A

PROJECT REPORT
ON

THIRD PARTY STOCKS RECONCILIATION OF

THE SUB-CONTRACTED PARTS
UNDERTAKEN AT,

GENERAL MOTORS (I) PVT. LTD, PUNE.

UNDER THE GUIDANCE OF:

MR.ANAND PRAKASH,
INDIRA INSTITUTE OF MANAGEMENT, PUNE

SUBMITED BY:

ASHOK SHALGAR,
OPERATIONS MANAGEMENT - 2011-13,
INDIRA INSTITUTE OF MANAGEMENT, PUNE.
PUNE UNIVERSITY SEAT NO. - 00547.

IN THE PARTIAL FULFILLMENT OF,

MASTER OF BUSINESS ADMINISTRATION

(M.B.A.)

COMPANY CERTIFICATE

COLLEGE CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Ashok Vijay Shalgar, a student of Master of Business
Administration Production & Materials Management from Indira Institute of
Management, Pune has done his/her Summer Internship Project at General
Motors India Pvt. Ltd., Pune from 1st Jun12 to 1st Aug12.
The project work entitled,
Third Party stocks Reconciliation of The Sub-Contracted Parts,
embodies the original work done by him/her during his/her Summer Internship
Project period.

Date:
Place: Pune

Mr. Anand Prakash,

Professor,
Indira Institute of Management, Pune.

ACKNOWLEDGEMENT

I would like to express my deep gratitude and sincere thanks to my project guide Mr. Anand
Prakash (Professor IIMP) for his valuable guidance and unparallel support during the
progress of this project. Without his encouragement & crucial inputs, this project would not
have been possible.
I acknowledge with pleasure my debt to Mr. Avinash Bagul( HOD Operations Dept., MBAIIMP), who has provided me with important guidelines & supported in the project work.
I express my heartiest thanks to Dr. Poornima Tapas (HOD MBA, IIMP) for her guidance
& Support.
I would like to specially thank Mr. Dhiraj Agrawal (Manager, GSC, Power-Train Plant, GM
India) and Mr. Rajiv Gupta (Head, GPSC, Power-Train plant, GM India) for giving me this
opportunity to learn & work in the dynamic environment of the esteemed organization,
General Motors India.
On a more personal note, I would like to express my special thanks to my parents, all my
friends, who directly or indirectly, contributed to the successful completion of this project.
I sincerely thank everyone who was a part of this and helped me in completing this project
successfully.

Sign. :
Name: Ashok Vijay Shalgar

CONTENTS
I. LIST OF FIGURES
II. LIST OF TABLES
1.0 INTRODUCTION12
1.1 Motivation
1.2 Objectives
1.3 Scope
1.4 Chapterization
2.0 INDUSTRY PROFILE.16
2.1 Industry Definition
2.2 Products and Services
2.3 History
2.4 Life Cycle
2.5 Major Players & Segmentation
2.6 Market Statistics & Potential
3.0 COMPANY PROFILE ....20
3.1 General Motors
3.2 Vision & Strategy
3.3 General Motors in India
3.4 Joint Venture of GMIPL with SAIC
3.5 Products in the Indian Market
3.5.1 GM-Chevrolet Products in India
3.5.2 GM-Power-Train /Engine Products
4.0 LITERATURE REVIEW & NEED/PURPOSE OF THE PROJECT.26
4.1 Definition: Reconciliation
4.1.1 Reconcile
4.1.2 Reconciliation
4.2 Concept of Reconciliation
5

4.3 Purpose of Reconciliation

4.3.1 Supply chain & Supply Chain Management
4.3.1.1 Supply Chain
4.3.1.2 Supply Chain Management
4.3.2 Sub-contracting
4.3.2.1 The Process of Sub-Contracting the Parts to
Suppliers
4.3.3 Flow of Materials during Sub-Contracting
4.3.4 Purpose of Reconciliation
4.4 Types of Reconciliation Methods & General Procedure of
Stocks Reconciliation
4.4.1 Types of Reconciliation Methods
4.4.2 Types of Inventory Systems:
4.4.3 General Procedure of Stocks Reconciliation
4.5 Global Manufacturing System
4.6 Overview of GPSC Department activities in GM India
4.6.1 Study Of Global Purchasing & Supply chain (GPSC) Process
4.6.2 Study of Roles & Responsibilities of Schedulers
5.0 RESEARCH METHODOLOGY.....41
5.1 Methodology for the Third Party Stocks/ Inventory Reconciliation
Process at General Motors India
5.2 Stocks/ Inventory Reconciliation Conducted in GMI Power- Train
Plant
5.2.1 In Detail Procedure of Reconciliation
5.3 Reconciliation Status of the Sub-Contracted Parts
5.3.1 Steps followed in the Reconciliation Process
5.3.2 Status of Reconciliation Part -1
5.3.3 Status of Reconciliation Part -2

6.0 RECONCILIATION DISCREPANCY ANALYSIS...55

6.1 Reconciliation Part 1 Discrepancy Analysis
6.1.1 Data for Reconciliation Discrepancy Analysis
& Reconciliation discrepancies Chart
6.2 Reconciliation Discrepancies Analysis
6.3 Savings & Treatment of the Discrepancies
7.0 SUGGESTIONS & FUTURE SCOPE.59
8.0 OTHER ASSIGNMENTS62
8.1 Short Lead Time (SLT) audit
8.1.1 Internal Audit for GMS SLT implementation
8.1.2 Action Plan for GMS SLT implementation
APPENDICES
REFERENCES

I. LIST OF FIGURES
Figure 2.1: Indian Auto Industry Market share distribution
Figure 2.2: Indian Auto Industry Market share, Passenger vehicles
Figure 3.1: New GM Business Model
Figure 4.1: Supply Chain activities
Figure 4.2: Principles of the Global Manufacturing System (GMS)
Figure 4.3: 33 Elements of The GMS Principles
Figure 4.4: In-Plant Material Flow Process Global Purchasing & supply
Chain Dept., General Motors India
Figure 5.1: Methodology The Third Party Stocks/Inventory Reconciliation
Process
Figure 5.2: Format of Reconciliation data received from Supplier.
Figure 5.3: Format showing the Child part cross verification for Reconciliation
purpose
Figure 5.4: Format showing the Parent part cross verification for
Reconciliation purpose
Figure 5.5: Format for Stocks Balance Sheet for Reconciliation
Figure 5.6: Status Third Party Stocks Reconciliation-1
Figure 5.7: Status Third Party Stocks Reconciliation-2
Figure 6.1: Discrepancies reasons Frequency Bar Chart
Figure 7.1: Reconciliation Format in use
Figure 7.2: Proposed Reconciliation format

II. LIST OF TABLES

Table 3.1:

GM India Power-Train division products

Table 5.1:

List of sub-contracted Parts Reconciliated

Table 6.1:

Reconciliation Discrepancies Reasons

Table 6.2:

Savings Summary Third Party Stocks Reconciliation

EXECUTIVE SUMMARY

This project is titled as the Third Party Stocks Reconciliation of the Sub-Contracted Parts It
covers the Reconciliation of all the sub-contracted parts in the GM-Power-Train division
manufacturing plant. It includes reconciling first the GMs ERP maintained inventory records
with the suppliers Book/System maintained Inventory records and then reconciling the
system record with the Actual Physical Inventory of the specific part/s at the Suppliers end.
The Third Party here stands to be jointly the Finance Dept. of the company & external
Financial Auditing firm which will audit the Reconciliation from Financial point of view.
The project is aimed at Reconciling the Physical Inventory of all the sub-contracted parts at
suppliers end with the GM ERP system inventory records for the last nine months period so
that there will be an updated inventory record available after resolving all the previous
discrepancies. The process of Reconciliation is studied, analyzed for improvements and
required improvements are suggested so that, in future, the process will be easier, less time
consuming and carried out more frequently to provide the transparent and updated inventory
records. The standardization & Continuous Improvement Principles of Global Manufacturing
system (GMS) are used to improve the Reconciliation process. Another Principle of GMS,
Short Lead Time (SLT) is also studied and Internal Audit for GMS-SLT is co-ordinated
during the Summer Project period.
The Methodology used is based on the standardized Procedure of Reconciliation in GM. First
the existing standard procedure of Reconciliation is studied & Reconciliation is carried out
for the last nine months transactions. For some parts, reconciliation is carried out since the
beginning of the transaction i.e. last two years period. The two inventory records i.e. GMERP System record & Physical Inventory record at the suppliers end, are cross checked &
discrepancies are found. The discrepancies are investigated & evidences are collected. Later
discrepancies are treated accordingly & ERP system adjustments or debit on supplier is done.
The Reconciliation is done in two phases, phase one being Reconciliation up to 31 st March
2012 & Second Phase is from 1st Apr12 to 29th Jul12 when Annual Physical Inventory is
carried out.

