Page No.-1 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Summer Internship Project Report
“Resource Optimization study in warehouse”
(Material Management)
SUBMITTED BY
VISHAL THAKUR
PGDM E-BUSINESS 2016-18 TRIMESTER IV
SPECIALISATION: OPERATIONS MANAGEMENT
ROLL NO.-32
UNDER THE GUIDANCE OF:
Mr. Dharmendra Pandey
Deputy General Manager
Volvo CE
Page No.-2 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Table of Contents
Sr. No. Description Page No.
1. Acknowledgement 03
2. Certificate 04
3. Executive summary 05
4. Company Profile 06
5. Volvo Group Organization 08
6. Volvo Construction Equipment 10
7. Volvo Products 8
8. Volvo Production System (VPS) 9
9 Basics in Material Management 10
10. GRN – Good Receipt Note 12
11. Material Handling Process 15
12. 5S Methodology 30
13. Time Study 35
14. Conclusion 37
15. References and Bibliography 38
Page No.-3 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
ACKNOWLEDGEMENT
The satisfaction and delight that accompanies the successful completion of any task
would be incomplete without mentioning the people who are involved in it, whose
relentless guidance and encouragement crown all our efforts with success.
Therefore, I would like to thank all of them who have supported us in completing
this project successfully.
Our special thanks to Prof. Alex Nero, Professor, Welingkar Institute of
Management Research and Development for granting us permission to carry out our
academic project at Volvo Construction Equipment, Peenya, Phase-1, Bengaluru -
560058.
We express profound sense of gratitude to our respected guide Mr. Dharmendra
Pandey, Deputy General Manager – Material Management head for his valuable
insights and support throughout the tenure of the project.
Page No.-4 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
CERTIFICATE
Page No.-5 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
EXECUTIVE SUMMARY
This Project report on ‘Resource Optimization study in warehouse”’ is the complete
analysis of the Material handling process at the Volvo Construction Equipment’s
shop floor.
All the issues happening in that are completely studied from the process to process
which is described in detail in this report and the issue is rectified using time study
methodology and viable solutions are suggested to avoid and control the issue
thereafter.
We had to do the time study analysis in all stations and to suggest new ideas to
eliminate non value added time.
Page No.-6 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
COMPANY PROFILE - VOLVO GROUP
Volvo Construction Equipment
The Volvo Group is one of the world’s leading manufacturers of trucks, buses,
construction equipment and marine and industrial engines. The Group also provides
complete solutions for financing and service.
The Volvo Group, with its headquarters in Gothenburg, employs about 100,000
people, has production facilities in 19 countries and sells its products in more than
190 markets.
In 2014 the Volvo Group’s net sales amounted to about SEK 283 billion. The Volvo
Group is a publicly-held company. Volvo shares are listed on Nasdaq Stockholm.
Although the two firms are still often conflated, Volvo Cars, also based in
Gothenburg, has been a totally separate company since it was sold off in 1999. The
companies still share the Volvo logo and co-operate in running the Volvo Museum.
Volvo was established in 1915 as a subsidiary of SKF, the ball bearing
manufacturer.
Page No.-7 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Vision
The Volvo Group's vision is to become the world leader in sustainable transport
solutions by:
Creating value for customers in selected segments
Pioneering products and services for the transport and infrastructure industries
Driving quality, safety and environmental care
Working with energy, passion and respect for the individual
Core Values
Quality
Safety
Environmental care
The values have a long tradition and permeate our organization, our products and
our way of working. Our goal is to maintain a leading position in this area.
Page No.-8 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Volvo Group Organization
The Volvo Group’s various operations are organized to deliver the greatest possible
focus on customers and their needs, and to exploit and harness the Group’s far-
reaching and shared resources in the best possible way. Truck operations account for
almost two-thirds of the Group’s total turnover
In addition to truck operations there are other business areas:
Construction Equipment - Manufactures a number of different types of
equipment for construction applications and related industries.
Buses - City and intercity buses, coaches and chassis.
Volvo Penta - Market leader in marine and industrial engines
Governmental Sales - Sales to government agencies and organizations.
