Coromandel Copy

Manipur incstitute of management studies

A STUDY ON

INVENTORY MANAGEMENT

With reference to

“COROMANDEL INTERNATIONAL LIMITED”

VISAKHAPATNAM

This project is submitted in partial fulfilment for the completion of Master of Business Administration (MBA) from Manipur Institute of

Management Studies (MIMS), Manipur University

Submitted by

Kabrambam Monoranjan Singh

MBA 3rd semester (2010-2012)

Roll.no.201011

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Declaration

I hereby declare that this project report “INVENTORY MANAGEMENT” with reference to “COROMANDEL INTERNATIONAL LIMITED” has been prepared by me during the period 06-06-2011 to 21-07-2011 is fulfilment of the requirement

for the award of degree of Master of Business Administration of Manipur University, Manipur.

I also declare that this project is a result of my own effort and that it has not been submitted to any other university for the Award of Any Degree.

Place: VISAKHAPATNAM (KABRAMBAM MONORANJAN SINGH)

Date:

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A successful project can never be prepared by single effort or the person to whom the project is assigned, but it also demand the help and guardianship of some conversant persons who helps in the undersigned actively or passively in the completion of successful project.

With great pleasure, I express my deep sense gratitude to the management of “COROMANDEL INTERNATIONAL LIMITED” Visakhapatnam for giving me this very inspirational opportunity to do my observation study in their reputed company to take this opportunity to express my deep and profound gratitude to the people concerned who have helped me directly or indirectly in successful completion of this project.

I convey my sincere thanks to Mr. CH. V.S.R. SANJEEVA RAO, Manager Accounts who has motivated me their valuable suggestion and helped throughout the project in permitting to perform various tasks in this esteemed organization.

I owe my sincere thanks to B.Kishore Kumar, Training Department HR-

Manager and for this kind approval for this project.

I would like to extend my special thanks to Dr. W. Chandbabu Singh, Summer training and placement advisor, MIMS for providing me the guidance and support during my training period.

I would also like to thank those entire people whose co-operations, suggestions and heartfelt support paved my way to accomplish and make my project successful.

(Kabrambam Monoranjan Singh)

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CERTIFICATE

This is to certify that MR. KABRAMBAM MONORANJAN SINGH, a bonafide student of Management Studies, Manipur Institute of Management Studies, Manipur has carried out the project work and prepared the project report entitled “A STUDY ON INVENTORY MANAGEMENT with reference to COROMANDEL INTERNATIONAL LIMITED, VISAKHAPTNAM” in partial fulfilment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION under my guidance.

Date: Mr.CH. V.S.R. SANJEEVA RAO

Place: Finance Manager

CONTENTS

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Pg.No.

CHAPTER-I INTRODUCTION 1-5

1.1CONCEPT OF FINANCE

1.2 INTRODUCTION TO INVENTORY MANAGEMENT

1.3 OBJECTIVES OF THE STUDY

1.4 PURPOSE OF THE STUDY

1.5 SCOPE OF THE STUDY

1.6 METHODOLOGY

1.7 LIMITATIONS

CHAPTER-II INDUSTRY PROFILE 6-14

2.1 INTRODUCTION TO FERTILIZER INDUSTRY

2.2 ORGIN AND DEVELOPEMENT OF FERTILIZERS

INDUSTRY IN INDIA

2.3 MAJOR SEGMENTS IN FERTILIZERS

2.4 DEMAND AND SUPPLY

2.5 INCREASES IN FERTILIZER PRODUCTION

2.6 PRICING POLICY

2.7 FERTILIZER SUBSIDY

CHAPTER-III COMPANY PROFILE 15-27

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3.1 INTRODUCTION

3.2 HISTORY

3.3 MANAGEMENT TEAM

3.4 GROUP COMPANIES

3.5 INTERNATIONAL ALLIANCES

3.6 INTRODUCTION TO CIL

3.7 OBJECTIVE OF CIL

3.8 CIL VISION, MISSION, POLICIES

3.9 VALUES AND BELIEFS

3.10 CIL’S MAJOR COMPETITORS

3.11 BOARD OF DIRECTORS

3.12 NON-FERTILIZER ACTIVITIES

3.13 PRODUT AND SERVICES

3.14 ACHIVEMENTS OF CIL

3.15 ORGANISATIONAL CHART

CHAPTER-IV THEORITICAL FRAME WORK 28-46

4.1 INTRODUCTION

4.2 ABC ANALYSIS

4.3 EOQ (ECONOMIC ORDER QUANTITY)

4.4 REORDER-POINT

4.5 XYZ ANALYSIS

4.6 VED ANALYSIS

4.7 NON-MOVING ITEM ANALYSIS

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4.8 INVENTORY MANAGEMENT OF RAW MATERIAL

4.9 INVENTORY MANAGEMENT OF FINISHED GOODS

4.10 PURCHASING SYSTEM

CHAPTER-V DATA ANALYSIS&INTERPRETATION 47-73

5.1 ANALYSIS &INTERPRETATION

5.2 ABC ANALYSIS

5.3 CALCULATION OF EOQ FOR 2009-2010

5.4 FIRST IN FIRST OUT

5.5 STANDARDISATION AND VARIETY REDUCTION

5.6 INVENTORY ANALYSIS

CHAPTER –VI SUMMARY OF FINDINGS&SUGGESTION 74-77

6.1 FINDINGS

6.2 SUGGESTIONS

6.3 SUMMARY

6.4 BIBLIOGRAPHY

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CHAPTER-1 INTRODUCTION

1.1 CONCEPT OF FINANCE1.2 INTRODUCTION TO INVENTORY MANAGEMENT1.3 OBJECTIVES OF THE STUDY1.4 PURPOSE OF THE STUDY1.5 SCOPE OF THE STUDY1.6 METHODOLOGY1.7 LIMITATION

1.1 CONCEPT OF FINANCE

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Financial management is that managerial activity which is concerned with the planning controlling of the firm’s financial resources. It was a branch of economics till 1890 and as a separate discipline it is of recent origin. Still, it has no unique body of knowledge of its own, and draws heavenly on economics for its theoretical concepts even today.

The subject of financial management is of immense interest to both academicians because the subject is still developing and there are still certain areas where controversies exist for which now unanimous solution have been reached as yet. Practicing mangers are interested in this subject because among the most crucial decisions of the firm are those which relate to finance, and an understanding of the theory to make decision skilfully.

Meaning of Financial Management

I.M Pandey defines financial management as that managerial activity which is concerned with the planning and controlling of firm’s financial resources. According to him managing funds most wisely with a view to maximise the wealth of shareholder is the main objective.

According to wheeler business activities concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise come under financial management.

S.C Kuchhal defined financial management as “the procurement of the funds and their effective utilization in business”

Scope of finance

Firms create manufacturing capacities for production of goods: some provide services to customers. They sell their goods or services to earn profit. They raise funds to acquire manufacturing and other facilities.

A firm secures whatever capital is needs and employees it in activities, which generate returns on invested capital

1.2 INTRODUCTION TO INVENTORY MANAGEMENT

Inventory is a usable resource which is physical and tangible such as goods and material or those goods and material themselves, held available in stock by a business. In this sense our stock is our inventory. It is also used for a list of the contents of a household and industries etc., but even then the term inventory is more comprehensive. Though inventory is a usable resource, it is also an idle resource, unless it is managed efficiently and effectively. In accounting inventory is considered as an asset.

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Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different location within a facility or within multiple location of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concern the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.

The inventory management process begins as soon as one has started production and ordered raw material, semi finished products or any other thing from a supplier. If you are a retailer, then this process begins as soon you have placed your first order with the wholesaler.

Once orders have been placed, there is generally a short period of time available to a firm to put an inventory management plan in place before the suppliers are delivered. Inventory management helps a firm to decide in advance where these supplies should be stored.

Inventory constitutes the most significant part of current assets to a large majority of companies in India. On an average inventories are approximately 60% of current assets in public limited companies in India. Because of the large size of inventories maintained by the firms, a considerable amount of funds is required to be committed to them.

It is possible for a company to reduce its levels of inventories to a considerable degree e.g., 10-20%, without any adverse effect on production and sales, by using simple inventory planning control techniques. And at the same time company should not invest excess money in inventory by managing large size of inventories. The company may lose the opportunity cost on the excess inventory and also the carrying cost will increase due to large size of inventories. Therefore it is advisable for the company to maintain inventory at an optimum level always. There are different techniques available for the company to maintain optimum level of inventory. As the inventories form a major part in CIL, a study is being carried over on how the inventories are controlled and manage

1.3 OBJECTIVES OF THE STUDY:

The study titled” INVENTORY MANAGEMENT”- A case study of COROMANDEL INTERNATIONAL ltd.,has been carried out with the following objectives

To find whether the CIL ensures a continuous supply of material to facilitates uninterrupted production.

To study the inventory management policies, techniques and their effectiveness. To give suggestion to increase inventory turnover. To give suggestion when inventory is replenished. To make an appropriate investment in inventories and kept it in an optimum level.

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1.4 PURPOSE OF THE STUDY:

To study about the inventory management at COROMANDEL INTERNATIONAL LIMITED and to have an idea about the utilization of the inventory and little more about the storage procedure that are practically implemented in organisation. Inventory plays a vital role in every manufacturing organization to have an un interrupted production process by maintaining an optimum level of raw material available at all time.

1.5 SCOPE OF THE STUDY:

The scope of my study is confined to one of the key areas of finance i.e. inventory management. The study concentrates on the methods and techniques followed by COROMANDEL INTERNATIONAL LIMITED for its inventory management and its relative merits and demerits.

The study appraises the company’s success in meeting the requirements of the company and the country by helping the farmers to raise agriculture output to meet the requirement of the country’s growing population for food.

1.6 METHODOLOGY:

Both primarily and secondary data were used in conducting the project which is as follows:

PRIMARY DATA: This is done by personal discussion with various official in warehouse department and financial department of CIL.

SECONDARY DATA: Data collection from the in-house purchase order books and are house. Indent books and journals relating to fertilisers industry magazines and annual report of CIL. The secondary data is also obtained from the annual report and the documents by the company.

1.7 LIMITATION: The below mentioned are the constraints under which my study has been carried out.

The study is confined to only 5 years Most of the information has been kept confidential and as passed on as a part

of the policy of the company Since the number and size of inventory is very large, all the raw materials

could not be included in the analysis

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CHAPTER-II INDUSTRY PROFILE

2.1 INTRODUCTION TO FERTILIZER INDUSTRY2.2 ORIGIN AND DEVELOPMENT OF FERTILIZERS INDUSTRY IN INDIA2.3 MAJOR SEGMENTS IN FERTILIZERS2.4 DEMAND AND SUPPLY2.5 INCREASES IN FERTLIZER PRODUCTION2.6 PRICING POLICY2.7 FERTILIZER SUBSIDY

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2.1 Introduction to Fertilizer Industry:

Fertilizer is generally defined as “any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth”

Since the essential physiological attribute of seeds is their ability to convert a great duel of nutrients into grain. The spread of this variety lead for greater consumption of fertilizers simultaneously with increasing demographic pressure on the agricultural productivity has assumed more importance. This also contributed to the rising demand for fertilizers.

Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples. The Government Of India from time to time has taken considerable steps for the upliftment of Agriculture Sector. Here we have analyzed the performance of Fertilizer Industry being one of the vital parts in agricultural production and Government’s policy initiative for the same

Fertilizer in the agriculture process is an important area of concern. Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizer in the recent years. The Fertilizer Industry in India started its first manufacturing unit of Single Super Phosphate(SSP) in Ranipet near Chennai with a capacity of 600 MT a year. Then established the first two lagged sized fertilizer plant, one was the Fertilizer & Chemicals Travancore of India Ltd. (FACT) in Cochin, Kerala, and another one was Fertilizer Corporation of India (FCI) ion Sindri, Bihar.These two were established as pedestal fertilizer units to have self sufficiency in the production of food grains. Afterwards, the industry gained impetus in its growth due to green revolution in late sixties, followed by seventies and eighties when fertilizer industry witnessed an incredible boom in the fertilizer production.

Fertilizer consumption of plant nutrients per unit grossed cropped area in India is still very low average being 91.5 kg/ha. Productivity of food grain crops in the country is also quite low, around 1.6t/ha, which can certainly be doubled by enhancing per unit average fertilizer use.Fertilizer consumption has to increase substantially in order to achieve the food grain requirement of 220 million tons by the 2002.

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2.2 Origin and Development of Fertilizers Industry in India:

The Indian fertilizer industry has succeeded in meeting almost fully the demand of all chemical fertilizer except for MOP. The industry had a very humble beginning in 1906, when the first manufacturing unit of Single Super Phosphate (SSP) was sat up in Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd.(FACT) at Cochin in Kerala ant the fertilizer Corporation of India (FCI) in Sindri in Bihar were the first large sized fertilizer plants set up in the forties and fifties with a to establish an industrial base to achieve self-sufficiency in food grains. Subsequently, green revolution in the late sixties gave an impetus to the growth of fertilizer industry in India. The seventies and eighties then witnessed a significant addition to the fertilizer production capacity.

The Indian fertilizer industry has witnessed a phenomenal growth in the eighties. However, the growth has tapered off in the nineties and in the recent past only public and cooperative sectors have made major investment in this industry. Presently public, private and coop. sector share 45, 33 and 22% of capacity, respectively, whereas their share in P2O5 capacity is 26, 64 and 10% respectively. New proposal to government for setting up fresh in country are mainly are from Public and Cooperative sector.

The installed capacity as on 30.01.2003 has reached a level of 12110 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) 53.60 lakh MT of phosphatic nutrient, making India the 3rd largest fertilizer producer in the world. The rapid build-up of fertilizer production capacity in the country had been achieved as a result of a favourable policy environment facilitating large investment in the public, co-operative and private sector.

Capacity Build up:

Presently, there are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizer. Out of these, 29 unit produce urea, 20 units produce DAP and complex fertilizer 13 plants manufacture Ammonium Sulphate (AS), Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous fertilizers. Besides, there are about 64 medium and small-scale units in operation producing SSP.

The sector experienced a faster growth rate and presently India is the third largest fertilizer producer.

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Capacity utilization:

The domestic fertilizer industry has attained the level of capacity utilization, which compare favourably with others in the world. The capacity utilization during 2001-02 was 89.6% for Nitrogen and 75.7% for Phosphate. The capacity utilization is estimated at 89.8% for Nitrogen and 81.3% for Phosphate during 2002-03.

Report showed the total installed capacity of fertilizer production in 2004 to be 119.60 LMT of Nitrogen and 53.60 LMT of Phosphate. These figures went up to 120.61 LMT of Nitrogen and 56.59 LMT of Phosphate in 2007. The production of fertilizer was 113.54 LMT of Nitrogen and 42.21 LMT of Phosphate during 2005-06. The target of production for 2006-07 was set at 114.48 LMT of Nitrogen and 48.20 LMT of Phosphate. Though the target production was not met, there was a growth in production during 2006-07 as compared to the production during 2005-06.

Indian fertilizer industry has reached international levels of capacity utilization by adopting various strategies for increasing the production of fertilizer. These include the following:

Expansion and increase in efficiency through modernisation and revamping of existing fertilizer units.

Reviving some of the closed fertilizer plants. Using alternative source, such as coal or liquefied natural gas for the production of fertilizers,

especially area. Establishing joint venture projects with companies in countries that abound in cheaper

resources of raw materials. In order to meet the demand for gas, which is one of the prime requirements for the production of nitrogenous fertilizers, India has entered into joint ventures with foreign companies in a number of countries. Joint ventures have also been established for the supply of phosphoric acid. Indian fertilizer manufacturing companies has joined hands with companies in Senegal, Oman, Jordan, Morocco, Egypt, Tunisia and other countries. It is, therefore, evident that the Indian fertilizer industry has witnessed extensive growth and development in a short span of time. With such extensive growth, it is not surprising that the India ranks among the leading fertilizer manufacturing countries of the world.

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Strategy for Growth:

The fertilizer Industry has adopted the following strategy to increase fertilizer production:

Expansion/retrofitting/ revamping of existing fertilizer plants. Setting up joint ventures projects in countries having abundant and cheaper raw

material resources. Working out the possibility of adopting alternative sources like liquefied Natural gas

to overcome the constraints in the domestic availability of Natural gas

2.3 MAJOR SEGMENTS IN FERTILIZERS:

The Indian fertilizer industry is broadly into Nitrogenous, Phosphatic and Potassic segment. In addition to these, nutrients are combined to produce several complex fertilizers. To express the nutrient constituents of fertilizer, the grade of a fertilizer is expressed as a set of three numbers in the order of percent of Nitrogen (N), Phosphate (P), and Potash (K). The straight nitrogenous fertilizer produced in the country is urea, ammonium sulphate, calcium ammonium nitrate (CAN) and ammonium chloride. The only straight phosphate fertilizer being produced in sector report: fertilizer Industry India/Economics the country is SSP. The complex fertilizer include DAP, several grades of nitro phosphates and NPK complexes. Urea and DAP are the main fertilizer produced indigenously.

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-Ammonium sulphate -Single super phosphate -Muriatic of potash -Ammonium phosphate sulphate

-Ammonium chloride (SSP) (MOP) -Diammonium phosphate (DAP)

-Calcium ammonium nitrate -Sulphate of Potash -Nitro phosphate

-Urea (SOP) -Ammonium nitrate phosphate

-Urea ammonium phosphate

-NPK fertilisers

(a)Chart showing different types of fertilisers

2.4 DEMAND AND SUPPLY:

The Demand-Supply scenario in fertilisers has been worked out by the Working Group on Fertilisers for the Ninth Plan (1997-98 to 2001-02) on the basis of the estimated demand and production projections in terms on N and P2O5 nutrients (Table-2). The increase in production (supply) will be 4.86 million tons, most of it is confined to nitrogen resulting from the commissioning of the expansions, new plants or joint ventures abroad. Production of N is expected to increase from 9.7 million tons in 1997-98 to 25.0 million tons in 2005-08. The Group estimated that the available phosphate supply will increase from 2.8 million tons of P2O5 in 1997-98 and reach 7milliojn tons in 2007-08. The demand for N, P2O5, K2O has also been estimated up to 2006-2007 (terminal year of tenth plan) at 16.35, 6.65 and 2.60 million tonnes, respectively.

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Fertilizers

Nitrogenous fertilisers Phosphatic fertilisers Potassic fertilisers Complex fertilisers


2.5 INCREASES IN FERTILISER PRODUCTION:

1951-52: .04 million Mts 1975-75: 1.8 mm Mts 2005-06: 15.5mn Mts

These periods also witnessed a rapid increase in food grain production, which was estimated to be initially 121 million tons from 52 tons and finally increased to 208 tons.

At present the government has formulated a new pricing scheme (NPS) replacing the RPS. The fertiliser industry of India is not same in terms of stock, its yield, and technology. Because of this, the urea plants have been assorted into groups to reduce them from being divers and incomparable under the NPS scheme. The NPS has been modified, promoting further investment in the Indian fertiliser sectors.

The Fertiliser Association of India (FAI) has been set up a model which is based on several factors that include fertiliser prices, high yielding areas, irrigated areas, fertiliser nutrient prices and previous year’s fertiliser consumption. An estimate of the demand and supply till the end of the 11th five plan is given in the chart below:

Year SupplyN+P

DemandN+P+K

Demand SupplyGap N+P+K

Demand of K

2007-2008 16950 23125 8835 26602008-09 17585 24085 9305 28052009-10 18595 25035 9405 29652010-11 19912 25960 9178 31302011-12 19965 26900 10235 3300

Today, India stands as the third largest fertiliser consumer and producer of the world. It has been observed that the subsidies on Indian fertiliser have been rising at constant rate. This is due to the rise in the cost of production and inability of the government to raise the maximum retail price of the fertilisers. The population of the country is rapidly increasing at 1.5% annually. This requires higher production of food grains. The total cropped area is only 30% of the net geographical area, which is not enough for increasing the agricultural productivity. Now, the main focus is on the improvement of the farm income, for which the fertiliser industry needs to lay more stress on the agricultural activities in the country. This will also help to improve terms between the government agencies and the fertilisers industry in India.

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90 Subsidy on fertilizer (in INR billion )85807570656055504540 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00


2.6 PRICING POLICY:

The fertiliser policy is aimed at increasing consumption to meet the food and fibre requirement of growing population through setting up required production capacities, ensuring that quality fertilisers are made available to farmers throughout the country at uniform and affordable price. It was also recognised that fertiliser use should be profitable to the farmers for which he must get a certain minimum return for the produce. This led to the announcement of procurement prices and minimum support prices for several crops from 1970 onwards. The Maratha Committee was assigned the task of task of resolving the issue of keeping Farm Gate Prices (FGP) of fertilisers at an affordable level in the face of rising production/import costs. Its recommendations in 1977 led to the birth of the Retention Price Scheme (RPS). This scheme was intended to ensure that both fertiliser producers as well as the farmers should find it worthwhile to produce and use fertilisers. The policy aimed that each manufacturer is able to get12% post-tax return on investment on efficient operation regardless of the location, age, technology and cost of production. In addition, the government agreed to reimburse the cost of transportation from factory gate to railhead and also take care of the distribution margin. The RETENTION PRICE SCHEME is now restricted to urea only.

2.7 FERTILISER SUBSIDY:

The RPS system helped in achieving the objective of increased availability and supplying it to farmers on affordable and uniform price. The difference between FARM GATE PRICES and RPS is paid to the industry as subsidy. With the growth in fertiliser

(b) Chart showing subsidy on fertilizers

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Production along with escalation in price of raw material and plant cost, the subsidy amount swelled to huge proportions over the years. In an attempt to reduce the burden of subsidy, the government has increased urea price by 10% w.e.f February 2005. As a result, domestic urea prices have risen from Rs 3320/t (US$ /t) to Rs 3660/t (US$ 91/t) for bagged deliveries to farmers. The average subsidy pattern of urea is around US$84/t. prior to decontrol of phosphatic and potassic fertilizer (in the year 1992) subsidy was available to all domestic and imported fertilizers. The fertilizer subsidy increased from US$ 418 million in 1999-00 to US$ 2446 million in 204-2005. However, the subsidy bill after the de3dcontrol of phosphatic and potassic fertilizer declined and remained below 1990-91 level.

The union budget for 2000-01 raised urea raised by 15 percent, DAP by 7 percent and that of MOP by 15 %. This move enabled the Government of India to prune the subsidy bill to some extent. However, there was no increase in urea price in the union budget for 2001-02.

In the long term policy, the subsidy withdrawal in a phased manner has been proposed. However, modalities to phase out the subsidy have not been clearly mentioned.

