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PROJECT REPORT ON INVENTORY
MANAGEMENT
Duration :1st June 2011 to 30th July 2011
Placement :KRISHAK BHARATI COOPERATIVE
LIMITED
15 Km, Surat Hazira Road,
Hazira 394270 District: Surat. (Gujarat)
Tel:+0261-2862766/67/68, Fax: 0261- 2860283.
E-mail: www.kribhcosurat.com
Department : Finance & Accounts
Guide : Mr. Thomas T.S
Institute :Jaywant Institute of Computer Application,JSPM
University : PUNE University
Course : M.B.A. ( Finance )
Guide : Prof. Vikas Barbate
(Respective Faculties of JICA)
Trainees : VISHAL D. FINAVIYA
E-Mail ID : [email protected]
Cell : +91-9913039998/9970743643
Project on :Detailed Study of Inventory Management
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Practice.
P R E F A C E
The basic aim of training is to know how to work in the banking sector in a practice. As it is
said, THE EXPERIENCE MAKES MAN PERFECT. The practice study is very
important for a management student. It is pleasure to undergo practical training to submit the
report to the university as a fulfillment of the term work.
Someone rightly said, EDUCATION TURNS A BEAST TO A MAN. Education is
important in a life of a human being as it teaches a person how to live a disciplined and
successful life. Knowledge can be gain by education only.
In this competition era, it is very necessary to have some kind of knowledge of each and
every thing, which prevails, in market or society. Here we are talking about manufacturing
sector, kribhco change the senario of agriculture sector in india. In todays era of competition
it is very necessary for you to be very fast and also be first as compared to MONEY and
banking sector will provide both to you.
We are students of M.B.A. and for us it is very necessary to have some kind of
knowledge how the todays banking organization working and recovery their loan due, and what
kind of facilities they have been providing. And we are here studying of the same.
I have tried my level best to present all the relevant information as detailed as possible
space constraint has curbed me a little bit.
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A C K N O W L E D G E M E N T
I wish to express my thanks to the officers and all the staff members of The KRISHAK
BHARATI COOPERATIVE LTD for their valuable assistance and excellent co-operation in
preparation of this project report.
I wish to place on record the co-operation given me by MR.J.K.MATHUR for making
capable of teaching new things, which are helpful in our practical life that is going on projectat different places.
I also would like to express my thanks to the honorable principal of our college and M.B.A.
in charge professors who have provided me special guidance for collecting information
regarding industrial training and in preparing industrial training report. I am also thanking to
my parents and friends for their exclusive support and emotional encouragement during the
entire project.
An effort has been made to present the subject matter in a systematic form. I shall be glade to
receive any criticism for future improvement.
Signature of student,
Place:
Date:
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D E C L E R A T I O N
I, undersigned VISHAL D. FINAVIYA a Student of M.B.A. semester-III of
Jaywant Institute of Computer Application (JSPM, PUNE) Studies I have prepared the
summer project report in the KRISHAK BHARATI COOPERATIVE LTD during my
fully summer training, this practical training has given me the practical knowledge & more
experience and also learn how the theoretical aspect is implement in real situation. This project
report contains the original detail of current scenario of the company.
Thank you,
Date:
PLACE: SURAT Yours Faithfully
Mr. VISHAL FINAVIYA
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EXECUTIVE SUMMARY
KRIBHCO is one of the biggest co-operative sectors of Asia which manufactures
fertilizer. KRIBHCO is manufacturing Urea, Ammonia & Bio-fertilizers at Hazira, Surat in
the State of Gujarat, on the bank of river Tapi, near Kawas village, 15 Kms. from Surat city
and 20 Kms. from Surat Railway Station.
During the project period from 20January,2010 to 20March,2010 I have study
ANAIYSIS OF INVENTORY MANAGEMENT TECHNIQUES & BRAND IMAGEANAIYSIS OF INVENTORY MANAGEMENT TECHNIQUES & BRAND IMAGE
OF KRIBHCO in depth; by providingOF KRIBHCO in depth; by providing and its various aspect like net working capital, cash
management, receivable management, inventory management, ratio analysis. I have also
studied different departments at KRIBHCO. I observed different activities of them. I have
studied Finance & Accounting, Materials.
The objective of study is to learn about how company manages its day to day
operation and how company manages its working capital and its other components.
An activity of Personnel & Administration department is to do recruitment and
selection, Performance appraisal, promotion and all administration activities of KRIBHCO
Township. Main activities of Finance and Account Department is financial planning, capital& revenue budgeting, Ratio Analysis, SWOT analysis etc. In Materials department they do
all the activities related to purchase and storage of materials and all other consumables. In
transportation department, the main activities of transportation are departure of materials by
road and rail. Marketing department is mainly concerned with pricing policies, sales
promotion, sales and demand forecasting. HRD department is mainly concerned with training
activities, HR planning and other HR activities.
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In short, KRIBHCO handles its all functions efficiently and effectively. It operates
its effective level by performing the sequence of operations, and acquires the maximum
profits among leading manufacturers of fertilizers- urea.
Introduction to FertilizerIndustry
Before introducing organization Kribhco (A fertilizer producing unit) I feel necessary
to give an overview of the Indian fertilizer industry.
India lives in villages, said Mahatma
Gandhi decades ago. It is true even today.
Like every developing economy, the
economy of India is also agro-based.
Agriculture accounts for nearly 1/4th of
India's GDP and more importantly, about
2/3rd of the country's population is
dependent on agriculture and allied
activities for their livelihood. As per
statistics nearly 175 lakh MT of fertilizer nutrients are required every year in this country.
The demand of fertilizers was so high that India had to import almost 30% of its requirement
from other countries. Therefore, to achieve the economic growth, agriculture base of the
country must be strengthened. To attain this objective, agriculture practices have to be
improved from their traditional pattern to a higher technological track involving better
irrigation and use of better quality seeds, fertilizers, insecticides & pesticides. Therefore,
chemical fertilizers are key player in this process and fertilizer industries plays quite a major
role in increasing food production in the country and also helps to modernize the out look of
the common farmers and make them innovative and respective to the new technology change.
