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Report on Summer Training and Inventory Management

1

OBJECTIVES

OF

STUDY

Merit Swiss Asian School Of Management, Ooty 1


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1. OBJECTIVES OF STUDY

Following are the objectives of the study.

1.1. Primary .

My primary objective behind this training is to know about all function of company and

its all-different department in it. As I was assigned the project on inventory

management, so study of each and every minor details related to inventory management

is also my primary objective. This helps me to develop my knowledge regarding

inventory management.

1.2. Secondary .

My secondary objective of the training is to know application of management concept

in practical field. Here, I have tried to relate management concept directly or indirectly.

Besides this I have aimed to know how the company function and how liaison is

maintain internally as well as externally, which type of communications network is

effective and how the record in accounts department and other related department is

maintained.



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2

METHODOLOGY

ADOPTED

FOR

DATA COLLECTION



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2. METHODOLOGY ADOPTED FOR DATA COLLECTION.

To collect the data, below mention methodology are adopted by me:

2.1. Primary Data.

I had collected the primary data in the following ways:

1. To collect the past data I studied and collected the past record, which are within

the company like Balance sheet, Profit and Loss account and other statement. Most

of the data I got from the annual report and plant performance report.

2. I used to liasioning with the financial staff of the company.3. The guide in the organization as well as in the college faculties to collect the data

guided me.

2.2. Secondary Data.

I had collected the Secondary data in the following ways:

1. I collected the theoretical data from the reference books related to my topic of

inventory management.

2. I had collected some of the data from the journals related to the fertilizers

industries.



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3

INTRODUCTION

OF

IFFCO



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3. INTRODUCTION OF IFFCO.

3.1. History of IFFCO.

During mid- sixties the Co-operative sector in India was responsible for distribution of70 percentage of fertilizers consumed in the country. This Sector had adequate

infrastructure to distribute fertilizers but had no production facilities of its own and

hence dependent on public/private Sectors for supplies. To overcome this lacuna and to

bridge the demand supply gap in the country, a new cooperative society was conceived

to specifically cater to the requirements of farmers. It was a unique venture in which

the farmers of the country through their own Co-operative Societies created this new

institution to safeguard their interests. The number of co-operative societies associatedwith IFFCO has risen from 57 in 1967 to more than 36,000 now.

Indian Farmers Fertilizer Co-operative Limited (IFFCO) was registered on November

3, 1967 as a Multi-unit Co-operative Society. On the enactment of the Multistate

Cooperative Societies act 1984 & 2002, the Society is deemed to be registered as a

Multistate Cooperative Society. The Society is primarily engaged in production and

distribution of fertilizers. The byelaws of the Society provide a broad framework for

the activities of IFFCO as a Cooperative Society.

IFFCO commissioned ammonia - urea complex at Kalol and the NPK/DAP plant at

Kandla both in the state of Gujarat in 1975. Ammonia - urea complex was set up at

Phulpur in the state of Uttar Pradesh in 1981. The ammonia - urea unit at Aonla was

commissioned in 1988. The annual installed capacity of all the plants was 1.62 million

tonne of Urea and NPK/DAP equivalent to 309 thousand tonne of phosphates.

In 1993, IFFCO had drawn up major expansion programs of all the four plants under

overall aegis of IFFCO VISION 2000. The expansion projects at Aonla, Kalol and

Phulpur have been completed on schedule. The latest feather in the cap of IFFCO was

completion of Kandla Phase-II on 5th August 1999, which has heralded realizations of

all the objectives set forth under VISION - 2000. As per the tradition of IFFCO the

project was completed more than two months ahead of schedule. As a result of these

expansion projects IFFCO's annual capacity has been increased to 3.69 million tonne of

Urea and NPK/DAP equivalent to 825 thousand tonne of phosphates. With the

successful realization of all the objectives of Vision 2000, IFFCO has emerged as a

pioneer in international cooperative movement. A new path has been chalked out to



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realize newer dreams and greater heights through Vision 2010, which is presently under

implementation.

The distribution of IFFCO's fertilizers is undertaken through over 36,000 co-operative

societies. The entire activities of Distribution, Sales and Promotion are coordinated by

Marketing Central Office (MKCO) at New Delhi assisted by the Marketing offices in

the field. In addition, essential agro-inputs for crop production are made available to the

farmers through a chain of 167 Farmers Service Centre (FSC). IFFCO obsessively

nurtures its relations with farmers and undertakes a large number of agricultural

extension activities for their benefit every year.

At IFFCO, the thirst forever improving the services to farmers and member co-

operatives is insatiable, commitment to quality is insurmountable and harnessing of

mother earths' bounty to drive hunger away from India in an ecologically sustainable

manner is the prime mission. All that IFFCO cherishes in exchange is an everlasting

smile on the face of Indian Farmer who forms the moving spirit behind this mission.

IFFCO, to day, is a leading player in India's fertilizers industry and is making

substantial contribution to the efforts of Indian Government to increase food grain

production in the country.

3.2.Investment of IFFCO in other Firms .

IFFCO has started the joint venture in all below mention firms in India as well as in

other country and all the detail regard all the joint venture of IFFCO:

Industries Chimiques du Senegal (ICS).

Industries Chimiques du Senegal (ICS) is producing Phosphoric Acid at Darou

(Senegal) which IFFCO needs in producing the NPK/DAP. Its production capacity is

1.5 million TPA of Phosphoric acids. Its paid up capital as on 31st March, 2000 was Rs

6.5 billion out of which IFFCO's share was Rs 927.4 million i.e.14.32% of paid up

capital.

Indian consortium, consisting of Government of India, IFFCO & SPIC, entered into a

long-term agreement with Industries Chimiques du Senegal (ICS) in March 1980. The

agreement was for purchase of Phosphoric Acid by setting up a plant at Darou,

Senegal. The plant with a capacity of 313000 TPA phosphoric acid started commercial

production in February 1984. ICS had been consistently supplying phosphoric acid to



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Kandla unit since commencement of production.

Doubling of the capacity of the existing plant for production of an additional 313000

TPA was taken up at a total investment of US$ 250 million. IFFCO has committed to

purchase the entire quantity of the acid that would be produced by the ICS expansion

project.

Oman India Fertilizer Project

IFFCO and KRIBHCO have entered into a Joint Venture Agreement with Oman Oil

Company (OOC), Oman for setting up of a Urea - Ammonia Fertilizer Plant at a

Capital Cost of US$ 969 million, with a Debt: Equity Ratio of 2:1. The Fertilizer Plant

would be located on the east coast of Oman, and have a capacity of producing 16.52

lakh MT of urea per annum and surplus Ammonia of 2.5 lakh MT per annum.

Raw Material (Natural Gas) will be supplied by Omani Government under a long Term

Gas Supply Agreement. Government of India will purchase entire Urea for 15 years

under a Urea Off take Agreement. Surplus Ammonia will be purchased by IFFCO for

10 years under Ammonia Off take Agreement. The main project Agreements, Urea Off

take (UOTA), Ammonia Off take (AOTA) and Gas supply (GSA) were signed on 29th

May 2002. Other Project Agreements have been finalized amongst the Sponsors and

the Arranging Banks. The Arranging Banks, a consortium of International Banks,

appointed for arranging Debt finalized the financing arrangements for the Project. All

the contracts leading to the Financial Closure for the Project have been executed. The

zero date for the project was 15 August 2002. The construction of the Project will be

completed in 35 months.

IFFCO and National Commodity & Derivatives Exchange Limited

IFFCO has picked up 12% stake in Commodity Exchange NCDEX recently. IFFCO's

endeavor had always been to ensure that the farmers receive best quality fertilizer input

at economical price. The present association facilitates enhancement in the scope of

services for farmers wherein the farmers can realize higher prices, minimize risk and

strive for reliable market conditions. With this new relationship, farmers &

cooperatives will have a new platform floated by reputed national institutions to herald

a new era in Indian agriculture.

The on-line multi commodity exchange promoted by ICICI Bank Limited (ICICI

Bank), Life Insurance Corporation of India (LIC), National Bank for Agriculture and



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Rural Development (NABARD) and National Stock Exchange of India Limited (NSE).

Punjab National Bank (PNB) and CRISIL Limited (formerly the Credit Rating

Information Services of India Limited) by subscribing to the equity shares have joined

the initial promoters as shareholders of the Exchange.

