PREFACE Summer Training constitutes an important part a good practice oriented management course. According to the syllabus of MBA, every student has to undergo 6-8 weeks summer training for exposure in any commercial industry or organization. So for the partial fulfillment of this requirement, I underwent my training at IFFCO AONLA , BAREILLY.

Training is necessary to understand that how theoretical concepts are applicable practically.

During my short stay in the organization, I was introduced to entire company. I visited many

departments- Human Resources, Accounts, Administration, Regulatory and Safety, main

plant, etc.

ABSTRACTIn every organisation management is that of an organisation which concerns with

planning, organizing, directing and controlling of various marketing activities to attain

the business objectives. It is the science and art of preparing plans and organize them

as well as direct the human efforts to control the force and utilise the materials for the

benefits of human being.

As an integral part of the curriculum, all MBA students are required to undergo a

practical training in some industry. The main objective of this training is to

supplement student’s theoretical knowledge with exposure to practical operation of an

organisation. This provide the student with better understanding of all functional areas

of management and management skills applied in those functional areas.

In pursuance of the said requirement, I had my Summer Training at “Indian Farmers

Fertilizers Cooperative Limited Aonla”, one of the big producer of fertiliser in

Asia.

My project was “INVENTORY MANAGEMENT AND ACCOUNTING OF

STORES IFFCO”. I had a contrast of both happiness and anxiety and had undergone

difficulties also but with the immense assistance proper guidance and enough

encouragement from the IFFCO officials and staff, the work went on smoothly and

systematically. I really enjoyed working under congenial and convivial environment

of IFFCO, Aonla.

ACKNOWLEDGEMENT

Expression of sincere gratitude is just a partial acknowledgment. The accomplishment of this project would have not been possible individually without the encouragement, assistance & valuable support from various sources. My vocabulary falls short of word to express my sincere gratitude to Mr. Deepak Yaday(account officer) under whose guidance I had opportunity to carry out the present work.

I am very thankful to Mr. K.K. Pandey (Sr. Training officer) & Mr. D. Kalia (Manager training) who support me & helped me throughout the project. I am also thankful to Mr. D.R. Kundra (Sr. Manager-acconts) who helped me throughout the project with his been supervision & guidance.

I am thankful to F & A staff & to all the employee of IFFCO who cooperated with me during my training period.

Last but not the least , I would like to express my gratitude to Mr. A.U.Ahamed (Assisitant Manager) and Mr. Sandeep Ghambhir(depty. Manager) for their help and guidance.

I owe a deep sense of gratitude to all the respondents who gave me valuable information for the project.

Shilpi Sharma MBA (F&A) IIMS

LIST OF CONTENTS

1) List of abbreviation 12) Introduction to topic 2-33) Need of the study 44) Objective of the study 55) Methodology 6-76) Introduction about IFFCO 8-447) Finance and account department 45-508) Inventory management 51-549) Material department 5510)  Purchase section 56-6111) Payment against purchase 62 12) Delay in delivery 6313) Material coding 64-6514) Packing 6615) Inspection of material 6716) Accounting of raw material 68-7717) Insurance and verification 78-8018) Inventory control 81-83 19) Techniques of Inventory control 84-8920) Inventory software 9021) Different vouchers 91-113 22) Analysis 114-12623) conclusion 127-12924) Reference 130

LIST OF ABBREVIATION

Q.C.S Quotations comparison statement

T.O.I Telex of Indent

T.O.P Terms of Payment

F.O.R Free on Rail / Road

M.P.R Material Purchase Requisition

N.I.T Notice Inviting Tender

S.O.R Schedule of Rates

B.O.Q Bill of Quantities

I.T.B Invitation to Bid

F.O.B Free On Board

C.I.F Cost Insurance & Freight

5R's Right Price, Right Quantity, Right Quality, Right Place, Right

Source.

INTRODUCTION TO THE TOPIC

INVENTORY MANAGEMENT

"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 management. A proper planning of purchasing, handling,

storing and accounting should form a part of inventory management. 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 management will determine.

1) What to purchase

2) How much to purchase

3)      From where to purchase

4)      Where to store, etc.

"Effective inventory management enables an organization to meet or exceed

customers' expectations of product availability while maximizing net profits or minimizing

co.

Inventories constitute about 60% of current assets of companies of India. The manufacturing companies hold inventories in the form of raw materials, work in process, finished goods, stores and spares, chemicals, lubricants etc.

Three motives for holding inventories:- To facilitate smooth production and sales operation (transaction motive),

To guard against the risk of unpredictable changes in usage rate and delivery time (precautionary motive)

To take advantage of price fluctuation (speculative motive)

Inventories represent investment of a firm’s funds. The objective of the inventory management should be the maximization of the value of the firm. The firm should therefore consider costs, return, risk factors in establishing its inventory policy.

Two types of cost are involved in the inventory maintenance:-O “Ordering cost” requisition, placing of order, transportation, receiving,

inspecting, storing, clerical staff, are fixed per order. Therefore, they decline as the order size increases.

O “Carrying cost” warehousing, handling, clerical staff, insurances and taxes. Carrying costs vary with inventory holding. As order size increases, average inventory holding increases and therefore the carrying costs increase.

The firm should minimize the total cost (ordering+carrying). The economic order quantity of inventory level occur at point where total cost is minimum

EOQ = √2AS/C, where A= annual requirement, S = ordering cost per unit, C = carrying cost per unit per annum

When should the firm place an order to replenish inventory?The inventory level at which the firm places order to replenish inventory is called re-order level. It depends on lead time, usage rateRe-order level = lead time * usage rateLead time is the time normally taken in replenishing inventory after the order has been placed.Under uncertainty about lead time. Therefore firms maintain safety stock which serves as a buffer or cushion to meet contingencies.Re-order level = safety stock + lead time * usage rate

A firm which carries number of inventories that differ in value, can follow a selective control system. ABC analysis classifies- A category consists highest value, B category consists high value items, C category consists lowest value item. Tight control may be applied for high value item and loose control for low value item.

Large number of companies these days follows the total quality management (TQM) system which requires companies to adopt just in time (JIT) and computerized system of inventory.

NEED OF THE STUDY

1) How to make the inventory system more efficient and effective?

2) By which way the cost can be minimized that is invested in the inventory and how

to regulate the whole inventory system in a better way.

3) How IFFCO can 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) To analyze the working of various departments that work in coordination with

Finance department as payroll section, bill section, taxation section etc.

OBJECTIVE OF STUDY

"The main aim of study is to check the efficiency and effectiveness of inventory

management 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 management.

Or

To give suggestions to ensures smooth and uninterrupted supply without making

unnecessary investment of funds in inventory.

METHODOLOGY.   

      Research covers the search for retrieval of information for a specific purpose. Basically

research is the objective and systematic method of finding solution to a problem. The steps

followed to conduct this study are as follows:-

(1) Formulating research problem – The problem under study viz. how effective are the

measures applied by Iffco, Aonla to control the inventory is basically studied through

analytical research. Material is important for the efficiency of the system. It is a matter of

great importance for inventory department. Inventory department of IFFCO, Aonla is

responsible for efficient inventory control. Thus the whole study is conducted under the

guidance of officers of this department.

(2) Extensive literature survey – Many published studies, books or material on effective

control of inventory were referred to for getting a true direction to research process.

(3) Data collection – The study is conducted through collection of data through surveys,

interviews with officials etc. Personal interviews were conducted where a set of pre- conceived

questions were asked from the officers of inventory department regarding material control

policies adopted by them. Books of accounts of Aonla –I and Aonla – II are studied thoroughly

to details about inventory stock, cost of material consumed, increase and decrease in stock in

the last few years etc.

Sample of material was obtained randomly. ABC analysis was used where sample of

material was graded under three categories: A, B, C.

(4) Analysis and interpretation – The data about inventory is analysed to find out the

effectiveness and efficiency of inventory policy. As regards the financial performance, the data

about different financial indicators is analysed to calculate the different ratios and to draw the

graphs.

This section deals with the methodology used in my study. It describes the nature of study,

data collecting method, accounting procedure of inventories, valuation and verification of

inventories etc. The data used in study was manually collected from the employees of IFFCO

as well as from the net. Data were collected through the inventory software, databases, net

and by asking questions to the employees. There is no manual coding. I have also included

some financial data with the help of annual report.

We were placed in different departments that are related to the inventory .

We were told how the documentation in different departments like srv, po ,isrv , bills etc. are

done .For collecting data we have asked questions to the different department heads

TOOLS OF THE STUDY

I have mainly concerned the literature survey. I have used the graphs and tables in 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 following-

1)      Through asking the questions from the employees

2)       Net

3)      Annual report of IFFCO

4)      Accounting manual of IFFCO

5)      From the stores

6)      By the inventory software (PSL) that is used in IFFCO

7)      I have also collected some information from the purchasing department.

ORGANIZATION PROFILE

INTRODUCTION ABOUT IFFCO

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:

  1.   Largest producer of fertilisers in the country

  2.   Number of Plant Locations : Five

  3.   Installed Annual Capacity  ('000 MT)

     1.             UREA                -  4242.2

     2.             NPK/DAP          -  4335.4

     3.             TOTAL 'N'        -  2628.2

     4.             TOTAL 'P2O5   -  1712.8

1. Only Fertiliser Institution in the country to produce 68.47 lakh MT of fertilisers and

93.24 lakh MT of sales during 2007-08.