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A fertilizer is any material, organic, inorganic, natural or synthetic, that is placed on
or incorporated into the soil to supply plants with one or more of the chemicals elements
necessary for normal growth. Fertilizer is the material, which supplies the chemicals elements
required for plant growth. Primary nutrients like nitrogen, phosphates and potassium
(required for fertilizer land) are supplied through chemical fertilizer. Fertilizer response
studies have proved that one kg. Of fertilizer nutrient application can the food grain
production by 8-10 kg.
A condition of Indian farmers Government of India framed fertilizer policy in 1977
based on Maratha committee report. The purpose behind introducing this policy was to
supply fertilizer to resource poor at a price they could afford, so as to increase the
consumption of fertilizer, to increase food production, and ensure fair return to fertilizer
producers.
With this twin objective, Retention Price Scheme (RPS) for fertilizers came into
picture. In this scheme government has brought the fertilizer under the preview of Essential
Commodities Act (ECA) in which the retail price of fertilizer to the farmer is notified by the
Government of India from time to time. This retail price to the farmer is uniform throughout
the country and is subject to local taxes applicable under the respective States.
Further under ECA, the government also operates a system of distribution control in
which the manufacturers including the handling agents for the imported fertilizers are
directed to sell specified quantities of fertilizers in given states/union territories. While doing
so, the logistics of fertilizer distribution including storage, transportation, handling etc. are
also suitably regulated conforming to overall supply plans of the government to meet the
requirement in all the parts of the Country.
Now manufacturers also should get reasonable rate of return as all incentive for
producing fertilizers. Manufacturers should get at least that much, which call enable them to
remain in the industry.
Government of India fixes the price of fertilizers in such a way that manufacturer's
cost of production including cost of marketing is covered and the manufacturer gets a 12%
post tax return on net worth of the unit at a pre-defined capacity utilization. Norms are fixed
for consumption of raw material, utilities, services, capacity utilization, depreciation etc. The
price so fixed is called Retention Price (RP). This price is reviewed every three years.
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In a nutshell fertilizers can not be sold in open markets and producing unit has almost
nil say in fixing fertilizer price. Then how to increase profits? By operating plant efficiently
only.
The work of administering the Retention Price Scheme (RPS) is entrusted to Fertilizer
Industry Co-ordination Committee (FICC) which works under the control of department of
chemicals and fertilizers.
Growth of Fertilizer Industry
One of the most significant achievement of the post Independence
period of our Country has been the ability to achieve self-sufficiency in food
grain production. This achievement is due to the rapid growth andimprovement of Fertilizer industry. The Fertilizer industry is growing at the
rate of 4% for the last 10 years and has been contributing a significant part of G.D.P. ahead
The growth and importance of Fertilizer industry in India can be divided in to three
distinct phases, these are given below.
1. Pro Green Revolution Period:
This period is described in 1952-1953 era where increased growth of food grains took
place however this increased production in food grains took place due to increased irrigation
methods. In this phase the land under agriculture was made more, during this period about
80% of the country's population was involved in Agriculture either directly or indirectly.
During this period the fertilizer's which were manufactured were Super Phosphate &
Ammonium Sulphate. Irrigation was thought to be heart of Agriculture.
2. Green Revolution Period:During this phase Government stated the Programme aimed at making our country
self sufficient in Food Products. This was the period between the years 1959-1960. This plan
laid the emphasis on production of High Yielding Varieties. To make this plan a success there
was a high need to make soil fertile by providing it with nutrients like Phosphorus, Nitrogen
and Potassium.
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During this phase Fertilizer industry tried to play a vital role, became one of the most
important, and inherits part of our economy.
3. The Post Green Revolution Period:The world's population along with Indian population has kept on growing at a
alarming rate, the fertilizer companies all over India are trying to expand their scale of
operations in order to increase the production rate. The demand for fertilizers per year is
increasing. The current demand of fertilizers in India is 18 million tones.
- According to Fertilizer Association of India.
Global Scenario of Fertilizer Industry
The United Nations projection indicate the world population has been increasing at
very fast rate while the nature resource such as land remain the same so, to recover increasing
demand for the food grain the productivity of the crop can be increased by using fertilizer.
Today 35% of the world fertilizer/production from developing countries. But their
consumptions being 50% of the total global fertilizer consumptions; the developing
countries are the net importer of the fertilizers. This is natural because they are essential agro
based economics. While Canada and U.S.A. are top exporters of fertilizer in the developing
countries. India and china are also develop/ping their scenario in the world market.
Fertilizer Industry Scenario in India
In India, First of all in 1906, A Single Super Phosphate (SSP) manufacturing unit was
set up at Ranipat near Chennai (Madras) with annual capacity of 6000 tones per annum.
By fiscal year 1995, the fertilizer consumption in India touched 13.56 million tons. In
the same year, the total supply was 10.43 Million tons. With that become the third largest
producer after U.S.A. and china. To bridge the demand and supply gap India has to import
necessary fertilizer.
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1. Public Sector
The Fertilizer and Chemicals Travancore Ltd. (FACT)
Hindustan Fertilizer Corporation Ltd. (HFC)
Madras Fertilizer Ltd. (MFL)
Hindustan Copper Ltd. (HCL)
Naively Lignite Corporation Ltd. (NLC)
Pyrites, Phosphates And Chemicals Ltd. (PPCL)
Pradeep Phosphates Ltd. (PPL)
Rashtriya Chemicals And Fertilizers Ltd. (RCFL)
National Fertilizer Ltd. (NFL)
2. Co-operative Sector
There are only two fertilizer manufacturing societies in Co-operative sector.
Indian Farmers Fertilizers Cooperative Ltd. (IFFCO)
Krishna Bahrain Cooperative Ltd. (KRIBHCO)
3. Private Sector
There are 17 companies in private sector, which are producing fertilizer.
Gujarat Narmada Valley Fertilizer Co. Ltd. (GNFC)
Hindustan Lever Ltd.(HLL)
Hari Fertilizer
ICI India Ltd.
Indo Gulf Fertilizers & Chemicals Corporation Ltd.
Mangalore Chemicals & Fertilizer Ltd. (MCFL)
Southern Petro Chemicals Industries Corporations Ltd.
Nagarjuna Fertilizer & Chemical Ltd. (NFCL)
Shri Ram Fertilizer & Chemicals
Tuticorian Alkali Chemicals & Fertilizer Ltd.