NCDEX is a public limited company incorporated on April 23, 2003 under the

Companies Act, 1956. It obtained its Certificate for Commencement of Business on

May 9, 2003. It has commenced its operations on December 15, 2003.

NCDEX has an independent Board of Directors and professionals not having any

vested interest in commodity markets. It is committed to provide a world-class

commodity exchange platform for market participants to trade in a wide spectrum of

commodity derivatives driven by best global practices, professionalism and

transparency.

NCDEX currently facilitates trading of fifteen commodities - Gold, Silver, Soy Bean,

Refined Soy Bean Oil, Rapeseed-Mustard Seed, Expeller Rapeseed-Mustard Seed Oil,

RBD Palmolein, Crude Palm Oil, and Cotton - medium and long staple varieties,

Pepper, Rubber, Jute Sacking, Chana and Guar Seeds. At subsequent phases trading in

more commodities would be facilitated.

IFFCO - Tokio General Insurance Company Limited (ITGI)

IFFCO had done the amalgamation with the Tokio General Insurance Company

Limited and started serving the insurance sector in India as well as in other countries. It

involve in General Insurance Activity, its Corporate Office is situated at New Delhi.

The total paid up capital of Tokio General Insurance Company Limited was Rs 1

billion as on 31st March 2001. Out of which IFFCO's share was Rs 510 million i.e. 51%

of its paid up capital.

Godavari Fertilizers & Chemicals Limited (GFCL)

Godavari Fertilizers & Chemicals Limited (GFCL) is situated at Kakinada in Andhra

Pradesh. It is producing NPK/DAP fertilisers; its production capacity in P2O5 terms is

1.5 million TPA. The paid up capital of Godavari Fertilizers & Chemicals Limited

(GFCL) was Rs 320 million as on 31st March 2000. Out of which IFFCO's share was

Rs 79.7 million-i.e.24.9% of its paid up capital.



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Indian Potash Limited (IPL)

Indian Potash Limited (IPL) mainly involve in activities like supply of imported potash

as well as supply of imported fertilizers. The paid up capital of Indian Potash Limited

(IPL) was Rs 95 million as on 31st March 2000. Out of which IFFCO's share was Rs

32.4 million i.e. 34% of its paid up capital.

3.3.Vision and mission of IFFCO .

Vision

Retain dominant position in Indian fertilizer sector, improving its position further by

achieving sustainable and viable growth through excellence in all its activities and

gearing itself to fulfill the diverse expectations of stockholders, customers, employees

and society.

Vision 2010

Attaining an annual turnover of Rs. 15000 crore by 2010.

Installation of Ammonia and Urea plants including acquisition of fertilizer

units.

Backward integration to meet feedstock requirements such as Phosphoric acid

Generation of Power.

Exploration/distribution of hydrocarbons

Production and marketing of micronutrients, seeds, bio-fertilizers, pesticide etc.

Value addition to agricultural-products and marketing

Banking and financial services.

Information technology and IT enabled services

Mission

IFFCOs mission spans the globe because our commitment knows no bounds.

To acquire, assimilate, and adopt reliable, efficient and cost effective

techniques.

Sourcing raw materials for production of the phosphate fertilizers at the

economic cost by entering into joint ventures outside India.

Commitment to social responsibilities for the sustainable development.



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Commitment to health, safety, environment and forestry development to enrich

the quality of community life.

Building a value driven organization with and improved and responsive

customer focus. A true commitment to transparency, accountability and integrity inprinciple and practice.

A true cooperative society committed for fostering cooperative movement in

the country.

Emerging as a dynamic organization, focusing on strategic strengths, seizing

opportunities for generating and building upon past success, enhancing earning to

maximize the shareholders value.

Future plans

It is the plan for investing one billion.

A state of the art phosphoric acid plant in Egypt with an installed capacity of 5

lakh tones P2O5 tones per annum. The project would be executed through a Joint-

Venture Company with the equity association of El Nasr Mining Co. (ENMC) of

Egypt as a JV partner. IFFCO would hold the majority equity with over 75% along

with management control while the Egyptian counter part ENMC would pitch in

with balance equity in the JV. ENMC will supply Rock Phosphate for the project

and IFFCO will buy the entire phosphoric acid. This will lend stability to the

international prices of phosphoric acid.

A second Phosphoric Acid Plant in Kutch district, Gujarat with a capacity of

five lakh tones P2O5 per annum will be set up. This Plant will be wholly owned by

IFFCO.

The two Phosphoric Acid plants are being executed as part of IFFCOs strategy

to achieve backward integration vis--vis vital ingredients for its DAP production

capacities.

A DAP / NPK Plant, with a capacity of 18 lakh tonnes per annum will be set up

in Kandla. The new facility with the latest know how will also be fully owned by

IFFCO.

IFFCO is in advance stage of negotiations with a Government entity in Egypt to

undertake rock phosphate mining. This venture will involve production of 20 lakh



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tonnes of rock phosphate per annum to feed the phosphoric Acid Plant facility in

India.

The two phosphoric acid units, one DAP/NPK facility and rock phosphate

mining will involve a total investment of US $ 800 million dollars. And, US $ 200 million is being invested in IFFCOs energy saving and

expansion scheme. This will, eventually, result in subsidy savings worth Rs.800

crore per annum as the production costs of Urea would be pruned substantially.

IFFCO is targeting a debt equity ratio of 2:1 for the US $ 1 billion business

plan. Negotiations have commenced with both domestic, foreign banks and

financial institutions to tie-up the debt funds for the green field projects. About US

$ 670 million will be raised in debt and the rest US $ 330 million would be mopped

up towards equity.

Financial closure for all its new projects would be completed during this fiscal.

Commercial production will commence in the first quarter of 2009.

3.4.Approach and commitments of IFFCO .

Approach

To achieve our mission, IFFCO as a cooperative society, undertakes several activities

covering a broad spectrum of areas to promote welfare of member cooperatives and

farmers. The activities envisage to be covered are exhaustively defined in IFFCOs

Byelaws.

Commitment

Our thirst for ever improving the services to farmers and member co-operatives

is insatiable, commitment to quality is insurmountable and harnessing of mother

earths' bounty to drive hunger away from India in an ecologically sustainable

manner is the prime mission

All that IFFCO cherishes in exchange is an everlasting smile on the face of

Indian Farmer who forms the moving spirit behind this mission.

3.5.Achievements of IFFCO .



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1 Safety Awards from the National Safety Council U.S.A.

Perfect record Award for operating 7486565 employees hours without death

or case involving days away from work 13th November 1995 to 31st December.

1998. Industrial leader award exemplary safety achievement attained in the

chemical and allied products industry for the year 1998.

Prefect record award for establishing a new best record for standard

industrial classification code: 2874 agricultural chemical for operating 9930227

employee hours without a death on case involving days away from work from 30 th

November 1995 to 31st December 1999.

Industry leader award for exemplary safety achievement attained in thechemical and allied products industry for the year 1996.

2 Safety Awards from the Government of India.

Special commendation certificate from meritorious performance in

industrial safety during the year 1994 for achieving longest accident free period.

3 Safety Awards from Gujarat Safety Council.

Certificate of honour in-group B, category I for working three million men

hour and above without loss time accident for the year 1998.

Runner up and certificate of honour in-group B category I for lowest

disability injury index for the year 1998.

Certificate of Honourto Kandla and Kalol units for year 2003 from Gujarat

Safety Council

4 Performance Awards from Fertilizer Association of India (FIA).

Best overall performance award 1998-99, award for excellence in safety for

the year 1999-2000.

Best overall performance runners up award 2003-04, from fertiliser

association of India.

5 Award from Hewitt Associates.



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Best Managed Workforce Award for year 2004 from

Hewitt Associates.

3.6.Market share of IFFCO .

MARKET CAPTURED BY IFFCO

IFFCO

50%

KRIBHCO

24%

GNFC

21%

OTHERS

5%

Merit Swiss Asian School Of Management, Ooty

S.R. NO. COMPETITORS MARKET CAPTURED IN%1 IFFCO 502 KRIBHCO 243 GNFC 214 OTHERS 05

Total 100

14


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3.7. Financial Highlight of the IFFCO.

