Project Report on Inventory Mgmt

INDIAN FARMERS FERTILISER COOPERATIVE LTD.

PROJECT REPORT  ON “

STUDY OF INVENTORY MANAGEMENT  IN IFFCO ”

In partial fulfillment of the requirement for the award of the degree of  BACHELOR OF BUSINESS ADMINISTRATION (2007-2010)

DEPARTMENT OF MANAGEMENT

GRAPHIC ERA INSTITUTE OF TECHNOLOGY AFFILIATED TO H.N.B GARHWAL UNIVERSITY, DEHRADUN

UNDER THE SUPERVISION OF

SUBMITTED BY  

MR AMAR JOHRI FACULTY

AKASH AGARWAL BBA

INDIAN FARMERS FERTILISER COOPERATIVE LTD. GEU, DEHRADUN

ACKNOWLEDGEMENT

Before I start introducing the adventures of my 4 weeks summer training, I feel it obligatory to pay my humble thanks to those who made this opportunity for me to undergo my summer training. For this, ofcourse,my first thanks goes to my guide RAMESH GOEL who helped me to complete this report. Very many thanks to IFFCO Aonla Officers specially  MR.D. KALIA (Training department head), MR.K.K.PANDEY (Finance Department). They were very helpful to me and always readily helped and guided me. Thanking  all of them again.  AKASH AGARWAL

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PREFACE  The successful completion of this project was a unique experience for me because by visiting many place and interacting various person ,I achieved a better knowledge about sales . The experience which I gained by doing this project was essential at this turning point of my career career this project is being being submitted submitted which content content detailed detailed analysis of the research under taken by me.  The research provides an opportunity to the student to devote his/her skills skills knowle knowledge dge and compet competenc encie ies s requir required ed during during the techni technical cal session.

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CONTENT     

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Acknowledgment History Board of Directors Rating Introduction Finance Department Material Department Purchase Section  Terminology used in Purchase Department Store section Receipt section Custody section Spare section Inventory Control Techniques Inventory Software Production Department Inventory Management Objective of the study Concept of Inventory Management Research and Methodology Conclusion

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CERTIFICATE CERTIFICATE OF COMPLETION OF WORK 

 This is to certify that AKASH AGARWAL has completed the project title “A STUDY ON INVENTORY MANAGEMENT IN IFFCO” under my guidance and supervision.

He is submitting the project in the partial fulfillment of the requirement for the award of Bachelor of Business Administration, H.N.B GARHWAL University, Dehradun.

 This work is original and has not been published or submitted elsewhere for any purpose what so ever. All sources of information have been mentioned and dully acknowledged.

 The performance was satisfactory during the development of  the project.

Faculty Dept. of Management Studies GEIT, Dehradun.

INDIAN FARMERS FERTILISER COOPERATIVE LTD.

History of IFFCO IFFCO : Indian Farmers' Success Story During mid- sixties the Co-operative sector in India I ndia was responsible for  distribution of 70 per cent 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 an unique venture in which the farmers of the country through their own Co-operative Societies created this new institution to safeguard their interests. The number of co-operative societies associated with IFFCO have risen from 57 in 1967 to 38, 155 at present. pr esent. 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 commissioned an ammonia - urea complex at Kalol and the  NPK/DAP plant at Kandla both in the state of Gujarat in 1975. Another  ammonia - urea complex was set up at Phulpur in the state of Uttar Pradesh in 1981. The ammonia - urea unit at Aonla was commissioned in 1988. In 1993, IFFCO had drawn up a major expansion programme of all the four   plants under overall aegis of IFFCO VISION 2000 . The expansion projects at Aonla, Kalol, Phulpur and Kandla have been completed on schedule. Thus all the projects conceived as part of Vision 2000 have been realised without time or cost overruns. All the production units of IFFCO have established a reputation for excellence and quality. A new growth path has  been chalked out to realise newer dreams and greater heights through Vision 2010 which is presently under implementation. As part of the new vision, IFFCO has acquired fertiliser unit at Paradeep in Orissa in September 2005. As a result of these expansion projects and acuisition, IFFCO's annual capacity has been increased to 3.69 million tonnes of Urea and NPK/DAP equivalent to 1.71 million tonnes of P2O5.

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IFFCO has made strategic investments in several joint ventures. Godavari Fertilisers and Chemicals Ltd (GFCL) & Indian Potash Ltd (IPL) in India, Industries Chimiques du Senegal (ICS) in Senegal and Oman India Fertiliser  Company (OMIFCO) in Oman are important im portant fertiliser joint ventures. Indo Egyptian Fertiliser Co (IEFC) in Egypt is under implementation. As part of  strategic diversification, IFFCO has entered into several key sectors. IFFCO-Tokio General Insurance Ltd (ITGI) is a foray into general insurance sector. Through ITGI, IFFCO has formulated new services of benefit to farmers. 'Sankat Haran Bima Yojana' provides free fr ee insurance cover to farmers along with each bag of IFFCO fertiliser purchased. To take the  benefits of emerging concepts like agricultural commodity trading, IFFCO has taken equity in National Commodity and Derivative Exchange (NCDEX) and National Collateral Management Services Ltd (NCMSL). IFFCO Chattisgarh Power Ltd (ICPL) which is under implementation is yet another foray to move into core area of power. IFFCO is also behind several other companies with the sole intention of benefitting farmers. The distribution of IFFCO's fertiliser is undertaken through over 38155 cooperative societies. The entire activities of Distribution, Sales and Promotion are co-ordinated by Marketing Central Office (MKCO) at New Delhi assisted by the Marketing offices in the field. In addition, essential agro-inputs for crop production are made available to the farmers through a chain of 158 Farmers Service Centre (FSC). IFFCO has promoted several institutions and organisations to work for the welfare of farmers, strengthening cooperative movement, improve Indian agriculture. Indian Farm Forestry Development Cooperative Ltd (IFFDC), Cooperative Rural Development Trust (CORDET), IFFCO Foundation, Kisan Sewa Trust  belong to this category. An ambitious project 'ICT Initiatives for Farmers and Cooperatives' is launched to promote e-culture in rural India. IFFCO obsessively nurtures its relations with farmers and undertakes a large number of agricultural extension activities for their benefit every year. At IFFCO, the thirst for ever improving the services to farmers and member  co-operatives is insatiable, commitment to quality is insurmountable and harnessing of mother earths' bounty to drive hunger away from India in an ecologically sustainable manner is the prime mission. All that IF FCO cherishes in exchange is an everlasting smile on the face of Indian Farmer  Far mer  who form the moving spirit behind this mision. m ision.

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IFFCO, to day, is a leading player in India's fertiliser industry and is making substantial contribution to the efforts of Indian Government to increase foodgrain production in the country.

