PREFACE

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

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

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

plant, etc.
 ABSTRACT
In every organisation management is that of an organisation which concerns with
planning, organizing, directing and controlling of various marketing activities to attain
the business objectives. It is the science and art of preparing plans and organize them
as well as direct the human efforts to control the force and utilise the materials for the
benefits of human being.
As an integral part of the curriculum, all MBA students are required to undergo a
practical training in some industry. The main objective of this training is to
supplement student’s theoretical knowledge with exposure to practical operation of an
organisation. This provide the student with better understanding of all functional areas
of management and management skills applied in those functional areas.
In pursuance of the said requirement, I had my Summer Training at “Indian Farmers
Fertilizers Cooperative Limited Aonla”, one of the big producer of fertiliser in
Asia.
My project was “INVENTORY MANAGEMENT AND ACCOUNTING OF
STORES IFFCO”. I had a contrast of both happiness and anxiety and had undergone
difficulties also but with the immense assistance proper guidance and enough
encouragement from the IFFCO officials and staff, the work went on smoothly and
systematically. I really enjoyed working under congenial and convivial environment
of IFFCO, Aonla.
 ACKNOWLEDGEMENT

Expression of sincere gratitude is just a partial acknowledgment. The accomplishment of this

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

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

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

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

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

Shil
pi Sharma
MB
A (F&A)

IIMS
 LIST OF CONTENTS

1) List of abbreviation 1
2) Introduction to topic 2-3
3) Need of the study 4
4) Objective of the study 5
5) Methodology 6-7
6) Introduction about IFFCO 8-44
7) Finance and account department 45-50
8) Inventory management 51-54
9) Material department 55
10) Purchase section 56-61
11) Payment against purchase 62
12) Delay in delivery 63
13) Material coding 64-65
14) Packing 66
15) Inspection of material 67
16) Accounting of raw material 68-77
17) Insurance and verification 78-80
18) Inventory control 81-83
19) Techniques of Inventory control 84-89
20) Inventory software 90
21) Different vouchers 91-113
22) Analysis 114-126
23) conclusion 127-129
24) Reference 130

LIST OF ABBREVIATION
 Q.C.S  Quotations comparison statement

T.O.I  Telex of Indent

T.O.P  Terms of Payment

F.O.R  Free on Rail / Road

M.P.R  Material Purchase Requisition

N.I.T  Notice Inviting Tender

S.O.R  Schedule of Rates

B.O.Q  Bill of Quantities

I.T.B  Invitation to Bid

F.O.B  Free On Board

C.I.F  Cost Insurance & Freight

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

Source.

INTRODUCTION TO THE TOPIC

INVENTORY MANAGEMENT
 "Managing the level of inventory is like maintaining the level of water in a bath tub

with an open drain. The water is flowing out continuously. If water is let in too slowly, the

tub is soon empty. If the water is let in too fast, the tub overflows."

The dictionary meaning of inventory is 'stock of goods'. The investment in inventory

is very high in most of the undertakings engaged in manufacturing. The amount of

investment is sometimes more in inventory than in other assets. About 90 percent part of

working capital is invested in inventories. It is necessary for every management to give

proper attention to inventory management. A proper planning of purchasing, handling,

storing and accounting should form a part of inventory management. By proper planning it is

possible for a company to reduce its levels of inventories to a considerable degree, without

any adverse effect on production and sales, by using simply inventory planning and control

technique. The reduction in excessive inventories carries a favorable impact on company's

profitability.

An efficient system of inventory management will determine.

1) What to purchase

2) How much to purchase

3) From where to purchase

4) Where to store, etc.

"Effective inventory management enables an organization to meet or exceed

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

co.

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

Three motives for holding inventories:-

 To facilitate smooth production and sales operation (transaction motive),
 To guard against the risk of unpredictable changes in usage rate and delivery time
(precautionary motive)
 To take advantage of price fluctuation (speculative motive)

➢ Inventories represent investment of a firm’s funds. The objective of the

inventory management should be the maximization of the value of the firm.
 The firm should therefore consider costs, return, risk factors in establishing its
inventory policy.

➢ Two types of cost are involved in the inventory maintenance:-

○ “Ordering cost” requisition, placing of order, transportation, receiving,
inspecting, storing, clerical staff, are fixed per order. Therefore, they
decline as the order size increases.
○ “Carrying cost” warehousing, handling, clerical staff, insurances and
taxes. Carrying costs vary with inventory holding. As order size
increases, average inventory holding increases and therefore the
carrying costs increase.

➢ The firm should minimize the total cost (ordering+carrying). The economic order
quantity of inventory level occur at point where total cost is minimum
EOQ = √2AS/C, where A= annual requirement, S = ordering cost per unit, C = carrying cost
per unit per annum

➢ When should the firm place an order to replenish inventory?

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

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

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

NEED OF THE STUDY

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

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

to regulate the whole inventory system in a better way.

3) How IFFCO can ensure the interrupted supply without making over investment in

the inventories. As we know that IFFCO has large machineries due to which it has

to retain too much stock of spares to avoid the interruption?

4) As we know that IFFCO is a very big organization and it is typical to coordinate

with all the employees who are working there. But for the effective inventory

system there should be coordination between the store, purchase department and

finance department. So what should be done for the coordination between the

departments to make the inventory system effective?

5) To analyze the working of various departments that work in coordination with

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

 OBJECTIVE OF STUDY

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

management system."

Investment in inventory incurs a high cost. Therefore effective management is

necessary to minimize the cost and ultimately increases profitability of an organization.

A part from our main objective our main objectives are:

1) To analyze the level of investment in inventory by IFFCO.

2) To analyze the financial position of the company.

3) To give suggestion if any, regarding effective inventory management.

Or

To give suggestions to ensures smooth and uninterrupted supply without making

unnecessary investment of funds in inventory.

 METHODOLOGY.

Research covers the search for retrieval of information for a specific purpose. Basically
research is the objective and systematic method of finding solution to a problem. The steps
followed to conduct this study are as follows:-

(1) Formulating research problem – The problem under study viz. how effective are the
measures applied by Iffco, Aonla to control the inventory is basically studied through
analytical research. Material is important for the efficiency of the system. It is a matter of
great importance for inventory department. Inventory department of IFFCO, Aonla is
responsible for efficient inventory control. Thus the whole study is conducted under the
guidance of officers of this department.

(2) Extensive literature survey – Many published studies, books or material on effective
control of inventory were referred to for getting a true direction to research process.

(3) Data collection – The study is conducted through collection of data through surveys,
interviews with officials etc. Personal interviews were conducted where a set of pre- conceived
questions were asked from the officers of inventory department regarding material control
policies adopted by them. Books of accounts of Aonla –I and Aonla – II are studied thoroughly
to details about inventory stock, cost of material consumed, increase and decrease in stock in
the last few years etc.
Sample of material was obtained randomly. ABC analysis was used where sample of
material was graded under three categories: A, B, C.

(4) Analysis and interpretation – The data about inventory is analysed to find out the
effectiveness and efficiency of inventory policy. As regards the financial performance, the data
about different financial indicators is analysed to calculate the different ratios and to draw the
graphs.

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

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

inventories etc. The data used in study was manually collected from the employees of IFFCO
 as well as from the net. Data were collected through the inventory software, databases, net

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

some financial data with the help of annual report.

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

We were told how the documentation in different departments like srv, po ,isrv , bills etc. are
done .For collecting data we have asked questions to the different department heads

TOOLS OF THE STUDY

I have mainly concerned the literature survey. I have used the graphs and tables in this study.
There is the use of Histogram in Graphical presentation.
SOURCES OF DATA
There were various sources for collecting the data. But I have collected data from some of the
resources that are as following-
1) Through asking the questions from the employees
2) Net
3) Annual report of IFFCO
4) Accounting manual of IFFCO
5) From the stores
6) By the inventory software (PSL) that is used in IFFCO
7) I have also collected some information from the purchasing department.
ORGANIZATION
PROFILE

INTRODUCTION ABOUT IFFCO

During mid- sixties the co-operative sector in India was responsible for distribution of 70
percent of fertilisers consumed in the country. This Sector had adequate infrastructure to
distribute fertilisers but had no production facilities of its own and hence dependent on
public/private Sectors for supplies. To overcome this lacuna and to bridge the demand supply
gap in the country, a new cooperative society was conceived to specifically cater to the
requirements of farmers. It was a unique venture in which the farmers of the country through
their own co-operative societies created this new institution to safeguard their interests. The
numbers of co-operative societies associated with IFFCO have risen from 57 in 1967 to 38,
155 at present.
Indian Farmers Fertiliser Co-operative Limited (IFFCO) was registered on
November 3, 1967 as a Multi-unit Co-operative Society. On the enactment of the Multistate
Cooperative Societies act 1984 & 2002, the Society is deemed to be registered as a Multistate
Cooperative Society. The Society is primarily engaged in production and distribution of
fertilisers. The byelaws of the Society provide a broad frame work for the activities of IFFCO
as a Cooperative Society.
IFFCO had set up the KALOL plant for manufacture of Nitrogenous Fertiliser
and KANDLA plant for manufacture of Phosphoric fertiliser. These plants commenced
commercial production in the year 1974-75.
IFFCO had emerged as Asia's largest Fertiliser Cooperative with its four
modern sophisticated plants at KALOL and KANDLA in GUJRAT and PHULPUR and
AONLA in UTTAR PRADESH. IFFCO is country's largest producer of nitrogenous and
complex fertiliser with the total production capacity of 2.6 million tones.
IFFCO IS:

1. Largest producer of fertilisers in the country

2. Number of Plant Locations : Five
3. Installed Annual Capacity ('000 MT)
1. UREA - 4242.2
2. NPK/DAP - 4335.4
3. TOTAL 'N' - 2628.2
4. TOTAL 'P2O5 - 1712.8

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

93.24 lakh MT of sales during 2007-08.

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

country during the year 2007-08.

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

Centers.

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

 VISION
"To augment the incremental incomes of farmers by helping them to increase

their crop productivity through balanced use of energy efficient fertilisers; maintain the

environmental health; and to make co-operative societies economically and democratically

strong for professionalized services to the farming community to ensure an empowered rural

India."

MISSION
IFFCO's mission is "to enable Indian farmers to prosper through timely supply

of reliable, high quality agricultural inputs and services in an environmentally sustainable

manner and to undertake other activities to improve their welfare"

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

with an objective to increase crop productivity.

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

energy.

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

quality of community life.

• Commitment to social responsibilities for a strong social fabric.

• To institutionalize core values and create a culture of team building, empowerment

and innovation which would help in incremental growth of employees and enable

achievement of strategic objectives.

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

and challenging experience for stakeholders.

• Building a value driven organization with an improved and responsive customer

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

principle and practice.

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

entering into joint ventures outside India.

• To ensure growth in core and non-core sectors.

• A true co-operative society commitment for fostering co-operative movement in the

country.