Particular 2004-05 2003-04 2002-03 2001-02 2000-01Operating Results

Sales 409760 375339 353563 310764 304849

Subsidy from Govt. 312643 216618 255551 198644 210341

Turnover 722403 591957 609114 509408 515190

Other Revenue 26819 27236 24566 23998 18235

Total Income 749222 619193 633680 533406 533425

Cost of Sales 681969 545409 525719 463435 469590Profit before Dep. Int. & I. Tax(PBDIT) 67253 73784 107961 69971 63835

Interest 3402 4112 11200 15939 24749

Depreciation 16759 18402 16052 15917 15686

Profit before Tax (PBT) 47092 51270 80709 39115 23400

Tax 15128 18303 24988 6277 292

Profit after Tax (PAT) 31964 32967 55721 30838 23108

Dividend 8392 8016 8633 8382 5013

Cooperatives Education Fund 298 252 556 307 217

Donation 25 115 125 155 1245

Retained Profit 23249 24584 46407 21994 16633

Sources And Application of Fund

Sources of Funds

Equity Share Capital 42131 46190 44449 41984 41857

Reserves & Surplus 287984 264768 282902 236593 214680

Net Worth 330115 310958 327351 278577 256537

Borrowing - Long Term 32131 67520Short Term 53310 89000 98452 80814 88876

Deferred Trade Tax 11399 10393 8879 6865 4979

Deferred Tax Liability 42125 42543

Funds Employed 436949 452894 434682 398387 417912

Application of Funds

Net Fixed Asset (Incl. Capital Work-in-Progress) 216062 217228 224651 236224 245277

Investments 69073 69508 44222 26622 26622

Current Assets 260398 256402 267441 214407 222159

Current Liabilities 110484 90244 101632 78866 76146

Net Current Assets 149914 166158 165809 135541 146013

Miscellaneous Expenditure (To theExtent not written off) 1900



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Net Assets Employed 436949 452894 434682 398387 417912

3.8. Performance Highlight of IFFCO in 2004-05.

Highest Production of Fertilizers61.54 lakh tones

Previous Best 60.47 lakh tonne in 2002-03)

Highest Production of Urea37.14 lakh tonne

(Previous Best 36.85 lakh tonne in 2002-03)

Highest Production of NPK/DAP24.40 lakh tonne

(Previous Best 23.62 lakh tonne in 2002-03)

Highest Sales of Fertilizers64.64 lakh tonne

(Previous best 60.54 lakh tonne in 2003-04)

Sales of Urea36.70 lakh tonne

(Highest Sales of 37.02 lakh tonne in 2003-04)

Highest Sales of NPK/DAP27.94 lakh tonne

(Previous best 23.52 lakh tonne in 2003-04)

Profit Before TaxRs.471.00 crore

(Best PBT Rs.807.09 crore in 2002-03)

Profit After TaxRs.320.00 crore

(Best PAT Rs.557.21 crore in 2002-03)

Highest TurnoverRs.7224.00 crore

(Previous best Rs.6091.14 crore in 2002-03)

Plant Productivity1511 MT per head

(Previous best 1367 MT in 2003-04)

Marketing Productivity3848 MT per head

(Previous best 3345 MT in 2003-04)

Lowest Product Inventory4.26 lakh MT

(Previous lowest 5.09 lakh MT in 2003-04)

Lowest Composite EnergyConsumption

6.138 Gcal/ MT

(Previous lowest 6.14 Gcal/ MT in 2003-04)



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3.9.History of IFFCO Kandla Unit .

IFFCOs NPK plant is located on the waterfront adjacent to Kandla Port Trust Oil

Jetty. The plant was built at a cost of about Rs. 30 crores with two streams (called train

A and train B) and with the licensed capacity of 127000 tonnes of P2O5. This plant was

designed by the M/s Door Oliver-Inc., to produced three grade of NPK based on DAP,

the plant was commissioned on 26th November, 1974 and its commercial production

started on 1st January, 1975.

With increase in demand for complex fertilizers, the capacity of NPK has been doubled

at a cost of about Rs. 28.6 crores. Two more streams (train C and train D) had been

added with the increased licensed capacity from 127000 MT P2O5 to 260000 MT P2O5

per annum. The new two streams are called Kandla Phase 2 was completed one month

ahead of the projected schedule. This is a rare phenomenon not only in India but also in

entire South East Asian region. Kandla Phase 2 commissioned on 4 th June 1981 with

the production record for IFFCO. The production of Kandla Phase 2 was started from

6th September 1981.

IFFCO went for expansion of their unit at Kandla in 1996-97. Kandla phase-II

NPK/DAP project conceptualized the setting up of two additional streams (train E and

train F) for manufacturing of the same grades of NPK/DAP fertilizers with an annual

production capacity of 2,10,700 MTPA thus increasing the total capacity from 3,09,000

MTPA of P2O5 to 5,19,700 MTPA of P2O5. The actual cost of the project was Rs.

205.30 crores against a budgeted cost of Rs. 212.20 crores.

The total annual production of the Kandla unit was 127000 MTPA as on 26th

November, 1974 with two streams (train A and train B), which was increased by

182000 MTPA as on 6th September, 1981 by starting two more stream (train C and train

D), which was further increase to 210700 MTPA as on 1999 by introducing two more

streams (train E and train F). So currently the total production capacity of the both plant



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at Kandla unit is 519700 MTPA. Currently all six streams (train A, B, C, D, E and F) is

working in its full-fledged capacity and giving its optimum output.

In 1974 when the Kandla Unit was started IFFCO was importing its raw material with

help of Kandla Port Trust Oil Jetty and currently Kandla unit has its own Liquid cargo

Jetty.

3.10. Achievements of IFFCO Kandla Unit.

Nineteen Safety Awards from National Safety Council - U.S.A.

Fourteen Safety Awards from the National Safety Council, Bombay,

government of India.

Twenty-six Safety Awards from Gujarat Safety Council, Baroda.

Six Fertilizers Association of India (FAI) Awards for the best overall

production performance during the years 1981, 1982, 1996-97, 1997-98, 1998-99 &

2002-03.

One National Productivity Council (NPC) Best Productivity Award for the year

1997-98 in the category of Fertilizers Industry - Phosphatic Sector presented in

August'00.

One Safety award from FAI for Excellence in Safety for 1999-2000.

One Safety award from Directorate General Factory Advice Service & Labour

Institutes, Ministry of Labor, Government of India Runner, National Safety award

1999.

One Labour, Government of India Runner, National Safety award - 1999"



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3.12. Overview of Departments.

There are following department in the Kandla unit of IFFCO:

3.12.1. Finance and Accounting.

Finance and accounting department is divided into three sections at IFFCO Kandla unit

which are mention below:

Raw materials and Excise section.

Payroll section.

Store accounting section.

This is one department with whom maximum coordination is required. It is responsible

for allotment of working capital. It is responsible for all stores accounting. The

accounts department arranges clearance of all inward and outward invoices. It arranges

verification of stocks. It supplies material cost information and as well as cost of

operation of stores service. Periodically it revises prices if stores held in stock. Here in

Kandla Finance and Accounts department works jointly. In short, a day-to-day working

relationship must be evolved between these departments.

Following are the different types of function of Finance and accounting department of

IFFCO Kandla.

Budget compilation, monitoring & review.

Financial concurrence.

Cash & bank accounting.

Purchase & stores accounting.

Payroll.



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Matters related to custom, sales tax, and income tax etc.

Maintaining accounting registers.

Raw material accounting.

Management reporting etc.

3.12.2 Personal and Administration.

Personal and administration department look after the below mention functions of the

IFFCO Kandla Unit.

Staff transportation, buses/cars, shift schedules, payment of

bills, insurance related jobs.

Processing application, inspection of properties etc.

Placing indent for stationary, furniture/office equipment.

Payment of Ground rent of the lands of IFFCO & records.

Taking residential accommodation for CISF from Kandla

Port Trust.

Allotment of quarters in Township and maintaining of

related records.

Allotment of quarters and jobs related to Kendriya

vidyalaya.

Allotment of shops in shopping complex and its

correspondence.

Arrangement of all functions at plant level.

Activities related to Industrial Relation maintenance of

record etc.

Booking of Air/Rail tickets.