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 Board of Directors The Directors of IFFCO

Shri Surinder Kumar Jakhar, Chairperson Shri. N. P. Patel, Vice-Chairperson Directors Shri Amal Kumar Verma Shri S.L. Dharmegowda Shri Sudhir Rajpal Shri Harminder Singh Jassi Shri Kartic Chandra Sarkar  Shri Umesh Tripathi Shri Ramakant Bhargava Shri Subhash Chandra Garg Shri Ankushrao R. Tope Shri Prem Chandra Munshi Shri Tryambakrao G. Sirsath Shri Vithalbhai H. Radadia Shri Pramod Kumar Singh Shri Sheesh Pal Singh Shri Balvinder Singh Nakai Shri Ravindra Pratap Singh Shri Simachal Padhy Shri K. Srinivasa Gowda Shri A. Praveen Reddy Shri B. S. Vishwanathan Shri Raj Kumar Tripathi Dr U.S. Awasthi (Managing Director) Shri. Rakesh Kapur (Jt. Managing Director) Shri. K.L. Singh (Director (Technical) Dr. G.N. Saxena (Director (Coop. Development) Shri R.P.Singh (Acting Director (HRD) Shri. Arabinda Roy (Acting Marketing Director)

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Rating Ratings assigned by CRISIL: (1) Rating for Governance and Value Creation (GVC) Practices P ractices 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. (2) 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. (3) 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 saf ety with regard to timely payment of interest and principal on the instrument. Ratings assigned by FITCH (4) 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. (5) 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”.

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FINANCE & ACCOUNTS DEPARTMENT

Money or capital being a scare as well as crucial resource in the working of  any any organ organiz izat atio ion, n, need needss to be give given n prim primee impo import rtan ance ce.. The The fina financ ncia iall resour resources ces have have been been planne planned d and contro controlle lled d in a proper proper and contin continous ous manner. As among the most crucial decisions of a firm are those which rela relate te to fina financ nce. e. Fina Financ ncee & acco accoun unts ts from from an inte integr gral al part part of any any organization. Proper and smooth functioning of this section is very vital for  the organization to survive and grow.

Finance function are of two types:  

Managerial finance function Routine finance function

Manage Manageria riall financ financee functi functions ons are so called called becaus becausee they they requir requiree skilfu skilfull  planning, control and execution of financial f inancial activities.

Rout Routin inee fina financ ncee func functi tion onss on the the othe otherr hand hand,, do not not requ requir iree a grea greatt managerial managerial ability ability to carry them out. They are chiefly and are incidental incidental to the effective handling of the material finance functions. f unctions.

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Finance & Accounts Deptt. At A Glance The Finance & Accounts Department. Of IFFCO, Aonla is divided into 3 sections, to facilitate smooth and easy functioning and control.

Organisation Structure FINANCE & ACCOUNT DEPARTMENT

BOOKS/ FICC Cell

FINANCIAL CONCURRENCE SECTION/ BUDGET

Supply Section

Indigeneou s Supply

BILL SECTION

PAYROLL SECTION

 Note Sheet Payment

Imported Supply

PSL SECTION

Work  Order 

Works Contract

Service Contract

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 Line Of Control In Finance & Account Department  HOD D.G.M. (F & A) Ch MANAGE(F & A)

MANAGER (Account)

Deputy Account Manage r

SENIOR MANAGE(F & A)

MANAGER (Account)

Deputy Account Manage r

MANAGER (Account)

MANAGE R (Account)

Deputy Account Manage r

Deputy Account Manage r

Senior A/C Officers ACCOUNT OFFICERS……. JUNIOR ACCOUNT OFFICERS… SENIOR ACCOUNTANT  JUNIOR ACCOUNTANT 

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The various are covering under the preview of 3 subsections are as follows:

 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

 PAY ROLL SECTION  This section deals with the payments of salary and wages to the employees and extending various other benefits area covering under to  preview are –   Salary  Leave Travel Concession (LTC)  Medical Allowance  Conveyance  Advances  Loans to employees

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MATERIAL DEPARTMENT Materials from the most critical inputs of any business firm organization Proper handling and control of material inputs ensures the smooth running of plant. plant. Materi Material al manage managemen mentt includ includes es the procur procureme ement nt issuan issuance ce and contro controll of materi materials als in right right quanti quantity ty and at right right time time to facili facilitie tiess the  production function.

From this we can gather that material management includes two important functions: • •

Purchasing Storing and control of materials

Hence, it is divided into sections: • •

Purchase section Stores section

Through performing two extent these two section are interrelated and work  in coordination.

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PURCHASE SECTION

The purchase department, in any organization, is at the interface of internal and external environment. This department is responsible for purchase of  vario arious us mac machin hines, es, raw raw mate materi rial alss and and othe ther item itemss requ requir ireed by the the organization. Purchase function from integral part of material management and it plays very important function as it is through this procedure that the right amount of material required is delivered at the right place and at the righ rightt time time so that that the the proc proces esss of produ product ctio ion n or manu manufa fact cturi uring ng goes goes on unhampered.

There is a distinct difference between “ buying and purchasing”.The latter  involving knowledge of various vendors, their prices, comparison of the  prices, actual buying, after sale service and followup, besides payment terms etc.

The purchase department of an organization must know following things: Knowledge of the materials • Soucre of material- Vendors • Reasonable price • The most important thing is that indenter must m ust trust the vendor.

PURCHASE PROCESS

i)

Recognition of need: The purchase function is perform whenever  something is neede and which not available in stores department at the particular point of time.

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This is an inti intima mati tion on to purc purcha hase se Requis Requisiti ition on to pur purcha chase se : This department by the indenter that the needed certain materials. He raises request by filling form as ‘ material purchase requisition’ (MPR). In this he furnishes several information like:-

ii)

• • • • • • •

 Name of the item & its code no. Amount required. Technical and other specifications. Estimated price. Required delivery date. Suggested vendors. Section/ Deptt. Code No.

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 wether the material is available or not. If it is not available the MRP goes to the purchase deptt. For futher  action. Here it is scrutinize in three ways :-

iii)

• • •

Approval scrutiny Budget scrutiny Technical scrutiny

Sending or Enquiry/invitation to bid: Items can be classified in to two categories keeping in view the purchasing function – 

iv)

•

•

  Proprietary items : These are those items e.g. spares which have to be bought from particular supplier or vendor.   Nonproprietary items: These are those for which there is no restriction on vendor.

