Inventory Control in IFFCO

SUMMER TRANING PROJECT REPORT ON INVENTORY CONTROL IN IFFCO AT AONLA UNIT

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER OF BUSINESS ADMINISTRATION

G. L . BAJAJ INSTITUTE OF TECHNOLOGY ANDMANAGEMENT , GREATER NOIDA

SUBMITTED TO : Mrs. DEEPA GUPTA SINGH Professor, MBA

SUBMITTED BY : SHIKHAR KUMAR M.B.A. 2011 - 13

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ACKNOWLEDGEMENT
Through this acknowledgement, I express my sincere gratitude towards all those people who have helped me in the preparation of this project, which has been learning experience. I appreciate the co-operation by the management and staff of IFFCO for giving me the opportunity to get trained in their office. I would like to thank the Faculty Guide: Mr. Nitin tripathi, and the other Faculty members, the Librarian and the administrative staff of IN GLBITM, Greater Noida, for their support. Finally, I express my sincere thanks to Mr. D. Kalia, who guided me through out the project and gave me Valuable suggestion and encouragement.

SHIKHAR KUMAR SINGH MBA 2ND Year

DECLERATION
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I ,Shikhar Kumar Singh , Roll no-1119270042, student of MBA of G L Bajaj Institute Technology And Management, Greater Noida , hereby declare that the project report on “Inventory control in IFFCO ” is an original and authenticated work done by me. The project was of 2 months duration and was completed between 05-06-2012………to 0408-2012……… I further declare that it has not been submitted elsewhere by any other person in any of the institutes for the award of any degree or diploma.

Name of the student : Shikhar kumar Singh Date :

INDEX
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PAGE NO. 1. Introduction to topic 2. Introduction about IFFCO 05 07

3. Need of the study

37

4. Objective of the study

38

5. Methodology

39

6. Data Analysis and Interpretation

106

7. Findings of The Study

109

8. Suggestions And Recommendations

115

9. Bibliography

121

10. Annexure

122

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INTRODUCTION OF THE TOPIC

INVENTORY CONTROL
“Managing the level of inventory is like maintaining the level of water in a bath tub with an open drain. The water is flowing out continuously. If water is let in too slowly, the tub is soon empty. If the water is let in too fast, the tub overflows.” The dictionary meaning of inventory is ‘stock of goods’. The investment in inventory is very high in most of the undertakings engaged in manufacturing. The amount of investment is sometimes more in inventory than in other assets. About 90 percent part of working capital is invested in inventories. It is necessary for every management to give proper attention to INVENTORY CONTROL. A proper planning of purchasing, handling, storing and accounting should form a part of INVENTORY CONTROL. By proper planning it is possible for a company to reduce its levels of inventories to a considerable degree, without any adverse effect on production and sales, by using simply inventory planning and control technique. The reduction in excessive inventories carries a favorable impact on company’s profitability. An efficient system of INVENTORY CONTROL will determine 1) What to purchase 2) How much to purchase 3) From where to purchase 4) Where to store, etc.

INTRODUCTION ABOUT IFFCO
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During mid- sixties the co-operative sector in India was responsible for distribution of 70 percent of fertilisers consumed in the country. This Sector had adequate infrastructure to distribute fertilisers 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 numbers of co-operative societies associated with IFFCO have risen from 57 in 1967 to 38, 155 at present. Indian Farmers Fertiliser 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 fertilisers. The byelaws of the Society provide a broad frame work for the activities of IFFCO as a Cooperative Society. IFFCO had set up the KALOL plant for manufacture of Nitrogenous Fertiliser and KANDLA plant for manufacture of Phosphoric fertiliser. These plants commenced commercial production in the year 1974-75. IFFCO had emerged as Asia’s largest Fertiliser Cooperative with its four modern sophisticated plants at KALOL and KANDLA in GUJRAT and PHULPUR and AONLA in UTTAR PRADESH. IFFCO is country’s largest producer of nitrogenous and complex fertiliser with the total production capacity of 2.6 million tones.

IFFCO IS:
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1. 2. 3.

Largest producer of fertilisers in the country No. of Plant Locations : Five Installed Annual Capacity (‘000 MT) a. b. c. d. UREA NPK/DAP TOTAL ‘N’ - 4242.2 - 4335.4 - 2628.2

TOTAL ‘P2O5 - 1712.8

4. Only Fertiliser Institution in the country to produce 68.47 lakh MT of fertilisers and 93.24 lakh MT of sales during 2010-11. 5. Contributed about 20% to the total ‘N’ and 25% to the total “P 2O5” produced in the country during the year 2010-11. 6. Fertilisers marketed through 39,564 Cooperative Societies and 158 Farmers Service Centers. 7. Service to the Farmers through a variety of programmes.

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BOARD OF DIRECTORS

The Directors of IFFCO
Chairperson – Shri Surinder Kumar Jakhar Vice-Chairperson- Shri N.P. Patel

DIRECTORS
Shri Chandra Prakash Shri S.L. Dharme Gowda Shri Kartick Chandra Sarkar Shri Harminder Singh Jassi Shri M.Gopal Reddy Shri Ankushrao R.Tope Managing Director – Dr. U.S.Awasthi Dy. Managing Director-cum-Marketing Director – Shri D.K. Bhatt Dy. Managing Director – Shri Rakesh Kapur Director (Technical) - Shri V.K. Bali Director (Coop. Development) – Dr. G.N. Saxena Director (HRD) – Shri S.K. Mishra

OBJECTIVE OF THE COMPANY
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The broad objectives of setting up this venture:1) Producing fertilisers. 2) Promoting the fertilisers distribution system in the co-operative sector. 3) Ensuring availability of fertilisers at the farmer’s doorstep. 4) Creating scientific awareness among farmers. 5) Promoting nation’s growth through modern family techniques. 6) Improving agricultural productivity through balanced fertiliser application. 7) Strengthening coopen distribution system. 8) To promote the activity for enriching the life of the rural.

IFFCO has grown steadily since its inception today. It has emerged not only as the largest fertiliser producing organization in India but also Asia’s largest fertiliser co-operative. IFFCO started with two modern plants at a cost of Rs. 976 million. One ammonia and urea complex at Kalol and NPK plant at Kandla both in Gujrat.

IFFCO’s MAIN AIM
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“Strengthening

management and participatory character of the Indian Cooperative

Movement by using duly tested and appropriate consultancy, advisory and technological interventions sourced from within the country and abroad and in accordance of the Cooperative Principles and in harmony with the law and culture of the land.”

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ORGANISATION CHART OF IFFCO

Board of Directors

Chairman & Vice Chairman

Managing Director

Director Marketing

Director Finance

Sr. Executive Director Technical

Executive Director (P& A)

Executive Dir. Planning & development

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INVESTMENT OUTSIDE IFFCO

1. Indian Potash Ltd (IPL)
IFFCO’s Equity Percentage of Equity held Paid up capital (Mar 31, 2000) Activity : Rs. 2.68 Crore : 34% ( Rs. 32.4 million) : Rs 95 million : Marketing of Potash and imported fertilisers

IPL is the Indian canalizing agency for domestic potash requirements.

2. Industries Chimiques du Senegal (ICS) I & II
Percentage of Equity held Plant Site Products Activity Production capacity : 19.09 % : Darou, Senegal : Rock Phosphate, Phosphoric Acid and NPK Fertilisers : Phosphoric Acid at Darou (Senegal) : 1.5 million TPA

Paid up capital (Mar 31, 2000): Rs 6.5 billion

3. IFFCO - TOKIO General Insurance Company Ltd. (ITGI)
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IFFCO’s Equity Percentage of Equity held Activity Corporate Office Paid up capital (Mar 31, 2006)

: Rs. 193.90 Crore : 72.64% : General Insurance : New Delhi : Rs 2.2 billion

4.Oman India Fertiliser Company (OMIFCO)
IFFCO’s Equity : Rs. 329.08 Crore

Percentage of Equity held : 25% Plant Site Products : Sur, Oman : Ammonia, Urea

5. Indo Egyptian Fertiliser Co. (IEFC)
Project Cost IFFCO’s Paid up Equity Debt : Equity IFFCO’s Equity El Nasr Mining Co. Activity : USD 325 million : Rs. 38.89 Crore : 70 : 30 : 76% : 24% : Phos. Acid Plant

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6. National Commodity and Derivative Exchange (NCDEX)
IFFCO’s Paid up Equity Percentage of Equity held : Rs. 3.60 Crore : 12%

Redeemable Preference Share Capital : Rs. 10 Crore Activity : On Line Trading in commodity futures

7. National Collateral Management Services Ltd. (NCMSL)
IFFCO’s Equity Percentage of Equity held Activity : Rs. 4 Crore : 13.33% : Collateral Risk Management Solutions

8-IFFCO Chhattisgarh Power Ltd
Project Cost IFFCO’s Paid up Equity Debt : Equity IFFCO Equity CSEB Activity : Rs. 6265 Crore : Rs. 11.10 Crore : 70 : 30 : 74% : 26% : Power Genen (1320 MW)

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9. Kisan International Trading FZE (KIT)
Investment Location Activity : Rs. 11 Crore* : Dubai : Special purpose vehicle (SPV) for shipping, logistics and investments in new overseas Joint Ventures. * Includes Rs. 9.80 crore towards 9 bonus shares received during 2010-11.

10. Jordan India Fertiliser Company (JIFCO)

Project Cost

: USD 580 Million

IFFCO Equity : 52% (Rs. 2.08 Crore) JPMC Equity : 48%, Activity : Phos. Acid Plant

11. IFFCO Kisan Sanchar Ltd. (IKSL)
Paid up Share Capital : Rs. 5 Crore IFFCO Equity : Rs. 3.65 Crore (73%)

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VISION “To augment the incremental incomes of farmers by helping them to increase their crop
productivity through balanced use of energy efficient fertilisers; maintain the environmental health; and to make co-operative societies economically and

democratically strong for professionalized services to the farming community to ensure an empowered rural India.”

MISSION

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IFFCO’s mission is “to enable Indian farmers to prosper through timely supply of reliable, high quality agricultural inputs and services in an environmentally sustainable manner and to undertake other activities to improve their welfare” 1) To provide to farmers high quality fertilisers in right time and in adequate quantities with an objective to increase crop productivity. 2) To make plants energy efficient and continually review various schemes to conserve energy. 3) Commitment to health, safety, environment and forestry development to enrich the quality of community life. 4) Commitment to social responsibilities for a strong social fabric. 5) To institutionalize core values and create a culture of team building, empowerment and innovation which would help in incremental growth of employees and enable achievement of strategic objectives. 6) Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for stakeholders. 7) Building a value driven organization with an improved and responsive customer focus. A true commitment to transparency, accountability and integrity in principle and practice. 8) To acquire, assimilate and adopt reliable, efficient and cost effective technologies.

