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PRODUCTION DEPARTMENT

Production DepartmentProduction is the process by which, raw materials and other inputs are converted into finished products. It involves many functions such as manufacturing process, product and process design, plant layout, inventory control, plant maintenance, etc. KRIBHCO has the Production Department in the Plant Premises and it works in harmony with the Marketing Department and Transportation Department as well as all other departments. It also includes Stores and Purchase Department which take care of all the materials used in the production process. UREA PLANT

UREA- PLANT

Installed Capacity - 2 x 1310 MTPD

Process Licensor- Snamprogetti

Process Technology- Ammonia Stripping

Raw Material- Co2 and Ammonia

Urea Plant-Process DescriptionThe Ammonia and carbon dioxide produced in Ammonia Plant are again made to react to form first Ammonium carbamate and then to Urea. The concentration of urea is progressively increased by the decomposition and separation of Ammonium carbamate the melt urea of 99.8% concentration is sprayed in a prilling tower through revolving bucket. The solid particles of prilled urea are packed in 50 kg polythene lined urea bags. For recovery of Waste water the following facilities have been provided.In the waste water treatment section, the urea bearing waste water containing 0.98 % urea and 4.76 % ammonia is treated in deep urea hydrolyser with 37 data steam, which recovers carbon dioxide and ammonia from waste water and recovered materials are recycled back to the process. This treated water is sent to DM plant for production of boiler feed water after polishing. One effluent collection pit has been provided for collection of floor washings and occasional waste which is treated separately in Centralized Effluent Treatment Plant. Quality Norms for Urea: The Fertilizer Control Order (FCO) 1985 of the Government of India states that any fertilizer, including urea, that does not meet the quality norms in the FCO cannot be sold for use in agriculture. As per FCO, besides specifications, urea shall have N content of 46%. Not less than 90% of the particles should pass through 2.8mm IS sieve and not less than 80% by weight shall be retained on 1.0 mm IS sieve, with a tolerance limit of 0.20 unit for N content and 3 units for particle size.Our Urea always meets the quality norms.The process steps are:CO2 Compression

High Pressure Recovery

Medium Pressure Recovery

Low Pressure Recovery

Urea Purification

Urea Prilling

Waste Water Treatment

Urea Plant -Process Flow Diagram

Urea Plant-Process Flow Diagram

BAGGING PLANT

Bagging Plant

Prilled Urea is sent thorough conveyors to Bagging Section, for packing in 50 kg HDPE bags. Road-Map of the plant (for reference) is placed here-below:

Inventory Control TechniquesInventory Control is a term that refers to control of all factors that affecting the materials. It starts with obtaining materials and ends with consumption. Material control is a systematic check over procurement, storage and consumption of material so as to ensure minimum wastage, wvwn flow of materials and minimum investment in inventory.To know the practical use of various inventory control techniques in KRIBHCO. Following Inventory control techniques were studied and evaluated are:1. Codification System2. Standardization3. Determination of inventory level4. Classification of inventory

EXISTING CODIFICATION SYSTEM IN KRIBHCO:KRIBHCO has adopted Kodak system of codification, which is based on mine group codification system. First two digits have been used to codify main group. Remaining seven digits have been used to codify all the specifications in that group. The main groups have been sub-divided in the following four categories for easy segregation of materials.

CATEGORYMAIN GROUP NO.

1. General stores00 TO 49

2. Electrical equipments and spares50 TO 63

3. Instrumentation equipments and spares64 TO 80

4. Electrical equipments & spares 81 TO 99

BASIC STRUCTURES IS GENERALLY IN THE FOLLOWING BASIS:

GENERAL STORES (00TO 49)

DIGITS

IIIIIIIVVVIVIIVIIIIX

MAIN GROUP

SUB GROUP

SPECIFICATION/MATERIAL OFCONSTRCTION/THICKNESS

SIZE OF ITEMS

ELECTRICAL AND INSTRUMENTATION

EQUIPMENT & SPARES 50 TO 63 AND 84 TO 80

DIGITS

IIIIIIIVVVIVIIVIIIIX

MAIN GROUP

MAKE

TYPE

SPECIFICATION

ITEMS

ELECTRICAL EQUIPMENT & SPARED (81 TO 99]

IIIIIIIVVVIVIIVIIIIXDIGITS

MAIN GROUP

PLANT CODE

SPECIFICATION/EQUIPMENT/SIZE/RATING

SUB ASSM / CONSTRUCTION

SPARE PARTS / S. NO.