Zuari Agro Chemicals Ltd.
Bindali Agro Chemicals Ltd.
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Chambal Fertilizer & Chemicals Ltd.
Coromandal Fertilizer Ltd. (CFL)
Deepak Fertilizer & Petrochemicals Corporations Ltd. (DEPCL)
E.D.I. Passy (India) Ltd.
Gujarat State Fertilizer Company (GSFC)
The Role of the Fertilizer in the National Economy
Agriculture Industry Services Environment
As a critical input
in crop production.
It promotes
agricultural
growth, food
security and rural
upliftment.
Fertilizer industry
promotes use of
gas, sulphur etc.
Foreign exchange
savings.
Distribution
network promotes
domestic and world
trade, credit and
banking services,
research, and
transport and
storage services.
The proper use of
fertilizers can help in:
1) Maintenance of
soil structures.
2) Prevention of soil
erosion and
Degradation.
3) Control of
Deforestation.
About the
Krishak Bharati Co-operative Limited
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KRIBHCO the worlds premier fertilizer producing co-operative has an outstanding
track record to its credit in all spheres of its act ivies. Since 17th April 1980 as a national level
co-operative society promoted by Government of India authorized to manufacturing and
distribution of fertilizers. Chemical fertilizer and allied farm imputes KRIBHCO imbibed
the co-operative philosophy fulfilling its commitment to strengthening and promoting the
cause of agriculture development and co-operative movements in the country.
Krishak Bharati co-operative limited popularly known as KRIBHCO has been
registered as national level co-operative society under the provision of the multi-state co-
operative societies act, 1984.
TheKRIBHCO hazira unit is located around 15 Kms, west of Surat and lies on the
north of river Tapti. An all weather road from Surat to hazira connects the plant site with the
city. The cannel belonging to irrigation department is running on the plant site and is feeding
water from ukai. A railway feeder line apporx. 55 kms. Long has connected the site with
Bombay Ahmedabad main line.
KRIBHCO multiunit co-operative societies were promoted jointly by IFFCO and the
agricultural co-operative all over the country.
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KRIBHCO PLANT AT HAZIRA
Plant is based on Natural Gas from BOMBAY HIGH SOUTH BASSEIN. The society
massive Ammonia, Urea complex is situated at HAZIRA near SURAT in GUJARAT.
KRIBHCO plant is one of the largest and most modern fertilizer compels in the co-
operative sector in the world. It has two phases on UREA plants consisting of two streams of
1100 MTPP with an annual capacity to produce 14.52lakh.MT of urea equipment to 6.68
lakhs MT interns of nutrient nitrogen.
KRIBHCO aims to fulfil the ever-growing fertilizer needs of the country. The
HAZIRA project with project zero date of 31st March, 1985. The estimated project cost was
Rs.957.71 crore However, the final project cost was Rs.885 crore resulting in hot saving at
Rs. 72.71 crore.
KRIBHCO Network
A. Head office: - fertilizer plant, Noida, Delhi
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B. (I) Plant:- Surat Gujarat
(II) Bio fertilizer plant: - Surat (Gujarat)(III) Seed processing plant: - Andhra Pradesh, Gujarat, Haryana, M.P.
Punjab, Rajasthan, U.P. (For Punjab & Haryana)
C. Zonal offices: - Bhopal, Bangalore, Lucknow and Chandigadh.
D. State mktg. offices: - Jaipur, Ahmedabad, Chennai, Mumbai, Bangalore, Patna,
Lucknow, Chandigadh, Bhopal, Hyderabad, Guwahati, Dehurdun, Kolkata.
Besides marketing its products KRIBHCO carries out various other
programmed like farmers benefit programmed, sanket Haran bima yojana, marketing of
BVFCL (Brahmputra valley fertilizer corporation limited) vred seed multiplication
programmer, gramin vikas trust (rural development trust).
MEMBERSHIP
A cooperative thrives on the trust of, its members. Membership of KRIBHCO is
open to government of India, national state and district and village level cooperative society.
At the initial stage, way back in June, 1981 the total membership in KRIBHCO was only221 cooperative societies which rose significantly to 6306 cooperative societies as on march
31,2007 as against 6242 as on march 31 2006. Phenomenal progress made by the society
becomes a testimony to the ever-increasing membership over the years.
The total paid up share capital as on March 31, 2007 was Rs.396.05 crore as against
Rs.394.62 crore in the previous year. The Society has refunded share capital of Rs 2.20 crore
to the Government of India.
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INTRO OF KRIBHKO
Krishak Bharati Co-operative Limited (KRIBHCO), a premier Co-operative Society for
manufacture of fertilizer, registered under Multi-State Cooperative Societies Act 1985,
was promoted by the Govt. of India, IFFCO, NCDC and other agricultural cooperative
societies spread all over the country. Oil & Gas findings in Bombay High and South
Basin triggered off the birth of eight new generations fertilizer plants to fulfill ever-
growing food needs of the country. KRIBHCO was amongst the first two Projects in the
first phase.
KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia & Bio-
fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, near Kawas village,
15 Km from Surat city and 20 Km from Surat Railway Station on Surat Hazira State
Highway.
Late Smt. Indira
Gandhi, former Prime
Minister of India laid the
Foundation Stone on
February 5, 1982.
The trial production
of Urea commenced from
November 26, 1985 and
within a very short time of 3
months, the commercial
production commenced from March 01, 1986. Since then, it has excelled in performance
in all areas of its operations.
The total Project cost was Rs. 890 crores as against the estimated cost of Rs. 957
crores. This shows a saving of Rs. 67 crores (approximately 7%) in Capital Cost of the
Project, which is a rare feature in the history of a Public Sector Unit.
Subsequently, a Bio-fertilizer plant of 100 MT per year capacity was
commissioned at Hazira on August 15, 1995. KRIBHCO has also completed the
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installation of an expansion of the Bio-Fertilizer plant with an additional capacity of 150
MT and the same was commissioned in December 1, 1998.
