Project Report
Performance Appraisal through Inventory Management with reference to Orient Area






Roll no – 10 PGDM(FINANCE)

A project report submitted in partial fulfillment of Requirement for the degree of Post Graduate Diploma in Management(PGDM)

Survey No. 9/1/5, 9/2/4 & 9/1/4 Ambegaon Budruk, Off Westernly Bypass Road, Near Sinhgad boy's hostel, Pune–411 041





I here by declare that this Project Reports entitled “ A study on INVENTORY MANAGEMENT at ORIENT AREA , MCL , BRAJARAJNAGAR , ORISSA “ submitted by me under guidance of Dr. J.N.Pol , Director , Sinhgad Business School (Matrix), Pune is my own and has not been submitted to any other University or Institution or published earlier .

Place: - Orient Area (MCL) Date : -





ACKNOWLEDGEMENT It is a great pleasure for me to acknowledge the assistance and contribution given by large number of individuals to this effort. First and foremost I wish to express my deepest gratitude to Dr. J.N. POL , Director , Sinhgad Business School( Matrix) , Pune for giving me the opportunity to do this project work . I am in debt to this institute. My sincere thanks to Shri. U.C.Panda (Area Finance manager) and Shri. U.N.Panda (Dy. Finance Manager), Orient Area , Mahanadi Coalfield Limited (MCL). Whose indispensable guidance, valuable suggestion and immense encouragement during the training period made me possible to make a project report of this magnitude. I would also like to express my thanks to Shri.J.S.RAO, (Depot Officer, Regional Store), Orient Area. who in spite of his busy schedule help me to get all data and information required for my project report . I am also equally obliged to express my gratitude to all the staffs of Finance and Store Department of Orient Area, MCL, Brajrajnagar , Orissa , for offering their all kinds of help and encouragement for completion of my Project Report.




This is to certify that the project report entitled “Inventory Management and Finance Department” at Orient Area of Mahanadi Coalfields Limited, Orissa, submitted to Finance department. This study is a bonafied research work carried out by Mr. RAVI BHUSAN under our guidance and supervision. We further certify that all necessary help or source of information as has been availed of in the connection, is duly acknowledged by them. During his training period their performance and behavior are found EXCELLENT.

Mr. U.C.Panda
(Area Finance Manager, Orient Area)

Mr. U.N.Panda
(Dy. Finance Manager , Orient Area)


PUNE .. INTRODUCTION………………………………………………………Page 10..INVENTORY MANAGEMENT 6 1. J. K. REVIEW OF FINANCIAL PERFORMANCE…………………….. E. I. EXECUTIVE SUMMARY……………………………………………Page 7 2. COMPANY PROFILE ………………………………………………. FUTURE PLAN………………………………………………………. D.Page 51 6.Page 9 3.Page 52 7.. C.Page 49 5. B. Storage. H. CONCLUSION & RECOMMENDATION…………………………Page 54 MATRIX BUSINESS SCHOOL.. Care & Preservation of Stores. L. F. Organizational Setup Principles of Store Keeping. VISION & MISSION OF MCL (CIL)………………………………. G.48 A. Receipt Procedures & Inspection Manual Store Accounting Stock Verification Issue of Stores Local Purchase Disposal Procedure Loss of Stores Return of Stores Inventory Control Financial 4. BIBLOGRAPHY ………………………………………………………Page 53 8.

PUNE . Bharat Coking Coal Limited (BCCL). Dhanbad . Chattisgarh Mahanadi Coalfields Limited (MCL) . Bilaspur . Coal India presently contributes 85% of the total coal production in India. Sanctoria. Reorder Point. Nagpur . The mines of North Eastern Coalfields (Assam & Meghalaya) operate directly under coal India. Out of all these are some techniques which are applied for inventory control at Coal India Limited. Eastern Coalfields Limited (ECL). India. Coal India Limited. It was formed as a public Sector undertaking in November 1975. is a Holding Company under ministry of Coal. West Bengal. ABC analysis.INVENTORY MANAGEMENT 7 1. Safety Stock. VED analysis. Sambalpur . EXECUTIVE SUMMARY Inventory is the most excessive assets of a Coal Producing company like Coal India Limited and also the idle resource. Singrauli . XYZ analysis. Jharkhand Northern Coalfields Limited (NCL). Jharkhand. Having about 4. Madhya Pradesh Western Coalfields Limited (WCL). Jharkhand Central Coalfields Limited (CCL). Government of India. FSN analysis. It operates through eight subsidiaries: seven producing companies and one planning & design institute. Maharastra South-Eastern Coalfields Limited (SECL) . Ranchi . Orissa Central Mine Planning and Design Institute Limited (CMPDIL) .60 lakh employees with headquarter at Kolkata. HML analysis. Ranchi . • • • • • • • • COAL INDIA OPERATION MATRIX BUSINESS SCHOOL. There are various inventory control techniques such as Economic Order Quantity. Just In Time inventory control and many more. a Nav Ratna Company is the second largest corporate body.

Orissa. 12396. Coal India managed to achieve 99. Capacity of cocking coal washeries-19.5 MT’s respectively for attaining an ‘Excellent’ rating.47 Crores during 2009-10. • Operates 19 washeries (Cocking coal 12.INVENTORY MANAGEMENT 8 • Spreads over eight states in Jharkhand.5 MT’s and 462. 2. 2210 Crores. CIL’s targeted production and coal off take have been pegged at 461. For the Fiscal 2010-11 .1% of the targeted production of 435 MTs. Maharashtra & Assam. VISION AND MISSION MATRIX BUSINESS SCHOOL. Manmohan Singh. • • Operates through 8 Subsidiaries & 78 areas. Coal India Limited as a whole made a profit (before tax and dividend) of Rs.PUNE .4% achieved in 2008-09 and 5.68 Mt’s approx. physical as well as financial.3% per annum achieved during the period 2002-03 to 2007-08. for the fiscal year 200910 ended on a note of satisfaction. OC mine 151. CIL paid a dividend of Rs. power plants etc. Uttar Pradesh.the highest ever – to Government of India during the fiscal. Madhya Pradesh. Mixed mines 37. • • Has over 200 other establishment like workshops.8% in 2009-10 against a growth of 6. The cheque was presented to Dr.the highest achieved in any year so far. West Bengal. Chattisgarh. Hon’ble Prime Minister by Shri Sriprakash Jaiswal. Operates 475 mines (UG mines 287. CIL has attained a growth of 6. Hon’ble Minister of Coal on 26 march 2010.8% . Noncoking 7). The production of 431.27 Million Tonnes – registered a growth of 6. captive Coal India’s performance. hospitals.

