You are on page 1of 64

INDEX

TOPIC Acknowledgement Declaration Executive Summary Chapter-1 Introduction 1.1 Introduction 1.2 Objectives of the study 1.3 Scope of the study Chapter-2 Profile of the Company 2.1 NTPCs Vision and Mission 2.2 State-wise power generation 2.3 NTPCs growth and its initiatives

PAGE NO. ii iii iv 1-2

2-10

Chapter-3 Conceptual Framework 11-33 3.1 Inventory management & inventory control 3.2 Cost concept in Inventory management 3.3 Selective inventory control techniques 3.4 Mathematical modeling for inventory control 3.5 Inventory system for managerial control at NTPC 3.6 Drawbacks of traditional methods with respect to manufacturing environment 3.7 Modern inventory control techniques of NTPC 3.8 Inventory management and control at NTPC 3.9 Advantage of a good inventory control 3.10 Important quantity standard used as a tool to control inventory 3.11 Layout of stores 3.12 Warehousing and storage handling and stacking of materials

Page | 1

INDEX
Chapter 4- Research Methodology 4.1 Research design 4.2 Data collection tools 4.3 Sampling technique 4.4 Data analysis tools 4.5 Data presentation tools Chapter 5- Data Interpretation and Analysis 5.1 Evaluation of Inventory of NTPC 5.2 Trend analysis of inventories 5.3 Analysis using Questionnaires Chapter 6- Conclusions and Suggestions 6.1 Conclusions 6.2 Suggestions 6.3 Limitations Bibliography Annexure 35-36

38-57

59-61

62 63-64

Page | 2

CHAPTER -1
INTRODUCTION

Page | 3

1.1 INTRODUCTION
The term Inventory includes stock of (a) finished goods (b) work-in-progress and (c) raw materials and components. In case of a trading concern, inventory primarily consists of finished goods while in case of a manufacturing concern; inventory consists of raw materials, components, stores, work-in-progress and finished goods. A business's inventory is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold. It also costs money to store, track and insure inventory. Inventory Management is the overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. Inventories that are mismanaged can create significant financial problems for a business, whether the mismanagement results in an inventory glut or an inventory shortage. Successful inventory management involves creating a purchasing plan that will ensure that items are available when they are needed (but that neither too much nor too little is purchased) and keeping track of existing inventory and its use. Inventory management plays a very significant role in facilitating the production process with adequate amount of required materials at the right time and in right amount. Inventory Management process needs to be studied so as to understand the overall working of the process adopted by the organization and the challenges faced by the organization during the process. The study of the Inventory Management can help the organization to come up with measures to improve the system of inventory management and attain its objectives in the long-run

Page | 4

1.2 Objective of the Study


The objective of this research is to get an understanding of inventory management process & to find out the inventory control techniques implemented by NTPC. To study the various inventory ratios for forecasting the future movement of inventories in the organization. To identify the problem area regarding the inventory management/control process of NTPC. To provide few suggestions to incorporate the changes required in accordance with the internal & external environment.

1.3 Scope of the Study


Study will help to understand the movement of inventories and to know about the process of handling the inventories. It will indicate the drawbacks and measures to overcome these, which will ultimately enhance the productivity and influence the profitability of NTPC.

Page | 5

CHAPTER -2
PROFILE OF THE COMPANY

Page | 6

INTRODUCTION
NTPC Limited (formerly National Thermal Power Corporation) an Indian stateowned electric utilities company and is based in New Delhi, India. NTPC's core business is generation, distribution and sale of power to state-owned power companies in India. NTPC Limited is the largest power generating company of India with an electric power generating capacity of 41,794 MW. A public sector company, it was incorporated in the year 1975 to accelerate power development in the country as a wholly owned company of the Government of India, which held 75% of its equity shares on 31 March 2013 (after divestment of its stake in 2005, 2009 and 2012). Although the company has approx. 18% of the total national capacity it contributes to over 27% of total power generation due to its focus on operating its power plants at higher efficiency levels (approx. 83% against the national PLF rate of 78%). In May 2010, NTPC was conferred Maharatna status by the Union Government of India. It is listed in Forbes Global 2000 for 2012 at 384th rank in the world.

The total installed capacity of the company is 41,794 MW (including JVs) with 17 coal-based and seven gas-based stations, located across the country. In addition under JVs (joint ventures), six stations are coal-based, and another station uses naphtha/LNG as fuel.

Page | 7

2.1 NTPCS VISION AND MISSION

VISION
To be the worlds largest and best power producer, powering Indias growth.

MISSION
Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society.

CORE VALUES
Business Ethics Environmentally and Economically Sustainable Customer Focus Organizational and Professional Pride Mutual Respect and Trust Motivating Self and Others Innovation and Speed Total Quality for Excellence Transparent and Respected Organization Enterprising Devoted

Page | 8

2.2 STATE-WISE POWER GENERATION BY NTPC

Page | 9

2.3 NTPCS GROWTH AND ITS INITIATIVES

NTPC has set new benchmarks for the power industry both in the area of power plant construction and operations. It is providing power at the cheapest average tariff in the country. With its experience and expertise in the power sector, NTPC is extending consultancy services to various organizations in the power business. NTPC is committed to the environment, generating power at minimal environmental cost and preserving the ecology in the vicinity of the plants. NTPC has undertaken massive aforestation in the vicinity of its plants. Plantations have increased forest area and reduced barren land. The massive afforestation by NTPC in and around its Ramagundam Power station (2600 MW) has contributed reducing the temperature in the areas by about 3c. NTPC has also taken proactive steps for ash utilization. In 1991, it set up Ash Utilization Division to manage efficient use of the ash produced at its coal stations. A "Centre for Power Efficiency and Environment Protection (CENPEEP)" has been established in NTPC with the assistance of United States Agency for International Development. (USAID). CENPEEP is efficiency oriented, eco-friendly and eco-nurturing initiative - a symbol of NTPC's concern towards environmental protection and continued commitment to sustainable power development in India.

Page | 10

As a responsible corporate citizen, NTPC is making constant efforts to improve the socio-economic status of the people affected by the projects. Through its Rehabilitation and Resettlement programmes, the company endeavors to improve the overall socio-economic status of Project Affected Persons. NTPC was among the first Public Sector Enterprises to enter into a Memorandum of Understanding (MOU) with the Government in 1987-88. NTPC has been Placed under the 'Excellent category' (the best category) every year since the MOU system started operating. Inspired by its glorious past and vibrant present, NTPC is well on its way to realize its vision of being "A world class integrated power major, powering India's growth, with increasing global presence.