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CHAPTER-III COMPANY PROFILE

3.1 INTRODUCTION

3.2 HISTORY

3.3 MANAGEMENT TEAM

3.4 GROUP COMPANIES

3.5 INTERNATIONAL ALLIANCES

3.6 INTRODUCTION TO CIL

3.7 OBJECTIVE OF CIL

3.8 CIL VISION, MISSION, POLICIES

3.9 VALUES AND BELIEF

3.10 CIL’S MAJOR COMPETITORS

3.11 BOARD OF DIRECTOR

3.12 NON-FERTILIZER ACTIVITIES

3.13 PRODUTS AND SERVICES

3.14 ACHIVEMENTS OF CIL

3.15 ORGANISATIONAL CHART

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3.1 INTRODUCTION:

Headquartered in Chennai, the Rs 15,907 cores (US$ 3.14 billion) Murugappa Group is one of India’s leading conglomerates. Market leader in diverse areas of business including Engineering, Abrasives, Finance, General Insurance, Cycles, Sugar, Farm Inputs, Fertilizer, Plantation, Bio-products and Nutraceuticals, its 29 companies have manufacturing facilities spread across 13 states of Indie. The organisation fosters an environment of professionalism and has a workforce of over 32,000 employees. The Group has forged strong joint venture alliance with leading international companies like DBS Bank, Mitsui Sumitomo, Foskor, Cargill and Groupe Chimique Tunisien has consolidated its status as one of the fastest growing diversified business houses in India. The group stated in early 20th century at Tiruvottriyur, Chennai in association with present-day (Carborundum Universal Ltd.), with the name Ajax India Ltd., as a hardware manufacturer

3.2 HISTORY :

The business has its origin in 1990, when Dewan Bahadur A M Murugappa Chettiar established a money-lending and banking business in Burma (now Myanmar), which then spread to Malaysia, Sri Lanka, Indonesia and Vietnam. In these 100-plus years, it has withstood enormous vicissitudes, including strategically moving its asset back to India and restarting from scratch in the ‘30s, before the Japanese invasion of Burma in World War II.

Starting with a sandpaper plant, the Group forayed into making steel safes, and then into manufacturing. It set up an insurance company, and bought a rubber plantation; making a small but significant beginning. The rest is history.

The company crossed the USD 1 billion mark in 2003-04, with an impressive growth of 25% over Rs4206 crore in 2002-03, and a 40% jump in profit before tax over the previous year. Today, it is one of the country’s biggest industrial houses. Consolidated Group turnover for 2004-05 crossed USD 1.44 billion, a growth of 20% over the previous year. In 2005-06, combined turnover increased by 17% to USD 1630 million (Rs 7340 crore) and net profit (PBT) by 45% to USD 177 million (Rs 800 crore). The Group ended the year 2006-07 with a turnover of Rs 8,446 crore, and profit before tax of Rs 649 crore. The year 2007-08 saw a turnover of USD 2.4 billion (Rs9 852 crore) and has the group well on its way to achieving its vision of becoming a USD 4 billion conglomerate by2010.

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Name Designation

V. Ravichandran Managing Director

P. Naga Rajan Chief Financial Officer

G. Ravi PrasadSr Vice President-Sales and

Marketing (fertilizer)

P. Gopala Krishna Sr Vice President-Retail

Harish Malhotra Sr Vice President-Commercial

G. Veera Bhadram Sr Vice President-Pesticides SBU

Arun Leslie George Sr Vice President and Head of HR

S. GovindaranjanSr Vice President and Head of Manufacturing

3.3 MANAGEMENT TEAM:

3.4 GROUP OF COMPANIES:

Carborundum Universal Ltd (CUMI) :Ccarborundum Universal Ltd

(CUMI) pioneered the manufacture of coated and bonded abrasives in India, besides super refractories, elrctrominerals, industrial ceramics and ceramic fibres.

CUMI is an industrial ceramic material-based product and service provider with operations spread across three businees segments such as abrasives, ceramic and electrochemicals.

Cholamanadalam DBS Finance Limited: Cholamanadalam DBS Finance

Limited, a pan Indian company is a joint venture between the Murugappa Group and DBS Bank of

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Singapore. The company offers vehicle finance, corporate finance, capital market finance, capital market finance and fixed deposit.

Cholamandalam MS General Insurance Company Ltd: Cholamandalam

MS General Insurance Company Ltd is a joint venture between the Murugappa Group and the Mitsui Sumitomo Insurance Group of Japan.

The company is in the business of non-life and general insurance; home; motor; health, travel, shop and office insurance for the individual, as well as marine, Liability, engineering and fire insurance for the corporate customer.

Coromandel International Limited: Coromandel International Limited, a

constituent of the Murugappa Group, is a leading manufacturer of a wide range of fertilizer and pesticides.

The company produces high analysis fertilizer and broadband pesticides hat can be used across various crops.

EID Party: EID Party is a pioneer in the manufacture of plantation white sugar from

sugarcane. The company has five (5) fully equipped plants in the country.

The company manufactures and markets a wide range of agri products such as sugar, bio product and micro algal health supplements.

Parry Agro: Parry Agro is in the business of tea and coffee plantations and is one of the

leading producers of tea in the country.

Apart from tea and coffee, the company has interest in other plantation crops. It grows vanilla, as well as grows and processes rubber.

Tube Investment of India: Tube Investment of India Ltd is a pioneer and market leader

in high-end cold0drawn welded (CDW) tubes. TI also enjoys a sizeable share of the Indaian auoyo market.

TI Cycles, Tube Products of India (TPI), TIDC India and TI Metal Forming are the business division of TII.

3.5 INTERNATIONAL ALLIANCES:

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Coromandel Fertilizer Limited (CFL) and Gujarat State Fertilizer Corporation (GSFC) signed a joint venture agreement with Groupe Chimique Tunisien of Tunisia for the manufacture of phosphoric acid, a critical raw material in the manufacture of phosphatic fertilizer and DAP.

In february 2005, Coromandel Fertilizer acquired a 2.5 percent stake for Rs 27 crore in Foskor Limited, a South African fertilizer company. The Indian company will also advise Foskor on operational issues to enable it to improve its financial performance.

EID party (India) Ltd and Cargill International S.A., Geneva have announced their plans to enter into a joint venture to set up a port-based stand-alone sugar refinery in Kakinada, Andhra Pradesh.

Murugappa Group and DBS bank, Singapore became equal partners in the joint venture Cholamandalam Investment and Finance Company Ltd. (CIFCL). CIFCL has been renamed Cholamandalam DBS Finance Ltd.

Group company Wendt India Limited is a joint venture with Wendt, West Germany, a niche player in the abrasives Industry. It makes diamond and CBN grinding wheels and tools.

Murugappa Morgan Thermal Ceramics Ltd is a joint venture between Carborundum Universal (CUMI) and Morgan Crucible Co plc of the UK. It produces ceramic fibres.

Cholamandalam MS General Insurance Co Ltd is a joint venture with Japanese insurance giant Mitsui Sumitomo.

The Group has a joint venture with Borg Warner Morse Tec of the US, a global leader in the design and manufacture of automotive chain systems and components for engine timing to manufacture silent chains and associated systems.

COMPANY PROFILE

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3.6 INTRODUCTION TO CIL:

Coromandel International Limited incorporated in 1064, now belonging to the Rs.15,646 crores Murugappa Group, is a leading comopany in India manufacturing a wide range of fertilizers and plant protection products (technical & formulation). Coromandel markets around 2.9 million tonnes of phosohatic fertilizer making it a leader in its addressible markets and the second largest phosphatic fertlizer player in India. The Company also markets phosphogypsum and the sulphur pastilles.

Coomandel Interrntional Limited has multile-location production facilities and market its products all over India and exports pesticides to various countries across the globe. It is managed by competent and comitted professional using advanced management practices. The company is klnown for fostering a climate of high performance amnd continuous improvement.

The company also has strategic partnerships with leading companiues across the globe. Voted as one of the ten greeniest company in India, reflects the company’s comittment to the enviroment and to the society.

3.7 OBJECTIVES OF CIL:

Towards Nation – To conduct profitable and progressive fertilizer products distribution and the other related agricultural input business wealth of the nation.

Towards the Investor – To provide good return on capital to generate internal resources for growth expectation and diversification of industry and progress agricultural production

Towards Distributor – To promote all around commercial policies and competitive marketing effort top serve the customers.

Towards Farmers – Importing required knowledge to farmers for optional used of fertilizer inculcate proper attitude the adoption of improved practice in achieving better agricultural productivity apart frrom companies, self iterested and national social economic interests

Towards Society – Upholdong the rich heritage, culture and the prestige of the Society and the serve towards the economic growth and the prosperity of the people.

Towards Co-Promoter – To drive esteeemed co-operation of co-promoters in Capital and Resources utilisation and Adoption of innovative and the proper methods production & maintenance.

Towadrs the Employees – To evolve the participative style of management which insures good works ethic, job satisfaction better ways promotion which leads to prosperity of employees.

3.8 CIL VISION, MISSION, POLICIES:

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Vision:

To be the leader in the phosphatic fertilizer industry, producing high quality fertilizers at low cost and giving satisfaction to all stake holders.

Mission :

To enhance the property of farmer through the supply of quality farm inputs and related services to ensure value for money.

Policies :

Quality Control:

CIL are committed to supply phosphate fertilzers and related produts with safety requirements of customers and comply with application specifications.

Further they are committed to continual improvement of the quality management system and the process with the objective of improving the product quality

CIL will strive to achieve the quality objective and customers satisfaction by:-

Developing Implementing maintaining quality management system to International standards.

Imparting requistes knowledge, skills and competency through employees and the ensuring employees participation in continuos improvement measures.

Safety Policy: It is the policy of Coromandel International Ltd to conduct its activites

in a amnner which ensure the healthy work environment and the safety of its employees.

At all Coromandel location local management has the responsibility to ensure that all processes that equipment and facilities and designed, constructed, operated and the maintained in asafe national state and local government regulation cost consideration or demands of product and the operation must not allowed shadow safety consideration.

It is the obligation of every employee to KNOW and FOLLOW our safety rules and regulation.

TEACH what we know to others WARN other of unsafe conditions

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React positively to emergencyn situations REPORT promptly hazardous or unsafe practices and the

conditio to Concerned departmentment head PROJECT company properly from loss or accidents PROTECT company properly from loss or accidents Fellow employees and the neighbouring community.

3.9 VALUES AND BELIEF:

Adhere to ethical norms in all dealing with share holders, employees, customers, suppliers, financial institutions and government.

Provide value for money to customers through quality products and services. Manage environment effectively for harnessing opportunities Discharge responsibilities to various sections and preserve environment. Grow in an accelerated manner consistent with values and belief by continuous

organisational renewal. Maintain an organization climate conductive to trust, open communication and term

sprit and style operation befitting our size, but reflecting moderation and humility.

3.10 CIL’S MAJOR COMPETITORS:

The Fertilizers and Chemicals Travancore Ltd. (FACT) Gujarat Narmada Val ties Fertilizers and Chemicals Ltd.(GNFCL) Gujarat State Fertilizers Company Ltd. (GSFCL) Hindustan Lever Ltd. (HLL) Indian Farmers Fertilizers CO-operation Ltd. (IFFCO) Madras Fertilizers LTD. (MFL) Pyrites and Phosphates Ltd. (PPL) Rastriya Chemicals and Fertilizers Ltd.(RCF) Southern Petrochemical and Industries Corporation Ltd. (SPCL) Oswal Chemical and Fertilizers Ltd. (OCFL)

3.11 BOARD OF DIRECTORS:

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Name Designation

A.Vellayan Chairman

K.Balasubramanian Director

BVR Mohan Reddy Director

R A SavoorDirector

M K Tandon Director

D E Udawadia Director (up to 21-07-2009)

Ranjana Kumar Director (up to 19-03-2010)

V. Ravichandran Managing Director

3.12 NON-FEERTILIZERR ACTIVITIES:

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Sale of intermediates such as Sulphuric acid, Phosphoric acid and Hydrofluoric acid. Sale of fertilizers raw material such as spur, rock phosphate, potash etc Sale of by-products such as vizag gypsum and carbon dioxide. Handling of other cargo at our berth.