Each Regional Stores will be under the charge of Depot Officer. INTRODUCTION A. Regional Stores will be created in each Area.INVENTORY MANAGEMENT 9 “ BE THE LEADING ENERGY SUPPLIER IN THE COUNTRY. who will be assisted by a Store Officer. “ 3. he will be administratively under the General Manger of the Area. While he will be functionally responsible to the Area Material Manager. THROUGH BEST PRACTICES FROM MINE TO MARKET “ “ THE MISSION OF CIL IS TO PRODUCE AND MARKET THE PLANNED QUANTITY OF COAL AND COAL PRODUCTS WITH EFFICIENTLY DUE REGARD AND TO ECONOMICALLY SAFETY . CONSERVATION AND QUALITY.PUNE . The broad functions of Regional Stores/Area Stores will be: MATRIX BUSINESS SCHOOL. ORGANISATIONAL SET UP I) Regional Stores To cater to the material requirement of various Collieries.

PUNE . Material Manager or Assitant Material Manager as the case may be. (v) Plan material storage. especially with GMs in order to solve/reduce material problems. particularly in respect of items in critical short supply. (iii) Supervise arrangement in his zone for safety and security of the stores under him. Inventory control. The colliery store will keep the receipt and issue record on a numerical ledger. Issues to collieries. Receipts. Each colliery will have a small store for charged of materials of daily consumption. store procedure.. Overall Responsibility He will have overall responsibility for the efficient functioning of Regional/Area Stores and will be responsible for all material management functions pertaining to the Area. II) Colliery Stores The collieries will draw their requirements from the Regional Stores/Area Stores for direct consumption on weekly or fortnightly basis. The Depot Officer of the Regional/Area and Central Stores will be a Dy. from the Area Material Manager (Stores) directly or through the General Manager. however. (iv) Organize division of labour for the staff under him. replenishment system. Material Manager: The Dy. He may. Material Manager will head the Regional/Area Stores of the Area in which he is posted. obtain advice on the technical aspects of Stores Department like inventory control. Functional analysis. Custody & store keeping. Detailed Responsibility (i) Maintain direct personal contacts will all levels of production. drawn from the Regional Store/Area Stores. etc. He will also assist the General Manager in matters pertaining to stores. III) Job Description and Responsibilities (a) Deport Officer: Every Store Depot in the subsidiaries of Coal India Ltd. insurance & other miscellaneous work. (b) Dy. maximum MATRIX BUSINESS SCHOOL. Claims. Kardex posting & record keeping.INVENTORY MANAGEMENT 10 • • • • • • • • • Indenting. procurement. will be under the supervision of an officer nominated by the management who will be termed as a Depot Officer. Stock verification. He will be directly responsible to the General Manager for the stores under his custody. (ii) Maintain direct personal contact with Purchase Officer to ensure/speed up delivery. movement and handling in a way as to achieve utilization of space and energy.

(viii) Initiate action for the disposal of unwanted materials and scrap lying in collieries/units and assist in the disposal activities. Issue Register and accountings records of “SELF” consignment. vouchers. (iii)Arrange collection of consignment from railway station and ensure timely unloading of wagons and collection of consignments to avoid incidence of wharfage/demurrage. R. (ii)He will responsible for correct receipt. safe custody. claims. (v) Make visits to the railway station periodically to see that there is no undue delay in clearance of consignments by the Store Depots.g. (v) Correspond with suppliers regarding receipt of materials. (vii) Review stocks continuously for control of the inventory.PUNE . damage. Handling Over/Taking Over Charge of the Stores Depot MATRIX BUSINESS SCHOOL. Material Manager of the Stores Depot and will directly supervise the staff under him. (iii) Check that preparation of Receipt Vouchers and clearance of documents is not delayed. Responsibility (i)He will report to the Material Manager/Dy. issue. (vii)He will be responsible for opening and closing of the store depot. Issue Register etc. etc. (iv)Arrange inspection of the material received and preparation of receipt. Maintain minimum/maximum levels and revise them periodically according to lead time and past consumption. RR Register. Carry out ABC-XYZ and other inventory analysis.Register. (ii) Test check all registers e. care. (viii)To retire documents from the banks and submit monthly statements to Accounts branch giving accountal of the advance drawn. rejection. (c) AMM Store Officer : He will be responsible for custody. maintenance and handling of materials in his store. Day Book of Receipt. (ix)To arrange for departmental stock verification. preparation and posting of store documents in Kardex/bin cards. (xi) Distribute the work to his subordinates. Analysis of stores cost and its control. (vi)Inspect every week the Day Book of Receipt. Inspection Duties (i) Carry out periodical inspection of the colliery stores to ensure the inventory build up does not take place. (x) Watch stock position and raise indents when they drop to the recorder level and early out the periodic review. Depot Transfer Register. (iv) Check the general condition of the stores so that stores are preserved from deterioration and the store area is kept neat and clean.R.INVENTORY MANAGEMENT 11 (vi) Raising of indents/material budgets on the Purchase Department to replenish stocks in time.

I. (v) Handing taking over charge certificates will be submitted in triplicate. in addition to the handing over/taking of other functions. (c) Optimum utilization of space. providing gangways for working space. B. fire lane and use of mechanical handling devices and ventilation. Principles of Store Keeping.PUNE .INVENTORY MANAGEMENT 12 Store Officers: When a Depot Officer is transferred and new officer takes over as Depot Officer of a Store Depot. minimum space for office accommodation in store houses.floor area and vertical space. (b) Unidirectional flow of stores. (d) Proper lay-out. storage and issue). issue and adjustment vouchers have been prepared and posted in the Bin and Kardex Cards and disposed of as per the procedure. the handing over/taking over of the Store Depot should be attended to as an important independent function. (iv) Provision reviews for recoupment of stock. Care & Preservation of Stores Principles of Store Keeping The following principles of store keeping will be observed by all personnel employed on store keeping functions : (a) Separate areas for different functions (Receipt. (iii) Disposal of Scrap materials. MATRIX BUSINESS SCHOOL. (i) That all receipt. (ii) Details of plant & equipment/Stores held surplus on which action is pending. Storage.