Page | 11

FUTURE GROWTH PLANS


Over the last three decades, NTPC has spearheaded development of thermal power generation in the Indian power sector. In this process, it has built a strong portfolio of coal and gas/liquid fuel based generation capacities. The Indian power sector is witnessing several changes in the business and regulatory environment. The legal and policy framework has changed substantially with the enactment of the Electricity Act 2003. To meet the twin objectives of ensuring availability of Electricity to consumers at competitive rates, as well as attract large private investments in the sector, a new Tariff policy has also been issued.. Growth of the Generation Business Developing and operating world-class power stations is NTPCs core competence. Its scale of operation, financial strength and large experience serve to provide an advantage over competitors. To meet the objective of making available reliable and quality power at competitive prices, NTPC would continue to speedily implement projects and introduce state-of-art technologies. Total capacity portfolio Indias generation capacity can be expected to grow from the current levels of about 120 GW to about 225-250 GW by 2017. NTPC currently accounts for about 20% of the countrys installed capacity and almost 60% of the total installed capacity in the Central sector in the country. Going forward, in its target to remain the largest generating utility of India, NTPC would endeavor to maintain or improve its share of Indias generating capacity. Towards this end, NTPC would target to build an overall capacity portfolio of over 66,000 MW by 2017. Fuel / Energy mix for capacity addition Currently, coal has a dominant share in the power generation capacities in India.With high uncertainties involved in Domestic gas/ LNG, both in terms of availability and prices, NTPC would continue to set up large pit-head coal based projects, including few integrated coal cum power projects. To reduce the dependence on fossil fuels, there is a need to push for renewable sources of power in the sector. NTPC would avail of opportunities to add hydropower to its portfolio subject to competitive tariffs. The fuel mix in 2017 may be different from the existing portfolio, though not very significantly.

Page | 12

Diversification along the Value Chain NTPC has achieved the distinction of being the largest thermal generating company in India. In the past, this focus was adequate as the industry was highly regulated with limited diversification opportunities. To safeguard its competitive advantage in power generation business, NTPC has moved ahead in diversifying its portfolio to emerge as an integrated power major, with presence across entire energy value chain. In fact, to symbolize this change, NTPC has taken on a new identity and a new name NTPC Limited. NTPC has recently diversified into coal mining business primarily to secure its fuel requirements and support its aggressive capacity addition program. In addition, NTPC is also giving thrust on diversification in the areas of power trading and distribution.. Establishing a Global Presence To become a truly global company serving global markets, it is essential for NTPC to establish its brand equity in overseas markets. NTPC would continue to focus on offering Engineering & Project Management Services, Operations & Maintenance services, and Renovation & Modernization services in the international market.

Page | 13

CHAPTER -3
CONCEPTUAL FRAMEWORK

Page | 14

3.1 INVENTORY MANAGEMENT: AN INTRODUCTION


Materials Management in general and inventory control in particular are of great importance to the manufacturing industry because materials are vital input to the production system. Since materials in general contribute more than 50% to the cost of production, their availability in right quantity and quality at proper time at a reasonable cost (procurement as well as storage) require a careful and specific attention furthermore there has to be an organized and efficient way of storage, upkeep issues and utilization of the material resource. In the context inventory control assumes a great importance. In the beginning inventory control was an intuitive process based on experience and judgment but later it developed into a more scientific activity, particularly since the start of 20th century. The concepts of selective inventory control, economic lot sizes and the EOQ came into being. Techniques were then developed with overall production schedule in background resulting in the concept of aggregate inventory management. However these techniques could not cope with the dynamic nature of inventory management in the context of modern manufacturing environment. These techniques had to work without proper means of huge inventory data processing and were based on some short cut approximation methods with assumptions, which were not appropriate in real life situations in manufacturing industry. But with the availability of computer capable of handling information in large volumes at high speed the individual manufacturing inventory items requirement can now be pin pointed in terms of both quantity and timing. As such the traditional inventory control techniques have been rendered obsolete in dynamic manufacturing environments. Techniques like Material Requirement Planning' and' Just in Time' have emerged as more appropriate and effective. JIT techniques are a recent development, which originated in and is widely applied in Japan. It is still in trial or investigation stage in other countries. Material Requirement Planning called MRP in short is the inventory control technique, which is widely used in almost all industrial advanced countries. MRP, which is based on Master Production Schedule and implemented with the help of EDP on computer, has been found to be quite successful in present day manufacturing environment and is highly systematic. It saves a good amount of time, money and space as well as operational difficulties. In this work it is endeavored to develop a comprehensive set of recommendations duly supported by appropriate PPC information/data for implementing MRP. Relevant production data and information on store, purchase and inventory control has been collected and processed to work out a requisite frame work for developing and needed MRP system which, with suitable modification and alternative/additional data can be extended to other sections of production system also.
Page | 15

Inventory
Inventory is defined as the sum of value of raw materials, fuels and lubricants, spare parts, maintenance consumable, semi-processed materials and finished goods stock at any given point of time. Inventory could be the amount of raw materials, fuel and lubricants, spare parts and semi processed to be stocked for smooth running of plant. Since resources are idle when kept in stock, inventory is also defined as an idle resource of any kind having an economical value. Inventories are assets of an organization and represent investment. Like all investments, inventory may be too high or too low; it may be well managed or poorly managed. While any redundant inventory is wastage of capital that should otherwise be earning a return, properly maintained and controlled inventories can be a great asset.

Classification of inventories
The inventories are kept in the form raw materials, work-in-process and finished good. The reasons for keeping inventories at these stages are given below: 1. Raw Materials: Economic bulk purchasing Seasonal factors of availability and price advantages. As protective buffer against I. II. Delay in supply Change in production rate, due to market fluctuations for the finished product etc.

2. Work-in-progress inventories: As liquid stock to cater for variety and shorten the manufacturing cycle. As protective buffer against product breakdown, rejections For economic lot size production. 3. Finished goods inventories: To ensure ex-stock delivery. This is especially required for consumer type goods where customers cannot be expected to wait during, procurement, processing and supply stages. As protective buffers against sales rate changes. To absorb economic production lot. To stabilize the level of production and employment when sale is of seasonal variety.

Page | 16

Functional classification of inventories


1. Movement inventories: These are necessary because it takes time to move products from one place to another. The average amount of movement inventory is worked out by: I=ST where S is the average sale rate (say per week) and T is the transit time in week and I, the movement inventories required. This is particularly important when finished goods are sent from the factory to different warehouses or distribution centers. 2. Lot size inventories: Such inventories are carried to obtain quantity discounts, to keep down transportation cost, buying cost and cost of receipt and holding. For example, it will be obviously uneconomical for a textile mill to buy cotton everyday rather than in bulk during the cotton season. Not only daily supplies will entail higher cost, they will also expose the mill the serious shutdowns arising from any mishaps in procurement. 3. Fluctuation stocks: These stocks are carried to ensure ready supplies to consumers in the face of irregular and unpredictable fluctuations in their demand. Consider, for example the case of a sugar mill, which is marketing 12 varieties of sugar, such as cubes, crystals, powder, while and brown etc. it may also be presumed that a costumer will demand immediate supplies and will not wait for the mill to produce his requirements after he has placed the order. Inevitable, therefore, the mill will have to keep stocks of all the varieties and in quantities normally sufficient to meet variable demands. 4. Anticipated stocks: Such stocks are kept to meet predictable changes in demand or in availability of raw materials. The case of fruit processing factory, which is to buy tomato in the tomato season to meet regular demand of tomato ketch-up throughout the year, is an example of seasonal availability or raw materials.