3.13 PRODUCTS AND SERVICES:

Coromandel International Limited has muilti-locational production facilities and markets its products all over India and export and pesticides to various countries across the globe. It is managed by competent and committed professionals using advanced management practices. The Company is known for fostering a climate of high performance and continuous improvement.

Gromor 14:35:14 Contains nitrogen phosphate and potash. Highest total nutrients content (63%) N&P ratio same as DAP but 14-35-14 has extra 14% potash. Highest in phosphate (35%)

Gromor 28:28:0 Complex with highest N&P in 1:1 Unique granulation by coating prilled urea with ammonium phosphate layer Such granule configuration ensures efficient utilization of nutrients. Highly suitable for paddy, wheat.

Gromor 20:20:0:13 A high analysis complex Fertilizer containing all the three major nutrients Nitrogen,

Phosphate and Potash, was launched by Coromandel in March 2003. This complex contains Phosphate and Potash in the ratio of 1:1, the highest among

the NPK fertilizers.

Paramfos 16:20:0:13

Ammonium phosphate sulphate containing Nitrogen, Phosphate and sulphur It is the most preferred Fertilizer in drill-sown areas

Parry Gold Ammonium Phosphate Sulphate containing Nitrogen and Phosphate in 1:1 ratio. It is an ideal Fertilizer for all crops grown in Sulphur deficient soils.

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Parry Super (Single Super Phosphate) First chemical Fertilizer to be manufactured in India. Favoured Fertilizer for dry land areas. Controls acidity in soil and increase productivity.

DAP

GODAVARI DAP (NP 18:46) is a complex fertilizer containing nutrients Nitrogen and Phosphorus.

10:26:26 Godavari 10:26:26 is a high analysis complex fertilizer containing all the three

major plant nutrients viz Nitrogen, Phosphate and Potash Godavari 10:296:26 contains phosphate and potash in the ratio of 1:1

12:32:16 Godavari 12:32:16 is a complex fertilizer containing all three major plant

nutrients viz. Nitrogen, Phosphate and Potash

14:35:14 Godavari 14:35:14 is a complex fertilizer containing all three major plant

nutrients viz. Nitrogen, Phosphate and Potash. This is the only complex having highest total nutrient content among all the NPK complex fertilizer (63%).

3.14 CIL AWARDS:

ISO 14001 certifies received by CIL for its environment management system. Occupational health and safety management system certification under OSMAS

18001. Government of Andhra Pradesh labour department mayday award 2007 for best

management. ISO 9001 certified received for quality management system. FAI award for improvement in overall performance for the year 2004-2005.

The FAI Best Production Performance Award-2006 for the Phosphoric Acid Plant at Vizag.

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Award for 2005-06 Best Energy Conservation in the Fertilizer sector received by Vizag Plant on December 14, 2006 National Energy Conservation Day.

The FAI Best Video Film Award-2006 for the film on ‘Gromor Sulphur’ for the 5th time.

National Award (1st Prize) for House Journal-2006 from The Public Relations Society of India, New Delhi, received for ‘The Voice’ (house journal) for the 2nd

consecutive year National Award (2nd Prize) for Video Film- 2006 from The Public Relations

Society of India , New Delhi received by Marketing Department (Fertilizer) for the film “Cheyutha” (Helping Hand)

British Council ‘Five Star’ rating for Safety Management System in 1998. First Prize for safety, among the 162 fertilizer companies in the International

Fertilizer Industries Sectional Contest. Andhra Pradesh Pollution Control Board’s award for ‘Waste minimisation’ at

Source and Adopting Cleaner Technologies for 2001-02. FAI award for ‘Environment Protection in NP/NPK Fertilizer Plant Category’

for 1995-96. Adjudged one of the ‘Ten Greenest Companies in India’ by a joint survey of

Tata Energy Research Institute and Business Today magazine. Several other awards from the central and state Government and other

institution like AP Pollution Control Board. Jawaharlal Nehru Award for Pollution Control and Energy Conservation.

Received a Commendation Certificate for “Strong Commitment to HR Excellence” from the Confederation of India Industries (CII).

3.15 ACHIEVEMENT OF CIL:

1 million safe man hour-27 times; a record in fertilizer Industry 2 consecutive million safe man hours- 8 times. 3 consecutive million safe man hours- 4 times. 4 consecutive million safe man hours- once. Won first prize for safety among 162 fertilizers companies in the international

fertilizers Industry section contest in 1992.

3.16 ORGANISARTIONAL CHART:

Board of directors manges the organisational of Coromandel International Limited. President and MD acts as Chief Executive of the entire setup and stationed at its registered office located at Chennai, Tamilnadu. Vice president oversees the CIL plant at Visakhapatnam.

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CHAPTER-IV THEORITICAL FREAMEWORK

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4.1 THEORITICAL FRAMEWORK

4.2 INTRODUCTION

4.3 ABC ANALYSIS

4.4 EOQ (ECONOMIC ORDER QUANTITY)

4.5 REORDER-POINT

4.6 XYZ ANALYSIS

4.7 VED ANALYSIS

4.8 NON-MOVING ITEM ANALYSIS

4.9 INVENTORY MANAGEMENT OF RAW MATERIAL

4.10 INVENTORY MANAGEMENT OF FINISHED GOODS

4.11 PURCHASING SYSTEM

4.1 INTRODUCTION:

In today’s competitive market scenario, all organization are focusing their efforts on inventory reduction and lean management practices.

It is always essential to control stocks at various location in organisation at optimum level, proper inventory control is possible only with the support of efficient stores management i.e, at various

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places such as respect of raw material, finished components, work-in-progress, finished goods and spare parts.

The objective of inventory control can be met by analysing the process, Inventory carrying cost, procuring cost, set up cost, stock –out cost, EOQ etc. For this various tools like ABC analysis, XYZ analysis, VED analysis, FSN analysis etc. are being used.

Lead time management and vendor managed inventory (VMI) also facilitates to reduce the inventory to optimum level.

In any industry there are four ‘M’s that play a very important role in the smooth functioning of the organisation and relation and objectives, they are Man, Machinery, Money and Material. The management of material plays an important role as 60% of the capital cost is attributed to materials alone.

Inventories represent aggregate of those items, which are either held for the sale in the ordinary course of the business, or are in the process of production for sale or yet to be utilized consumed in the production of goods and services.

Inventory can be classified into seven categories. They are given below

Raw materials Finished parts Work-in-progress Finished goods Tools Machinery suppliers

The principal items of inventory are as follows:

RAW MATERIALS – Raw materials is a fabricated materials, which have undergone no Conversion what so ever since their receipts from the suppliers.

FINISHED PARTS – Finished parts are those which may either be brought out parts or piece part’s brought out parts are those finished parts sub-assemblies or assemblies, which are purchased from outside supplies. Piece part, are those parts, which are manufactured at the company’s own plant from the basic raw material.

WORK-IN-PROGRERSS- It comprises of the items in partially completed condition of manufacture.

FINISHED GOODS – these are the final products ready to be shipped.

TOOLS- These comprise of standards tools and hand tools, standard tools used machines such as saws, drills, reamers, etc. and hand tools are drill guns, hammers, mallet, etc.

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SUPPLIERS- include materials used in running the plant or in making company’s products but do not they go into the product.

MACHINERY SPARES- Are which used to maintain without any problems so that there won’t be unnecessary breakdowns, these spares include consumable spares, replacement spares, rotable spares, insurance spares.

4.2 ABC ANALYSIS: All the spares and stores other than the construction meant for specific construction activities are subjected to consumption analysis covering specific periods. Items constituting 70% of the total annual consumption by value are classified as ‘A’ items. Items constituting the next 20% of the annual consumption value are classified as ’B’ class items. The remaining moving items constituting 10% of the annual consumption value are classified ‘C’ class items. Very large number of items by numbers falls under this classification whose consumption valued will be very low.

ABC analysis helps in classification in A, B&C class.

Class of item %of item % of consumptionA 10-15 70-75B 10-15 10-15C 70-75 5-10

4.3 EOQ (ECONOMIC ORDER QUANTITY) : one of the basic decision that must be made in any stock control system is that of determining the quantity to order since investment in inventories largely depends upon he quantities in which the items are ordered for replenishment.

Ordering large lots infrequently, reduces administrative work but increases investment in stocks ordering small lots frequently keeps the investment in low but increases administrative work. This is because small lots require high order frequency, more purchase requisition require to be raised, more frequently the comparative statement must be raised, more he material must be received, more posting must be done moiré bills must be handled. All these activities will call for more staff and hence more administrative cost and overheads. Therefore a rational approach is needed for fixing the order quantity of an item which will either increase neither the procurement cost nor the storage cost. So such quantity which result in equal procurement cost & storage cost is known as EOQ (Economic Order Quantity)

The mathematical explanation of EOQ is as follows

EOQ is given by Q= √(2*D*O.C) / C.C

Where: D= annual consumption cost

O.C= cost of placing one order including the cost of receiving he goods i.e Cost of getting an item into the firms inventory

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Q= quantity per order in time

C.C= annual carrying cost per unit

The annual carrying costs are equal to the average value of stock held multiplied by carrying cost per unit and represent as EOQ (C.C)/2. Where

C.C= annual cost per unit.

4.6 REORDER- POINT: An important question in any inventory management system is “which should an order for the purchases of an item should be placed, so the RE-ORDER point system provides he answer o his question. RE-ORDER point is the level of inventory at which the storekeeper should initiate the purchases requisition for the purchases of inventory in the amount of the economic order quantity.

In designing a RE-ORDER point sub- system three items of information are needs as inputs to the sub-system.

1. Lead time, i.e time lag between indenting and receiving of the inventory is usually expressed in number of days.

2. Usage rate, i.e, the quantity per day at which the items consumed in production process or sold to customer.

3. Minimum Stock level, i.e, the quantity below which stock should not be allowed to fall. This can be calculated by multiplying the usage rate by the number of day the firm wants to hold as a protection against shortages.

The following formula can be used for the calculation of the reorder point

RE-ORDER POINT=UR*LT

= UR *DAYS OF SAFETY

Where,

UR= Usage rate per day

LT= Lead time in Days

DAYS OF SAFETY= Days of safety stock desired by the firm.

Lead Time: There is a definite time lag between identification of the need for an item till it is received in store ready for issue after placing of order, manufacturing, transport, receiving and inspection. The total time elapses between the recognition of the need for an item and the fulfilment of the need is called lead time of the item and it plays an important role in establishing the right time for procurement.

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The right time for the procurement of an item is the time the stock on hand is just enough to satisfy the demand for the period required for the procurement since there may be increase in the demand between the time the order is placed and received in store, safety stock may be added to the average requirements of the lead time. This implies that the right time for procurement of an item is the time when stock drops down to a level which is enough to take care of demand during the period necessary to replenish stock and extension of lead time.

IMPORTANCE OF LEAD TIME- Lead time has a direct relationship with investment in investors. The longer the lead time, higher is the requirement of the working capital. Since during the lead time, there is no delivery of material, the requirement of the production is met from the inventories in stock. Also since both lead time and consumption rate increase without notice, over and above the stock to take care of normal consumption during average lead time, safety stock is required to be maintained. This implies that a major factor which influences investment in inventories is that lead time and it is therefore responsibility of the purchase department to take steps to reduce the lead time.

