TEAM ELECTRA
Nikhil Menda
Robin Aranha
OVERVIEW
ECIL – Electronic Corporation India Limited
Registered in April 1967
Small Medium Enterprises (SME) in Public Sector
Manufactures Computers, Communications Systems & Consumer Electronics
Aimed at achieving self-reliance at all levels of operations
Previously organized into 7 semi-autonomous strategic business units (SBU’s)
Employs workforce of over 8000 including 2000 qualified and experienced
engineers
Produces over 250 items belonging to the seven SBU’s
BUSINESS TACTICS
To look into both integrated projects and single product
selling
Power to make any changes in management policies
NEWLY DESIGNED ORGANIZATION
STRUCTURE
ECIL
Service Groups Components
Business Groups
Group
• Control Systems • Human Resource Group
• Computer • Finance & Accounts
• Communication Systems • Planning & Monitoring
• Consumer Electronics • Purchase Function
• Instruments • Sales Function
FOCAL POINTS
Centralizing Structure of operations
Percentage share of Military Systems in:
Value of the Product: 1.79%
Income: 1.87%
Contribution to Administrative expenses: 8%
Divest Military system due to its negligible contribution in income
and value of product
Centralize components product group as it is essential in two
aspects:
Used for production of other products
Used as a single product to be sold directly
FOCAL POINTS
Reduction of percentage of raw materials in the total inventory
through Backward Integration
Create a sales function group and remove the liaison group
To follow matrix organization structure for projects so as better cash
and credit management
The above points help us address the first question with the help of
which we can restructure the organization leading to better cash
flows and better cash management.
FOCAL POINTS
Firstly increasing the number of Qualified and experienced of
engineers from 2000 to 4500
Backward integration
Main objective to collect early pay late. As government departments
are our major clients as 95% of total sales are effected to them and the
outstanding period has been 2 years or more and had increased year
after year
Focus also on to create negative working capital
To have a single purchasing function for efficient procurement and
management of materials
FOCAL POINTS
Produce based on demand so as to reduce stagnation of inventory (Reduce
Work In Progress)
Scheduling incase of integrated products i.e. a project
Duration of Operating Cycle = Work In Process Period + Finished Goods
Storage Period + Debtor’s Collection Period + Creditor’s Payment Period
The above points addresses the second question which deals with the
internal procedures with regard to curbing growth of investments in
inventory and debtor component of cash which in turn reduce the operating
cycle.
FOCAL POINTS
Reduce internal financing in order enjoy tax incentive
Cost of internal funds as per recent statistics provided shows as
16.47 % , which is the area to be tackled
Thus improving shareholder value and increasing overall Net profits
More of external debt financing
To restructure credit policy of the company (Letter Of Credit)
FOCAL POINTS
Financing of working capital to be focused on bank finance more than
non-bank or internal finance
High Quality earnings which refers to free flowing cash flows
The above given points answers our third question regarding the
financial pattern of ECIL for cash requirements. We understand that it
is not advisable to mobilize cash through company deposits as we lose
the benefit of tax incentive.
FOCAL POINTS
As per earlier statistics , 2 issues can be seen :-
Work in progress & Raw Materials Congestion:
The statistics provided for the above two show 106 and 150
number of days respectively in the operating cycle. Which should be
reduced to increase working capital management
Debtors collection and Creditors payment:
As per 85-86 debtors collection is 97 days and creditors payments 80
days and this area has to be tackled
As per statistics cash credit for 85-86 shows as 17.5% where as credit from
financial institutions shows as 14% , thus the ratio showed be vice versa in
order to have better investment of working capital
FOCAL POINTS
Actual internal financing as on 88-89 shows as 3207.03 as compared to
3218.87 of 87 -88 , but has to be further reduced
Actual borrowing of 87-88 and 88-89 has remained more or less same which
in figures is 2805.01 and thus should be increased further
Working capital as per the budget estimates of 86-87 and 87-88 are 6220
and 6012.04 respectively , this should be reduced to ensure better inventory
management
Thus the working capital budget deviations are not within controllable limits
and the above points act as guidelines to bring it within controllable limits.
CONCLUSION
In conclusion we can summarize this case in 3 basic points:
Restructuring the organization structure to avoid
distribution of power to several hands
Effective management of working capital through external
financing or using Letter Of Credit to the advantage of the
company
Optimum utilization of storage space and manufacturing
time through Backward Integration
Thank You