10

The major findings are in terms of frequency of Reconciliation andmethod of data

collection& treatment used. The Reconciliation was not carried out since the beginning of the
operations of the plant. Previously, only physical stock taking was done in September 2011
but the two system records i.e. GM ERP System & Suppliers Book/System records were not
cross checked. And the reconciled system record was not cross verified with the physical
inventory record at Suppliers end. So, the discrepancies already existing at that time were
not resolved and carried forward. The format standardized for the Reconciliation Process has
many areas of improvement. One major area is the absence of feedback system. The record
maintained in the books/system for the sub-contracted parts transaction needs feedback in
terms of Goods Receipt Note at both the ends. And the system needs to be updated after every
reconciliation process which was not done previously.
A more frequent i.e. monthly Reconciliation is suggested and improvement is suggested in
the formats used for data collection from suppliers & formats for Reconciliation.A feedback
system is incorporated by including the GRN records to be maintained in the data collection
format.After these improvements are done,it will become a self-Reconciling activity apart
fromother benefits like reduction in time & efforts for the same. As an ideal state of Inventory
Management, Perpetual Inventory system is suggested.
The limited time period of two months for the project seems to be limiting factor in exploring
the more possible results from the project work. The complete & timely data availability for
the project work was constrained by the lack of access to the ERP system of the company for
being a project trainee. No cost was allocated separately for the project work which turned
out to be a cost saving project for the company.
The savings in terms of Debit on supplier range between 2% and 18 % of the Invoice value
ranging from Rs. 2,000 to Rs.10, 00,000.
The project has to be mutually benefiting to both the organization & the researcher. In this
project, it helped the organization in completing the long pending activity of Inventory
Reconciliation which is a mandatory norm to comply with the GMS system and bring
transparency in inventory records and financial records. It also helped the researcher in
learning the aspects of Materials Management, Supply Chain Management and
manufacturing processes & practices in the Automobile Industry.

11

1.0 INTRODUCTION
The project is a study as well as the actual working application of The Third Party
Stocks/Inventory Reconciliation Process carried out in the Supply Chain Management of a
Worlds leading Automobile firm in the challenging environment of Automobile Industry. The
challenge lies in the fact that a large number of parts go into the manufacturing of an
automobile product i.e.an Automotive vehicle, along with tighter time constraints, for which
an efficient Inventory management is a tough task. Inventory Reconciliation is a part of a
larger function called Materials Management in an organizations operations. It is an
inevitable part of Materials Management for maintaining up to date records of the Inventory
being utilized by the Organization. Materials are one of the most important resources being
used by a firm as it contributes almost sixty to seventy percent in the total cost of the product,
being manufactured, on an average. The importance of this activity is of great concern to all
the functions like Sales & Marketing, Operations and Finance of a firm. Periodic
Reconciliation of Stocks is a general practice whereas Perpetual Inventory being an ideal
condition in this regard. The Standard Procedure for Reconciliation Process is previously
developed in GMI which is followed as guideline and further additional formats & methods
are used for simplification of the process. Reconciliation is done in two parts, first half being
Reconciliation upto 31st March 2012 & second half is from 31st March 2012 to 29th July
2012.The Nett outcome of this process in terms of final adjustments in the inventory figures
in ERP system & Debit to the suppliers, as applicable,are subjected to thePlanned
Organizational Decisions which we hope will be affected soon after the Annual Physical
Inventory(API) conducted from 29thJuly 2012 to 4th August 2012 across GM India Plants.

1.1Motivation
The Project is completed in the Worlds Leading Auto manufacturer General Motors
manufacturing facility which has its existence in India since a long way back in 1928 with
currently two manufacturing facilities, one at Halol, Gujarat & second at Talegaon, Pune,
Maharashtra. The Power-Train Plant of GM India started its operations on 12 th November
2010. Before this, GM had an operative Plant of General Assembly along with the Body Shop
& Paint Shop at its Pune facility since August 2008.
From the beginning of operations at Power-Train Plant, the Stocks Reconciliation was carried
out after ten months since it started the operations. Due to some technical reasons, the
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previous Reconciliation conducted in September 2012 could not be affected in the ERP
system with due adjustments in the system to bring the Systems stocks & Physical stocks in
agreement. And it remained as just the stock taking process and not the complete Stocks
Reconciliation. So, to keep the inventory records transparent & updated up to date, the Stocks
Reconciliation for its Sub-Contracted parts was vital.This task has been tried to be
accomplished under this project.

1.2 Objectives
a. To study the Third Party Stocks Reconciliation at GM India & overall study of the
Process of Purchasing & Supply Chain Management at GM India
b. To carry out Third Party stocks Reconciliation for the selected parts for specified time
period to bring into agreement the GM ERP system Inventory records & Physical
Inventory at the Suppliers end.
c. To suggest improvements in the process of Third Party Stocks Reconciliation as a part
of Continuous Improvement (Kaizen)
d. To study Global Manufacturing System - Lean Manufacturing system at GM
i. Study of elements of GMS Short Lead Time , Audit point of View
ii. Coordinating the SLT Audit for Power-Train plant

1.3 Scope
The project is mainly focused on delivering the successful completion of stocks
Reconciliation of all the sub-contracted parts. The concerned dept. is the Global Supply
Chain, a sub group of the Global Purchasing & Supply Chain Dept. under the Power-Train
division of GM India operations.
Here we will refine the ERP system data available with the company. The data with the
company and the suppliers needs to be cross checked for accuracy. Some corrections are
required in both the data available with both the sources. Finally this corrected data will be
cross checked with the actual Physical Inventory available with supplier/ GM India. The
discrepancies need to be treated.
The discrepancies are either in the form of adjustments in the ERP system records or the
amount of inventory in discrepancy shall be debited to suppliers account. After the
completion of this task, the two inventory records will be in agreement i.e. reconciled.
13

The suggestions will be done on the basis of shortcomings observed in the existing process of
reconciliation. Those will be useful to meet the shortcomings and make the inventory
management & reconciliation process stronger and easier.
The discrepancies may or may not be investigated thoroughly due to the fact that the data is
not investigated for the last nineteen months since the operations of the plant are initiated.
The various adjustments, reversals, cancellations are done at various times in the inventory
records. This will reduce the accuracy of the data being used. Hence we need to rely on the
data available & the investigation possible at this point of time.
The area of work will be limited for the Power-train plant only and to the sub-contracted parts
under consideration. The engine assembly consists of hundreds of parts. We have selected
only the eight sub-contracted parts for reconciliation. The time period is well defined which is
of nine months from the last stock taking up to the Annual Physical Inventory carried out in
the month of July 2012. The cost/Price of the parts is not a limiting factor for the work. As
all the suppliers are located within the boundaries of India, the work will be carried out in
India only.

1.4 Chapterization
The report is made up of total eight chapters.
The first chapter is of Introduction which covers the basic introduction to the task of
reconciliation of inventory, the background of the work, the organizational history related to
the work and purpose, importance in brief. Objectives and scope of work is also explained in
this chapter.
The second chapter is the Industry Profile which deals with the background and current status
of the Indian Automobile Industry in which the organization works. The major players, their
contribution and economical aspects & importance of this industry are explained.
The Third chapter is of Company profile where we can find the details about the
organization, General Motors India. Its existence and tenure in the country. Current product
offerings and economical statistics of the company are also explained.
The forth chapter is of the Literature Review of the Reconciliation process where the Supply
chain process, Sub-contracting activity & the need /purpose of the project are elaborated. The
general practices adopted in this area are explained to get an overview of what are the
14

practices followed & how is the project work will be guided with respect to the existing work
in this area.
The fifth chapter is the Research Methodology which covers the procedure followed for
reconciliation work. The various steps actually carried out and formats, methods of work are
shown in this chapter.
The sixth chapter is of the analysis of discrepancies found during reconciliation and their
treatment. The monetary savings which are of great importance can be sited here.
The seventh chapter consists of the Suggestions made based on the work carried out during
the project. The future scope of the project is about improvements to be done in existing
processes and practices followed. This will surely enhance the efficiency & effectiveness of
the process of reconciliation.
The eighth chapter explains the other assignments completed during the project period. The
assignments were additional knowledgeable activities under the umbrella of Supply Chain
Management which were helpful in learning the concept & practical aspects of the Supply
Chain management.