ELEMENTS LEAD TIME:

Time required by the indenting department to convey requirements to purchase. Time required by the buyer to call quotation, make enquires/visit potential vendors negotiate

terms, enter in to contract. Time required by the supplier to route buyers order through his administrative channel and fill the

same. Transit time for goods to reach buyer works. Time required by the buyers receiving department to uncrate goods, prepare necessary documents

and offer material for inspection. Time require by buyers inward to verify qualify of goods. Time required by the stores deportment to take goods in to stock, deposit into appropriate bins and

update stock records.

MAJOR PARTS OF LEAD TIME:

Lead time of an item can be divided into two parts

Internal lead time External lead time

INTERNAL LEAD TIME:

It is also called as buyer lead time, is the sum of servicing time and receiving time. The servicing time includes time required by the buyers to call quotations, compare quotations, visit vendors negotiate terms, obtain sanctions, enter in to contract etc. and receiving time is made up of time

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required to uncreated and inspects goods, move them between stores, deposit them in appropriate bins and make entries into stock cards.

EXTERNAL LEAD TIME:

It is also called as suppliers lead time, is made of administrative, manufacturing and delivery times required by the supplier. External lead time therefore is the time required to get the items from selected suppliers.

4.5 XYZ ANALYSIS:

Inventory holding of each project will also be analyzed with reference to value of the holding against each item. It is found that about 70% of the total holding would be covered by very small percentage of items by number, which will be around 10%. This category will be classified as ‘X” class items. Similarly items accounting for the remaining 20% contributing will be categorized as ‘Y” class items and the remaining items will be listed in ‘Z” class. This analysis is usually done for the annual stock review.

In ABC analysis consumption value of items for a particular time span is considered. In XYZ analysis inventory value of item on a particular day will be considered. All steps in ABC analysis are followed in XYZ analysis.

4.6 VED ANALYSIS: Vital, Essential and Desirable.

VITAL:

It is not ready to available in market.

ESSENTIAL:

Can be replaced immediately Lead time for procurement is 1-2 month

DESIRABLE:

The item is available at market. Lead time at procurement by low level Cost will not much VED analysis is generally usef7ull for spares parts inventory for company’s plant and

Machinery

Items are classified as Vital Essential Desirable

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4.7 NON- MOVING ITEM ANALYSIS:

All items held in stock will be subjected to non-movement analysis segregating the items for different non-movement periods like over 2yeary, over 5 years and 10 years so as to critically analyse the possibility of utilization of these times or otherwise for declaring surplus especially those items which have not moved for more than 5 years. Materials management department with the concerned technical departments will jointly do this analysis and separate list will be prepared, i.e code group wise, for the non-moving items beyond 5 years on an annual basis project wise under different code groups and steps would be taken so that the non-moving items are not indented again, until the existing stocks are utilized. Every effort will be made to keep as low practicable because this is non-productive inventory. Which is blocking the capital, storage space needing preservation and up keeping efforts and results, in extra inventory carrying cost. The company reduces the non-moving inventory by regular review for utilization or by declaring as surplus.

CODIFICTION: Any organization engaged in production repair of construction is obliged to stock a large number of items of stores. It is essential to maintain accurate stock records of these items and also to know their location in store warehouses. The normal way of identifying an article is by simple description but this method is far from satisfactory. The best way is to list out the various items classifying or grouping them in some convenient manner and allotting each item a code number which if quoted is sufficient to indentify the items. Each code number is unique and represents one single item. By this maintenance of stocks will be carrier records with the help of data processing machines are able to give any output using these codes. These are three types of coding system are i.e Alphabetical, alphanumeric and numerical.

STANDARDIZATION AND VARIETY REDUCTION: It is the process of establishing agreements up on acceptable levels of various characteristics of a product e.g. Quality, design, dimensions, physical characteristics, chemical composition, performance etc. on the basis of study and experience gained by established agreement or uniform identification is termed a standard / specification. Standardization is applied usually in two distinct areas in industry.

Standardisation of products Standardisation of business products.

AUTOMATIC REPLENISHMENT SYSTEMS: For few items in the stock that frequently moving and are usually of low value and required by more than one department are subjected to ARS, ARA is completely controlled by materials control department, they actually fix a minimum, maximum and recorder level. So as soon as these items reaches reorder level material control department will monitor it and indent is prepared immediately for procurement of these items.

STORES MANAGEMENT: Stores are used for receiving, storage and supply of the goods. It plays a major role in inventory management. Stores are the centre of activities of material in motion, an

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system must aim at good systems and procedures efficient O & M and smooth and speedy receipts and issues. The main objective of stores will be to provide efficient service to all operating functions such as production, construction, repair and maintenance. These are usually two sections in stores

Receipt / issue section Custody section

Custody section usually takes care of storage and preservation of the incoming goods where as issues / receipt section confirms of right input according to the order and issues the same according to the requirements.

STORES PRESERVATION: Proper material storage it very important and it is carried out very effectively by the concerned department. For carrying out an effective preservation programs, factors such as economic aspects, period of idleness of a part, condition of the part, nature of the exposed surface as well as applicability of specific protective to be applied is considered and make sure that they do no exceed the cost of the part to be preserved.

Some of the procedures followed are as follows:

All ferrous spares are given a protective cost of paint / varnish and stored. Precision spares like instruments, electronic and electrical spares, ball and roller bearing are

covered in polythene bags, enclosing moisture absorbent chemicals like silica gel etc. Precision spares are maintained in dust free air – conditioned rooms without sunlight and

moisture.

Sl.No. Title Basic Main Uses

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1 ABC (Always Best Control) Value of Consumption To Control Raw Material

Components and Work in Progress

Inventories in the normal courses of

Business.2 EOQ ( Economic Best Control ) Based on demand

Situation

To find that Particular Quantity of

Which minimum total Inventory cost.3 Reorder Point Based on Consumption

Requirements.

It decides when it is time to Replenish.

4 XYZ Analysis Value of items in Storage To review the Inventories and their

Use scheduled intervals.5 VED ( Vital Essential Desirable ) Critically of the

Component

To determine the stocking levels of

Spare parts.6 HML ( High, Medium, Low usage ) Unit Price of the Material Mainly to control purchase7 FSND ( Fast Moving, Slow Moving,

Non-Moving, Dead Items)

Consumption pattern of

the Material

To Control Obsolescence

8 SDE ( Scare, Difficult, Easy to

Obtain items

Problems faced in

Procurement

Lead Time Analysis and Purchasing

Strategies

French chalk powder is sparkled whenever possible and rubber like tires, tubes hoses, v belts etc. Items like electrodes are kept intact original packing and kept in dry storage room with same

heaters to avoid excess of moisture affecting the coating. Sintered bush bearings are soaked in warm oil for 24 hours once in a year. Pipes over 2 “are flushed / cleaned with dry our in these cases protective paints to the exterior

painting. Vertical stocking of grin dining wheels with partitioning in between is necessary so that the faces

do not came in to contact with each other. Strip heaters in all high voltage motors, LT motors should be provided to avoid moisture entering

in to the motors. Copper parts are protected against ingress of ammonium salts. Silver and lead parts are cleaned with fresh water. Compressors and turbines of multistage pumps are rotated on their bearings every quaters to

prevent staging / clogging. Anti-rodents and insecticides measures are taken on regular basis. Shafts gears and impellers are stored horizontally after painting with dewatering protection films

such as rust guards, rust line etc. Fasteners and screws that are kept in the racks are treated with hard preservation film.

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Perishables spares like V belts with a low shelf life are identified and the FIFO method of issues are practiced.

4.8 INVENTORY MANAGEMENT OF RAW MATERIAL:

Raw materials are those items which are yet to be consumed by the company. The main raw materials of the company are Phosphoric Acid, Sulphuric Acid and Ammonia.

The main function of Raw Material Department is to procure right material at right time and at right cost so that there are no interruptions in the production CIL procured almost 99% of its raw materials from outside countries such as South Africa, Tunisia, and Bangladesh etc.

Raw Materials storage tanks, which are situated in Kakinada, are given below---

AT KAKINADA:For Phosphoric Acid : 1 tank of 5,000 MT capacities

: 2 tank of 10,000 MT capacity



For Ammonia : 2 tank of 1,500 MT capacity


For Sulphuric Acid : 4 tank of 2,400 MT capacity

Similarly the details of the lead time (both internal and external) are given below

Time required by the indenting department to convert requirements to purchase – 3 days Time required by the buyer to call quotation make enquiries/visit potential vendors, negotiate

terms enter into a contract – 45 days Time required by the supplier to route buyers order through his administrative channel and fill the

same – 7 days Transit time for goods to reach buyer works 10 days (indigenous work) 30 days (imported) Time required by the receiving department to uncreated goods prepared necessary documents and

offer material for inspection – 7 days Time required by buyer inward to verify quality of goods – 3 days Time required by the stored department to take goods into stock, deposit into appropriate bins and

update stock records – 2 days

Details of the norms provided by the operations department for the requirement of the raw materials, for the production of one metric ton of fertilizer.

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PHOSPHORIC ACID DAP ( DA AMMONIUM PHOSPHATE) : 872

14 : 35 : 14 : 622

12 : 32 : 16 : 613

AMMONOIA DAP (DI AMMONIUM PHOSPHATE) : 213

12 : 32 : 16 : 154

14 : 35 : 14 : 177

Raw material department receives a production plan from the Operation Department it provides all the details of the production for that particular financial year & it also provides the required norms.

Now raw material department, depending upon the production plan & the norms provided, prepares a monthly schedule rep[ort which not only consist of the production plan, norms but also the information of the closing stock at the end of that particular year / day / month. So depending upon the available stock, consumption rate, lead time and storage capacity raw material department prepares the monthly schedule report which provides all the necessary information of when to procure and where to store the raw materials. It also consist of the details about the name and other details of the supplier.

PRODUCTIO PROFILE OF THE COMPANY:

The company is mainly engaged in manufacturing the complex fertilizers DAP, which is having the highest nutrient value of its grade with 15% Nitrogen and 46% of phosphorous. The major raw material required for manufacturing DAP are Ammonia and Phosphoric Acid. The storage tanks for these raw materials are situated in Kakinada

RAW MATERIAL CONSUMPTION TREND

For Ammonia:

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Year Quantity (in tonnes) Price in lakh

March 31, 2006 213010 32284.74

March 31, 2007 238296 33165.31

March 31, 2008 339504 44479.72

March 31, 2009 370057 98342.97

March 31, 2010 475691 68966.65

For Rock Phosphate:

Year Quality (in tonnes) Price (in lakh)

March 31, 2006 767627 29447.26

March 31, 2007 842130 34322.97

March 31, 2008 637438 28648.64

March 31, 2009 592017 79824.32

March 31, 2010 653242 45564.22

For Urea:

Year Quantity (in tonnes) Price (in lakh)

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March 31, 2006 183315 22922.10

March 31, 2007 167906 21019.92

March 31, 2008 164112 24001.90

March 31, 2009 104696 27533.44

March 31, 2010 134345 19688.93

For Sulphur:


March 31, 2006 268494 11923.84

March 31, 2007 292178 11086.04

March 31, 2008 232376 13294.48

March 31, 2009 238917 69901.21

March 31, 2010 252755 7667.40

For Phosphoric Acid:


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March 31, 2006 77397 16141.15

March 31, 2007 73704 16199.22

March 31, 2008 443581 104990.57

March 31, 2009 449927 348066.25

March 31, 2010 617046 174290.84

4.9 INVENTORY MANAGEMENT OF FINISHED GOODS:

Sales & distribution department ensure that finished goods reach the right place at right time and right cost.