ORGANIZATIONPROFILE:
Name of the Organization: Krishak Bharati Cooperative Limited, abbreviated
KRIBHCO
Plant Office: PO: Kribhco Nagar, Hazira Road, Surat 394 515. Phone-2320034
Head Office: A-8-10, Sector 01, Noida, Distt. G. B. Nagar, U.P.
Registered Office: 49-50, Nehru Palace, New Delhi-19
Type of Organization: Society is registered under Multi-State Co-operative Societys
Act-1984 and under the Administrative Control of Department of Chemical & Fertilizer,
Govt. of India.
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Product: Manufacturing Nitrogenous Fertilizers and Allied Products Viz: Urea,
Ammonia Liquid, Bio-Fertilizer, 30 Mega Watt Power Plants, Operation and
Maintenance of Heavy Water Plant of Department of Atomic Energy.
ABOUTKRIBHCO:
Installed Capacity: Urea 14,52,000 MT/Year (Plant Nutrient 6,67,920 MT of
Nitrogen/Year)
Plant Technology:
Ammonia 2 x 1350 T/day: Kellogg (USA) & FEDO (INDIA)
Urea 4 x 1100 T/day: Snamprogetti (ITALY) & PDIL (INDIA)
Power & Off sites: DCPL (INDIA)
a) 3 Boilers (One Standby) with capacity of 275 MT of steam / boiler / hr.:
Foster
Wheeler, UK
b) 2 TG Sets with capacity of 15 MW each.: BHEL, INDIA
Total Cost of Project: Rs. 890 Crores
Concreting: 3, 00,000 M3
Steel: 58,000 MT
Cement: 1,50,000 MT
Heaviest Equipment: 410 MT Ammonia Converter
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Tallest Structure: 150 Meters
Periling Tower: 90 M Height x 26 M
Urea Silos (Largest in Asia): 45,000 MT x 2 Nos.
Ammonia Storage(Atmospheric): 10,000 MT x 2 Nos.
Bagging Capacity with 16 bagging machines of each 1200 bags/hr.: 6,000 MT in two shifts.
Loading of Urea: 6 trucks & 12 wagons
Pollution Control: Exhaustive pollution control measure at source with latest equipments &
techniques.
Computerisation Programme: For information processing, data logging & process control.
Share of KRIBHCO as % of countries installed capacity of Urea: 12%
Contribution to countrys food grain production: 6 million tonnes/year.
Natural Gas Requirement: 3.2 million M3/day
Power Consumption: 25 MW
Water: 9 million gallons/day
Empty bags requirements: 1 lack/day
MISSION:
A) To contribute to agriculture &rural development in the reigns.
B) Services to members of cooperatives society by providing finance.
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C) Managing society desirable and commercial profitable investment
opportunity preferable at multiple locations.
VISION: They want to be a world class organization that represents the farmer
Community and maximizes returns to them through specialization in agricultural
Input, products and other diversified businesses that maximize stakeholder value.
OBJECTIVES:
To undertake the activities for rural and agriculture development.
To promote economic interest of its members by undertaking manufacturing of
chemical fertilizer & allied product.
In furtherance of these objectives KRIBHCO may undertake one or more of the
following activities: -
(I) To undertake production processing, manufacture, sale distribution, marketing,import export and to otherwise deal in agriculture production requisites.
(II) To set up storage units for storing fertilizer and other goods by itself or in
collaboration with other agency.
(III) To act as warehousing agency under the warehousing act and own go downs or
hire go downs for the storage of fertilizers and other goods
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BOARD OF DIRECTORS as on March 31, 2009
Chairman Dr. Chandra Pal Singh
Vice-Chairman Shri R. K. Dhami
Director
Shri Ponnam Prabhakar
Shri V. R. Patel
Shri V. S. Chowdary
Shri Mathew C. Kunnumkal
Shri Deepak Singhal
Shri Shiv Narayan Prasad Mishra
Shri S. S. Jamgod
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Managing directorShri B. D. Sinha
Marketing DirectorDr. V, P. Singh
Operational DirectorShri I. N. Bansal
AWARDS:The excellence performance of the society has brought a number of laurels from
various organizations .The awards received during year were as follows: -
KRIBHCO receives gold star award of Excellence from Institute of Economic studies
for its overall excellent performance.
KRIBHCO receives the Rajshabha Award from Honorable Minister of Chemical and
Fertilizers for 2002-03, 2003-04 and 2004-05.
KRIBHCO was awarded First Prize for Production, Promotion and marketing of Bio
Fertilizers for the year 2004-05 on 1st December 05 by FAI.
National productivity council has awarded productivity award the society for bio
fertilizer product for the year 1999-2000, 2001-2002 in the year 2003-2004.
Certificate of merit by public relations society of India, Hyderabad chapter for house
journal of KRIBHCO
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Best technical innovative award for the year 2003 by fertilizer association of India.
Certificate of merit Gujarat safety council for relining 30 lakh accident free man-
hours.
Hazira ammonia extension project (HAEP) rotating shield winner and certificate for
lowest disabling injury index in group-c industries.
Sardar Vallabhbhai Patel Agriculture and Technical University, Meerut All India
Farmers Fair and agro Industrial Exhibition First Prize To Kribhco on 10-03-2005.
Kribhco has won first prize for Bio-Fertilizer Production, Marketing and Promotion
Award for the year 2003 And 2004 by National Productivity Council (NPC). Award has been
given formal function held on 10th May, .2005 by honourable Minister for Agriculture Shri
Shard Paxar.
MILESTONES OF KRIBHCO
1. Project zero date : 31/03/1981
2. Foundation stone laid by Smt. Indira Gandhi : 05/02/1982
3. Project completion : 31/03/1985
4. Plan completion : 26/11/1985
5. Commercial production : 01/03/1985
6. Percentage of capacity utilization : Urea 99%
7. Plant ready to production : January/September,1985
8. Gas available by ONGC : PHASE 1 & PHASE 2
18/09/85 06/11/85
9. Trail production ammonia : PHASE 1 & PHASE 2
14/11/85 30/11/85
Urea (stream11/13) : 26/11/85 & 30/11/85
Ammonia (stream21/14) : 31/12/85 & 01/12/85
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ISO CERTIFICATE
1. KRIBHCO Plant ISO 9001-2000
2. KRIBHCO Plant ISO 14001
3. KRIBHCO Marketing Office ISO 9001-2000
OTHER PROJECT HIGHLIGHTS
23
Total Plant Land 1,700 acres
Total Land for Township 100 acresCement 15,000 MT
Steel 28,000 MT
Piping 8,80,300inch-meter
Electrical Cabling 700 Kms
Excavation 32Lakhs cum
Concreting 3.0Lakhs cum
Reinforcement 30,000 MT
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PLANT CAPACITY & CONSULTANTS
PLANT CAPACITY CONSULTANTS
DAILY ANUUAL
AMMONIA 2 X 1350 MT 8.9 LAKH MT M.W.kellogg, USA, FEDO, INDIA
UREA 4 X 1100 MT 14.52 LAKH MT SNAMPROGETTI, ITALY, PDIL, INDIA
SENIOR THERMAL ENG.U.K
POWER 2 X 15 MWH THERMAL ENGG.U.K.