15

2.0 INDUSTRY PROFILE

The Indian Automotive sector has a significant place in the countrys economy which
provides about 5 % contribution to the nations GDP of $1.78 Trillion and 13 million
employments. It has come a long way since its inception.
(Source: Department of Heavy Industry & Public Enterprises Government of India http://www.imaginmor.com)

2.1 Industry Definition

This class consists of units mainly engaged in manufacturing motor vehicles or motor vehicle
engines.

2.2 Products and Services

The primary activities of this industry are:
1. Motor cars manufacturing
2. Motor vehicle engine manufacturing
The major products and services in this industry are:
1. Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles &
Multi Purpose Vehicles)
2. Commercial Vehicles (Medium & Heavy and Light Commercial Vehicles)
3. Two Wheelers
4. Three Wheelers

2.3 History
The first car ran on India's roads in 1897. Until the 1930s, cars were imported directly, but in
very small numbers. The automotive industry emerged in India in the 1940s. Mahindra &
Mahindra was established by two brothers as a trading company in 1945, and began assembly
of Jeep CJ-3A utility vehicles under license from Willys. The company soon branched out
into the manufacture of light commercial vehicles (LCVs) and agricultural tractors.
Following the independence, in 1947, the Government of India and the private
sector launched efforts to create an automotive component manufacturing industry to supply
to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s
16

due to nationalisation and the license raj which hampered the Indian private sector. Tatas
were in Heavy Commercial Vehicles Mfg. whereas Ashok Leyland was another major player
in this segment. Govt. of India formed the joint venture Maruti-Suzuki with Japanese vehicles
manufacturer Suzuki for commercial passenger cars. 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 has attracted significant India-specific
investment by multinational automobile manufacturers.After a 100 % FDI allowed in the
sector, Today there are almost all the major International Auto manufacturing Players like
Toyota, Volkswagen, General Motors, Ford, Honda, Hyundai, Daimler, BMW present in India
with their Manufacturing plants which supply to the Domestic demand as well as Export the
vehicles to the World Market.
(Source: "Timeline: India's automotive industry". BBC News. 3 April 2007. Archived from
the original on 2 January 2009. )

2.4 Life Cycle

The life cycle stage of the Indian Auto Industry is growth.
The Life Cycle stage is so called because of following reasons:
1. The market for manufacturing motor vehicles is consistently increasing.
2. The products manufactured by this industry are profitable.
3. Companies have been consistently opening new plants and employing over the past
five years.
4. Japanese and European manufacturers of motor vehicles have entered the market.
5. Industry value added has been rising, along with the rise in GDP.

2.5 Major Players & Segmentation

The Indian automobile Industry has following major segments:
1. Passenger Vehicles ( 15.07 % Market Share)
17

2. Commercial Vehicles (4.66%)

3. Three Wheelers (2.95%)
4. Two Wheelers (77.32 %) (Source : SIAM data www.siamindia.com)

Figure 2.1 : Indian Auto Industry Market share distribution

The Major Players in the Indian Automobile sector are

1. Tata Motors
Market Share: Commercial Vehicles 63.94%, Passenger Vehicles 13.10 %

2. Maruti Suzuki India

Market Share: Passenger Vehicles 36.60 %

3. Hyundai Motors India

Market Share: Passenger Vehicles 14.61%

4. Mahindra & Mahindra

Market Share: Commercial Vehicles 10.01%, Passenger Vehicles 11.26%,
Three Wheelers 1.31%

5. Ashok Leyland
Market Share: Commercial Vehicles 22%
Others being Toyota, General Motors, Volkswagen, Ford, BMW, HM, Hero Honda,
Bajaj,TVS etc.

(Source: Economic Times 14th Sept12 publication)

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Figure 2.2: Indian Auto Industry Market share, Passenger vehicles

The figure 2.2 shows the market shares of the various Auto manufacturers in the passenger
vehicles segment for the two consecutive years and respective variations. Maruti Suzuki, in
spite of being the market leader, has lost a big amount of market share and other players are
gaining the same at the same time. The competition has become tougher and some other
reasons like shut down at the Maruti Suzukis Manesar plant has given other companies to
excel in the share.

2.6 Market Statistics& Potential

Indian Auto Industry is
The Largest three wheeler market in the world
2nd largest two wheeler market in the world
10th largest passenger car market in the world
4th largest tractor market in the world
5th largest commercial vehicle market in the world
5th largest bus & truck market in the world. (source: www.oica.net )
The turnover of Indian Auto Industry is about $ 36 Billion.
It manufactures over 11 million vehicles and exports about 1.5 million each year.
The growth rate of the industry has been on an average of 17% for last few years.
The industry provides direct and indirect employment to 13.1 million people.
About 91% of the vehicles sold are used by households and only about 9% for commercial
purposes.
India's share is about 3.28% of the world Passenger & commercial vehicle production with
2.6 million units a year in 2011.
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The Global Production is 77 million passenger and commercial vehicles.

India's automotive exports constitute only about 0.3% of global automotive trade.
The contribution in the nations GDP is expected to grow around 10 % by 2016. Indian
passenger car market will have a growth rate of about 12 percent per annum over the next
few years to reach the production of 5.1 million units by the year 2015 and turnover of $122$159 in the year 2016 and 25 million additional employments. Experts state that in the year
2050, India will top the car volumes of all the nations of the world with about 611 million
cars running on its roads.
(Source: Dept of Heavy Industry & Public Enterprises Govt. of India- www.imaginmor.com)

3.0 COMPANY PROFILE

3.1 General Motors:
General Motors was found in 1908 in Flint, Michigan, U.S.A. by William C. Durant. The
company has its global headquarters in Detroit and employs approximately 2, 02,000 people
all over the world. It does business in 120 countries and, together with its strategic partners,
produces cars and trucks in 31 countries. GMs highest sales are reported from China,
followed by the United States, Brazil, the United Kingdom, Germany, Canada, and Russia.
The company includes a total of 13 brands - Baojun, Buick, Cadillac, Chevrolet, FAW, GMC,
Daewoo (car division), Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling under its
umbrella.
Over the past few years, GM has suffered several setbacks, including the declaration of
bankruptcy in June 2009 and an eventual split. A New GM emerged in 2009 with the
support of the US government. The new company was listed on the New York Stock
Exchange in November 2010. As part of the reorganization, the company phased out two of
its brands - Pontiac and Goodwrench - and adopted a new brand identity. It also received
loans from European governments in 2009, and reduced its stake in European operations.
Operations in other parts of the world were not affected by the bankruptcy and continued as
before. (Source: "History of General Motors, Company profile". www.gm.com)
The company has generated total revenue of $ 150 Billion in the year 2011-12 with net profit
of $ 7.58 Billion. Total unit sales of the company stood at maximum in the industry i.e. 9.025

20

million units sold worldwide, corresponding to 11.9% market share of the global motor
vehicle industry which makes GM the number one manufacturer in auto sector.
(Source: GM Press Release ,January 20th 2012. "GM global sales up 7.6% in 2011 to 9.026M
vehicles; China and US largest markets". Green Car Congress. )

3.2 Vision & Strategy

The GM is focused on a single global vision:
To design, build and sell the worlds best vehicles.
To be the world leader in transportation products and related services.
We will earn our customers enthusiasm through continuous improvements driven by the
integrity, teamwork and innovation of GM people.
This powers the development of world-class products that are winning in the marketplace,
and is helping to transform the business and fortify the balance sheet of GM.