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9) Sourcing raw materials for production of phosphatic fertilisers at economical cost by entering into joint ventures outside India. 10) 11) To ensure growth in core and non-core sectors. A true co-operative society commitment for fostering co-operative

movement in the country.

Emerging as dynamic organization, focusing on strategic strengths, seizing opportunities for generating and building a past success, enhancing earning to maximize the shareholder’s value.

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VISION 2010

In order to maintain the sustained pace of remarkable growth being achieved under mission-2005 the society is in the process of formulating another growth plan “VISION 2010” which aims at:

1. Attaining an annual turnover of Rs.15000 crore by 2010 2. Installation of Ammonia and Urea plants including acquisition of fertilisers units. 3. Backwards integn to meet feedstock requirements such Phosphoric acid. 4. Genen of Power. 5. Explon /Distribution of marketing of Hydrocarbons. 6. Value addition to agro-products and marketing. 7. Manufacturing of Petrochemicals, Banking and Financial services. 8. Information technology and IT enabled services. 9. Production and marketing of micronutrients seeds, biofertilisers, pesticides etc.

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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 envisaged to be covered are exhaustively defined in IFFCO’s 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 earth’s 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.

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IFFCO ASSOCIATES

1. INDUSTRIES CHIMIQUES DU SENEGAL 2. OMAN INDIA FERTILISER COMPANY S.A.O.C. 3. INDIAN POTASH LTD. 4. NATIONAL COMMODITY & DERIVATIVES EXCHANGE LTD. 5. NATIONAL COLLATERAL MANAGEMENT SERVICES LTD.

6. COOPERATIVE RURAL DEVELOPMENT TRUST

7. KISAN SEWA TRUST

8. IFFCO FOUNDATION

9. LEGEND INTERNATIONAL HOLDINGS INC

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AWARDS GALORE

KALOL UNIT
1) Seven awards received for overall performances from FAI. 2) Two awards for industrial safety from GOI. 3) Award for technical innovation from FAI. 4) Two Rajya Bhasha Shield for promoting Hindi. 5) Award for safety from National Safety Council, Chicago. 6) Indo German greentech environment excellence award.

PHULPUR UNIT
1) Four awards for productivity from NPC. 2) Six national safety’s award from GOI. 3) Two awards for overall performance from FAI. 4) Two awards for technical innovation from FAI. 5) FAI’s Award for Best Overall Performance of an operating fertiliser unit for Nitrogen (Ammonia and Urea) Plant jointly with Zuari Industries Limited, Goa. 6) Three national energy conservation awards. 7) Three awards for best environmental protection from FAI. 8) Best environmental excellence awards from Indo German green tech foundation. 9) Best technical paper award by FAI.

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KANDLA UNIT
1) Twelve safety awards from national safety council Bombay GOI. 2) Twenty-three safeties award from Gujarat. 3) Raj Bhasa award for promoting Hindi. 4) Six awards for overall performance from FAI.

AONLA UNIT
1) Award for best implemented project ( 2nd price) from GOI. 2) Award for conservation of energy from GOI.

GROWTH IN THE NUMBER OF MEMBER SOCIETIES

1967-68

:

57

1974-75

:

25528

1980-81

:

26960

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1986-87

:

28134

1997-98

:

30200

2002-04

:

35072

2006-08

:

37381

2008-11

:

39564

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ABOUT AONLA UNIT

LOCATION

State State Capital Distance from Lucknow Distance from New Delhi Nearest Airport Railway Station Road Area under Plant Area under Township

Uttar Pradesh Lucknow 280 Km. 260 Km. New Delhi Aonla (10 Km. from the Plant) Plant is In Bareilly–Aonla Bareilly highway. 260 Hectares 220 Hectares

YEAR OF COMMISSIONING INVESTMENT YEAR OF EXPANSION INVESTMENT

: Ammonia- Urea Complex commissioned in 1988 : Rs. 651.6 Crore AONLA- I : 1996 : Rs. 954.7 Crore AONLA- II

YEAR OF DEBOTTLENECKING: 2008 INVESTMENT : Rs.149.2 Crore

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PRODUCT

CAPACITY TPD TPA 11,48,400 19,99,800 9,19,908

TECHNOLOGY

AMMONIA UREA ‘N’

3480 6060 2788

HALDOR TOPSOE SNAMPROGETTI

The IFFCO AONLA Unit is located in the Gangetic Plains of Uttar Pradesh in Bareilly district about 28 Km. Southwest on Bareilly-Aonla Road. It was set up on 08 January 1985 and started commercial urea production at 16 July 1988. The infrastructure of AONLA unit is very big and constructed on 713 acres of land. IFFCO Aonla unit is the most efficient and quality-wise as well as environmental oriented unit so that M/s KPMG Peat Marwick, a quality registrar has certified it as ISO: 9002 unit and M/s BVQI London has accredited it as ISO:14001 unit. The Aonla unit, an Ammonia- urea complex is comprised of the two phases: o AONLA-1 o AOLLA-2 AONLA -1 was established in 1988 and it was digested to nation by honourable Prime Minister of India late Shri Rajeev Gandhi on 17 May 1989. AONLA-2 was established in1996 December. This unit was designed to nation by honorable Prime Minister of India Shri I.K. Gujral on 28 Jan 1997.

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SALIANT FEATURES OF AONLA UNIT

Particular Capacity (P.A.) Ammonia Urea

Aonla-1

Aonla-2

4,45,500MT 7,26,000MT

4,45,500MT 7,26,000MT 30.09.1993 30.11.1996 15.12.1996

Project zero date 08.01.1985 Mechanical completion 08.01.1988 Ammonia production 15.05.1988 started Urea production started Feedstock 18.05.1988 Natural gas

26.11.1996 Natural gas with Naphtha

Capacity Enhancement of Aonla and Phulpur Units
IFFCO has submitted the Techno-Economic Feasibility Report (TEFR) for Capacity Enhancement of Aonla and Phulpur Unit to the Department of Fertilisers (DOF). Following enhancement in capacity has been envisaged with a total annual increase in Urea Capacity by 5.115 lakh MT:

Name of Unit Phulpur-1 Phulpur-2 Aonla-1 Aonla-2 Total

Present Capacity ( MTPD) 1670 2620 2620 2620 9530

Proposed Capacity (MTPD) 2080 3000 3000 3000 11080

Increase

in

Capacity (MTPD) 410 380 380 380 1550

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The installed cost for the Enhanced Capacity is estimated at about Rs. 19 lakh per MTPD of Urea as against the Rs. 65-70 lakh per MTPD Urea in case of a Grassroots Plant. Therefore De-bottlenecking of existing Urea Units is the best route to create additional capacity.

IFFCO has initiated action for De-bottlenecking of its plant at Aonla and Phulpur Units for Capacity Enhancement. We are awaiting final clearance from DOF. Incidentally this will also reduce the subsidy to Government vis a vis imported Urea.

PLANTS OF AONLA UNIT
There are mainly four plants in the unit namely: 1. Ammonia Plant 2. Urea plant 3. Product Handling Plant 4. Steam and Power Genen Plant

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LINE CHART AT AONLA UNIT

Sr. General Manager

General Manager

General Manager

JGM/CM Production Ammonia Plant Urea Plant

JGM/CM Maint. Mechanical

JGM/CM Technical

JGM/CM Utility Power Plant

JGM/CM Comm.

JGM/CM F&A

Process

Purchase

F& A

Electrical

Design & Drawing

Offsite

Store

Product Handling

Instrumental Library & Civil Document Laboratory

Fire & Safety & Env.

Traffic

Training & Development General Engg. JGM/CM JGM/CM

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Finance & Accounts Department At A Glance
The Finance & Accounts Department of IFFCO, Aonla is divided into 5 sections, to facilitate smooth and easy functioning and control.

Organisation Structure
FINANCE & ACCOUNT DEPARTMENT

BOOKS/FICC CELL

FINANCIAL CONCURRENCE

BILL SECTION

PAYROLL SECTION

PSL SECTION

Supply Section

Note Sheet Payment

Work Order

Indigenous supply

Imported supply

Work contract

Service contract

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Line of Control in Finance & Account Department

HOD/ C.M. (F & A)

Senior Manager (F& A)

Senior Manager (F& A)

Manager (Account)

Manager (Account)

Manager (Account)

Manager (Account)

Deputy Account Manager

Deputy Account Manager

Deputy Account Manager

Deputy Account Manager

Senior Account Officers

Account Officers Junior Account officers Senior Accountant Junior Accountant

FINANCE AND Y
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Each company is carried with a purpose of earning money. Money or capital being a scare as well as crucial resource in the working of any organization needs to be given prime importance. The financial resources have been planned and controlled in a proper and continuous manner. As among the most cr[`ucial decisions of a firm are those which relate to finance. Finance & accounts from an integral part of any organization. Proper and smooth functioning of this section is very vital for the organization to survive and grow. Finance functions are of two types:  Managerial finance function  Routine finance function

Managerial finance functions are so called because they require skilful planning, control and execution of financial activities. Routine finance functions on the other hand, do not require a great managerial ability to carry them out. They are chiefly and are incidental to the effective handling of the material finance functions. The various areas covering under the preview of subsections are as follows 1.

BOOKS SECTION

This section basically deals with accounting function, maintenance and keeping of records. The various functions include:

a. Books: Preparing and maintaining balance sheets. b. IFCC (Fertiliser Industries Coordination committee)

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c. Costing & Pricing Cells d. Reporting

2. PAY ROLL SECTION
This section deals with the payments of salary and wages to the employees and extending various other benefits are covering under to preview are – a. Salary b. Leave Travel Concession (LTC) c. Medical Allowance d. Conveyance e. Advances f. Loans to employees

3. Taxation Section
As per the status and opens of the society, It deals with the following Taxes:a. Central Excise Duty b. Income Tax c. Service Tax d. Sales Tax

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NEED OF THE STUDY
In every organization INVENTORY CONTROL is a big problem and for IFFCO it is too much typical to handle the inventory in a better and efficient way. Because there will be lack of inventory then the production will be interrupted and it is not good for any organization. 1) The management tries to make its inventory system more efficient and effective to continue the smooth production of fertilizers. 2) An organization is always interested in minimizing the cost that is invested in the inventory and how to regulate the whole inventory system in a better way. 3) Management of any organization tries to ensure the interrupted supply without making over investment in the inventories. As we know that IFFCO has large machineries due to which it has to retain too much stock of spares to avoid the interruption? 4) As we know that IFFCO is a very big organization and it is typical to coordinate with all the employees who are working there. But for the effective inventory system there should be coordination between the store, purchase department and finance department. So what should be done for the coordination between the departments to make the inventory system effective? 5) This report is prepared to analyze the working of various departments that work in coordination with Finance department as payroll section, bill section, taxation section etc.