The principles of store keeping should be observed while organizing a store house. indicating the class. First in-First out.PUNE . code number and the full description of the items. identification boards showing the class/code number and description of the stores will be kept in the vicinity of the items. (e) Identification boards showing the class. a Trustee of Stores. Storage Every Store Depot will be laid out and organized to allow smooth flow of receipts and issues. Sacred trust-store Keeper. Bulk stores near receipt and retail store near issue-bay. code number and description of the items will be kept near POL drums stacked in the POL area. Room for expansion. An identification label showing part number/code number and description of the items will be affixed to one or more pieces of the item in a bin. Where more than one item is kept in a bin. III Method of Storage The following methods may be adopted for the storage of different classes and categories of stores : (a) All small items of stores and spare parts will normally be kept in bins. code number and the description of the materials will also be affixed to the different classes of the iron and steel materials in the steel yard. numerical and priced ledgers. (b) Where heavy items are stored on the ground in a shed. The stacks of materials will be arranged in such a way so as to facilitate the counting and issue of the older materials. the bin front label of the different items will be pasted in front of the bin. Use of drainage. to obviate stock verification discrepancies and above all to reduce the cost of inventory by better stores management.INVENTORY MANAGEMENT 13 (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) II Proper system of location – Alpha Numerical System. Correct accounting (Use of kardex. A bin front label showing the part number/code number and description of the item will also be affixed to the front side of the bin. (c) Timber stacks will have identification boards attached to the stacks. The stores will be arranged and stacked in such a way that the oldest materials can be selected first for issue. Cleanliness. (d) Similarly boards indicating the class. MATRIX BUSINESS SCHOOL. to ensure that no hidden stocks exist or stocks accumulate. Use of mechanical handling devices.) Security cage for attractive and costly items and restriction of entry to store houses.

INVENTORY MANAGEMENT 14 (f) Items of special steel like tool steel. (g) Cement & lime will preferably be stocked in a separate godown to obviate the fine dust from setting on the stores. Both the ends of the items will be colour painted so that even if an item is issued from one end. carbon steel etc. with paint and stencil at regular close intervals for easy identification at the workshops also. (b) The cost of preventing deterioration along-with spoilage cost is one of the element constituting the inventory carrying charges and it it necessary that the out of pocket expenses incurred in this regard are kept to the absolute minimum with a view to reducing the total inventory cost. it will still be possible to identify the cut piece from the colour code at the other end. It will be preferable to mark the specification of the special steel throughout the lengths of rods. (c) Gantry (d) Gravity rollers (e) Chain pulley block (f) Trolley (g) Trailer (h) Trucks Preservation of Stores General (a) Preservation of stores is the process of preventing deterioration of stores held in storage in store depots.PUNE . (b) Fork lift trucks. The extent to which preservatives will be applied and the degree of protection to be accorded will depend upon the value of the stores. will be marked by a colour code. 7 and 3 tones capacity crane at Regional Stores/Area Stores. Under the normal conditions obtainingn in stores depots. and also subject to the condition that the total production cost is not thereby enhanced considerably. bars etc. insufficiency of proper storage conditions and also as a result of chemical and other reactions brought about by the environment in which the stores are kept. IV Handling of Stores The following material handling equipment will be provided : (a) 12 tones capacity crane at Central Store. cement bags will be stacked not more than 10 feet high to prevent the bottom layer bags turning into stone. stores are liable to deterioration and spoilage due to inadequacy of covered storage accommodation. • . Method of Preservation The methods of maintenance and preservation applicable to some of the important types of stores used in the coal India Limited are described below : MATRIX BUSINESS SCHOOL.

They will be stored in a clean and dry place.O. Reels of belting will be kept under covered accommodation on tripod stands. (g) Wire ropes : As ropes have to be stored for long perods. sleepers. Packages of this kind are often broken in the store house to check the goods in detail. the exposed ends will be brushed with a vulcanizing solution to prevent absorption of moisture. They should never be hung up on nails to obviate strain and cracking.C. and equivalent fluids of other oil companies will serve the purpose. Note: Timber treatment under pressure is a specilized technique and falls outside the scope of Stores Depots. (c) Timber : Timber normally used in collieries are props and rollas. sprags. wrapped in impregnated paper and packed in separate sealed card-board boxes.INVENTORY MANAGEMENT 15 (a) Iron & Steel : All metals are more or less liable to corrosion. Toxic reagents are needed to destroy them. If stored in the opem. Hoses will be kept coiled on floors and shelves. External surface should be greased to prevent ingress of moisture. mineral oil as plasticizer and white spirit. The simplest of these solutions is varnish containing resin. grease or some slushing compound. (i) Wires & cables : Wires and cables will be protected from corrosion and deterioration by moisture chemicals.PUNE . strain and eventual deformation. (b) Metal surfaces : For metallic items of stores in warehouse. This particularly applied to bright finished steel bars and iron and steel materials stored in the open area. If the materials are to be stored for long periods. A red oxide paint is good primer to prevent corrosion of structural steel. (f) V belts : V belts will be stored in a cool dry room and should be stored in coils. it provides lastings effect. as they are liable to telescope and become distorted. the reels should be raised from the ground.New cable wound on solid wooden drums will be retained as received MATRIX BUSINESS SCHOOL. As these items are susceptible to damage by bacteria and fungi. and the reels rotated once a week. cracking and bursting of the hoses. it is necessary to protect them with a coat of oil. as such methods are likely to cause sharp bending. (e) Conveyor belting : New conveyor belting will always be stored upright in factory crates. hooks or across boards. (d) Rubber hoses : Rubber hoses will be stored in a cool dry place and kept away from direct sun-light and high temperature. and is generally used immediately after installation as long term preservatives. and never on their sides. Rubber hoses will never be hung on nails. (h) Bearings : Bearings are received from suppliers well greased. particularly iron and steel. Where short lengths are cut from reels. it is necessary to ensure that there is no external or internal corrosion. bamboos and sawn planks. Coal tar/creosole is highly toxic to fungi and bores and as it is insoluble in water. Servo/R P 102 of I. the use of temporary coating on metal surfaces will provide adequate cover during their period of storage. high termperature and severe exposure etc. bitumen.