The codification system has been introduced in KRIBHCO from 22nd December 1984 only. The detailed catalogue against each main group is still under preparation and is to be circulated on its operation. The existing codification system has the following advantages.Avoidance of supplication due to multiple names, long description of the items and storing of the same items under different names is avoided. Easy to identify. Reduction in clerical work.The objective of any inventory control system is to determine total number of item to be stocked, keeping necessary records, finding out of selected items & trying to obtain a specific answer as to When to order? & How to order? is answered in item of fixed order quantity known as economic order quantity.

Standardization

A standard is a norm or a model or a general agreement of a rule established by authority, Consensus or custom, created and use by various level of interest. The object of stander is to bring about uniformity in a certain sphere to crate a certain habit, pattern, system or rule. Standardization is the process of defining as to what would be the norm. One of the reasons for high inventory in a large number of organizations is that they keep large number of item under stock having very little variation in dimension, quality or functional effectiveness. It, therefore becomes necessary for the organization to resort to standardization thereby reducing varieties without much affecting the performance and thereby reduction in inventory.

The process of standardization logically leads to simplification or variety reduction which implies reducing unnecessary verities and standardizing the most economical sizes, shapes, colors, types and so on. Fever the items to be controlled, the simpler and more efficient is the materials management process.One of the main advantages that accrue from codifying materials in stock is that once immediately notices a large variety of material to one other. Standard parts are those, which can be used, in different product. Examples of stander parts should be used as they are more readily available and are usually cheaper.

DETERMINATION OF INVENTORY LEVELS:The Inventory level concept considers store keeping as profit intensive service to production. Store keeping should contribute directly to profitability and be concerned with such matter as flow, lead time storage cost, acquisition cost, material handling, preservation, packaging and dispatches.In the same way that specification is related to technical needs, so, general level of stock should be related to the sales and production policies of the company.There are various levels of stock, which are established by the KRIBHCO, is as follows MINIMUM STOCK LEVEL:This is the level at which any further demands upon the bill will necessary withdrawals from the reserve stock. The minimum stock is converted to meet exceptional conditions of demand.Two months usage (consumption) of material (stocks) taken into consideration by the KRIBHCO as a minimum stock level. MAXIMUM LEVEL:This is the level above which the stock should not be permitted to raise. Eighteen months consumption of stocks (material) taken into consideration by the KRIBHCO as a maximum stock level. RE ORDER LEVEL:The point of which the order has to be placed. The reorder level may not always be numerically equal to the economic order quantity. It should be regularly reviewed for paid moving items. For fast factors as change in demand, delivery times or variation in trend.Eight months consumption of stocks (material) taken into consideration by the KRIBHCO as a reorder level.To justify these different kinds of level in December 1985 with the codification system, KRIBHCO established Inventory cells. KRIBHCO also appointed four export of the USAGE OF MATERIAL STOCK IN THE USER DEPARTMENT. Based on their experience and consumption of material stock within the four years, from the year 1989 these different types of stock levels are established. EXISTING CLASSIFICATION OF INVENTORY

The existing classification system is based on its use, i.e. inventories classified as stock items and non-stock items.The list and amounts of stock and non stock items is described in Annexure-The existing system keeps strict control on the item that are of recurring nature. It takes in to consideration only the amount use of quantity not in value. While for non-stock item low control is being kept. This system has following shortcomings.The classification gives importance to only those items, which are of recurring natures. It excludes from the control point of view the items that are high value in stock.It considers the quantity used not the money value of the material used.

Control kept on stock items a give equal weight age to all items, which neglects the benefit of selective control technique.

Considering the practical use of classification techniques, two important methods are suggested as follow.