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OBJECTIVE OF STUDY

“The main aim of study is to check the efficiency and effectiveness of INVENTORY CONTROL system”. Investment in inventory incurs a high cost. Therefore effective management is necessary to minimize the cost and ultimately increases profitability of an organization. A part from our main objective our main objectives are: 1) To analyze the level of investment in inventory by IFFCO. 2) To analyze the financial position of the company. 3) To give suggestion if any, regarding effective INVENTORY CONTROL. Or To give suggestions to ensures smooth and uninterrupted supply without making unnecessary investment of funds in inventory.

METHODOLOGY
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The data has been collected from the primary resources as questionnaire. Then it was distributed to all the employees of the finance department and purchase department. The questionnaire is built considering the availability of data and convenience. Data were collected through the inventory software, databases, net and by asking questions. The collected data is captured into the questionnaire for the analysis. There is no manual coding. I have also included some financial data with the help of annual report. The data is collected with the help of questionnaire and observation. In the questionnaire all the relevant questions regarding the INVENTORY CONTROL are included. Here we have used convenience sampling that is we have selected the data according to our convenience. I have followed that results which are quite similar in responses.

TOOLS OF THE STUDY

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For preparing the report the data has collected through the literature survey. The graphs and tables are used to complete this study. There is the use of Histogram in Graphical presentation.

SOURCES OF DATA
There were various sources for collecting the data. But I have collected data from some of the resources that are as following1) Questionnaire 2) Internet 3) Annual report of IFFCO 4) From the stores 5) By the inventory software (PSL) that is used in IFFCO

CONCEPT OF INVENTORY CONTROL

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Dictionary meaning of inventory is “detailed list of movable articles”. The literary meaning of inventory is stock of goods. According to International Accounting Standards-2, inventory is a tangible property which is held:  For sale in the ordinary course of business;  In the process of manufacture for such a sale;  For consumption in the process of production of goods and services for sale including maintenance supplies and consumables other than machinery spares.

INVENTORY CONTROL involves the control of assets being produced for the purpose of sale in the normal course of the company's opens. The goal of effective INVENTORY CONTROL is to minimize the total costs - direct and indirect - that are associated with holding inventories. However, the importance of INVENTORY CONTROL to the company depends upon the extent of investment in inventory. The term ‘inventory’ includes:  Inventory of Raw Materials : In the case of manufacturing concerns, various types of raw materials are being used in the production system. To ensure smooth production function and also to avoid any kind of production delays the concern has to keep inventory of raw materials.

 Inventory of Stores and Spare Parts : This inventory consists of those products which serve as accessories to the main products manufactured for the purpose of sale. Bolts, nuts screws, clamps, etc., are the examples of stores and spares parts. Such spare parts are either bought from outside or manufactured in the concern itself.
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 Inventory of Work-In-Process (W.I.P.) : Sometimes the manufacturing system involves various processes for converting raw materials into finished goods. As such, some materials might have been issued to the production process but might not have been completed as finished goods. This is known as work-in-process.

 Inventory of Finished Goods : All goods manufactured during a particular period may not be sold immediately. These are to be kept in warehouse. The idea is to uncouple the production and sales function so that it is no longer necessary to produce the goods before a sale can occur. The application of managerial function on the basis of management principles in the field of inventory is termed as INVENTORY CONTROL. Managerial functions are performed with respect to inventory; it may be called INVENTORY CONTROL. The objective of INVENTORY CONTROL is to plan the optimum size of inventory which is neither excessive nor deficient and is timely available. For timely availability along with optimum size, there is need for controlling as well. Only on the basis of various control techniques one can ensures whether inventory would be timely available. But effective control in itself depends upon organizing and coordination. Thus, INVENTORY CONTROL comprises the functions of planning, controlling and organizing the types of all goods, quantity, status, flow and time- sequence etc.

Need for INVENTORY CONTROL
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INVENTORY CONTROL is an integral part of general management. Three important functional aspects of a business are closely related to INVENTORY CONTROL. These are:

1) Production management 2) Marketing management 3) Financial management

Here the production management and marketing management are related to the physical aspect of INVENTORY CONTROL and; financial management is concerned with the financial aspect of the INVENTORY CONTROL. In production management, production manager will always strive to have a large inventory of raw materials and of such a good quality as to ensure stable production opens.

In marketing management, marketing manager aims at satisfying ever increasing demands for improved customers’ service by having large inventory of inside goods.

In financial management, finance manager will effort towards to keep investments in different types of inventory at a minimum possible level so that the business concern may earn maximum return.

MATERIAL DEPARTMENT
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Material Department is responsible for the proper handling of inputs and controlling of material inputs. Proper handling of input materials ensures the smooth running of plant. Material department recognizes the need of the input materials and arranges them for the plant. It includes the procurement, verification and controls of materials in right quantity and at right time to facilities the production function. Material management includes two important functions: • • Purchasing Storing and control of materials

That’s why; it is divided into following sections: • • Purchase section ( It is responsible for purchasing of materials ) Store section ( It stores the inputs)

These both sections are interrelated and perform their function on coordination. All purchases are to be made only by the materials department except purchases of petty item through some vouchers and Department Managers within the limits prescribed in purchase procedure. Material purchase indent should give following information: 1) Quantity in stores 2) Average monthly consumption since last purchase for stock items 3) Maximum /minimum level 4) Last purchase order reference 5) Reorder level

PURCHASE SECTION
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The purchase department is at the interface of internal and external department. Purchase department do enquiry about the inputs whether it is required or not. This enquiry is done in two ways that are: 1) Single stage 2) Two stage After enquiry purchase department invites a tender. After confirmation of all terms and conditions the department contacts the supplier and orders for the inputs. Thus it is responsible for purchasing of materials and other raw materials whatever is required by the organization. Purchase department is responsible for the delivery of right amount of material at the right time and at the right location to avoid the hampering of the production. Purchasing is distinct from buying. Purchasing involves the extra knowledge as the tenders, various vendors, their prices, comparison between them, after sale service, dispatching follow up and payment terms. The purchase department considers various things before purchasing the raw materials. 1. Information about the input material 2. Sources of material- vendor 3. Reasonable price of that material 4. All terms and conditions Indentor is that person which raises the indent.

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PURCHASE PROCESS
The purchase process can be expressed as following:

INDENTOR

Material Purchase Requirement (MPR) Single stage Enquiry Two stage

E- Procurement (15 days)

Manual (21 days)

Opening

Quotation Comparative Statement (QCS)

Technically Acceptable L-1 Bidder

Order (With approval of competent authority)

It can also be summarized as follows:

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1) RAISING OF INDENT: First of all the indentor raises the indent. This indentor may belong to any department. Now the indentor informs to the store. If that particular material is not available at the particular point of time then store informs to the purchase department. After it the working of purchase department starts.

2) RECOGNITION OF NEED: The purchase department recognizes the need of indentor and checks whether that material is available in the store or not. The availability of input material at all points of time is the responsibility of purchase department.

3) REQUISITION TO PURCHASE: This is an intimation to purchase department by the indentor that he has need of certain materials. He raises indent by filling a form ‘Material Purchase Requisition’ (MPR). In this he gives several information like:a. b. c. d. e. f. g. h. Material description/ Proposed Reason Item code/ proposed code Unit Quantity required Value Budget code MPR No. Indentor

4) MRP SCRUTINY: Next step involves scrutinizing of the MRP to certified the genuinely of the need, for this, first approval to given by immediate higher authority
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of the indentor. Next, the MRP is send to the stores, to check whether the material is available or not. If it is not available the MRP goes to the purchase department. For further action. Here it is scrutinize in three ways :-

• • •

Approval scrutiny Budget scrutiny Technical scrutiny

5) SENDING or ENQUIRY/INVITATION TO BID: Enquiry can be done by two types: I. II. Single stage Two stage

SINGLE STAGE: Single stage is followed when there is no or very few chance of technical deviation. Here there is no restriction on supplier or vendor. This enquiry is done in case of nonproprietary items.

TWO STAGE: Two stage enquiry is followed when there is more chances of technical deviation. This enquiry is done in case of proprietary items.

Items can be classified in to two categories keeping in view the purchasing function – • Proprietary items: These are those items e.g. spares which have to be bought from particular supplier or vendor.

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•

Nonproprietary items: These are those for which there is no restriction on vendor.

Enquiry is sent in order to know the prices and other terms and conditions of vendors. Bidding can be done in three ways-

I.

Proprietary bidding: This is for the proprietary items and is sent to only one vendor. Here the proprietor is invited to set a competitive price.

II.

Limited tender enquiry: This is done for non proprietary items and bids are invited from a limited no. of vendors selected from the registered vendors with the company.

III.

Press tender/Open bidding: If the amount involved in purchase is more than three lakhs and the item is non proprietary then press tenders are issued in various news papers. There may be global tenders also.

6) Receiving of offers: After all the bids have been submitted the tenders are opened before tender committee to compare the quotationsQuotations comparison statement (QCS) is made and bid with lowest quotation is generally chosen. QCS is also sent to the technical department and in consultation with it one more than one offer are chosen, giving quality and price the top priority. Quotation must be technically acceptable. Generally technically acceptable L-1 bidder is chosen.

7) Purchase order: After selecting the best offer, purchase order is sent to that vendor with all the terms and conditions specified and details of the material to be purchased are also given. A bank guarantee of performance is taken from the vendor
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in advance which is usually 5% of the P.O.A. time limit is set for delivery of consignment and in case of delay a penalty is imposed @ 5% of P.O. per week.

8) Receipt of materials: After the consignment reaches the stipulated place, the payment is done by the organization according to the purchase terms agreed upon by the two parties. The material is checked for quality conditions, quantity and then sent to the store where the store releases the “Stores Receipt Voucher” (SRV). From here it is delivered to the indentor. Normal payment is done after 30 days from the receipt or acceptance of material.

9) Follow up done for every order: It may be regarding delay in supply, changes in price, defective or damaged items supplied etc. For every indent, a separate file is opened and correspondence goes on. For every step, recommendations of indentor, manager (F& A), materials manager & general manager are sought. In case of damaged input materials the store does not accept the materials. A rejection report is prepared in case of damaged items.

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Packing & Dispatch
All packing, boxing and protection shall conform to the specification or requirements of the order. The supplier shall be held liable for the damage or breakage of the goods due to defective or insufficient packing. It will be according to term and conditions that are given already in the format. All goods shall be dispatched by rail/road freight paid and the railway receipt/lorry receipt shall be posted to the concerned officer of IFFCO.

DOCUMENT REQUIRED FOR THE DISPATCH OF GOODS
Following documents are required for the dispatching of materials: Challan Packing list Test certificate Railway/ Lorry/ Air Consignment note 3 copies 3 copies 3 copies 4 copies

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Inspection of Material

The material department shall coordinate with other departments and arrange inspection of material at vendor’s shop prior to dispatch. Inspection of materials in other cases shall be carried out on receipt of materials at site. Only materials those cleared by the inspection will be taken on charge in stores. The person inspecting the material will sign

on the stores receipt voucher in token of having inspected and accepted the material. Generally indentor is called upon for the inspection of the material. Sometimes inspection is done at the gate of IFFCO. Only after inspection material enters into the store. If there is any damage in the material or they are insufficient in quantity then rejection report is prepared. Its copies are distributed among all the parties which are involved in it.