Functions of inventory:
Inventories have many useful functions in spite of the facts that it is very costly to maintain them. But for the inventories, the whole production distribution system of an economy may breakdown. If it is possible to procure or process materials without any loss of time, the major need for inventory disappears. But this is just not possible, given the market of industrial goods in the country. There is always a delay between rising of materials requisition and receipt of materials (lead-time). Also this delay is not uniform or constant. This introduces uncertainty of supply. There is also uncertainty in demand. It is very difficult to forecast the exact requirement of materials and the main function of inventory thus is to serve as a cushion and to protect the production distribution system from shocks due to uncertainty in demand and supply. If no inventories are kept, uncertainty in demand and supply will break the production distribution system, increasing ultimately the cost.
Page | 17

INVENTORY CONTROL
Inventory control is a planned method of determining what to indent, when to indent, how much to stock so that purchasing and storing costs are the lowest possible, without effecting production and sales. In this process investment in material and parts carried in stock is so maintained as to ensure smooth and continuous operations of production and sale and the cost of inventories are kept at the lowest possible level. Inventory control ensures adequate supply of materials to Production means controlling the inventories in the organization. It is a technique of maintaining stock items at desired levels, whether they may be a raw material, goods in process or finished products.

Objectives of Inventory Control


The primary objectives of inventory control are: 1. To minimize idle time caused by shortage of raw materials spares etc. 2. To keep down capital investment in inventories, inventory carrying costs and obsolescence losses. The two objectives are in conflict with each other and the efficiency of inventory management lies in balancing them to arrive at optimum overall results.

Benefits of Inventory Control


Following are the main benefits of inventory control: Minimizes stock outs and shortages. Ensures economy in purchase Eliminates duplication in ordering. Keeps inventory carrying costs at lowest levels? Permits better utilization of available stock. Provides a check against losses of material through pilferage, spoilage etc. Facilitates proper accounting of material. Locates and disposes inactive or obsolete items of store. Financial Operation and periods. Reduces the possibility of excess items being stocked. Thus saving capital from being unnecessarily locked up. Simplifies procedures for paper work and record keeping. Increase profitability.

Page | 18

3.2 COST CONCEPTS IN INVENTORY MANAGEMENT


There are three costs, which are one way or the other associated in inventory management and are guiding factors in fixing the inventory levels: Inventory carrying cost/ stock holding cost Ordering cost/set up cost Stock-out cost/ non-availability cost. Inventory carrying cost: Inventory is liquid asset like money, but it is not as liquid as money in the bank. Money in the bank earns interest while it actually costs to maintain inventories. The main elements of inventory carrying cost are: Capital cost: this normally is the interest charge, which are to be paid to the bank and may be 15-18%. But it will be more realistic, especially under prevailing conditions, to consider opportunity cost of money. By opportunity cost is meant the cost that is incurred in withdrawing funds from a productive activity to invest them in inventories. Opportunity cost of capital is the rate of return earned by the company on its total investment. Storage and handling cost: this is the most obvious inventory carrying cost. This includes rent of storage facilities or depreciation, if owned by the company; salaries of personnel and related storage expenses, handling and insurance; security and preservation of materials and so on.. Deterioration & obsolescence cost: the usage of every material cannot be judged very accurately and some material get stored for a longer time than what is generally desirable. This results in deterioration of materials, which is very high for certain type of material such as paints, rubber goods. The larger the accumulation of inventory and higher is the risk of wastage and obsolescence.

Page | 19

Ordering cost: The ordering cost covers the cost of originating an indent, calling of quotations, processing the tenders, placing the order, verifying the invoices and payments. The composition of buying cost can be grouped as under: Purchase i. Cost of inviting quotations and fixing most suitable supplier for the item. ii. Cost of preparing and placing order. A) Expediting& miscellaneous costs: Salary of purchase personnel. Administrative and over-head costs. Expediting cost. Other Misc. cost. B) Receipt& Inspection: Cost of receiving and handling Cost of inspection Cost of delivery from receiving to stores or direct to using department.

Stock-out cost: When an item is required and it is not available in stock, it is called stock-out. Because of stock-out, certain consequences follow and there is a certain cost associated with those consequences. Such a cost is known as the stock-out cost. If the consequences are serious such as break down or shut down of plant and machinery, men idle time, loss of production and profit, failure of customer services or loss of goodwill, the stock-out cost is considerable.

Page | 20

3.3 SELECTIVE INVENTORY CONTROL TECHNIQUES:


In a large size stores, there may be a few thousands item having different characteristics. Annual consumption value of some of the items may be very high whereas for some items this value might be insignificant. Some items might be moving very fast, i.e. there might be many issues from stores in a month whereas there may be some items, which might not have moved from stores for years together. Some items may be imported whereas some might be indigenously available. Some items may be vital in the operations of the organization and non-availability might result in huge production losses if they are required. Following are some of the selective techniques, commonly used for the purpose of inventory control. Classification Annual Value of

ABC Analysis (also known as Items(not based on unit price of items or the importance Always consumption of better of items in operation) control) VED Analysis(Vital, Essential & Desirable) Criticality of the items i.e. Non-availability of items shall effect Operations to what extent(stock-out cost)

FSN(fast moving, slow-moving and Movement i.e. issues from stores Non-moving) HML(high, medium and low unit Unit price of the items rates) SDE(scarce, difficult and easy) Purchasing problems with regard to availability in the market.

GOLF(Govt. controlled , ordinary, Source from which the material is obtained. local, foreign) MUSIC-3D (multi unit spares Finance, maintenance & Materials inventory Control-three dimensional approach)

XYZ

Value of items in the inventory at a given time, say end of financial year

Page | 21

3.4 MATHEMATICAL MODELING FOR INVENTORY CONTROL


The solution of inventory problem with mathematical models is to find appropriate levels of holding inventory, ordering sequence and the quantity that have to be ordered so that the total cost incurred is minimized. The demand and supply conditions that act within and without impose constraints on the decision-making process. The demand can be fully known, partially known or completely unknown. These states of nature of demand and supply conditions can be combined to form six different practical situations, namely: 1. Supply station -demand certain 2. Supply station-demand risky 3. Supply station-demand uncertain 4. Supply dynamic-demand certain 5. Supply dynamic-demand risky 6. Supply dynamic-demand uncertain