1. ABC classification 2. VED classification3. Just-In-Time Inventor

1. ABC ANALYSIS:In KRIBHCO inventory has been classified in to three groups. The classification is based on annual consumption value.A (High Value above 50000 Rs.) class like a heavy bearings, heavy pickings, tor steel, metals, heavy electrical spares, empty bags etc..The expected future consumption should be estimated in advance and procurement be on planned basis.B (Medium Value up to 10000 to 49999 Rs.) class item general bearings, general packing, chemicals, resins fire and safety items etc..Order Quantity ROL and safety stock should be fixed with consumption review once or twice in a year. Review should be less frequent as compared to a class item and be at the middle level.C (Law Value below 10000 Rs.) general items... Stock may be maintained for 12 month or more advantage of quantity purchase should be obtained for such low value items. Review should be after large interval and control at the lower levels.A CLASS ITEMS10% items of total inventory70% consumption of vale of total inventories

B CLASS ITEMS20% items of total inventory20% consumption of vale of total inventories

C CLASS ITEMS70% items of total inventory10% consumption of vale of total inventories

As per the ABC ANALYSIS inventory in KRIBHCO on the year of 2009-010 as below:CLASSTOTAL ITEMSVALUE

A Class Items (2 month inv.)220 ITEMS3874180.06 Rs.

B Class Items (4 month inv.)412 ITEMS1439054.80 Rs.

C Class Items (6 month inv.)915 ITEMS 834532.22 Rs

Minimum inventory considering the levels and also stock out looses in the company, however as per the FICC norms company can have 04 months inventory. However the level shall be review considering the consumption pattern. 2. VED ANALYSIS:

VITAL ITEMSLED TIME: FEW MONTHSItem of proprietary Nature.Only single manufacture. Its substitute is not available.Tailor made items/ capital goods.Imported items and Insures spares.Probability of years rare ONCE IN LIFEProbability of high consequential looses.Usually, high cost of item. Probability of obsolesces very real. If the materials not available, than total production stopped at the time.

ESSENTIAL ITEMS LED TIME: FEW DAYSItem of regular production and easily available with manufacturer.Chemicals, general bearings, fasteners, valve, pipe fittings, welding materials, paints, refectories etc.If the materials not available than same may be production affected in future

DESIRABLE ITEMSLED TIME: FEW HOURSFor the sales available from ready stock. Ready available in local market.Continues/ frequent requirement consumables, expendables.Small nuts bolt, emery papers, GI fittings, lubes, lab ware, general stationeries, hand gloves, marketing cloths etc..If the materials not available, than same may production affected in future after long time. The following measures are suggested to reduce the inventory holdings by society:i. Quantity disciplineii. Time disciplineiii. Stock available at the time of intendingiv. Utilization of alternatives

3. Just-In-Time Inventory:JIT, Just-In-Time is a term usually thought of as describing inventory arriving or being produced just in time for the shipment or next process. JIT is a process for optimizing manufacturing processes byeliminating all process waste including wasted steps, wasted material, and excess inventory. The term also describes lean manufacturing that is dependent upon JIT inventory systems (Term=JIT). The term is commonly referred to the concepts of Taiichi Ohno from the Toyota Motor Company in Japan regarding production. Just-In-Time inventory systems depend upon logistics that include: transportation, warehousing and several strategies for handling the potential supply chain uncertainties. Just-in-time is easy to grasp conceptually, everything happens just-in-time. Conceptually there is no problem about this; however achieving it in practice is likely to be difficult.

CLASSIFICATION OF INVENTORIES:Inventories can be classified in terms of its different uses, which will enable one to appreciate the peculiarities and problems in its uses. Secondly the differentiation based on uses of inventories will enable one to adopt control techniques to suit the needs.

Inventories are classified according to uses and point of entry in the alteration is as follows: Raw Material Stores, Spares and Consumables Work in Process Goods and Finished Goods

1. RAW MATERIALS: Raw materials are those basic input materials that are converted into finished product through manufacturing process. The importance of raw materials can be easily visualized when any break in its supply will keep the production lines ideal. There are two important factors, which determine the size of raw materials Inventory.i. Consumption rate and ii. Importance of item.Under the head of the raw material maintained in fertilizer company KRIBHCO are Carbon Di Oxide, Ammonia, etc.

2. STORES AND CONSUMABLES:Consumables:There are the materials which at as catalysis in the production process and are not directly found in the output. This enables the production process to function smoothly. Fuel, oil etc are the example consumables.Spares:Spares are an importance class of inventories by themselves. Then consumption pattern defers from that of raw materials, consumables and finished goods, consequently the stocking polices are different necessitating special methods for solving their peculiar Inventory problems.Spare parts can be classified as routable spares, insurance spares, capital spares, maintenance spares and over handling spares etc.