Damaged/Short/Rejected Materials

If the materials are received short or in damaged condition, there are some conditions in this regard.  In cases where the responsibility for the transit insurance is on IFFCO, a claim should be lodged with insurance company for the value of material plus incidentals. This insurance is done by IFFCO TOKIO GENERAL INSURANCE COMPANY. As soon
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as the shortage per damage of the materials is noticed the material department will lodge the provisional claim with the underwriters and pass on the relevant papers to the finance & accounts department for lodging monetary claim.

 In respect of transit insurance claims bill section will pass an adjustment Entry debiting “claim recoverable account” and credit the “Advance to Vendors account”. After the adjustments the bill section sent the copy of journal voucher along with all necessary details such as P.O. No. , MRR No. quantity and value, name of the supplier to the insurance section for following up the claim with the insurance company.

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Accounting of Raw Materials
Based on the projected consumption requirement of raw materials, the procurement action is taken by the commercial department at the head office which is in Delhi. Described below is the accounting requirement of major raw material.

Imported Phosphoric acid and Ammonia
The consignment of phosphoric acid and Ammonia are received at Kandla and the material actually received is valued at the contracted cost & freight price. Where free on board (FOB) price is agreed, the ocean freight element is loaded separately. All connected expenditure like customs duty; handling charges etc. are also included in inventory valuation. The valuation of inventory at the month end is to be made on the basis of exchange rates prevailing on the last day of the month. The difference if any between the provisional rate and the actual payment rate shall be charged off to the consumption account, if the material is already consumed.

The account department also ensures that all claim suppliers for shortage are booked on monthly basis and necessary on quarterly basis for the pending claims.

Indigenous Ammonia
The indigenous ammonia is supplied by KRIBHCO / GNFC to Kandla unit. The quantity received is accounted at the price payable to the party which is fixed by the Govt. of India. This price is fixed at par with the landed cost of imported ammonia.

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Potash

Potash purchase orders are placed by the commercial department time to time depending on the material requirement. The material received valued at agreed price plus local sales tax and freight for transportation of material up to plant site. The finance department at head office ensure that payment for these raw materials are released on due dates to avoid interest liability. After releasing the payments the inter unit debit advice is sent to plant. On receipt of the payment advices the supplier’s account is adjusted in the plant.

Natural Gas

Kalol and Aonla plant consume as feed stock and fuel. As per the contract with ONGC, gas is supplied to IFFCO at the price fixed by Govt. of India from time to time. The meters provided at the inlet point in the plants are the basis for monthly billing. Meter reading is carried out jointly by ONGC / GAIL and IFFCO representatives. The unit sends the telex to head office for making payment to ONGC / GAIL after due certification of bill by the head of technical department about quantity of gas received.

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Naphtha

Naphtha is supplied by IOC against advance payment terms. There are excise duty concessions available for these items provided they are consumed for manufacture of fertilisers. Accounts department in coordination with production department shall ensure that all the excise duty requirements are fulfilled that the duty concessions are fully availed. The inventory is valued based on the quantity received as per MRR received from production department on monthly basis. The price payable to IOC for naphtha is fixed by the Govt. by time to time the naphtha is supplied to Kalol unit from Mathura refinery.

Catalysts & Resins

The Catalysts & Resins are produced by the material department at the plant; on the receipt of the material the inventory is valued at the agreed price. For Catalysts & Resins where IFFCO has pooling arrangement with other companies, the material received is taken to inventory at the actual price paid and equivalent amount is credited to “material received on loan account”. This entry will be reverse when the material is procured by IFFCO and replenished for return of loan. The inventory and consumption account then shall be accounted at the actual procurement price.

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STORE SECTION

Store of any organization is of vital importance. It is the responsibility of stores to receive the material required by the organization’s opens to keep it properly & to issue it as when required. The stores are divided in two subsections for greater flexibility like receipt and custody section. In IFFCO there are two stores. a. Store A for Aonla-1( this store contains that spares which are used by Aonla-1) b. Store B for Aonla-2 unit.( it contains mainly catalysts used by Aonla-2 ) Store has the following warehouses: • • • • • • • Main Store Cement godown Petrol Pump Cable yard Chemical godown Paint godown PDIL store

A.

RECEIPT SECTION -

This section is responsible for receiving the materials and inspecting them. The process involves following steps. 1) The document regarding the material may be sent to the stores, purchase, concerned department. But ultimately they have to be send to stores.

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The documents may be:    2) 3) Goods receipt / railway receipt / challan Form Excise duty

The particulars of the document are noted in the carrier receipt register (CRR). After the entry in the register, the document is given to an agent termed as handling contractor. He will collect the material.

4)

If any discrepancy is found during checking, the accounts section is informed for necessary action and getting claim from insurance company. The date of receipt is filled in CRR.

5)

The next open is filling the stores receipt vouchers (SRV). Here the quantity mentioned in challan and purchase order are compared, SRV Has 7 copies, two for accounts and one for each purchase, stores, indentor, master file & custody section.

B)

CUSTODY SECTION -

This section is responsible for proper keeping of materials and issuing them when required by different department and contractors. The material received here is first checked as per SRV for every material there is a card. These cards are located in bins according to code of material is received in custody the card information is updated.

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When someone wants to issue certain material he has to fill the store issue voucher (SIV). Once the item is issued again information is updated in the kardex. When a particular part is returned then this received in stores, by internal stores return voucher (ISRV). After issuing the material the number of issue and the quantity issued is noted in SIV control registers. Custody section takes care of spares.

SPARES –

About 36848 spares of Aonla Unit-1 are housed in store and 17799 spares of Aonla Unit2 are housed in store. Spares have been classified plant wise. The first digit of the code of item is numbered according to given criterion      Ammonia Urea Product handling Power Sp. Equipments General items

In IFFCO inventory is divided into two types:

i. ii.

General and Spares

General are those inputs which can be used at various sites as wire, pipe etc.
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Spare are those inputs which are specific to a particular plant and are of particular size.

ABC CLASS WISE LIST OF PHYSICALLY VERIFIED ITEM

AONLA UNIT -1

Verified A Class in the General Spar year e 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 0 0 0 0 0 0 134 0 Total 134 0 0 0 0 1 0 402 0 403

B Class
General Spar e 0 0 0 22 72 49 384 23 550 0 0 0 20 122 0 630 112 884

C Class
General Spar e 0 7 3 8323 3512 41 3982 229 16097 1 1 6 1038 1 1277 0 4072 613 1638 1

Unclassified
General Spar e 0 0 0 0 0 0 0 523 523 0 0 0 0 0 0 0 1876 1876

Total
General Spare 0 7 3 8345 3584 90 4500 775 17304 1 1 6 10401 1400 0 5104 2631 19544

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ABC CLASS WISE LIST OF PHYSICALLY VERIFIED ITEMS AONLA UNIT-2

Verified A Class in year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 0 0 0 0 0 134 0 Total 134 the General Spar e 0 0 0 1 0 389 0 389

B Class
General Spar e 110 0 0 0 0 257 0 367 271 0 0 0 0 626 0 897

C Class
General Spar e 203 2 2713 1185 13 1428 159 5703 393 11 5353 311 4 2204 219 9055

Unclassified
General Spar e 0 0 0 0 0 0 139 139 0 0 0 0 0 0 1115 1115

Total
General Spare

313 2 2713 1185 13 1819 298 6343

664 11 5353 811 4 3279 1334 11456

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ACCOUNTING FOR STORES

General Outline of stores Function:

a. The authority of storage of packing materials like bags is vested with bagging department. The bagging department receives the material, gets it inspected in laboratory, issued the same for product bagging and maintains the stocks.

b. Maintenance of records for all quantitative transaction of packing material is the responsibility of bagging department. Similarly the raw materials are handled by production department with all responsibilities in respect of quantity accounting.

Functions of Store Accounting Section
The section dealing with accounting of stores in the finance department shall have following functions:1. 2. Accounting of receipts, issues, return and transfer of materials. Accounting of imported materials for capital works and opens. 3. 4. Associating with stores section for stock verification. Valuation of stores items should do on weighted average basis.

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Receipt /Issues/ Returns Transfer of Materials

a) The second copy of the material receiving reports after pricing, shall be passed on to the stores accounts sections to scrutinized the same with reference to store item code quantity of measure etc. and process it for accounting of receipt of materials. After issue / return of materials, issue section of stores department arranges data entry on the daily basis. Checklist processed is sent to stores accounting section for scrutiny in respect of store item code, cost / service code, expense code and unit measure etc.

b) The corrections and financial and financial adjustments are made to arrive at final check list after scrutiny of final check list entry in priced store ledger is to be processed. The section shall ensure that all receipts, issues and returns / transfer voucher raised by the stores section are finally posted in the price store ledger.

c) For clearance of imported materials, amount deposited for custom duty in the PD account etc. Shall be cleared against individual MRR’s on receipt bill of entry

d) The issue notes shall be priced on the weighted average rate basis after accounting the last receipt of material. After ascertaining the nature of expenditure, the job for which material is issued; an appropriate account code shall be given in accordance with the chart of account.

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e) In case of material like steel plates etc. where materials are received on actual weight basis and the issues are accounted are on theoretical weight basis as per sectional measurements, the quantity accounting shall be kept on weight basis. The difference in quantity in weight basis, if any, shall be adjusted to revenue / capital account, as then case may be, in consultation with consuming department, in case the shortage is more than the consumption norms, the same should be recovered from the contractor.

f) For all issue notes relating to works contracts, one copy of the price issue notes may be sent to the work accounts section to enable them to debit the contractor’s account. A monthly abstract also be prepared and passed on to works accounts group for check.

g) Details for receipts and issue of materials received / issued on loan shall be maintained by the store account section loan transactions shall be approved by the competent authority. It is the responsibility of material department to take action to square up the transactions within the reasonable time.

h) Inter unit transfer of material shall be accounted at cost basis freight and other incidental charges shall be borne by the transferee unit.

i) Materials issued to contractors shall be priced at the monthly weighted average rate and debited to materials issued to contractors account. The accounting for the difference between issue price and recovery price provided in the contract shall be

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Cleared by the accounts section dealing with the works. Recovery should be predefined basis and must be uniform.

j) For material returned to stores, return note shall be priced by the stores accounting section at the same rate which it was issued and the Value shall be debited to the relevant code of stores and spares parts inventory accounts by credit to the cost center / job number where the material is received back. The return note shall be priced on the basis of the original issue requisition against which the material was drawn if such reference is available, otherwise the same should valued at the prevailing average monthly rate applicable to that material.

k) No material shall be transferred to one card to another card without giving proper information to the stores account section. Such transfers shall be made by means of a transfer voucher on receipt of such transfer voucher and pass adjustment entries by debiting and crediting respective accounts.

l) Under the mechanized system of store accounting, all documents, such as MRR’s issue notes return notes and transfer vouchers shall be sent to the EDP section after exercising the prescribed checks. The EDP section shall prepare the all accounting abstracts with the summary figures with monthly journal entry. In addition, it shall prepare the priced store ledger. Ledger abstract for all items transacted during the month giving the opening stock, receipts, issues and past closing balance shall also be prepared. A copy of this statement shall be forwarded to store section for verification of the bin card balances. Discrepancy if any shall be reconciled by the store section with the stores accounts section.