A. SUPPLY STATIC SITUATIONS With supply station only a single supply is possible during entire consumption period. Obtaining News papers to be sold in particular time, ice cream for one day fair, purchase of high fashion items. Replacement orders are either not possible or extremely expensive. For demand certain situation simply orders has to be placed taking lead-time and shelf life into consideration. B. DYNAMIC MODELS Economic Ordering Quantities: Important assumptions in EOQ models are listed below: 1. Demand and lead-time are known and constant. 2. Replenishment is instantaneous at the expiry of the lead-time. 3. Item cost doesn't vary quantity order i.e. there are no quantity discounts. 4. Ordering and carrying cost expressions include all relevant costs and these are constants. 5. Uniform demand in small increments. Many mathematical models for inventory control were developed by researchers. Mathematical models based on concept of EOQ techniques provide the total minimum inventory cost by balancing inventory carrying and ordering costs.
Page | 22

Total-cost of stocking inventory is the sum of purchase costs, cost of ordering and cost of carrying inventory i.e. T.C. = Co*D/Q + CC Q/2 + PD Where T.C = Total cost Co = Ordering cost D = Demand in units on annual basis Cc = Cost to carry a unit inventory in stock for a given period. P = Unit purchase cost. Q= Lot size and Q/2 is average inventory Differentiating the total cost with reference to Q gives the slope of T.C. curve. Setting the first derivative equal to zero, identifies the point where T.C. is minimum. Thus Q = sqrt 2CoD/Cc is obtained. This is known as economic ordering quantity equation. It is often referred to as Wilson Formulas. It is classical mathematical inventory model.

UNCERTAINTIES IN INVENTORY MANAGEMENT


In simple inventory management models both demand and supply lead times have been assumed constant. But variability in demand and supply lead time is a reality. The effect of demand and supply lead time variation is taken care of by carrying larger inventories called buffer stocks or safety stock. , EOQ models answer the question of how to order but these don't address the question of when to order. The later is the function of the reorders point models which identify the reorders point (ROP) in terms of quantity. The reorder point occurs when the quantity on hand drops to pre specified amount. That amount generally includes expected demand during lead-time and an extra cushion of stock which serves to reduce the probability of experiencing a stock out during lead time. There are four determinants of the reorder point quantity: 1. The rate of demand. 2. The length of lead-time. 3. The extent of demand and lead time variability. 4. The degree of stock out risk acceptable to the management.

Page | 23

According to above determinants the reorder models have been worked out. 1. CONSTANT DEMAND RATE AND CONSTANT LEAD TIME When both demand and lead-time are constant than there is no risk of a stock out created by increased demand and lead time longer than expected. In such case ROP is equal to the product of usage rate and lead-time. 2. VARIABLE DEMAND RATE AND VARIABLE LEAD TIME Under normal circumstances one or other or both demand rate and lead time tend to exhibit some variability. In order to compensate for uncertainties, in either demand rate or lead-time, additional stocks are carried to reduce the risk of a stock out during lead time interval. This additional stock is known as buffer stock or safety stock. ROP = Expected demand during lead-time + Safety stock.

Drawbacks of Traditional Methods With Respect To Manufacturing Environment


Due to heavy information processing constraints, the conventional methods of inventory control suffered from imperfections. These represented the best that could be done under the circumstances. Some unrealistic assumptions, short cut approximations were made to make these techniques workable. All the old techniques, which were based on short cut approximation method, can no longer deliver goods. The relevance "and applicability of the conventional inventory management concepts to manufacturing inventory is discussed below: 1. The concept of stock replenishment doesn't fit into manufacturing inventory. It is in conflict with basic management objectives of low inventory and high return on investment. In manufacturing, the inventory item should be available at the time of need rather than to carry it just so that it would be available when and if needed. Through the use of computer aided modern methods it is possible to pin point the quantity and timing of need of an item. So the stock replenishment techniques are not suitable in a manufacturing environment nowadays. 2. Reorder point techniques forecast demand during replenishment lead-time and attempt to provide some safety stock to compensate for fluctuation in demand. These techniques are not able to determine specific timing of future demand environment and misinterpret the observed demand behavior.

Page | 24

3. Since EOQ is determined solely on the basis of ordering cost, unit cost, carrying cost, and annual usage it is totally insensitive to the timing of actual, discrete demand arising during the period, that the EOQ is intended to cover.. The derivation of EOQ formula is based on the assumption of gradual inventory depletion at a steady rate which allows carrying cost to calculate for an average inventory of one half of the ordering quantity. In manufacturing environment this assumption is highly unrealistic.

Modern Inventory Control Techniques of NTPC


Material Requirement Planning (MRP) and Just in Time (JIT) techniques have taken care of most of the draw-backs which were being experienced with traditional inventory control techniques for managing inventories in manufacturing environments. These techniques termed as modern inventory control techniques are primarily meant for manufacturing environment. JIT philosophy is of recent origin and is being widely applied in Japan. Under these techniques component parts are manufactured only when required by down steam work centre, thus right amount of parts are made at the right time and title inventory is kept to virtually near zero. JIT techniques are being considered and tried in other industrialized countries too now. The success of JIT techniques in Japan is due to unique physical and philosophical typical production of Japanese characteristics system/ culture. These include the ability to virtually freeze master production schedules, to cross train the highly skilled and very disciplined Japanese workers, to utilize high degree of automation and robotics and to profit from close proximity and reliability of material and parts suppliers. These characteristics enable Japanese firms to reduce system variability to the extent that demand -can be estimated very accurately and production parameters such as machine processing times and utilization approach very stable levels. These factors are not I exhibited in manufacturing $systems in other countries. JIT techniques are at trial stage in industrially advanced countries and have not found their way in developing countries, as yet. MRP items are widely used for controlling manufacturing inventories in industrially advanced countries.

Page | 25

3.5 Inventory Management and Control at NTPC


Inventory is a detailed list of movable goods such as raw material general supplies and equipment etc. and gives the quantity and value of each item. Inventory control may be defined as the systematic location, storage and recording of goods and materials in such a way that desires supplies can be made from the mine to the thermal power plant at minimum cost. Inventory control is needed to maintain a reserve (store) of goods that will ensure mining operation according to a production plan. Losses from improper inventory control included purchases in excess than what needed & the cost of slowed production resulting from material not being available when wanted. Proper inventory control reduces such losses to a great extent.

Function of inventory control To run the stores effectively: - This includes layout storing media (bins, shelves &
open space etc.) Utilization of storage space, receiving and issuing procedures. To ensure timely availability of material and at the same time avoid build up of stock levels. To have technical responsibility for the state of material: - this includes methods of storing, maintenance procedure, studies of deterioration and obsolescence. To have a stock control system: - physical verification records (especially at the time of stock taking) ordering policies and procedure for the purchase of goods. Maintenance of the supply of specified raw material:-general supplies component parts in sufficient quantities to meet the demand of production. Protecting the inventory from losses:-due to improper handling and storing of goods and unauthorized removal from stores.

Page | 26

Advantages of a Good Inventory Control.