Emerging as dynamic organization, focusing on strategic strengths, seizing opportunities for

generating and building a past success, enhancing earning to maximize the shareholder's

value.

VISION 2010

In order to maintain the sustained pace of remarkable growth being achieved under

mission-2005 the society is in the process of formulating another growth plan "VISION

2010" which aims at:

1. Attaining an annual turnover of Rs.15000 crore by 2010

2. Installation of Ammonia and Urea plants including acquisition of fertilisers units.

3. Backwards integration to meet feedstock requirements such Phosphoric acid.

4. Generation of Power.

5. Exploration /Distribution of marketing of Hydrocarbons.

6. Value addition to agro-products and marketing.

7. Manufacturing of Petrochemicals, Banking and Financial services.

8. Information technology and IT enabled services.

9. Production and marketing of micronutrients seeds, biofertilisers, pesticides etc.

 Vision – 2015

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

 Production of fertilizers through expansion of existing units.

 Setting up of fertilizer production facilities in India and outside the country through
joint ventures.
 Diversification into other Profitable Sectors.
 Strengthening its raw material sourcing through Strategic Joint Ventures in India and
abroad.
 Strategic Alliances through IFFCO Consortium.

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

○ To stand as a Global Leader in Fertilisers Production to cater to the food security need
of the nation.
○ Maximizing the synergies of the Core Business through Downstream Value Additions
and Forward/ Backward Integrations.
○ Enhancing presence in International Markets through Strategic Joint Ventures and
Synergistic Acquisitions.
○ Diversification into other profitable businesses to maximize returns to our
stakeholders.
○ Leveraging State of the Art Technologies and Global best practices to retain its global
competitiveness.
○ Promoting Integrated Nutrient Management to improve efficiency of Fertilizer use
and promoting location specific research on efficient fertilizer practices.
○ To bring in Sustainability and Strategies to prevent Climate Change by reducing
Energy Consumption, better Resources Management and promoting Renewable
Energy sources.
○ To help the Cooperative Societies become economically strong, professionally
managed and to equip the Farming Community with advanced agricultural practices
for improved Productivity, to ensure an Empowered Rural India.
○ Achieve Fertilizers Production / Marketing target of 15 million Tonne per annum with
an annual turnover of Rs. 30,000 crores.
ORGANISATION CHART OF IFFCO

BOARD OF DIRECTORS
 BOARD OF DIRECTORS
The Directors of IFFCO

Chairperson  Shri Surinder

CHAIRMAN Kumar
AND VICE Jakhar
CHAIRMAN

Vice-Chairperson  Shri N.P. Patel

Directors
Shri Chandra Prakash
MANAGING DIRECTOR
Shri Halappa Basappa Achar
Shri Kartick Chandra Sarkar
Shri Harminder Singh Jassi
Shri M.Gopal Reddy
Shri Ankushrao R.Tope
Managing Director  Dr. U.S.Awasthi
Dy. Managing Director-cum-Marketing Director  Shri Arabindo Roy
Jt. Managing Director  Shri Rakesh Kapur
Director (Technical)  Shri K.L. Singh
Director (Coop. Development)  Dr. G.N. Saxena
Director (HRD)  Shri R.P. Singh

DY. MD-CUM-MKT. DY.MD-CUM- DIRECTOR DIRECTOR DIRECTOR

FINANCE (COOP. DEVELOPME
DIRECTOR
DIRECTOR (TECHNICAL) (HRD)
 BANKERS
 India Overseas Bank

 State Bank of India

 Bank of Baroda

 Standard Chartered Bank

 The Maharashtra State Co-operative Bank Ltd.

 The West Bengal State Co-operative Bank Ltd.

 Madhya Pradesh State Co-operative Bank Ltd.

 The Karnataka State Co-operative Bank Ltd.

 The Punjab State Co-operative Bank Ltd.

 The Hongkong and Shanghai Baking Co-operation Ltd.

 ICICI Bank Ltd.

 IDBI Bank Ltd.

 OBJECTIVE OF THE COMPANY
The broad objectives of setting up this venture:-

1) Producing fertilisers.

2) Promoting the fertilisers distribution system in the co-operative sector.

3) Ensuring availability of fertilisers at the farmer's doorstep.

4) Creating scientific awareness among farmers.

5) Promoting nation's growth through modern family techniques.

6) Improving agricultural productivity through balanced fertilizer application.

7) Strengthening cooperation distribution system.

8) To promote the activity for enriching the life of the rural.

IFFCO has grown steadily since its inception today. It has emerged not only as

the largest fertiliser producing organization in India but also Asia's largest fertiliser co-

operative.

IFFCO started with two modern plants at a cost of Rs. 976 million. One

ammonia and urea complex at Kalol and NPK plant at Kandla both in Gujrat.
Iffco's Main Aim

"Strengthening management and participatory character of the Indian

Cooperative Movement by using duly tested and appropriate consultancy, advisory and

technological interventions sourced from within the country and abroad and in accordance of

the Cooperative Principles and in harmony with the law and culture of theland."
ORGANISATION CHART OF IFFCO

BOARD OF DIRECTORS

Chairman & Vice Chairman

Managing Director

Director

Marketing Director

Finance

Sr. Executive Director

Technical Executive

Director (P& A)

Executive Dir. Planning & development

 INVESTMENT OUTSIDE IFFCO

Indian Potash Ltd (IPL)

IFFCO’s Equity : Rs. 2.68 Crore
Percentage of Equity held : 34%
Activity : Marketing of Potash and

Imported Fertilisers

Industries Chimiques du Senegal (ICS) I & II

IFFCO’s Equity : Rs. 80.37 Crore

Percentage of Equity held : 18.54 %
Plant Site : Darou, Senegal
Products : Rock Phosphate,
Phosphoric Acid
and NPK Fertilisers
IFFCO - TOKIO General Insurance Company Ltd. (ITGI)
IFFCO’s Investment : Rs. 303.78 Crore
Percentage of Equity held : 72.64%
Activity : General Insurance

Oman India Fertiliser Company (OMIFCO)

IFFCO’s Equity : Rs. 329.08 Crore
Percentage of Equity held : 25%
Plant Site : Sur, Oman
Products : Ammonia, Urea

IFFCO - TOKIO General Insurance Company Ltd. (ITGI)

IFFCO’s Investment : Rs. 303.78 Crore
Percentage of Equity held : 72.64%
Activity : General Insurance

Oman India Fertiliser Company (OMIFCO)

National Commodity and Derivative Exchange (NCDEX)

IFFCO’s Equity : Rs. 329.08 Crore

Percentage of Equity held : 25%
Plant Site : Sur, Oman
Products : Ammonia, Urea
Paid up share capital : Rs. 30 Crore
IFFCO’s Equity : Rs. 3.60 Crore
Percentage of Equity held : 12%
Redeemable Preference Shares : Rs. 10 Crore
Activity : On Line Trading commodity
futures
National Collateral Management Services Ltd. (NCMSL)
IFFCO’s Equity : Rs. 4 Crore
Percentage of Equity held : 13.56%
Activity : Collateral Risk Management
Services
IFFCO Chhattisgarh Power Ltd
Project Cost (Estimated) : Rs. 7500 Crore
IFFCO’s Paid up Equity : Rs. 51.80 Crore
Debt : Equity Ratio : 70 : 30
IFFCO Equity : 74%
Activity : Power Generation (1320 MW)
Ratings assigned by different Rating Agencies to the Society

Kisan International Trading FZE (KIT)

Investment : Rs. 11 Crore*
Location : Dubai
Activity : Special purpose vehicle
(SPV) for shipping,
logistics and investments in new overseas
Joint Ventures.
* Includes Rs. 9.80 crore towards 9 bonus shares received during 2007-08

Jordan India Fertiliser Company (JIFCO)

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

IFFCO Kisan Sanchar Ltd. (IKSL)

Paid up Share Capital : Rs. 5 Crore
IFFCO Equity : Rs. 3.65 Crore
% of Equity held : 72.99 %
Activity : Rural Telecom related
Services
Ratings assigned by CRISIL:

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

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

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

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

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

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

Ratings assigned by FITCH:

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

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

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

FITCH Ratings assigned National Long - Term Rating of ‘AA+(ind)’ to the Long Term Debt
Programme of IFFCO. The outlook on the Long Term Rating is “Stable”.
 Performance Highlights for the Year 2009-10

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

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

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

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

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

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

Rs. 567.28 Crore

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

Rs. 401.10 Crore

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

Rs. 16,809 Crore

Total Turnover (Previous Best Rs. 32,933 Crore in
2008-09)

1,608 MT per employee

Plant Productivity (Previous Best 1,669 MT in 2005-06)

7,885 MT per employee

Highest Marketing Productivity (Previous Best 7,397 MT in 2008-09)
Provisional highlights of IFFCO performance during 2008-09.

Highest Production of Fertilisers 71.68 lakh MT

(Previous Best 70.12 lakh MT in 2006-07)

Highest Production of Urea 40.68 lakh MT

(Previous Best 39.63 lakh MT in 2007-08)

Production of NPK/DAP/NP 31.00 lakh MT

(Best 32.26 lakh MT in 2006-07)

112.33 lakh MT
Highest Sales of Fertilisers
(Previous best 93.24 lakh MT in 2007-08)
Highest Sales of Urea 58.49 lakh MT
(Previous best 54.29 lakh MT in 2007-08)

Highest Sales of NPK/DAP 53.84 lakh MT

(Previous best 38.95 lakh MT in 2007-08)

Highest Turnover Rs 32800 crore

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

Plant Productivity
(Best 1669 MT in 2005-06) 1376 MT per
employee
Highest Marketing Productivity 7380 MT per
(Previous best 6158 MT in 2007-08) employee

Composite Energy Consumption 5.9433 Gcal/ MT

Lowest 5.907Gcal / MT in 2007-08)
BALANCE SHEET AND PROFI AND LOSS ACCOUNT OF IFFCO
10 YEAR’S PERFORMANCE HIGHLIGHTS OF IFFCO
PRODUCTION IN IFFCO ( in Lakh MT)

SALES IN IFFCO (in Lakh MT)

IFFCO ASSOCIATES

1. INDUSTRIES CHIMIQUES DU SENEGAL

2. OMAN INDIA FERTILISER COMPANY S.A.O.C.

3. INDIAN POTASH LTD.

4. NATIONAL COMMODITY & DERIVATIVES EXCHANGE LTD.

5. NATIONAL COLLATERAL MANAGEMENT SERVICES LTD.

6. COOPERATIVE RURAL DEVELOPMENT TRUST

1. KISAN SEWA TRUST

2. IFFCO FOUNDATION

3. LEGEND INTERNATIONAL HOLDINGS INC

 AWARDS GALORE
KALOL UNIT

1) Seven awards received for overall performances from FAI.

2) Two awards for industrial safety from GOI.

3) Award for technical innovation from FAI.