Hiring of cars and other requirements for official gatherings

VIPs.

Liaison with Govt. and local authorities.

Maintenance of Buildings/Reception.

Various other jobs assigned & above normal working.

3.12.3 Systems.



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The Computerization activities at Kandla started in the year 1986 with the installation

of at personal computer for production reporting. The system group was established in

1987 personnel computer were installed in each section in January 1990. Kandla unit

have a super computer system involving in major organizational activities like payroll,

Accounting, Inventory, and Procurement etc. are carried out through in-house

development of Software.

With a view to providing better technology, higher efficiency and productivity,

KANDLA in establishing a Fiber Optic Based Network to connect all the PC to central

Sun server and Window NT server.

Networking Infrastructure

Networks come in all shapes and sizes. Network administrators often classify

networks according to geographical size. Networks of similar sizes have many

similar characteristics, the most common are LAN and WAN.

At IFFCO following networks are used:

LAN (Local Area Network):

A Local area network is a group of computers and network communication devices

interconnected within a geographically limited area, such as building or campus. A

LAN tends so use only one type of transmission medium- cabling.

LANs are characterized by the following:

They transfer data at high speed.

They exist in a limited geographical area.

Their technology is generally less expensive.

Some of the Features of the LAN at IFFCO-

At IFFCO, there is plant wide network of LAN. Which connect 20

different buildings all over the plant the cabling used for this network is majority

Fiber optic and UPT CAT6. This clearly indicates the high-speed data transfer



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rates. The giga speed lucent fiber UTP CAT6 structured cabling has data

transfer rate as high as 1000 MBPS.

The network has an installed capacity of connecting 500 PC over

LAN and presently having 250 PCs. Provision of connecting 500 PC nodes over LAN (it currently has 250

PCs).

It used 9000 meters of optic fiber cabling and 30000 meters of UTP

CAT6 cabling.

Network uses the latest central and departmental switch based

technology. The switch-based technology is used for better response in todays

graphical software and application/environment. It has distribution Star Topology.

Twenty building have UTP cabling with departmental/work group

switches.

Administration building (Central location) has dual central switches in

a clustering fail over mode.

The system department is the central location for all network activity.

WAN (Wide Area Network):A wide area network interconnects LANs. A WAN may be located entirely within a

state or country, or it may be interconnected around the world.

WANs can be further classified into two categories:

Enterprise WANs and

Global WANs.

An enterprise WAN is a WAN that connects the widely separated computer resources

of a single organization. An organization with computer operations at several distantsites can employ an enterprise WAN to interconnect the sites.

A global WAN interconnects network of several corporations or organizations. An

example of global WAN is the Internet.

E-mail and Internet Services

Data communication

Video conferencing

Connectivity between plant and township



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Software:

A.Application software: Oracle RDBMS is mainly used at IFFCO. It is setup on the

three environments for oracle database applications.

1. Client-server environment:

Oracle 8.1 version 8.a.7 database engine on Solaris 7 UNIX Operating

System.

Oracle 3 tier architecture environment: Oracle application server version

9i AS on window NT 4.0 operating systems.

Web based environment.

2. E-mail software:

Lotus note domino R5 on windows NT 4.0 Operating System

PCs have Lotus Notes Client R 4.5/5 on Windows 98

3. Office automation:

Lotus smart suite on all 250 PCs

PCs used by more than 450 PC users in exclusive/shared Environment

Word pro, 123, Freelance Graphics etc.

B. Hindi software: Leap from C-DAC. Used for Hindi word processing and e-mail

Purpose.C. AutoCAD Software:

AutoCAD R2002i on windows NT 4.0 work station operating system

Extensively used by draftsmen

Automation of drawing office related work

D. Application development: standardized application developed by other units and

implemented at IFFCO Kandla. Applications developed in-house at IFFCO Kandla.

There is also other software developed for Department for further facilitations:

1. Transportation System:

2. Materials management system:

3. Financial Accounting system:

4. Human resources management system (HRMS) etc.

IFFCO is also establishing a corporate level wide are network linked trough 64kbps

satellite at all unit, H.O. and Zonal office IFFCO Kandla will be benefited by this to

facilitate faster communication among the unit ,H.O., Marketing office.



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3.12.4 Stores.

Responsibilities of stores:

Receiving of all incoming goods

Inspection of all receipts

Identification of all material stored

Storage and preservation

Material handling

Issue and dispatch

Maintenance of stock records

Inventory control

Stock taking

3.12.5 Purchase department.

Responsibility for purchase function is on the in charge of Materials Department. The

demand from various departments should give from issuing enquiries. The main

purchase functions are as below:

A registration of vendors/contractors.

Requisition to purchase.

Record and numbering or requisitioning.

Enquiries/Invitation to bid.

Time allowed for submission of bid.

Validity of bid.

Opening of bids.

Late, invalid and unsolicited bids and EMD.

Quotation Comparisons Statement (QCS)

Tender Committee.

Selection of successful Bidder.

Signal tender.

Negotiation.

Rate Contracts.

Purchase Order.

Guarantees.



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Amendment to purchase order.

Extension of Delivery/ Completion time.

Report Order.

3.12.6 Transportation.

Logistics or transportation department of any industry is a Bridge between

Productions and Marketing without which neither marketing can survive nor

production units. Therefore, transportation department is a lifeline not only to

industries but also to any country throughout the world.

There are two main functions of the transportation department:

1. Operations2. Claims

1. Operations function :

a. Road Dispatch:

Road dispatches are carried out only in Gujarat and Rajasthan. This is due to the fact

that many of the warehouses in these states are not situated closer to the rake points,

which leads to increase in secondary movement and thus in costs. Damages and

material handling costs are reduced in road dispatches. For road dispatches, annual

contracts are given to transporters for which advertisement is placed in the

newspaper, inviting the transporters to submit their bids. Different contractors are

assigned for different locations. Around 25 trucks per day are dispatched from the

plant with each truck carrying 10 metric tones. Material waste is about 0.03%. The

cost in road dispatches is high as they charge a fixed cost based on the number of

kilometers traveled. It is cheaper to use this means of transportation up to 300

Kilometers. Only 4% of the dispatches are by roads.

b. Rail Dispatches:

Kandla comes under western railway. There are identified rake points all over the

country where the fertilizer are sent as per the dispatch instructions received from the

head office. There are warehouses situated near the rake points where the fertilizers

are off loaded. From the warehouses, the fertilizer is then transported to near by

villages through secondary movement. Since railways are well connected to all the



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areas in India, transportation is cheaper and also due to fact that railways adopt a

telescopic freight structure. More that 200 centers are covered in rail dispatches.

Railway is bound to give 3 rakes per day to IFFCO on the On your wagon scheme.

Each rake has a capacity to carry more than 2000 metric tones. Railways provide for

as a contract between the note, which acts as contracts between the firm and the

railways.

2. Claims :

As a network of railways IFFCO contractors and courier services is jointly

coordinating the activities. There are conflicts about financial aspects arising.

Consider the case if the wagons with a definite number of bags are sent to the

destination but the number of bags received is less than sent, then the claims section

in the transportation department will come into play. There are two type of claims

i.e. Refund and compensation. In refund money collected wrongly by Railway is

demanded. However in compensation, extents of losses/damages are claimed.

The two main types of claims are:

1. Tenable Claims:

If today consignee doubts that the material or delivery arriving is not in proper

condition by seeing wagons condition, broken seal or any other reason, then he will

call the railway authorities and then in their presence they will open the wagons. If

any loss in the quantity is there the railways are obliged to pay for the loss. This type

of delivery taken is called Assessment or Open delivery.

Sometimes wagons from the full rake on journey may be lost or any other reason for

not reaching to the destination. Under this situation it is job of the transportation

department to send railway the notice that the particular wagon has not arrived at the

destination and ask them to make inquiry in the concerned matter. After sending the

notice, if still not outcome comes then the transportation department will lay down

claim for missing wagons to the railways. This type of claims should take place

within six months from the sending of consignment.

In material received is in damaged condition, and then the department can lay claim

for damage to railway authorities based on negligence on railways part. But such

kind of claim can only be made if open delivery has been taken and abnormal period

of reaching the wagon at destination.