2. Contributed about 20% to the total 'N' and 25% to the total "P2O5" produced in the

country during the year 2007-08.

3. Fertilisers marketed through 39,564 Cooperative Societies and 15 Farmers Service

Centers.

4. Service to the Farmers through a variety of programmes.

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

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"

To provide to farmers high quality fertilisers in right time and in adequate quantities

with an objective to increase crop productivity.

To make plants energy efficient and continually review various schemes to conserve

energy.

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

quality of community life.

Commitment to social responsibilities for a strong social fabric.

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.

Foster a culture of trust, openness and mutual concern to make working a stimulating

and challenging experience for stakeholders.

Building a value driven organization with an improved and responsive customer

focus. A true commitment to transparency, accountability and integrity in

principle and practice.

Sourcing raw materials for production of phosphatic fertilisers at economical cost by

entering into joint ventures outside India.

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.

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 integration to meet feedstock requirements such Phosphoric acid.

4. Generation of Power.

5. Exploration /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.

Vision – 2015

In pursuit of its growth and development, IFFCO had embarked upon and successfully implemented its Corporate Plans, ‘Mission 2005’ and ‘Vision 2010’. These plans have resulted in IFFCO becoming one of the largest producer and marketeer of Chemical Fertilisers by expansion of its existing Units, setting up Joint Venture Companies Overseas and Diversification into new Sectors. :IFFCO has now visualized a comprehensive plan titled ‘Vision-2015’ which will be guided by the following objectives:

Production of fertilizers through expansion of existing units. Setting up of fertilizer production facilities in India and outside the country through

joint ventures. Diversification into other Profitable Sectors. Strengthening its raw material sourcing through Strategic Joint Ventures in India and

abroad. Strategic Alliances through IFFCO Consortium.

The salient features of the ‘Vision-2015’ document are as under:

o To stand as a Global Leader in Fertilisers Production to cater to the food security need of the nation.

o Maximizing the synergies of the Core Business through Downstream Value Additions and Forward/ Backward Integrations.

o Enhancing presence in International Markets through Strategic Joint Ventures and Synergistic Acquisitions.

o Diversification into other profitable businesses to maximize returns to our stakeholders.

o Leveraging State of the Art Technologies and Global best practices to retain its global competitiveness.

o Promoting Integrated Nutrient Management to improve efficiency of Fertilizer use and promoting location specific research on efficient fertilizer practices.

o To bring in Sustainability and Strategies to prevent Climate Change by reducing Energy Consumption, better Resources Management and promoting Renewable Energy sources.

o To help the Cooperative Societies become economically strong, professionally managed and to equip the Farming Community with advanced agricultural practices for improved Productivity, to ensure an Empowered Rural India.

o Achieve Fertilizers Production / Marketing target of 15 million Tonne per annum with an annual turnover of Rs. 30,000 crores.

ORGANISATION CHART OF IFFCO

BOARD OF DIRECTORS

CHAIRMAN AND VICE CHAIRMAN

MANAGING DIRECTOR

DY. MD-CUM-MKT.

DIRECTOR

DIRECTOR(COOP.

DEVELOPMENT)

DIRECTOR

(HRD)

DIRECTOR

(TECHNICAL)

DY.MD-CUM-FINANCE

DIRECTOR

BOARD OF DIRECTORS

The Directors of IFFCO

Chairperson Shri Surinder Kumar Jakhar

Vice-Chairperson Shri N.P. Patel

Directors

Shri Chandra Prakash

Shri Halappa Basappa Achar

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 Arabindo Roy

Jt. Managing Director Shri Rakesh Kapur

Director (Technical) Shri K.L. Singh

Director (Coop. Development) Dr. G.N. Saxena

Director (HRD) Shri R.P. Singh

BANKERS

India Overseas Bank

State Bank of India

Bank of Baroda

Standard Chartered Bank

The Maharashtra State Co-operative Bank Ltd.

The West Bengal State Co-operative Bank Ltd.

Madhya Pradesh State Co-operative Bank Ltd.

The Karnataka State Co-operative Bank Ltd.

The Punjab State Co-operative Bank Ltd.

The Hongkong and Shanghai Baking Co-operation Ltd.

ICICI Bank Ltd.

IDBI Bank Ltd.

OBJECTIVE OF THE COMPANY

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 fertilizer application.

7)      Strengthening cooperation 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

"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 theland."

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

Indian Potash Ltd (IPL) IFFCO’s Equity: Rs. 2.68 Crore Percentage of Equity held : 34% Activity: Marketing of Potash and Imported Fertilisers

Industries Chimiques du Senegal (ICS) I & II

IFFCO’s Equity: Rs. 80.37 Crore Percentage of Equity held : 18.54 % Plant Site: Darou, Senegal Products: Rock Phosphate, Phosphoric Acid and NPK Fertilisers

INVESTMENT OUTSIDE IFFCO

IFFCO - TOKIO General Insurance Company Ltd. (ITGI)IFFCO’s Investment : Rs. 303.78 CrorePercentage of Equity held : 72.64%Activity : General Insurance

Oman India Fertiliser Company (OMIFCO)IFFCO’s Equity : Rs. 329.08 CrorePercentage of Equity held : 25%Plant Site : Sur, OmanProducts : Ammonia, Urea

IFFCO - TOKIO General Insurance Company Ltd. (ITGI)IFFCO’s Investment : Rs. 303.78 CrorePercentage of Equity held : 72.64%Activity : General Insurance

Oman India Fertiliser Company (OMIFCO)

IFFCO’s Equity : Rs. 329.08 CrorePercentage of Equity held : 25%Plant Site : Sur, OmanProducts : Ammonia, Urea

National Commodity and Derivative Exchange (NCDEX)

Paid up share capital : Rs. 30 CroreIFFCO’s Equity : Rs. 3.60 CrorePercentage of Equity held : 12%Redeemable Preference Shares : Rs. 10 Crore Activity : On Line Trading commodity

futuresNational Collateral Management Services Ltd. (NCMSL)IFFCO’s Equity : Rs. 4 CrorePercentage of Equity held : 13.56%Activity : Collateral Risk Management

ServicesIFFCO Chhattisgarh Power LtdProject Cost (Estimated) : Rs. 7500 CroreIFFCO’s Paid up Equity : Rs. 51.80 CroreDebt : Equity Ratio : 70 : 30IFFCO Equity : 74%

Ratings assigned by different Rating Agencies to the Society

Kisan International Trading FZE (KIT) Investment : Rs. 11 Crore* Location : Dubai Activity : 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 2007-08

Jordan India Fertiliser Company (JIFCO) Project Cost : USD 580 Million IFFCO Equity : 52% (Rs. 59.11 Crore) JPMC Equity : 48%, Activity : Phosphoric Acid Plant (1500 MT/Day)

IFFCO Kisan Sanchar Ltd. (IKSL) Paid up Share Capital : Rs. 5 Crore IFFCO Equity : Rs. 3.65 Crore % of Equity held: 72.99 % Activity : Rural Telecom related Services

Ratings assigned by CRISIL:

(i) Rating for Governance and Value Creation (GVC) Practices of IFFCO:

CRISIL has, assigned a “GVC Level 2” rating to IFFCO. This rating indicates that the capability of the Society with respect to wealth creation for all its stakeholders, while adopting sound corporate governance practices, is High.

(ii) Rating for the Rs. 100 crore Commercial Paper Programme of IFFCO.

CRISIL has assigned a “P1+ (pronounced “P One Plus”) rating to IFFCO’s Rs.100 Crore Commercial Paper Programme.This rating indicates that the degree of safety with regard to timely payment of interest and principal on the instrument is Very Strong.

(iii) Rating for the Rs. 400 crore Bonds Programme of IFFCO.

CRISIL has assigned the rating on IFFCO’s Long Term Borrowing Programme to AA/Stable.The rating indicates high degree of safety with regard to timely payment of interest and principal on the instrument.

Ratings assigned by FITCH:

(i) Rating for the Rs. 100 crore Commercial Paper Programme of IFFCO.

FITCH Ratings has assigned a National Short Term Rating of ‘F1+(Ind)’to IFFCO’s Rs. 100 crore Commercial Paper Programme.

(ii) Rating for Long Term Borrowing Programme of IFFCO.

FITCH Ratings assigned National Long - Term Rating of ‘AA+(ind)’ to the Long Term Debt Programme of IFFCO. The outlook on the Long Term Rating is “Stable”.