4) Two Rajya Bhasha Shield for promoting Hindi.

5) Award for safety from National Safety Council, Chicago.

6) Indo German Greentech environment excellence award.

PHULPUR UNIT

1) Four awards for productivity from NPC.

2) Six national safety's award from GOI.

3) Two awards for overall performance from FAI.

4) Two awards for technical innovation from FAI.

5) FAI's Award for Best Overall Performance of an operating fertilizer unit for Nitrogen

(Ammonia and Urea) Plant jointly with Zuari Industries Limited, Goa.

6) Three national energy conservation awards.

7) Three awards for best environmental protection from FAI.

8) Best environmental excellence awards from Indo German green tech foundation.

9) Best technical paper award by FAI.

KANDLA UNIT

1) Twelve safety awards from national safety council Bombay GOI.

2) Twenty-three safeties award from Gujarat.

3) Raj Bhasa award for promoting Hindi.

4) Six awards for overall performance from FAI.

AONLA UNIT

1) Award for best implemented project ( 2nd price) from GOI.

2) Award for conservation of energy from GOI.

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

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

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

Best Cooperative Society Award from Public Relations Society of India ( PRSI ) at its Golden Jubilee Ceremony in
Mauritius
IFFCO has been ranked 1st in Sales Turnover and 2nd in terms of Networth and
Profitability amongst unlisted enterprises by Economic Times Intelligence
Group for the year 2007-08

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

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

Two Awards for Highly Commendable Accounts

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

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

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

➢ 1st Prize for Best Corporate Film from NCU

➢ Three awards for Best Display in FAI Exhibitions

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

➢ IFFCO has bagged FAI “Best Video Film Award 2006-07” for film on “Water
Harvesting”.
 AONLA
Award for Best Implemented Project (Second Prize) from GOI
Four Awards for Conservation of Energy from GOI
Two National Award for “Excellence in Energy Management”
Indo German and Greentech Environment Excellence Award
Award for Best overall performance from FAI
Two Awards for Excellence in Safety from FAI and one “National Safety Award “ from DGFASLI
Two Safety Awards from National Safety Council of India
Rajiv Ratna National Gold Award 2005 for Best Executive
Excellence Award for papers published on “Safety and Health in Chemical Industry” and “Hazard
Identification & Risk Management”
Best Technical Innovation Award from FAI

• IFFCO AONLA unit have received gold award from Greentech Foundation
• IFFCO Anola Unit have won the prestigious FAI awards on 3rd Dec.' 2009
• IFFCO AONLA WINS “NSCI Safety Awards 2008“
• Iffco Aonla Wins "Gold Award“ - 10th Annual Greentech Environment Excellence
Award 2009
• National Award for Excellence in Energy Management 2008
• IFFCO Aonla Unit has been awarded as the winner of the 'Golden Peacock
Environment Management Award - 2008'
• IFFCO Aonla Unit wins National Energy Conservation Award-2006
• Yogyata Praman Patra for developing and implementing effective Occupational
Safety and Health Management System and Procedures for the year 2004 from
National Safety Council.
GROWTH IN THE NUMBER OF MEMBER SOCIETIES

1967-68 : 57

1974-75 : 25528

1980-81 : 26960

1986-87 : 28134

1992-93 : 30200

1998-99 : 35072

2004-05 : 37381

2007-08 : 39564

2008-09 : 39824

2009-10 : 39862

AONLA-UNIT ABOUT AONLA UNIT

LOCATION

State : Uttar Pradesh

State Capital : Lucknow

Distance from Lucknow : 280 Km.

Distance from New Delhi : 260 Km.

Nearest Airport : New Delhi

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

Road : Plant is In Bareilly-Aonla Bareilly highway.

Area under Plant : 260 Hectares

Area under Township : 220 Hectares

YEAR OF COMMISSIONING : Ammonia-Urea Complex commissioned in 1988

INVESTMENT : Rs. 651.6 Crore AONLA- I

YEAR OF EXPANSION : 1996

INVESTMENT : Rs. 954.7 Crore AONLA- II

YEAR OF DEBOTTLENECKING : 2008

INVESTMENT : Rs.149.2 Crore

 PRODUCT CAPACITY TECHNOLOGY
TPD TPA
AMMONIA 3480 11,48,400 HALDOR TOPSOE
UREA 6060 19,99,800 SNAMPROGETTI
'N' 2788 9,19,908

The IFFCO AONLA Unit is located in the Gangetic Plains of Uttar Pradesh in

Bareilly district about 28 Km. Southwest on Bareilly-Aonla Road. It was set up on 08

January 1985 and started commercial urea production at 16 July 1988. The infrastructure of

AONLA unit is very big and constructed on 713 acres of land.

IFFCO Aonla unit is the most efficient and quality-wise as well as environmental

oriented unit so that M/s KPMG Peat Marwick, a quality registrar has certified it as ISO:

9002 unit and M/s BVQI London has accredited it as ISO:14001 unit. The Aonla unit, an

Ammonia- urea complex is comprised of the two phases:-

1- AONLA-1
2- AOLLA-2

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

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

2- AONLA-2 was established in1996 December. This unit was designed to nation by

honorable Prime Minister of India Shri I.K. Gujral on 28 Jan 1997.

 SALIENT FEATURES OF AONLA UNIT
PARTICULARS AONLA I AONLA II
CAPACITY (per annum)
AMMONIA 5,01,600 MT 5,01,600 MT
UREA 8,64,600 MT 8,64,600 MT
PROJECT ZERO DATE 08.01.1985 30.09.1993
MECHSNICAL 08.01.1988 30.12.1996

COMPOSITION
UREA PRODUCTION 15.05.1988 26.11.1996

STARTED
COMMERCIAL 16.07.1988 25.12.1996

PRODUCTION STARTED
FEEDSTOCK Natural Gas Natural Gas with Naptha
PROJECT COST(Rs. In 660 995

crores)
GAURENTEED SPECIFIC

ENERGY PER MT
AMMONIA 8.03 G Cal 7.34 G Cal with Natural Gas +

Naptha
UREA 5.76 G Cal 5.4 G cal

(Natural Gas from HBJ pipeline being supplied from Bombay high)
 Capacity Enhancement of Aonla and Phulpur Units:-

IFFCO has submitted the Techno-Economic Feasibility Report (TEFR) for Capacity

Enhancement of Aonla and Phulpur Unit to the Department of Fertilisers (DOF).

Following enhancement in capacity has been envisaged with a total annual increase in

Urea Capacity by 5.115 lakh MT:

Present Capacity Proposed Capacity Increase in Capacity

Name of Unit
( MTPD) (MTPD) (MTPD)
Phulpur-1 1670 2080 410
Phulpur-2 2620 3000 380
Aonla-1 2620 3000 380
Aonla-2 2620 3000 380
Total 9530 11080 1550

The installed cost for the Enhanced Capacity is estimated at about Rs. 19 lakh per

MTPD of Urea as against the Rs. 65-70 lakh per MTPD Urea in case of a Grassroots Plant.

Therefore De-bottlenecking of existing Urea Units is the best route to create additional

capacity.

IFFCO has initiated action for De-bottlenecking of its plant at Aonla and Phulpur

Units for Capacity Enhancement. We are awaiting final clearance from DOF. Incidentally

this will also reduce the subsidy to Government vis a vis imported Urea.

PLANTS OF AONLA UNIT

There are mainly four plants in the unit namely:

1. Ammonia Plant
2. Urea plant

3. Product Handling Plant

4. Steam and Power Generation Plant

1. AMMONIA PLANT
There are two streams of Ammonia plants having the capacity to produce 2x1520
MTDP of liquid ammonia. The technology is based on Haldor Topsoe, Denmark process with
Natural Gas and Naphtha as main raw material.
2. UREA PLANT
There are four streams of Urea Plant having the capacity to produce 4x1310 MTPD OF
Urea Fertiliser. The technology is based on Snamprogetti, Italy on Ammonia stripping
process.
3. PRODUCT HANDLING PLANT
Product handling plant is composed of Urea storage known as Silo and packing and
transport activities. Two silos of 45,000 and 30,000 MT capacity have been provided to Urea
product to ensure continuous urea production even if it is not taken off due to non-
availability of rail wagons or seasonal demand fluctuations.
4. STEAM AND POWER GENERATION PLANT
To meet the continuous power supply needs of the main plants, captive power plant and
stem generation facilities have been provided. In this plant, two gas turbines each having the
capacity of 18MW along with heat recovery steam generation unit has been provided to cater
to the plant needs of power and steam. Additionally, HRU unit of Ammonia –II add to the
steam supply of the complex.
 LINE CHART AT AONLA UNIT

 Sr. General Manager

 General Manager

 General Manager

 JGM/CM Technical

 JGM/CM Maint.

 JGM/CM Production

 JGM/CM Utility

 JGM/CM Comm.

 JGM/CM F & A

 Ammonia Plant

 Mechanical

 Process Power Plant

 Purchase

 F& A

 Urea Plant

 Electrical

 Design & Drawing

 Offsite Store
 Traffic

 Product Handling

 Instrumental

 Library &Document

 General Engg.

 Fire & Safety & Env.

 Civil Laboratory

 Training & Development

 JGM/CM P & A

 JGM/CM System
 ORGANISATION CHART AT IFFCO AONLA UNIT
Design&draw
Prod.handlin
Mechanica
Ammoni
Electrica
Traffic
Lib.
Fire
Power
Urea
Gen.
T
F &&Sr.General
Civi
Stor
Instrumenta
JGM/DG
Laborator
Purchas
Proces
Offsit General
safety
Engg.
docu.
Plant
MAD
ygeas.l Manager
Technical
Productio
Comm.
Maint.
Utility
F&A
n
 FINANCE
&

ACCOUNTS

DEPARTMENT
 AT A GLANCE:-

The Finance & Accounts Department of IFFCO, Aonla is divided into 5

sections, to facilitate smooth and easy functioning and control.

ORGANISATION STRUCTURE

SUPPLY SECTION

NOTE SHEET PAYMENT

WORK ORDER

FINANCE & ACCOUNT DEPARTMENT

BOOKS/FICC CELL

FINANCIAL CONCURRENCE

BILL SECTION

PAYROLL SECTION

PSL SECTION

WORK CONTRACT

IMPORTED SUPPLY

INDIGENOUS SUPPLY

SERVICE CONTRACT
 ORGANISATIONAL STRUCTURE

PAYROLL
FINANCIAL
IMPORTE
SUPPLY
WORK
BILL
PSL &FINANCE & ACCOUNT
INDIGENOU
NOTESHEE
SERVICE
BOOK
CONCURRENCE
TRANSACTION
CONTRACT
SECTION
ORDER
D
CONTRAC
SECTIO
T
S
S/ DEPARTMENT
PAYMENT
SUPPLY
N
T
FICC
CELL
 LINE OF CONTROL IN FINANCE & ACCOUNTS DEPARTMENT

Sr.
Manager
Manager
Manager
CHIEF HOD
MANAGER
DEPUTY ACCOUNT MANAGER
(Accounts)
(Accounts)
Accounts
JGM/DGM
(F & A)
(F & C)

Assistant Manager(Acc.)
Senior Accounts Officer
 Account Officer
Jr. Account Officer
Sr. Accountant
Jr. Accountant

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

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

1. BOOKS SECTION

This section basically deals with accounting function, maintenance and keeping of records.
The various functions include:
 Books: Preparing and maintaining balance sheets.
 IFCC (Fertiliser Industries Coordination committee)
 Costing & Pricing Cells
 Reporting

1. PAY ROLL SECTION

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

Aonla Unit undertakes processing of salary and other staff related payments of all
employees through Human Resource Management System (HRMS). It is an integrated
package based on Oracle DBMS. The System integrates Personnel & Administration
Department and Finance & Accounts Department.