HAEVY WATER 2 X 55 MT P.A PDIL HTAS,DENMARK BIO-
FERTILIZER
250 MT PER
YEAR
DAE
SALIENT FEATURES OF KRIBHCO FERTILIZER COMPLEX
Project Cost
1. Original Estimate: Rs. 957.7 Crore
2. Final Cost :Rs. 890.7 Crore
3. Saving in Project : Rs. 87.7 Crore i.e. 7%
Typical Raw Material & Utilities Consumption
Natural : 3.0 million standard cubic meters/day
Natural Gasoline Liquid (NGL) : 640 MT/dayPower : Self-sufficient (captive plan)
Water : 35,000 m3/day
JUTE/HDPE Bags : 1 Lac/day
Product Storage and Handling Facility
Bulk Urea Silo : 2 45000 MT
Filled Urea Bags : 20000 MT
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Anhydrous Ammonia : 2 10000 MT
(Atmospheric storage tanks)
Tallest Structure : 150 meters height (Power Plant Chimney)
Urea Prilling Tower : 2
90 meters height and 26 meters diameterShare of KRIBHCO in Countrys Urea Production : 8%
FINANCIAL PERFOMANCE
EQUITY PARTICIPATION
SOURCE OF INCOME (for the year ended 31/03/2009)
PARTICULAR RS. IN CRORE PERCENTAGE
SALES (NET) 1384.88 56.00%
CONCESSION/REMUNERATION FROM
GOVT. OF INDIA
844.79 35.00%
OTHER REVENUE 230.53 9.00%
DISTRIBUTION OF INCOME (for the year ended 31/03/2008)
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PARTICULAR RS. (IN CRORE) PERCENTAGE
Consumption - Materials and Stores 1111.16 45.00%
Purchase- Seeds, chemicals and other
fertilizers
454.50 19.00%
Employees remuneration and benefits 173.40 7.00%Expense- Manufacturing,
administration, distribution and interest
426.21 17.00%
Depreciation 22.79 1.00%
Taxation(net) 62.94 3.00%
Profit after tax 209.20 8.00%
NET WORTH
PERFORMANCE HIGHLIGHTHighest Monthly Bio Fertilizer Production At Hazira In May 07
Earlier Record (Nov. '06)
87 Mt
80 Mt
Highest Monthly Bio-Fertilizer Sale In June 07
Earlier Record (Nov. 05)
147 Mt
133 Mt
Highest Total Monthly Bio-Fertilizer Production Aug. '07 Since
Inception
Earlier Record (May. 07)
138.6 Mt
110.7 Mt
Highest Monthly Urea Production December '07 Since
Inception
Earlier Record (Jan 05)
166204 Mt
166061 Mt
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Highest Monthly Average Daily Urea Production In Feb '07
Earlier Record (Nov. '05)
5374 Mt
5363 Mt
Highest Monthly Total Urea Sales March '08 Since Inception
Earlier Record (Dec 07)
4.75 Lmt
4.36 Lmt
Highest Total Annual Bio-Fertilizer Production
Earlier Record (2005-2006)
953.3 Mt
775.2 Mt
Highest Annual Bio-Fertilizer Sales
Earlier Record (2006-2007)
956.8 Mt
784.4 Mt
Highest Annual Urea Production
Earlier Record (2004-2005)
18.1 Lmt
18.1 Lmt
Highest Annual Urea Sales
Earlier Record (2007-2008)
37.76 Lmt
36.30 Lmt
Highest Annual Seeds Production
Earlier Record (2007-2008)
198 000 Qtls
168 000qtls
Highest Annual Seed Sale
Earlier Record (2007-2008)
196 000 Qtls
167 000 Qtls
Highest Annual Ammoniya Production
Earlier Record (2004-2005)
11.3 Lmt
10.9 Lmt
QUALITY POLICY
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Management of KRIBHCO, Hazira plant is committed to operate and maintain its
fertilizer-manufacturing complex through quality assurance, environment protection and
to the satisfaction of customers.KRIBHCO; Hazira plant shall achieve this quality policy
through following objectives:
1. Continually upgrading technology to improve plant efficiency & reliability.
2. Maintaining & improving the safety & environmental performance.
3. Improving the skills & knowledge of personnel.
4. Continuously improving the quality Management system.
OBJECTIVE OF INVENTORY MANAGEMENT:-
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The basic responsibility of the financial is to make sure the firms cash flows are
managed efficiently. Efficient management of inventory should ultimately result in the
maximization of the owners wealth. It was indicated that in order to minimize cash
requirements, inventory should be turned over as quickly as possible, avoiding stock-outs that
might result in closing down the production line or lead to a loss of sales.
The main objective of inventory management consists of two parts:
1. To minimize investment in inventory
2. To meet demand for the product by efficiently organizing the production and sales
operations.
The firm should minimize investment in inventory implies that maintaining inventoryinvolves costs, such that the smaller the inventory, the lower is the cost to the firm. But
inventory also provide benefits to the extent that facilitate the smooth functioning of the
firms.
Need to hold Inventory:-
Business firm keep inventory for different purpose. Every firm, big of small, trading
of manufacturing has to maintain some minimum level of inventories.
Transaction motive:-
Every firm has to maintain some level of inventories to meet the day to day
requirement of sales, production process, customer demand etc. the inventory level will
provide a smoothness to the operation of the firm.