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

•

•

 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.  Limited tendor enquiry : This is done for non proprietory items and bids are invited from a limited no. of vendors selected from the registered vendors with the company. the amou amount nt invo involv lved ed in   Pres Presss tend tendor or/O /Ope pen n bidd biddin ing g : If the   pu purcha rchasse is more more tha than three hree lak lakhs and and the the ite item is non non   prop proprie rieto tory ry then then pres presss tend tendor orss are are issu issued ed in vari variou ouss news news  papers. There may be global tendors also.

v)

Receiving of offers: After all the bids have been submitted the tend tendor orss are are open open befo before re tend tendo or comm commit itte teee to comp compar aree the the quotationsQuotations comparison statement (QCS) is made and bid with lowest quotation is generally chosen. QCS is also send to the technical deptt and in consultation with it one more than one offers are chosen, giving quality and price the top priority.

vi)

selecting the best offer, purchase order is Purchase order : After selecting 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 panality is imposed @ 5% of  P.O. per week.

vii)

the cons consig ignm nmen entt reac reache hess the the Rece Receip iptt of mate materi rial als: s: After  the stip stipul ulat ated ed plac place, e, the the paym paymen entt is done done by the orga orgaan anis isat atio ion n according to the purchase terms agreed upon by the two parties.

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The material is checked for quality conditions and then sent to the store where the

store release the “ Stores Receipt Voucher” (SRV). From here it is delivered to the vendor.

viii)

Follow up done for every order: It may be regarding delay in supply supply,, change changess in price, price, defect defective ive or damage damaged d items items suppli supplied ed etc.For every indent, a separate file is opened and crrespondance goes on. For every step, recommendations of indenter, manager  (F& A), materials manager & general manager are sought.

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 Payment against purchase There are various modes of payment

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 Advance payment to supplier : Advance payment shall be made to the suppliers only in such cases where it is specif specifica ically lly provid provided ed in the contrac contractt order. order. The advanc advancee paymen paymentt to contra contracto ctors rs shall shall be made made agains againstt submis submissio sion n of bank bank guaran guarantee tee in the Performa provided by IFFCO. Advance payment against indemnity bond shall not be released as provided in the purchase procedure.

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Full payment / 90% to 95% payment : In case the terms of payment provide for full paymeny 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 a bank intimation alongwith 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      

Purchase order number  Whether materials supplied are as specified in the purchase Purchase order number  Whether materials supplied are as specified in the purchaseorder. Quantity supplied. Price basis whether F.O.R. or Ex-works Whether excise duty, sale tax and other taxes are as per the order.

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 

Whether bank charges are claimed as per the purchase order. 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 penality 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 soug sought ht from from mate materia rials ls dept depttt and and prop proper er appr approv oval al take taken n for for waiv waivin ing g of   penality 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.

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Full payment / Balance payment after receipt of materials : In case the purchase ored provides the 100 % payment after receiving of  materials and accepted payment is to be released after the MRR is receised from the stores department. In case the purchase order despatch 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 case of paym paymen ents ts rele releas ased ed thro throug ugh h bank bank.. In addi additi tion on it shou should ld also also be verified whether all the items invoiced have been received, inspected and accepted per the MRR.

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 Delay In Delivery In case of project purchases, the time and date of the delivery is 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 f ollowing actions – 

1. Accept Accept delaye delayed d delivery delivery at price reduce reduced d by a sum equiva equivalen lentt 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 

2. Cancel Cancel the order order in part or full full and purchase purchase such such cancelled cancelled material materialss from elsewhere on account and at the risk of the suppler without  prejudice to his right inspect of goods delivered.

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TERMINOLOGY USED IN PURCHASE DEPTT. Q.C.S.

Quotations comparison statement

L.O.I.

Letter of Indent

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

E.X.W.

Ex-Works(At the supplliers work)

F.A.S.

Free Along Sideship

N.I.T.

 Notice Inviting Tender 

S.O.R.

Schedule Of Rates

B.O.Q.

Bill Of Quantitiess

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.

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 About Imported Materials Materi Materials als procur procured ed may be either either indige indigeneo neous us or import imported. ed. For major  major   projects the foreign contracts are normally finalised at head office level and  payment against these contracts are made by the concerned unit. Where the order have been placed by the unit directly, they will make the payment to the foreign party by debiting to the appropriate advance account. If the   payme payments nts are made made throug through h L/C agains againstt docume documents nts,, the same shall shall be debited to advances to foreign suppliers account. On receipt of material at site, site, projec projectt engine engineer er shall shall prepar prepared ed the MRR and sent same same to projec projectt accounts for clearing the supplier’s advance account for material. m aterial.

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 brokage between the port of dispatch and port of destination, claim action shall be taken by them.

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 Material Coding  In every organisation it is very difficult to maintain the stock items in case of large number of items. So the need of coding is created. For the material coding the account persons assign the codes for each item of stores. So in this away every item has it’s code, and code is called material code.

Mate Materia riall codi coding ng facil facilit itat ates es the the acco accoun untt pers person onss and and stor storee manag manager er or  incharge to maintain the transactions of the items whether of receiving or of  issuing.

Every item maintained by itt’s code in the stode as well as in the store accounting section. The item / material codes remains same in stores aand acco accoun unti ting ng sect sectio ion. n. When Whenev ever er a tran transa sact ctio ion n is done done in stor storee for for the the inventorie inventoriess the full details details of that transaction transaction is send to inventorie inventoriess the full detail detailss of that that transa transacti ction on is send send to the store store accoun accountin ting g sectio section n also, also,   because the computers of stores and accounting section are connected in Local Area Network.(LAN)

In this way it is very comfortable task to maintian the inventories on the inventory software with the help of material coding.

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 Packing & Despatch All All pack packin ing, g, boxi boxing ng and and crati crating ng and and prot protec ecti tion on shal shalll conf confor orm m to the the specification or requirements of the order. The seller shall be held liable for  damage or brokagee to the goods due to defective or insufficient packing, marking as specifically advised in the order or dispatch instruction shall be done by seller in delible delible paint and in such manner to ensure that the same same is clearly visible.

All goods shall be dispatched by rail / road freight paid and the railway receipt / lorry receipt shall be posted to the concerned incharge of IFFCO.

Inspection of Material  The The mate materia riall depa departm rtmen entt shal shalll coor coordi dina nate te with with othe otherr depa depart rtmen ments ts and 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.

Damages / Short / Rejected Materials If the material are received short or in damaged condition there are some conditions in this regard.

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

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. 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

resp respec ectt of tran transi sitt insu insura ranc ncee clai claims ms bill bill sect sectio ion n will will pass pass an adjustment entry debiting “claim recoverable account” and credit the “ Advance to vendors account”. After the adjustments the billn 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 resposibility for short supply or damages in transit is of the suppliers, the material department should taake up the matter with the supplier for arranging replacement.

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 Accounting Of Raw Materials Based Based on the projec projected ted consum consumpti ption on requir requireme ement nt of raw materia materials, ls, the   procurement action is take by the commercial department at head office. Described below is the accounting requirement of major raw r aw material.

 Imported Phosporic acid and Ammonia The consignment of phosporic 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 uinventory 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 ensure 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 thee landed cost of  imported ammonia. However after the abolition of price control on complex

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fert fertil ilis iser. er. This This pric pricee is fixe fixed d at par par with with the the land landed ed cost cost of impo import rted ed 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 maat maateri erial alss are are rele releas ased ed on due due date datess to avoi avoid d inte intere rest st liab liabil ilit ity. y. Afte After  r  releasing the paayments 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 ffor making payment to ONGC / GAIL after due certification of bill by the head of technical department about quantity of gas received.