while in storage. t bring to proper level. away from hot air duets or radiators and will be shielded from direct sun-light.PUNE Composition rust preservative. MATRIX BUSINESS SCHOOL. Also good air circulation will be provided to prevent dry-rot in the wood. tools. milling cutters. .INVENTORY MANAGEMENT 16 from the firm. Tyres : Tyres will be kept in vertical position in suitably designed racks. (ii) Batteries should be segregated by type. Before putting on charge. tyre retreading materials and other rubber goods will prefereably be stored in air-conditioning rooms with controlled termperature. The date of receipt will be marked prominently on the carton or battery. gear etc. scaling. In order to minimize the extent of self-discharge. These fluids can be easily applied or removed. They will not be stored in piles on their sides. necessary to store cement in a dry.Servo grades of temporary protective such as Servo RO 102 based on mineral oils provide adequate protection to plant and machinery for short period of storage.8 Type of Preservatives Some of the general preservatives and the stores on which they are used are indicated below: Types of preservatives (a) Stores on which used Chain. Batteries : (b) (c) (i) New batteries will be stocked in their cartoons and will be so located that the oldest batteries are issued first. Ceement will be stored on wooden dunnage. (m) Plant & machinery spare parts : Plant and machinery and pare parts will be protected against deterioration due to rusting. batteries will be stored in a very cool place. Tyre will be stored away from heat sources as heat is injurious to articles made of rubber. Such drums will be stored in a vertical position. 3. it is necessary to observe the level of electrolyte and ass water to the cells. if necessary. They provide a continuous protective coating inside and outside storage irrespective of the fact whether the parts are dried or not.. It is. They have dewatering and rust preventive properties and finger-print neutralizing effect. The bags will be stacked not more than 10 feet high and these will be restacked often to avoid setting of cement. Charged batteries are liable to self-discharge while in storage. one to top of the other. atmospheric corrosion etc. (a) Cement : Cement solidifies when it gets damp. This will help in selecting the oldest battery of any type in stock for earliest issue. Tyre. because the weight may damage the internal fabric. therefore. heated buildings and will be kept off the floor because even in a warm store-house there will certain amount of condensation at times on the floors.

Soap yellow Dubbin Plastic packing Copper Naphtha ate & Creosol French chalk Coal tar/Creosol oil On exposed & working parts of machines. graduations etc. lubrication on spare parts For costly small articles. To Keep in cupboards containing small tools For leather goods of definite shape For leather goods of indefinite shape Drills. cutter.PUNE . MATRIX BUSINESS SCHOOL. For rubber goods. The Sources of Receipt (a) (b) (c) (d) Receipt Procedures & Inspection Suppliers.S Solution rust preventive Oil M-80 Vapour phase inhibitors Silica Gel as moisture absorbent. Interior surfaces.gauges etc General purpose. Stock transfer from one Store depot to another within the Company.INVENTORY MANAGEMENT 17 (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (j) Mineral Jelly Grease G. Departmental workshops manufactured items. both indigenous and foreign. For timber C. Return of items from units as surplus.engine cylinders. costly article On bamboo poles.

Entry regarding condition of the package will be made in the delivery book while surrendering the RR.PUNE . If any package is found broken or in a tampered condition. (b) Piece Consignments : These will be checked carefully. An application will be made to the Station Master for giving open delivery of the consignment. In case of non arrival he shall have this recorded on the RR by the Railway staff with date and initials. If the consignments are not received within one or two months (depending upon the despatching station) from the date of dispatch of consignment. When stores are received. (b) Furniture. A short certificate will be obtained from the Railways clearly indicating the shortages/losses/damages involved for lodging claims on the Railways/Insurance Company/suppliers. will be unloaded within the free time (5 day light hours) allowed by the railways. railway receipts/Parcel way bills/consignment notes/bills of lading are received at the stores. challans.e. Mode of Delivery (a) (b) (c) (d) (e) Rail Road Air Post Sea Despatch Documents from Suppliers (a) When dispatch documents i. MATRIX BUSINESS SCHOOL. delivery will be taken by surrendering RR to the Railways after making necessary entries in the delivery book. they will be scrutinized against the relevant purchase orders. without incurring any demurrage. “open delivery” will be demanded. (c) Full Wagon Loads (j) Wagons booked to the depot/colliery sidings or at the nearest Railway Station. the matter will be taken up with the Railway authorities. RRs and consignment notes will be recorded in the following as applicable : (i) (ii) Railway receipt register Road challan register Delivery at the Railway Station (a) A Store Keeper from the stores will be detailed daily to the railway station to verify the arrival of the consignments whether dispatched as piece consignment or full wagon. invoices.INVENTORY MANAGEMENT 18 Category of materials which will not pass through stores (a) Printing and stationery items.

spare parts and materials received in a store depot will be subjected to inspection by the Inspection Department according to the procedure given separately on the subject. Consignment Register The store staff detailed on station duty for collection of consignments despatched by rail will maintain Consignment Register as per specimen given at Annexure 5. rail. stores. In-charge of the Stores Depot will verify the actual receipt of the material with reference to the Depot Transfer Issue Voucher received from the issuing store depot. Store Keeper. After taking delivery. the packages will be opened in the presence of the driver. he will put his initial in the appropriate column and handover the consignments to the Incharge of the Receipt Section who will also put his initials as token of receipt and enter in the goods inward register along with details of discrepancies if any. Documentation of Receipts MATRIX BUSINESS SCHOOL. Inspection of Stores at Store Depot All plant. This register will be inspected by the Officer-in-charge of the stores depot weekly to ensure that the consignments transported from the Railway station have actually brought in the depot and accounted for. the carriers’ representative if accompanying the truck and also truck driver. the delivery will be taken after executing an Indemnity Bond as prescribed by Railways. minutes drawn up and signed by the Depot Officer. The relevant rule regarding Railway goods tarrif requires the production of a stamped Indemnity Bond signed by the sender and countersigned by the Station Master of the forwarding station. Damage/loss statement will be prepared. If the RR relating to a consignment booked to ‘SELF’ is lost. In the case of timber delivered directly to the collieries. (b) In case of suspicion regarding loss/damage in transit. Goods Inwards Register All stores received in the store depot whether by road.PUNE .INVENTORY MANAGEMENT 19 (ii) In the event of loss/non receipt of the RR. Depot Transfer Receipt When stores are received in depot by depot transfer from anther stores depot. He will sign a copy of the challan/invoice and return it to the driver. equipment. Road Carriers (a) The store Keeper shall take delivery of material transported by road. air or post will be recorded in this register . mere execution of an Indemnity Bond at the receiving station will not be enough. the inspection will be carried out by the Colliery Manager nominated by the Project Officer/Agent for the purpose.