Figure 3.1: New GM Business Model

(Source: www.gm.com)
Heres how GM brings the insight, drive and vision of its business model to the market every
day to yield positive results for its investors, employees and customers worldwide:
1. Design

21

Focusing on core brands; leveraging global resources to create the most compelling vehicles
and technologies, leading in the research and development of advanced technologies to
reinvent the future of transportation.
2. Build
Optimizing its global footprint to cost-effectively develop best-in-segment vehicles.
Maximizing the efficiencies of operating its facilities in an environmentally and sociallyresponsible manner.
3. Sell
Maximizing revenues with a focused brand strategy; delivering world-class vehicles to the
marketplace that offer its customers higher residual value, with lower incentives and
appropriate pricing.

4. Reinvest
Consistently reinvesting cash and profits into vehicle and technology development at
strategic points in the business cycle. Putting its financial strength to work to ensure the
economic viability of the company.

3.3 General Motors in India:

General Motors India has its headquarters in Gurgaon, Haryana, and has two assembly plants
(in Talagaon, Maharashtra and Halol, Gujarat) with a combined production capacity of
385,000 vehicles per year.
It also has a technical centre in Bangalore which focuses on research and development,
vehicle engineering activities, purchasing and financial support services, and vehicle engine
and transmission design.
The company first started doing business in India in 1928, assembling Chevrolet cars, trucks
and buses, but ceased operations in the country in 1954. It continued its tie-up with Hindustan
Motors to build Bedford trucks, Vauxhall cars, Allison Transmissions and off-road
equipment.
In 1994, General Motors India Private Limited (GMIPL) was formed as a 50-50 joint venture
between GM and Hindustan Motors. GMIPL started out producing and selling Opel vehicles,
and was bought over completely by GM in 1999. Till 2003, the company continued to

22

produce Opel cars at its Halol facility. Later, it switched to producing Chevrolet vehicles at
the same plant.
GM is the sixth largest passenger cars manufacturer in India with a Market Share of 3.4 % as
of August 2012. (source: www. http://business.mapsofindia.com)

3.4 Joint Venture of GMIPL with SAIC

In December 2009, Chinese auto company Shanghai Automotive Industry Corporation
(SAIC) bought a 50 percent stake in GM India. The new joint venture company is called
General Motors SAIC Investment Limited (GMSIL) and is the sixth largest automobile
manufacturing company in the country after Maruti Suzuki, Hyundai, Tata
Motors & Mahindra and Toyota. (source: www. http://business.mapsofindia.com)

3.5 Products in the Indian Market

General Motors India has many products in its portfolio which are accepted as value for
money by the Indian Market. Following are the Products and their specifications.

3.5.1 GM-Chevrolet Products in India

The GM currently manufactures & sells its Chevrolet brand products in India. Since 2003, it
has launched eleven products in various categories from small car, sedan to SUV.
Some other brands like GM corvette are also launched by the company to attract the premium
segment customers.
Following is the list of various GM Chevrolet brand models and their technical specifications
& Prices which explains the segment, Price range in which GM India operates.
In the near future GM India plans to launch the vehicles in Hatchback, Multi Utility Vehicles
and Notchback segments which will enhance its product portfolio to capture two digit market
share from the current 3.4 % share.

23

24

( Source : www.carwale.com)

25

3.5.2 GM-Power-Train /Engine Products

The Various engines manufactured in GM Talegaon plant are:
i.

1.0 L XSDE (Extra Smart Diesel Engine)

ii.

1.2 L Petrol Engine

iii.

1.2 L LPG Engine

iv.

1.3 L Diesel Engine

GM Power-Train division manufactures various engines as shown in the table below for its
cars manufactured at the same facility and for export purpose. By utilizing the cost benefit of
manufacturing engines in India, the company exports the engines to its various car
manufacturing plants across world. The engines are mainly used in its small and medium
sized car models like Beat, Spark, Sail & U-VA.

Table 3.1: GM India Power-Train division products (Source: GM India database)

26

4.0 LITERATURE REVIEW & NEED/PURPOSE OF THE

PROJECT
4.1 Definition: Reconciliation
4.1.1 Reconcile:
To bring (two or more different aims, points of views etc.) into agreement.

4.1.2 Reconciliation:
Item by item examination of two related sets of figures obtained from different sources.
Most commonly, this term is applied to bank reconciliationof stocks/funds. In the same
manner, it is applicable to Stocks/Inventory in case of Supply Chain Management (SCM).
In our study of the Inventory Reconciliation of Sub-Contracted parts, the two different
sources of data are the physical Inventory count at the Suppliers end & the ERP System
maintained inventory record for the same supplier.

4.2 Concept of Reconciliation:

In general, The Reconciliation is the process of :
Item by item Examination of two sets of figures where
1. The sets of figures collected are related in the same context e.g. in SCM, the
dispatch & receipt ofMaterial between two parties
2. The source of sets of figures will be different. i.e. The data about dispatch of
material from sender & receipt of material by the receiver.
When the two different sets of data are collected from the two parties, it will be considered as
the

data collected from different sources, which can be further reconciled.

The two records of the inventory i.e. physical Inventory count at the Suppliers end & the
ERP System maintained inventory record for the same supplier, at the predetermined date are
collected and cross checked for discrepancies. If no discrepancies are found, a Reconciliation
Note is prepared and approved.
If some discrepancies are found, they are investigated, reasons are found for the same. And
the difference is eliminated by appropriate adjustment in the system with required approvals
or debit on supplier. In detail Reconciliation process is explained in the latter part.
27

4.3Purpose of Reconciliation
Purpose of Stocks/ Inventory Reconciliation in Supply Chain Management
(SCM):
Inventory reconciliation is very important when the parts are sub-contracted to the vendors &
there is a flow of material to and fro the Suppliers. To understand the need of reconciliation
for Sub-Contracted parts it is mandatory to understand the Supply Chain & Sub-Contracting
Process in it.

4.3.1 Supply chain & Supply Chain Management

4.3.1.1 Supply Chain
A supply chain is a system of organizations, people, technology, activities, information and
resources involved in moving a product or service from supplier to customer.
It isreferred to as the logistics network of facilities i.e. Suppliers, manufacturers, warehouses,
distribution centers & retail outlets and the inventory in the form of Raw materials, Work-inprocess (WIP) inventory & Finished productsthat flow between the facilities.
There are majorly three types of flow that take place in a Supply chain
i.

Material

ii.

Information

iii.

Finances

4.3.1.2 Supply Chain Management:

A set of approaches used to efficiently integrate Suppliers, Manufacturers, Warehouses &
Distribution centers So that the product is produced and distributed in the right quantities, to
the right locations and at the right time so as the System-wide costs are minimized
andService level requirements are satisfied.
So the function of a Supply Chain Management is to Integrate;
i.

Suppliers

ii.

Manufacturers

iii.

Warehouses

iv.

Distribution System

28

So that the product is produced & distributed in

i.

In the right quantities

ii.

To the right locations and

iii.

At the right time

With the objective to achieve is

i.

System-wide costs are minimized and

ii.

Service level requirements are satisfied

Figure below shows the overall structure, integration & flow of Material, information &
Finances in a Supply Chain.

Plan

Source

Make

Deliver

Buy

Figure 4.1: Supply Chain activities (Source: http://www.supplychainmanagement.in)

4.3.2Sub-contracting
The practice of assigning part of the obligations and tasks under a contract to another party
known as a subcontractor.Subcontracting is especially prevalent in areas where complex
projects are the norm, such as construction and information technology. Subcontractors are
hired by the project's general contractor, who continues to have overall responsibility for
project completion and execution within its stipulated parameters and deadlines.

29

In Automotive manufacturing, where large number of parts go into the final assembly of a
vehicle , its a smart & obvious move to sub-contract some items to the suppliers to achieve
cost, time and quality obligations. In this process, The Original Equipment Manufacturer
(OEM) is the Customer & the service providing vendors are the suppliers. The OEM supplies
some parts & receives the parts in theform of sub-assembly or assembly.