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 Naphtha  Naphtha is supplied by IOC aagainst advance payment terms. There are exci excise se duty duty conc conces essi sion onss avai availa labl blee for for thes thesee item itemss prov provid ided ed they they are are cons consum umed ed for for manu manufa fact ctur uree of fert fertil iliz izer ers. s. Acco Accoun unts ts depa depart rtme ment nt in coordination with production department shall ensure that all the excise duty requirements aare 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.

Catalsts & Resins The Catalysts & Resins are produced by the material department at the  palnt, 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  price paid and equivalent equivalent amount is credited credited to “ material material received on loan account”.

This entry will be reverse when the material is procured by IFFCO and replenished for return of loan. loan. The inventory inventory and consumption consumption account then then shall be accounted at the actual procurement price.

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STORE SECTION Store of any organization is of vital importance. Its 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 to three three subsec subsectio tions ns for greate greaterr flexib flexibili ility ty like like receip receipt, t, custod custody, y, issues issues and spares.

Store have following warehouses:       

A.

Main Store Cement godown Petrol Pump Cable yard Cemical godown Paint godown PDIL store

RECEIPT SECTION This section is responsibl responsiblee for receiving receiving the materials and inspectin inspecting g them. The process involves following steps.

1)

The d oc ocument regarding th t he m at aterial may be b e sent t o th the st s tores,  purchase, concerned deptt. But ultimately they have to be send to stores. The documents may be :  Goods receipt / railway receipt / challan  Form 31  Excise duty  Toll tax

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2)

The pa p articulars of o f the the doc document ar are not noted in i n th t he ca c arriers rec receipt register (CRR)

3)

After th the en entry in in th the re register, th the do document is is gi given to to an an ag agent termed as handling contractor. He will collect the material.

4)

Consignment’s ca cases ar are in intact. If If no not he he wi will as ask fo for op open de delivery. He then 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 an any di discrepancy is is fo found du during ch checking, th the ac accounts se section is is informed for necessary action and getting claim from insurance company. The date of receipt is filled in CRR 

6)

The ne next op operation is is fi filling th the st stores re receipt vo vouchers (S (SRV) he h er e the quantity mentioned in challan and purchase order are compared, SRV Has 7 copies, copies, two for accounts accounts and one for each purchase, purchase, stores, indenter, indenter, masterfile & custody section.

7)

Inpection is done by the indenter: 



Supp Suppos osee all all item itemss are are acce accept pted ed then then the the mate materi rial al is hand handed ed to custod custody y sectio section n after after puttin putting g an identi identific ficati ation on & giving giving a SRV control number. If some items are defective then the accepted items will be sent to custod custody y and for defec defectiv tivee ones, ones, inform informati ation on is sent sent to suppli supplier, er, accounts, indenter & insurance company and the particulars noted in rejection register.

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

If ther theree is some some brea breaka kage ge then then eith either er item item may may be repl replac aced ed by company or claim against insurance is obtained, when an item is replaced, its dispatch advice is made.

8) Dire Direct ct char charge ge SRV SRV ( DCSR DCSRC) C) is prep prepar ared ed when when inde indent nter er want wantss material directly from receipt section.

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CUSTODY SECTION -

B)

This section is responsible for proper keeping of materials and issuing them when when requi require red d by diffe differen rentt depa depart rtme ment nt and and cont contra ract ctors ors.. The The mate materi rial al received received here is first checked checked as per SRV for every material 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 some one wants to issue certain certain material he has to fill the store issue voucher ( SIV). Once the item is issued again information is updated in the card. When a particular part is returned then this received in stores, by internet stores return voucher (ISRV). After issuing the material the number  of issue and the quantity issued is noted in SIV control registers.

C)

SPARES –  Around 30000 spares are housed in stores, 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

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 ACCOUNTING FOR STORES  General Outline of stores Fuction 

The authority of of receipt, store and issue of all material is centralized centralized in the materi materials als depart departmen mentt subjec subjectt to except exception ion in permit permitted ted in certai certain n cases. In certain cases a nominal stock of few consumable items can be   per permi mitt tted ed with with uses uses depa depart rtme ment ntss such such as main mainte tena nanc nce, e, labo labora rato tory ry,, admini administr strati ation on depart departmen mentt for meetin meeting g emerge emergenci ncies. es. In additi addition on certa certain in chemicals are permitted to be stored in production department due to the operational needs.



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 maintain the stocks.

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

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Fuctions of stores Accounting Section The section dealing with accounting of stores in the finance department shall have following functions :Accounting of receipts, issues, return and transfer of materials. Accounting of imported materials for capital works and operations. Associating

with

stores

section

for

stock 

verification. Valuation of stores items should done on weighted average basis.

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 Receipt /Isues/ Returns Transfer of Materials 

The 2nd copy of the material receiving reports after pricing, shall be   pas passe sed d on to the the store storess acco accoun unts ts sect sectio ions ns to scru scruti tini nize zed d the the same same with 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.



The corrections and financialand 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 ensures that all receipts, issues and returns / transfer voucher raised by the stores section are finally posted in the price store ledger.



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



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.

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

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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.



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.



Details for receipts and issue of materials received / issued on loan shall be maintained by the store account section loan transactions shall be approv approvee by the compet competent ent author authority ity.. It is the respon responsib sibili ility ty of materi material al department to take action to square up the transactions within the reasonable time.



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



Mate Materi rial alss issu issued ed to cont contra ract ctor orss shal shalll be pric priced ed at the the mont monthl hly y 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.



For material returned to stores, return note shall be priced by the stores accounting section at the same rate which it was issued and the

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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.



 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.



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 trasacted 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.



The price store ladger 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 10 th 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.

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 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 arisin arising g out of fire fire explos explosion ion,, riot riot , strike strike terrori terrorism, sm, malici malicious ous damage 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 foe each product shall shall be stated stated separatel separately. y. The liabilit liability y of the insurers insurers is limite limited d to the insured amount. At any time if it is found that the actual stock is more than the the insu insure red d amou amount nt to avoi avoid d less less amou amount nt of insu insura ranc nce. e. In case 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 with a view view to sele select ct such such item itemss for for whic which h insu insura ranc ncee is cons consid ider ered ed necessary.

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Verification of Inventories The officer of stores will coordinate the job of physical verification and the accoun accounts ts officer officer in charge charge shall shall render render all assist assistanc ancee to ensure ensure that that the 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.

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 surveyer by the society. No adju adjust stme ment ntss need need be carr carrie ied d out out in the the book bookss of acco accoun unts ts unle unless ss the 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.