Rejection note will be prepared in quadruplicate within maximum 15 days of receipt and distributed as follows : (i) (ii) Supplier. in the receipt control register. (b) Separate receipt voucher will be prepared for each challan. In-charge of shed/area will sign in the peon book in token of having received the materials and receipt documents. and Duplicate and triplicate (white & green) – Accounts. freight charges. by receipt section in respect of the stores found acceptable by the inspecting wing.PUNE . MATRIX BUSINESS SCHOOL. paying authority. (d) The stress along with all the copies of receipt voucher will be forwarded to the concerned shed/area on a peon book. In case of full/part rejections the instruction as laid down in Annexure 9 will be followed. Each receipt voucher will be allotted a control number from the receipt control register maintained by receipt section. He will then forward all the copies of receipt voucher to Receipt Section. (c) Receipt voucher number will be endorsed on the relevant challan which will be retained in the Receipt Section. if any. The columns in receipt control register showing the ‘date stores binned/stacked’ and ‘date posted in kardex cards’ will be completed and the receipt voucher will be put up for the signature of Depot Officer along with the receipt control register.S. The green copy will be sent to Kardex Section for filling. the receipt voucher will be prepared in quadruplicate. The Depot Officer will check if any abnormal delay has taken place in binning or kardex posting and after signing the receipt vouchers return the same to receipt section with his remarks. and the officer stores. (f) Receipt section will retain the book copy (yellow copy) of receipt voucher and distribute the other copies as follows : (i) (ii) Original copy (pink) – Data Processing Section. (g) Accounts Department will carry out valuation of the receipt voucher by adding sales tax.e. All copies of receipt vouchers will be signed by In-charge of Receipt Section.INVENTORY MANAGEMENT 20 (a) After inspection is over. The control numbers will remain in serial order for each block year commencing from 1st April. and Accounts. Total value will be shown in both the copies of receipt vouchers. White copy will be retained by the Accounts and green copy sent to data processing section for carrying out adjustments in the value of stores received. (e) Kardex poster will post the receipts in kardex cards and put his signature with date in the receipt voucher. packing/handling charges etc. excise duty. wharfage/demurrage. i. The result of inspection will be recorded by the Inspector under his signature duly dated on the receipt voucher itself in the column provided. CSK/Sr.K. to the basic price and pass the supplier’s bill.

The supplier will be asked by a registered post letter to remove the rejected material within 15 days from the receipt of the letter.e. (c) The date of despatch of consignment i.INVENTORY MANAGEMENT 21 (h) Rejected goods will be kept aside and not mixed (other acknowledgement due) with the other consignments. Acceptance of Stores after Expiry of Delivery Date (a) The Depot Officer will accept the stores delivered upto a period of 21 days after the expiry of the delivery date as stipulated in the supply order provided he is satisfied that the material is still required. When there are no pending bills. under advice to the suppliers. Packing and handling charges will be recovered from the supplier. This. however. They will be kept in cabinets in the order of material code number. accept the material but forward the bills relating to that supply under objection to the Purchase Office concerned for consideration of acceptance of the bill with or without penalty for late delivery. then arrangements will be made to send back the goods on freight ‘to pay’. The advantage for maintaining the store accounts in the Kardex cards are as follows : MATRIX BUSINESS SCHOOL. is not applicable to local purchase. MANUAL STORES ACCOUNTING Introduction In all the stores depots manual stores accounts will be maintained in kardex cards by Central Regional Stores. date of railway receipt will be taken as the date of delivery of material for the above purpose. If the supplier does not remove the material within the specified time limit or if he desires that the goods be sent to him. the consignment will be accepted only with the prior approval of Material Manager (Purchase). the Depot Officer will. in the first instance. Where the delay in supply is more than 90 days. arranged category wise. D. Depot Officer will approach purchase wing to arrange recovery of the amount for the rejected materials prior to handling over to the supplier. (b) Where the delay in supply is more than 21 days but less than 90 days from the date of delivery stipulated in the supply order. Specimen forms of the kardex cards comprising numerical ledger card and history card are in respectively.PUNE .

the range of items on which action is required can be determined merely by pulling out the panels from the kardex cabinets. the date of receipt or the date of issue. the quantity ordered. the name of the supplier from whom the stores are received. (iii) Party : In the case of receipts. Name of the department or indentor in case of issues. (b) (i) (ii) (iii) (iv) (v) (vi) History Card : will have the following details : Monthly Consumption of stores : This information will be collected by the person maintaining the same from the column “Issues” of the stock card. i. return receipt voucher. (ix) Initials : The ledger poster posting the kardex cards will initial at the space against the each transaction posted by him. The store depot will also receive copies of supply orders placed by the purchase department. The supply order received will be routed through the ledger poster for making entries as indicated above. discount etc. MATRIX BUSINESS SCHOOL. (c) By using plastic sliding signal. (iv) Reference : Reference of the receipt voucher. purchase order rate including sales tax. line row and bin (with alphabet and number alternating) where the item is stored. name of the supplier. Supply Orders Issued Against Indent/Material Budget : The No.PUNE .e. (viii) Location : Alpha numerical location indicating the shed/area. and date of the supply order. (vii) Balance : The balance quantity which will be arrived at after each transaction.e.INVENTORY MANAGEMENT 22 (a) Periodical review of cards is easy. (ii) Date : Date of the transaction. (v) (a) Quantity : Quantity received. departmental stock verification sheet etc. rate and promised date of delivery will be indicated in the appropriate column of the history card. against the indents initiated by the areas. (vi) Issues : Quantity issued. : To be allotted serially. Note : All postings should be made within 24 hours of the transactions. (b) Rate : The rate at which the material has been purchased i. Procedure for Kardex/System The kardex/system will contain a set of two cards as follows and a title insert for each item : (a) Kardex/Numerical Ledger Card : The numerical ledger card will contain the following information : (i) Line No. (b) Easier to operate the automatic replenishment system of procurement. the Direct Demanding Officer will place the supply order against the rate contract as per the min/max limits fixed for each item. Material Budget/Indent Reference : This will show either quantity approved against the material budget or indent issued by the area concerned. Once the material budget is approved.