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

DBMS has been launched in F&A DEPARTMENT through which General Ledger Sub
Ledger of Employees is maintained and Trial Balance and Financial Accounts are generated.
There is also inter- relation of HRMS and FAS so that cash payment/receipt vouchers, Bank
Payment Vouchers and Journal Vouchers generated in HRMS are automatically posted online
to Payroll Section of Finance & Accounts Department.

1. Taxation Section
As per the status and operations of the society, It deals with the following Taxes:-
➢ Central Excise Duty
➢ Income Tax
➢ Service Tax
➢ Sales Tax

4. Central Excise Duty

As we know that this duty is charged by Central Government on the goods
manufactured. IFFCO mainly produce ammonia and urea at Aonla plant. So duty on
ammonia is charged. In this relation monthly production report is prepared and all documents
and accounts are prepared by the Finance & Accounts Department. The duty is deposited in
the Government bank account on the 5th day of the month.
EXCISE Duty is not charged on production of Urea.
INVENTORY

MANAGEMENT
CONCEPT OF INVENTORY MANAGEMENT

Dictionary meaning of inventory is "detailed list of movable articles". The literary meaning

of inventory is stock of goods. According to International Accounting Standards-2, inventory

is a tangible property which is held:

 For sale in the ordinary course of business;

 In the process of manufacture for such a sale;

 For consumption in the process of production of goods and services for sale including

maintenance supplies and consumables other than machinery spares.

Inventory Management involves the control of assets being produced for

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

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

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

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

The term 'inventory' includes:

1. Inventory of Raw Materials:-

In the case of manufacturing concerns, various types of raw materials are

being used in the production system. To ensure smooth production function and also to avoid

any kind of production delays the concern has to keep inventory of raw materials.

2. Inventory of Stores and Spare Parts :-

This inventory consists of those products which serve as accessories to the

main products manufactured for the purpose of sale. Bolts, nuts screws, clamps, etc., are the

examples of stores and spares parts. Such spare parts are either bought from outside or

manufactured in the concern itself.

3. Inventory of Work-In-Process (W.I.P.) :-

Sometimes the manufacturing system involves various processes for

converting raw materials into finished goods. As such, some materials might have been

issued to the production process but might not have been completed as finished goods. This is

known as work-in-process.

4. Inventory of Finished Goods :-

All goods manufactured during a particular period may not be sold

immediately. These are to be kept in warehouse. The idea is to uncouple the production and

sales function so that it is no longer necessary to produce the goods before a sale can occur.

The application of managerial function on the basis of management principles in

the field of inventory is termed as inventory management. Managerial functions are

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

 The objective of inventory management is to plan the optimum size of inventory

which is neither excessive nor deficient and is timely available. For timely availability along

with optimum size, there is need for controlling as well. Only on the basis of various control

techniques one can ensures whether inventory would be timely available. But effective

control in itself depends upon organizing and coordination. Thus, inventory management

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

quantity, status, flow and time- sequence etc.

Need for inventory management

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

aspects of a business are closely related to inventory management. These are:

1) Production management

2) Marketing management

3) Financial management

Here the production management and marketing management are related to the

physical aspect of inventory management and; financial management is concerned with the

financial aspect of the inventory management.

In production management, production manager will always strive to have a large

inventory of raw materials and of such a good quality as to ensure stable production

operations.

In marketing management, marketing manager aims at satisfying ever increasing

demands for improved customers' service by having large inventory of inside goods.

In financial management, finance manager will effort towards to keep investments in

different types of inventory at a minimum possible level so that the business concern may

earn maximum return.

 MATERIAL DEPARTMENT
Material Department is responsible for the proper handling of inputs and controlling

of material inputs. Proper handling of input materials ensures the smooth running of plant.

Material department recognizes the need of the input materials and arranges them for the

plant. It includes the procurement, verification and controls of materials in right quantity and

at right time to facilities the production function. Material management includes two

important functions:

 Purchasing
 Storing and control of materials

That's why; it is divided into following sections:

 Purchase section ( It is responsible for purchasing of materials )

 Store section ( It stores the inputs)

These both sections are interrelated and perform their function on coordination. All

purchases are to be made only by the materials department except purchases of petty item

through some vouchers and Department Managers within the limits prescribed in purchase

procedure. Material purchase indent should give following information:

1) Quantity in stores

2) Average monthly consumption since last purchase for stock items

3) Maximum /minimum level

4) Last purchase order reference

5) Reorder level

PURCHASE SECTION
The purchase department is at the interface of internal and external department. Purchase

department do enquiry about the inputs whether it is required or not. This enquiry is done in

two ways that are:

1) Single stage

2) Two stage

After enquiry purchase department invites a tender. After confirmation of all terms

and conditions the department contacts the supplier and orders for the inputs. Thus it is

responsible for purchasing of materials and other raw materials whatever is required by the

organization. Purchase department is responsible for the delivery of right amount of material

at the right time and at the right location to avoid the hampering of the production.

Purchasing is distinct from buying. Purchasing involves the extra knowledge as the

tenders, various vendors, their prices, comparison between them, after sale service,

dispatching follow up and payment terms.

The purchase department considers various things before purchasing the raw

materials.

1. Information about the input material

2. Sources of material- vendor

3. Reasonable price of that material

4. All terms and conditions

Indenter is that person which raises the indent.

PURCHASE PROCESS
The purchase process can be expressed as following:

INDENTER

Material Purchase Requirement (MPR)

Single stage Enquiry

Two stage Enquiry

E- Procurement Manual
(15 days) (21 days)

Opening

Quotation Comparative Statement (QCS)

Technically Acceptable L-1 Bidder

Order
(With approval of competent authority)
It can also be summarized as follows:

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

indenter and checks whether that material is available in the store or not. The

availability of input material at all points of time is the responsibility of purchase

department.

3) REQUISITION TO PURCHASE:- This is an intimation to purchase department

by the indenter that he has need of certain materials. He raises indent by filling a

form 'Material Purchase Requisition' (MPR). In this he gives several information like:-

a. Material description/ Proposed Reason

b. Item code/ proposed code

c. Unit

d. Quantity required

e. Value

f. Budget code

g. MPR No.

h. Indentor

4) MRP SCRUTINY
Next step involves scrutinizing of the MRP to certified the genuinely of the need, for this,

first approval to given by immediate higher authority of the indenter. Next, the MRP is send

to the stores, to check whether the material is available or not. If it is not available the MRP

goes to the purchase department. For further action. Here it is scrutinize in three ways:-

 Approval scrutiny

 Budget scrutiny

 Technical scrutiny

5) SENDING or ENQUIRY/INVITATION TO BID:- Enquiry can be done by two

types:

1- Single stage

2- Two stage

1- SINGLE STAGE:- Single stage is followed when there is no or very few

chance of technical deviation. Here there is no restriction on supplier or vendor. This enquiry

is done in case of nonproprietary items.

2- TWO STAGE:- Two stage enquiry is followed when there is more

chances of technical deviation. This enquiry is done in case of proprietary items.

Items can be classified in to two categories keeping in view the purchasing

function –

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

bought from particular supplier or vendor.

B) Nonproprietary items:- These are those for which there is no restriction on

vendor.

Enquiry is sent in order to know the prices and other terms and conditions of

vendors. Bidding can be done in three ways-

 i) Proprietary bidding:- This is for the proprietary items and is sent to

only one vendor. Here the proprietor is invited to set a competitive price.

ii) Limited tender enquiry:- This is done for non proprietary items and bids are

invited from a limited no. of vendors selected from the registered vendors with the company.

iii) Press tender/Open bidding:- If the amount involved in purchase is more than

three lakhs and the item is non proprietary then press tenders are issued in various news

papers. There may be global tenders also.

6) Receiving of offers:- After all the bids have been submitted the tenders are opened

before tender committee to compare the quotations-

Quotations comparison statement (QCS) is made and bid with lowest

quotation is generally chosen. QCS is also sent to the technical department and in

consultation with it one more than one offer are chosen, giving quality and price the top

priority. Quotation must be technically acceptable. Generally technically acceptable L-1

bidder is chosen.

7) Purchase order:- After selecting the best offer, purchase order is sent to that

vendor with all the terms and conditions specified and details of the material to be purchased

are also given. A bank guarantee of performance is taken from the vendor in advance which

is usually 5% of the P.O.A. time limit is set for delivery of consignment and in case of delay

a penalty is imposed @ 5% of P.O. per week.

8) Receipt of materials:- After the consignment reaches the stipulated place, the

payment is done by the organization according to the purchase terms agreed upon by the

two parties. The material is checked for quality conditions, quantity and then sent to the store

where the store releases the "Stores Receipt Voucher" (SRV). From here it is delivered to the

indenter. Normal payment is done after 30 days from the receipt or acceptance of

material.
9) Follow up done for every order:- It may be regarding delay in supply, changes in

price, defective or damaged items supplied etc. For every indent, a separate file is opened and

correspondence goes on. For every step, recommendations of indenter, manager (F& A),

materials manager & general manager are sought. In case of damaged input materials the

store does not accept the materials. A rejection report is prepared in case of damaged items.
 PAYMANT AGAINST PURCHASE
There are various modes of payment through which payment is done:
1- Advance payment to supplier:-
If both the parties are agreed upon advance payment that is specifically provided in
the contract order, only then advance payment is given. The advance payment to contractors
shall be made against submission of bank guarantee in the Performa provided by IFFCO.
Advance payment against indemnity bond shall not be released as provided in the purchase
procedure.
2- Full payment / 90% to 95% payment:-
In case the terms of payment provide for full payment or part payment against
dispatch documents through bank, the supplier will be negotiating the documents through the
bankers. After the documents are received by the bankers, they are forwarding bank
intimation along with a copy of the purchase order to ascertain that the invoice is raised for
the material ordered and conforms to the other terms and conditions of purchase order.
After the intimation from the bank is received the invoice of the suppliers will be
scrutinized by the finance and account department for the following-
1. Purchase order number
2. Whether materials supplied are as specified in the purchase
3. Whether materials supplied are as specified in the purchase order.
4. Quantity supplied.
5. Price basis whether F.O.R. or Ex-works
6. Whether excise duty, sale tax and other taxes are as per the order.
7. Whether bank charges are claimed as per the purchase order.
8. Other terms and conditions of the purchase order.
Where there is delay in supplying the material and the payment through bank is 90%

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

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

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

of penalty or otherwise before retiring documents.