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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 verificati verification on may be completed 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)

A B C

Above Rs.50,000/10,001 to 50,000/Below Rs.10,000/-

Quantum of verification

100 % 70 % 25 %

A team of stock verifiers shall prepare a stock verification verification sheet giving the kardex balance and the physical balance of each item covered in the stock  veri verifi fica cati tion on.. Afte Afterr filli filling ng up the the parti particu cula lars rs of the the valu valuee and and qual qualit ity y discrepancies with reference to the priced stores ledger balance , the stock  veri verifi fica cati tion on shee sheets ts shal shalll be forw forwar arde ded d to the the mate materi rial alss depa depart rtme ment nt for  for  scruti scrutiny ny and reconc reconcili iliati ation on and adjust adjustmen mentt in consul consultat tation ion with with financ financee department accepted shortage shall be processed for the approval of the competent authority.

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 Reconcilation and adjustment etc. 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.

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 Internal Check  

One set of document for receipts, issues and return of materials 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 quan quanti tity ty bala balanc ncee appe appear arin ing g in price priced d stor storee ledg ledger er shal shalll serv servee as counter check for accuracy of bin card balance in store which is essential for proper functioning of inventory control system.



The priced store ledger shall not be maintained for large number of  low value items such as atationery, 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.

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 Inventory Control  Inventory control is a systemetic control and regulation of purchase and usag usagee of mate materi rial alss in such such a way way so as to main mainta tain in an even even flow flow of   production at the same time avoiding excessive investment in inventories. Effici Efficient ent materi material al contro controll reduce reducess losses losses and wastag wastagee of materi materials als that that otherwise pass unnoticed .

Inve Invent ntor ory y cont contro roll is the the core core of mate materia riall mana manage geme ment nt . The The need need and 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 want for for them them and and no inve invent ntor ory y need need to be carr carrie ied. d. But But it is high highly ly 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 I=of inventories are of great importance .

Inventory control is planned method of determining what to indent , so that  purchasing and storing cost is minimum without affecting the production or  sales. Without proper control inventories have a tendency to grow beyond economic limits. Funds are tied up unnecessarily in surplus stores and stocks   productive operations are stalled, and finances of the plant are severely srained . Lack of control over inventory also leads to excessive consumption and wastage , as operatives are liable to becom careless with irrational supply of materials.

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A good ood inve invent nto ory man manage agement ment poli olicy shou should ld ensu nsure smoot mooth h and 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 for smooth operat ration and effi fficient customers’ services.

ii) ii)

To main mainttain ain only nly a mini minimu mum m possi ossibl blee inve inven ntory tory beca becau use hold holdin ing g costs and opportunity cost of funds invested in inventory.

OBJECTIVE OF INVENTORY CONTROL Scientific control of inventories should serve the following purposes: 1) To provi provide de the conti continu nuou ouss flow flow of requ requir ired ed mater materia ials ls,, part partss and and components for efficient uninterrupted flow of production. 2) To mini minimi mize ze inve invest stme ment nt in inve invent ntor orie iess keep keepin ing g in view view oper operat atin ing g requirements. 3) To prov provid idee for for effi effici cien entt stor storee of mate materi rial alss so that that inve invent ntor orie iess are are  protected from losses by fire and threat and handling time and costs are kept at minimum. 4) To keep keep surplus surplus and absol absolute ute items items to minimum. minimum. 5) To prot protec ectt the the inve invent ntor ory y agai agains nstt dete deteri rior orat atio ion, n, obso obsole lesc scen ence ce and and unauthorized use. 6) To ensure that that finished finished goods are availabl availablee for delivery to custome customers rs just to fulfill the orders.

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TECHNIQUES OF INVENTORY INVENTORY CONTROL :USED :USED AT IFFCO

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

 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.

Order Cycling System: In this system , quantities in hand of each item or class of stock are reviewed  periodically (30,60.90 days ). 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 . Fixation of Various Levels: Certain stock levels or fixed levels are given below :a). Maximum Level It represents minimum quantity above which stock should not be held at any time .

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 Maximum stock = Re-order level + Reordering quantity – (Minimum level consumption * Minimum Re-order period)

 b). Minimum Level It represents the minimum quantity of stock that should be held at all the time .

 Minimum Level = Reorder level – ( Normal consumption * Normal   Re-order period)  Re-order period)

c). Safety Level Normal Normal issues issues of stock usually stopped at this level and made only under specific instructions.  Safety stock level = Ordering Level – (Average rate of consumption * Re-order level ) OR = (Maximum rate of consumption – Average rate of consumption) * Lead Time.

d). Ordering Level It is a level at which indents should be placed for replenishing stocks.

Order Level =Minimum level + Consumption during the lag period   . OR =Maximum Consumption* Maximum re-order   period.

Use of Control Ratios: Inventory turnover ratio helps management to avoid capital being locked up unnecessarily. This ratio reveals the efficiency of stock keeping .

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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 .

 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 stoc stock k shou should ld be iden identi tifi fied ed and and spee speedi dily ly disp dispos osed ed off off . The The spee speed d 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

The ABC Analysis : With With the the nume numerou rouss parts parts and and mate materi rial alss that that ente enterr into into each each and and every every industrial production, inventory control leads itself, inventory and foremost, to the problem of analysis. Such analytical analytical approach is popularly popularly known as ABC (ALWAYS BETTER CONTROL) Analysis.

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HOW ABC ANALYSIS IS CONDUCTED IN IFFCO AONLA For all inventories (finished goods, raw materials, packaging, spare parts, utility items, and the like ), multiply the average annual usage of the item by the cost per unit.That number will be TOTAL USAGE VALUE. List all items in descending order of usage value. Then add all the values to reach a total start at the top of list , then add each value until we reach 80 % of total. Those are the items which comprise our “A” list.In general 15–20 % of the items fall into this category. Contiuning down the list, determinewhich of the items constitute next 15 % of total value. Usually 15 – 30 % will fall in this “B” group. The remaining 50 – 70 % is the “C” category, normally accounting for only about 5 % of  usage value. When using ABC Analysis, remember that it is intended as a tool for setting inventory inventory priorities priorities and as a method method for determining determining which areas will offer  the highest return on inventory controls.

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 Inventory Software There is a very powerful software in IFFCO for inventories of the various items. 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 installed on the systems systems of the stores, whenever 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 enviro environme nment nt it is very very easier easier to accoun accountan tants ts to retrie retrieve ve the inform informati ation on regarding the transactions made by the stores.

Apart from this, this software have 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: Data Entry Queries Reports Processing Calculator  Exit

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 Data Entry Menu  Data Entry

Document Entry

 SRV   SIV   ISRV   SAV   STV(in)  STV(out)

Adjustment SIV

 Physical  verification

Adjustment ISRV  

 Entry of Surplus

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

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

 Adjustment Entry: With the help of this option we may easily make the adju adjust stme ment ntss in the the stoc stock k issu issuee vouc vouche herr (SIV (SIV), ), due due to any any prev previo ious us adjustment.  Adjustment ISRV:

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This option of data entry menu has the same working in issue stock return voucher (ISRV).