A good inventory control has several uses and adds a great deal of flexibility to the different power generation operation. It makes the operation independent of each other: If proper inventory is not stored there could be many delays and inefficiency. For example if one activity has to be completed before a second activity can be started it could stop the entire process. Having some stored inventory between each process, it could act as a buffer. Storing resources in inventory: it can be a safeguard against inflation if cash is placed in a bank; one may get around 8% returns. On the other hand some materials have increase in price over 30% per year. Thus it may be a better investment to keep the financial reserve in inventory. Of course one has to consider the cost of holding or carrying the inventory. When the demand or supply for an inventory item is irregular storing certain amounts in inventory is absolutely necessary. Another important use of inventory is to avoid shortages or stock outs. If the inventory is repeatedly out of stock many mining operation may suffer resulting in great loss of production Another use of inventory is to take the advantage of quantity discounts: Many suppliers offer discounts for large orders purchasing in large quantities can substantially can reduces the cost of materials or products. These are however some of the disadvantage of buying in large quantities. One will have higher storage cost and higher cost due to spoilage, damaged stock, theft, insurance etc. further by investing in more inventories less cash will be available to reinvest elsewhere.

Page | 27

3.6 Important Quantity Standards Used As a Tool to Control Inventory


There are five important quantity standards used as tool to control inventory: The maximum stores: It is the upper limit of the inventory and represents a reserve or margin of safety to be used in case of emergencies. The minimum stores: It is the lower limit of the inventory and represents a reserve or margin of safety to be used in case of emergency. The standard order: It is the quantity to be purchased at any time. Repeat order for a given material or product is always for this quantity. The ordering point: This represents the quantity required to ensure against exhaustion of the supply during the time interval between the placement of an order and delivery. Lead or procurement time: It is the time which takes the stock to reach from reorder point to minimum stock level.

3.7 Tools Used For Inventory Control: Inventory Levels


The summarized description about the various control level is given below: a) Minimum Level: The minimum level is the level below which available raw material should never drop. The exact quantity which they represent is determined by the rate at which an item is used, its importance in the process, the normal procurement time and whether substitutes are available. Ideally, a new shipment should arrive just as stock reaches this minimum. Minimum are not set at zero, the difference between zero and established quantity is a safety to guard against the shortages. b)Reorder point: The reorder point is the quantity level at which a replenishment order should be issued to ensure that fresh supply arrive in sufficient time to keep the item from running out of stock. Thus a reorder point will logically consist of the following elements: 1. The average volume of the use during the normal procurement time. 2. An additional quantity or the safety factor to cover any unanticipated increase in the rate of war in procurement time.

Page | 28

c) Standard Order Quantity: The standard order quantity is that amount of material which will be requisitioned each time available balance drop to the reorder point. The objective in setting reorder quantity should be to achieve the lowest overall inventory cost consistent with uninterrupted operation of the plant. d) Maximum Level: When the system is working properly, the maximum level is the sum of the minimum level and standard order quantity. Having laid down these levels and quantities they should be reviewed periodically or occasionally because the assumption on which they are based, e.g. procurement time and rate of use may change.

Lead Time When material is obtained either from an outside source or from an internal manufacturing department there is always a finite interval of time between deciding to place an order and its subsequent fulfillment. This is the interval defined as 'Lead Time'. The lead time can be assumed to be made up of two points: a. An internal part b. An external part The internal part of lead time may also be divided into two parts: a. Serving time or administrative time which consists of the time taken to place the order b. Receiving and inspection lead time which consists of time taken to receive and inspect the goods and pass them into the appropriate store. The external part of the lead time consists of the time taken to execute the order. This includes the time required by the supplier to get the material ready if they are not in stock and for shipping or transporting them from supplier go down to buyers receiving section.

Page | 29

3.8 Determination of Safety Stock and Order Level


In many practical situation, it is observed that neither the consumption rate of material (commodity) is constant throughout the year nor is the lead time. The variation in demand and lead time cause both shortages and surpluses.

a. To face these uncertainties in consumption rate and lead time, extra stock is maintained to
meet out the demand if any. This extra stock is termed as Safety Stock. For determining the safety stock we approximate the estimated maximum and normal lead time. If 'S' denotes the safety stock, '1' is the difference of the maximum and normal lead time, 'r' is the, consumption rate during the lead time than S=LR For example, suppose for an item the monthly consumption is 200 units and normal lead time is 15 days and the maximum lead time is estimated as 2 months then the safety stock is given by S= (2-1/2)*200 = 300 units Now if we don't maintain a safety stock then the total requirement for inventory during the lead time will be LR.

b. This consumption implies that as soon as the stock reaches a level LR we place an order
for Q quantity. This policy of ROL results in shortages about half the time. To avoid this we add a safety stock and place an order when stock reaches S+ LR i.e. ROL= S+LR for example suppose that for an item the monthly consumption is 100 units, normal lead time is 15 days and the safety stock is of 150 units then ROL= 150+ (1/2*100) = 200 units

c. It does not depend upon the importance of the item and d. The limits of ABC categorization are not uniform but will depend upon the size of the
under taking, its inventory as well as the number of items controlled.

Page | 30

3.9 Layout of Stores for Smooth Running of Operation


Layout means general arrangement of stores, storage equipment and space so as to provide for most efficient receipts, storage and issue of materials. In this, day arrangement of store entrance, equipment passage and in general storage space forms part of the store layout. A very well planned layout of a store of warehouse will have the following advantages: a. b. c. D. e. f. g. h. 1. J. k. Ease of receive material receipts. Ease of storage. Ease of issue Gives better appearance. Reduce damage and wastage's. Cuts down pilferage and accidents. Reduce operating expenses and minimum transportation and handling of materials. Adequate capacity, provision of flexibility for future expansion. Efficient utilization of floor space and height. Clear identification of material, quick location of items in case of physical counting. Creates better impression.

Housing of Scrap
Normally the salvage bay is outside the main stores parameter. This has the following advantage: a. It will not intrude upon valuable storage space. b. It will avoid the possibility of scrap or reject materials getting back into the production line. c. It will permit the collection vehicles to pick up materials without entering the main goods receiving and dispatch bays, they are able to at will without congesting the main bays, and they can spend as long as necessary in sorting and loading.

Page | 31

Methods of Salvage
a) Materials: This is the most obvious and frequently mentioned salvage operation. It needs little outlay apart from suitable bags or containers to hold the materials. Operating costs are confined to the labor of sorting into appropriate bags or containers. Materials can with advantage be segregated at source and then stored in different compartments. b) Incineration: Sometimes it is more economical to destroy material by incineration. It however, costs money and the economics should be carefully studied before resorting to this method. c) Cable stripping: The economics of salvage clearly depends upon the value of the recovered materials. The stripping of waste cables can be highly rewarding where there are any significant copper and lead contents. The equipment however requires fairly high capital investment. d) Containers and Sacks: There is a good resale value of the containers especially large drums like 200 liters drum and jute sacking. It is worthwhile to ensure that least damage is caused to these items during handling. e) Fire Precautions: Following fire precautions should be observed in all store houses for preventing outbreak of fire. Especially inflammable stores should be segregated in separate building or in separate stacks. Storehouse should be properly ventilated. Smoking in storehouses should be forbidden and notices may be pasted to this effect. Appropriate fire preventive equipment should be provided. All such equipment should be regularly inspected and maintained. Drill to be observed in case of fire should be laid down and all personnel working in the storehouse should be adequately trained for fire fighting.