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

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

released.

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

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

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

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

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

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

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

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

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

4- Delay In Delivery

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

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

project authorities may take following actions -

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

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

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

OR

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

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

to his right inspect of goods delivered.

IMPORTED MATERIAL

Materials procured may be either indigenous or imported. For major projects the
foreign contracts are normally finalized at head office level and payment against these

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

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

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

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

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

advance account for material.

Clearing and handling of imported material is the responsibility of material

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

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

destination, claim action shall be taken by them.

MATERIAL CODING

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

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

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

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

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

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

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

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

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

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

(LAN)

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

software with the help of material coding.

Advantages of codification

1. Lengthy descriptions are replaced by a simple code.

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

3. Ease in identification of stores.

4. It is comprehensive.

5. It facilitates, mechanized accounting.

6. Secrecy of description can be maintained.

7. It ensures clarity.

CODING

There are different types of coding that are as follows:

a) Numeric: Each item is given a number.

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

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

system. This helps in remembering the codes.

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

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

indicated by decimals.

In IFFCO 12 digits coding is done.

The various codes for the different materials are as follows:

1. Ammonia - 11

2. Urea - 12

3. Offsite - 13

4. Product handling -14

5. Power plant -15

2 digits = for the plant location

3 digits = for the equipment

3 digits = for the material

3 digits = for the size and

1 digit = for the item identification.

Packing & Dispatch

All packing, boxing and protection shall conform to the specification or requirements

of the order. The supplier shall be held liable for the damage or breakage of the goods due to

defective or insufficient packing. It will be according to term and conditions that are given

already in the format.

All goods shall be dispatched by rail/road freight paid and the railway receipt/lorry

receipt shall be posted to the concerned officer of IFFCO.

DOCUMENT REQUIRED FOR THE DISPATCH OF GOODS

Following documents are required for the dispatching of materials:

Challan 3 copies

Packing list 3 copies

Test certificate 3 copies

Railway/ Lorry/ Air 4 copies

Consignment note

Inspection of Material

The material department shall coordinate with other departments and arrange

inspection of material at vendor's shop prior to dispatch. Inspection of materials in other cases
shall be carried out on receipt of materials at site. Only materials those cleared by the

inspection will be taken on charge in stores. The person inspecting the material will sign

on the stores receipt voucher in token of having inspected and accepted the material.

Generally indenter is called upon for the inspection of the material.

Sometimes inspection is done at the gate of IFFCO. Only after inspection material enters

into the store. If there is any damage in the material or they are insufficient in quantity then

rejection report is prepared. Its copies are distributed among all the parties which are

involved in it.

Damaged/Short/Rejected Materials

If the materials are received short or in damaged condition, there are some

conditions in this regard.

 In cases where the responsibility for the transit insurance is on IFFCO a claim should

be lodged with insurance company for the value of material plus incidentals. This insurance

is done by IFFCO TOKIO GENERAL INSURANCE COMPANY. As soon as the shortage

per damage of the materials is noticed the material department will lodge the

provisional claim with the underwriters and pass on the relevant papers to the finance &

accounts department for lodging monetary claim.

 In respect of transit insurance claims bill section will pass an adjustmentEntry

debiting "claim recoverable account" and credit the "Advance to Vendors account". After the

adjustments the bill section sent the copy of journal voucher along with all necessary details

such as P.O. No. , MRR No. quantity and value, name of the supplier to the insurance section

for following up the claim with the insurance company.

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

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

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

Accounting of Raw Materials

Based on the projected consumption requirement of raw materials, the procurement

action is taken by the commercial department at the head office which is in Delhi. Described

below is the accounting requirement of major raw material.

Imported Phosphoric acid and Ammonia

The consignment of phosphoric acid and Ammonia are received at Kandla and the

material actually received is valued at the contracted cost & freight price.

Where free on board (FOB) price is agreed, the ocean freight element is loaded

separately. All connected expenditure like customs duty; handling charges etc. are also

included in inventory valuation.

The valuation of inventory at the month end is to be made on the basis of exchange

rates prevailing on the last day of the month. The difference if any between the provisional

rate and the actual payment rate shall be charged off to the consumption account, if the

material is already consumed.

The account department also ensures that all claim suppliers for shortage are booked

on monthly basis and necessary on quarterly basis for the pending claims.

Indigenous Ammonia

The indigenous ammonia is supplied by KRIBHCO / GNFC to Kandla unit. The

quantity received is accounted at the price payable to the party which is fixed by the Govt. of

India. This price is fixed at par with the landed cost of imported ammonia.

Potash

Potash purchase orders are placed by the commercial department time to time

depending on the material requirement. The material received valued at agreed price plus

local sales tax and freight for transportation of material up to plant site.
 The finance department at head office ensure that payment for these raw materials are

released on due dates to avoid interest liability. After releasing the payments the inter unit

debit advice is sent to plant. On receipt of the payment advices the supplier's account is

adjusted in the plant.

Natural Gas

Kalol and Aonla plant consume as feed stock and fuel. As per the contract

with ONGC, gas is supplied to IFFCO at the price fixed by Govt. of India from time to time.

The meters provided at the inlet point in the plants are the basis for monthly billing.

Meter reading is carried out jointly by ONGC / GAIL and IFFCO representatives. The unit

sends the telex to head office for making payment to ONGC / GAIL after due certification of

bill by the head of technical department about quantity of gas received.

Naphtha

Naphtha is supplied by IOC against advance payment terms. There are excise duty

concessions available for these items provided they are consumed for manufacture of

fertilisers. Accounts department in coordination with production department shall ensure that

all the excise duty requirements are fulfilled that the duty concessions are fully availed. The

inventory is valued based on the quantity received as per MRR received from production

department on monthly basis. The price payable to IOC for naphtha is fixed by the Govt. by

time to time the naphtha is supplied to Kalol unit from Mathura refinery.

Catalysts & Resins

The Catalysts & Resins are produced by the material department at the plant; on the

receipt of the material the inventory is valued at the agreed price. For Catalysts & Resins
where IFFCO has pooling arrangement with other companies, the material received is taken

to inventory at the actual price paid and equivalent amount is credited to "material received

on loan account".

This entry will be reverse when the material is procured by IFFCO and replenished

for return of loan. The inventory and consumption account then shall be accounted at the

actual procurement price.

 STORE SECTION
Store of any organization is of vital importance. It is the responsibility of stores to

receive the material required by the organization's operations to keep it properly & to issue it

as when required. The stores are divided in two subsections for greater flexibility like receipt

and custody section. In IFFCO there are two stores.

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

2. Store B for Aonla-2 unit.( it contains mainly catalysts used by Aonla-2 )

Store has the following warehouses:

- Main Store

- Cement godown

- Petrol Pump

- Cable yard

- Chemical godown

- Paint godown

- PDIL store
A. RECEIPT SECTION:-

This section is responsible for receiving the materials and inspecting them. The

process involves following steps.

1) The document regarding the material may be sent to the stores, purchase, concerned

department. But ultimately they have to be send to stores.

The documents may be:

 Goods receipt / railway receipt / challan

 Form

 Excise duty

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

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

contractor. He will collect the material.

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

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

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

face delivery.

5) If any discrepancy is found during checking, the accounts section is informed for

necessary action and getting claim from insurance company. The date of receipt is filled in

CRR.

6) The next operation is filling the stores receipt vouchers (SRV). Here the quantity

mentioned in challan and purchase order are compared, SRV Has 7 copies, two for accounts

and one for each purchase, stores, indenter, master file & custody section.

7) Inspection is done by the indenter:

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

putting identification & giving a SRV control number.

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

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

company and the particulars noted in rejection register.

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

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

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

from receipt section.

B). CUSTODY SECTION:-

This section is responsible for proper keeping of materials and issuing them when

required by different department and contractors. The material received here is first checked

as per SRV for every material there is a card. These cards are located in bins according to

code of material is received in custody the card information is updated.

When someone wants to issue certain material he has to fill the store issue voucher

(SIV). Once the item is issued again information is updated in the kardex. When a particular

part is returned then this received in stores, by internal stores return voucher (ISRV). After

issuing the material the number of issue and the quantity issued is noted in SIV control

registers.

Custody section takes care of spares.

C. SPARES:-

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

Unit-2 are housed in store. Spares have been classified plant wise. The first digit of the code

of item is numbered according to given criterion-

- Ammonia

- Urea
 - Product handling

- Power

- Sp. Equipments

- General items

In IFFCO inventory is divided into two types:

1. General and

2. Spares

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

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

ACCOUNTING FOR STORES

General Outline of stores Function:

a. The authority of receipt, store and issue of all material is centralized in the materials
department subject to exception in permitted in certain cases. In certain cases a nominal stock

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

laboratory and administration department for meeting emergencies. In addition certain

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

1. The authority of storage of packing materials like bags is vested with bagging

department. The bagging department receives the material, gets it inspected in

laboratory, issued the same for product bagging and maintains the stocks

2. Maintenance of records for all quantitative transaction of packing material is the

responsibility of bagging department. Similarly the raw materials are handled by production

department with all responsibilities in respect of quantity accounting.

Functions of Store Accounting Section:-

The section dealing with accounting of stores in the finance department shall have

following functions:-

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

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

3. Associating with stores section for stock verification.

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

Receipt /Issues/ Returns Transfer of Materials:-

a) The second copy of the material receiving reports after pricing, shall be passed on to

the stores accounts sections to scrutinized the same with reference to store item code quantity

of measure etc. and process it for accounting of receipt of materials. After issue / return of

materials, issue section of stores department arranges data entry on the daily basis. Checklist

processed is sent to stores accounting section for scrutiny in respect of store item code, cost /

service code, expense code and unit measure etc.

b) The corrections and financial and financial adjustments are made to arrive at final
check list after scrutiny of final check list entry in priced store ledger is to be processed. The

section shall ensure that all receipts, issues and returns / transfer voucher raised by the

stores section are finally posted in the price store ledger.

c) For clearance of imported materials, amount deposited for custom duty in the PD

account etc. Shall be cleared against individual MRR's on receipt bill of entry

d) The issue notes shall be priced on the weighted average rate basis after accounting the

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

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

chart of account.

e) In case of material like steel plates etc. where materials are received on actual weight

basis and the issues are accounted are on theoretical weight basis as per sectional

measurements, the quantity accounting shall be kept on weight basis. The difference in

quantity in weight basis, if any, shall be adjusted to revenue / capital account, as then case

may be, in consultation with consuming department, in case the shortage is more than the

consumption norms, the same should be recovered from the contractor.

f) For all issue notes relating to works contracts, one copy of the price issue notes may be

sent to the work accounts section to enable them to debit the contractor's account. A monthly

abstract also be prepared and passed on to works accounts group for check.

g) Details for receipts and issue of materials received / issued on loan shall be maintained

by the store account section loan transactions shall be approved by the competent

authority. It is the responsibility of material department to take action to square up the

transactions within the reasonable time.