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m) The price store ledger balance for each category store shall reconciled value wise with the control account balance in the ledger wherever possible. The accounts

section shall draw out reconciliation on monthly basis. After reconciliation a monthly material consumption statement, cost center wise, is prepared and circulated to concerned department by the 10th of following month for verification of its correctness and for monitoring the budgeted expenditure, if any discrepancy is reported, the same is adjusted in the ensuring month.

Insurance of Stock & Stores

For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and finished products held at plants, insurance shall be taken to cover the risks arising out of fire explosion, riot, strike terrorism, malicious damage, earthquake, etc. The stock of finished products lying at different marketing warehouses should also be adequately covered through the warehousing agencies. According to the value of stores and finished products keeps on varying from time to time, insurance shall be obtained in the form of declan policy whereby the average daily stock for each product held during the month shall be declared to the insurers in the first week of the next month. According to the declan policy, the insured amount for each product shall be stated separately. The liability of the insurers is limited to the insured amount. At any time if it is found that the actual stock is more than the insured amount to avoid less amount of

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insurance. In case of a declan policy, insurance premium is payable for minimum 35 % of the insured value. Before insurance is obtained, various categories of stores shall be reviewed with a view to select such items for which insurance is considered necessary.

Verification of Inventories

The officer of stores will coordinate the job of physical verification and the accounts officer in charge shall render all assistance to ensure that the physical verification of inventories is carried out as per the policy and the policy and the approved program. The store department will ensure that the posting in the Kardex are updated before the verification of inventories. Kardex contains all the information that is in the store.

The inventories are classified in three categories for verification purpose. • • • Raw material & Packing materials Stores, Chemicals & Spare parts Finished products

The stocks of raw materials, packing materials and finished products are to be verified on quarterly basis by an independent surveyor by the society. No adjustments need be carried out in the books of accounts unless the discrepancies in liquid raw materials and solid raw material are in excess of 1% to 5% respectively. This is as per guidelines issued by the head office. In case of finished goods also the same principle applied except that no adjustments in the books of accounts shall be made. However the stock registers shall be adjusted on the
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basis of actual stock in order to replace the notional figures of stocks by more accurate estimate based on physical verification. The inventories for other items such as stores, spares, construction materials etc. are also verified every year keeping in view ABC analysis of stock items value and exercise of verification may be completed by March every year.

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For the purpose of verification of stores, chemicals & spare parts shall be classified in to A, B, C categories.

Categories A B C

Value (Rs. per unit) Above Rs. 50,000/10,001 to 50,000/Below Rs. 10,000/-

Quantum of Verification 100% 70% 25%

A team of stock verifiers shall prepare a stock verification sheet giving the kardex balance and the physical balance of each item covered in the stock verification. After filling up the particulars of the value and quality discrepancies with reference to the priced stores ledger balance, the stock verification sheets shall be forwarded to the materials department for scrutiny and reconciliation and adjustment in consultation with finance department accepted shortage shall be processed for the approval of the competent authority.

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Inventory Control

Inventory control is concerned with minimizing the total cost of inventory. The three main factors in inventory control decision making process are:
a. b.

The cost of holding the stock (e.g., based on the interest rate). The cost of placing an order (e.g., for row material stocks) or the set-up cost of production.

c.

The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand.

The third element is the most difficult to measure and is often handled by establishing a "service level" policy, e. g, certain percentage of demand will be met from stock without delay. The INVENTORY CONTROL system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. INVENTORY CONTROL and the activities of Inventory Control do not make decisions or manage opens; they provide the information to Managers who make more accurate and timely decisions to manage their opens. Inventory control is a systematic control and regulation of purchase and usage of materials in such a way so as to maintain an even flow of production at the same time avoiding excessive investment in inventories. Efficient material control reduces losses and wastage of materials that otherwise pass unnoticed. Inventory control is the core of material management. The need and importance of inventories varies in direct proportion to the idle time cost of men and machinery, and urgency of requirements. If men and machinery in the factory could wait and so could the
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customers, materials good not lie in want for them and no inventory need to be carried. But it is highly uneconomical to keep the men and machine waiting and the requirements for modern life are so urgent that they can not wait for materials to arrive after the need for them has arisen. Because materials constitute a significant part of the total production cost of the product. Thus, cost is controllable to some extent; proper planning and controlling of inventories are of great importance. If investment in inventory will be more then the company has to bear carrying cost and that finance can not be utilized. A good INVENTORY CONTROL policy should ensure smooth and uninterrupted supply without making unnecessary investment of funds in inventory. This requires that INVENTORY CONTROL policy must balance the requirements of the following two opposing and conflicting ends: i) ii) To maintain a large quantity for smooth open and efficient customers’ services. To maintain only a minimum possible inventory because holding costs and opportunity cost of funds invested in inventory.

OBJECTIVE OF INVENTORY CONTROL
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Scientific control of inventories should serve the following purposes: 1) To provide the continuous flow of required materials, parts and components for efficient uninterrupted flow of production. 2) To minimize investment in inventories keeping in view operating requirements. 3) To provide for efficient store of materials so that inventories are protected from losses by fire and threat and handling time and costs are kept at minimum. 4) To keep surplus and absolute items to minimum. 5) To protect the inventory against deterion, obsolescence and unauthorized use. 6) To ensure that finished goods are available for delivery to customers just to fulfill the orders.

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TECHNIQUES OF INVENTORY CONTROL
Reduction of surplus stock is an essential requirement inventory control. Various techniques are available to solve the various types of problems associated with inventory control:1) Min-Max plan 2) Order cycling system 3) Fixation of various levels 4) Use of control s 5) Review of slow and non-moving items 6) The ABC Analysis

1) Min-Max plan:
In this plan analyst lays down a maximum and minimum for each stock item. Minimum level establishes the reorder point and order is placed for quantity of material, which will bring it to the maximum level.

2) Order Cycling System:

In this system, quantities in hand of each item or class of stock are reviewed periodically. In that, if it is observed that stock level of a given item will not be sufficient till the next schedule review keeping in view of its probable rate of depletion, an order is placed to replenish its supply.

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3) Fixation of Various Levels:
Certain stock levels or fixed levels are given below:-

A). Maximum Level
It is the quantity of materials beyond which a firm should not exceed its stocks. If the quantity exceeds maximum level limit then it will be overstocking. Maximum Level = Re-ordering level + Re-ordering Quantity-(Minimum

Consumption*Minimum Re-ordering period)

B). Minimum Level
It represents the quantity of stock that should be held at all the time, stock level is normally not allowed facing below this level. Minimum Level = Re-order level – (Normal consumption*Normal Re-order Period)

C). Safety Level
Normal issues of stock usually stopped at this level and made only under specific instructions. Safety stock is a buffer to meet some unanticipated increase in usage.

Safety stock level = Ordering Level – (Average rate of consumption * Re-order level) OR = (Maximum rate of consumption – Average rate of consumption) * Lead Time.

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d). Re-ordering Level
When the quantity of materials reaches at a certain figure then fresh order is sent to get materials again. Re-ordering level = Maximum Consumption*Maximum Re-order period.

4) Use of Controls:
Inventory turnover helps management to avoid capital being locked up unnecessarily. This reveals the efficiency of stock keeping .

Inventory turnover =Cost of materials consumed / Cost of average stock held during the period Where, Cost of average stock = [Cost of opening stock + Cost of closing stock] / 2

Inventory turnover [in days] =Days during the period /Inventory turnover .

5) Review of slow moving and non- moving items:
Stock turnover should be as high as possible. Loss due to obsolescence be eliminated or these items used in some profitable work. Slow moving stock should be identified and speedily disposed off. The speed of movement should be increased. The turnover of different items of stock can be analyzed to find out the moving stocks.

The percentage of slow moving stores = Slow moving stores / Total Inventory
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TECHNIQUE USED IN IFFCO FOR INVENTORY CONTROL

The ABC Analysis:
With the numerous parts and materials that enter into each and every industrial production, inventory control leads itself, inventory and foremost, to the problem of analysis. Such analytical approach is popularly known as ABC (ALWAYS BETTER CONTROL) Analysis. This Plan is based upon segregation of material for selection control. It measures money value i.e. cost significance for each materials item in relation to total cost and inventory value. The logic behind is that the management should study each item of stock in terms

of its usage, lead-time , technical or other problems and its relative money value in the total investment in inventories. Critical, i.e. high value items deserve very close attention, and low value items need to be devoted minimum expense and effort in the task of controlling inventories.

The ABC Reports are made: “A” inventory reports lists parts having little or no turnover. Turnover frequency is measured by an exposure index. We calculate the index by dividing a part’s inventory quantity by its usage during the most recent 24 month period. “B” report shows the parts with more than a one year supply but less than a 2-year supply. “C” report lists the parts with more than six months supply but not more than one year.

Criteria For Judging The Inventory System
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While the over-all objectives of the inventory system is to minimize the cost to the firm the risk level acceptable to the management, the more proximate criteria for judging the are: Comprehensibility Inventory system range from the utterly simple to the complex ones. Irrespective of how simple or how complex a system is, regardless of whether it is automated or manual, it should be clearly understood by all affected parties. The system must be properly explained to all concerned people so that its purpose, logic and nale are transparent. This generates enthusiasm for the system and enhances its credibility. Otherwise it is likely to be perceived as a mysterious ‘Black box’ of dubious value.

Adaptability –

The questions raised in this context are: 1. Is the system responsive to change? 2. Can new products, new situations and new requirements be handled by the system? A certain degree of flexibility and adaptability must be desired into the system to make it versatile. Of course this cannot be and this should not be carried too far. The system must not provide for every possible and imaginable contingency. If it is developed with this ideal, it is likely to be a complex monstrosity. Remember the caveat that the design of any system should ordinarily take care of about 90% of the cases, leaving the balance 10% to be handled by hand.