Page | 32

3.10 Warehousing and Storage


Functions: The functions of Warehousing and Storage are as under: 1. Safe custody of all materials (Stores and Equipment) warehoused in the Project Site /Power Station. 2. The correct tally of materials with the Kardex, or on computer ledger. 3. Correct preparation and posting of all initial documents in the available On-line system. In case of the On-line system gets down the above document should be maintained manually and the same should be re-entered into the On-line system whenever the system is available. 4. Periodical identification of Materials in stock (likely to become inactive) and declaration of the same as "Surplus for Sale".

Storage
For satisfactory receipt, storage, preservation & issuance of material Stores / Godown facilities should be in proper manner & preferably as follows: Stores Layout: Uniformity is maintained regarding the layout of stores and especially for Covered Sheds so that the godowns are all in one identified place and the inward / outward movements become smooth. "O&M stores Building" is established near the "Main plant". This provides better area coverage, compact warehousing, quick facility of handling equipment, tight security, less kg-km. movement per day, etc. The sheds are to be grouped broadly as under to take care of the major material classes:

The Layout for Better Space utilization and Dual entry/Exit Points Bin Management
Page | 33

CHAPTER -4
RESEARCH METHODOLOGY

Page | 34

4.1 Research Design


Descriptive type of Research Design has been used under the study. Under the study facts or information already available have been used and analyses have been done to make critical evaluation of the Inventory Management process.

4.2 Data Collection Tool


The Primary Data for research has been collected using the survey technique. Questionnaires were prepared to learn about employees knowledge, belief, satisfaction, attitude, and so on and to measure these magnitudes in the general population. The Secondary Data for the study has been collected from the various sources such as: Annual Reports of NTPC Companys Website- www.ntpc.co.in Magazines- Business World, Business Today etc.

4.3 Sampling Technique


The sampling technique used under the study was Stratified Random Sampling. Number of employees who responded to the questionnaires was 140, out of which 80 were Supervisors and 60 were the Front Line Managers.

4.4 Data Analysis Tools


The Data Analysis tools help us to analysis the performance of an organization in a certain area. The Data Analysis tools used under this study are: Ratio and Trend Analysis: ratio and trend analysis was used on the secondary data. It was used to analyze the movement of inventories in the organization and thereby forecasting the trend of the ratios for the upcoming financial years. Percentages: Percentages were used on the primary data collected via questionnaires. Percentages helped to analyze the responses of the employees in relation to the inventory management of the organization.

Page | 35

4.5 Data Presentation Tools


Data Presentation tools help us to present the results of the study and assess the condition of area of study. Data Analytical tools used in the study were Column Charts and Line Charts. Column charts were used in order to demonstrate the pattern of responses generated in the questionnaires; on the other hand Line charts were used to do the trend analysis of the overall study.

Page | 36

CHAPTER -5
DATA ANALYSIS AND INTERPRETATION

Page | 37

5.1 EVALUATION OF INVENTORY OF NTPC


Evaluation of Inventory of NTPC has been done in this section. Ratio analysis is used for making this evaluation. The ratios for the last five years have been worked out and compared to draw conclusions. The various figures required are given below: (In crores) 2008-09 Average Inventories Total Current Assets Cost Of Goods Sold RATIOS Inventory To Gross Working Capital 10.62 Inventory Turnover Ratio 2008-09 Inventory Conversion Period(days) 34.37 2009-10 35.44 2010-11 29.60 2011-12 27.73 2012-13 29.15 10.3 12.33 13.16 12.52 0.07 0.11 0.098 0.098 0.094 31432.1 33939.4 43089.77 48314.73 48589.59 30925.3 30815.7 35396.79 37396.37 41167.08 2959.55 2009-10 3295.56 2010-11 3493.42 2011-12 3670.99 2012-13 3880.02

Page | 38

Interpretations
a) Average Inventories: Average Inventories of NTPC has been increasing significantly from Rs. 2959.55Crores in 2008-09 to Rs.3493.42 Crores in 2010-11 and to Rs. 3880 Crores in 2012-13. This increase has taken place over the last five years because of the increase in power generation capacity of NTPC..

b) Total Current Assets:

Total Current Assets of NTPC were Rs.

20925.3 Crores in 2008-09, which decreased to Rs. 30815.7 Crores in 2009-10, but it has increased significantly in the following financial years. It rose to Rs.35396.79 Crores in 2010-11 and reached Rs. 41167.08 Crores in 2012-13. It shows that NTPC has been increasing the amount of current assets required for the working. c) Cost Of Goods Sold: Cost of Goods sold has also been increasing significantly in the past five financial years. It has increased from Rs. 31432.1 Crores in 2008-09 to Rs. 48589.59 Crores in 2012-13. It shows that Cost of Goods sold has been a major part of NTPCs expenditures for power generation.

d) Inventory to Gross Working Capital Ratio: It was 0.07% in 200809, increased to 0.11% in 2009-10, then decreased to 0.98 % in 201011 and 2011-12 and to .094% in 2012-13. Keeping in view the above position, NTPC should keep on giving the importance to the inventory so as to reduce cost.. e) Inventory Turnover Ratio: Inventory Turnover Ratio of NTPC was 10.62 times in 2008-09, which reduced to 10.3 times in 2009-10, but since then it has been increasing. It rose to 12.33 times, 13.16 times in 2010-11 and 2011-12 respectively, but it again decreased to 12.52 times in 2012-13.

Page | 39

f) Inventory Conversion Period: Inventory Conversion Period of NTPC was 34.37 days in 2008-09 which rose to 35.44 days in 2009-10, but after that it decreased to 29.60 days and 27.72 days in 2010-11 and 2011-12 respectively. It again rose to 29.15 in 2012-13. It is desirable to have the minimum conversion period, so the organization should look forward to take it to the minimum level.

Page | 40

5.2 Trend Analysis of Inventories

1. Average Inventories

Average Inventories
6000 5000 4000 3000 2000 1000 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Average Inventories Linear (Average Inventories)

Average Inventory is the average of inventories held at the beginning and at the end of a financial year. The average inventory has been increasing significantly in the last five financial years, and it can be forecasted that it can reach Rs.48000crores mark in 201314and Rs.4800 crores till 2016-17. Major component of NTPCs inventories are Coal, fuel oil, chemicals & consumables, loose tools, steel scraps etc. all the inventory component have been showing an upward trend.

Page | 41

2. Total Current Assets

Total Current Assets


60000 50000 40000 30000 20000 10000 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Total Current Assets Linear (Total Current Assets)

Total Current Assets include Trade Receivables, cash and bank balances, short-term loan and advances and other current assets which include inventories. Total current assets have moved from Rs.30925.3 crores in 2008-09 to Rs.41167.08crores in 2012-13. It showed a downward trend in 2009-10 but the overall trend can be seen as moving upwards. It can be forecasted on the basis of this study that amount of total current assets may reach Rs. 45000 crores (approx) in 2014-15 and Rs.50000 crores (approx) in 2016-17. So it can be forecasted that there is a significant increase in the total current assets of NTPC.