Volvo Financial Services- Delivers competitive financial solutions to Volvo
Group customers.
The Volvo Group appreciates the value of sound corporate governance as a
fundamental base in achieving a trusting relation with shareholders and other
key parties.
Page No.-9 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
VOLVO CONSTRUCTION EQUIPMENT
Volvo Construction Equipment manufactures equipment for construction
applications and related industries all over the world. The operation includes the
Volvo and SDLG (Lingong)brands. Volvo Construction Equipment is the world’s
leading manufacturer of articulated haulers and wheel loaders and one of the
leading manufacturers of excavator equipment, road development machines and
compact construction equipment. Volvo CE has production plants in ten countries
and offers more than 150 different product models to meet the construction
equipment needs of demanding customers all over the world.
SDLG (Shandong Lingong Construction Machinery Co) is a Volvo Joint Venture in
China owned to 70 percent by Volvo CE. SDLG develops, manufactures and
markets a broad range of products including wheel loaders, excavators, backhoe
loaders and road rollers. The company has a nationwide distribution and service
network in China.
Page No.-10 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Volvo Products
Volvo Construction Equipment's extensive product range includes loaders,
backhoes, excavators, small excavators, artics, forestry carriers, demolition
machines, high reach demolition machines and pipe layers
Road building machines from motor graders and milling equipment to
compactors, double drum compactors, single drum compactors and pavers,
tracked pavers
Powered by fuel-efficient, environmentally compliant Volvo engines
Simplified service access for fast maintenance and more uptime
All-day comfort, safety and command from legendary Volvo Care Cabs
Equipment built with quality for long life and high residual value
Page No.-11 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
VOLVO PRODUCTION SYSTEM (VPS)
Volvo Production System
Volvo Production System (VPS) serves as the source of common principles and
practices. The overall vision of VPS is: “An organization where we continuously
improve quality, delivery and productivity, in everything we do.”
VPS is also a toolkit, including methods such as Six Sigma – reduction of unwanted
variation in processes, and Lean – elimination of wasted time and material that help
create value for our customers through increased Quality, Delivery Precision and
Cost-efficiency.
With the Volvo core value “Quality” as foundation, the 5 principles of the Volvo
Production System are:
Page No.-12 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Process stability
Teamwork
Built-in quality
Just-in-time
Continuous Improvement
Teamwork means creating a sound organization where all employees are involved
in the improvement process contributing to achievement of our goals and strategic
objectives. This is where everyone’s experience, knowledge and creativity is put in
play.
Process Stability means reducing all kinds of variability and waste in our processes
to make them predictable and efficient. Deep knowledge and understanding of the
operation is essential for succeeding as we strive for process stability. 9
Built-in Quality means doing things right the first time, detecting and correcting
problems at the point of origin. We move towards zero-defects by having the
mindset of not accepting bad quality, being proactive, and eliminating root causes.
Just-in-Time means producing and conveying what is needed, when it is needed, in
the amount needed in the shortest possible lead-time. The mainstays of the principle
are minimal inventory, customer demand and one-piece flow.
Continuous Improvement is the driving force behind our efforts and requires a
systematic and long-term approach. Generation and implementation of
improvement ideas is essential. It is based on standardization and a clear vision of
the future desired state
Page No.-13 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Volvo Production System (VPS)
Bill of materials
A bill of materials or product structure (sometimes bill of material, BOM or
associated list) is a list of the raw materials, sub-assemblies, intermediate
assemblies, sub-components, parts and the quantities of each needed to manufacture
an end product. A BOM may be used for communication between manufacturing
partners, or confined to a single manufacturing plant. A bill of materials is often
tied to a production order whose issuance may generate reservations for
components in the bill of materials that are in stock and requisitions for components
that are not in stock.