PUNE . (iv) Unit : The accounting unit (unit of measure) (v) Classification : The first two digits of the material code Nos. the ledger poster will simultaneously post receipt details in the numerical card. (g) The obsolete materials and the items having no movement for the last 24 months will be taken note of for initiating disposal action either by transfer of stock to other sister group/collieries ot through tender/auction as laid down in disposal procedure. The ledger clerks will also operate the automatic replenishment system of procurement under the advice of the Depot Officer. The quantities so fixed will be recorded in this column. (iii) Manufacturer’s Part Number : The part number will be typed. (b) Kardex will remain under the safe custody of stores staff. (ix) Deliveries : All receipt and issue vouchers and cancellations/reductions relating to indents/material budget and supply orders will be routed through the ledger poster. the date of receipt. (vi) Minimum : This is the safety stock which will always be kept for the item to meet the demands during procurement lead time fluctuations. allotted to each item will represent “Classification” of the materials. (x) When the receipt vouchers are received by the ledger poster. Description of the items as Given in the Vocabulary : The principal noun describing the items will be typed in “Block Capitals” followed by the remaining portion of the description. quantity and the relevant reference under which reservation has been made. (xi) Cancellation/reduction of quantities against indents/supply orders will also be posted under “Delivery Column”. (viii) Remarks : The stores to be kept reserved for any project/group/colliery/unit will be recorded in this column giving the name of the unit for which the stores have been reserved. These two digits will be typed out in this column. (c) (i) (ii) Title Insert : Title insert will contain the following information : Code Number of the item : This will be typed. Instruction for Maintaining Kardex Cards (a) These cards will be maintained at the respective store depots by store staff who will be responsible to the Depot Officer for the prompt and correct posting of all the stores transactions. quantity received and the balance due will be posted in the relevant column of the history card corresponding to the indent and supply order in question. This will be posted in pencil. (vii) Re-order Point : This figure will represent lead time consumption plus safety stock (minimum). (e) Posting in the numerical ledger will be done daily. Depot Officer will carryout check periodically. In addition to these entries. MATRIX BUSINESS SCHOOL. This will also be posted in pencil.INVENTORY MANAGEMENT 23 (vii) Monthly Quota : Depending on the consumption pattern monthly quota will be fixed for each group/colliery stores/unit to avoid over demanding by indentor.

STOCK VERIFICATION General Stock verification is the process of physically counting/weighing/measuring all items of stores held in the stores depots and colliery stores and to compare the physical balances with stores recorded in the stock cards/numerical ledgers. MATRIX BUSINESS SCHOOL. E. a record of pages added and the moved as per the specimen and code numberwise index of items will be filled on the top of the ledger inside the binder. items having more than one but less than 3 years life) and capital items (i.e. Deferred revenue items (i.INVENTORY MANAGEMENT 24 Numerical Ledger Loose leaf numerical ledgers as per specimen will be maintained by all colliery/washery coke plant and workshop stores and revenue items of stores which are treated as “Charged off stores”. A certificate duly signed by the Depot Officer on 1st April of each year giving the total number of the pages contained in the ledger. The card inserted between 2 and 2. The total of quantities distributed should always be equal to the quantity shown as “balance” on the obverse of the card. Decimal numbers should be given to the ledger cards inserted during the year. All the ledger pages should bear the colliery/project stamp and should be serially numbered from 1 onwards at the commencement of each financial year.24 and so on. On the reverse of each card. 2 &3 it should be numbered 2. items having more than 3 years life like plant & machinery) will be accounted for in the numerical ledger as per Annexure 13. Each page will be signed by the Depot Officer and all entries initialed by the Store Keeper maintaining the ledger. The discrepancies detected if any.48.e.PUNE . the details of distribution will be entered in pencil. when card i inserted between cards No.48 should be numbered 2. For example. will be investigated promptly and adjustment action taken at the earliest.

non-ferrous metals. be verified more frequently. MATRIX BUSINESS SCHOOL. plant and machinery. may however. etc. (b) The actual balances agree with the balances recorded with stock cards/ledgers.PUNE . All store holders will also carryout departmental stock verification of the stores at least once in two years. (c) Stock verifiers who will physically carry out the stock verification work allotted to them. bearings. (b) All charged off stores with colliery/project stores which are accounted for on numerical ledgers – once a year. (c) The discrepancies noticed are investigated and adjusted. (d) Proper arrangements exist for the safe custody. general and consumable stores. instruments. (c) Plant & machinery and other capital items deployed – once a year. (b) Inspector incharge (stock verification) who will supervise the verification work in various area and other places in the company. Organization The internal audit organization for stock verification will comprise the following : (a) Accounts officer (stock verification) who will be responsible for organizing stock verification in the entire company as per the periodicity laid down. spare parts for mining and earth moving machinery and drilling equipment and all charged off stores held in colliery/consumers units. The stock of costly and attractive items like power and training cables. materials. It will be carried out departmentally under instructions from the Chief Material Manager by the stores personnel of the stores depots/units independently.INVENTORY MANAGEMENT 25 Object The object of stock verification is to ensure the following : (a) Stores and materials held tally with the descriptions and specifications as shown I the stock cards/ledgers. Periodicity Internal audit will carryout stock verification as per the following periodicity : (a) Plant and machinery and other capital items in stores depots and all deferred revenue and revenue stores on charge of stores depots – once a year. medicines and medical stores. accountal and issue of stores. Responsibility Accounts Department (Internal Audit) will be responsible for stock verification of stores. Types of Stores to be Verified All items of plant & machinery. proper storage.

Duties The duties of various personnel employed on stock verification work be as follows: (i) To ensure that before commencement of the financial year. (iii) To receive the stock verification sheets from stock verifiers and Depot Officers and obtain the orders of Accounts Officers (SV). (vi) To ensure that the reconciliation of discrepancies is carried out within a specified period. (iv) To submit a report once in two months. (ii) To watch the progress on stock verification through weekly reports to be submitted by stock verifiers. MATRIX BUSINESS SCHOOL. (iv) To carry out test check on the items verified by the stock verifiers. Discrepancies not adjusted within a period of two months will be reported to the Controller of Accounts (IA) and the Chief Materials Manager.000/.1. (b) Field book register. (iii) To obtain progress reports on stock verification periodically. (v) To carry out surprise stock verification of a few items selected at random. showing the progress on stock verification programme to the Accounts Officer (SV) who will keep the Chief Accounts officer (IA) informed of the same. and (c) Plant and machinery deployed in projects. and (e) Register of serious discrepancies i.INVENTORY MANAGEMENT 26 The departmental stock verification will be carried out by the stores depots under their own arrangements. (c) Stock verification sheet register. (vi) To carry out test check of the work done by stock verifiers when considered necessary. (ii) To carry out surprise verification of stocks wherever ordered by higher authorities. On receipt of one copy of the approved programme from Controller of Accounts (IA). (b) Plant and machinery in stores. (ii) To prepare 3 copies of Annual Stock Verification Programme and submit 2 copies of the same to the Controller of Accounts (IA) for approval by 15th March each year.e. Stock Verifier (i) To carry out routine verification of stock comprising of any of the following as per the detailed procedure given in succeeding paragraphs : (a) Stores in the custody of stores depots/units. Inspector (SV) (i) To maintain the following for the purpose of control : (a) Verification register. discrepancies involving value of Rs. (d) Write off register. (v) To make surprise visits to see that the stock verifiers are actually performing their duties. the programme for the whole year will be intimated to all concerned. adequate staff is positioned in all the areas and other places for stock verification.PUNE .and above each.