Page | 42

3. Cost of Goods Sold

Cost Of Goods Sold


80000 70000 60000 50000 40000 30000 20000 10000 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Cost Of Goods Sold Linear (Cost Of Goods Sold)

Cost of goods sold is the amount spent on the raw materials, administration expenses and other related expenses incurred during the production process. As we can see that there has been an upward trend in the cost of goods sold from 2008-09 to 2012-13, and it can be forecasted that cost of goods sold is certainly going to move upwards in the next 4 years as well. It can reach Rs. 60000 crores in 2015-16 and Rs. 65000 crores in 2016-17.

Page | 43

4. Inventory to gross working capital

Inventory to Gross Working capital


0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Inventory to Gross Working capital Linear (Inventory to Gross Working capital)

Inventory to Gross working capital is the ratio of inventories in the gross working capital of a company. It represents the contribution of inventories in the working capital of a company. This ratio Indicate the proportion of inventories to net working capital and the possible risk if inventory values were to reduce. A low ratio is a positive indication. It was 0.07 in 2008-09 and reached 0.098 in 2011-12, but it showed the downward trend in 2012-13 and reached 0.094. Studying the overall trend in the last five financial years it can be forecasted that it can reach again to 0.11 in 2016-17. NTPC should try to keep this ratio as low as possible, so as to reduce the risk pertaining to the inventories.

Page | 44

5. Inventory Turnover Ratio

Inventory Turnover Ratio


18 16 14 12 10 8 6 4 2 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Linear (Inventory Turnover Ratio) Inventory Turnover Ratio

Its a ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days." From 10.6 times in 2008-09 it decreased to 10.3 times in 2009-10, but it improved in the succeeding years and reached 12.52 times in 2012-13. Considering the overall trend of ration, it can be forecasted that it can reach 15.9 times in the year 2016-17 as it has been showing an upward trend, which is a positive sign for the organization.

Page | 45

6. Inventory Conversion period(days)

Inventory Conversion period(days)


40 35 30 25 20 15 10 5 0 2008- 2009- 2010- 2011- 201209 10 11 12 13 Inventory Conversion period(days) Linear (Inventory Conversion period(days))

An inventory conversion period is equal to the number of days between the date that materials are acquired and the date that a product or service is sold. Decreasing an inventory conversion period improves a company's cash conversion cycle, which, in turn, reduces the organization's working capital requirements and increases its cash flow. From 34.37 days in 2008-09 it has been reduced to 29.15 days in 2012-13. Studying the overall trend of inventory conversion period we can forecast that its showing a downwards trend and can be reduced to 21 days in 2016-17. It is suggested to decrease this period to the minimum.

Page | 46

5.3 Analysis using Questionnaire


Q.1) Are you aware of the overall process of inventory management/ control procedure of your organization?

60% 50% 40% 30% 20% 10% 0% Yes No 45% 55%

Interpretation Approximately 55% of the respondents may know about the inventory management. Thus, this shows that the response is not up to the desired satisfactory level. Organization should try to make the employees familiar with the inventory management/control and its techniques. NTPC should conduct certain programmes in order to make them understand the overall working of Inventory Management.

Page | 47

Q.2) Inventory management is essential for your organization.

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

20%

45% 22% 8% A N D SD 5%

SA

Interpretation From the chart shown above, we came to know that only 13% of the respondents were not in favor of Inventory management. Overall result is therefore satisfactory. Reponses are positive, but some of the respondents are still not in favor of Inventory Management. Organization should therefore make them understand the importance of Inventory Management in such a big power generation company.

Page | 48

Q.3) Your organization receives the best quality of raw material.

40% 30% 20% 10% 0% SA A 20% 32%

20% N

17% 11% D SD

Interpretation From the responses shown above, around 52% of the respondent might thought that organization receives the best quality of raw materials. But 28% of the respondents were not satisfied with the quality of raw materials. The overall result is below the satisfactory level. Organization should therefore evaluate the quality of raw materials its procuring from suppliers. Organization can use various quality checking methods at the beginning of the inventory cycle and if the quality of raw materials is appropriate, then communicate the same with all the employees of the organization.

Page | 49

Q.4) Your organization chooses the best supplier of the raw materials.

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% SA A N 27% 8% 7% D 13% SD 45%

Interpretation From the above response we came to know that nearly 72% of the respondent stated that organization chooses the best suppliers of the raw materials. 20% of the respondents contradict and 8% of the respondent thought that the delivery time is acceptable. The results are hence satisfactory. NTPC, being such a big organization would certainly be having the availability of best suppliers of raw materials such as coal. Though the suppliers are the best, organization should still rethink whether it has chosen the right suppliers for the delivery of raw materials or not.

Page | 50

Q.5) Rate the delivery of raw materials by the suppliers according to its timeliness.

30% 25% 20% 15% 10% 5% 0% Very Bad(1) Bad(2) Good(3) 11% 12% 30% 23%

24%

Very Good (4)

Excellent(5)

Interpretation According to the response of the respondent, most of the respondent i.e. 77% stated that the raw materials are timely delivered by the suppliers to the organization. But the area of concern is that 23% of the respondents dont feel the same. So the results are satisfactory but there is still a scope for improvement. Organization should therefore decide upon the standard time required for the delivery of raw materials to the warehouses. It should also take actions to make the suppliers deliver the raw materials when its required.

Page | 51

Q.6) warehousing of raw materials is appropriate.

30% 25% 20% 15% 10% 5% 0% SA A 18%

27%

28% 15% 12% N D SD

Interpretation 73% of the respondent might agree with the fact that the warehousing of raw materials is appropriate, but 27% of the respondents were not in favor of the same. Though the results are satisfactory, therefore organization should take this into consideration and ensure that appropriate warehousing is done for the raw materials. Storage areas should be prepared in such a way that it maintains the quality of the raw materials as well as its easy to take in and take out the raw materials from the storage to the production area. Computerized storing system can also be implemented in order to keep a check on the raw materials storage and quality while in warehouse.

Page | 52

Q.7) Quantity of raw materials received is in accordance with the requirement of organization.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Agree Disagree 82%

18%

Interpretation 82% of the respondents agreed that the quantity of raw materials received is in accordance with the requirements, but approximately 18% disagreed with this. So the results are satisfactory. Quantity of raw materials received at one delivery has a very crucial role to play in the production process. If the quantity is not appropriate and doesnt matches the requirements of the organization, it can seriously make the production cost go higher.

Page | 53

Q.8) Proper planning is done before placing an order for raw materials?

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% yes no 17% 83%

Interpretation Out of the 60 respondents, 83% of the respondent agreed with the fact that proper planning is done before placing an order for raw materials. So the results are satisfactory. Planning before ordering for the raw materials ensures that the right suppliers for the raw materials are chosen. It also ensures that the quantity and quality of raw materials are delivered to the organization at the right time.