4.3.2.1The Process of Sub-Contracting the Parts to Suppliers:

In Supply Chain Management(SCM) certain parts needs to be sub contracted to the vendors
for various purposes i.e. machining, sub-assembly, Assembly.
The various organizations Sub-Contract some parts/ Sub-Assemblies in their products
because of various reasons like:
1. Optimum Capital utilization in manufacturing of only critical parts& assemblies and
rest of the parts can be Sub-contracted to the vendors/Suppliers.
2. Special Purpose Machines / Capabilities available with certain vendors which may
need large Capital investment or high complexity & monitoring. Such parts
manufacturing & processing is delegated to the Vendors.
3. Convenience in terms of nearness from the Delivery point. E.g. Some companies
utilize the facilities of vendors who are located nearer from the harbours, Air ports or
Delivery points to optimize the delivery time & cost.
4. Some tooling development at particular vendor after modifications in his(Vendors)
existing facility will be cost effective for the company instead of fresh capital infusion
in buying new tooling.
5. Reduce Risk by delegating the manufacturing. This is in context of some rescheduling
of projects/ orders. The risk of non-utilization of inventory, manpower & capital will
be distributed between the Customer (the firm who Sub-Contracts) & Supplier firms.
6. Outsourcing is a better option for certain one time or less frequent activities where the
facilities of suppliers can be utilized intermittently by the Customer firm.
7. Some parts can be manufactured by certain vendors in smaller batches with high cost
efficiency.
8. The special high skilled manpower can provide required services to the customer firm
whenever required. This is applicable where it is not feasible to maintain such
manpower on continuous basis by the Customer firm due to one or more reasons.

30

4.3.3 Flow of Materials during Sub-Contracting:

While Sub-Contracting the parts manufacturing or Services to the vendors, there is a
continuous transaction of materials between Supplier & the Customer firm in following
manner 1. The material which goes from Customer firm to the supplier as sub-contracted items
are called child part & the part which are returned by the supplier firm to the customer
firm are called parent parts.
2. The child parts material is issued by the customer firm to the supplier when required
for sub-assembly, assembly or processing and
3. After processing, the parent parts are returned to the Customer firm with the subassembly or assembly.
4. The transactions are maintained in the books and/or systems.
5. The respective financial transactions are maintained in the Suppliers Accounts.
6. The inventory moves from Customer firm to Supplier firm in computerized systems.
7. The child parts are credited to the suppliers account when it is issued to him & they
are debited from Suppliers account when it is returned along with the parent part by
the supplier.
8. The inventory accounts are maintained and updated as the inventory moves between
the two firms.

4.3.4 Purpose of Reconciliation:

In ideal condition, there should be hundred percent perfection in maintaining the inventories
between the customer & supplier firms accounts. But there are certain cases where this
system of inventory accounting is disturbed. Following are the reasons which can be
responsible for them.
1. Some items are scheduled for dispatch by the customer firm but the dispatch is
cancelled due to some reasons. The system entry is done initially but physically the
material doesnt move.
2. The order is re-planned as per the updated requirement after entering the order details
in the system. But the previous system entry is not discarded.
31

3. When the parent parts are rejected at the Customers end, the child parts should be
credited to suppliers account along with the parent parts credit. But only the parent
part is credited and child part inventory accounts get disturbed.
4. Manual errors contribute a large part in this regard. The manual errors can be of the
following types :
i.

Entering a wrong invoice number or other details i.e. quantity, date or Supplier
name while making an entry in the Material shipping or receiving register.

ii.

Making a mistake while making an entry in the system when updating the system
with the manual register of Material Shipping or Receiving.

iii.

At Suppliers end the same mistake can take place which creates difficulty while
reconciling the invoice numbers.

iv.

The invoice copies are not entered at all in the register. So such entries are not
found while reconciling the inventory.

v.

The invoice hard copies are lost, some times before the entry is made in the
register and the system.

5. Theft is another reason to reconcile inventory. If there is theft occurring in the

warehouse, the system maintained inventory will be higher than the physically
available inventory which will show a wrong figure and cause stock-out condition on
the assembly line. This will hamper production & supply of goods.
6. Damage of parts during transit or during handling. The damaged parts if not treated
accordingly in the system record will show a wrong picture regarding receipt &
delivery of child parts and Parent parts respectively.
7. The damaged parts or short supply needs to be updated in the system timely to
maintain a true record of inventory.
8. Inventory reconciliation can affect a companys tax liability. Taxes can be accessed on
the unsold balance of inventory based on the companys accounting information.
Inaccurate balances can result in companies having to pay more money in taxes from
faulty inventory information. Additionally, paying taxes on damaged, obsolete, or
otherwise unsellable goods results in more money lost from poor inventory figures.
The main purpose of reconciling the inventory is to maintain the system & physical inventory
numbers in harmony. The most important aspect of this is to be able to get the updated
information of inventory as and when required.

32

The matched figures between system & physical record allow,

1. Materials Manager to plan the movement of Inventory in and out of the factory may
be in terms of Raw material, WIP and Finished Goods.
2. The sales personnel to know if enough inventory exists to meet company orders /
Customer Requirements.
3. Plant personnel can know if enough raw material& WIP inventory is on hand to meet
production needs.
4. The Finance Personnel can plan the funds accordingly for the purchase of material
etc.

4.4 Types of Reconciliation Methods & General Procedureof Stocks

Reconciliation
4.4.1Types of Reconciliation Methods
Inventory reconciliation involves mainly two steps:
1. Physical Inventory
2. Accounting Inventory

1. Physical Inventory:
The steps including in Physical Inventory are:
i.

Physical Count of the Inventory in the warehouse

ii.

Taking a written inventory record and

iii.

Comparing it to the actual goods in the companys warehouses.

iv.

Counting obsolete and damaged products.

2. Accounting Inventory :
Reconciliation steps on the accounting side include
i.

Verification that all inventory purchases are posted,

ii.

Entering adjustments from the physical count and

iii.

Analyzing the dollar differences between months.

33

4.4.2 Types of Inventory Systems:

There are two types of inventory systems common in business:
1. Periodic Inventory System and
2. Perpetual Inventory System.
Both involve tasks or activities that relate to the physical and accounting methods of
inventory reconciliation which are as explained ahead.

1. Periodic Inventory System:

This system is somewhat easier, as it only requires for the recording of financial inventory
information on a monthly, quarterly, or annual basis. For example, the general ledger will
include a starting figure for the quarter. Accountants will add the total inventory purchases for
this time period, deduct sales and adjustments, and then present a final figure on the
companys balance sheet.
Physical inventory counts under the periodic method are typically quarterly or annual. More
frequent counts may be necessary if theft occurs, or if a significant number of inventory
products continually wind up damaged going through the companys processes.

2. Perpetual inventory System:

This method records and reconciles inventory information after each purchase, sale, or
adjustment to the general ledger account. Inventory reconciliation under the perpetual method
is much more accurate than the periodic system. Companies with individual or unique
inventory products will often use the perpetual system because of the large variety of goods
within the companys warehouse. Physical inventory counts are often annual, although cycle
counts may be more frequent. Cycle counts help maintain records on a weekly basis to ensure
significant adjustments are not made to the companys general ledger at one time.
In our study & subsequent reconciliation practice, the reconciliation is carried out under the
Periodic Inventory system where the Annual Physical Inventory(API) has been conducted
after ten months.
The system data is prepared and the Physical Inventory figures will be collected & compared
for action either an adjustment in the system or Debit to the Supplier.