2. Untenable claim:



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So many times during the distributing purpose, there are losses, which cannot be

claimed. For e.g. fertilizer being sent to destination in wagons in seals intact

condition and still the bags delivered at destination is less in numbers. This type of

shortages cannot be claimed. Under this situation, claims department will prepare

untenable claim report and sent it to committee. The committee will review the

claims. This committee comprises representatives from bagging/ transportation/

finance. After review, if it found satisfactory the committee will drop the claims.

3.12.7 Time office.

Following are the functions of the time office in IFFCO Kandla.

Maintaining the attendance records of all employees and marking

attendance, leave record etc. of workers.

Reporting to the accounts department the monthly staff in respect of

employees.

Compiling the statistical report regarding employment and attendance,

etc. of workers for submission to various labour enactments and Head office.

Issue attendance cards to the employees

Maintaining all types of leave records of employees as per the

requirements of Gujarat Government.

Factories Rules/ standing orders /payments of wages etc.

Maintaining records of overtime

They also maintenance Temporary casual labour attendance records.

Maintaining the attendance records of all employees and marking

attendance, absence, leave etc. of workers.

3.12.8 Research and development.

R & D Laboratory, at IFFCO Kandla, has taken up the work for development of new

fertilizers like High Analysis Polyphosphate based liquid fertilizer, chloride free NPK,

incorporation of Micronutrients in solid and liquid fertilizers. Cheated Micronutrients,

colouring of NPK Fertilizers, alternatives of silica sand filler etc, and a brief write up of

the projects is given below:



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High analysis Polyphosphate based liquid fertilizers

Liquid fertilizers have become an important segment of the fertilizer industry in the

developed as well as in developing countries due to their various advantages like: less

pollution, good compatibility & versatility, carrier of micronutrients, pesticides &

herbicides, along with uniform application of fertilizers. Polyphosphate based liquid

fertilizers are still more useful as these type for fertilizers are slow release fertilizers.

A process for producing liquid fertilizer was developed in R&D Laboratory, at

IFFCO Kandla. The process involves the use of merchant grade phosphoric acid (52-

54 % P2O5), Urea and Ammonia. Merchant grade phosphoric acid and urea react to

form Urea phosphate mother slurry. This slurry, on centrifugation, yields Urea

phosphate & Urea phosphate mother liquor. Urea phosphate on pyrolysis produces

Urea ammonium polyphosphate. The Urea-phosphate mother liquor is purified with

ammonia to separate the metallic impurities. The purified mother liquor and

pyrolysed urea phosphate were mixed to get liquid fertilizer. Final adjustment of

grade is done with water and Ammonia.

About 10 MT of liquid fertilizer NP 16:32 produced in our laboratory and sent to

various agricultural institutions and in house facilities for feeler trails. The results

received from various feeler trails indicate favorable supremacy of liquid fertilizers.

A proposal for setting up of a 10 MT/day capacity pilot plant for liquid fertilizer is

under study to meet the increase demand for this fertilizer.

High analysis Chloride Free NPK

Potassium is considered to be one of the major plant nutrients, which influence crop

yields & quality. Major sources of potassium areas: Marinate of Potash (MOP) &

Sulphate of Potash (SOP) or Potassium Sulphate. Generally potassium chloride

(MOP) is used in agriculture due to its less cost as compared to potassium sulphate.

Use of potassium sulphate is restricted due to its high cost and poor availability to

chloride sensitive crops like FCV, tobacco, citrus fruits, potato etc. A process has

been developed to produce chloride free NPK using MOP.

Continuous use of chloride containing fertilizer increases the salinity and salt index

of the soil and ultimately the crop yield and quality.

The process for producing chloride free NPK uses the same raw materials like

phos.acid, ammonia, and potash as are being used in our existing NPK plant. In this

process, potash is admixed in phos.acid and ammonia. The ammoniated slurry is

cooled, centrifuged, granulated and dried. The centrifuged cake contains potassium in



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chloride free form. The mother liquor is rich in chloride. Mother liquor is dried and

sold as another fertilizer.

About 5 MT of this fertilizer was manufactured and sent for agronomic studies.

Results of agronomical studies are quite encouraging.

Incorporation of Micronutrients

In solid fertilizers: Studies were carried out for incorporating micronutrients like

zinc, copper, iron, manganese boron & molybdenum in NPK fertilizers, zinc, copper,

iron & manganese when incorporated in solid fertilizers (NPK) were not available in

water-soluble form while boron and molybdenum were available in water soluble

form after incorporation. It is observed that boron & molybdenum can be

incorporated in NPK fertilizers.

In liquid fertilizers: Studies were also carried for the incorporation of micronutrients

in liquid fertilizers. The results shows that the maximum amount of micronutrients

which can be incorporated in liquid fertilizer of grade NP 16:32 is as under:

Zinc: 2%, Iron: 0.4%, Boron: 0.9%, and Molybdenum: 0.3 %. Manganese could not

be incorporated as it gets precipitated.

Zinc Chelate

A process was developed for preparing zinc chelate containing 12 % zinc in liquid

form. Further the zinc chelate does not contain any sodium ions but contains

ammoniac nitrogen as micronutrients.

Colouring of NPK/DAP fertilizers

We are producing NPK fertilizer using phos.acid as one of the raw materials.

Phos.acid is imported from various countries. The quality of phos.acid affects the

quality of the product with respect to colour. To give an identity and marketability of

IFFCO NPK fertilizers and to impart various colouring materials, this should be

compatible for W.R. to storage and agronomic suitability. Work is in process for

incorporating this on a commercial scale.

Trials have also been conducted with products from various forms for economic &

agronomic solubility for use on a commercial scale.

Study regarding use of different filler materials in place of Silica Sand:

IFFCO KANDLA is using silica sand as filler material to adjust the grades as per

Fertilizer Control Order Specifications. Work was undertaken to study the feasibility of

using various filler materials like Betonies, Phosphogypsum, Single Super phosphate or

Sulphuric acid instead of silica sand. A Trial was also carried out in the running plants



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using Bentonite partially replacing the filler feed. The positive and negative points of

each were noted and further study is being done.

3.12.9 Production.

IFFCO Kandla plant is located on the western bank of Kandla creek adjacent to Kandla

Port Trust oil Jetties. The plants produce NPK/ DAP complex phosphatic fertilizers of

various grades, namely NPK grades 10:26:26, 12:32:16 & DAP 18:46:00 in terms of N:

P2O5: K2O.

There are two NPK/DAP plants as I mention above in which there are totally six

process streams. Plants are named as:

1. Plant-1 (NPK 1)

2. Plant-2 (NPK 2)

The various type of Vessels, Equipments, Machineries, with Mechanical, Electrical

devices are used in the manufacturing of fertilizer like NPK- 10:26:26, NPK -

12:32:18, and DAP - 18:46:00.

The raw materials are passed and processed through Pre-neutralizers, Granulators,

Rotary Driers, Bucket elevators, Conveyors, Vibrating Screens, Pulverizes etc. and is

produced final product at the end.

The safety devices like plant trip in case of over load. Auto shut off valve,

interlocking arrangement in case of Mal-function or equipment failure during the

process. The various safety and handling instruments are provided and kept

efficiently working. It can also be remotely operated from the control room.

A number of cyclones are provided to collect and recover the dust generated at

various points, thereby keeping the clean and polluting free environment. Dust

escaping from the cyclone along with fumes from pre-neutralizer and granulator are

scrubbed in scrubbers and diluted with phosphoric Acid. The effluent from the

scrubber is consumed in pre-neutralizer.

The process is unique in the sense that no liquid effluent is generated in the NPK

Plant. It is a total recycle process.

Nitrogen, Phosphorus and Potassium are primary nutrients for living plants. Here in

the chemical fertilizer so produced, Phosphoric Acid is the source for Phosphorous,

while Ammonia and Urea, which are the sources of nitrogen, muriate of potash is the

source of potassium and filler is added, to balance the fertilizer composition.



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BULK STORAGEBULK STORAGE FOR

K-1 (NPK)

BULK STORAGE FOR

K-2 (DAP)


3.12.10. Product handling.

Product handling is the main Department linking relation between the finished

product and Transportation section. Whose main duty is of handling procedure of the

finished product NPK/DAP produce from the plant K1 and K2 where it is produce to

send the same in bulk storage and from bulk storage again to the Bagging section all

that procedure is handled by the product-handling department.