Operating department prepares the production plan and sends it to vice president (Marketing) who along with RMO of different region prepares a sales plan & sends it to the sales &distribution department.

These plans are of different formats:

Product wise, Season wise sales plan Product wise, month wise sales plan Marketing office wise, month wise DAP sales plan Marketing office wise, product wise sales plan Month wise4, Destination wise rake movement plan

Sales &distribution department considers both sales and production while preparing a dispatch plan, s & d department also makes sure to cross check the monthly stock reconciliation report, sent by RMO from every regi0on, so that details about the closing stock of each centre are known. So any variation in the closing stock will lead to a little variation in the dispatch plan when compared to sales.

SALES

SALES FOR THE YEAR END MARCH 31, 2006

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Product Quantity (in MT’s) Price (in lakh)

Ammonium phosphate 984375 77641.45

Ammonia 14529 2197.46

Muriate of Potash 127358 5641.83

Single Super Phosphate 121115 3583.44


Product Quantity (in MT’s) Price ( in lakh)


Ammonia 5577 1065.55




Product Quantity (in MT”s) Price (in lakh)

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Di ammonium phosphate 521065 47241.14


Ammonia 74072 2479.11

Muriate of Potash 78286 3306192



Product Quantiy ( in MT’s) Price (in lakh)



Ammonia 88271 2929.91




Product Quantity (in MT’s) Price (in lakh)

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Ammonium, phosphate 1962579 137640.53

Ammonia 92140 3369.88



4.10 PURCHASING SYSTEM:

To keep pace with changed market conditions. To satisfy demand during period of replenishment. To carry reserve stocks to avoid stock outs. To prevent loss of sales. To level out or stabilise production. To satisfy other business constraints. Suppliers condition of lien quantity. Government regulation. Seasonal availability. Demand forecast error Suppliers delivery interval. Lead – time offered to customers are shorter than supplier lead-time Minimisation of delivery costs.

INTRODUCTION: The purchasing department occupies a vital and unique position in the organisation of an industrial concern because purchasing is one of the main function of the success of a modern manufacturing concern

Mass production industries, since they rely upon a continuous how of right material, for demand for an efficient purchasing division. The purchasing function is liaison agency, which operates between the factory organization and outside vendors on all matters of procurement. Purchasing implies procurement materials, suppliers, machinery and services need for production and maintenance of the concern.

OBJECTIVE OF PURCHASING DEPARTMENT:

To procure right material. To procure material in right quantities. To procure material of right quality.

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To procure from right and reliable source or vendor. To procure material economically, i.e at right or reasonable price. To receive an delivery of material at right place and at a right time.

FUNCTIONS OF PURCHASING DEPARTMENT:

Keep records- indicating possible material and their substitutes. Maintain records of reliable sources of supply and price of materials. Review of materials specification with an idea of simplifying and standardizing them Making contacts with right sources of supply at competitive price. Procure and analyze quotations. Place and follow up purchase orders. Maintain records of all purchases. To make sure through inspection that right kind (i.e. quantity quality etc) To act as liaison between the vendors and different department of the concern such as

production, quality control, finance, maintenance etc. To check if the material has been purchases at right time and at economical rates. To prepare purchasing budget. To prepare and update list of materials required by different departments of the

organization within a specified span of time.

CIL PURCHASE DEPARTMENT:

The internal organization of purchase department is on a line basis with purchasing agent, director of purchase or purchasing manager being in charge of purchase department. He is responsible for the overall efficient operation of the department. The purchasing manager is however assisted in purchasing by a number of assistants an few clerical staff.

The purchasing manager has the powers to executer purchasing contracts for the concern. He divides the duties among the assistant according to the nature of purchase to be made. For example goods, one assistant may purchase only electrical another (major) raw material, third plant equipment and so on. Purchasing section places orders with the vendors, purchase service section follows the progress to he order at its shipment by vendors and its vendors end its final receipt in the company.

At CIL Kakinada as a part of modernisation and up gradation of technology in line with government thinking, the company has entered in to a contract with m/s Satyam enterprise solution a cost of Rs 3.00 Cr for implementation of ERT/SAP. The total company operations all over India i.e Production Unit, Corporate Office, Liaison Office and various marketing offices are being hooked up through, a network (WAN). At CIL they are using SAP to overall department in the plants up to date each and every transaction in purchasing, the vendor department, material procurement, stores and accounts.

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At CIL Kakinada as a part of Logistics Development, company has implemented ERP (SAP) system. In this SAP system not only material procured but material consumed in daily production every transaction, can be updated in the system. The company’s material department is maintaining the following files.

Purchasing Requisition (PR) Purchasing Order (PO) Daily Receipt Report (DRR) Discrepancy Report (DR) Materials Receipt Report (MRR) Materials Issue Voucher (MIV) Materials Return Voucher (MRV) Materials Transfer Voucher (MTV Stores Correction Voucher (SCV)

The above shown files will give updated details of materials state.

STEPS IN COMPLET PURCHASING CYCLE:

Recognition of need, receipt and analysis of purchase requisition. Selection of possible potential sources of supply Making the request for quotation Receipt and analysis of quotation Selection of right source of supply Issuing the purchase order. Follow –up and expedi6ing the orders. Analyzing received reports and processing discrepancies and rejection. Checking and approving vendor’s invoices for payment Closing completed order Maintenance of records

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CHAPTER- V DATA ANALYSIS& INTERPRETATION

5.1 ANALYSIS & INTERPRETAION5.2 ABC ANALYSIS5.3 CALCULATION OF EOQ FOR 2009-20105.4 FIRST IN FIRST OUT5.5 STANDARDISATION AND VARIETY REDUCTION5.6 INVENTORY ANALYSIS

5.1 ANALYSIS & INTERPRETATION:

Inventory control is very essential for any organization. An organization represents an aggregate of those items which are either held for the sale in ordinary course of business or in the process of production (i.e, work-in-progress) or yet to be utilized in the production of goods and

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services. In case of CIL, Raw Material Department procures the required raw material. Here central stores department take care of spares consumed in the production, Sale & Distribution.The tools used by the company for the inventory control in stores are

ABC ANALYSIS ECONOMICALLY ORDER QUANTITY (EOQ) FIFO (First In First Out) NON MOVING Item analysis

5.2 ABC ANALYSIS:

A category items otherwise called as high priority items which requires tight control including complete accurate records, regular and frequent review by management.

B category item which is called medium priority items requires only normal control. C category items which require lowest priority which needs simplest possible control

perhaps use a two – bin system or periodic review system.

TABLE -1:

ABC ANALYSIS OF THE YEAR 2005-06

s.no Description of material COST per unit Units

consumedAnnual wage

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1SLEEVE SHAFT CVB 6754-1 FOR GA614N

26988 3 80964

2BUSH THRUST SLEEVE GUN METAL GA701

211.32 23 4860

3SAP REAR BEARING OUTER CVB 4606-0GA701

743.34 7 5203

4 COVER END FOR FRONT BRG O/B CVB 1346-2

1850 6 11100

5RING STATIONERY SEAL TEFLONGA701

144.5 8 1156

6GOVERNOR SLEEVE SAE 64 CVC4765 GA701

1932.07 6 11592

7GOVERNOR WEIGHT CVA 1121GA 7012

655.52 57 37365

8GASKET CASE PLATE CVA 1360

111.44 42 4680

9LABYRINTH RING CVA 1166 904L GA 615

6772.90 20 135458

10SHAFT CR STEEL CVB 1164-1 GA 1901

18655.81 20 373117

11GOVERNER SPRING CVA 1535-2

8.27 1820 15051

12IMPELLER 9004L CVD2159 GA615 EV ACIDPUMPS

41256.75 6 247541

13SLEEVE BUSING THRUST CVA 1782-1 GA703

429.75 38 16331

14GOVERNER SLEEVE CVB 2296-2 GA703

2279.51 27 61547

15RINGS STATIONARY SEAL PTFE CVA

192.79 16 3085

16GASKET PTFE 4 1/2“*3”*I/8” THICK

44.83 50 2242

17PIPE CONNECTING CVB 1076-3 WITH TC

12576.21 16 201219

18OIL SEAL 3 1/4”*4 1/4”*1/2”M TYPE

129.92 2 260

19SLEEVE SHAFT (SET=3 NOS)PUMP GA 506

8399.70 1 8400

20INSERT GRAPHITE CVA 1484-1

138.67 31 9879

TABLE -1.1:

Descrition of materialAnnual wageIn descendingOrder

ConmulativeAnnual wages

The percentageOf each item onToatl inventroyValue

Commulative

percentage

Commulative

weight

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SHAFT CR STEEL CVB 1164-1 GA1901 373117 373117 30.31 30.31 5

IMPELLER 904L CVD2159 GA615 EV ACIDPUMP 247541 620658 20.11 50.42 10

PIPE CONNECTING CVB 116 904L GA615 201219 821877 16.35 66.77 15

LABYRINTH RING CVA 1166 904L GA 615 135458 957335 11 77.77 20

SLEEVE SHAFT CVB 6754-1 FOR GA 614N 80964 1038299 60.57 84.34 25

GOVERNOR SLEEVE CVB 2296-2 GA 703 61547 1099846 4.99 89.33 30

GOVERNOR WEIGHT CVA 1121 GA 7012 37365 1137211 3.04 92.37 35

SLEEVE BUSING THRUST CVA 1782-1 GA 703 16331 1153542 1.33 93.7 40

GOVERNOR SPRING CVA 1535-2 15051 1168593 1.22 94.93 45

GOVERNOR SLEEVE SAE 64 CVC 4765 GA 703 11592 1180185 0.94 95.8 50

COVER END FOR FRONT BRG O/B CVB 1346-2 11100 1191285 0.90 96.77 55

INSERT GRAPHITE CVA 1484-1 9879 1201164 0.80 97.57 60

SLEEVE SHAFT (SET=3NOS) PUMP GA 506 8400 1209564 0.68 98.25 65

CAP REAR BEARING OUTER CVB 4606-0 GA 701 5203 1214767 0.42 98.68 70

BUSH THRUST SLEEVE GUN METAL GA701 4860 1219627 0.39 99.07 75

GASKET CASE PLATE CVA 1360 4680 1224307 0.38 99.45 80

RING STATIONERY SEAL PTFE CVA 3085 1227392 0.25 99.70 85

GASKET PTFE 4 1/2’’*3”*1/8” 2242 1229634 0.018 99.88 90

RING STATIONERY SEAL TEFLON GA 701 1156 1230790 0.0.9 99.98 95

OIL SEAL 3 1/4"*4 1/4”*1/2” M TYPE 260 1231051 0.02 100 100

CLASS% OF USAGE

VALUE

%OF

COMMULATIVE

USAGE VALUE

NO.OF

ITEMS

% OF COMMULATIVE

ITEMS

A 67 67 15 15

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B 22 89 15 30

C 11 100 70 100

INTERACTION:-

During the year 2005-06, 15% of the items have been classified as A category items because it have the 67% (nearly 70%) of the total consumption of units so it requires very strict control and no chance to maintain safety stock for these category items. And maintain the weekly control statements.

Under B category there are 15% of items. Which requires only medium control because its value of consumption is less than the A category items that is 22% and there is a chance to maintain the low safety stock and prepare monthly control reports. The remaining items are under C category which requires less control because its value of consumption is 11%, So there is high safety stock. And prepare control reports for quarterly.