34

4.4.3 General Procedure of Stocks Reconciliation:

The reconciliation is mandatory everywhere whenever there is flow of material. Every type of
industry handles certain type of material. The physical count of stocks is checked periodically
for its match with the Book Records for purposes discussed previously. Though it be FMCG
sector or Pharmaceutical sector or any other manufacturing sector, if there is flow of material,
Reconciliation of inventory has a vital place. There are certain steps that you should follow
during the reconciliation of inventory.
In particular, you should consider following any or all of these steps:
1. Recount the inventory:
It is entirely possible that someone incorrectly counted the inventory. If so, have a
different person count it again (since the first counter could make the same counting
mistake a second time). Further, if the physical count appears to be significantly lower
than the book balance, it is quite possible that there is more inventory in a second
location - so look around for a second cache of inventory. Recounting is the most
likely reason for a variance, so consider this step first.
2. Match the units of measure:
Are the units of measure used for the count and the book balance the same? One
might be in individual units (known as "eaches"), while the other might be in dozens,
or boxes, or pounds, or kilograms. If you have already conducted a recount and there
is still a difference that is orders of magnitude apart, it is quite likely that the units of
measure are the problem.
3. Verify the part number:
It is possible that you are misreading the part number of the item on the shelf, or
guessing at its identification because there is no part number at all. If so, get a second
opinion from an experienced warehouse staff person, or compare the item to the
descriptions in the item master records. Another option is to look for some other item
for which there is a unit count variance in the opposite direction - that could be the
part number that you are looking for.
4. Look for missing paperwork:
This is an unfortunately large source of inventory reconciliation issues. The unit count
in the inventory records may be incorrect because a transaction has occurred, but no
one has yet logged it. This is a massive issue for cycle counters, who may have to root
around for un-entered paperwork of this sort before they feel comfortable in making
35

an adjusting entry to the inventory records. Other examples of this problem are
receipts that have not yet been entered (so the inventory record is too low) or
issuances from the warehouse to the production area that have not been entered (so the
inventory record is too high).
5. Examine scrap:
Scrap can arise anywhere in a company (especially production), and the staff may
easily overlook its proper recordation in the accounting records. If you see a modest
variance where the inventory records are always just a small amount higher than the
physical count, this is a likely cause.
6. Investigate possible customer ownership:
If you have no record of an inventory item at all in the accounting records, there may
be a very good reason for it, which is that the company does not own it a customer does. This is especially common when the company remodels or enhances
products for its customers.
7. Investigate possible supplier ownership:
To follow up on the last item, it is also possible that you have items in stock that are
on consignment from a supplier, and which are therefore owned by the supplier. This
is most common in a retail environment, and highly unlikely anywhere else.
8. Investigate Back-flushing records:
If your company uses Back-flushing to alter inventory records (where you relieve
inventory based on the number of finished goods produced), then the bill of
materials and the finished goods production numbers had better both be in excellent
condition, or the reconciliation process will be painful. Back-flushing is not
recommended unless your manufacturing record keeping is superb.
9. Accept the variance:
If all forms of investigation fail, then you really have no choice but to alter the
inventory record to match the physical count. It is possible that some other error will
eventually be found that explains the discrepancy, but for now you cannot leave a
variance; when in doubt, the physical count is correct.

36

4.5 Global Manufacturing System (GMS)

GMS is a set of standards which describe the what, why and how to organize manufacturing
operations in GM in order to eliminate waste. Within GMS, waste is defined as anything that
the customers are not willing to pay for. Elimination of waste is the only way to survive as a
company.
The structure of GMS is organized around five principles
1. People Involvement
2. Continuous Improvement
3. Standardization
4. Short Lead Time (SLT)
5. Built in Quality
1. People Involvement
GM recognizes its employees as the most valuable resource, and will provide the support
necessary to allow all the people to work in a motivated, empowered and particular way.
2. Standardization
A dynamic process by which the work is documented, followed and performed according to
core standards, terminology, principles, methods, and processes to achieve a common base
from which to improve.
3. Built-in Quality
Quality expectations are achieved in each process to ensure defects are not passed on to the
following process.
4. Short Lead Time
Reduce the time from the placement of an order by the final customer to the delivery of the
product and receipt of payment. There are three types of lead time:
i.

Total Lead Time

ii.

Product Development Lead Time and

iii.

Process Lead Time.

5. Continuous Improvement
GM fosters an attitude which nurtures change and supports all employees in improving their
own jobs and environment for the continuous improvement of the company.

37

Within each of these five principles are several unique operating concepts named Elements
which define particular ways to accomplish a particular part of all the manufacturing effort.
In total, there are 33 Elements, each one belonging to one of the 5 Principles. The most
important thing to understand about the Principles and Elements is that it takes ALL of them
to form GMS.

Figure 4.2: Principles of the Global Manufacturing System (GMS)

Figure 4.3: 33 Elements of The GMS Principles (Source: GMS Tri-fold, GM India)
38

The GMS is implemented at all the manufacturing facilities & offices of General Motors. It is
implemented at GMIs newly formed Power Train division manufacturing facility &its
offices at Talegaon, Pune from Day one.

4.6 Overview of GPSC Department activities in GM India

4.6.1 Study Of Global Purchasing & Supply chain (GPSC) Process:
The chart below shows the Process Map of the whole GPSC - activities carried out in the GM
India Power-Train Plant which can be explained as below:
1. Data Capture center captures the data for new material requirement and generates
Purchase Orders
2. The Follow up team follows up & tracks the dispatches of the material from Supplier
& their movement in Transit as per the schedules of material
3. The Goods Supplied by the Suppliers is received & Goods Received Note is Prepared.
The GRN data flows to the Data Capture center
4. The material is stored in the Storage area at the appropriate Storage Locations. There
the Identification of material, 5 S application & safety of the material is taken care of.
5. The material in storage is inspected before it is used. The Inspection test passed
material moves ahead in special locations to be further used for Production.
6. The material failing to pass inspection test is sent to Hold area. Here the material can
be treated in three ways,
i.

Repair & send for location of inspection test passed material.

ii.

Rework &send for location of inspection test passed material.

iii.

Return to the Supplier or reject

7. The material ready for Production moves to Production area & further Production
takes place.
8. The Line side rejects during the Production & after Production are again sent to Hold
area where they are treated for correction and sent back to use or rejected.
9. The Quality test passed final product is sent for Sale to the Customers.
10. The Rejected parts are treated in following ways,
i.

Return the material to the Supplier after preparing the Reject Tag by Data
Capture center.

ii.

Scrap the material after Preparing Scrap Tag by the Data Capture center.

39

Figure 4.4: In-Plant Material Flow Process Global Purchasing & supply Chain Dept.,
General Motors India

40

4.6.2 Study of Roles & Responsibilities of Schedulers:

The reconciliation of the Sub-contracted parts being a responsibility of Scheduling team,
there was an opportunity to study the activities carried out by the Schedulers in the Global
Supply Chain group of GPSC. A summary of the activities studied during the project period is
given below:
The roles and responsibilities of a scheduler are as following:
1. To ensure that the scheduled supply quantities are sufficient to cover daily Schedule.
2. To ensure the material flow is being maintained or to take appropriate action &
escalate the issues.
3. To ensure that the suppliers supply the material as per schedules
4. To ensure that the shipments are followed by the Suppliers and monitor & co-ordinate
the activity
5. Monitoring inventory status in system & its compliance with physical inventory
6. To Verify receipts of material in ERP system and respective packing details
7. To Performs physical inventory of parts as required
8. To Analyze and correct discrepancies in the balances of supply & inventory
9. To ensure reduction in inventory levels
10. Make corrections in the system as and when required
11. To Maintains supplier contact information
12. To Report problem parts or suppliers, status to schedule, recovery plans
13. To Coordinate for part changes and communicate to suppliers
14. To Support Production activities including new launch activities
15. To Verify that the contracts are current and request the GM purchasing team to renew
expired or expiring contracts
16. To Verify the cumulative yearly shipments match with supplies and reconciles
differences

41

5.0 RESEARCH METHODOLOGY

Third Party Stocks/Inventory Reconciliation at GM India Power-Train Plant
In GM India, Power Train Plant, the Reconciliation Process has been standardized when the
plant became operative. This process is finalized on the basis of the guidelines from Global
Manufacturing System (GMS) standardization concept.

5.1 Methodology for the Third Party Stocks/ Inventory Reconciliation Process
at GMI
Following is the methodology to be followed for Third Party Stocks/Inventory Reconciliation
in GMI.

Methodology for Third Party stocks Reconciliation :

1. Obtain Suppliers stock statement in a standard format for the Specified period.
2. Reconcile: Supplier statement with GMI database records for Mother Parts receipts,
Child parts dispatches, Child Part Rejections, if any.
3. Obtain Suppliers Reconciliation Statement in a standard format for the Specified
period in case of discrepancy else review reconciliation statement with department
Head & submit to inventory controller.
4. After finance approval post the discrepancy if any in ERP system.
5. Raise the debit note on supplier in case any discrepancy found at supplier end.
6. Once in a year the stock at supplier end will be taken in presence of GM employee.