the entire stock will always be weighed regardless of what the stocks may be. For intact drums/reels. (b) Where large quantities of small items are involved. BCCL is working as a clearing agent for all the subsidiary companies of Coal India Limited through their office at 6. (e) In the case of valuable articles like non-ferrous metal ingots. The actual weight of the wire rope will be ascertained by deducting the tare weight of the reel as marked on it from the gross weight of the reel and thereafter the length will be determined by dividing the net weight by the sectional weight i. M. the Railways and they will work in such a way as to get the forwarding note accepted within the free time.Angles. (c) In the case of iron and steel materials. like M. the customs. Lyons Range. M. weight per meter as indicated in the manufacturer’s handbook. the maximum quantity which the scale can weigh will be weighed each time. etc. the actual stock will be indicated in m/tonne and in decimals indicating kilograms. M. When the weighment of the entire quantity is made. the actual weight or numbers as printed on the packages will be taken as the correct weight/quantity. (g) In respect packed goods like spare parts. the total weight of the entire holdings will be determined on the basis of sectional weight as prescribed.S.Plates. a certificate will be obtained from the holders of the stock regarding the correct physical balance. R. Method for Determining Physical Stock The following simplified methods may be adopted for determining the physical balances of certain types of stores as indicated below : (a) Where the accounting unit is in m/tonne. In performing their duties.S. In such cases.Joist.PUNE . per meter for different categories is indicated in the vocabulary of colliery stores. Clearing Agents Normally clearing agents are engaged for the discharge of cargo from the ships. in the vocabulary.INVENTORY MANAGEMENT 27 (iii) To test check the postings on the receipt and issue side in bin cards for the items verified by him to ensure that the receipt and issue side postings are genuine. as also to ensure that the goods MATRIX BUSINESS SCHOOL. provided the packages cartons are intact. the clearing agents comply with all the rules and regulations laid down by the Commissioners for the port of discharge. HSD oil which are distributed through supplier’s pumps.Squares.S. (d) In the articles like wire-ropes the weight of the total length of wire-rope in a partly used reel can be determined on the basis of the approximate weight per 100ft or per meter as indicated in the manufacturer ‘s handbook. the length as marked on the reel and manufacturer’s test certificate will normally be taken as correct.Rounds.S. therefore.S. the steamer agents. (f) In the case of large stocks of electrical and fragile materials liable to damage in handling. (h) In the case petrol.e. Kolkata-700001. the quantity held in stock will be determined by use of a properly graduated dipstick. which are accounted for in M/tonne the weight in kgs. it will be preferable to determine the test weight of say 100 pieces of the items or of 5% of the total stock and thereafter the entire stock will be weighed and the total quantity determined on the basis of the test weight carried out earlier.

MATRIX BUSINESS SCHOOL. The suit should be filed within six months from the accrual of the cause of such suit for the proceedings. a suit can be filed. a statutory notice under section 80 of Civil Procedure Code which is a pre-requisite and condition prior to the filling of a suit shall be served on the Railway administration within three years from the date of R/R.INVENTORY MANAGEMENT 28 while I their custody are to be protected from damage or loss and are safely delivered to the consignee.PUNE . (b) Landed but missing packages (c) Short landed packages Legal Action If a legitimate claim of loss/damage preferred against the carriers/Insurance Company/supplier’s within the stipulated period is not settled by them inspite of close follow up action .. Remarks On the basis of this survey the cleaning agents will obtain refund of the value of loss from clearing agents & Insurance Co. (a) To institute a suit against the Railways. (ii)Short landed certificate to be obtained from steamer agents. the clearing agents will also get the consignments surveyed in the following cases for lodging claims for compensation of the loss/damage. is to enable the Railway administration to consider the claim on merits and to settle it without litigation and if they fail to effect settlement within the prescribed period of 60 days. (b) To institute legal proceedings against port trust. if any. Nature of Loss (a) Consignments shows external sign of damage and there is suspicion about soundness of the contents Authorities to be associated for survey (i) Manager of the Dock (ii) Insurance Company (iii) Steamer agent (Survey to be completed within 3 days) ‘Landed but missing’ certificate is obtained from port authorities on the basis of which claim is lodged. and proportionate refund of custom duty. it is necessary to give one month’s notice. Care has to be taken by the consignee to preserve all evidence and correspondence in support of the claim and also to ensure that all actions for filling a suit are taken within the prescribed time limits. The object of giving notice under Section 80. Besides the responsibility of clearing the consignments from the port and then dispatching to the consignee. CPC. Claims to be lodged by the Purchase Department on agents / Insurance Co. (i)’B’ form for the short landed packages is obtained from the port authorities. a suit may be filed in consultation with the legal adviser of the company after obtaining sanction from the competent authority. in writing of the indicated suit or other proceedings and the cause thereto. Claims to be lodged by the Purchase Department on agents/port authorities /under-writers & Insurance Company.

ISSUE OF STORES Basis of Issue Issue of plant and machinery. Types of Issue The types of issues are indicated below : (a) Unit Issues : There are issues made by the colliery stores to the consuming unit. F. Dy. stores and spares parts will be made from the stores depots on the basis of requisitions submitted by the indentor in the prescribed proforma. Issues will also be made as per the release orders by the General Manager. (b) Depot Transfer Issue : There are issues made by one stores depot to another under the order of competent authority.CMM(Stores) or Chief Engineers. MATRIX BUSINESS SCHOOL.PUNE .INVENTORY MANAGEMENT 29 (c) To institute a suit against the steamer’s agent unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered the claim will be time barred.