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

i) Materials issued to contractors shall be priced at the monthly weighted average rate

and debited to materials issued to contractors account. The accounting for the difference

between issue price and recovery price provided in the contract shall be Cleared by the

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

uniform.

j) For material returned to stores, return note shall be priced by he stores accounting

section at the same rate which it was issued and the Value shall be debited to the relevant

code of stores and spares parts inventory accounts by credit to the cost center / job number

where the material is received back. The return note shall be priced on the basis of the

original issue requisition against which the material was drawn if such reference is available,

otherwise the same should valued at the prevailing average monthly rate applicable to that

material.

k) No material shall be transferred to one card to another card without giving proper

information to the stores account section. Such transfers shall be made by means of a

transfer voucher on receipt of such transfer voucher and pass adjustment entries by debiting

and crediting respective accounts.

l) Under the mechanized system of store accounting, all documents, such as MRR's issue

notes return notes and transfer vouchers shall be sent to the EDP section after exercising the

prescribed checks. The EDP section shall prepare the all accounting abstracts with the

summary figures with monthly journal entry. In addition, it shall prepare the priced store

ledger. Ledger abstract for all items transacted during the month giving the opening stock,

receipts, issues and past closing balance shall also be prepared. A copy of this statement shall

be forwarded to store section for verification of the bin card balances. Discrepancy if any

shall be reconciled by the store section with the stores accounts section.
m) The price store ledger balance for each category store shall reconciled value wise with

the control account balance in the ledger wherever possible. The accounts section shall draw

out reconciliation on monthly basis. After reconciliation a monthly material consumption

statement, cost center wise, is prepared and circulated to concerned department by the 10th of

following month for verification of its correctness and for monitoring the budgeted

expenditure, if any discrepancy is reported, the same is adjusted in the ensuring

month.

Insurance of Stock & Stores

For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and finished

products held at plants, insurance shall be taken to cover the risks arising out of fire

explosion, riot, strike terrorism, malicious damage, earthquake, etc. The stock of finished

products lying at different marketing warehouses should also be adequately covered through

the warehousing agencies.

According to the value of stores and finished products keeps on varying from time to

time, insurance shall be obtained in the form of declaration policy whereby the average daily

stock for each product held during the month shall be declared to the insurers in the first

week of the next month.

According to the declaration policy, the insured amount for each product shall be

stated separately. The liability of the insurers is limited to the insured amount. At any time if

it is found that the actual stock is more than the insured amount to avoid less amount of

insurance. In case of a declaration policy, insurance premium is payable for minimum 35 %

of the insured value.

Before insurance is obtained, various categories of stores shall be reviewed with a

view to select such items for which insurance is considered necessary.

Verification of Inventories

The officer of stores will coordinate the job of physical verification and the accounts
officer in charge shall render all assistance to ensure that the physical verification of

inventories is carried out as per the policy and the policy and the approved program. The

store department will ensure that the posting in the Kardex are updated before the verification

of inventories. Kardex contains all the information that is in the store.

The inventories are classified in three categories for verification purpose.

 Raw material & Packing materials

 Stores, Chemicals & Spare parts

 Finished products

The stocks of raw materials, packing materials and finished products are to be

verified on quarterly basis by an independent surveyor by the society. No adjustments

need be carried out in the books of accounts unless the discrepancies in liquid raw

materials and solid raw material are in excess of 1% to 5% respectively. This is as per

guidelines issued by the head office.

In case of finished goods also the same principle applied except that no

adjustments in the books of accounts shall be made. However the stock registers shall

be adjusted on the basis of actual stock in order to replace the notional figures of stocks

by more accurate estimate based on physical verification.

The inventories for other items such as stores, spares, construction materials etc.

are also verified every year keeping in view ABC analysis of stock items value and

exercise of verification may be completed by March every year.

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

classified in to A, B, C categories.

Categories Value (Rs. per unit) Quantum of Verification

A Above Rs. 50,000/- 100%
B 10,001 to 50,000/- 70%
C Below Rs. 10,000/- 25%
 A team of stock verifiers shall prepare a stock verification sheet giving the kardex

balance and the physical balance of each item covered in the stock verification. After filling

up the particulars of the value and quality discrepancies with reference to the priced stores

ledger balance, the stock verification sheets shall be forwarded to the materials department

for scrutiny and reconciliation and adjustment in consultation with finance department

accepted shortage shall be processed for the approval of the competent authority.

RECONCILIATION AND ADJUSTMENT

After each physical verification by the custodians of inventories and suitable

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

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

itself.

Internal Check

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

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

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

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

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

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

essential for proper functioning of inventory control system

2) The priced store ledger shall not be maintained for large number of low value items
such as stationery, medicines, canteen stores etc. in this case the expenditure shall be charged

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

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

Inventory Control

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

main factors in inventory control decision making process are:

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

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

production.

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

The third element is the most difficult to measure and is often handled by establishing

a "service level" policy, e. g, certain percentage of demand will be met from stock without

delay.

The Inventory Management system and the Inventory Control Process provides

information to efficiently manage the flow of materials, effectively utilize people and

equipment, coordinate internal activities, and communicate with customers. Inventory

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

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

decisions to manage their operations.

Inventory control is a systematic control and regulation of purchase and usage of

materials in such a way so as to maintain an even flow of production at the same time

avoiding excessive investment in inventories. Efficient material control reduces losses and

wastage of materials that otherwise pass unnoticed.

 Inventory control is the core of material management. The need and importance of

inventories varies in direct proportion to the idle time cost of men and machinery, and

urgency of requirements. If men and machinery in the factory could wait and so could the

customers, materials good not lie in want for them and no inventory need to be carried. But it

is highly uneconomical to keep the men and machine waiting and the requirements for

modern life are so urgent that they can not wait for materials to arrive after the need for them

has arisen.

Because materials constitute a significant part of the total production cost of the

product. Thus, cost is controllable to some extent; proper planning and controlling of

inventories are of great importance. If investment in inventory will be more then the company

has to bear carrying cost and that finance can not be utilized.

A good inventory management policy should ensure smooth and uninterrupted supply

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

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

conflicting ends:

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

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

cost of funds invested in inventory.

OBJECTIVE OF INVENTORY CONTROL

Scientific control of inventories should serve the following purposes:

1) To provide the continuous flow of required materials, parts and components for

efficient uninterrupted flow of production.

2) To minimize investment in inventories keeping in view operating requirements.

3) To provide for efficient store of materials so that inventories are protected from losses

by fire and threat and handling time and costs are kept at minimum.

4) To keep surplus and absolute items to minimum.

5) To protect the inventory against deterioration, obsolescence and unauthorized use.

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

orders.

TECHNIQUES OF INVENTORY CONTROL

Reduction of surplus stock is an essential requirement inventory control. Various

techniques are available to solve the various types of problems associated with inventory

control:-

1) Min-Max plan

2) Order cycling system

3) Fixation of various levels

4) Use of control ratios

5) Review of slow and non-moving items

6) The ABC Analysis

1) Min-Max plan:

In this plan analyst lays down a maximum and minimum for each stock item.
Minimum level establishes the reorder point and order is placed for quantity of material,

which will bring it to the maximum level.

2) Order Cycling System:

In this system, quantities in hand of each item or class of stock are reviewed

periodically. In that, if it is observed that stock level of a given item will not be sufficient till

the next schedule review keeping in view of its probable rate of depletion, an order is placed

to replenish its supply.

3) Fixation of Various Levels:

Certain stock levels or fixed levels are given below:-

A). Maximum Level

It is the quantity of materials beyond which a firm should not exceed its stocks. If the

quantity exceeds maximum level limit then it will be overstocking.

Maximum Level = Re-ordering level + Re-ordering Quantity

-
(Minimum Consumption Minimum Re-ordering period)

B). Minimum Level

It represents the quantity of stock that should be held at all the time, stock level is

normally not allowed facing below this level.

Minimum Level = Re-order level - (Normal consumption Normal Re-order Period)

C). Safety Level:-

Normal issues of stock usually stopped at this level and made only under specific

instructions. Safety stock is a buffer to meet some unanticipated increase in usage.

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

D). Re-ordering Level:-

When the quantity of materials reaches at a certain figure then fresh order is sent to get
materials again.

Re-ordering level = Maximum Consumption Maximum Re-order period.

4) Use of Control Ratios:

Inventory turnover ratio helps management to avoid capital being locked up

unnecessarily. This ratio reveals the efficiency of stock keeping.

Inventory turnover ratio = Cost of materials consumed / Cost of average stock

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

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

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

Stock turnover ratio should be as high as possible. Loss due to obsolescence be

eliminated or these items used in some profitable work. Slow moving stock should be

identified and speedily disposed off. The speed of movement should be increased. The

turnover of different items of stock can be analyzed to find out the moving stocks.

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

The ABC Analysis:

With the numerous parts and materials that enter into each and every industrial

production, inventory control leads itself, inventory and foremost, to the problem of analysis.

Such analytical approach is popularly known as ABC (ALWAYS BETTER CONTROL)

Analysis.

This Plan is based upon segregation of material for selection control. It measures

money value i.e. cost significance for each materials item in relation to total cost and

inventory value. The logic behind is that the management should study each item of stock in

terms of its usage, lead-time , technical or other problems and its relative money value in the

total investment in inventories.

Critical, i.e. high value items deserve very close attention, and low value items need

to be devoted minimum expense and effort in the task of controlling inventories.

The ABC Reports are made:

"A" inventory reports lists parts having little or no turnover. Turnover frequency is

measured by an exposure index. We calculate the index by dividing a part's inventory

quantity by its usage during the most recent 24 month period.

"B" report shows the parts with more than a one year supply but less than a 2-year supply.

"C" report lists the parts with more than six months supply but not more than one year.
Criteria For Judging The Inventory System:-

While the over-all objectives of the inventory system is to minimize the cost to the

firm the risk level acceptable to the management, the more proximate criteria for judging the

are:

Comprehensibility:-

Inventory system range from the utterly simple to the complex ones. Irrespective of

how simple or how complex a system is, regardless of whether it is automated or manual, it

should be clearly understood by all affected parties. The system must be properly explained

to all concerned people so that its purpose, logic and rationale are transparent.

This generates enthusiasm for the system and enhances its credibility. Otherwise it is

likely to be perceived as a mysterious 'Black box' of dubious value.