Performance Highlights for the Year 2009-10

81.98 Lakh MTHighest Production of Fertilisers (Previous Best 71.68 Lakh MT in 2008-09)

43.24 Lakh MTHighest Production of Urea (Previous Best 40.68 Lakh MT in 2008-09)

38.74 Lakh MTProduction of NPK/DAP/NP (Previous Best 32.26 Lakh MT in 2006-07)

118.27 Lakh MTHighest Sale of Fertilisers (Previous Best 112.58 Lakh MT in 2008-09)

63.35 Lakh MTHighest Sale of Urea (Previous Best 58.69 Lakh MT in 2008-09)

54.92 Lakh MTHighest Sale of NPK/DAP/NP (Previous Best 53.89 Lakh MT in 2008-09)

Rs. 567.28 CroreProfit Before Tax (Best PBT Rs. 807.09 Crore in 2002-03)

Rs. 401.10 CroreProfit After Tax (Best PAT Rs. 557.2 Crore in 2002-03)

Rs. 16,809 CroreTotal Turnover (Previous Best Rs. 32,933 Crore in 2008-09)

1,608 MT per employeePlant Productivity (Previous Best 1,669 MT in 2005-06)

7,885 MT per employeeHighest Marketing Productivity (Previous Best 7,397 MT in 2008-09)

Provisional highlights of IFFCO performance during 2008-09.

Highest Production of Fertilisers(Previous Best 70.12 lakh MT in 2006-07)

71.68 lakh MT

Highest Production of Urea (Previous Best 39.63 lakh MT in 2007-08)

40.68 lakh MT

Production of NPK/DAP/NP(Best 32.26 lakh MT in 2006-07)

31.00 lakh MT

Highest Sales of Fertilisers(Previous best 93.24 lakh MT in 2007-08)

112.33 lakh MT

Highest Sales of Urea(Previous best 54.29 lakh MT in 2007-08)

58.49 lakh MT

Highest Sales of NPK/DAP(Previous best 38.95 lakh MT in 2007-08)

53.84 lakh MT

Highest Turnover(Previous best Rs.12163 crore in (2007-08)

Rs 32800 crore

Plant Productivity(Best 1669 MT in 2005-06) 1376 MT per

employeeHighest Marketing Productivity(Previous best 6158 MT in 2007-08)

7380 MT per employee

Composite Energy ConsumptionLowest 5.907Gcal / MT in 2007-08)

5.9433 Gcal/ MT

BALANCE SHEET AND PROFI AND LOSS ACCOUNT OF IFFCO

10 YEAR’S PERFORMANCE HIGHLIGHTS OF IFFCO

PRODUCTION IN IFFCO ( in Lakh MT)

SALES IN IFFCO (in Lakh MT)

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

1. KISAN SEWA TRUST

2. IFFCO FOUNDATION

3. LEGEND INTERNATIONAL HOLDINGS INC

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 fertilizer 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.

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.

MAJOR AWARDS RECEIVED

Prestigious Economic Times Acer and Intel Smart Workplace Award in the Manufacturing and Industrial Segment

“Best Content Service” as well as the “Best Project Management” in respect of IFFCO Kisan Sanchar Limited (IKSL) at the World Communications Award held at London

Institute of Chartered Accountants of India (ICAI) Award for Excellence in Financial Reporting for IFFCO’s Annual Report and Accounts for the year 2007-08

Best Cooperative Society Award from Public Relations Society of India ( PRSI ) at its Golden Jubilee Ceremony in Mauritius

IFFCO has been ranked 1st in Sales Turnover and 2nd in terms of Networth and Profitability amongst unlisted enterprises by Economic Times Intelligence Group for the year 2007-08

IFFCO has also got Prestigious CIO 100 Award by International Data Group (IDGI India), the world’s leading Technology Media Event and Research Group

Best managed Workforce Award for the year 2004 from Hewitt Associates and CNBC TV-18

Two Awards for Highly Commendable Accounts

National HRD Award from National HRD Network for outstanding contribution in HR Development

IFFCO Annual Report bagged the third prize, instituted by Public Relations Society of India (PRSI)

FAI Golden Jubilee Award on “Transfer of improved Farm Technologies”

1st Prize for Best Corporate Film from NCU

Three awards for Best Display in FAI Exhibitions

IFFCO Corporate film was adjudged the best by Public Relations Society of India (PRSI)

IFFCO has bagged FAI “Best Video Film Award 2006-07” for film on “Water Harvesting”.

AONLAAward for Best Implemented Project (Second Prize) from GOI Four Awards for Conservation of Energy from GOITwo National Award for “Excellence in Energy Management”Indo German and Greentech Environment Excellence AwardAward for Best overall performance from FAITwo Awards for Excellence in Safety from FAI and one “National Safety Award “ from DGFASLITwo Safety Awards from National Safety Council of IndiaRajiv Ratna National Gold Award 2005 for Best ExecutiveExcellence Award for papers published on “Safety and Health in Chemical Industry” and “Hazard Identification & Risk Management”Best Technical Innovation Award from FAI

IFFCO AONLA unit have received gold award from Greentech Foundation IFFCO Anola   Unit have won the prestigious FAI awards on 3rd Dec.' 2009 IFFCO AONLA WINS “NSCI Safety Awards 2008“ Iffco Aonla Wins "Gold Award“ - 10th Annual Greentech Environment Excellence

Award 2009 National Award for Excellence in Energy Management 2008 IFFCO Aonla Unit has been awarded as the winner of the 'Golden Peacock

Environment Management Award - 2008' IFFCO Aonla Unit wins National Energy Conservation Award-2006 Yogyata Praman Patra for developing and implementing effective Occupational

Safety and Health Management System and Procedures for the year 2004 from National Safety Council.

GROWTH IN THE NUMBER OF MEMBER SOCIETIES

1967-68                    :           57

1974-75                    :           25528

1980-81                    :           26960

1986-87                    :           28134

1992-93                    :           30200

1998-99                    :           35072

2004-05                    :           37381

2007-08                    :           39564

2008-09 : 39824

2009-10 : 39862

ABOUT AONLA UNIT

LOCATION

State :     Uttar Pradesh

State Capital                       :      Lucknow

Distance from Lucknow         :        280 Km.

Distance from New Delhi       :       260 Km.

Nearest Airport                       :       New Delhi

Railway Station                     :       Aonla (10 Km. from the Plant)

Road                                     :      Plant is In Bareilly-Aonla Bareilly highway.

Area under Plant                   :      260 Hectares

Area under Township             :   220 Hectares

YEAR OF COMMISSIONING : Ammonia-Urea Complex commissioned in 1988

INVESTMENT                             : Rs. 651.6 Crore AONLA- I

YEAR OF EXPANSION               : 1996

INVESTMENT                             : Rs. 954.7 Crore AONLA- II

YEAR OF DEBOTTLENECKING : 2008

INVESTMENT                              : Rs.149.2 Crore

PRODUCT CAPACITY TECHNOLOGY

TPD TPA

AMMONIA 3480 11,48,400 HALDOR TOPSOE

UREA 6060 19,99,800 SNAMPROGETTI

'N' 2788 9,19,908

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:-  

1- AONLA-1

2- AOLLA-2

1- AONLA -1 was established in 1988 and it was digested to nation by honorable Prime

Minister of India late Shri Rajeev Gandhi on 17 May 1989.

2- 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.

SALIENT FEATURES OF AONLA UNIT

PARTICULARS AONLA I AONLA II

CAPACITY (per annum)

AMMONIA 5,01,600 MT 5,01,600 MT

UREA 8,64,600 MT 8,64,600 MT

PROJECT ZERO DATE 08.01.1985 30.09.1993

MECHSNICAL

COMPOSITION

08.01.1988 30.12.1996

UREA PRODUCTION

STARTED

15.05.1988 26.11.1996

COMMERCIAL

PRODUCTION STARTED

16.07.1988 25.12.1996

FEEDSTOCK Natural Gas Natural Gas with Naptha

PROJECT COST(Rs. In

crores)

660 995

GAURENTEED SPECIFIC

ENERGY PER MT

AMMONIA 8.03 G Cal 7.34 G Cal with Natural Gas +

Naptha

UREA 5.76 G Cal 5.4 G cal

(Natural Gas from HBJ pipeline being supplied from Bombay high)

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 UnitPresent Capacity

( MTPD)

Proposed Capacity

(MTPD)

Increase in Capacity

(MTPD)

Phulpur-1 1670 2080 410

Phulpur-2 2620 3000 380

Aonla-1 2620 3000 380

Aonla-2 2620 3000 380

Total 9530 11080 1550

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 Generation Plant

1. AMMONIA PLANT

There are two streams of Ammonia plants having the capacity to produce 2x1520

MTDP of liquid ammonia. The technology is based on Haldor Topsoe, Denmark process with

Natural Gas and Naphtha as main raw material.

2. UREA PLANT

There are four streams of Urea Plant having the capacity to produce 4x1310 MTPD OF

Urea Fertiliser. The technology is based on Snamprogetti, Italy on Ammonia stripping

process.

3. PRODUCT HANDLING PLANT

Product handling plant is composed of Urea storage known as Silo and packing and

transport activities. Two silos of 45,000 and 30,000 MT capacity have been provided to Urea

product to ensure continuous urea production even if it is not taken off due to non-

availability of rail wagons or seasonal demand fluctuations.

4. STEAM AND POWER GENERATION PLANT

To meet the continuous power supply needs of the main plants, captive power plant and

stem generation facilities have been provided. In this plant, two gas turbines each having the

capacity of 18MW along with heat recovery steam generation unit has been provided to cater

to the plant needs of power and steam. Additionally, HRU unit of Ammonia –II add to the

steam supply of the complex.