A BOM can define products as they are designed (engineering bill of materials), as
they are ordered (sales bill of materials), as they are built (manufacturing bill of
materials), or as they are maintained (service bill of materials or pseudo bill of
material). The different types of BOMs depend on the business need and use for
which they are intended. In process industries, the BOM is also known as the
formula, recipe, or ingredients list. BOMs that describe the sub-assemblies are
referred to as modular BOMs
Page No.-14 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Good Receipt Note (GRN)
Every part has its Quality, Quantity and documentation characteristics known as
GRN (Good Receipt Note) or Quality copy
GOODS RECEIPT NOTE (GRN) is prepared by the Stores /Warehouse
Department for accounting the receipt of goods purchased from suppliers. When
GRN is prepared in a software, Inventory is updated with quantity and value. It will
also update the financial records by debiting Purchases A/c & Crediting the
Supplier's (Vendor's) A/c.
One copy of the GRN (with vendor's invoice , inspection / quality report copy) is
maintained in the location where it is prepared and the original GRN with Original
Invoice of the Supplier will be authenticated by the Warehouse / Stores In-charge
and sent to the Finance/Accounts department for transaction validation, payment
and preservation of the documents for future reference and audit.
Whatever goods comes into a particular warehouse should be recorded through
some sort of document. When the goods come it has to be attached with this
document and the same has to be signed by the gate keeper, store in-charge and the
receiver. The copy of this record will attached with the bill and forward to accounts
dept. for payment. This document is called Goods Receipt Note.
Goods Receipt Note is a document used to record the inward entry of the any goods
received at the premises of the organization. The document normally consists of the
details of Quantity Received, Quantity Rejected and Quantity Accepted, Supplier
Name & P.O. No. The practice of preparing GRNs is important as it promotes
proper inventory control and restricts the unwanted, unauthorized entry of goods in
the organization. The GRN preparation is a part of effective Inventory Control
Management.
Page No.-15 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Good Receipt Note:
Page No.-16 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Inventory turnover ratio
The inventory turnover ratio is an efficiency ratio that shows how effectively
inventory is managed by comparing cost of goods sold with average inventory for a
period. This measures how many times average inventory is "turned" or sold during
a period.
This measures how many times average inventory is "turned" or sold during a
period. In other words, it measures how many times a company sold its total
average inventory dollar amount during the year. A company with $1,000 of
average inventory and sales of $10,000 effectively sold its 10 times over.
This ratio is important because total turnover depends on two main components of
performance.
The first component is stock purchasing. If larger amounts of inventory are
purchased during the year, the company will have to sell greater amounts of
inventory to improve its turnover. If the company can't sell these greater amounts of
inventory, it will incur storage costs and other holding costs.
The second component is sales. Sales have to match inventory purchases otherwise
the inventory will not turn effectively. That's why the purchasing and sales
departments must be in tune with each other.
Formula
Inventory turnover ratio = cost of goods sold
average inventory
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Cycle time
Cycle time is the time from when the Operation begins to the point-of-time at which
the operation ends.
Cycle time is the maximum time allowed at each workstation to complete its set of
tasks on a unit.
Cycle time = (operating time available / day )
desired output rate
Example.
A customer requests their product on November 6. The company receives the order
instantly, and delivers the product on November 10. He actually starts working on
the product only from the 8.
Therefore, the Lead Time here is 4 days, while the Cycle Time is 2 days.
Lead Time
Lead Time can never be less than Cycle Time. For optimal operations, at best, Lead
Time = Cycle Time.
Lead time = (No of work stations) x (Cycle time)
Takt Time
It is the maximum acceptable time to meet the demands of the customer. In other
words, Takt Time is the speed with which the product needs to be created in order
to satisfy the needs of the customer.
Takt time is the maximum amount of time in which a product needs to be produced
in order to satisfy customer demand
Takt Time = (Net Time Available for Production)
(Customer′s Daily Demand).
Page No.-18 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Service Example:
The company has a 9 hour work-day for its employees, of which 1 hour is the
allocated break and other idel times.
Available production time = 8 hours & 480 minutes
Assume that the customer sends in 24 accounting forms to be read.
Takt Time = 480/24 = 20 minutes/form.
This means that the staff would have to work at a speed of 20 minutes per form in
order to meet the customer’s needs or demands.
Throughput Time
Throughput time is a measure of the time required for a material, part or sub-
assembly to pass through a manufacturing process following the release of an order
to the manufacturing floor.
Throughput time or manufacturing cycle time consists of
Process time
Inspection time
Move time
Queue time.