Adaptability:-

The questions raised in this context are:

1. Is the system responsive to change?

2. Can new products, new situations and new requirements be handled by the system?

A certain degree of flexibility and adaptability must be desired into the system to

make it versatile. Of course this cannot be and this should not be carried too far. The system

must not provide for every possible and imaginable contingency. If it is developed with this

ideal, it is likely to be a complex monstrosity. Remember the caveat that the design of any

system should ordinarily take care of about 90% of the cases, leaving the balance 10% to be

handled by hand.

Timeliness:-

Inventories may suffer loss in value on account of a variety of factors. The more

common sources of value decline are:

Obsolescence caused by changes in technology & shifts in consumer taste.

  Physical deterioration with the passage of time.

 Price fluctuation because of inherent volatility of certain commodities

The inventory system should be capable of inducing timely action. It should

provide adequate forewarning which triggers appropriate corrective steps

Inventory Software:-

In IFFCO the PSL software is used for the management of inventories. This software

holds all the transactions of the stocks. So this software helps much in maintenance of stocks.

It makes very easy to account persons to maintain the transactions of inventories.

A part of this software is installed on the systems of the stores, whenever a transaction

is made in the store, the details of that transaction is reaches to the systems of the store

accounting section, because both the systems are connected in the local area network (LAN).

So with the help of LAN environment it is very easier to accountants to retrieve the

information regarding the transactions made by the stores.

A part from this, this software has the variety of qualities which we can discuss with

the help of menus of software. There are six different menus in this software these are as

follows:

1. Data entry

2. Queries

3. Reports

4. Processing

5. Calculator

6. Exit

DATA ENTRY MENU

Data Entry
 SRV

SIV

ISRV

SAV

STV (IN)

STV (Out)

Document entry

Adjustment SIV

Adjustment ISRV

Entry of Surplus/ obsolete/ Insur.

Physical Verification Entry

 The very first menu that is data entry is used for the various types of

entries of transactions. In the data entry menu there are several options

shown in above diagram.

Document Entry:

This option is used to enter the data in various types of documents like SRV, SIV, ISRV,

STV (in), STV (out) etc.

Adjustment Entry:

With the help of this option we may easily make the adjustments in the stock issue

voucher (SIV), due to any previous adjustment. If the value of material has wrongly feed in

the documents or the valuation is high then it is used to decreases the value of that material.

Adjustment ISRV:

This option of data entry menu has the same working in issue stock return voucher

(ISRV). This is used whenever the valuation of any material has to increase. Thus easily

adjustments are made.

Physical Verification:

In case of verification of stock the person responsible for stock verification estimates

a range of items for verification and after verifies the selected range of items, they punched

the quantity verified or lock the verified quantity till the next verification.

Entry of Surplus/ Obsolete:

This option is used for adjust the surplus items which are declared by the plant. The

surplus items means, the items which are exceeds from the records. So in case of this

situation the accountants make entry @ of 1 Rupee per unit of items. There are some spares

which are not in used. We give entry them in surplus. While the spares which are not in

working condition or they are outdated, comes under obsolete items.

 REPORTS MENU

Reports

Summary account head wise

Month Report before PSL runs

Month Report after PSL runs

PSL JV

Inventory Consumption

Kardex

Code wise inventory status

Yearly summary for HO
Issue more than
Issue above

OTHER REPORTS
Summary A/C head wise:

This option creates the summary reports of all the A/Cs in respect of accounts heads

like

- Inventory spares (Ammonia, Urea etc.)

- Loose Tools

- Chemicals

- General Stores

- Construction Materials etc.

Monthly report before PSL runs:

This option creates the monthly report of all the documents like - SIV, ISRV, SAV,

STV (in), STV (out) etc. so that the account persons may check whether the documents are

correct or not., because if there is any mistake in any document and PSL run is performed it

will create the wrong final reports.

Monthly report after PSL runs:

The working of this option is same as the previous option but the difference is that the

reports made after the PSL run are more accurate updated and non volatile in nature.

PSL JV:

After processing of PSL run all the documents becomes updated and all the

transactions also gets updated. So that by this option we can see all the journal voucher of the

entries of inventories.

Inventory consumption:

This option of the report menu shows the data regarding the consumption of materials

according to the date. We can see the consumption of a particular item. This report helps in

forecasting of material purchasing for the future consumption of the materials. It helps in

deciding the re-order level of inventory.

Code wise inventory status:

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

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

Kardex:

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

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

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

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

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

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

information about the materials.

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

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

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

Material code: 998574907100 MOTOR 1.5KW , CGL ,ND112M2

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

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

QUERIES MENU

Queries

Brows Inventory Master

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

PROCESSING MENU
 Processing

Weekly PSL proc.1

Reverse stock for Physical

Kardex mismatch

Put account group in

INVMAST

Cumulative process

Reverse stock for PSL Kardex

mismatch

PSL Process 1

Processing is the most important task of this software, because all the reports which are
forwarded to the concerning authorities and are the basis for the further actions are made only
after the processing or the PSL run. PSL processing makes update all the documents.
PSL Process I:
The option process I update and calculate the values for all documents and makes
available to create the final reports. Once a PSL run is processed the data can not be changed,
So that this task is very sensitive so the operating person should have the great care and
responsibility in processing task. PSL Process is done for tallying codes and value of the
material.
Put A/C group in inventory Master:
This option also a processing task when we executes this option it assigns the account
group to all the inventory / item codes so that these codes may link to a particular account
group. In this inventory are grouped.
Reverse stock for PSL kardex mismatch:
It is very important processing because it creates a list of all the items which are
mismatching in respect of units / quantity between the
PSL and kardex. If there is any mismatch in PSL and Kardex the report shows those
mismatches on the screen.
Reverse stock for physical kardex mismatch:
 This option creates a list of mismatches of karedx and physical verification. This processing
performed once in year, because the physical verification of the inventories is done once in a
year.
Calculator & Exit Menus
The calculator menu has no sub option we can use the calculator only by clicking on the
calculator menu. It helps much in manual calculations make the surety of correctness.
Apart from this the exit menu is simply for quitting the software, whenever we click
over the exit menu it exits from the software

DIFFERENT VOUCHERS
In IFFCO there are 3 types of receipt and 1 issue voucher are generally used for the particular
receipt and issue material. These are listed as below:
1. RECEIPT VOUCHER
• SRV (Store receipt voucher)
• ISRV (Internal store receipt voucher)
• DCSRV (Direct consumption store receipt voucher)

2. ISSUE VOUCHER
SIV (Store issue voucher)

3. ADJUSTMENT VOUCHER

SAV (Stock adjustment voucher)

STV (Stock transfer voucher)

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

(a) FIS (Receipt from supplier voucher)

These vouchers are generally generated by the store whenever the material is received from the
supplier/ vendor in stores.

(b) H.P (Receipt voucher for direct consumption)

These vouchers are generally generated when material is directly received by the indenter for
direct consumption of raw material.

The copy of these SRV will be dispatched departments such as:

(a) 1 copy to purchase department.
(b) 1 copy to indent department.
(c) 2 copy account department.
(d) 1 copy lie with stores itself.

ISRV (INTERNAL STORE RECEIPT VOUCHER)

If the hundred percent of the issued material have not been utilized by the particular
department or parties, in this stage the concerned party or department will revert back the
remaining raw material to store by using such type of issue voucher.
These ISRV can be of 5 types which are as follows:
BD: Such type of ISRV are generally used by the particular department for the general item.
BB: Such type of ISRV are used for the spare return by the particular department.
BC: Such type of ISRV are generally used by the contractor for return of remaining raw
material.
BE: These vouchers are used for stationary items.
BA: these are also used by controller for spares.
Note: The copy of these ISRV will be send to the following departments mentioned as:
(a) One copy to store.
(b) Two copy to account department.
(c) One copy lies with the indenter itself.
Note: The issue notes shall be priced on the Weighted Average Rate basis after accounting the
last receipt of the material. After ascertaining the nature of the expenditure , the job for which
the material is issued , an appropriate account code shall be given in accordance with the chart
of account.

SIV (STORE ISSUE VOUCHER)

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

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

DCSRV (Direct Consumption Store Receipt Voucher)

DCSRV is prepared when the material is not purchased through purchasing order. There are
some materials which are not bought through purchasing order. As an indenter needs a
stationary material then he has no need to go through the whole purchasing process. He has to
take permission from its immediate officer. After that he may purchase that product and form
DCSRV i.e. Direct Consumption Store Receipt Voucher.

SAV (Store Adjustment Voucher)

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

STV ( Store Transfer Voucher)

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

2) STV(out)
 STORE ISSUE VOUCHER

No.

Deptt.

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

S no. Qty Qty

Material Description U.M. Reqd. Issued Balanc Rs. P.
Code e
1

Please use one voucher for Hash Total

max. four items Preferable
same group
Authorised by Received Issued Kardex posted Checked by MGR/ Sr. MGR(S) P.S.L.
by by by J.S.O./ S.O. Posting

Name

Designation
 INTERNAL STORE RETURN VOUCHER

ISRV No. Date

SIV No. Date

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

S.no. Qty Qty

Material Code Description Unit Retur Receive Balance Rs. P.
n
1

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

Inspected by Authorised Returned Received by Kardex P.S.L. Posted by Certified

by by Posted by

Name

Designation
 STORE ISSUE VOUCHER CONTRACTOR
No.

Deptt.

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

S. no. Qty Qty

Material Code Description U.M. Reqd. Issued Balance Rs. P.

Please use one voucher for max. four Hash Total

items Preferable same group

Authorised by Received Issued Kardex posted Checked by MGR/Sr. MGR(S) P.S.L.

by by by J.S.O./ S.O. Posting

Name

Designation

INDIAN FARMERS FERTILISER COOPERATIVE LTD.

AONLA UNIT
 STORES RECEIPT VOUCHER

SRV NUMBER
DATE
CRR NUMBER
SRV PREPARED:
PO No.& Date ABNL ABB Ltd. CRR RECD CHALLAN/BILL
Date Date No.

GR/RR No. Freight From: DEPT CODE: FORM 31 No.

Date:, Paid Truck/Trailer/Wagon DEPT Name RR
Transporter FARIDABAD

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

remarks

PO Card balance No Po:

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

PO Card balance No Po:

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

INDIAN FARMERS FERTILISER COOPERATIVE LTD.

AONLA UNIT
 DIRECT CONSUMPTION STORE RECEIPT VOUCHER
DCSRV SRV NUMBER
DATE
CRR NUMBER
SRV REF:
PO No.& Date IFPH CRR RECD Date CHALLAN/BILL No.
Inter unit trans. IFFCO PHULPUR UNIT Date

GR/RR No. Freight From: TRK/WGN DEPT CODE: FORM 31 No.