  LINE CHART AT AONLA UNIT

Sr. General Manager

  General Manager

  General Manager

  JGM/CM Technical

  JGM/CM Maint.

JGM/CM Production

JGM/CM    Utility

JGM/CM Comm.

JGM/CM   F & A

Ammonia Plant

 Mechanical

  Process Power Plant

Purchase

F& A

Urea Plant

Electrical

Design & Drawing

Offsite Store

Traffic

Product Handling

Instrumental

Library &Document

General Engg.

Fire & Safety & Env.

Civil Laboratory

Training & Development

JGM/CM  P & A

JGM/CM System

Sr. General Manager

General ManagerGeneral Manager

JGM/DGMProduction

JGM/DGMComm.

JGM/DGMUtility

JGM/DGMTechnical

JGM/DGMMaint.

JGM/DGMF&A

Ammonia

Urea Plant

Prod.handling

Fire & safety

Traffic

Mechanical

Electrical

Instrumental

Civil

Process

Lib. & docu.

Design&draw.

Gen. Engg.

T & D

Laboratory

Offsite

Power Plant F & A

Store

Purchase

ORGANISATION CHART AT IFFCO AONLA UNIT

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

SUPPLY SECTION

NOTE SHEET PAYMENT

WORK ORDER

FINANCE & ACCOUNT DEPARTMENT

BOOKS/FICC CELL

FINANCIAL CONCURRENCE

BILL SECTION

PAYROLL SECTION

PSL SECTION

WORK CONTRACT

IMPORTED SUPPLY

INDIGENOUS SUPPLY

SERVICE CONTRACT

FINANCE & ACCOUNT DEPARTMENT

BOOKS/FICCCELL

PSLSECTION

PAYROLL & TRANSACTIONBILL SECTIONFINANCIAL CONCURRENCE

WORK ORDERNOTESHEETPAYMENT

SUPPLY SECTION

SERVICECONTRACT

WORK CONTRACTIMPORTEDINDIGENOUSSUPPLY

ORGANISATIONAL STRUCTURE

HODJGM/DGM

(F & C)

CHIEF MANAGER(F & A)

CHIEF MANAGER(F & A)

Sr. Manager(Accounts)

Sr. Manager(Accounts)

Sr. Manager(Accounts)

Sr. Manager(Accounts)

Manager Accounts

ManagerAccounts

ManagerAccounts

Manager Accounts

DEPUTY ACCOUNT MANAGER

LINE OF CONTROL IN FINANCE & ACCOUNTS DEPARTMENT

Assistant Manager(Acc.)

Senior Accounts Officer

Account Officer

Jr. Account Officer

Sr. Accountant

Jr. Accountant

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 crucial 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:

Books: Preparing and maintaining balance sheets.

IFCC (Fertiliser Industries Coordination committee)

Costing & Pricing Cells

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 –

Salary

Leave Travel Concession (LTC)

Medical Allowance

Conveyance

Advances

Loans to employees

Aonla Unit undertakes processing of salary and other staff related payments of all

employees through Human Resource Management System (HRMS). It is an integrated

package based on Oracle DBMS. The System integrates Personnel & Administration

Department and Finance & Accounts Department.

Simultaneously, Financial Accounting System (FAS) which is also based on Oracle

DBMS has been launched in F&A DEPARTMENT through which General Ledger Sub

Ledger of Employees is maintained and Trial Balance and Financial Accounts are generated.

There is also inter- relation of HRMS and FAS so that cash payment/receipt vouchers, Bank

Payment Vouchers and Journal Vouchers generated in HRMS are automatically posted online

to Payroll Section of Finance & Accounts Department.

3. Taxation Section

As per the status and operations of the society, It deals with the following Taxes:-

Central Excise Duty

Income Tax

Service Tax

Sales Tax

4. Central Excise Duty

As we know that this duty is charged by Central Government on the goods

manufactured. IFFCO mainly produce ammonia and urea at Aonla plant. So duty on

ammonia is charged. In this relation monthly production report is prepared and all documents

and accounts are prepared by the Finance & Accounts Department. The duty is deposited in

the Government bank account on the 5th day of the month.

EXCISE Duty is not charged on production of Urea.

INVENTORY

MANAGEMENT

CONCEPT OF INVENTORY MANAGEMENT

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 Management involves the control of assets being produced for the

purpose of sale in the normal course of the company's operations. The goal of effective

inventory management is to minimize the total costs – direct and indirect - that are

associated with holding inventories. However, the importance of inventory management

to the company depends upon the extent of investment in inventory.

The term 'inventory' includes:

1. 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.

2. 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.

3. 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.

4. 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 management. Managerial functions are

performed with respect to inventory; it may be called inventory management.

The objective of inventory management 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 management

comprises the functions of planning, controlling and organizing the types of all goods,

quantity, status, flow and time- sequence etc.

Need for inventory management

Inventory management is an integral part of general management. Three important functional

aspects of a business are closely related to inventory management. 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 management and; financial management is concerned with the

financial aspect of the inventory management.

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

operations.

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

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

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

Indenter is that person which raises the indent.

PURCHASE PROCESS

The purchase process can be expressed as following:

INDENTER

Material Purchase Requirement (MPR)

Single stage Enquiry

Two stage Enquiry

E- Procurement           Manual

(15 days)                     (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:

1) RAISING OF INDENT:- First of all the indenter raises the indent. This indenter

may belong to any department. Now the indenter 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

indenter 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 indenter 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. Material description/ Proposed Reason

b. Item code/ proposed code

c. Unit

d.      Quantity required

e.       Value

f.       Budget code

g.      MPR No.

h.      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 of the indenter. 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:

1- Single stage

2- Two stage

1- 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.

2- 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 –

A) Proprietary items:- These are those items e.g. spares which have to be

bought from particular supplier or vendor.

B) 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 quotations-

Quotations 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 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

indenter. 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 indenter, 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.

PAYMANT AGAINST PURCHASE

There are various modes of payment through which payment is done:

1- Advance payment to supplier:-

If both the parties are agreed upon advance payment that is specifically provided in

the contract order, only then advance payment is given. The advance payment to contractors

shall be made against submission of bank guarantee in the Performa provided by IFFCO.

Advance payment against indemnity bond shall not be released as provided in the purchase

procedure.

2- Full payment / 90% to 95% payment:-

In case the terms of payment provide for full payment or part payment against

dispatch documents through bank, the supplier will be negotiating the documents through the

bankers. After the documents are received by the bankers, they are forwarding bank

intimation along with a copy of the purchase order to ascertain that the invoice is raised for

the material ordered and conforms to the other terms and conditions of purchase order.

After the intimation from the bank is received the invoice of the suppliers will be

scrutinized by the finance and account department for the following-

  1. Purchase order number

  2. Whether materials supplied are as specified in the purchase

  3. Whether materials supplied are as specified in the purchase order.

  4. Quantity supplied.

  5. Price basis whether F.O.R. or Ex-works

  6. Whether excise duty, sale tax and other taxes are as per the order.

  7. Whether bank charges are claimed as per the purchase order.

  8. Other terms and conditions of the purchase order.

Where there is delay in supplying the material and the payment through bank is 90%

to 95%. It should be ensured that penalty for delay, as provided in the purchase order, is

recovered before releasing the balance payment. Where payment required to be made, a

clarification is to be sought from materials department and proper approval taken for waiving

of penalty or otherwise before retiring documents.

The payments under the contracts must be regulated as per the expressed terms and

conditions. Any payment not covered by the contractual terms and conditions should not be

released.

3- Full payment / Balance payment after receipt of materials :-

In case the purchase order provides the 100% payment after receiving of materials

and accepted payment is to be released after the MRR is received from the stores department.

In case the purchase order dispatch documents and the balance payment after receipt of

materials, the balance payment may also to be released after the MRR is received and it is

confirmed that the material has been accepted after inspection and taken on charge.

Before released of the payment, the invoices should be scrutinized as the case of

payments released through bank. In addition it should also be verified whether all the items

invoiced have been received, inspected and accepted per the MRR.

4- Delay In Delivery

In any contract, the time and date of the delivery is the essence of the contract. In the event of

delay in the execution of the order beyond the date of delivery as stipulated in the order, the

project authorities may take following actions -

  1. Accept delayed delivery at price reduced by a sum equivalent to 0.5 %

  if the value goods not delivered for every week of delay or part thereof

  limited to a maximum of 5% of the contract value.

OR

1. Cancel the order in part or full and purchase such cancelled materials

  from elsewhere on account and at the risk of the suppler without prejudice

  to his right inspect of goods delivered.

 

IMPORTED MATERIAL

Materials procured may be either indigenous or imported. For major projects the

foreign contracts are normally finalized at head office level and payment against these

contracts are made by the concerned unit. Where the order has been placed by the unit

directly, they will make the payment to the foreign party by debiting to the appropriate

advance account. If the payments are made through L/C against documents, the same shall be

debited to advances to foreign suppliers account. On receipt of material at site, project

engineer shall prepared the MRR and sent same to project accounts for clearing the supplier's

advance account for material.