Timeliness –

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Inventories may suffer loss in value on account of a variety of factors. The more common sources of value decline are:    Obsolescence caused by changes in technology & shifts in consumer taste. Physical deterion with the passage of time. Price fluctuation because of inherent volatility of certain commodities

The inventory system should be capable of inducing timely action. It should provide adequate forewarning which triggers appropriate corrective steps

Inventory Software

In IFFCO the PSL software is used for the management of inventories. This software holds all the transactions of the stocks. So this software helps much in maintenance of stocks. It makes very easy to account persons to maintain the transactions of inventories. A part of this software is installed on the systems of the stores, whenever a transaction is made in the store, the details of that transaction is reaches to the systems of the store accounting section, because both the systems are connected in the local area network (LAN). So with the help of LAN environment it is very easier to accountants to retrieve the information regarding the transactions made by the stores. Apart from this, this software has the variety of qualities which we can discuss with the help of menus of software. There are six different menus in this software these are as follows: i. ii. Data entry Queries
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iii. iv. v. vi.

Reports Processing Calculator Exit

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DATA ENTRY MENU

Data Entry

Document entry

Adjustment SIV

SRV SIV ISRV SAV STV (IN) STV (Out)

Adjustment ISRV

Physical Verification Entry Entry of Surplus/ obsolete/ Insur.

The very first menu that is data entry is used for the various types of entries of transactions. In the data entry menu there are several options shown in above diagram.

Document Entry:
This option is used to enter the data in various types of documents like SRV, SIV, ISRV, STV (in), STV (out) etc.

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Adjustment Entry:
With the help of this option we may easily make the adjustments in the stock issue voucher (SIV), due to any previous adjustment. If the value of material has wrongly feed in the documents or the valuation is high then it is used to decreases the value of that material.

Adjustment ISRV:
This option of data entry menu has the same working in issue stock return voucher (ISRV). This is used whenever the valuation of any material has to increase. Thus easily adjustments are made.

Physical Verification:
In case of verification of stock the person responsible for stock verification estimates a range of items for verification and after verifies the selected range of items, they punched the quantity verified or lock the verified quantity till the next verification.

Entry of Surplus/ Obsolete:
This option is used for adjust the surplus items which is declared by the plant. The surplus items means, the items which are exceeds from the records. So in case of this situation the accountants make entry @ of 1 Rupee per unit of items. There are some spares which are not in used. We give entry them in surplus. While the spares which are not in working condition or they are outdated, comes under obsolete items.

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REPORTS MENU

Reports

Summary account head wise Month Report before PSL runs PSL JV Month Report after PSL runs Inventory Consumption Kardex Code wise inventory status Yearly summary for HO Issue above Issue more than Other reports

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Summary A/C head wise:
This option creates the summary reports of all the A/Cs in respect of accounts heads like      Inventory spares (Ammonia, Urea etc.) Loose Tools Chemicals General Stores Construction Materials etc.

Monthly report before PSL runs:
This option creates the monthly report of all the documents like – SIV, ISRV, SAV, STV (in), STV (out) etc. so that the account persons may check whether the documents are correct or not., because if there is any mistake in any document and PSL run is performed it will create the wrong final reports.

Monthly report after PSL runs:
The working of this option is same as the previous option but the difference is that the reports made after the PSL run are more accurate updated and non volatile in nature.

PSL JV:
After processing of PSL run all the documents becomes updated and all the transactions also gets updated. So that by this option we can see all the journal voucher of the entries of inventories.
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.

Inventory consumption:
This option of the report menu shows the data regarding the consumption of materials according to the date. We can see the consumption of a particular item. This report helps in forecasting of material purchasing for the future consumption of the materials. It helps in deciding the re-order level of inventory.

QUERIES MENU

Queries

Brows Inventory Master

This menu has single option that is brows inventory master. In this option we may see the status of various materials or items. As the name of this menu, we can perform the query task, on the basis of material codes, that are of twelve digits number. This option is very helpful in search of any particular transaction in inventories. In a query task we are supposed to enter the material code in the material code box and then click over the retrieve button. As soon as we click over the retrieve button the whole in formation regarding that code is appears on the screen.
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The appearing statement contains the material code, material description, opening quantity, closing quantity, values, PSL rate that is the per unit price and also the location of that material.

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PROCESSING MENU

Processing

Weekly PSL proc.1

Put account INVMAST

group

in

Reverse stock for Physical Kardex mismatch Cumulative process Reverse stock for PSL Kardex mismatch PSL Process 1

Processing is the most important task of this software, because all the reports which are forwarded to the concerning authorities and are the basis for the further actions are made only after the processing or the PSL run. PSL processing makes update all the documents.

PSL Process I:

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The option process I update and calculate the values for all documents and makes available to create the final reports. Once a PSL run is processed the data can not be changed, So that this task is very sensitive so the operating person should have the great care and responsibility in processing task. PSL Process is done for tallying codes and value of the material.

Put A/C group in inventory Master:
This option also a processing task when we executes this option it assigns the account group to all the inventory / item codes so that these codes may link to a particular account group. In this inventory are grouped.

Reverse stock for PSL kardex mismatch:
It is very important processing because it creates a list of all the items which are mismatching in respect of units / quantity between the PSL and kardex. If there is any mismatch in PSL and Kardex the report shows those mismatches on the screen.

Reverse stock for physical kardex mismatch:
This option creates a list of mismatches of karedx and physical verification. This processing performed once in year, because the physical verification of the inventories is done once in a year.

Calculator & Exit Menus
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The calculator menu has no sub option we can use the calculator only by clicking on the calculator menu. It helps much in manual calculations make the surety of correctness. Apart from this the exit menu is simply for quitting the software, whenever we click over the exit menu it exits from the software.

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DIFFERENT VOUCHERS

In IFFCO there are 3 types of receipt and 1 issue voucher are generally used for the particular receipt and issue material. These are listed as below:

1. RECEIPT VOUCHER • • • SRV (Store receipt voucher) ISRV (Internal store receipt voucher) DCSRV (Direct consumption store receipt voucher)

2. ISSUE VOUCHER • SIV (Store issue voucher)

3. ADJUSTMENT VOUCHER

• •

SAV (Stock adjustment voucher) STV (Stock transfer voucher)

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SRV (STORE ISSUE VOUCHER)

When material is checked with challan / invoice and the purchase order for quantity SRV (store receipt voucher) is prepared and the material kept in section. SRV can be of two types:

(a) FIS (Receipt from supplier voucher) These vouchers are generally generated by the store whenever the material is received from the supplier/ vendor in stores. (b) H.P (Receipt voucher for direct consumption) These vouchers are generally generated when material is directly received by the indentor for direct consumption of raw material.

The copy of these SRV will be dispatched departments such as: (a) 1 copy to purchase department. (b) 1 copy to indent department. (c) 2 copy account department. (d) 1 copy lies with stores itself.

ISRV (INTERNAL STORE RECEIPT VOUCHER)

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If the hundred percent of the issued material have not been utilized by the particular department or parties, in this stage the concerned party or department will revert back the remaining raw material to store by using such type of issue voucher. These ISRV can be of 5 types which are as follows: BD: Such types of ISRV are generally used by the particular department for the general item. BB: Such types of ISRV are used for the spare return by the particular department. BC: Such types of ISRV are generally used by the contractor for return of remaining raw material. BE: These vouchers are used for stationary items. BA: these are also used by controller for spares.

Note: The copy of these ISRV will be send to the following departments mentioned as:

(a) One copy to store. (b) Two copy to account department. (c) One copy lies with the indentor itself.

SIV (STORE ISSUE VOUCHER)

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The accepted & stock charged material is to user department against Store Issue Voucher issue to contractor through SIV. The authority of the SIV is given to competent person of Indentor department and this sign checked by the store section before issue and any permanent employee of IFFCO AONLA shall sign it at the time of receipt of material by the indentor department. These SIV can be of 5 types such as: ID: Such types of SIV are generally used by the particular department for the general item. IB: These vouchers are issued by the department for spares. IC: Such types of vouchers are generally issued to the contractor in case of general items. IE: Such vouchers are generally issued by the particular department for the stationary items. IA: These vouchers are generally used when the spares are issued to contractor.

NOTE: The copy of these SIV will be dispatched to following department such as: (a) One copy to purchase department. (b) One copy to indentor. (c) Two copy to account department. (d) One copy lie with the store itself. (e) One additional copy to security.

SAV (Store Adjustment Voucher)

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These vouchers are used when there is some fault in the code of the material. In this case SAV is prepared. But in SAV the value of the material should be same that is equal to the previous material which was entered in the voucher by mistake.

STV ( Store Transfer Voucher)

Store Transfer Voucher is used in case of transferring the material from one store to another. As we know that there are two stores in IFFCO. One is for Aonla-1 Unit and second for Aonla-2 Unit. In Aonla-2 store generally catalyst are stored. Thus STV is used when we transfer the input material from one store to another. STV are of two types: 1) STV(in) 2) STV(out)

INDIAN FARMERS FERTILISER COOPERATIVE LTD. AONLA UNIT
STORES RECEIPT VOUCHER
SRV NUMBER DATE CRR NUMBER SRV PREPARED:

PO No.& Date GR/RR No. Date:, Transporter S.No.

ABNL ABB Ltd.

CRR Date

RECD Date

CHALLAN/BILL No. FORM 31 No. RR Value Inspection remarks

Freight From: DEPT CODE: Truck/Trailer/Wagon Paid DEPT Name FARIDABAD DESCRIPTION Unit Qty.

ITEM CODE

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PO SNo

Card balance

No

Po: Challan: Received: Accepted: Rejected: DIS/REJ No.

PO SNo

Card balance

No

Po: Challan: Received: Accepted: Rejected: DIS/REJ No.

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INDIAN FARMERS FERTILISER COOPERATIVE LTD. AONLA UNIT
DIRECT CONSUMPTION STORE RECEIPT VOUCHER DCSRV
SRV NUMBER DATE CRR NUMBER SRV REF:

PO No.& Date

IFPH

Inter unit trans. IFFCO PHULPUR UNIT GR/RR No. Date:, Transporter S.No. DESCRIPTION PO SNo Freight From: Paid TRK/WGN

CRR Date

RECD Date

CHALLAN/BILL No. FORM 31 No.

DEPT CODE: DEPT Name Unit Qty.

PHULPUR

Value

Inspection remarks

BOLT WITH NUT SIZE M12*165MM No LONG PT.NO.BN 12*165(SS304)

Po: Challan: Received: Accepted: Rejected: Exp. Code DIS/REJ No.

PO SNo

No

Po: Challan: Received: Accepted: Rejected: DIS/REJ No. Exp. code

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DESPATCH ADVICE
NO: TIN NO: KER ENGG. WORKS RAMPUR ROAD, BAREILLY S.NO 1 2 3 4 CASE MARK DIMENSIONS& TOTAL NO PKG NET WT. PKD.BY DESCRIPTION 2RE-69 NO) ROUND RAR(5 C.B.GUNJ. BAREILLY P.O/W.O.NO: AUTHORITY DISPATCH:GM UNIT MR MR MR MR PREP. BY FOR

QUANTITY

REMARKS FOR MACHINING -DO-DO-DODESPATCH THROUGH: DOOR DELIVERY RR/GR NO: GATE PASS: FREIGHT

PKGS COST: RS. SIV NO:

SR. MANAGER STORES

THE AFORESAID ITEMS HAVE BEEN RECEIVED IN GOOD ORDER & CONDITION COPY TO: 1) CONSIGNEE 2) TRANSPORTER 3) CM (F &A)/ INSURANCE 4) INDENTOR

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5) G.M.APP./W.O.FILE.