Precautionary motive:-
A firm should keep some inventory for unforeseen circumstances also. For example,
supply of raw material may not reach due to strike by the transporters.
Speculative motive:-
The firm may be tempted to keep some inventory in order to capitalize an opportunity
to make profit
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Types of Inventory:-
1. Raw Material Inventory:-
These are goods which have not yet been committed to production in a manufacturing
firm. They may consist of basic raw material.
1) Work-In-Process:-
This includes those materials which have been committed to production process but
have not yet been completed.
2) Finished goods:-
These are completed products awaiting sale. They are the final output of theproduction process in manufacturing firms.
3) Supplies:-
A fourth kind of inventory, Supplies or what is called consumable -stores are also
maintained by the firms. These materials are of low value & they do not enter the production
process, for example oil, fuel, bulbs, soaps etc.
4) Scrap:-The waste of materials arising during manufacturing process is also a part of the
inventory. Even defective pieces to be disposed off are a part of in inventory.
COSTS OF HOLDING INVENTORY:-
The costs associated with inventory fall into two basic categories:
(A) Ordering costs or set-up costs
(B) Carrying costs.
(A) Ordering Costs or Set-up Cost: -
This category of costs is associated with the acquisition or ordering of inventory.
Firms have to place orders with supplier to replenish inventory of raw materials. The
expenses involved are referred to as ordering cost. Ordering costs involved are referred to as
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ordering cost. Ordering costs involved in (1) preparing a purchased order or requisition form
and (2) receiving. Inspecting and recording the goods received to ensure both quantity and
quality. The cost of acquiring materials of clerical costs and cost of stationary. It is therefore,
called as set-up-cost. They are generally fixed per order placed, irrespective of the amount of
the order. The larger the order placed, or the more frequent the acquisition of inventory made,
the higher are the costs. From a different perspective, the larger the inventory, the fewer are
the acquisitions and the smaller the order costs.
(B) Carrying costs or Set-up Cost:-
The second broad category of cost associated with inventory is the carrying cost. They
are involved in maintaining or carrying inventory. The cost of holding inventory may be
divided into two categories:
a) Those that arise due to storing of inventory:-
The main components of this category of carrying costs are (1) storing cost, that is tax
depreciation, insurance, and maintenances of the building. (2) Insurance of inventory against
fire and theft. (3) Deterioration in inventory because of pilferage, fire and price decline (4)
Serving costs, such as, labor for handling inventory, clerical and accounting costs.
b) The opportunity cost of funds:-
This consists of expenses in raising funds to finance the acquisition of inventory. If
funds were not locked up in inventory, they would have earned a return. This is the
opportunity cost of funds or the financial cost component of the cost.
The sum of the order and carrying cost represent the total cost of inventory. This is
compared with the benefits arising out of inventory to determine the optimum level of
inventory.
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INVENTORY MANAGEMENT
IN KRIBHCO
INTRODUCTION:
A study in KRIBHCO was carried out taking into consideration the concept of total
material control, which significant that efficiency of any organization is contingent upon
having the right material of right quality or right place in the right quantity at the right time
and place.
To study the Inventory Management the several of interview techniques depending on
the situations were followed. Discussions were carried out with various personnel of the
company to study the following 3 broad areas.
1. PURCHASE CONTROL
2. STORAGE CONTROL
3. WAREHOUSE ACCOUNTING
To study the above a relationship and link was sought between theory and
practice. An evaluation was done to each stage and suggestions were also made to
improve the existing Inventory control system.
1) PURCHASE CONTROL
Purchasing is one of the basic functions of Inventory Management and forms a
major part of it. What to buy, when to buy, where it buy, how much to buy, how much
to pay and how much to stock are the fundamental of the Inventory control. It also
involves creative functions such as development of new resources, introducing new
materials and sources in the undertaking etc. It needs considerable expertise not only
negotiating but also in the techniques of competition and studying of economic trends
in respect of materials to be purchased in large quantity. Every rupee saved by the
good purchasing goes directly in to the profit for the simple reason is that it is not
spent at all.
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OBJECTIVES OF PURCHASING
The objective of Inventory purchasing can be enumerated as follows.
To Maintain Continuity of production. To contribute to the competitiveness of the end product. To contribute towards higher productivity. To buy for the best ultimate value not necessarily at the lowest initial price.
To contribute towards standardization, variety reduction and value analysisprograms.
To increase profits
EXISTING PURCHASE PROCEDURE IN KRIBHCO
To 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:
SCOPE
The scope of purchase in KRIBHCO includes the following
Capital items, like plant and machinery, office equipment, furniture and fixtures etc. Raw materials and semi finished goods. Consumable items like tools, oils and lubricants, office stationery etc. Spare parts. Contract / agreement for clearing, handling, loading and transportation of incoming/outgoing materials.
Rate contractors for procurement of casual labors and for maintenance of plant andtownship buildings.
Contract for construction of civil, structural. Mechanical, electrical, instrumentation,insulation and painting etc.
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Contracts for hiring of vehicles. Contract for running of canteen / guesthouse. Rate contracts for procurement of laboratory, glass wares/ chemicals etc.
RESPONSIBILITY FOR PURCHASE FUNCTIONS
The purchase department issues the material manager (purchase all purchase orders/
contracts after the approval of the competent authority i.e. the material manager (purchase).
The purchase function in other offices (like head office at NEW DELHI and its various
branch office) is headed by the single officer nominated / 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.
REGISTRATION / SELECTION OF SUITABLE VENDOR/S
Purchase department is responsible for developing a list approved vendors for various
type of materials and service as per procedures, and advertisement is issued in all the leading
newspapers inviting applications in the prescribed Performa for registration suppliers and
contractors listing out of various types of purchase and service that are likely to be made
during the next 3 to 5 years. The application received scrutinizes by a committee consisting
of a representative from technical, finance and purchase departments (nominated by General
Manager) and ascertained the resources, capacity and quality of workmanship of the vendor.
The committee also calls the vendor and contractors for personnel discussions 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 updated at least every five
years by issuing a press advertisements.