TABLE-2:

ABC ANALYSIS FOR THE YEAR 2006-07

SL.NO DESCRIPTION OF METERIAL COST/UNIT Units Consumed

Annual USAGE

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1 SLEEVE SHAFT CVB6754-1 FOR GA614N 226988 1 3170

2 BUSH THRUST SLEEVE GUN METAL GA701 211.32 15 3170

3 CAP REAR BEARING OUTER CVB 4606-0 GA701 743.34 3 2230

4 COVER END FOR FRONT BRG O/B CVB 1346-2 1850 7 12950

5 RINGS STATIONARY SEAL TEFLON GA701 144.5 38 5491

6 GOVENOR SLEEVE SAE 64 CVC 4765 GA 701 1932.07 13 25117

7 GOVENOR WEIGHT CVA 1121 GA7012 655.52 72 47917

8 GASKET CASE PALTE CVA 1360 111.44 4 446

9 LABYRINTH RING CVA 1160 904L GA 615 6772.90 20 135458

10 SHAFT CR STEAL CVB 1164-1 GA 1901 18655.84 8 149247

11 GOVENOR SPRING CVA 1535-2 8.27 2000 16540

12 IMPELLER 904L CVD2159 GA615EV ACIDPUMPS

41256.75 10 412568

13 SLEEVE BUSHING THRUST CVA 1782-1GA703 429.75 28 120333

14 GOVENOR SLEEVE CVB 2296-2 GA703 3279.51 44 100298

15 RING STATIONARY SEAL PTFE CVA 192.79 14 2699

16 GASKET PTFE 4 1/2 “X3”X1/8” THICK 44.83 60 2690

17 PIPE CONNECTING CVB 1076-3 WITH TC 12576.21 0 0

18 OIL SEAL 3 ¼”X4 ¼”X1/2”M 129.92 2 260

19 SLEEVE SHAFT (SET=3NOS)PUMP GA506 8399.67 18 5736

20 INSERT GRAPHITE CVA 1484-1 138.67 18 5736

TABLE-2.1:


DESCRIPTION OF METERIAL Annual USAGE IN

COMULATIVE ANNUAL

% of each item on total

COMULATIVE %

COMULATIVE WEIGH

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DESCENDING ORDER

USAGE inventory T

IMPELLER 904L CVD2159 GA615EV ACIDPUMPS

412568 412568 41.88 41.88 5

SHAFT CR STEAL CVB 1164-1 GA 1901 149247 561815 15.00 56.48 10

LABYRINTH RING CVA 1160 904L GA 615

135458 697273 13.62 70.1 15

GOVENOR SLEEVE CVB 2296-2 GA703 100298 797571 10.08 80.18 20

GOVENOR WEIGHT CVA 1121 GA7012 47197 844768 4.74 84.92 25

SLEEVE SHAFT (SET=3NOS)PUMP GA506

33599 878367 3.38 88.3 30

SLEEVE SHAFT CVB6754-1 FOR GA614N

26988 905355 2.71 91.01 35

GOVENOR SLEEVE SAE 64 CVC 4765 GA 701

25117 930472 2.52 93.53 40

GOVENOR SPRING CVA 1535-2 16540 947012 1.66 95.19 45

COVER END FOR FRONT BRG O/B CVB 1346-2

12950 959962 1.30 96.39 50

SLEEVE BUSHING THRUST CVA 1782-1GA703

12033 971995 1.21 97.7 55


RING STATIONARY SEAL PTFE CVA 5491 983222 0.54 98.81 65

BUSH THRUST SLEEVE GUN METAL GA701

3170 986392 0.32 99.13 70


GASKET PTFE 4 1/2 “X3”X1/8” THICK 2690 991781 0.27 99.67 80

CAP REAR BEARING OUTER CVB 4606-0 GA701

2230 994011 0.27 99.89 85


PIPE CONNECTING CVB 1076-3 WITH TC

260 994717 0.03 99.96 95

OIL SEAL 3 ¼”X4 ¼”X1/2”M 0 994717 0 99.96 100

TABLE 2.2:

CLASS % OF USAGE VALUE

% OF CUMULATIVE VALUE

NO. OF OTEMS % OF CUMULATIVE ITEMS

A 70 70 15 15

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B 21 91 20 35

C 9 100 65 100

INTERPRETATION:

During the year 2006-07, 15% of items have been classified as A category items these items requires strict control; and there is no chance to maintain safety stock because this category items have maximum consumption value. And compared to the previous year there is no change in weight of A class items but the change in between the items based on their annual usage.

Under B category there are 29% of the items. Which requires a minimum control and there is a chance to maintain the low safety stock and compared to previous year the weight age of B class items increased 5%.

Remaining items are under C category almost more than half of inventory is maintained under this category but compared to last year class items weight age reduces to 5% and in this category items requires limited control because it has the low consumption value than A & B category items.

TABLE-3:


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Annual USAGE






6 GOVENOR SLEEVE SAE CVC 4765 GA 701 1932.07 19 36709







41256.75 4 165027






18 OIL SEAL 3 ¼”X4 ¼”X1/2”M 129.92 7 909



TABLE-3.1:


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DESCRIPTION OF METERIAL Annual USAGE IN DESCENDING ORDER

COMULATIVE ANNUAL USAGE

% of each item on total inventory

COMULATIVE %

COMULATIVE WEIGHT


IMPELLER 904L CVD2159 GA615 165027 388897 17.17 40.46 10


161928 550825 16.85 57.31 15


81275 632100 8.46 65.77 20


75457 707557 7.85 73.62 25




36709 843614 3.82 87.77 40


25199 868813 2.62 90.39 45


24050 892863 2.50 92.89 50


18479 911342 1.92 94.81 55


RINGS STATIONARY SEAL TEFLON GA701

6936 935148 0.72 97.29 65





4226 954795 0.44 99.33 85



1847 960182 0.15 99.89 95

OIL SEAL 3 ¼”X4 ¼”X1/2”M 909 961091 0.09 99.89 100

TABLE 3.2:




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A 74 74 25 25

B 16 90 20 45

C 10 100 55 100

INTERACTION:

During the year 2007-08, 35% items are under the A category because its value of consumption is 74 so strict control is maintain on these items. Compared to previous year there is 10% increase of weight age of items so the duty of monitoring of A class items has been increased.

Under B category 20% of items are there. In this there is no change in the weight age of items compared to last year.

Under C category 55% of items are there so half of the inventory under C class because is a high safety stock and a minimum control is suited these items. So that prepared stock records on quantity duration.

TABLE-4:


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Annual USAGE













41256.75 2 82514






18 OIL SEAL 3 ¼”X4 ¼”X1/2”M 129.92 6 780



TABLE-4.1:


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DESCRIPTION OF METERIAL Annual USAGE IN DESCENDING ORDER

COMULATIVE ANNUAL USAGE

% of each item on total inventory

COMULATIVE %

COMULATIVE WEIGHT


IMPELLER 904L CVD2159 GA615 82514 325040 12.53 49.37 10


67729 392769 10.29 56.66 15


53976 446745 8.2 67.86 20




335599 571965 5.10 86.88 35


15457 587422 2.35 89.23 40


13322 600744 2.02 91.25 45




9250 633902 1.41 96.29 60



5283 648304 0.80 98.487 70


2552 650856 0.39 98.87 75


2457 653313 0.37 99.24 80


GASKET CASE PALTE CVA 1360 1894 657520 0.29 99.88 90

OIL SEAL 3 ¼”X4 ¼”X1/2”M 780 658300 0.12 100 95


100 658300 0 0 100

TABLE 4.2:




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A 69 69 20 20

B 22 91 20 40

C 9 100 60 100

INTERPRETATION:

During the year 2008-09, 20% of the items classified as A category. Which requires the maximum control because this class 0 items have high value of consumption and compared to previous year its weight age is decreased to 5%?

Under B category 20% of items are there. These items required a minimum control.

Under C category 60% of items are there half of the inventory maintained under the category it’s have less values of consumption than A & b minimum control is required to this category and a quarterly stock reports are prepared to this category.

TABLE-5:


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Annual USAGE













41256.75 2 82514






18 OIL SEAL 3 ¼”X4 ¼”X1/2”M 129.92 22 2858



TABLE-5.1:


DESCRIPTION OF METERIAL Annual COMULA % of each COMU COMUL

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USAGE IN DESCENDING ORDER

TIVE ANNUAL USAGE

item on total inventory

LATIVE %

ATIVE WEIGHT


IMPELLER 904L CVD2159 GA615 82514 325040 16.21 63.85 10


53976 379016 10.6 74.45 15


33599 412615 6.6 81.05 20


22200 434815 4.36 85.41 25


21696 456511 4.26 89.67 30




7736 487499 1.52 95.76 45



3386 494818 0.67 97.2 55

GASKET CASE PALTE CVA 1360 3232 498050 0.63 97.83 60

OIL SEAL 3 ¼”X4 ¼”X1/2”M 2825 500908 0.56 98.39 65



2113 505720 0.42 99.34 75


1487 507207 0.29 99.63 80


1156 508363 0.22 99.85 85



0 509041 0 99.98 95

GOVENOR SLEEVE CVB 2296-2 GA703 0 509041 0 99.98 100

TABLE 5.2:




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A 74 74 15 15

B 16 90 15 30

C 10 100 70 100

INTERPRETATION:

During the year 2009-10, 15% of items are under A category because its value of consumption is 74 these are required strict control and there is no chance to maintain the safety stock because it have high consumption value and compared to previous year this A class items weight age again decrease to 5%.

Under B category 15% items are there it requires a minimum control only. And maintain a monthly stock records.

Under category more than 70% items are there its value of consumption is 10 so it requires a minimum control and quarterly stock records.

5.3 CALCULATION OF EOQ (ECONOMICALLY ORDER QUANTITY)

FOR 2009-10:

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FOR AMMONIA:

Annual demand (D) = 209137

Unit price = 14498 Rs

Ordering cost (O.C) = 15049 Rs

Carrying Cost (C.C) = 20% on unit price

= 14498*20/100

= 2900 Rs

EOQ= √ 2∗D∗O .C

C .C

=√ 2∗(209137 )(15049 )

2900

= 1473 mt

ITERPRETATION:

EOQ is an important technique in inventory management. EOQ for Ammonia is 1473 units per order i.e.; in one order 1473 units will be order to reduce the carrying cost as well as buying cost which could be n optimum level for maintaining and as well as for the production activities.

FOR ROCK PHOSPHATE:

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Annual demand (D) =3 72475 mt.


Ordering cost(O.C) = 5878 Rs

Carrying cost(C=C) = 20% of unit price

= 1395 Rs


C .C

=√ 2∗(372475 )(5878)

1395

=1772 mt.

INTERPRETATION:

EOQ for rock phosphate is 1772 units per order i.e.; in one order 1772 units will be in order to reduce the carrying costs as well as buying cost. With respect to Rock phosphate, 1772 mt are being placed as an order which could be an optimum level for maintaining and as well as for the production activities.

FOE SULPHURIC ACID:

Annual demand (D) = 28880 mt



Carrying cost (C.C) = 20% on unit price

= 602

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C .C

= √ 2∗(28880 )(1012)

602

=312 mt

INTERPRETATION:

EOQ for sulphuric acid is 312 mt per order i.e.; in one order 312 mt will be order to reduced the carrying cost as well as buying cost. With respect to Sulphuric acid 312mt units are being placed as order which could be an optimum level for maintaining and as well as for the production activities.

FOR SULPHUR:





= 623 Rs


C .C

= √ 2∗(160097 )(4126 )

623

= 1456 mt.