RECEIVER’S SIGNATURE& STAMP

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REJECTION/DISCREPENCY REPORT

REF:

DATED:

M/S AB SALES & SERVICES 365, HARRIS GANJ KANPUR FAX: CRR NUMBER: SUB: OUR P.O. NO:4410/1294/WS0137//071125 YOUR REF/INVOICE/BILL.CHALLAN NO. 10/SP/TAX/08 RR/LR NUMBER: GR 8319469 Transpoter: SOUTH EASTERN ROADWAYS DATE: DATE:

BOMBAY Dear Sir, Please refer to the supply of materials against your invoice/Challan No. as mentioned above. On opening the case/s and checking the contents the following discrepencies have been observed.

S.No

Material Description

Unit Desp.

QUANTITY Received Excess Short Rejected

Remarks

1. 2.

The packing case/s was/were received in sound/broken condition.

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ACTION REQUIRED BY YOU
YOU ARE REQUESTED TO:1. Make good of shortages. 2. Dispatch replacement against breakages/unacceptable material. 3. Inform disposal action for breakages/unacceptable material. 4. Being excess supply than our order quantity, material has not been accepted.

Cost of damage if any_____________________________________________

Payment Terms:

yours faithfully, For INDIAN FARMERS FERTILISER COOP.LTD.

Location Mail: Fax: Through E-proc

CH. MANAGER (STORES)e-

Phone

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INDIAN FARMERS FERTILISER COOPERATIVE LIMITED Aonla Unit, P.O. IFFCO Township, Bareilly TENDER ENQUIRY MPR No 080380 Enquiry No: 6000/672/UT0044/IE/080308(*) This Enquiry is due on 14/07/2008 Desired Delivery: 4 Weeks

INDENTOR’S COPY UTILITIES DEPT

Enquiry Type Single Stage Dear Sir, Please submit your Sealed Quotation, with earliest delivery, as per terms and conditions and specification given below and enclosed herewith. S.No. 1 Item Code Description DC Liquid Chlorine 99% pure as per IS code 646/1988(latest version) in IFFCO. Quantity 220 Unit MT

PERFORMANCE BANK GUARANTEE: The seller on award of P.O./W.O., shall furnish a Performance Bank Guarantee equivalent to 5% of the P.O. value in our Performa enclosed. This bank guarantee shall be issued by any State Bank of India and its associates. Nationalised/ Scheduled Commercial Bank/ Cooperative Bank who are members of IFFCO’s consortium of Banks (Except other cooperative and Gramin Banks) having branch in India and be valid to cover the guarantee period with a claim period of further six months. INDIAN FARMERS FERTILISER COOPERATIVE LIMITED

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PURCHASE ORDER Thru Courier M/s : JASUBHAI ENGINEERING PVT. Add: 803-4, Chiranjiv Towers, Nehru place City: New Delhi E-mail: Code: JASU Test Copy Pin: 110019 Order No. Your Quot: Our Enq No: Delivery Dely Pd. Consignee: Destination: Dear Sir, Please arrange to supply the following as per your quotation referred above subject to conditions mentioned herein and enclosed herewith. S.No Description 1 2 Total Value ………………… Quantity Unit Rate Amount

Price Basis

: Ex-Works Ahmadabad

P& F Charges : P&F Charges @ 2.00% extra Excise Duty 14.42% Sales Tax : Extra as applicable against form ‘C’ : Extra as applicable against documentary evidence present rate is @

IFFCO-AONLA MATERIAL PURCHASE REQUITION:
MPR-NO.: 080472
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Dept-Ref-No.: 2200/2171 Budget Code Sanctioned- UtilisedAmt Amt This MPR(Rs.) Balance Issue-Date: Expected: Dly Date: N*.05 ……….. ………… ……….. ………..

Class: Stock, capital, D.C., Supply, Ordinary, Proprietory, Domestic, Single stage Indentor: ADMN SECTION Suggested Vendor Ctegory: Godrej & Boyce Mfg. Co. Lucknow. MPR Description: Procurement of official furniture for the year-2008 Brief Justification: Office furniture are required for different section/deptt. Last Pos/WOs Ref Nos: Last Pos/WOs total value: S.No Item code Material decription DC DC DC Unit Quantity required Inventory Value Stk-oth.unit/ levels last 3yr consumption

1 2 3

INDIAN FARMER FERTILISER COOPERATIVE LTD. AONLA UNIT
SAV NUMBER: 089UYW008 DATE : 8/6/2005

STORES ADJUSTMENT VOUCHER

----------------------------------------------------------------------------------------------------------------------------------------------------------FROM TO

----------------------------------------------------------------------------------------------------------------------------------------------------------101

Sno Code No. E

Stock

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------SIGN

INDENTOR MANAGER STORE

STORE KEEPER

STORE

STORE OFFICER

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ANALYSIS OF IFFCO

A is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. One of the most important financial tools which have come to be used very frequently for analyzing the financial strengths and weaknesses of the enterprise is analysis. analysis as a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various s for helping in making certain decisions. “Financial analysis is the calculation and comparison of s which are derived from the information in a company's financial statements. The level and historical trends of these s can be used to make inferences about a company's financial condition, its opens and attractiveness as an investment.” Financial s are calculated from one or more pieces of information from a company's financial statements. A financial can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A gains utility by comparison to other data and standards. analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things.

Financial analysis groups the s into categories which tell us about different facets of a company's finances and opens. An overview of some of the categories of s is given below.

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1.

Leverage s which show the extent that debt is used in a company's capital structure.

2.

Liquidity s which give a picture of a company's short term financial situation or solvency.

3.

Openal s which use turnover measures to show how efficient a company is in its opens and use of assets.

4.

Profitability s which use margin analysis and show the return on sales and capital employed.

5.

Solvency s which give a picture of a company's ability to generate cashflow and pay it financial obligations.

s are always expressed as a decimal value, such as 0.10, or the equivalent percent value, such as 10%. Financial s allow for comparisons
• •

between companies between industries between different time periods for one company between a single company and its industry average

•

•

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HOW A IS EXPRESSED?
 As Percentage - Such as 25% or 50%. For example if net profit is Rs.25, 000/and the sales is Rs.1, 00,000/- then the net profit can be said to be 25% of the sales.  As Proportion

- The above figures may be expressed in terms of the

relationship between net profits to sales as 1: 4.  As Pure Number /Times - The same can also be expressed in an alternatively way such as the sale is 4 times of the net profit or profit is 1/4th of the sales

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FINDINGS OF THE STUDY

Some organizations invest 60 to 70 % of its capital in inventories. Thus it is very important for the organization to manage its inventory through effective inventory control systems. The findings of studying INVENTORY CONTROL of IFFCO are as follows: 1) There is used one inventory software (PSL) by the employees for efficient INVENTORY CONTROL and to remove the paper work. But there are some employees including managers who do not know how to operate that inventory software while it should be known by all the employees that are related to INVENTORY CONTROL segment. 2) It was observed one thing that there was not coordination among the employees even between those who lies in the same level. This feeling of human characteristics is normally seen but it is not good for the organization. For the better productivity there should be proper coordination. And through the coordination an organization can manage its all functioning including INVENTORY CONTROL. 3) IFFCO is a semi-government organization. So there were some employees who have got the senior position because of experience. Even after having experience those people were not able to operate all the functions and work related to inventory. It was due to change in the technology. 4) Firstly in IFFCO paper work pattern was followed but now it has converted in soft form that is computers are provided to the employees. Now the kardex and
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other documents and details are entered in the computer as well as in the files. But due to lack of knowledge about new software, the working is not proper. 5) I. II. III. The inventories of IFFCO are divided into three parts that areInventory of raw materials Inventory of finished goods Inventory of spares Here I have studied the inventory of spares. Because the raw material that is used in IFFCO are gases and the measurement of its inventory level is very typical. 6) In the IFFCO the inventory are divided into spares and generals. Generals are those parts which are used normally in various machines, offsite while spares are unique to its machines. There are two stores in IFFCO. In one store the inventory of Aonla Unit 1 is stored while in other catalysts and various chemicals are stored. For the transfer of spares from one store to another, a voucher is used that is store transfer voucher (STV). 7) It clears that the person who raises the indent for the required material is known as indentor. Indentor plays an important role in this. The indentor checks whether that material that has purchased is according to his requirement or not. Indentor can be any person. 8) Before the purchasing of the material, firstly enquiry takes place. This enquiry can be done in two ways. Through the e-procurement or manual. After this enquiry a QCS (quotations comparative statement) is prepared in which

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normally technically acceptable lowest bidder is chosen. Thus the purchasing process completes and the working of store department starts. Now the storing and issuing is the responsibility of stores. 9) There is followed a coding pattern in IFFCO that is good for the proper INVENTORY CONTROL. It helps the store’s employees in identifying the spares and generals. This coding is of 12 digits. It avoids the confusion. Hence it is good for the organization to do coding of the inventory. It highlights the INVENTORY CONTROL. 10) There are various formats as STV, ISIRV, DCSRV, SAI, SIV etc which are used for different purposes as for issuing the material from the store, store receipt voucher (SRV) is used, for the adjustment of the materials, the store adjustment voucher (SAV) is used. 11) The whole study shows that there is a good INVENTORY CONTROL system but nothing is perfect that why there are also some limitations. In IFFCO a history book of spares is used. It is prepared in both the form as a soft copy and a hard copy. 12) For the controlling of the inventory a technique is used in IFFCO that is ABC analysis. In ABC analysis spares and generals are divided in three categories on the basis of their values. Some items have 70% value while their quantity is 20%. The spares whose value comes under 20%, its quantity is present in 70%. While there are some spares whose value is 20% as well as quantity is also 20%. 13) For the verification of inventories a technique is used in which the material whose value is more is more than 50000, are verified 100%, the materials whose

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value comes under 10001 to 50000 are verified 70% and the remaining materials whose value is less than 10000 are verified 30%. 14) There is a company IFFCO- TOKIO General Insurance Company which is responsible for the insurance of damaged and short materials. Firstly there were different cooperatives which were associated with this task. 15) As we know that with the passage of time, some items becomes outdated or of no use. They are known as obsolete items. The items which do not move up to 7 years are not valued according to its original value. There’s 40% value is written off while they are valued at the 60% of their face value. The items which do not move up to 7 to 10 years, are valued at 55% of their original value while 45% of its value is written off. And the items which do not move more than 10 years, are valued at the 50% of their face value and 50% is written off. 16) In IFFCO to ensure the availability of items or spares, they are inventoried. There are decided various levels which shows the level of items that are stored in it. These levels are minimum level, maximum level and reorder level. Reorder level is that level at which new order is placed. These three levels are different for different items. The item which are frequently used that is generals have the high level of reorder. 17) Effective INVENTORY CONTROL enables an organization to meet or exceed customers’ expectations of product availability while maximizing net profits or minimizing costs. And the annual report shows that the inventory has decreased. It shows that they are managing inventory in a better way due to which it has decreased in compare to last year.