REQUSITION TO PURCHASE / WORK
The indenters from various departments are raising a requisition called the material /
purchase requisition for purchase n the prescribed Performa. It is ensured that the requisition
for purchase is completed in all respect with regard to
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a) Descriptions of the material / equipments / scope of work.
b) Material of construction / specification.
c) Temperature / pressure/ standard if anywhere applicable.
d) Quality and chit of measurements.
e) Date when delivery of material / services required.
f) Name of vendor in case the item is of proprietary nature.
g) Estimated value and budget head.
h) Whether item is a stock item/ non-stock item.
The stores departments raise the requisition for purpose of stock items after the
quality in stock has reached the recorder 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 consummations per
months since last purchases.
The requisition for purchase of non-stock items is invariably routed through the
stores departments, which indorses on the requisition the availability/non availability. In
case item is available the quantity thereof is indicated on the purchase requisition and
quality to be purchased is adjusted by the materials manager in consultation with the
indenture.
The requisition for purchase of capital items, award of civil works, erection
contracts and repair to plant and machinery and equipment, handling and transportation of
materials, repairs/service of equipments hiring of causal labors, selection of contractors
for repair, maintenance, electrical instrumentation provision of after service and painting
jobs on schedule of rate valid for one year, is sent directly to the materials after same are
approved by the authority.
All requisition for purpose of materials or for award of work as described above is
raised by respective departments. The departments manager ensure the following
particulars in the purchase requisitions.
1) Budget provisions.
2) The amount utilized up to the previous requisition.
3) The estimated value of the present requisitions, and
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4) The balance available under the budgeted head after booking the present
requisition.
The requisition is submitted to the competent authority for approval of
purchase/work after filling the above information. After the approval of
requisition, the same is passed on to the purchase departments for inviting bids.
PURCHASE FUNCTION AFTER RECEIPT OF MPR
To enter requisition in indent register, the requisition are checked for specifications,
quality, code numbers, budget heads etc. This numbers is entered on all the 4 copies of
indent, 1copy is for action by purchase departments, 2nd copy is sent to finance departments,
3rd copy is returned to indenter, and 4th copy is retained in the purchase departments file.
FLOATING INQURIES
Purchase department issues inquire to approved vendor lost or press advertisement
depending upon value of purchase, which are followed as per the following guidelines.
Estimate value of purchase
order/work
Order contract
Minimum of vendors to
whom inquiry to be issued
Minimum No.
of bids to be
obtained
1] Up to Rs1,00,000/- 5 3
2] Exceeding
Rs.1,00,00/- and up to
Rs. 3,00,000/-
All suppliers on the
approved list
3
3] Exceeding Rs. 3,00,000/- Press tender 3
The idea in prescribing thing the minimum no. of vendors to whom inquires
to be issued and bids to be obtained is to create a healthy competitions amongst the
bidders, so that society is able to procure materials and services at the most
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economical price open tenders through the advertisements in the press as invited
incase of estimated value of purchase exceeds Rs. 3 Lakhs
The competent authority (competent authority Annexure-2] on his discretion
may allow floating of limited inquires in respect of purchases not exceeding Rs. 3
Lakhs and work/contracts for a value not exceeding Rs 5 Lakhs in each case.
QUOTATION COMPARISON STATEMENTS
After the necessary procedure has been follow for inviting and purchase
departments prepare opening of bids a quotation comparison statement.
The bids confirming to the specifications and lowest in value is rated in the
Q.C.S. as lowest (L1) second lowest (L 2} third lowest (L3) etc.
The purchase dept. sends the QCS to the indentures /tender committee for review and
recommendations. The committee will give the recommendation for placement order.
PURCHASE ORDER/ WORK ORDER
Therecommendation of the tender committee is routed through the finance dept. to
enable them to record the value of commitment in the budget records. Confirm availability of
funds under the approved budget and also record financial concurrence.
As soon as the recommendation of the tender committee are approved by
competent authority, the purchase dept. shall arrange to issue purchase /work order
[annexure3] it the recommended successful bidder. The purchase work order raised by the
purchase dept. in 7 copies and numbered in the same manner as purchase requisition, each
copy of purchase order will be send to concerned dept. and 2 copies will be sent to suppliers
with request to return 1st and 2nd copy duly signed
The purchase dept. is a responsible for following of the purchase order /contracts
with vendors and transporters until the material as reached and accepted at the plant/stores.
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On receipt of materials at plant site/stores, the stores dept. will fill up the store
receipt voucher [anneure5] and arrange the inspection from the inspection dept. or indenters
as the case may be necessary
Purchase from foreign vendors (imported)
KRIBHCO is partially financed by world bank through govt. of India .all purchases of
capital goods, equipments, machinery, instruments, special tools, ultra sonic testing
equipments etc. are required to be procured following international competitive biding
procedure laid down by world bank.
As per the World Bank, the imports against their credits can be done for World Bank
member countries only. World Bank also approves the members. A global press
advertisement was advertised for getting foreign as well as Indian vendor for various supplies
services etc.
After scrutinizing the vendor list was submitted to DGTD New Delhi [especially to see
list of Indian vendor and to suggest to few names of other Indian manufacturers].
After DGTD approval [i.e. no objection to vendor list ],it was forwarded to world bank
for their approval, world bank approved the list. This list is forwarded for all procurement.
All purchase below US $50,000/- are sent to World Bank for post facto approval and for
all purchases /contracts service costing more than US $50,000/-prior approval of World Bank
has to be obtained in a prescribed form enclosing the following documents:
Enquiry copy.
Copies of bids received and their quotations, comparative statements [in
equivalent US $ currency]. Proposal to place order as a particular firm [if order other than L, sufficient
reasons for ignoring is given].
Filling a form 384.
World bank after scrutinizing the case, grants approval, than only order is placed.
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After placement of order, a copy is sent to World Bank for their records. (The procedure
for floating inquiry opening tenders and their evaluation is similar to indigenous purchases).
After placement of order following activities are done.
A formal application for release of exchange is prepared and sent to Ministry of
Agriculture Department of Fertilizer, Krishi Bhavan, New Delhi (As payments of imported
material as done in respective currency only.) Government of India also has released a free
foreign exchange of 8 million US $ to utilize for emergency purchase if requirement is
critical.