42

Figure 5.1: Methodology The Third Party Stocks/Inventory Reconciliation Process

43

5.2 Stocks/ Inventory Reconciliation Conducted in GMI Power-train

Plant:
This project covers the actual Stocks / Inventory Reconciliation Conducted for the SubContracted parts in Power Train Plant of General Motors India.
Following are the various steps followed as per the methodology shownabove to carry on
Reconciliation of the Inventory for the Eight Selected Sub-Contracted parts.
These parts are used in the assembly of Petrol, Diesel & LPG engines manufactured at GMI
Power-Train Plant in Talegaon, Pune, India.
List of Parts Reconciliated:
The table below shows the Nine Sub-Contracted Parts:

Table 5.1: List of sub-contracted Parts reconciliated

44

5.2.1 In Detail Procedure of Reconciliation

The Procedure adopted for Reconciliation can be elaborated as given below:
Step I : Obtain Suppliers statement in a standard format for the Specified Period .
1. The various suppliers are provided with a standard format to maintain the data of all
the receipts& dispatches of sub-contracted parts from GM India.
2. All the Suppliers maintain the data on daily basis & communicate the same to GMI
monthly.
3. For Reconciliation purpose , a consolidated data for the last six months was invited.
4. The Format of Reconciliation Data are as shown below:
i. The Format of Child Part receipt from GM to Supplier:

45

Suppliers maintain the Reconciliation data in the form of Child Part receipt data &
parent part dispatch data.

The invoice number which is maintained on the above format sheet is important to
reconcile the child parts dispatched from GM to suppliers.

This invoice number is generated by GM and the same invoice number can be found
in GM child part data.

ii. The format for Parent/Mother part dispatch from Supplier to GM:

As like child part , the suppliers maintain their Parent part dispatch details to GM.

The invoice number maintained in above format is also recorded in GM records when
this material is received at GM.
46

This invoice number is cross verified with GM data invoice numbers to reconcile the
parent part details.

Figure 5.2: Format of Reconciliation data received from Supplier.

Step II : Reconcile: Supplier statement with GMI Database/ERP records for

Mother Parts receipts,Child parts dispatches, Child Part Rejections, if
any.
Step II.I - Collection of Data from GM ERP for the respective part & Supplier .
1. In the similar manner, the data available in GM ERP System is obtained & structured
in a standard format.
2. Data of all the vendors is collected from the system & structured in the format to
compare the two sets of data for reconciliation purpose.
3. The formats used at GMs end for structuring the data to be compared with that of
Suppliers are as shown :

47

i. Format for Child Part dispatch from GM to supplier

48

ii. Format for Parent /mother Part receipt from Supplier to GM

Step II.II Compare the two sets of Data

1. The Two sets of data collected from GM System & Supplier are compared.
2. A format for this comparison is as shown below.
3. The child part dispatch from GM to Supplier & receipt of those child parts are
compared against Invoice numbers generated by the GM.
4. The Supplier generates the invoices for the Parent parts dispatch which are compared
against the Invoice details maintained by GM. The comparison is made on the basis of
Invoice numbers of the supplier in this case.

49

5. A summary of the two types of data is created with previous opening stock, fresh
receipts of material, fresh Dispatches of material & the available stock at Supplier and
GM end.
6. The formats used for the above mentioned comparisons & Summary are as given :

Figure 5.3: Format showing the Child part cross verification for Reconciliation purpose

Figure 5.4: Format showing the Parent part cross verification for Reconciliation purpose
7. The above collected data is summarized in the form of a Balances summary with
following contents in it :
i.

Opening Balance as on starting date of Reconciliation period

ii.

Child Part Supply(in GM Record) or Receipt (in Supplier Record)

50

iii.

Parent Part Supply (in Supplier Record) & Receipt (in GM Record).

iv.

Closing Balance as on last date of the Reconciliation Period.

v.

The Format of Balance Summary is as shown below :

Figure 5.5 Format for Stocks Balance Sheet for Reconciliation

Step II.III Find Discrepancies if any.
The Discrepancies are found in two inter-dependent ways,
II.III.iFinding Discrepancy between Supplier System & Documents Record & GM
System &Documents Record
II.III.ii Finding Discrepancy between Supplier Physical Inventory Declaration & GM
System data
II.III.i Finding Discrepancy between Supplier System & Documents Record and
GM System & Documents Record
1. The first step in finding discrepancies is to find them between Suppliers
computerized systems & manually maintained Document Records & GM System and
document records.
2. The advantage of finding discrepancies between Supplier Doc. Records & GM system
data is that we can compare the two sets of data in documents & try to eliminate the
discrepancies before the Physical count of inventory. This saves the time of
reconciliation after Physical Inventory count. This is the major tool of finding &
eliminating the discrepancies between the two records.
3. The above explained formats & Method is used for finding the non-matching entries
in the two sets of data. Such entries are separated & evidences are collected for them.
4. The evidences are collected in the form of :
51

i.

The Invoice hard/Soft copy.

ii.

Goods Receipt Note (GRN) number & hard/soft copy.

iii.

Other Proof Of Delivery (POD) from GM to Supplier or Supplier to GM, like LR

( Loading Receipt)

iv.

System generated reference number of transaction if any.

5. After Collection of evidences, the discrepancy is shared with the other party & data of
both the parties are updated accordingly. This action eliminates the discrepancy.
6. The discrepancies for which the evidences cannot be collected are discarded with due
intimation of the respective party.
After the discrepancies are eliminated, this data becomes the Final system data
which can be compared with the physical count of the Inventory.
II.III.ii Finding Discrepancies between Supplier Physical Inventory Declaration
&Final System Data
1. Here the actual Physical Inventory count takes place first.
2. As Periodic Inventory system is being followed at GM India, the physical inventory
count is carried out at the end of July 2012.
3. The refined final System data which is agreed between GM and Supplier system will
be compared with the Physical Count figures for discrepancy.
4. There is a possibility of some discrepancies between System Data & Physical count or
no discrepancies between the two sets of data.
III Reconciliation Statement Preparation:
The reconciliation Statement is prepared under two conditions,
1. No discrepancies found
2. Discrepancies found between system data & Physical count
III.I Reconciliation Statement Preparation under no discrepancies found Condition:
1. A reconciliation statement is prepared stating that the system inventory data is
matching with the Physical count of the Inventory which confirms the system
inventory as the true inventory status.
2. After this, the Finance Department of the organization approves the Reconciliation of
stocks along with the authorities of the Supply Chain Group after thorough review of
the statement & related data.
3. This completes the Reconciliation Process in this case.
52

III.II Reconciliation Statement Preparation under condition of discrepancies Found:

1. If there are some discrepancies between system data & physical count of inventory,
the Supplier needs to prepare his version of Reconciliation Statement with thorough
explanation about the discrepancies & valid reasons for the same.
2. The Supplier Reconciliation statement will be reviewed by GM.
3. If the Supplier Reconciliation Statement & the reasons of discrepancies are valid, GM
will consider the discrepancies & prepare a Reconciliation statement accordingly.
There are two actions that can be taken in this case.
I.
II.

Making adjustments in the system if the discrepancies are found valid.

Preparing a Debit Note to debit the amount of discrepancy on the supplier, if the
discrepancies are not found valid. The Supplier has to take the responsibility of
the discrepancy as it is not explainable by him.

4.

Hence the system & the Physical count Inventory Records are brought into
agreement in this manner. This completes the Reconciliation Process under
consideration.

5.3 Reconciliation Status of the Sub-Contracted Parts:

5.3.1 Steps followed in the Reconciliation Process
Following are the various steps followed in the Reconciliation of Inventory during the project
1.

Supplier Data Collection for child part receipt & mother part dispatch

2.

GM Data Collection child part dispatch & mother part receipt

3.

Cross check between the two records

4.

Finding Discrepancies, if any

5.

Correction about discrepancy in GM Records internally by GM

6.

Cross check between two records again

7.

Finding Discrepancies , if any

8.

Communication about discrepancy, if any, to Vendor

9.

Correction of Discrepancy, if any, in Vendor Data by the vendor

10.

Agreement about the Discrepancy observed

11.

Supplier Physical Stocks declaration at API

12.

System data Finalization after API considering Plant Stocks & Rejections

13.

Required action for discrepancy (e.g.System Adjustment or Debit on Vendor)

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5.3.2 Status of Reconciliation Part -1

The status of the reconciliation is as shown in the table below :
Reconciliation 1 for the Period up to March 2012.