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INTERPRETATION:

EOQ for sulphur is 1456 mt per order i.e. one order 1456 mt will be in order to reduce the carrying cost as well as buying cost. With respect to sulphur 1456 mt are being placed as order which could be an optimum level for maintaining and as well as for production activities.

FOR UREA:




Carrying cost (C.C) = 20% unit price

= 2931 Rs

EOQ=

√ 2∗D∗O .CC .C

=√ 2∗(114462 )(14366 )

2931

= 1059 mt.

INTERPRETATION:

EOQ for urea is 1059 mt per order i.e. in one order 1059 mt will be order o reduce the carrying cost. With respect to urea, 1059 mt is being placed as order which is the optimum level for maintaining and as well as for the production activities.

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FOR PHOSPHORIC ACID:





= 5649 Rs

EOQ=

√ 2∗D∗O .CC .C

= √ 2∗(133025 )(28566 )

5649

= 1160 mt.

INTERPRETATION:

EOQ for phosphoric acid is 1160 mt per order i.e. in one order 1160 units will be in order to reduce the carrying cost as well as buying cost. With respect to phosphoric acid 1160 mt are being placed as an order which could be an optimum level for maintaining and as well as for the production activities.

5.4 FIRST IN FIRST OUT:

Some items get expired beyond a particular time limit. Those items are to be used before they get expired, so such items are controlled using FIFO for effective utilization. Company utilizes this technique for almost all the spares available in the stock.

5.5 STANDARDISATION AND VARIETY REDUCTION:

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Company follows this procedure in the following three areas:

GENERAL STORES – General stores under different sub groups like fastener, paints, electrodes, lamps, pipe fitting, wire ropes etc. are subject to critical scrutiny for standardising the size, reducing the varieties, specification, shades, size etc. This will help in reducing the number of items required to be held under these sub groups and ensuring better availability at lesser investment.

STANDARDISATION OF SPARES: Spares are generally held under part numbers of different equipment, but on a detailed analysis of items like oil, seals bearing, borings houses, washer’s belts etc could be listed under different sizes and numbers and the same are provisioned according to the sizes rather than the part number. This will help in reducing the number of items to be held, cost of the materials and improve availability of items at lesser investment. Every item on receipt in subjected to this analysis and relevant size and specification are note down separately for carrying out these exercise at regular intervals with consulting the user department.

STANDARDISATION OF EQUIPMENT: According to the company, the standardisation of the equipments before procurement is very essential to avoid building of the every model/brand equipments. The specifications of every equipments/machinery as replacement/additions are critically examined with a view to avoid adding any new variety/brand/model of equipments leading to building up of parallel inventory of spares.

STORES MANAGEMENT: CIL is having central stores for receiving and storing of all incoming equipments, spares and stores till these are issued and disposed. These stores are under the control of appropriate level officers reporting to head of the materials department of the project.

Receipt section. Custody / Issue section.

RESPONSIBILITIES OF RECEIPT AND ISSUE SECTIONS:

RECEIPT SECTION: Receipt of dispatch of documents and proper recording of details. Taking delivery of the incoming consignment from the carriers. Ensuring proper receipt of door delivery consignment. Transportation of materials from carriers to receipt section. Preparation of receipt vouchers. Custody of incoming consignments till handed over to custody section. Handling over the accepted material to the custody section. Taking claim action regarding rejected/short received/not received materials with

the carriers and suppliers and underwriters. Lodging and follow up of the claims with carriers, underwriters and suppliers.

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Checking of freight bills. Reconciliation of store in transit. Material coverage of transit insurance for incoming /outgoing consignments. Coverage of fire insurance policy for store, important installation/capital items Maintaining the receipt voucher register/outgoing register.

CUSTODY/ISSUE CELL: Keeping a safe custody of material inside the go downs as well as the open yard. Undertaking periodical preservation action to ensure materials are not allowed to

get damaged / deteriorated in storage. Arranging issue of materials against proper authorization given by the head of the

department from time to time. Accounting of the materials as per the receipt vouchers and entering transactions in

the Kardex card or in the material master records (SAP) promptly. Accounting of the materials returned i.e. partly used, scrap materials etc. Examine frequently the condition of fencing, lighting, locking arrangements of

godowns and main gates, security checks etc and take remedial measure wherever necessary.

In case of POL depots, proper care / safety is to be followed with displaying board of no smoking etc. Fire extinguishers and other safety appliance are to be maintained properly.

For serviceable partly used item are to be accounted in the ledger with NIL value. However user department should return the item with proper return voucher.

When the material reaches the stores the details of the receipts will be entered in LR / RR register showing all relevant particulars like station of booking, destination station, mode of dispatch, purchase order reference, no. of packages, freight payable / paid and amount etc. It will be examined by the store officials for any outwardly visible damages to the packages at the carrier godown. In case of any damages he will ask for open delivery of the consignments. Open delivery from the carrier is taken in association with the concerned technical department for the correct identification of the items along with the concerned purchase order and suppliers bill. In case of any doubt the package would be got re weighed before taking delivery and if ever thing is present as per the requirement the payment is done through credit notes or cash. In case of any short receipts of packages stored officials would ask for shortage certificates from the carrier.

If there are no visible damages, these items will be stored at appropriate places at receipt section where inspection and numbering is done before reaching the final storage places. These packages are opened there and items will be tallied with the copy of bills already received by the receipt section to ascertain correctness of the number of items.

All incoming consignments will be entered in the stores receipt register of the receipt section in serial order of the receipt indicating the complete details of the suppliers, dispatch particular, purchase orders along with the freight particulars.

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A card known as Kardex card is also prepared for each and every item in which number of receipts and number of issues are noted down with transaction dates (after implementing SAP, these details are filled in Material master). Does it provides the exact available of the stock. It also provides the storage place of that particular item which enables store keepers for convenient issues to the user department.

All transaction of receipts and issues are to be done preparing. The receipt vouchers and issue vouchers. The issue vouchers would be department indicating the items, quantities demanded, code numbers, cost central numbers etc duly signed by the authorized officer. The store keeper concerned while issuing would indicates his serial numbers reference of the voucher on all copies along with the quantities issued and the balance after positing of the issue. The same will be recorded in the issue control register. The issue voucher will also be signed by the store in charge, along with concerned storekeeper.

FIRE PREVENTION: As lot of inflammable materials will be stored in the central stores, CIL takes necessary prevention to avoid any fire hazards.

Some of the precautionary actions are:

Stores godown, store yard and storage area around Petrol, Diesel tanks, Lubricants are declared as “NO SMOKING” zone, prominent boards with no smoking painted there upon are displayed at all such places.

Adequate number of and types of fire extinguishers are provided at proper places to combat general fires, oil fires and electrical fires.

Adequate numbers of fire buckets with sand, some water are kept in the stands duly filled to be used in case of any eventuality fire.

Fire alarm bell is mounted on the fire bucket stands to sound fire alarms Drainage arrangement with adequate slope are provided in place of the storage of the

lubricants, plants, varnishes etc.so that any leakage may drain off from the storage area.

Cotton wastes , paints, and other inflammable materials are stored separately. During night times when store is closed it is ensured that the main switch of the store

is switch off to avoid any electrical short circuiting and consequent fire hazards.

COLLECTION OF SCRAP AND USED MATERIALS: The indenting department after using the issue materials would return the corresponding scrap or old spares to the stores for custody and disposal. Such materials will be accounted in separate ledgers and are segment according to the nature of the. material s. And such scrap items will be listed and got surveyed by the survey committee before offering the same for disposal by tender or auction.

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5.6 INVENTORY ANALYSIS:

ANALYSIS OF RAW MATERIAL:

The Phosphoric Acid consumption 2002-2007 is increased to 47.56% and decreased in the year 2007-2008 by 07.07% .The Ammonia consumption from 2002-2007 is increased to 33.64% and the consumption decreased during the year 2007-2008 is 10.86%. The Muriate of potash is introduced in the year 2005-2006 and from that year the consumption is increased gradually.

Inventory Year Value

Raw material 2005-2006 18363.82

Raw material 2006-2007 17954.50

Raw material 2007-2008 63657.36

Raw material 2008-2009 81477.50

Raw material 2009-2010 54443.80

WORK IN PROGRESS:

The inventory of raw material has been increased from the year 2005-2006(18363.82) to the year2008-2009(81477.50). But it decreases in the year 2009-2010(54443.80)

INVENTORY YEAR VALUE

Raw material 2005-06 858.74



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Raw material 2008-09 1518.60

Raw material 2009-10 1707.25

The inventory of Work-in-progress value has been gradually increased from the year 2005-2006(858.74) to the year 2009-2010(1707.25)

FINISHED GOODS:

INVENTORY YEARS VALUES

Finished goods 2005-2006 18224.85

Finished goods 2006-2007 19400.43

Finished goods 2007-2008 18824.12

Finished goods 2008-2009 48774.27

Finished goods 2009-2010 33217.16

The inventory of the Finished goods has been increased from the year 2005-06 (18363) to the year 2008-09 (48774.27). But it decreases in the year 2009-10 (33217.16)

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CHAPTER-VI SUMMARY OF FINDING AND SUGGESTION

6.1 FINDINGS

6.2 SUGGESTIONS

6.3 SUMMARY

6.4 BIBLILOGRAPHY

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6.1 FINDINGS :

Company is right now using only for inventory managements technique suggest

ABC analysis, XYZ analysis FIFO, non moving items.

The company is using ABC analysis for the past 5 years.

EOQ method is followed by the company only on few inventories.

All the inventories are not included in ABC and XYZ analysis.

Large size of inventories is maintained by the company under XYZ and ABC

analysis in order to reduce the ordering cost.

The carrying cost incurred by the company for maintaining the given level of

inventory is increasing every year.

The equipments and spares in general store are also to maintained as an inventory

wish requires huge investments.

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6.2 SUGGESTIONS:

Company should maintain an optimum level of inventory to ensure efficient

and smooth production.

The company is investing huge amount on A class and X category items on

which the company would loosed opportunity cost. Therefore company shall

reduce size of inventory on these categories.

The categories under ABC have to be continuously monitored and review. The

company can maintain only minimum investment in order to maintain

efficiently.

E.O.Q method of inventory managements can be extended to other items of

inventory.

Company should make an effort to reduce carrying cost by maintaining

expensive inventories less in number.

LIFO method can also be used effectively in case if the item is quickly

perceivable & also in case of heavy investment inventories.

The other techniques like V.E.D analysis, P.V.A analysis etc. can also be used

applied by the company to manage the inventories.

The firm should estimate the cost, return and risk factor also in establishing its

inventory policies.

Instead of maintaining huge size of inventory, the company can maintain

safety stock in all the items.

The re-order point has to be calculated by the company in order to avoid

excess inventory and to reduce lead time

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6.3 SUMMARY:

Inventory management as a project has been carried over in CIL for a duration of 6

weeks. This topic is chosen because almost 60% of the working capital is blocked in

inventories for all the Indian companies.

The study period is from 2005-06 to 2009-10. The techniques used by the company in

managing inventory such as ABC analysis, E.O.Q, FIFO etc.have been analyzed thoroughly

& inferences were also presented respectively. There are some drawbacks with the company

in inventory management, the suggestions were given accordingly.

Hopefully the company would consider the suggestion in managing the inventories

effectively in coming years.

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6.4 BIBLIOGRAPHY:

“Fundamentals of financial management” by D. Chandra Bose

“Fundamentals of financial management” by Paresh Shah

“Financial management” by I.M Pandey

Website: www.cil.com

www.wikepedia.org

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http://www.wikepedia.org/

http://www.cil.com/

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