Process time is the time period during which work is performed on the product
itself.
Inspection time is the time during which the quality of the product is confirmed.
Move time is the time during which materials or works-in-process are moved from
one workstation to another.
Page No.-19 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Queue time is the period of time during which the product awaits transfer to a
workstation, undergoes further inspection and subsequent manufacturing processes.
Material handling process:
Total Number of Forklift –> 9 Forklift
No of forklifts Capacity (tons) Usage area
3 5 Paint shop, fab. Shop and
Receiving area
2 3 Receiving area
1 2.5 Excavator line
2 2.5 Road Machinery line
1 Stacker 1.5 Bay 6
1 8 Paint shop and Receiving area
Material classification (ABC)
A -> Heavy – Big frame, Radiator
B -> Moderate – Kitting tools
C -> Light – Hardware
Page No.-20 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Material storage by frequency
ABC analysis (or Selective Inventory Control) is an inventory categorization
technique. ABC analysis divides an inventory into three categories- "A items" with
very tight control and accurate records, "B items" with less tightly controlled and
good records, and "C items" with the simplest controls possible and minimal
records.
Examples of ABC class are
‘A’ items – 20% of the items accounts for 70% of the annual consumption
value of the items.
‘B’ items - 30% of the items accounts for 25% of the annual consumption
value of the items.
‘C’ items - 50% of the items accounts for 5% of the annual consumption value
of the items.
Page No.-21 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Number of people required in each process:
Binning 3 people
Kit Preparation 3 people
Issuing Hardware 2 people
Receiving 2 people
Back flushing Line – Station 7
Total manpower available in Excavator Assembly:
Apprentice (A) 21
Trainees (T) 5
Employees (E) 12
Total 38
Material handling
Material handling is a large part of a company´s internal work and represents
between 15 % and material consist of 70 % of the total cost of a manufactured
product.
By improving the internal handling of material, more efficient distribution and
manufacturing flows are possible.
The material handling process is an input to the production and assembly
process that has to be defined and mapped so that it can be improved.
The material handling process studied at Volvo CE includes goods receiving,
storage as well as the order/delivery process to assembly, and will finish with
the material transport to the assembly line.
Page No.-22 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Material management
Material management is a scientific technique, concerned with Planning,
Organizing &Control of flow of materials, from their initial purchase to destination.
Procurement:
Procurement is the process of finding, agreeing terms and acquiring goods, services
or works from an external source, often via a tendering or competitive bidding
process. The process is used to ensure the buyer receives goods, services or works
at the best possible price, when aspects such as quality, quantity, time, and location
are compared.
Inventory control: One of the powerful ways of controlling the materials is
through Inventory control.
It covers aspects such as setting inventory levels, doing various analyses such as
ABC , XYZ etc. ,fixing economic order quantities (EOQ), setting safety stock
levels, lead time analysis and reporting.
It means stocking adequate number and kind of stores, so that the materials are
available whenever required and wherever required. Scientific inventory control
results in optimal balance.
Inventory Management
Inventory management is the practice overseeing and controlling of the ordering,
storage and use of components that a company uses in the production of the items it
sells.
Two common inventory-management strategies are the just-in-time (JIT) method,
where companies plan to receive items as they are needed rather than maintaining
Page No.-23 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
high inventory levels, and materials requirement planning (MRP), which schedules
material deliveries based on sales forecasts.
Material requirements planning (MRP)
Material requirements planning (MRP) is a production planning, scheduling,
and inventory control system used to manage manufacturing processes. Most MRP
systems are software-based, but it is possible to conduct MRP by hand as well.
An MRP system is intended to simultaneously meet three objectives:
1) Ensure materials are available for production and products are available
for delivery to customers.
2) Maintain the lowest possible material and product levels in store
3) Plan manufacturing activities, delivery schedules and purchasing activities.
The MRP inventory management method is sales-forecast defendant. This means
that manufacturers must have accurate sales records to enable accurate planning of
inventory needs and to communicate those needs with materials suppliers in a
timely manner.