After receipt of foreign exchange, the bank is requested to open a letter of credit in
favour of vendor specifying the various documentation required simultaneously a list of item
is prepared ( as per order) and submitted to Chief Controller of Imports and Exports, New
Delhi for certification.
This certified list is to be produced act customs while clearing the shipment from
airport/sea port. The vendor after receipt of L/C Ships. / Air freights material and collects his
payment through bank.
EVALUATION OF EXISTING PURCHASE SYSTEM OF KRIBHCO:
The existing purchase procedure gives fair chances of competition to all the vendors.
It leaves no room for malpractices or favouritism of employees i.e. nobody oblige any one out
of way. It is not very rigid. 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, stationery, chemicals, medicines, printing job etc. This is reducing the
repetitive job times and money of company.
But there are shortcomings also, which are evaluated taking into consideration the five
essentials of purchase functions are as follows:
(1) Purchase time,
(2) Purchase quantity,
(3) Purchase quality,
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(4) Purchase price and
(5) Source of supply
1. PURCHASE TIME
The purchase time indicates the lead-time i.e. time taken to physically receive the
material from the date of its indent.
To find out the lead time five cases different items have been studied randomly, and
analyzed its fact which indicates that by following the existing procedure, the administrative
lead time is very long i.e. 5 to 7 months, while suppliers lead time is about 2 to 3 months.
2. PURCHASE QUANTITY AND QUALITY:
It has been observed that the quantity of material is being purchased considering 6 to
12 months consumption that means no economic order quantity has been fixed for different
types of material. Due to the existing system:
Company is incurring cost of carrying Inventory interest of capital rent etc. Company as also incurring loses due to the depreciation in quantity, detoriation in quality
and obsolesce of materials during storage.
Company is also incurring avoidable expenditure such as holding and up keep of surplus
material, financial losses due to fall in the price of materials, extra expenditure on excess
of materials required.
It is suggested that before taking final decision economic order quantity should be
determined for each item and order should be placed accordingly.
The determination of economic order quantity techniques has been discussed on
succeeding pages.
3. PURCHASE PRICE
The price of each item is being compared with suppliers quotations considering the
quality of material to be supplied.
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Although, purchase department should keep itself informed of the price trends, with
the help of market reports, trade papers and journals, report by purchase against and sales
representative of the suppliers, published catalogue and price list.
4. SOURCE OF SUPPLY
The selection of a particular supplier is made after inviting tenders from possible
source of supply. There are four types of tenders commonly used, which are
(a) Single tender,
(b) Limited tender,
(c) Open tender and
(d) Global tender
The tender received are opened on the date and time stipulated and compared to
select a final vendors, considering quality, delivery after sales services etc. which
indicates that right source is selected, only thing taken in to consideration is to maintain
cordial relations with suppliers.
2) STORAGE CONTROL
The control of materials while in storage is affected through what is known as the
perpetual Inventory. Thus two main functions of the perpetual Inventory system have been
studied which are:
(i) Receipt and issue system, and
(ii) Maintenance of store records.
And also the uses of Inventory control techniques have been evaluated considering
existing position of KRIBHCO.
3) WAREHOUSE SYSTEM AND PROCEDURE:
THE SCOPE:
The procedure comes in to operation immediately on receipt of dispatched documents or
dispatched intimation in the stores and covers on the activities, i.e. clearance, delivery,
inspection, stock charging and preservation, issue and return of materials by the consumer
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and ends after striking out balance from the stock card and delivery of documents VIZ.
SRV.SIV. to the account department.
RECEIPT SYSTEM:
The system for receipt starts even before the time when the material actually reached the
plant, when purchase order is planed a copy is sent to the stores indicating quantity and
approximate delivery date. These are arranged in chronological order so that any time the
volume of receipt can be estimated. This also helps in planning labour contracts when
unloading activities exceed a particular limit. This is the first step in the store system.
Suppliers, once they despatch the goods, normally send and advice note, dispatch note to
the stores. This provides information on the date of dispatch, carrier details, description
consignment and value. This as sent in advance so that quick and easy clearance may be
done. On receipt of consignments, the store personnel check the consignment and tally the
material with suppliers delivery note / challans along with relevant documents, the material
is visually checked for any apparent damage or discrepancy. Appropriate remarks /
endorsement is made accordingly on the delivery notes / challans in case of discrepancies on
deviation being found in the suppliers received. Material received against the delivery notes /
challans will be checked with the relevant purchase orders details mentioned in the challans /delivery notes and packing notes received with the consignment. Store receipt voucher is
prepared in seven copies for item found in an order.
The material is than paid up for inspection, items finally accepted is physically handed
over to the custody stores or project departments and their acknowledgement obtained in the
appropriate columns of the receipt notes.
INSPECTION
In exercising control on the quality of incoming materials inspection plays an
important role. Materials purchased in India and abroad are inspected according
specifications, prescribed tests, drawings, approved samples etc as stipulated in the purchase
order. To inspect different types of materials following inspection methods are used.
(a) Inspection by third party :
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Such agencies are EIL cloyed register, IBR; etc. acceptance of material is
based on the certificates and reports of these agencies.
(b) Inspection by indenting departments :
At vendors premises during manufacture of materials or before dispatch of the
same the concerned officers of indenters carry out such inspection.
(c) Materials test certificates :
The material may be inspected and accepted based on the manufactures test
certificates.
(d) Materials are inspected and accepted by carrying out chemical,
electrical or mechanical test either of the project site or through the
recognized lab as stipulated in the purchase order.
(e) Some materials like shop, cotton, waste, phenol etc are accepted by
visual inspection. Proprietary nature of materials are accepted by either
visual inspection or carrying necessary tests whenever required.
(f) Materials are also accepted after ascertaining the quality as per samples
on stipulated in the order.
ISSUE SYSTEM:
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 all bulk and raw
materials directly stored by the users. It begins with the preparation of issue voucher
and ends with their submission to accounts departments.
GENERAL AUTHORITY AND RESPONSIBILITY:
The authority for receipt and storage of all the materials is centralized in the store
department accepts medicines and stationary. Issue will be made only on receipt or
presentation of authorized requisition.
Stores department is responsible to provide material (through stores issue voucher)
to the authorized requisition on demand, all material declared as stock items and contained
in the store catalogue as the desired and the quantities requested for immediate use by them.
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