Clearing and handling of imported material is the responsibility of material

department on the arrival of ship the materials will be cleared with reference to the invoices

and bills. For any short landing or breakage between the port of dispatch and port of

destination, claim action shall be taken by them.

MATERIAL CODING

It is very typical for the every organization to maintain the stock items in case of large

number of items. It will be very typical to identify them at the time of requirement. So the

items are coded to avoid confusion. For the coding of materials the account person assigns

code for every item of store. Thus every item has a code that is called its material code.

Material coding facilitates the account persons and store manager to maintain the

transactions of the items whether of receiving or of issuing. Every item maintained by its

code in the stock as well as in the store accounting section. The item/material code remains

same in stores and accounting section. Whenever a transaction is done in store for the

inventories the full details of that transaction is send to store accounting section also, because

the computers of stores and accounting section are connected through Local Area Network.

(LAN)

In this way it is very comfortable task to maintain the inventories on the inventory

software with the help of material coding.

Advantages of codification

1.       Lengthy descriptions are replaced by a simple code.

2.      It economizes space in forms and reduces clerical work.

3.      Ease in identification of stores.

4.      It is comprehensive.

5.      It facilitates, mechanized accounting.

6.      Secrecy of description can be maintained.

7.      It ensures clarity.

CODING

There are different types of coding that are as follows:

a)      Numeric: Each item is given a number.

b)      Alphabetic: Each item is denoted by a combination of alphabets. If the alphabet

selected indicates the inventory sound when it is pronounced, it is known as mnemonic

system. This helps in remembering the codes.

c)      Alphanumeric: It is a combination of alphabets and numeric code.

d)     Decimal System: It is basically a numeric system; sub-group may be

indicated by decimals.

In IFFCO 12 digits coding is done.

The various codes for the different materials are as follows:

1.       Ammonia - 11

2.       Urea       - 12

3.       Offsite   - 13

4.      Product handling -14

5.       Power plant -15

2 digits = for the plant location

3 digits = for the equipment

3 digits = for the material

3 digits = for the size and

1 digit = for the item identification.

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                        3 copies

Packing list                  3 copies

Test certificate            3 copies

Railway/ Lorry/ Air     4 copies

Consignment note

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 indenter 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 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 adjustmentEntry

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.

Where the responsibility for short supply or damages in transit is of the suppliers, the

material department should take up the matter with the supplier for arranging replacement. A

report is prepared in this case. Its copies are sent to the supplier, purchase department and

finance and account department.

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.

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.

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.

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 operations 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.

  1. Store A for Aonla-1( this store contains that spares which are used by Aonla-1)

  2. 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.

The documents may be:

Goods receipt / railway receipt / challan

Form

Excise duty

2) The particulars of the document are noted in the carrier receipt register (CRR).

3) After the entry in the register, the document is given to an agent termed as handling

contractor. He will collect the material.

4) Consignment's cases are intact. If not he will ask for open delivery. Then he has to

deliver the goods to stores. In case of damage he has to give a certificate. Some

consignment may without document i.e. door delivery and is some cases it may be face to

face delivery.

5) 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.

6) The next operation 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, indenter, master file & custody section.

7) Inspection is done by the indenter:

Suppose all items are accepted then the material is handed to custody section after

putting identification & giving a SRV control number.

If some items are defective then the accepted items will be sent to custody and for

defective ones, information is sent to supplier, accounts, indenter & insurance

company and the particulars noted in rejection register.

If there is some breakage then either item may be replaced by company or claim

against insurance is obtained, when an item is replaced, its dispatch advice is made.

8) Direct charge SRV (DCSRV) is prepared when indenter wants material directly

from receipt 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.

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.

C. SPARES:-

About 41249 spares of Aonla Unit-1 are housed in store and 19804 spares of Aonla

Unit-2 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:

  1. General and

  2. Spares

General are those inputs which can be used at various sites as wire, pipe etc.

Spare are those inputs which are specific to a particular plant and are of particular size.

ACCOUNTING FOR STORES

General Outline of stores Function:

a. The authority of receipt, store and issue of all material is centralized in the materials

department subject to exception in permitted in certain cases. In certain cases a nominal stock

of few consumable items can be permitted with uses departments such as maintenance,

laboratory and administration department for meeting emergencies. In addition certain

chemicals are permitted to be stored in production department due to the operational needs.

  1. 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

  2. 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. Accounting of receipts, issues, return and transfer of materials.

2. Accounting of imported materials for capital works and operations.

3. Associating with stores section for stock verification.

4. Valuation of stores items should do on weighted average basis.

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.

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 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 he 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.

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 declaration 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 declaration 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

insurance. In case of a declaration 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 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.

For the purpose of verification of stores, chemicals & spare parts shall be classified in

to A, B, C categories.

Categories Value (Rs. per unit) Quantum of Verification

A Above Rs. 50,000/- 100%

B 10,001 to 50,000/- 70%

C Below Rs. 10,000/- 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.

RECONCILIATION AND ADJUSTMENT

After each physical verification by the custodians of inventories and suitable

adjustment action has to be taken. It is desirable to complete the physical verification work by

March every year so that reconciliation/adjustment action can be completed within the year

itself.

Internal Check

1) One set of document for receipts, issues and return of materials shall be sent to the

accounting section of finance department. Based on these documents, priced store ledger

shall be prepared for each item for stores. The material code number between stores and

accounts shall be identical. The priced store ledger shall provide value of each receipt, Issue

and return transaction along with quantity ledger. The quantity balance appearing in priced

store ledger shall serve as counter check for accuracy of bin card balance in store which is

essential for proper functioning of inventory control system

2) The priced store ledger shall not be maintained for large number of low value items

such as stationery, medicines, canteen stores etc. in this case the expenditure shall be charged

to the appropriate expense account at time purchase. Quantitative record shall be kept by the

concerned department and shall be produced as and when required for audit purpose.

Inventory Control

Inventory control is concerned with minimizing the total cost of inventory. The three

main factors in inventory control decision making process are:

  1. The cost of holding the stock (e.g., based on the interest rate).

  2. The cost of placing an order (e.g., for row material stocks) or the set-up cost of

production.

  3. 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 Management 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

Management and the activities of Inventory Control do not make decisions or manage

operations; they provide the information to Managers who make more accurate and timely

decisions to manage their operations.

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

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 management policy should ensure smooth and uninterrupted supply

without making unnecessary investment of funds in inventory. This requires that inventory

management policy must balance the requirements of the following two opposing and

conflicting ends:

i) To maintain a large quantity for smooth operation and efficient customers' services.

ii)     To maintain only a minimum possible inventory because holding costs and opportunity

cost of funds invested in inventory.

OBJECTIVE OF INVENTORY CONTROL

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 deterioration, obsolescence and unauthorized use.

6)      To ensure that finished goods are available for delivery to customers just to fulfill the

orders.

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 ratios

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.

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.  

   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 Control Ratios:

Inventory turnover ratio helps management to avoid capital being locked up

unnecessarily. This ratio reveals the efficiency of stock keeping.

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

5)   Review of slow moving and non- moving items:-

Stock turnover ratio 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

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:-

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 rationale 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:-

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 deterioration 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.

A part 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:

  1. Data entry

  2. Queries

  3. Reports

  4. Processing

  5. Calculator

  6. Exit

DATA ENTRY MENU

Data Entry

SRV

SIV

ISRV

SAV

STV (IN)

STV (Out)

Document entry

Adjustment SIV

Adjustment ISRV

Entry of Surplus/ obsolete/ Insur.

Physical Verification Entry

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.

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 are 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.

REPORTS MENU

Reports

Summary account head wise

Month Report before PSL runs

Month Report after PSL runs

PSL JV

Inventory Consumption

Kardex

Code wise inventory statusYearly summary for HO

Issue more thanIssue above

OTHER REPORTS

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.

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.

Code wise inventory status:

This option creates a report inventory code wise. We can create report for selected

codes. This code is of 12 digits in the IFFCO.

Kardex:

              The kardex is the very useful tool for showing the current status of all the items.

Kardex shows the update inventory and also shows the past status of every past tears. The

accountant may see the past status as on any past date. The kardex retain all information

about the material. As when the material was received i.e. receipts, when the material was

issued i.e. issues, its balance in the store, vendor, its current stock, its value, location in the

store and as well as its minimum, maximum and reorder level. Thus it reserves every

information about the materials.

It is in form of software in IFFCO. Here I have given a example of kardex in which

each detail of material is written. It is as follows.

MATERIAL KARDEX w.e.f.       01/01/1900

Material code: 998574907100 MOTOR 1.5KW , CGL ,ND112M2

Current stock:  1.000  NO      Location: MA-PF-64-4R

 R.O.L   :   15.000        Max. Level   :   30.000       Min. Level   : 10.000

QUERIES MENU

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.

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.

Queries

Brows Inventory Master

PROCESSING MENU

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:

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.

Processing

Put account group in INVMAST

PSL Process 1

Reverse stock for Physical Kardex mismatch

Reverse stock for PSL Kardex mismatch

Weekly PSL proc.1

Cumulative process

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

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

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)

SRV

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 indenter 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 lie with stores itself.