3. WORK IN PROCESS GOODS: They represent products that need more work before they become finished products for sale. Work in process goods acts as a buffers within the manufacturing sub-system, which may consist of group of machines and assembly lines, i.e. work centers. The greater the period of process, there will be more amounts of manufacturing activities.

4. FINISHED GOODS: Finished Goods Is the Final or Stable Product. Which act as a buffer between the production department marketing dept. the level of inventory depends on the production and behavior of the market. Normally these Inventories are controlled by the Marketing Dept. Urea Is the Final Product of KRIBHCO.

Receipt ProceduresAll incoming goods must be received in receipt section and after making necessary documentation and paper work goods should be delivered for its custody or other destination. During that period same shall be identified and kept in separate specified place to prevent any misplacement/pilferage or mix up.

1. Verification of QuantityPacked materials are opened and verified with challan or bills accompanied with the lost and the same is matched with P.O. and also P.O is progressed simultaneously.

2. Daily Receipt ReportA report indicating `SRV reference of all the individual consignments on daily basis are being circulated to the purchase section/indenter/user for management information of its arrival and arranging inspection of the same.

3. Inspection and Discrepancy ReportIn order to ensure quality for all the incoming material with the help of skill, personnel, material is offered for inspection. The normal methods used are by visual, by touch, by smell, by comparison, by actual testing, Laboratory methods - ISI test etc. This is to determine the acceptability of the article received. Item rejected in inspection and observation regarding any deviation in quantity/condition is recorded separately in a register called MATERIALS EXCEPTION REGISTER, all these information also simultaneously sent to the purchase indenters and the supplier through a report. It is called MATERIAL EXCEPTION REPORT. The custody of rejected items remains with receipt section till it is disposed of as per the instruction of purchaser, indenters and looking to its status of payment respectively. The action for disposal may be one out of the details as under:

a)Items to be returned to the supplier/Insurance company.b)Items accepted later with some deviation and or reduction in price with or without rectification. c)Item is scraped and or destroyed.4. Claim for Loss/damage to the Material in TransitThe losses are liable for recovery either from the insurance company or from the vendor or from the carrier and to materialize of the same claim are lodged on the carrier/vendor, whosoever handled/brought or dispatched the material with the supporting documents. In our case Open Marine Policy theyre with insurance company. All incoming materials consigned to KRIBHCO is covered under the policy and claim may be lodged on the merit i.e. as per terms and conditions stipulated in the purchase order. The claim is then followed up till recovery of the loss is made from the defaulter. Centralized Claim Register is maintained for the purpose. 5. Legal ActionWhenever Kribhcos claims are pending i.e. on the event of carrier/vendor not settling the claim under stipulated or reasonable time period, a suit against them may be filed in consultation with legal advisor and with the managements consent.

Procedure for Material Issue:The issue system relates to function of issue card and inventory control section of stores. It covers all material stocked by the KRIBHCO stores and raw materials directly stored by the users. It begins with the preparation of issue voucher and with their submission to accounts departments.1. Materials are issued against SIV, Foemat signed by authorized persons.2. SIV and type of transaction will be checked.3. Quantity on hand and location of the items will be noted on the SIV for respective item.4. Quantity to be issued is decided based on type of material require.(a) If require material is stock Item, then quantity is issued is depending on stock available.(b) If require material is Non-Stock item, it can be issued fully.(c) If require material is of Reserved material category then entire reserved material can be issued to that particular department.

Existing Purchase Procedure in KRIBHCOTo study the existing purchase system, the purchase procedure followed by the purchase department have been analyzed and evaluated on the basis of observation and discussions with concerned personnel of KRIBHCO is as follows:

1. Responsibilities of the purchase functions are,The purchase department issues the material manager purchase orders/ contract after the approval of the competent authority. The purchase function in other offices (like head office at NEW DELHI and its various branch offices) is headed by the single officer designated for that purpose. The indenters from various departments are issuing inquiries, inviting bids, entering into correspondence or negotiation with vendors / contractors. All requisition for purpose is duly processed in accordance with procedure laid down, which is forwarded to purchase department for necessary action.