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

 Entry of Surplus : This option is used for adjust the surplus items which is declared by the plant. The surplus items means, the items which are exceeds from the records. So in case of this situation the accountants makes a entry @ of 1 Rupee per unit of items.

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 Reports Menu  Reports

Summary A/C head wise

Month report before PSL run

 PSL JV 

 Month report after PSL run

 Kardex 

 Inventory consumption

Code wise inventory status

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

 Monthly report before PSL run: This option creates the monthly report of all the documents like – SIV, ISRV, SAV, STV (in), STV (out) etc. so that the accoun accountt person personss may check check whethe whetherr the docume documents nts are correc correctt or not., not.,  because if there is any mistake in any document and PSL run is performed it will create the wrong final reports.

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 Monthly report after PSL run: 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 After proces processin sing g of PSL run all the document documentss  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.

 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.

 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.

Code wise inventory status: This option creates a report inventory code wise. We can create report for selected codes.

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Queries Menu

Queries

 Brows Inventory Master 

This menu has single option that is brows inventory master. In this option we may see the status of various materials or items.

As the name of this menu, we can perform the query task, on the basis of  material codes, that are of ten 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.

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 Processing Menu

 Processing   PSL Process I 

 Reverse stock for PSL kardex mismatch

 Put A/C group in IM 

 Reverse stock for physical  kardex mismatch

Proces Processin sing g is the most import important ant task of this this softwa software, re, becaus becausee all the reports reports which which are forwarded to the concerning concerning authorities 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 updates and calculates 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 sens sensit itiv ivee so the the oper operat atin ing g pers person on sho should uld have have the grea greatt care care and and responsibility in processing task.

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

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

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

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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 we exits from the software.

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Production Department IFFCO Aonla is town to production production of Urea. It is carried out out with the help of  two ammonia plants. For every ammonia plant there are two urea plants each of 1100 MTPD capacity. Urea Plant are linked with two product handling   pla plant nts. s. So, So, we can can stud study y the the produ product ctio ion n depa departm rtmen entt into into thre threee part partss as follows: 1. Ammo Ammoni niaa Pla Plant nt 2. Urea 3. Produc Productt hand handlin ling g Plan Plantt

 Ammonia Plant: Ammonia plant is designed to produce 1380 MTPD liquid ammonia based on Haldore Topsoe Process with Natural Gas the main raw material. For the  productio  production n of Ammonia Ammonia Hydrogen & Nitrogen Nitrogen are required required in the ratio 3:1. The source of hydrogen is Natural gas, water and the source of nitrogen is atmospheric air. Nitrogen gas is supplied by GAIL through HBJ pipe line from Bombay High and is used as feed stock which contains large percentage of Methane, along with Ethane, Propore, Butane, Pentane, CO2, Nitrogen and Sulphur compounds. Small quantity of Sulphur compound in the gas is removed by passing the gas through de-sulphurisation unit. Sulphur free gas is yhan mixed with steam and sent to primary reformer where reforming reacti reaction on takes takes place place in the presence presence of cataly catalyst st and produces produces a gaseou gaseouss mixtur mixturee of hydrog hydrogen, en, carbon carbon mono-o mono-oxid xidee and carbon carbon-- dioxid dioxide. e. Furthe Further  r  reforming takes place in the secondary reformer where air is added to furnish the nitrog nitrogen en requir required ed for ammoni ammoniaa synthe synthesis sis.. Hot reforme reformed d gases gases from Secondary reformer are cooled by heat recovery in Waste Heat Boilers, and introduced in the shift converters where most of the CO get converted into CO2. Carbon dioxide from gaseous mixture is separated in CO2 absorber  using benefield process and sent to urea plant. Residual of oxides of carbon

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in syn synthe thesis sis gas gas lea leavin ving abso bsorbe rber are conv conveerte rted to meth methaane in the the Methanator.

Pure synthesis gas from methanator exit is compressed and sent to Ammonia converter where ammonia is formed ammonia product obtain in sent to urea  plant for manufacturing urea.

Urea Plant: Two streams of Urea plant each having capacity of 100 MTPD has been   pro provi vide de.. Urea Urea proc proces esss is base based d Snam Snampr prog oget etti ti Ammo Ammoni niaa Self Self Strip Strippi ping ng  process.

Ammo Ammoni niaa and and CO2 CO2 obta obtain in from from NH3 NH3 plan plantt are are sent sent to Urea Urea Reac Reacto tor  r  o operating at 150 ATM pressure and 180 C temperature. In urea Reactor  Ammonia and CO2 react to form Ammonium Carbonate a part of which dehydrates to urea. Reactor product from urea reactor flow to a steam heated H.P stripper where most of them converted carbamate get stripped of as gaseous ammonia and COS. Urea solution having the bottom of stripper still contains some amount of carbamate. Further purification of urea to about 72 % concentration takes place in medium and low pressure decompressors. Vapour of ammonia and CO2 obtained from the above purification section are converted into ammonium carbamate and recycled back to Urea Reactor  for production of Urea Vaccum concentration are provided to concentrate 72 % Urea solution to 99.8 % in two stages operating at 0.3 atm and 0.03 atm respec respectiv tively ely.. Urea Urea melt melt ( 99.8 99.8 % concen concentra tratio tion) n) from from the concen concentra tratio tion n section is pumped to the top of natural draft Prilling Tower and sprayed by the means of rotating r otating pril bucket. The fine droplets while descending through the lower come into contact with cold air are solidify to form prills. Product Urea from the bottom of prilling tower is sent to Urea Silo or Product handling plant.

 Product Handling Plant:

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Homogeneous and freely flowing urea from the bottom of Prilling Tower is transported to Urea silo by means of belt conveyors at the rate of 220 TPD.

Three weeks factory production equivalent to 45,000 MT can be stored in Urea Silo. This ensured uninterrupted Urea Plant operation even when there is no off take for product urea due to non-availability of railway wagons or  irregular seasonal defacilities.

Product from Silo is reclaimed by means of Scrapper Reclaimer Urea from Silo is made free from lumps ( due to its prolonged storage ) by passing it throu through gh vibrat vibrating ing screens screens and delumb delumbers ers.. The produc productt is transp transport orted ed to Bagging House by means of various Belt Conveyors. The system can also take fresh urea from prilling tower to Bagging House by Urea Silo through a stream of various Belt conveyors.

Bagging House mainly consist of 8 bagging stations. Each station has two weighing and filling machines and one stiching machine. These weighing and filling machines machines are fully automatic, automatic, sophistic sophisticated ated and computeriz computerized ed  based on latest technology from M/S Richard Simon and Sons U.K. There are such 16 number of computapae Unit. Each is capable 10 weight to 50 kg or more weightments at the rate of 600 bags per hour.