It is also their duty to make arrangement for necessary transport vehicle such as

Truck, Railway Bogies for sending the NPK/DAP to various parts of country. They

have to be in regular touch with the transportation department.

After Making the arrangement for Necessary Transportation vehicles Railway Bogies

and Trucks it is also there duty to Load the required Bags of NPK/DAP in to the

bogies and trucks and at same time it there duty to seal the bogies with Bin card

specifying the Grade type, Quantity loaded along with the authorized signature as a

Proof.

Product Storage:

Two covered storage silos for storing bulk fertilizer are available at Kandla unit, one

is for KANDLA Phase -1 streams and the other is for Kandla expansion Phase- 2

steams. Each of these silos is has a capacity of storing 30000 MT of bulk fertilizer.

The Kandla Phase-1 silo is divided into four equal compartments, while half of the

Kandla Phase -2 silos consist of one compartment and the other half is divided into

two equal areas. The silos ensures that the plant can continue in operation even when

the product cannot be dispatched due to non availability of railway wagons and add

to the operation flexibility of producing and bagging different grades of fertilizer.

The product from bulk storage at phase-1 is reclaimed with semi portal scrapper

loader at a rate of 125 MTPH and sent to the bagging plant by belt conveyor, while

the semi portal scrapper loader at Phase-2 site can reclaim at rate of 250 MTPH



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Bagging:

Bagging is an important section of product storage. It is process by which finished

good is packed in various sizes.

The bagging plant has a total of fourteen slat conveyors, thirteen of which are fitted

each with two Nos. of microprocessor based semi automatic weighing machines and

one stitching machine and each slat is capable of weighing and stitching at a rate of

900 bags per hr. One fully automatic weighing and bagging machine is also installed

along with bag placer which has capacity of weighing and bagging at a rate of 1200

bags per hr.

There are different signs of colours shown on bags for differentiating the grades of

fertilizer like:

Sr.No. Fertilizer Colour of strip on Bag

1. NPK 10:25:26 Red Colour strip

2. NPK 12:32:18 Green colour strip

3. DAP 18:46:00 Green & Red colour strip

Sr.No. Bags size

1. 50 Kg.

2. 40Kg.

3. 25Kg.

The machines do automatic stitching of bags. The bags are reprocessed so no

wastage of bags is seen in the department. There is lab analysis done for checking

the bags and during inspection 26 pts related to different criteria are inspected. The

workers working in this department are having a piece wage system. Space has been

provided for storing more that 3 million empty bags in the bagging plant and the

covered platform area can be used for stacking more than 5000 MT of bagged

product. Bagged product is dispatched by road within the states of Gujarat &

Rajasthan and by railway wagons to places all over the country.

During bagging mainly 3 people are required to inspect the process. These persons

are mainly from:

1. Marketing Department

2. Bagging Department

3. Representative of the contractor.



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These people are needed for signing the loading receipt and then the wagons or trucks

are sealed.

3.12.11. Offsite/Utilities facilities.

Kandla plant main and important sections are offsite. Offsite facilities refer to the

storage facility for Ammonia, Potash, Urea, Filler, Phosphoric acid and other utilities

like Fuel oil, Instrument air, Stream Generation plant, Power and Water.

Raw Material Storage

Ammonia Storage:

The ammonia storage facility consists of two Nos. of Horton spheres each having a

storage capacity of 1500 MT of hydrous liquid ammonia stored at a temperature of

zero degree centigrade and at a pressure of 3.5dg/sq.cm G. Liquid ammonia from

IFFCOs other units is received in rail tanker each having a capacity of 32 MT and is

unloaded in the HARTON spheres. Vapor generated during the tankers unloading is

directly fed to the plant. Atmospheric ammonia storage facility consists of three

tanks having storage capacities as 5000 MT., 1000 MT. & 15000 MT. to store liquid

ammonia at a temperature of minus 33 degree centigrade & at atmospheric pressure.

Imported ammonia received in ships is stored in these tanks by pumping into an

unloading line directly from the ship to each of the storage tanks.

Storage & Handling of Potash, Urea & Filler.

Imported potash in the form of crystalline potassium chloride is received in trucks

and stored in a covered storage area which has a capacity to store 80000MT having

facilities to unload and stack at a rebate of 278 MTPH and reclaim for use in the

plant at a rate of 278 MTPH. Urea & Filler is stored area consisting of six bins, with

trucks directly unloading into the bins, having a total storage capacity of 20000 MT

with facilities to reclaim for use in the plant at a rate of 125 MTPH.

At Kandla phase-2 Expansion plant site (E&F streams) a separate covered facility is

constructed to store urea, filler, potash & seed consisting of DAP/NPK fertilizer.

Half of the storage area is for potash storage while there are four bins for storage of

urea, filler & seed. The total storage capacity is 8500 MT along with facilities to

stack at a rate of 100 MTPH and reclaim at the rate of 200 MTPH.

Storage & Handling of Phosphoric acid.

Phosphoric acid is stored in eight vertical cylindrical rubber lined steel tanks having

dimensions of 28 meters X10.30meters (diameterX ht.). Each of them has capacity to



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store 10000 MT of wet process phosphoric acid having around 57% P2O5 content.

Imported phosphoric acid received in ships is pumped from the ship to an unloading

line going from the jetty to each of the storage tanks. Two of these storage tanks are

located at the Kandla Phase- 2 Expansion Plan site. Each of the streams A & B, C &

D, and E & F are having day thanks of capacity 1350 MT for storage of phosphoric

acid at the plant battery limit.

Utilities:

Utilities section include to the look after the following Items:

1. Fuel Oil

2. Plant and Instrument Air.

3. Stream Generation Plant

4. Power

5. Water

6. Liquid Cargo Jetty.

3.12.12. Fire and safety.

This sections main duty is to look after the safety of the employees working. As the

plant consist of hazardous Raw Material Tank of Ammonia, Phosphoric Acid and

also the diesel fuel tank and also there pipelines connecting the raw material tanks.

Which can dangerously affect the health of the worker health working there due to

leakage in the one to them? They also have to continuously be alert due to the

possibility of fire, leakage in tanks or pipelines etc. to avoid any high destruction.

They also at regular time publish Books, pamphlets and make arrangement for lecture

in order to give safety guideless to worker working at plant.

3.12.13 Civil.

Civil department is concern with the maintenance of the Build infrastructure at the

plant. They regularly keep eye on the maintenance of the K1, K2 - plant, Bulk storage

building, Administrative Building etc. If any destruction had been seen while ruining

of the plant and management thinks that same is not bearable or management takes

decision to make necessary changes in old infrastructure make some new addition is

same then at same time role of Civil Department comes into play.

3.12.14. Mechanical maintenance.



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Maintenance looks after the maintenance of K-1, K-2 Plant. Maintenance work are

carried out in order to increase the plant efficiency so that plant can run smoothly,

effetely and they can utilized the full capacity of plant.

Division of Maintenance Department is as follow:

1. Mechanical maintenance

Mechanical maintenance -1

Mechanical maintenance -2

2. Electrical maintenance

Electrical maintenance -1

Electrical maintenance -2

3. Instrumental maintenance

Instrumental maintenance -1

Instrumental maintenance 2

Regularly weekly programmers are prepared for plant maintenance and during the

maintenance work going on plant are shut down for the period. Detail about the

reasons for shout down of plants for maintenance purpose is given above.

3.12.15. CISF

CISF main duty is look after the security of the plant. There are all over 33 people in

this section shouldering the security of plant.

Following are the functions of CISF:

They have to look that any unknown person without any management

permission letter cannot enter the plant premises.

To make proper parking at parking area specified at plant.

To allow the Trucks and other transport vehicles to enter and only after

checking the proper Bills or management permission letter.

To make sure that there is no theft of fertilizer due any reason for that they are

given fully power of checking.

3.12.16. Training.

There main duty is concern with providing the Training to employees to increasetheir efficiency and productivity at regular time. They also make arrangement for



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seminar, presentation etc, by the well known person specialized in some sector to

provide there guidance and suggestion to employees.