Supply chain management
Supply chain management has been defined as the "design, planning, execution,
control, and monitoring of supply chain activities with the objective of creating net
value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring performance globally.
Supply chain management (SCM), the management of the flow of goods and
services, involves the movement and storage of raw materials, of work-in-
Page No.-24 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
process inventory, and of finished goods from point of origin to point of
consumption.
Logistics
Logistics is the management of the flow of things between the point of origin and
the point of consumption in order to meet requirements of customers or
corporations.
Logistics management is the part of supply chain management that plans,
implements, and controls the efficient, effective forward, and reverses flow and
storage of goods, services, and related information between the point of origin and
the point of consumption in order to meet customer's requirements.
Logistics management involves identifying prospective distributors and suppliers,
and determining their effectiveness and accessibility.
Process involved in material handling:
Gate entry
Checking
Unloading
Checking/Counting as per invoice
Checking to buyer –Invoice
GRN
Binning
Location check
Bin
Page No.-25 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
List of Activities – Material Management
The main activities carried out in Material management are as follows:
On time Material orders release through SAP.
Material shipment follow up with suppliers.
Material In-warding.
Physical verification of material with documents.
Confirming quantity with respect to delivery challan.
Material received from suppliers is unloaded on time and moved to sub stores.
GRN Preparation.
Material storage in Designated locations.
Binning of components.
Line feeding through sequencing and kitting.
Perpetual cycle count.
Maintain 5S in Material stores department.
Problem solving and other VPS activities followed.
Annual physical Inventory.
Material handling
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Page No.-28 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Page No.-29 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Page No.-30 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Binning Process:
After making GRN, check location of
the component
Define location of the component
physically as well as in the system
Material moved to respective stores
from receiving section after GRN made
Unpack the material
Bin the material in pallets wherever
applicable/Bin the material in respective racks
Stop
Move the packing material waste after binning
to scrap yard
Is location
available
Page No.-31 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Material Feeding Process:
Receive charging plan from production
planning for Assembly line
Prepare the days plan as per the Takt. Provide
the material feeding plan to material spiders of
Bay 3 & 6 and also to forklift operator
Generate kit list as per production order from
SAP for each machine Serial Number.
Pick the sequential materials in
pallets as per kit list
Pick the material according to kit list
and prepare kit list
Move the sequential material and kitting
trolley to respective workstations
Collect the empty pallets from the stations
and put it at empty pallet locations
Stop
Page No.-32 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Page No.-33 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Excavator Assembly:
Feeder 1 Block Sub Assembly
Feeder 2 Bottom plate Sub Assembly
Feeder 3 Boom cylinder & Radiator Sub Assembly
Feeder 4 Cowl frame Sub Assembly
Feeder 5 Swing motor Sub Assembly
Feeder 6 Cabin Sub Assembly
Feeder 7 Boom & Arm docking Sub Assembly
Feeder 8 MCV – Main control valve
Feeder 9 Engine Sub Assembly
Feeder 10, 11, 12, 13 Lower frame Sub Assembly
Page No.-34 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
VOLVO CE STRATEGY
Page No.-35 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Time Study
Process Flow in material handling:
Receiving area details:
Time taken by local truck (inside campus):
Page No.-36 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Average time taken by local truck (inside campus):
Time taken for imported material (inside campus):
Page No.-37 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
Average time taken by local truck (inside campus):
Conclusion:
As per the observation from both local and imported material handling time in each
process most of the time is wasted in waiting and gate entry.
Suggestion:
To optimize the total time involved in all the material handling process (inside
campus) we can:
Local truck Check sheet should be updated on monthly basis (log book and
systems)
Excel can be used to fetch the permanent data to fasten the process
Diverting the un-utilized man power to receiving area in early weeks of every
month
Clearing the receiving area on timely basis
Fixed incoming traffic information should be given to security check post in
advance.
Page No.-38 Volvo CE, Bengaluru PGDM (E-Biz) Operations 2016-18, We School, Bengaluru
REFERENCES AND BIBILIOGRAPHY
1) https://www.volvoce.com/
2) https://books.google.co.in/books/about/Production_and_Operations_Man
agement.html?id=aZkp2Aq46EYC