The system system is equipp equipped ed with with Data Data logge logge facilit facility y which which can displ display ay and record various figures and fact from the plant. The field bags from these automatic bagging machine are moved on slate conveyor and mouth is closed   by indust industrial rial stitch stitching ing machin machinee suppli supplied ed by M/S Unimee Unimee,, Calcut Calcutta. ta. The  product in filled bags can be transported for various purposes such as : 1. 2. 3.

Stacking on filled bag storage. Loading directly into truck. loading directly into wagons.

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Product handling plant is designed to load a rack of 2,400 MT of fertilizer in 8 hrs. Plant is equipped with covered platform three in number. One for 

stacking filled bags which can store equivalent to 2 rack loads i.e. 5,000 MT and another two platform which are equipped with 6 Nos. of automatic wagon loader ( 3 on each platform ), each has capacity of automatic laoding of wagons at the rate of 1,200 bags per hr. These 3 covered platforms are sufficiently long to accommodate a complete rack so as to load from filled   bags storage as well as directly from bagging stations. These automatic wago wagon n / lorr lorry y load loadin ing g mach machin ines es are are supp suppli lied ed by M/S M/S Moll Moller ers, s, We West st Germany. Average time taken for each wagon loading is 20 to 25 min. An average time in loading a lorry is 10 to 12 min only. Wagon on average will carry 450 bags and 2 truck tr uck on an average will carry 200 bags approximately.

 Empty Bags: Empty bag’s bag’s size is 36.25 36.25 in inches inches or 915 X 610 in mm, weighing weighing 10 gms in case HDPE bags made out of 10 X 10 mash per inch using. Denier of tape equal to 1,000 and width of tape 1.5 mm. The monthly requirement of bag is around 10 Lakhs. There are 2 million bag storage capacity in 1400 m 2 area. The cost of bags varies from Rs 7.90 to 8.40 for HDPE and around 6.5 for  Jute bag. The consumption ratio of HDPE : Jute bag is 50:50. The bag will be supplied various vendors based at Kanpur, Calcutta, Hydrabad, Ahmedabad, Aurangabad etc. The movement of empty bags from these destinations to out side is by road. Average Average daily traffic will be two to three trucks. IFFCO has very strict quality control of bags. The bags once are ready for dispatch from vend vendor or’s ’s work worksh shop op are got got insp inspec ecte ted d by vari variou ouss up to date date insp inspec ecti tion on agencies sponsored by us. The consignment on its arrival at site is also screened by our Laboratory before it is piled for storage. Storage is equipped with EOT crimes two in number, each having lifting capacity of 1 tonne.

 Railway Siding:

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From main track of Chandausi- Barely broad quage, NR section tapping has  been taken at Basharat Basharat Ganj Railway, Railway, Take-up Take-up station. station. Two additiona additionall loop lines and simultaneous reception facilities have been incorporated at Take-up

station. Railway track has been laid which is 09.38 km long through major  one villages acquiring 110 acre approx. of land.

Inplant, yard forms 2.3 km in length and is equipped with : 3 loading lines ( from 700-715 mtr. In length). 4 lines for dealing incoming and out going traffic ( from 715-803 mtr  long). 1 Engine escape line ( 685 mtr. Long ).

In addition to it, the plant has: 2 lines each 340 mtr. Long accommodating one rake length for fuel oil stock. stock. These lines lines are laid over over ballast ballast less platform platform and have have concerts floor in order to recover spillage / leakage while handling fuel oil stock. 2 line each 340 mtr. Long to accommodate off loading of completing  Naphtha rake, an alternative fuel for power plant.

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An Introduction Inventory Management is a scientific method of determining what, when and how to purchase and how much to have in stock for a given period to time.

“Managing the level of inventory is like maintaining the level of water in a bath tub with with an open drain. drain. The water is flowing flowing out continuously. continuously. If water is let let in too slowly, slowly, the tub is soon soon empty. If the water is let in too fast, the tub over flows .”

Inventories are the important part generally in most of the companies today. In India inventories constitue the major portion (i.e. 60 %) of current assets. Due to this much large portion of inventories in the firms, a good amount of  fund are associated with it. So, it is required to pay a considerable attention towards the management of the inventories so that efficient and effective control can be possible.

It is poss possib ible le for for a comp compan any y to redu reduce ce its its leve levels ls of inve invent ntor orie iess to a considerable degree, without any adverse effect on production and sales, by using simple simple inventory inventory planning planning and control technique techniques. s. The reduction reduction in exce excesssive sive inv invent entorie ries carr carrie iess a favo favora rabl blee imp impact act on a comp compaany’s ny’s  profitability.

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Objective of the Study This study of the inventory management is done in IFFCO Aonla Unit to serves the following purposes :

To analyse the investment of funds in inventory. To give give sugges suggestio tions ns to ensure ensuress smooth smooth and uninte uninterru rrupte pted d supply supply without making unnecessary investment of funds in inventory.

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Concept of Inventory Management

Dictionary meaning of inventory is “detailed list of movable articles”. 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.

The term ‘inventory’ includes :

  Inventory

of Raw Materials : In the the case case of manu manufa fact ctur urin ing g conc concer erns ns,, vario various us types of raw materials are being used in the production system. Just to ensu ensures res smoo smooth th produ product ctio ion n func functi tion on and and also also to avoi avoid d any any kind kind of   production delays the concern has to keep inventory of raw materials.   Inventory

of Work-In-Process (W.I.P.) : Some Someti time mess the the manuf manufac actu turin ring g syst system em invo involv lves es variou variouss variou variouss proces processes ses for conver convertin ting g raw materi materials als into into finish finished ed 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.

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  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 applic applicati ation on of manage manageria riall functi function on on the basis basis of manage managemen mentt  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 For time timely ly avai availa labi bili lity ty alon alongw gwit ith h opti optimu mum m size size,, ther theree is need need for  for  controlling as well.Only on the basis of various control techniques one can ensures whether inventory would be timely available. But effective cont control rol in itse itself lf depe depend ndss upon upon organ organiz izin ing g and and coor coordi dina nati tion on.. Thus Thus,, inventory management comprises the functions of planning, controlling and organizing the types of all goods, quantity, status, flow and timesequence etc.

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 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 : Production management Marketing management 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  incr increa easi sing ng dema demand ndss for for impr improv oved ed cust custom omers ers’’ serv servic icee by havi having ng larg largee inventory of inside goods. In   financial management, financ financee manage managerr will will effort effort toward towardss to keep keep investments in different types of inventory at a minimum possible level so that the business concern may earn maximum return.

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BOOKS IFFCO PURCHASE ORDER REGISTER

No Date

P.O. Bill  Name of  amount  party

Bill No. Amount

Date of  Dt. –  Payment

Amount Paid

M.R.R.  No Dr. –  Remarks I.D.B.