ISRV (INTERNAL STORE RECEIPT VOUCHER)

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 type of ISRV are generally used by the particular department for the general item.

BB: Such type of ISRV are used for the spare return by the particular department.

BC: Such type 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 indenter itself.

Note: The issue notes shall be priced on the Weighted Average Rate basis after accounting the

last receipt of the material. After ascertaining the nature of the expenditure , the job for which

the material is issued , an appropriate account code shall be given in accordance with the chart

of account.

SIV (STORE ISSUE VOUCHER)

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 Indenter

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 indenter 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 indenter.

(c) Two copy to account department.

(d) One copy lie with the store itself.

(e) One additional copy to security.

DCSRV (Direct Consumption Store Receipt Voucher)

DCSRV is prepared when the material is not purchased through purchasing order. There are

some materials which are not bought through purchasing order. As an indenter needs a

stationary material then he has no need to go through the whole purchasing process. He has to

take permission from its immediate officer. After that he may purchase that product and form

DCSRV i.e. Direct Consumption Store Receipt Voucher.

SAV (Store Adjustment Voucher)

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)

STORE ISSUE VOUCHER

No.

Deptt.

Job/ work order Cost center Exp. Code department See.

S no.Material Code

Description U.M.QtyReqd.

QtyIssued Balanc

eRs. P.

1

2

3

4

Please use one voucher for max. four items Preferable same group

Hash Total

Authorised by Received by

Issued by

Kardex posted by

Checked by J.S.O./ S.O.

MGR/ Sr. MGR(S) P.S.L. Posting

Name

Designation

INTERNAL STORE RETURN VOUCHER

ISRV No. Date

SIV No. Date

Job/work order Vendor Code Exp. Code department See.

S.no.Material Code Description Unit

QtyReturn

QtyReceive Balance Rs. P.

1

2

3

4

Reason for Return- New/Serviceable/Recondition/Scrap/Empty cylinder

Inspected by Authorised by

Returned by

Received by Kardex Posted

P.S.L. Posted by Certified by

Name

Designation

STORE ISSUE VOUCHER CONTRACTOR

No.

Deptt.

Job/ work order Cost center Exp. Code department See.

S. no.Material Code Description U.M.

QtyReqd.

QtyIssued Balance Rs. P.

1

2

3

4

Please use one voucher for max. four items Preferable same group

Hash Total

Authorised by Received by

Issued by

Kardex posted by

Checked by J.S.O./ S.O.

MGR/Sr. MGR(S) P.S.L. Posting

Name

Designation

INDIAN FARMERS FERTILISER COOPERATIVE LTD.AONLA UNIT

STORES RECEIPT VOUCHER

SRV NUMBERDATECRR NUMBERSRV PREPARED:

PO No.& Date ABNL ABB Ltd. CRR Date

RECD Date

CHALLAN/BILL No.

GR/RR No.Date:, Transporter

FreightPaid

From: Truck/Trailer/WagonFARIDABAD

DEPT CODE:DEPT Name

FORM 31 No.RR

S.No. ITEM CODE DESCRIPTION Unit Qty. Value Inspection remarks

POSNo

Card balance No Po:Challan:Received:Accepted:Rejected:

DIS/REJ No.

POSNo

Card balance No Po:Challan:Received:Accepted:Rejected:

DIS/REJ No.

INDIAN FARMERS FERTILISER COOPERATIVE LTD.AONLA UNIT

DIRECT CONSUMPTION STORE RECEIPT VOUCHER DCSRV SRV NUMBER

DATECRR NUMBERSRV REF:

PO No.& DateInter unit trans.

IFPHIFFCO PHULPUR UNIT

CRR Date

RECD Date CHALLAN/BILL No.

GR/RR No.Date:, Transporter

FreightPaid

From: TRK/WGNPHULPUR

DEPT CODE:DEPT Name

FORM 31 No.

S.No. DESCRIPTION

Unit Qty. Value Inspection remarks

POSNo

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

No Po:Challan:Received:Accepted:Rejected:

Exp. CodeDIS/REJ No.

POSNo

No Po:Challan:Received:Accepted:Rejected:

Exp. code

DIS/REJ No.

INDIAN FARMER FERTILISER COOPERATIVE LTD.AONLA UNIT

SAV NUMBER: 089UYW008 DATE : 8/6/2005

STORES ADJUSTMENT VOUCHER

------------------------------------------------------------------------------------------------------------------------------------------------------------ FROM TO------------------------------------------------------------------------------------------------------------------------------------------------------------ Sno Code No. E Stock

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

INDENTER STORE KEEPER STORE STORE OFFICER MANAGER STORE

DESPATCH ADVICE

NO:TIN NO:

KER ENGG. WORKSRAMPUR ROAD, BAREILLY

C.B.GUNJ.BAREILLY

P.O/W.O.NO:AUTHORITY FOR DISPATCH:GM

S.NO DESCRIPTION QUANTITY UNIT REMARKS

1 2RE-69 ROUND RAR(5 NO) MR FOR MACHINING

2 MR -DO-

3 MR -DO-

4 MR -DO-

CASE MARK DIMENSIONS& TOTAL NO PKG

NET WT.

PKD.BY PREP. BY DESPATCH THROUGH: DOOR DELIVERY RR/GR NO: GATE PASS:

PKGS FREIGHT

COST: RS.

SIV NO: SR. MANAGER STORES

THE AFORESAID ITEMS HAVE BEEN RECEIVED IN GOOD ORDER & CONDITION

COPY TO: 1) CONSIGNEE 4) INDENTOR

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

3) CM(F &A)/ INSURANCE

. RECEIVER’S

SIGNATURE& STAMP

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 DATE:

Transporter: SOUTH EASTERN ROADWAYS 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 QUANTITY Remarks

Desp. Received Excess Short Rejected

1.

2.

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

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 CH. MANAGER (STORES)

e-Mail:

Fax: Through E-proc Phone

INDIAN FARMERS FERTILISER COOPERATIVE LIMITED

Aonla Unit, P.O. IFFCO Township, Bareilly

TENDER ENQUIRY

MPR No 080380

INDENTOR’S COPY

UTILITIES DEPT

Enquiry No: 6000/672/UT0044/IE/080308(*)

This Enquiry is due on 14/07/2008

Desired Delivery: 4 Weeks

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. Item Code Description Quantity Unit

1 DC Liquid Chlorine 99% pure as per IS code

646/1988(latest version) in IFFCO.

220 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 PURCHASE ORDER

Thru CourierM/s : JASUBHAI ENGINEERING PVT.Add: 803-4, Chiranjiv Towers, Nehru placeCity: New Delhi Pin: 110019E-mail:Code: JASUTest Copy

Order No.Your Quotation:Our Enquiry No:DeliveryDelivery Period.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 Quantity Unit Rate Amount

1

2

Total Value …………………Price Basis : Ex-Works Ahmadabad

P& F Charges : P&F Charges @ 2.00% extra

Excise Duty : Extra as applicable against documentary evidence present rate is @ 14.42%

Sales Tax : Extra as applicable against form ‘C’

Freight Codn.: On freight to pay basis.

IFFCO-AONLA MATERIAL PURCHASE REQUITION:

MPR-NO.: 080472 Dept-Ref-No.: 2200/2171

Budget Code Sanctioned-Amt

Utilised- Amt This MPR(Rs.)

Balance Issue-Date: Expected:Dly Date:

N*.05 ……….. ………… ……….. ………..

Class: Stock, capital, D.C., Supply, Ordinary, Proprietory, Domestic, Single stageIndentor: ADMN SECTIONSuggested Vendor Ctegory: Godrej & Boyce Mfg. Co. Lucknow.

MPR Description: Procurement of official furniture for the year-2008Brief 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 Unit Quantity required

Inventory levels

Value Stk-oth.unit/ last 3yr consumption

1 DC

2 DC

3 DC

ANALYSIS

FORMULAE USED FOR ANALYSIS

INVENTORY TURNOVER OF RAW MATERIAL =raw material consumed / total average inventory

HOLDING PERIOD(IN MONTHS) = 12/ inventory turnover ratio

AONLA - I

INVENTORY - GENERAL STORES

It has the highest value in total inventory and plays significant role in increase or decrease of total inventory.It contains pipes, fittings, valves, lubricants, electric items, general items that plays a significant role in increase or decrease of its inventory.Total inventory of general stores was 1527.47 lakhs in 2007 that increased to 1678.51 lakhs i.e. by 9.89% and in 2009 it increased by 53% and then there was a decrease by 5.63% in 2010.

PIPES

In 2007 the inventory of pipes was 104.05 lakhs. That increased by 76.8% in 2008.this was due to drastic increase in its issue by 88.35%. In 2009 the inventory of pipes again increased by 31.63% and in 2010 it decreased by 15.76%. This was due to less receipt and increase in issue by 61.91%.this shows that from 2008 to 2009 inventory is increasing but issue decreases that means there was high receipts in this year i.e. more purchase of pipes inspite of its less usage because of which inventory turnover decreased in 2009 and holding period increased.