2. Registration / Selection of Suitable Vender:Purchase department is responsible for developing a list of approved vendors for various types of materials and service as per procedure. An advertisement is issued in all the leading news papers inviting applications in the prescribed Performa for registration of suppliers and contractors for listing out of various types of purchase and service that are likely to be made during the next three to five years. The application received are scrutinized by a committee consisting of a representative from technical, finance and purchase department nominated by General Manager and ascertained the resources, capacity and quality of workmanship of the vendor. The committee also calls the vendors and contractors for personnel discussion and clarifies the applications and obtains such other information as may be considered necessary by the committee.The list of approved vendors and contractors as to be up dated at least every five years by issuing a press advertisement.3. Requisition to Purchase: The indenters from various departments are raising a requisition called the Material Purchase Requisition (MPR) for purchase in the prescribed Performa. It should be ensured that the requisition for purchase is completed in all respect with regard to.(a) Description of the material / equipment / scope of work.(b) Material of construction / specification.(c) Temperature / pressure / standard if anywhere applicable.(d) Quality and chit of measurement.(e) Date when delivery of material / service is required.(f) Estimated value and budget head.(g) Whether item is a stock item / non - stock item and fast moving / slow moving.The requisition for purchase of stock items is raised by the stores department after the quality in stock-.has reached the re-order level as determined for the respective items. Such requisition amongst other-particular also indicates the minimum, maximum and reorder level, the date on which last supply was received and average consumption per month since last purchase.The requisition for purchase of non-stock items is invariably routed through the stores department which indorses on the requisition the availability / non-availability.In case item is available the quantity thereof is indicated on the purchase requisition and the quality to be purchased is adjusted by the materials manager in consultation with the indenter.All requisitions for purchase of materials or for award of work is raised by respective departments. The department manager ensures the following particulars in the purchase requisitions.(a) The budget provisions.(b) The amount utilized up to the previous requisition.(c) The estimated value of the present requisition and(d) The balance available under the budged head after booking the present requisition.The requisition is submitted to the competent authority for approval of purchase after filling the above information. After the approval of requisition, the same is passed on to the purchase department for inviting bids.

4. Purchase Function after Receipt of MPR:To enter requisition in indent register, the requisitions are checked for specification, quality, code numbers, budget heads etc. This number is entered on all the four copies of indent, one copy is for action by purchase department, second copy is sent to Finance department, third copy is returned to indenter, and fourth copy is retained in the purchase department's master file.5. Floating Inquiries:Purchase department issue inquires to approved vendor or press advertisement depending upon value of purchase which is followed as per the following guideline.

Estimated value of purchase order / work order/contractMinimum of vendors to whom inquiry to be issuedMinimum No. of bids to be

obtained.

UptoRs.20,00,000/-53

Exceeding Rs 20 ,00,000/`All suppliers on the approved list3

This has been prescribed by the KRIBHCO so that a healthy competition amongst bidder to procure materials at the most economical price.Quotation Comparison Statement:At this stage a statement called Quotation Comparison Statement (QCS) is prepared by the purchase department.Then after the bids lowest in value is rated in the QCS as lowest (L1), second lowest (L2), Third lowest (L3), etc.The purchase department sends the QCS to the indenters and tender committee for review and recommendations.6. Purchase Order / Work Order:The recommendation of the tender committee is routed though the finance department to enable them to record the value of commitment in the budget records confirms availability of funds under the approved budget and also record financial concurrence.As soon as the recommendation of tender committee is approved by competent authority, the purchase department issues purchase/work order to the recommended successful bidder.The purchase department is responsible for following up of the purchase order/contracts with vendors and transporters until the material is reached and accepted at the plant/stores.On receipt of materials at plant site/stores, the stores department will fill up the store receipt voucher and arrange the inspection from the inspection department or indenters, as the case may be necessary.

7. Terms & Conditions:The existing purchase procedure gives fair chances of competition to all the vendors. It leaves no room for malpractice of favoritism of employee. In time of urgency of requirement, necessary deviations are approved by competent authority so as to avoid stoppage of work. The procedure is based on democratic way of working. Good suggestions to improve efficiency are always considered. Various annual rate contract, running contracts are entered for regular consumable items, like oil and lubricants, stationary, chemicals, medicines, printing job etc. This is reducing the repetitive job times and money of company.