in the Perambra unit.

4. In Apollo Tyres Ltd, 15 days stock is kept as safety stock against unexpected events.

Some suggestions for the further improvement of inventory management are given below:-

1. Apollo tyres can optimise tubes and flaps inventory with that of tyres by operating an

efficient management information system.

2. Since the monthly production plan for tyres is given by the Head Office, the company

can convey the requirement of tubes and flaps in advance for optimising the finished

goods inventory by looking at the information system.

3. The execution of information system needs to be closely observed at the initial phase for

any error. Since the information system has the ease of operating by any personnel as it

is built with the simple functions which is incorporated in Excel.

4. The huge inventory of tubes and flaps can be minimized by increasing the capacity of the

warehouse in the tube plant of Apollo. Since the tube plant need to utilize its warehouse

for anticipating the domestic market, they have to transfer the tubes and flaps to

Perambra unit and this lead to huge inventory.


Conclusion


This study was aimed to optimize the finished goods inventory of the Apollo Tyres Ltd,

Perambra. Here the system of inventory management was studied by conducting direct interview

with relevant officials of the concern and by observation. Further data are collected from

published reports of the company and it was found that the inventory management used by the

company is fairly a robust one. But there is a huge disparity of tubes and flaps stock when

compare with tyres and lead to high inventory. An efficient information system will helps to

optimize the inventory.

Based on the information system if followed, Apollo Tyres can reduce the disparity

among tyres, tubes and flaps. Since the FGS staff prepares stock statement daily and our

information system needs only the prepared stock statement as input, the developed information

system will be very useful. The information system is designed with the simple function that is

incorporated in the Microsoft Excel. This makes the information system unique as it can be

operated by any personnel.

By looking at the information system the manager can ask to expedite the order and if

there is a large amount of excess stock, he can tell the vendors to hold back the supply for some

days. Hence Apollo Tyres can maintain a satisfactory level of inventory by following the

information system.


Bibliography


1) Chadda R.S. (1964), Inventory Management in India, Allied Publishers, Bombay.

2) Agarwal, Krishna Kumar (1993), Inventory Management Concept and Dynamics, Kanishka

Publishers, Delhi.

Websites

www.apollotyres.com/corporate/corporate.aspx

www.apollotyres.com/corporate/human-resource.aspx

www.apollotyres.com/corporate/manufacturing-process.aspx

www.apollotyres.com/investor-relations.aspx


Annexure


TICKET FOR THE MONTH APRIL 2010

RTA1JJLSG1A0210.00-20 18PR LOADSTAR SUPER GOLD(S) –D 1500

RTA1JHXT71A03 10.00-20 16PR XT7(N)-D 22000RTA1JHX7G1A01 10.00-20 16PR XT7 GOLD -D 8000

RTA1JHX1K1A01 10.00-20 16PR XT 100K-D 2500RTA1JHXTD1K01 10.00-20 16PR KAIZEN XDT -D 3000

RTA1JH21L1K01 10.00-20 16PR KAIZEN 21L-D 1200

RTA1JHXT91A01 10.00-20 16PR XT9 -D 0RTA1JHX9G1A01 10.00-20 16PR XT9 GOLD -D 6000

RTA1JHHLG1A0A 10.00-20 16PR XT7 HAULUG -E 0RTA1JHHLG1A01 10.00-20 16PR XT7 HAULUG -D 20000

RTA1JHTX01A01 10.00-20 16PR CHAMPION DXL -D 0

RTA1JJMNG8A01 10.00-20 18PR MINE LUG -D 4000RTA1JHST52A01 10.00-20 16PR ST5 -D 1200

RTA1JHAMR3A01 10.00-20 16PR AMAR -D 15000RTA1JHADX3A01 10.00-20 16PR AMAR DELUXE -D 2000

RTA1JJADX3A01 10.00-20 18PR AMAR DELUXE -D 4000RTA1JHAMG3A01 10.00-20 16PR AMAR GOLD -D 12000

RTA1JHARB3A01 10.00-20 16PR AT RIB -D 4000

RTA1JH99S3K01 10.00-20 16PR KAIZEN 99R PLUS -D 5000RTA1KGAXP3A01 9.00-20 14PR AMAR EXPRESS -D 1800

RTA1KHADX3A01 9.00-20 16PR AMAR DELUXE -D 3000RTA1LHXT71A01 8.25-20 16PR XT7 -D 5500

RTA1LHADX3A01 8.25-20 16PR AMAR DELUXE -D 5400

RTA1FJXT71A01 11.00-20 18PR XT7 -D 500RTA1FJMNG8A01 11.00-20 18PR MINE LUG -D 600

RTC4MFKPR1A01 12.4-28 12PR KRISHAK PREMIUM -D 2500RTC4NFKPR1A01 13.6-28 12PR KRISHAK PREMIUM -D 3500

RTC4NFPWH1A01 13.6-28 12PR POWERHAUL -D 0RTC4PFKPR1A01 14.9-28 12PR KRISHAK PREMIUM -D 1800

RTM7AFRGP1A01 13.00-24 12PR ROADGRADER PREMIUM-D 100

RLM7BFRGP1A01 14.00-24 12PR ROADGRADRPRM TL - D 100RTM7HLTRX0AE1 14.00-25 20PR E-3 XTRAX-D 250

RTA1CFBLT6A01 15.00-21 12PR BULLET -D 1000RTDTFFFMK1AA1 340/85 R28 A8 12PR FARMKING -D 0

RTDTGFFMK1AA1 380/85 R28 A8 12PR FARMKING -D 550

RTDTEFFMK1AA1 420/85 R28 A8/A7 12PR FARMKING -D 600RTE3EFMSG1A01 7.00-15 12PR MILESTAR GOLD-D 2500

RTE3EFAMR3A01 7.00-15 12PR AMAR (N) 0RTE3EEAMG3A01 7.00-15 10PR AMAR GOLD-D 3000

RTE3DFADX3A01 7.00-16 12PR AMAR DELUXE -D ( ker) 0RTE3DGADX3A01 7.00-16 14PR AMAR DELUXE -D 2500

RTE3CHADX3A01 7.50-16 16PR AMAR DELUXE -D 3500

RTE3CHMLT1A01 7.50-16 16PR MILESTAR -D 2000RTE3BHMSR1A02 8.25-16 16PR MILESTAR(D) -D 3200


RTE3BHADX3A01 8.25-16 16PR AMAR DELUXE -D 3000RTE3BJLSS1A01 8.25-16 18PR LOADSTAR SUPER -D 1500

RTN5EDKPR3A02 6.00-16 8PR KRISHAK PREMIUM (N)-D 7500