FITTINGS

Its inventory increased from 114.02 lakhs. to 136.05 lakhs. in 2008 i.e. by 19.32% then in 2009 it increased to 184.17 lakhs i.e. by 35.37%. this was due sudden decrease in issue by 84.97%. this was due to unused items of ESP project are received by stores and in 2008 CEP project was finished that caused in decrease in issue. In 2010 the inventory went down by 3.43% and issue also decreased by 4% due to which the inventoty turnover decreased and holding period increased as it is a inverse function of inventory turnover.

VALVES

As in above cases its inventory also first increased from 2007 to 2009 then decreased in 2010. Its inventory was 138.26 lakhs in 2007 that increased by 182.05% in 2008. In 2009 it was increased by 20.46% and in 2010 it again decreased by 8.01%. this was because its issue first increased in 2009 and then decreased in 2010. As there is decrease in usage of items the inventory turnover also decreased in 2010 and the holding period increased to 109.09 months that is quite a high time period.

LUBRICANTS

There was a sudden fall in the inventory of lubricants from 2007 to 2008 . It was 259.98 lakhs in 2007 and in 2008 it came down to 33.89 lakhs i.e. by 86.96%. in 2009 there was a increase in it by 105.28% and then in 2010 there was a fall in its inventory. Issue of it decreased by 35.49%in 2010 due to which its inventory turnover increased and holding period decreased. In 2010 its issue increased by 112.38% because of that its inventory came down in 2010 and inventory turnover increased and thus holding period decreased.

ssssELECTRIC ITEMS

Same is the case of electric items. Its inventory was 189.99 lakhs in 2007 that increased by 52.3% , in 2009 its increase was by 3.946% and in 2010 it went up by11.65%. There was decrease in issues. There was continuous increase in its inventory even when its issue was going down that shows there was regular purchase of these items even when they are not in so much use.This was done due to the reason that it takes many days in purchasing items and this inventory has to be maintained for sudden demand of these items.Due to high inventory and low issue its inventory turnover has a decreasing trend and its holding period increasing.

GENERAL ITEMS

These are the items that are used all the plants and offices of this unit. Its inventory was 129.70 lakhs and it came down to 97.62 lakhs in 2008, then in 2009 and 2010 there was an increase in it. The issue values are decreasing with increase in inventory that shows there is not better utilisation of kept inventory.But due to the time taken by purchare process there may be shortage of these items when they are needed so there regular purchase is being done. Due to decrease in inventory turnover value its holding period increased.

TOTAL GENERAL STORE

it was 1269.36 lakhs in 2007 and was increased by 13.31% in 2008. It went up by 17.24% in 2009 and in 2010 there was a down fall in its inventory by 5.56%. although its average inventory for 2008, 2009, 2010 is in increasing pattern.Its issue was 1249.02 lakhs in 2008 that decreased by 41.23% and then increased by 13.01% . Because of above reasons the inventory turnover first decreased in2009 then increased in 2010 and the vice versa for holding period.

Groups like FLANGS, BOLT,NUTS STUD, FASTENERS, BEARING, WELDING MATERIALS, HOSES BELT, TYRES, TUBES, LAB CHEMICALS, GLASS WEARS are having less inventory and are having almost same level of inventory and there issue are also less and of almost same values for the 3 years.

BELLOWS, FILTERS, SPECIAL FITTINGS, CIRCLIPS, ABRASIVES, SAND, PAINT, SCRAP MATERIAL are having zero or very less inventory that does not effect the otal inventory very much.

FIRE AND SAFETY

Its inventory increased and then there was a sudden fall in 2009. Issue of it also decreased in 2009 but the inventory turnover remains same for 2008and 2009 i.e. .47. this is so because the recipts decrease d with issue. In 2010 inventory goes up but issue value came downbut the holding period was almost same.

TOOLS AND SPARES

It has a trend of decreasing inventory over these 3 years.its issue values are also decreasing, thats why its inventory turnover is decreasing. These are the items that are not of regular use but then also its inventory has to be maintained.

GENERAL STORES – ESP

FILTERS, WELDING MATERIALS, RINGS, GASKETS, SHEET, PA, GENERAL ITEMS are having no or negligible inventory and PIPES, FITTINGS, VALVES are having decreasing trend of inventory and trend of increasing issue .Thus inventory turnover increases and holding period decreased.ESP total is decreasing . There was decrease by 99.4% in 2010 from 2009. And an increase in issue was 838.21% due to which its inventory turnover increased in 2009 and holding period decreased for that period.

INVENTORY - SPARES IN STOCK

It has the items that are used specifically by different plants. It has major inventory of AMMONIA, UREA, OFFSITE, PRODUCT HANDLING , STEAM & POWER.

AMMONIA

Inventory is increasing for 2008, 2009, 2010 is increasing constantly. Its inventory was 640.45 lakhs2007That comes down by 4.56% in 2008. In 2009 it increases by 84.45% and in 2010 it goes up by 6.51% but issue is decreasing over these years so inventory turnover also decreased.

UREA

Its inventory increased till 2009 and then there was a sudden fall. Its issue also decreased. Thus its inventory turnover increased . there was a decrease by 1.53% in 2010.

OFFSITE

Its inventory has an increasing trend. In 2008 it increased by 18.02% , in 2009 by 3.01% and in 2010 by 20.1%. Its issue first increased from 2008 to 2009 and in 2010 it suddenly decreased due to that its turnover is more in 2009 .

PRODUCT HANDLING

It has a trend of decreasing inventory over 3 years i.e. there was less receipts but its issue increased by 70.4% in 2010 due to that its inventory turnover for this year increased.

TOTAL SPARES

It was 1703.15 lakhs in 2007 that decreased by 5.72% in 2008 , increased by 35.48% and in 2010 it increased by 12.5% . Its issue decreased in 2009 and increased in 2010 by 201.89%. thus its inventory turnover increased in 2010.

INVENTORY - LOOSE TOOLS IN STOCK

Its inventory is increasing over the yearsand issue is decreasing that shows purchases are being done even when its usage rate is low as it can be demanded any time . Thus its inventory has to be maintained anyways.

INVENTORY - CATALYST IN STOCK

Its inventory was decreased by 86.62% in 2009 and by 33.75% in 2010. Its issue increased by 412.52% and then decreased by 99.89%. its inventory turnover increased in 2009.

INVENTORY – STEEL

It has decreasing inventory in 2008, in 2009 it increased by 136.98% and then there is a decrease in it. Its issue increased by 202.62% and then decreased by 73.55% in 2010 due to that inventory turnover first increased in 2009 and then decreased in 2010.

INVENTORY – TIMBER

Since there is very less usage of timber so, its inventory is kept very low and its issue is also less. It has a high value of issue in 2008 when there was CEP project running and after that it decreased.

TOTAL INVENTORY

In 2007 it was 3731.88 lakhs. It decreased by 2.23% in 2008 , increased by 14.28% in 2009 and in 2010 it increased by 5.33%. this increase was due to decrease in issue and increase in receipts . Its reason may be that the CEP project was finished in 2008 that results in decrease in issue and thus its inventory turnover decreased and its holdind period increased but with small rate.

AONLA –II

INVENTORY - GENERAL STORE

General items plays important role in increase or decrease of its inventory. Its inventory was 635.84 lakhs in 2007 that increased by 11.87% in 2008, again in 2009 it increased by 59.36%. This was due to increase in purchases and receipt due to completion of project CEP in 2008. In 2010 its inventory goes down by 5.577%, its issue decreased by 66.43%. This was due to fewer receipts. Due to above reasons its inventory turnover ratio decreased constantly over last 3 years and holding period increased. To make this at constant level its inventory should be kept at moderate level.

PIPES

Pipes plays a significant role as it has high inventory above all other items. In 2007 the inventory of pipes was 128.93 lakhs and it increased by 37.76% in 2008. In 2009 it increased by 86.68% and then in 2010 it decreased by 15.77%. Increase of inventory in 2008 was due to finished projects. In 2009 there was a drastic decrease in issue by 78.95% and it reduced by 20.36%. we see that even when issue is decreasing inventory is increasing due to which its inventory turnover decreased and holding period increased.

FITTINGS

Inventory of fittings increased. In 2008 it was increased by 19% , in 2009 by 48% and there was a negligible decrease in it in 2010. Inspite of this its issue decreased over last 3 years. In 2010 it decreased by 60.77%. Its inventory turnover has a trend of decreasing values. And it has a trend of increase in holding period.

VALVES

It has a trend if increase in inventory over last 3 years. In 2008 it was increased by 16.26%, in 2009 by 62.41% and in 2010 by 10.23%. Its issue decreased over 3 years. In 2009 it was decreased by 35.67%, in 2010 by 68.26%. Inspite of decrease in issue its purchase is increasing due to which inventory turnover decreased and holding period increased.

ELECTRICAL ITEMS

In 2007 its inventory was 52.9 lakhs that decreased by 5.03% in 2008, in 2009 increased by 9.612% and in 2010 it increased by 22.93%. Its issue increased by 13.97% and then Decreased by 4.55%. there was a small change in inventory ans issue so its inventory turnover is almost same for these years.

GENERAL ITEMS

In 2008 its inventory increased by 22.08% , in 2009 by 32.804% and its issue decreased by 69.08%. In 2010 its inventory goes down by 16.43% and issue increased by 94.2%. Its inventory turnover decreased to .11 in2009 and then increased in 2010 to .21.