They also make arrangement for personality development programs for there

employees. As todays world we known that computer is the main part in today

business world. So they also make arrangement for the weekly training programs for

employees to guide them new computer programs which can reduce there work load

and increase there efficiency. It is also there duty to look after the vocational and

Appendix Trainees who come form various fields for experience purpose.



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4

INVENTORY

MANAGEMENT

4. INVENTORY MANAGEMENT.



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4.1. Introduction of Inventory Management.

Before going directly to inventory management I would like to mention the meaning of

inventory and all different type of inventory.

4.1.1. Meaning:

For better understanding of the technique of inventory control we have to firstly know

the about what we mean by the term Inventory. Inventory basically means the stock

of goods. It is the sum of the raw material, goods in production process, finished goods

and the stock of stores materials.

4.1.2. Types:

Following are the different types of the inventory, which the company generally holds.

Raw material

A raw material is the goods, which are required to produce the product of the firm.

Raw materials are the basic input of the production that is converted into finished

goods after manufacturing process.

Goods in production process

These are the goods or inventories, which are under the production process, in other

words we can say these goods as goods in process. In other words we can say that

these are the semi-finished goods. They represent the products that need more work

before they become finished products for sale.

Finished goods

Finished goods inventory are those completely, which are manufactured and ready

to sale. Stock of raw material and work-in-progress facilitate production, while

stock of finished goods is required for smooth marketing operation.

Stock of stores materials

Stock of store materials includes spare and tools. Spares mean the parts of the

machinery and tools are the equipment, which is provided to the employees of the

firm. These materials do not directly enter into production but it is essential for

production process.

So these four are the different type of inventory on which business depends. In any

manufacturing unit inventory plays a major role because the major part of the cost of



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production is cost of inventory. In any fertilizers industry cost of raw material is one of

the major elements accounting for almost 60%-70% of cost of production. Similarly

stock of inventory is one of major item of the current assets where resources are

blocked. It is essential to control holding of inventory and material cost in any

manufacturing concern to achieve greater profitability for the organization.

4.2. Importance of Inventory Management.

Following are the importance of the inventory management of in any organization:

1. As we all know that inventory plays a major role in any

organization because major part of the working capital is spend on the inventories,

so it is necessary for any firm to manage inventory.

2. If the inventories of the firms are not maintain or manage

than there may be a great loss for any firm, as the capital is blocked in it.

3. It is necessary to have a proper analysis otherwise there

huge block of the working capital in the inventories.

4.3. Needs for Holding Inventory Management.

The question of managing and controlling inventories arises only when the company

holds the inventories. Holding more inventories lead the firms towards more blockage

of capital in it and if the holds less inventories then there is chance of shortage of

inventories in production process as well as it incurred more carrying & ordering cost.

Mainly there are three motives of holding inventories.

4.3.1. Transactions motive.

A transactions motive emphasizes the need to maintain inventories to facilitate smooth

production and sale operations.

4.3.2. Precautionary motive.

Precautionary motive necessitates holding of inventories to guard against the risk of

unpredictable changes in demand and supplies forces and other factors.

4.3.3. Speculative motive.

Influences the decision to increase or reduce inventory levels to take advantage of price

fluctuation.

4.4. Techniques of Inventory Management.



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4.4.1. ABC analysis.

InABC analysis, the entire goods in store are divided into three categories A, B and C.

It is the most effective way of the inventory management most of the firms are adopting

this technique. That is why ABC is also known as Always Better Control. How the

goods are divided into three categories are mention below:

1. A category goods.

A category goods are high value goods which incurred maximum of cost of the total

inventory cost. In IFFCO the which costing more than Rs. 50000/-

2. B category goods.

B category goods are those, which are costing betweew Rs 10000/- to Rs 50000/-.

3. C category goods.

C category goods are those, which are costing below Rs 10000/-

Details of ABC analysis.ITEM PERCENTAGES ANNUAL USAGE VALUE



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CLASS

ACC. TO ITEM (IN LAKHS)

PERCENTAGES

ACC. TO VALUE

A 307 1 578.19 27

B 1063 3 630.66 29

C 30019 96 965.21 44

TOTAL 31389 100 2174.06 100

% OF ABC ITEMS ACC.TO THE NO. OF ITEMS

1%3%

96%

A B C

% OF ABC ITEMS ACC.TO VALUE OF ITEMS.

27%

29%

44%

A B C

Source: Stores department report

4.4.2. FSN analysis.



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Here in FSN technique all goods are categorized into three category fast moving

goods, slow moving goods and non-moving goods. The rules of the FSN analysis may

vary according companies norms. Below mention are the norms of FSN analysis of

IFFCO:

1. Fast moving goods.

Fast moving goods are those, which are used within three years

2. Slow moving goods.

Slow moving goods are those, which are used between three to five years.

3. Non-moving goods.

Non-moving goods are those, which are used since last five years.

For FSN analysis the rules may varies according to company norm. In IFFCO norms

of fast moving, slow moving and non-moving goods are the same as mention above.

Below given is the FSN analysis of the A category items.

FSN Analysis as on 30th June 2005.

Items Number of Items (In Rs.) % According to value

Fast Moving Items 228 83

Slow Moving Items 41 15

Non Moving Items 6 2

Total 275 100Source: Stores department report

Note: The total number of item in A category are 307 but I had taken into consideration

275 items for FSN analysis because 32 items are Surplus and Obsolete items.

4.4.3. EOQ technique.

EOQ stands for Economic Order Quantity. One of the major inventory management

problems to be resolved is how much inventory should be added when inventory is

replenished. If the firm is buying raw materials, it has to decide lot in which it has to be

purchase and on every replenishment. If the firm is planning a product run, the issue is

how much production to schedule (or how much to make). These problems are called

order quantity problems, and the task of the firm is to determine the optimum or

economic order quantity (or economic lot size).



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Determining an optimum inventory level involves two types of costs:

(a.) Ordering cost

Ordering costincludes all the costs, which are incurred while placing the order to the

supplier. It includes the salaries of the purchase department and the salaries of tender

committee. And all other cost like stationary, etc.

(b.) Carrying cost.

Carrying cost includes cost of transportation of raw material. It may be any way of

transportation railway, airways, waterways and pipeline. In IFFCO most of raw

materials are coming from another from ships. And some raw materials are coming by

truck or trains. So the cost that is incurred in charges of train, trucks and ships are

included in the carrying cost. It also includes the salaries/wages of all people that are

involved in the process of unloading the goods/materials.

4.5. Inventory valuation system in IFFCO.

1) Raw materials are valued at lower of weighted average cost or net realizable value.

2) Stores and spares, Packing material, and Construction Material are valued at of

weighted average cost. Item of stores and spares which are slow or non-moving are

value at lower of cost or realizable vale based on technical based on technical

estimation.

3) Finished goods and stock in process are valued at lower of cost or net realizable

value. Damaged stock as identified by the management are valued at their estimate



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realizable valued. Closing stock of finished goods is net of transit and

standardization losses.

a) The cost of stock lying at plant is derived taking attributable expense

incurred at factory.

b) Cost of stock lying at warehouses:

In respect of manufactured urea covered by group concession scheme at

cost of production after adjustment of contribution to /subsidy from fertilizer

industry coordination committee (FICC).

Imported Urea at procurement cost plus handling charges less remuneration

received from the government of India.

Fertilizer whose prices have been de controlled by the Government of India.

c) Net realizable value:

For stock of urea lying at plant, group concession price fixed by FICC.

For stock of urea lying in warehouses, selling price fixed by government of

India.

For fertilizer whose prices have been decontrolled by the government of India

and for imported fertilizer, the price prevalent on the date of balance sheet.

4) Stock of seeds and chemicals are valued at lower of weighted average cost or

estimated realizable value.

5) Tools issued are written off over the period of three years.

6) Catalysts and Resins issued at the time of commissioning the plant and capitalized.

Subsequent issues are charged to revenue on the basis of their estimated life.

4.6. Details of Inventory in IFFCO.

Consumption of Inventories (In Lakh).

YEARS RAW MATERIALS STORES & SPARESCHEMICALS &CATALYSTS

PACKAGINGMATERIAL

2000-01 327491.47 4193.13 2017 10137.79

2001-02 327608.16 5607.84 1863.76 9407.67

2002-03 393889.97 5733.74 1701.6 9755.13

2003-04 390579 4669.31 2062.67 9603.66

2004-05 497699.03 6857.29 2101.76 13098.68

Source: 37 Annual report of IFFCO

Trend analysis of raw material Consumed



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This analysis is done taking 2000-01 as a based years. And the entire figures are in

percentages.