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18) In IFFCO there is three type of inventory but IFFCO does not preserve the finished goods inventory. IFFCO is a cost centre. Hence they do production but just after accomplishing the whole process i.e. after packing the urea, they transfer it in the rail bogie and send it to its marketing channel. And the responsibility of Bareilly unit completes. They have owned its own rail bogies and engine. 19) According to balance sheet It was found that the production has increased in compare to last year because of capacity enhancement and increased demand. That’s why the consumption of raw material as well as the inventory of raw material has also increased. It is good for the organization. 20) In IFFCO the stock has decreased and current assets have also decreased. It shows that the management has handled the inventory in the better and efficient way. It is good for the organization as well as for the management. 21) Whenever the purchase department raises the tender then the enquiry is done in two ways. First one is single stage, the items where there is no more chances of technical deviation then the checking is done before loading the material and indentor checks it later. While in two stage i.e. the stage where there are more chances of technical deviation, checking is done before loading and after receiving the materials. Expert performs this checking. 22) The ideal current is 2:1 while the calculation as per the balance sheet shows that the current is more than two times of ideal . It shows that management of IFFCO is handing the all inventory, sales, and machines in a great way. Even in the current year the current has decreased in compare to previous year but the organization is even in a good position.
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23) The cost of production of urea is much more than it’s selling price. This difference in the cost is provided by the government that is subsidy from government. The whole report clears that the management of IFFCO is handling the inventory in efficient ways even there is also some drawbacks but even after the management is running the organization in a good way. The annual reports shows that the inventory is decreasing in compare to last year and there is no interruption in the production which shows the unavailability of inventory. It is a indication that management is handling the inventory in a better way in compare to previous year. And the investment has decreased in the inventory. This capital may be used in some other productive work.

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SUGGESTIONS

1) Every week a report should be produced listing the status of every product that has been in stock for less than six months. The report should list the following informationa. Items number and description b. Total consumption of items ( in units) c. Current-on-hand quantity d. Minimum stock level of the item e. Maximum stock level of the item f. Re-order level of the item g. Any new item that is required h. Reason why that item was added to stock 2) Detailed record should be maintained by the management of store as well as purchase department, for new stock items that do not meet six months consumption. Because in the organization the number of obsolete items has increasing because of outdated technology. Due to which the store department has to bear the maintenance cost and carrying cost of obsolete items. Thus the management should review the record time to time.

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3) The management of IFFCO should conduct some development programmes for the knowledge of employees. IFFCO conduct various programmes for the farmer’s knowledge and their awareness but not for their employees. As I have observed that there were some managers who do not know the open of inventory software due to which the working was hampering. And the remaining employees have to take extra load of that work. It should not be there. 4) The management should not add new inventory. If it is deciding to store any new inventory then the management should give the reason why management is going to add new inventory. Thus the reason should be clearly stated. 5) If the cost of any inventory is high, then the management should find the substitute material to decrease the cost of inventory. 6) The management should provide the necessary information to the supplier. As I have noticed that the management of IFFCO tries to reserve its all information. Thus the management should provide the necessary information to the supplier so that the supplier can send the materials according to the requirement. 7) The business owner will need to do an initial count of everything in stock. The count of all items in stock should be completely documented as well as all items that are ready for sale. A recount can ensure accuracy. This will give the business owner a starting point for inventory tracking. At this point, it may prove to be an advantage for the business owner to use some kind of inventory tracking software application. 8) When new inventory is added to existing inventory, the first thing a business owner should do is to check it for quality. Are any of the items dented or damaged? If so,

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they will need to be returned so that the business can get appropriate credit— damaged items do no good sitting on storeroom or warehouse shelves. 9) The new inventory should be added to the count of the existing inventory, particularly in the business documentation. This will help the business owner to keep an adequate count of what is in stock. 10) When ordering it is advised not to over order or to under order stock; however, this does not mean that the business owner shouldn’t take full advantage of what’s available to them in terms of sales and discounts. If items bought in bulk are less expensive, it is sometimes a good idea to purchase them that way. Essentially, the business owner will need to make a judgment call and take the perish-ability of the product into considen. 11) When ordering stock it is important that a business owner does not substitute quality for quantity. In other words, cheap inventory is not necessarily good inventory and buying less expensive products to increase one’s inventory could result in profit loss. No matter what measures of inventory control that one puts in place, it’s always imperative that quality products remain the first and foremost concern of the business. 12) Getting the right amount of inventory is going to require a bit of speculative projection on behalf of the business owner. The business operator is going to need to guess how much they think they may sell in the coming months in order to order the amount they need. By tracking inventory on a weekly or monthly basis, the business owner will be able to identify predictable patterns of product use and sale. They can then base their ordering process on such predictions. The end result is that over stock and under stock of inventory is minimized.
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13) Diligent and regular tracking of inventory is recommended at all times. Further, when counting inventory in a warehouse or business location it is imperative that all counts are accurate. What good is inventory tracking if the calculations are all wrong? Essentially, inaccurate calculations of inventory result in significant losses of time and money for a business. Thus the calculation should be accurate and right. There should not be any deviation. 14) With so many other things that the business owner should be responsible for how will they manage the time for inventory control? Small inventories are usually fairly easy to manage, but what about warehouses and larger supplies? So the owner and the store manager should take care of it. 15) INVENTORY CONTROL is not a process that can or should be avoided; it may be a good idea for business owners to hire someone to be responsible for large inventories. The management should hire one inventory consultant. Because he can give better suggestion for inventory control. Inventory consultants know in a better way how to handle and in how much quantity they should be stored. 16) The manager should be responsible for weekly or monthly stock counts and for ordering and reordering products. This allows for the business owner to focus on other aspects of the business’ open. Thus the manager should take care of it. 17) The management should follow all the rules and instructions. Documents should be released at the issuing and other formalities. The management including the employees should be aware of all functions of software.

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18) The management should do contract with the inventory consultancy. An inventoryconsulting agency can provide a business owner with a complete print out of their current inventory. Thus, business owners have access to vital business documents and the information they provide. When it comes time to insure the business or to run an inventory check, a business owner can feel confident in knowing precisely what they are expected to have. Some inventory consulting agencies will actually handle all of the ordering for the business. While this may seem like too much control to give to another agency, some business professionals like they idea of relying on a company to manage inventory. It leaves the business operator free to manage other aspects of the business. 19) Another factor that every business owner must consider is the cost to insure inventory. Let’s face it; the bigger the inventory the higher the premiums are for insurance. Paying out additional funds for inventory can prove rather costly in the long run. Again, to save businesses money, good inventory and warehouse management are a must. Thus the management should take care that they should not order too much heavy inventory. If yes then it should be insured. 20) The store manager must decide firstly what products they will need in the future and precisely how much product to order. Thus they should order according to the requirement. 21) As we know that there is coding system in the IFFCO. They make the process of inventory simple. Items that are sold can be automatically subtracted from the existing count. Some software applications automatically create and print a

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reordering document. This type of software should be installed in IFFCO. Even there is PSL inventory software but the entry should be renewing time to time. 22) The consumption of all materials do not remain same overall the year. Thus the maximum level, minimum level and reorder level should be review time to time. Depending on the situation these levels should be flexible. 23) The purchasing process is directly related to the consumption and it can be easily recognized only by reviewing their level in the store time to time. Before purchasing any material first of all the purchase department should conduct enquiry to know whether that material is present in the store or not. If present then in which amount that material is present. It will help the management to reduce the overinvestment in the inventory. 24) The materials which are not in use due to outdated technology, they should not be kept because they cover the unnecessary place of the stores. I have seen that there was a crane in the IFFCO and it was of no use because of outdated technology. But even after that they have kept it. They should sell it to get some money to reduce its maintenance and carrying cost. If the management of IFFCO will follow these instructions then it can handle or manage the inventory in a better way.

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BIBLIOGRAPHY

1) http://www.businessin.com 2) http://www.mapxl.com 3) http://www.invatol.com 4) http://www.inventorymanagement.com 5) http://www.effectiveinventory.com 6) http://www.toolwatch.com 7) http://www.opsinventory.com 8) Business world magazine 9) Business today 10) India today

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APPENDIX

INVENTORIES
As at 31-03-2010 As at 31-03-2011

Inventories (including goods-in-transit Rs. 277.63 crore) Previous year Rs. 283.93 crore Raw material Stores and spares Loose tools Chemical and catalysts Packing material Construction material Stock-in-process Finished goods: Traded products Own manufactured Total 59.56 114.68 174.24 1577.10 86.07 1234.83 1320.90 2283.94 950.80 336.42 1.83 28.94 33.26 14.72 36.89 551.27 311.74 2.25 30.81 28.08 12.45 26.44

LIST OF GRAPHS
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1) Inventory turnover 2) Working capital turnover 3) Current 4) Cash 5) Solvency 6) Stock to current asset 7) Raw material 8) Owned capital turnover 9) PBT to sales

LIST OF ABBREVIATION
Q.C.S. T.O.I. Quotations comparison statement Telex of Indent

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T.O.P. F.O.R. M.P.R. N.I.T. S.O.R. B.O.Q. I.T.B. F.O.B. C.I.F. 5R’s

Terms of Payment Free on Rail / Road Material Purchase Requisition Notice Inviting Tender Schedule of Rates Bill of Quantities Invitation to Bid Free On Board Cost Insurance & Freight Right Price, Right Quantity, Right Quality, Right Place, Right Source.

QUESTIONNAIRE

1)

How is the Item coding done in IFFCO?

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2)

What is the normal classification methods of inventory followed in IFFCO?

3) 4) 5) 6)

What are the documents received along with the consignment. How is the sampling for inspection done? At what stage of goods arrival, inspection is done? What are the internal documents made from the time of receiving materials till goods are moved to final location?

7) 8) 9) 10) 11) 12) 13) 14) 15) 16)

How do you handle rejections? Do you send materials back? Do you allow sorting / repair? If yes, where is repair carried out? Do you have expiry dates for the materials? Do you make material requests to stores for issue of raw material? Do you perform Inventory adjustments, value based or quantity based? Do you perform Inventory receipts? What the various types of analysis used for INVENTORY CONTROL? Do you use re-ordering methods? How do you determine the ordering quantity? Do you perform 100 % item checks or random? If Random, what are the criteria for selecting items?

17)

Which inventory software is used for the convenience in inventory control?

18) 19) 20)

On what basis inventory is divided into generals and spares? How much inventory is stored in form of spares and generals in IFFCO? Which pattern is followed for the payment against purchase?

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