Date:, Paid PHULPUR DEPT Name
Transporter

S.No. Unit Qty. Value Inspection

DESCRIPTION remarks

PO BOLT WITH NUT SIZE M12*165MM No Po:

SNo LONG PT.NO.BN 12*165(SS304) Challan: Exp. Code
Received: DIS/REJ
Accepted: No.
Rejected:

PO No Po:
SNo Challan: Exp. code
Received:
Accepted: DIS/REJ
Rejected: No.
 INDIAN FARMER FERTILISER COOPERATIVE LTD.
AONLA UNIT
SAV NUMBER:
089UYW008
DATE : 8/6/2005

STORES ADJUSTMENT VOUCHER

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

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

INDENTER STORE KEEPER STORE STORE

OFFICER MANAGER STORE

DESPATCH ADVICE
 NO:
TIN NO:
KER ENGG. WORKS C.B.GUNJ. P.O/W.O.NO:
RAMPUR ROAD, BAREILLY BAREILLY AUTHORITY FOR
DISPATCH:GM

S.NO DESCRIPTION QUANTITY UNIT REMARKS

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

2 MR -DO-

3 MR -DO-
4 MR -DO-
CASE MARK DIMENSIONS& NET PKD.BY PREP. BY DESPATCH
TOTAL NO PKG WT. THROUGH:
DOOR
DELIVERY
RR/GR NO:
GATE PASS:

PKGS FREIGHT

COST: RS.
SIV NO: SR. MANAGER STORES

THE AFORESAID ITEMS HAVE BEEN RECEIVED IN GOOD ORDER & CONDITION
COPY TO: 1) CONSIGNEE 4) INDENTOR
2) TRANSPORTER 5) G.M.APP./W.O.FILE
3) CM(F &A)/ INSURANCE
. RECEIVER’S
SIGNATURE& STAMP

REJECTION/DISCREPENCY REPORT
REF: DATED:
M/S AB SALES & SERVICES
365, HARRIS GANJ
KANPUR FAX:
CRR NUMBER:
SUB: OUR P.O. NO:4410/1294/WS0137//071125
YOUR REF/INVOICE/BILL.CHALLAN NO. 10/SP/TAX/08
RR/LR NUMBER: GR 8319469 DATE:
Transporter: SOUTH EASTERN ROADWAYS DATE:
BOMBAY
Dear Sir,
Please refer to the supply of materials against your invoice/Challan No. as mentioned
above. On opening the case/s and checking the contents the following discrepencies have
been observed.
S.No Material Unit QUANTITY Remarks
Description

Desp. Received Excess Short Rejected

1.

2.

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

ACTION REQUIRED BY YOU

YOU ARE REQUESTED TO:-
1. Make good of shortages.

2. Dispatch replacement against breakages/unacceptable material.

3. Inform disposal action for breakages/unacceptable material.

4. Being excess supply than our order quantity, material has not been accepted.

Cost of damage if any_____________________________________________

Payment Terms: yours faithfully,
For INDIAN FARMERS FERTILISER COOP.LTD.

Location CH. MANAGER (STORES)

e-Mail:
Fax: Through E-proc Phone

INDIAN FARMERS FERTILISER COOPERATIVE LIMITED

Aonla Unit, P.O. IFFCO Township, Bareilly
 TENDER ENQUIRY

MPR No 080380 Enquiry No: 6000/672/UT0044/IE/080308(*)

INDENTOR’S COPY This Enquiry is due on 14/07/2008
UTILITIES DEPT Desired Delivery: 4 Weeks

Enquiry Type Single Stage

Dear Sir,
Please submit your Sealed Quotation, with earliest delivery, as per terms and conditions and
specification given below and enclosed herewith.

S.No. Item Code Description Quantity Unit

1 DC Liquid Chlorine 99% pure as per IS code 220 MT

646/1988(latest version) in IFFCO.

PERFORMANCE BANK GUARANTEE:

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

INDIAN FARMERS FERTILISER COOPERATIVE LIMITED

PURCHASE ORDER
Thru Courier
M/s : JASUBHAI ENGINEERING PVT. Order No.
Add: 803-4, Chiranjiv Towers, Nehru place Your Quotation:
City: New Delhi Pin: 110019 Our Enquiry No:
E-mail: Delivery
Code: JASU Delivery Period.
Test Copy Consignee:
Destination:

Dear Sir,
Please arrange to supply the following as per your quotation referred above subject to
conditions mentioned herein and enclosed herewith.

S.No Description Quantity Unit Rate Amount

1
2
Total Value …………………
Price Basis : Ex-Works Ahmadabad
P& F Charges : P&F Charges @ 2.00% extra
Excise Duty : Extra as applicable against documentary evidence present rate is @ 14.42%
Sales Tax : Extra as applicable against form ‘C’
Freight Codn.: On freight to pay basis.

IFFCO-AONLA
MATERIAL PURCHASE REQUITION:
Budget Code Sanctioned- Utilised- Amt This Balance Issue-Date:
Amt MPR(Rs.) Expected:
Dly Date:

N*.05 ……….. ………… ……….. ………..

Class: Stock, capital, D.C., Supply, Ordinary, Proprietory, Domestic, Single stage
Indentor: ADMN SECTION
Suggested Vendor Ctegory: Godrej & Boyce Mfg. Co. Lucknow.

MPR Description: Procurement of official furniture for the year-2008

Brief Justification: Office furniture are required for different section/deptt.
Last Pos/WOs Ref Nos:
Last Pos/WOs total value:

S.No Item code Material decription Unit Quantity Inventory Value Stk-oth.unit/ last
required levels 3yr consumption

1 DC

2 DC

3 DC

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

FORMULAE USED FOR ANALYSIS

INVENTORY TURNOVER OF RAW MATERIAL

=raw material consumed / total average inventory

HOLDING PERIOD(IN MONTHS)

= 12/ inventory turnover ratio
 AONLA- I

INVENTORY - GENERAL STORES

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

PIPES

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

FITTINGS

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

VALVES

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

LUBRICANTS

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

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

GENERAL ITEMS

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

TOTAL GENERAL STORE

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

Groups like FLANGS, BOLT,NUTS STUD, FASTENERS, BEARING, WELDING

MATERIALS, HOSES BELT, TYRES, TUBES, LAB CHEMICALS, GLASS WEARS
are having less inventory and are having almost same level of inventory and there issue are
also less and of almost same values for the 3 years.

BELLOWS, FILTERS, SPECIAL FITTINGS, CIRCLIPS, ABRASIVES, SAND,

PAINT, SCRAP MATERIAL are having zero or very less inventory that does not effect the
otal inventory very much.

FIRE AND SAFETY

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

TOOLS AND SPARES

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

GENERAL STORES – ESP

FILTERS, WELDING MATERIALS, RINGS, GASKETS, SHEET, PA, GENERAL

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

INVENTORY - SPARES IN STOCK

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

AMMONIA

Inventory is increasing for 2008, 2009, 2010 is increasing constantly. Its inventory was
640.45 lakhs2007
That comes down by 4.56% in 2008. In 2009 it increases by 84.45% and in 2010 it goes up
by 6.51% but issue is decreasing over these years so inventory turnover also decreased.

UREA

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

OFFSITE

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

PRODUCT HANDLING

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

TOTAL SPARES

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

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

INVENTORY - CATALYST IN STOCK

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

INVENTORY – STEEL

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

INVENTORY – TIMBER

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

TOTAL INVENTORY

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

AONLA –II

INVENTORY - GENERAL STORE

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

PIPES

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

FITTINGS

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

VALVES

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

ELECTRICAL ITEMS

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

GENERAL ITEMS

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

STRAINER, FILTERS, BELLOWS, ABRASIVE, SYNTHETIC PAINTS,

INDUSTRIAL FUEL, LAB CHEMICAL, GLASS WEARS, FIRE AND SAFETY
ITEMS ,INDUSTRIAL GASES are having zero or very low inventory. Same was the case
with issues it was either 0 or very low. This shows that these items are either not in regular
and frequent use or they are used in less quantity that is why its inventory is not required in
heavy quantity.
INVENTORY- GENERAL STORES – ESP

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

INVENTORY- SPARES IN STOCK

AMMONIA

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

UREA

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

OFFSITE

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

PRODUCT HANDLING

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

LOOSE TOOLS IN STOCK

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

INVENTORY - CATALYST IN STOCK

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

INVENTORY STEEL-STRUCTURAL

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

INVENTORY CEMENT

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

OVERALL INVENTORY

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

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

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

also.

TREND FOR TOTAL INVENTORY IN AONLA I AND AONLA II

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

8000
7000
6000 spares(in lakhs ) aonla
II
5000
spares(in lakhs ) aonla
4000 I
3000 general stores( in
lakhs) aonla II
2000
general stores( in
1000 lakhs) aonla I
0
2007 2008 2009 2010

INVENTORY OF AONLA I
 2007
1%
1%
4% raw material
3%
storesand spares
0% 8%
30% loose tools
chemicals& catalyst
packingmaterial
construction material
53% stock in process
finished goods

3% 2008
2%
3% 0%
raw material
1% 6% stores and spares
loose tools
46% chemicals & catalyst
packingmaterial
39% construction material
stock in process
finished goods
 1% 2009
3% 1% 0%
raw material
1% 14% storesand spares
7%
loose tools
chemicals& catalyst
packingmaterial
construction material
73% stockin process
finished goods

2010
1% 0%
raw material
3%
8% 7% stores and spares
loose tools
13%
chemicals & catalyst
1%
packing material
construction material
67%
stock in process
finished goods
 INVENTORY OF AONLA II

2007
0%
raw material
4% stores and spares
16% 0%
loose tools
35% chemicals & catalyst
construction material

42% packingmaterial

0% stock in process
3% finished goods

1%
2008
1%
1%
0% 0%
raw material
0%
8% stores and spares
loose tools
chemicals & catalyst
construction material
packingmaterial
89% stock in process
finished goods
 0% 4% 0% 2009
2% 0%
raw material
storesand spares
loose tools
31% chemicals & catalyst
construction material
63%
packingmaterial
stock in process
0%
finished goods

2010
0% 0%
raw material

2% 0% 14% storesand spares

loose tools
chemicals & catalyst
19%
construction material
65% packingmaterial
0% stock in process
finished goods
 Conclusion

and

recommendations
The basic objectives of inventory management appear to be conflicting in

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

requirement and production schedules.

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

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

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

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

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

value.

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

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

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

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

cordinating the different kinds of of inventories and conflicting viewpoints of

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

authority of the organization as well as departments.

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

carrying cost.

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

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

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

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

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

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

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

understanding and coordination between the manufacturer an dsuppliers in terms of

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

production.

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

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

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

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

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

here .

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

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

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

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

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

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

utilizing a common computing platform, ERP systems consolidate all business

operations into a uniform and enterprise wide system environment.

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

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

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

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

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

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

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

security tools.
 REFRENCES

• www.Iffco.nic.in

• Annual report 2010 of IFFCO

• Accounting Manual of IFFCO

• NIT of purchase department of IFFCO

• I M Pandey