Figure 5.6 Status Third Party Stocks Reconciliation-1

In this status, the final action about discrepancies is to be taken based on the Physical
Inventory conducted atthe end of July 2012 as there was no physical inventory conducted at
the March end and no Physical inventory data is available for Reconciliation Purpose.

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5.3.3 Status of Reconciliation Part -2

Reconciliation 2 for the Period from March 2012 to July 2012.

Figure 5.7 Status Third Party Stocks Reconciliation-2

In the above chart, it shows that the Physical stocks have been declared by the suppliers but
the agreement about the discrepancies is to be finalized. This can happen because the two
steps are not completely inter-related.

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6.0 RECONCILIATION DISCREPANCY ANALYSIS

6.1 Reconciliation Part 1 Discrepancy Analysis:
The complete discrepancy analysis is done for Reconciliation Part 1 only as it is carried out
during the Project duration. The Reconciliation - Part 2 is partially completed during the
project period. So, the complete data of reconciliation part-2 is not available for analysis.

6.1.1Data for Reconciliation Discrepancy Analysis& Reconciliation

discrepancies Chart:
Out of the total data used during reconciliation, the data where the particular discrepancies
are observed is shown in APPENDIX A. The discrepancy analysis chart is shown for the
whole data in APPENDIX-B where it shows the explanation of various types of
Discrepancies & reasons for them and how they are handled.
.The analysis of the same data is shown in subsequent part. The complete reconciliation data
could not be disclosed as a part of company policy.

6.2 Reconciliation Discrepancies Analysis:

During the Discrepancy finding process, various types of discrepancies were found.
The chart below explains the consolidated analysis ofmajor type of discrepancies observed.

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Table 6.1: Reconciliation Discrepancies Reasons

Following is the chart showing the major reasons of discrepancies and their frequency.

Figure 6.1: Discrepancies reasons Frequency Bar Chart

The four major categories of reasons for the discrepancy are :
1.

GM System data not updated timely

2.

Data Not maintained by supplier accurately

3.

Material damage during Transportation

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4.

GM Reconciliation Data collection error

The Action suggested to avoid the above found reasons of discrepancies are :
1. To update & refine the GM system data of Sub-contracted parts on periodic basis i.e.
monthly.
2. The Suppliers need to maintain the data accurately. Incorrect Entries or additional
entries can be rectified by monthly review of the Reconciliation data provided by the
Suppliers.
3. The damage of material is one of the case as there is sufficient care taken to avoid it.
4. The GM Reconciliation data was collected part number- wise as it can be collected in
that manner only in the existing system. It should be tried to or a provision should be
made in the system to maintain the dispatch & receipt data Supplier wise.

6.3 Savings & Treatment of the Discrepancies:

Table in APPENDIX- E shows the saving affected for the organization by completion of this
project. The summary of saving is as shown below.

Table 6.2: Savings Summary Third Party Stocks Reconciliation

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The discrepancies are treated in following manner:

1. The discrepancies found are either positive or negative.
2. Positive discrepancies are scrutinized & after finalization of such discrepancies, the
ERP system adjustments are done to reconcile the stocks records.
3. Negative discrepancies are scrutinized & negotiated with vendor for debit on the
supplier for the negative inventory with supplier.

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7.0 SUGGESTIONS & FUTURE SCOPE

This section addresses the improvements that can be done in the existing practices of
Stocks/Inventory Reconciliation as a part of Continuous Improvement (which is an
element of GMS).
Following are the suggestions that can be considered for implementation in near
future:

1. Monthly Reconciliation:
i.

The reconciliation Process part-1 & part-2 of the Proposed Sub- Contracted parts was
carried out under the timeline of two months. Collecting the data and resolving
discrepancies after a long time period of 6 to 10 months was a time consuming &
complicated process.

ii.

Reconciliation of all the parts can be less complicated if it is an ongoing activity

conducted after every month. Hence, the Reconciliation of sub-Contracted parts is
proposed to be done every month after the month end.

iii.

This will need a good support from the Suppliers as well. Intimating the same to the
suppliers & getting the activity done will make this process stronger.

2. Format Improvement:
i.

In the Reconciliation Format , provided to the suppliers, as shown below , there can
be an additional information collected which is the Proof of Delivery for the material
Delivered to and from the Suppliers.

ii.

In the In-use format, there is no confirmation of delivery of material taken from

Supplier in case of child parts & the GM in case of Parent parts.

iii.

So this becomes a individual and bigger task in the reconciliation process to confirm
the data of supply & receipt of material.

iv.

If a GRN proof is included in this format in the form of GRN No. of Supplier & GM
respectively for child & Parent part, it will become a Self-Confirming format of
reconciliation.

v.

A demand should be made to the suppliers to strictly complete the proposed

Reconciliation format before submission at the end of each month.

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vi.

Further there is a scope to maintain the Rejection data& treat it accordingly in

monthly Reconciliation data which is not completely followed in the ongoing
Reconciliation by the Suppliers in the format being used.

Figure 7.1: Reconciliation Format in use

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Figure 7.2: Proposed Reconciliation format

3. Partial adoption of Perpetual Inventory System:

i.

Adopting Perpetual Inventory System will provide up to date information with live
updates as and when new material flow takes place & continuous reconciliation.

ii.

In a Perpetual inventory method, each purchase, sale or adjustment is recorded and

reconciled with the General Ledger Account maintained in the system.

iii.

Though it is applicable for companies with unique & individual inventory products, in
an automobile Industry with large number of parts being handled in inventory, this
system can be adopted up to a large extent by making continuous updates in material
inventory and reconciling it to the accounting data of the system.

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8.0 OTHER AGGIGNMENTS

8.1 Short Lead Time (GMS- SLT) audit:
The short Lead Time is one of the Principles of Global Manufacturing System (GMS), the
lean manufacturing system developed & used by GM. The Power-Train Plant at Talegaon,
Pune had implemented the GMS from its beginning of Operations in November 2010. As a
part of periodic Audit of the GMS implementation, an External Audit was planned in the
month of August 2012 in Power-train plant.Before the external Audit, an Internal Audit was
carried out in the month of July 2012.

8.1.1 Internal Audit for GMS SLT implementation:

For conducting the External Audit for GMS (SLT element) implementation following steps
were followed:
i.

The GMS document provides overall guidelines for implementation & continuous
operation of each element like SLT.

ii.

The entire SLT guidelines under GMS have 32 elements as requirements for complete
implementation of SLT.

iii.

The 32 elements are divided into sub-elements in the form of actions to be taken to
address the requirements.

iv.

The owners of the actions are identified as per the department responsible for the
Processes i.e. Supply Chain, Stores, Production line, logistics etc.

v.

The required actions are documented in-detail after a thorough discussion with the
owners of various actions.

vi.

The expected target dates are decided for the completion of various actions.

vii.

The Daily-Audit was conducted to ensure completion of actions at their target dates.

viii.

The incomplete actions on their target dates were reviewed & if required New target
dates & required action plan was decided.

ix.

After the completion of each action an evidence is maintained.

x.

After completion of Internal Audit, it is ensured that the procedures are followed
regularly by Daily Audit.

xi.

After continuous monitoring of the SLT actions being followed, the Final audit is
conducted on the pre-planned time.

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8.1.2 Action Plan for GMS SLT implementation:

The requirements of the GMS-SLT are shown in APPENDIX- C.
The action plan used for Internal as well as External GMS SLT Audit is shown in
APPENDIX D.

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APPENDICES
I. APPENDIX A
Data used for Reconciliation Analysis
II. APPENDIX B
Stocks Reconciliation Discrepancy Analysis Chart
III. APPENDIX C
GMS-SLT Requirements
IV. APPENDIX D
GMS SLT Action Plan
V. APPENDIX E
GMS SLT Savings Chart

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REFERENCES
Books:
Supply Chain Logistics Management - Bowersox, Gloss & Cooper
Logistics Management The Supply Chain Imperative V.Sople
Essentials of Inventory Management Max Muller

Websites:
www.gm.com
www.siamindia.com
www.oica.net
www.supplychainmanagement.in
www.accountingtools.com
www.businessdictionary.com
www.economictimes.timesofindia.com
www.news.bbc.co.uk
www.business.mapsofindia.com
www.imaginmor.com
www.carwale.com

Databases:
GM India Database

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