YEARSRAW

MATERIALSSTORES &SPARES

CHEMICALS &CATALYSTS

PACKAGINGMATERIAL

2000-01 100 100 100 1002001-02 100.03 133.73 92.40 92.79

2002-03 120.27 136.747 84.36 96.22

2003-04 119.26 111.35 102.26 94.73

2004-05 151.97 163.53 104.20 129.20

Distribution of Income on Raw Materials Purchased.

YEARS TOTAL INCOME (Rs in crore) RAW MATERIAL IN % OTHERS IN %

2000-01 5334 74 26

2001-02 5326 71 29

2002-03 6337 68 32

2003-04 6164 74 26

2004-05 7692 78 22

DISTRIBUTION OF INCOME

0

10

20

30

40

50

60

70

80

90

100

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

PERCE

NTAGES

RAW MATERIAL IN %

OTHERS IN %


Ratios of IFFCO Relating to Inventories.

Ratios 2000-01 2001-02 2002-03 2003-04 2004-05

Inventory of finished goods(Month sales) 1.6:1 1.81:1 1.88:1 1.3:1 0.77:1Inventory of raw material and packagingmaterial (Month consumption) 0.63:1 0.77:1 0.68:1 0.79:1 0.73:1

Current ratio 2.92:1 2.72:1 2.62:1 2.84:1 2.36:1

Quick ratio 1.65:1 1.39:1 1.51:1 1.71:1 1.51:1


4.7. Details of Inventory in IFFCO Kandla.



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Raw Material Consumed (In MT)

Years P2O5 Urea Potash Ammonia Filler2000-01 659273.180 66312.626 254101.644 284003.553 119641.050

2001-02 775707.525 37890.990 328552.389 351070.698 91621.035

2002-03 931084.715 63088.297 288353.680 412780.482 79722.900

2003-04 839936.861 49566.931 275209.163 374535.221 77425.800

2004-05 952216.039 67315.129 382800.465 414608.883 85890.60

Source: Audited report at IFFCO Kandla

Trend analysis of raw material Consumed

This analysis is done taking 2000-01 as a based years. And all the figure are in

percentages.

Years P2o5 Urea Potash Ammonia Filler

2000-01 100 100 100 100 1002001-02 117.66 57.14 129.30 123.61 76.58

2002-03 141.23 95.14 113.48 145.34 66.64

2003-04 127.40 74.75 108.31 131.88 64.72

2004-05 144.43 101.51 150.65 145.99 71.79

P2O5 COMSUMPTIONS

0.000

100000.000

200000.000

300000.000

400000.000

500000.000

600000.000

700000.000

800000.000

900000.000

1000000.000

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

QTY(INMT)



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UREA CONSUMPTION

0.000

10000.000

20000.000

30000.000

40000.000

50000.000

60000.000

70000.000

80000.000

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

QTY(INMT)


AMMONIA CONSUMPTION

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

QTY(INMT)


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POTASH CONSUMPTION

0.000

50000.000

100000.000

150000.000

200000.000

250000.000

300000.000

350000.000

400000.000

450000.000

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

QTY(INMT)

FILLER CONSUMPTION

0.000

20000.000

40000.000

60000.000

80000.000

100000.000

120000.000

140000.000

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

QTY(INMT)



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Down Time Detail (In numbers of days)

YEARS P2O5 AMMONIA2000-01 9.36 6.37

2001-02 7.47 3.37

2002-03 11.86 0.75

2003-04 42.94 21.65

2004-05 42.76 4.57

Source: Audited report at IFFCO Kandla

DOWN TIME DETAIL DUE TO SHORTAGE OF

P2O5

0

5

10

15

20

25

30

35

40

45

50

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

NO.OFDAYS

DOWN TIME DETAIL DUE TO SHORTAGE OF

AMMONIA

0

5

10

15

20

25

2000-01 2001-02 2002-03 2003-04 2004-05

YEARS

NO.OFDAYS



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Production loss due to raw material shortage:

Total production during Year 2004-05 was 2440100 MT and total stream hours used

was 43417 hrs so the production rate is 56.20 MT per hour

Now, average down time for phosphoric acid is 1026 hrs so the production loss due to

shortage of phosphoric acid is (1026 *56.20) = 57661.2 MT

Average down time for ammonia is 109.66 hrs therefore production loss due to the

shortage of ammonia is (109.66 * 56.20) = 6162.26 MT

So the total production loss due to shortage of raw materials is equal to 63823.46 MT

during 2004-05.

From below chart we find that in total down time 75% times plant is shut down due to

the shortage of raw materials only while others include mechanical maintenance,

electrical maintenance etc. so it is desirable to maintain adequate quantity of P2O5 and

ammonia as safety stock.

Transit time details for Raw Material (In days)

P2O5 Urea Potash Ammonia FillerMaximum Time 27 15 30 12 1

Minimum Time 12 5 13 6 1

Source: F & A Department

Here we take the latest details of raw material (In MT) consumed in 2004-05. And we

have taken 5 days approximately processing time of the purchasing process. So we

have taken lead-time as Minimum Time + 5days.

P2O5 Urea Potash Ammonia FillerRaw material consumed 952216.039 67315.129 382800.465 414608.883 85890.600

Per day consumption 2645.04 186.99 1063.33 1151.69 238.59

Lead time 17 10 18 11 6

So safety stock of the above calculated below:

P2O5

= 2645.04 x 17

=44965.68 MT

Urea

= 186.99 x 10

= 1869.9 MT



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Potash

= 1063.33 x 18

= 19139.94 MT

Ammonia

= 1151.69 x 11

= 12778.59 MT

Filler

= 238.59 x 6

= 1431.54 MT

Raw Material Conversion Period

Phosphoric Acid conversion period

= (Phosphoric Acid inventory / Phosphoric Acid consumption)*330

= (9766.855/178330.48)* 330

= 19 days.

Potash conversion period

= (Potash inventory / Potash consumption)*330

= (5495.16/33250.05)*330

= 54 days.

Urea conversion period

= (Urea inventory / Urea consumption)*330

= (1488.99/6484.37) * 330

= 75 days.

Ammonia conversion period

= (Ammonia inventory /Ammonia consumption)*330

= (2612.28/53876.84) * 330

= 16 days.



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Filler conversion period

= (Filler inventory / Filler consumption)*330

= (36.86/100.53) * 330

= 120 days.

Average Raw Material conversion period

= (Total Raw Material inventory/Total Raw Material consumption) * 330

= (21977.79/272042.28) * 330

= 27 days.

Note: All the inventory and consumption figures that are shown in above mention

calculation are in lakhs.



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5

LIMITATIONS

OF

REPORT



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5. LIMITATIONS OF REPORT.

As the field is to be covered is too vast and the time was limited, so it is

difficult to cover each and every minor detail.

As there are too many items in stores, which incurred different ordering cost

and different carrying cost. So it is impossible to find out Economic Order Quantity

for stores and spares items.

As order of the five major raw material are give on yearly basis by IFFCO it

is not possible to find out Economic Order Quantity for raw material.

As there too many item in stores and spare it is not possible to do FSN

analysis for B and C category items in such short time duration.



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6

FINDINGS



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6. FINDINGS.

I find out Percentages of ABC analysis according to value of items and according to

numbers of items in stores.

I find out Percentages of FSN analysis according to the fast moving, non-moving and

slow moving items.

I find out Safety stock based on the transit time and the time for order that is taken

approximately of the five major raw materials used by IFFCO.

I find out Raw material conversion period of five major raw materials.

I had calculated the Trend analysis of the five major raw materials consumed, taking

2000-01 as the base year.

I had calculated the detail of the production loss due to shortage of raw materials.



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7

CONCLUSION



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7. CONCLUSION.

Theoretical knowledge are provided to me in the college but such type of training helps

me to know lot more about the each and every aspect of the management it increases

my practical knowledge which may be helpful to me.

In training I got the knowledge in detail about the inventory management and its

control techniques.

I got knowledge in about the brief different the function, the techni

Documents

final rep-2