STRAINER, FILTERS, BELLOWS, ABRASIVE, SYNTHETIC PAINTS, INDUSTRIAL FUEL, LAB CHEMICAL, GLASS WEARS, FIRE AND SAFETY

ITEMS ,INDUSTRIAL GASES are having zero or very low inventory. Same was the case with issues it was either 0 or very low. This shows that these items are either not in regular and frequent use or they are used in less quantity that is why its inventory is not required in heavy quantity.

INVENTORY- GENERAL STORES – ESP

It was 131.18 lakhs in 2007. There was a decrease in 2008 in its inventory by 1.56% and came down to 0 in 2009. Its issue increased by 6049.04% in 2009. This was to clear out all its inventory by issuing it. In this group pipes, flanges, fittings, valves plays significant role . but at the end inventory of all these items under ESP becomes 0.Total inventory of spares has a increasing graph over last 3 years. In 2007 it was 1258.53 lakhs and increased by 21.66% in 2008, 7.53% in 2009 and 13.99% in 2010. On the other hand its issue increased by 314.41% in 2009 and decreased by 76.8% due to which inventory turnover increased in 2009 and decreased to .09 in 2010.

INVENTORY- SPARES IN STOCK

AMMONIA

It has the highest inventory above all other items under this group. Its inventory increased over last 3 years. In 2007 it was 782.15 lakhs, in 2008 it increased by 25.52%, in 2009 it increased by 4.54% and in 2010 by 14.55%. Its issue value increased drastically in 2009 by 823.34% and then there was a sudden fall in 2010 96.87%. inventory increased inspite of decrease in issue due to which the inventory turnover decreased . this shows there not proper utilisation of items under this group.

UREA

It also has trend of increasing inventory over last 3 years. In 2007 it was 306.11 lakhs that increased by 18.7% in 2008, by 37.01% in 2009 and by 9.45% in 2010. As in the case of ammonia it also has a increase in issue in 2009 and decrease in 2010. In 2009 it was increased by 35.03% and decreased by 2% in 2010.The fluctuation in inventory is not very high thus the inventory turnover has not been fluctuated very much.

OFFSITE

Its inventory was 99.77 lakhs in 2007 that was increased by 15/145% in 2008 and then a sudden fall in 2009 by 45.77% and then again decreased in 2010 by 4.56%. Its issue value has a increase in 2009 by 571.08% and in 2010 it decreased by 87.1%.

PRODUCT HANDLING

It was 55.39 lakhs in 2007 and increased by 1.55% in 2008. In 2009 it went down by 7.96% and in 2010 it increased by 23.7%. Its issue is lower than other items in this group. In 2009 issue decreased by 8.09% and then increased by 60.34% in 2010. Its inventory turnover decreased in 2010.

LOOSE TOOLS IN STOCK

Its inventory is constant over last 3 years , even the issue was in 2007 of low value. There was 0 or negligigle issue in 2009 and 2010, due to which inventory turnover is very low.

INVENTORY - CATALYST IN STOCK

In 2007 it was 406.55 lakhs and decreased by 42.04% in 2008, increased by 301.97% in 2009 and in 2010 it decreased by 47.12%. Its issue increased by 164.785 in 2009 and in 2010 it decreased by 8.123%. Its inventory turnover increased in 2009 and decreased in 2010. As holding period for catalyst should not be very high ,for this its inventory should be maintained to desired level.

INVENTORY STEEL-STRUCTURAL

It has increasing trend over the last 3 years. In 2007 it was 34.30 lakhs and increased by 20.44%in 2008, increased by 107% in 2009 and decreased by 14.06% in 2010. Its issue increased by 188.8% in 2009 , in 2010 it decreased by 73.07%. due to that its inventory turnover increased in 2009.

INVENTORY CEMENT

There is no inventory of cement at all that means there is no or very low usage of it.

OVERALL INVENTORY

The inventory was 2337.93 lakhs in 2007 and it increased by 7.88% in 2008. In 2009 it increased by 43.62% and in 2010 it decreased by 7.77%. Its issue increased by 89.01% in 2009 and decreased by 47.014% in 2010. Due to this its inventory turnover is more in 2009 and there was a decrease in 2010 in inventory turnover. Its holding period decreased in 2009 and then sudden increase in it in 2010.

The inventory of Aonla I is much more than of Aonla II even though their production

capacity is same . this is because some items are stored in aonla I that are issued for aonla II

also.

TREND FOR TOTAL INVENTORY IN AONLA I AND AONLA II

TREND OF INVENTORY IN GENERAL STORES AND SPARES IN AONLA I AND AONLA II

0

1000

2000

3000

4000

5000

6000

7000

8000

2007 2008 2009 2010

spares(in lakhs ) aonla II

spares(in lakhs ) aonla I

general stores( in lakhs) aonla II

general stores( in lakhs) aonla I

INVENTORY OF AONLA I

30%

53%

0%

3%8%

4%

1%1%

2007raw material

stores and spares

loose tools

chemicals & catalyst

packing material

construction material

stock in process

finished goods

46%

39%

1%

3%

6%

2%

3%

0%

2008raw material

stores and spares

loose tools

chemicals & catalyst

packing material

construction material

stock in process

finished goods

14%

73%

1%7%

3% 1%

1%

0%

2009raw material

stores and spares

loose tools

chemicals & catalyst

packing material

construction material

stock in process

finished goods

7%

67%

1%

13%

3%8%

1% 0%2010

raw material

stores and spares

loose tools

chemicals & catalyst

packing material

construction material

stock in process

finished goods

INVENTORY OF AONLA II

0%

16% 0%

42%

3%0%

35%

4%

2007raw material

stores and spares

loose tools

chemicals & catalyst

construction material

packing material

stock in process

finished goods

0%

89%

0%8%

1%0%

1%

1%2008

raw material

stores and spares

loose tools

chemicals & catalyst

construction material

packing material

stock in process

finished goods

0%

63%

0%

31%

2%

0% 4% 0% 2009raw material

stores and spares

loose tools

chemicals & catalyst

construction material

packing material

stock in process

finished goods

0%

65%

0%

19%

2% 0% 14%

0%

2010raw material

stores and spares

loose tools

chemicals & catalyst

construction material

packing material

stock in process

finished goods

Conclusion

and

recommendations

The basic objectives of inventory management appear to be conflicting in

nature.Inventories should increase or decrease in amount or time as related to sales

requirement and production schedules.

In most inventories a small proportion of items accounts for a very substantial

usage(in terms of monetary value and annual consumption)and a large proportion of

items accounts for a small usage.ABC analysis based on this emperical reality

advocates in essence a selective approach to inventory control, which calls for a

greater concentration of efforts on inventory items accounting for the bulk of usage

value.

Responsibility for control of inventories is of the top management,though decisions in

this regard might will be based upon the combined judgement of the production

manager,the sales manager and the purchasing manager.this is desired in view of the

financial considerations involved in the problem and also because of need for

cordinating the different kinds of of inventories and conflicting viewpoints of

different departments. Decisions relating to inventories should be taken by higher

authority of the organization as well as departments.

As in maintainance of inventory two types of cost incurres in it holding cost and

carrying cost.

So to lower it adequate level of inventory should be maintained. The items whose

inventory are high but issue are less should be tried to reduce .

JIT (Just In Time) is a system in which material or the manufactured components

and parts arrive to the manufacturing sites or stores just few hours before they are put

to use.the delivery of material is syncronised with the manufacturing cycle and speed.

JIT system eliminates the necessity of carrying large inventories, and thus saves

carrying and other related costs to the manufacturer. This system requires perfect

understanding and coordination between the manufacturer an dsuppliers in terms of

the timing of delivery and quality of the material. Poor quality material can halt the

production.

The JIT inventory system compliments the Total Quality Management (TQM).

There is no use of JIT due to which stores has to maintain high inventory of those

items also that are not in regular use. The company should use JIT to control and

lower their inventory. As lower inventory will result in reduction in carrying and

holding cost incurred in it. But JIT can not be implemented here for raw material used

here .

In iffco ERP should be applied. Enterprise resource planning (ERP) is an

Integrated computer-based system used to manage internal and external resources

including tangible assets, financial resources, materials, and human resources. It is a

software architecture whose purpose is to facilitate the flow of information between

all business functions inside the boundaries of the organization and manage the

connections to outside stakeholders. Built on a centralized database and normally

utilizing a common computing platform, ERP systems consolidate all business

operations into a uniform and enterprise wide system environment.

Some security features are included within an ERP system to protect against both

outsider crime, such as industrial espionage, and insider crime, such as embezzlement.

A data-tampering scenario, for example, might involve a disgruntled employee

intentionally modifying prices to below-the-breakeven point in order to attempt to

interfere with the company's profit or other sabotage. ERP systems typically provide

functionality for implementing internal controls to prevent actions of this kind. ERP

vendors are also moving toward better integration with other kinds of information

security tools.

REFRENCES

www.Iffco.nic.in

Annual report 2010 of IFFCO

Accounting Manual of IFFCO

NIT of purchase department of IFFCO

I M Pandey