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IFFCO MATERIALS RECEIVING REPORT REGISTER

MRR No & Date

B.Vr. No & Date

 Name of  Party & Place

P.O. No. & Date

Bill No & Date

Adv.To vendors/ Suppliers For  Goods Supplies Rs. P.

1

2

3

4

5

6

Cement

Spares

Claims Recover  able

11

12

Gross Amt

Rs.

21

Party’s CST/St Reg. No.

P.

22

13

Capital Items Amount Code

Others Amount Code

Rs.

Rs.

P.

14

Taxable Amount

C.S.T. Amt

Rs.

Rs.

23

P.

24

P.

7

Amount Code

P.

15

Ledger  Folio  No.

16

8

9

10

Delears Form S.C. Amt

Rs.

Rs.

Rs.

P.

17

Rs.

Rs.

26

Steel

Register  ed S.T. Amt.

Gross Amt of   bill

25

stores

Taxable Amount Form

Other  Charges

P.

tools

18

C. Form  No & Date

P.

P.

19

Purchase Form within state Unregiste red Dealers SC Amt Rs. P.

20

Descriptio n of  Goods

Remarks

28

29

P.

27

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RESEARCH METHODOLOGY   Significance of Research “All progress is born of inquiry. Doubt is often better than overconfidence. For it leads to inquiry, and inquiry leads to invention” is a famous Hudson Maxim in context of with the significance of research can will of research can will be understood. Increased amounts of research research make progress possible. Research includes scientifi scientificc and inductive inductive thinking thinking and promoted the development of logical habits of thinking and organization. The role of  research an several fields of applied economics, whether related to business or to the economy as a whole, as greatly. Increased in modern times. The increasingly complex nature of business and government has focused attention on the use of research and solving operational problems. Research, as an aid to economic policy, has gained assed importance, both for government and business. Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them. It is necessary for the researcher to know not only the research methods/ techniques but also the methodology. Researcher not only need to know a develop certain indices or tests, how to calculate the mean, the median or the standard deviation or chi-square, how to apply particular research techniques. The scope of research methodology is wider than that of research methods. Thus, when we talk of  research methodology we not only talk of the research but also consider the logic behind the method methodss follow following ing order order concern concerning ing variou variouss steps steps provid providee a useful useful proced procedura urall guideline regarding the research process :

These guidelines are : Formulating the research problem Extensive literature survey Developing the hypothesis Preparing the research design Determining design Collecting the data Execution of the project Analsis of data Hypothesis testing Generalisation and interpretation

INDIAN FARMERS FERTILISER COOPERATIVE LTD. Preparation of the report of presentation of the result, i.e. formal write up of  conclusions reached.

Meaning Of Research: Research in common parlence refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. According According to Clifford Clifford Woody research comprises defining and redefining redefining problems. problems. Formulati Formulating ng hypothesis hypothesis or suggested suggested solutions, solutions, collecting, collecting, organizing organizing and evaluating evaluating data; data; making making deduct deduction ion and reachi reaching ng conclus conclusion ions; s; and at last last carefu carefully lly testin testing g the conclusions to determine whether they fit the formulating hypothesis.

Objective Of Research The purpose of research is to discover answers to questions through the application of  scientific procedures. The main aim of research is to find out

the truth which is hidden and which has not been discovered as yet. Though each research study has its own specific purpose, we may think of research objectives as falling into a number of following broad groupings: To gain familiarity with a phenomenon or to achieve new insights into ( studies with with this this obje object ct in view view are are term termed ed as exploratory exploratory or formulative formulative research studies). To portray accurately the characteristics of a particular individual, situation or a descriptive research group ( studies with this object in view are known as descriptive studies). To test a hypothesis of a casual relationship between variables ( such studies are testing research studies). known as hypothesis- testing research

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CONCLUSION It might seem axiomatic that inventory control is efficient as

METHODOLOGY ADOPTED

The methodology adopted by me during my summer training which was of four – five weeks was based on the Principles and concept of Research Methodology.  Problem :

The problem which was discussed in this training was to check the effectiveness and effici efficienc ency y of the invent inventory ory managemen managementt in IFFCO IFFCO Aonla Aonla Unit Unit and to analys analysee the investment of funds in inventory and to suggest the measures for more effective control and smooth supply without unnecessary investment of funds in inventory..

 Research Design :

I prepared Research Design of my project which is a conceptual structure within which  project is conducted. To facilitates the smooth sailing of the various research operations, thereby making research as efficient as possible yielding maximum information with minimum expense of efforts & time. It is a blue print for the collection, measurement and analysis of data, my design focuses attention on the following aspects: What the study is about and why is it being made ? 1. To study study the the investme investment nt of funds in the the inventor inventory. y. 2. To mesure mesure the effect effectiveness iveness and efficieny efficieny of of the inventor inventory y management management.. 3. For smooth smooth supply supply withou withoutt unnecessary unnecessary investment investment in in inventory. inventory.

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 Information Required: Based on the objectives of the study the following information is required :The inventory control technique used in the unit. To know the investment of funds in inventory. To study the material management in the unit. How the information is recorded. What is the procedure for the receiving of material. How the maintenance of inventory is done.

 Data Collection Method: The data collection method includes –  Primary Primary Data collection through the Depth Interview with the Managers, Account Officer, and Survey of peoples in Purchase department and store section. The execution is done in the following ways :-

Personal Interview

Secondary Data collection from the concern’s internal sources and the other sources like Internet, IFFCO Magazines and the Account Manual and Annal Reports of the unit.

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Long as inventory level is going down. But the fact is that is if inventories are minimised without guaranteeing adequate operations, inventories have   been mismanaged rather than controlled efficiently. Thus, the two basic obje object ctiv ives es of inve invent ntor ory y cont contro roll appe appear ar to be conf confli lict ctin ing g in natu nature re.. Inventories should increase or decrease in amount or time as related to sales requirements and production schedules.

In most most inve invent ntor orie iess a smal smalll prop propor orti tion on of item itemss acco accoun unts ts for for a very 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 this empi empiric rical al real realit ity y advo advoca cate tess in esse essenc ncee a sele select ctiv ivee appr approa oach ch to invent inventory ory control control,, which which calls calls for a greate greaterr concen concentrat tration ion of efforts efforts on inventory items accounting for the bulk of usage value.

Responsibility for control of inventories is that of the top management, though decisions in this regard might well be based upon the combined  judgment of the production manager, controller, 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 coordinating the diffe differen rentt kind kindss of inve invent ntor orie iess and and confl conflic icti ting ng view viewpo poin ints ts of diffe differe rent nt departments. While decision relating to inventories are primarily taken by executives in production, purchasing and marketing departments, the finance manager should try to ensure that inventories are properly monitored and contro controlle lled. d. He must must emphas emphasise ise the financ financial ial point point of view view and initia initiate te  programmes with the participation and involvement of others for effective management of inventories.