Page | 54

Q.9) Purchase orders are placed on a timely basis?

80% 70% 60% 50% 40% 30% 20% 10% 0% YES NO 30% 70%

Interpretation Approximately 70% of the respondents agreed with the fact that purchase orders were timely placed, where as 30% disagreed. Hence, the results are satisfactory but 30% of the respondents didnt agree with same. So the organization should take this into consideration. Timely placed purchase order ensures that the cost of production doesnt increase and it enables the organization to utilize the resources effectively and efficiently. Organization should maintain the timeliness of the ordering for the raw materials.

Page | 55

Q.10) Workers are provided with proper training for the effective utilization of resources?

60% 50% 40% 30% 20% 10% 0% YES NO 55% 45%

Interpretation Only 55% of the respondents agreed that proper training is provided to employees whereas 45% disagreed. This can actually decrease the level of utilization of resources. Workers can actually feel de-motivated by this. Organization should conduct proper training session and ensure that workers can easily understand the overall process of production of power using coal. This will certainly increase their motivational level and will make them work in a positive manner in order to attain the organizations objectives.

Page | 56

Q.11 Do you think the overall process of inventory management/control can be improved?

70% 60% 50% 40% 30% 20% 10% 0% YES NO 63% 37%

Interpretation 53% of the respondent thinks that the inventory management/control process can be improved; on the other hand 47% think that it cant be improved or it is appropriate. Hence the results are not as satisfactory as they should have been. NTPC has implemented modern inventory management techniques such as Just-InTime (JIT) and Materials Resource Planning (MRP). But it should also ensure that the technique adopted is facilitating the production process and power generation is done in the best and the most effective manner. Organization should consider these results and try to improve the overall inventory management of the thermal power plant.

Page | 57

CHAPTER -6
CONCLUSIONS AND SUGGESTIONS

Page | 58

6.1 CONCLUSIONS
From the study of the inventory management of NTPC, it can be concluded that The power generation company with the huge capacity of around 41,794 MW has managed its inventories in an efficient manner. NTPC has constantly been increasing its installed capacity in various plants. This has resulted in increase of inventories requirements of the company and managing the inventory therefore becomes a tough task. NTPC has managed to work in the best possible manner by implementing modern technique of inventory control such as- Just in Time (JIT) and Materials Resource Planning (MRP). NTPC has been maintaining the various inventory ratios in order to facilitate the production process. In the financial year 2012-13 ratios have not improved as such, but they have not become unfavourable for the organization as well. NTPC has always been taking proper care while choosing the suppliers, ordering for the raw materials, raw materials requirements etc. but it needs to make the workers aware of the inventory management techniques implemented in the organization. Workers of the organization are satisfied due to the following reasons: NTPC, a brand name Salary packages Team work Job security The workers are satisfied but there are certain areas which the organization should look upon. The main problem in the organization is the maximum numbers of workers are illiterate because of which its very difficult to interact with them or extract their views. In short, we can say that NTPC, the leader in the power sector has been maintaining its standards in every section of the organization. With the increase in capacity, the inventories have rose, but it has been able to manage them properly and NTPC has been maintaining its global standards.

Page | 59

6.2 SUGGESTIONS

As a result of the study following suggestions can be made to the management of the organization: To reduce the supply cost by increasing the use of alternative source of power generation such as Gas. Piparwar Mines (Jharkhand) should continue providing the major raw material (Coal), but with a greater efficiency.

To take certain actions in order to educate the workers and provide them with certain facilities like: a) Training programmes b) Incentives facilities c) Role in decision-making d) Proper working environment

To maintain the ratios like Inventory Turnover Ratio and to decrease the Inventory Conversion Period in order to reduce the overall cost of production. Planning horizon of 3 months will be most appropriate for the organization. Bucket size of one week will be more suitable for the organization. NTPC should try to shorten the inventory control process. ERP should be used to control the overall activities of NTPC. Minimum Inventory levels should always be maintained so that workers dont stay idle. Supervision of the overall Inventory Management should be done in a proper manner.

Page | 60

6.3 LIMITATIONS
There were many limitations and shortcoming faced by me while conducting the analysis. The members of the organization were not ready to reveal internal details of the company. There is time limitation, as it was very difficult to study exhaustively in a limited time period of six-to-eight weeks.

Lack of coordination and communication was experienced while collecting the data for the present study. Respondents seemed to be over burdened with work so they didnt give proper attention.

People were hesitating in answering the question. Employees were not interested in filling open-ended questions.

Some of the respondents could have been biased while answering the questions.

Page | 61

BIBLOGRAPHY

1. Pandey I.M., Financial Management, Ninth Edition (2009), Vikas Publishing House Pvt. Limited. 2. Rustagi R.P., Financial Management- theory, concepts and problems, Fifth Edition (2011), Taxmann Publication. 3. Tulsian P.C., Financial Management, Sixth Edition (2010), Pearson Education. 4. Ashwathappa K., Production and Operations Management, Fifth Edition (2009), Himalaya Publications. 5. Chawla D. and Sondhi N., Research Methodology, First Edition (2011), Vikas Publishing House Pvt. Limited. 6. http://www.Investopedia.com 7. http://www.ntpc.co.in 8. http://www.accountingexplained.com 9. http://en.www.wikipedia.org/wiki/NTPC_Limited 10. http://www.moneycontrol.com/financials/ntpc/b... 11. http://www.ntpc.co.in/../NTPC-AR-2012-13.pdf 12. http://www.ntpc.co.in/../NTPC-AR-2011-12.pdf 13. http://www.ntpc.co.in/../NTPC-AR-2010-11.pdf 14. http://www.ntpc.co.in/../NTPC-AR-2009-10.pdf 15. http://www.ntpc.co.in/../NTPC-AR-2008-09.pdf

Page | 62

ANNEXURE

Q.1) Are you aware of the inventory management / control process of your organization? Yes No

Q.2) Inventory Management is essential for your organization. Strongly Agree Agree Neutral Disagree Strongly Disagree

Q.3) Your organization receives the best quality of raw materials. Strongly Agree Agree Neutral Disagree Strongly Disagree

Q.4) Your organization chooses the best suppliers of raw materials. Strongly Agree Agree Neutral Disagree Strongly Disagree Q.5) Rate the delivery of raw materials by the suppliers according to its timeliness. Very Bad Bad Average Very Good Excellent

Page | 63

Q.6) Warehousing of raw materials is appropriate. Agree Disagree Q.7) Quantity of raw materials received is in accordance with the requirements of the organization. Agree Disagree

Q.8) proper planning is done before placing an order for raw materials. Agree Disagree

Q.9) Purchase orders are placed on a timely basis? Yes No

Q.10) Workers are provided with proper training for the effective utilization of resources? Yes No

Q.11) Do you think the overall process of Inventory Management/ Control can be improved? Yes No

Page | 64