will be furnished in the case of spare parts) Quantity required. The following details will be entered in the voucher. The issue voucher will be prepared by indentor in quadruplicate.PUNE .) The serial number and type of machine for which the spares are demanded are required to be furnished on the issue voucher to ensure that the spares and accessories drawn for a particular machine are used for the same machine. all copies of which should be signed and dated by the indenting officer : (a) (b) (c) (d) (e) (f) (g) Name of indenting colliery/unit. al the machine deployed in the unit should be given a serial number. the second. at the predetermined issue rates. Material Code No. Requisitions for stores will normally be prepared by Unit Engineer in case of spare parts and general consumable stores and by the Under Manager/asst. For this purpose. Name of the work/scheme/project. third and fourth copies being carbon copies of the original. Requirements of stores should be properly worked out in advance and consolidated requisitions prepared to avoid demanding the same item several times during the day. The return of stores before expiry of loan period will be carefully progressed by the depot officer of the issuing stores depot. Where the stores are consumed by the outside parties. A machinery card should also be maintained for each MATRIX BUSINESS SCHOOL. The serial number and type of machine (in case of spare parts and accessories demanded. The stores will be returned by the outside agency before expiry of the period of loan. This will be mostly in the case of sale of such items by public auction or tender. Requisition No. Issue of surplus/unserviceable stores and plant and equipment to other Government Organisations and private companies are also treated as sale issues.INVENTORY MANAGEMENT 30 (c) Loan Issue : There are issues made by a stores depot to an outside party for a specified period with the approval of the competent authority. equivalent replacement will be made by them before expiry of the period of loan. Unit Issues Requisitions : Requisitions for stores will be made on issue voucher (unit issue). Manager in the case of mining equipment and supplies. This requisition-cum-issue document will be prepared by the officers authorised by Colliery Manager/Project Managers/Workshop In-charge to demand stores for their respective colliery/project/workshop. and date. Officers authorized to demand stores should obtain the signature/thumb impression of the person detailed to collect stores on the issue voucher in the column “Person authorized to collect” before sending the same to unit stores. Three specimen signatures of the officers authorized to demand stores duly attested by the authorising authorities should be maintained in the unit stores for record and verification at the time of issue of stores. (d) Sale Issue : There are issues made by the stores depots to contractors as per the terms of the contract. Description of item (Part No.

and number and date of the consolidated issue statement. The stores will be allowed to pass out of the gate after checking by the security staff. The gate pass No. and date will be entered in all the copies of issue voucher. He will write the Material Code No.3 . The indentor will retain the fourth copy of the issue voucher as book copy and send copies No. After entering the details of all the issues made during the day in the consolidated issue statement he will post the total quantity of each item issued during the day in the respective cards of the numerical ledger giving the Reference Serial No. signature of the machine incharge. MATRIX BUSINESS SCHOOL. for the stores issued. He will write page number of the ledger card in which the issue is posted and initial against each item in the consolidated issue statement. The copy of the gate pass deposited at the gate will be compared with the book copy by security staff for any breaches in security. Distribution Issue Document The three copies of the issue voucher will be distributed by the unit stores as under : (a) Copy No. Copy No. consolidated issue statement and the numerical ledger are correctly made. 1 – Retained by unit stores. wherever not done in the issue voucher and enter all the details (including rate) in the consolidated issue statement which will be serially numbered and dated. indicating quantity issued for retention. The number of packages or cases or bundles will be indicated on the gate pass to facilitate check by the security staff at the gate of the stores depot.2 ) will be sent to colliery/project Accountant for entering the value of issues made and for working out the stores cost. One copy of the statement will be filed by him and the other copy along with connected issue voucher (Copy No. Gate Pass System The stores staff issuing the stores will prepares three copies of gate pass in the printed from from the issue voucher.To accounts section/ (c) Copy No.INVENTORY MANAGEMENT 31 machine showing date of spares and accessories replaced with dated.1 to 3 to unit stores.To indenter. Store Keeper maintaining the numerical ledger for entering the issue in consolidated issue statement in duplicate. copies no.1 of the issue voucher will be kept as office copy by the ledger keeper. Store Keeper Incharge of unit stores will carry out necessary checks to ensure that all the entries in the issue vouchers. Gate pass will be signed by the Stores Keeper In-charge authorised by the Manager/Officer In-charge of unit.1&2 of the issue voucher. (b) Copy No. Documentation Procedure On completion of the issue. will be forwarded by the concerned Store Keeper to the Store Keeper/asst. The remaining two copies along with the stores will be delivered to the indentor’s representative who will surrender one copy at the gate to the security staff. The specimen signatures of the persons authorised to sign the gate passes will be maintained by the security staff for record and verification at the stores.PUNE .2 .

The Indenting Officer will sign the issue voucher (Depot transfer) in the space provided along with designation and date. issue voucher (inter unit transfer) will be used. 3rd. and date (Voucher No. (d) Copy No. the stores will not be directly issued to the consuming units.1 (white) to the issuing stores depot duly MATRIX BUSINESS SCHOOL. Unit of quantity (code).INVENTORY MANAGEMENT 32 Inter Unit Transfer Where stores are transferred from one unit stores to the other. The indenter will enter the following details in the voucher (Depot transfer). It may be from central stores to regional/area stores depot.4 : Book copy. He will retain Copy No. Description of item. through the stores staff authorized to draw the stores. between one colliery stores and another colliery stores within an area or outside an area. between the colliery stores and regional/area stores.2 : To receiving unit stores for retention. Quantity required. Depot transfer will be done by issue voucher (Depot transfer). 4th and 5th copies being carbon copies of the original. It will be prepared in quadruplicate and distributed as under : (a) Copy No. This form is prepared in quintuplicate. Depot Transfer Issues Transfer of stores from one depot to the other is termed as “Depot Transfer”.1 and 3 (white & yellow) and return Copy No. (b) Copy no. and date). Release order No. Indentor’s reference No. and date. 1 : To be retained by issuing unit stores duly receipted by receiving unit stores.PUNE . 2nd. The authorised stores staff of the receiving stores depot will take the stores along with Copies No. Here also as in the case of unit issue.5 marked as “Book Copy” (Blue colour) and forward the remaining four copies to the central stores/area stores/regional stores from where the stores are to be drawn. if any. (c) Copy No. Material code.3 : To area/regional of issuing unit for taking on charge in computerized ledger and to debit to the receiving unit. They are drawn from the regional stores/area stores at fixed intervals and issued from the colliery stores to the consuming units only as and when required. Chargeable A/c head (code). 3 sets of specimen signatures of the officers authorized to draw the stores duly attested by concerned officers and the specimen signatures of the authorized stores staff deputed for collection of stores by the above officers will be maintained at the issuing stores depots for verification and record. Unit of quantity in words. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Issuing stores depot’s name and Code No. Indenting stores depot’s name and Code No. Although the stores thus issued from the regional stores/area stores to the colliery stores are charged to consumption.

which are not available in stock in the stores depot concerned or in the regional/central stores. : (a) When a machinery or equipment has suffered breakdown and certain items of spares are required for replacement.INVENTORY MANAGEMENT 33 signed by the Depot Officer of the receiving stores depot as token of receipt within 72 hours of receipt of stores. LOCAL PURCHASE General Local purchase is a method of providing items of inventory required in an emergency or for a breakdown.1 (White copy) : To be retained by issuing stores depot duly receipt by receiving stores depot. Local purchases could be effected under the following circumstances viz.1 (white) duly receipted by receiving stores depot for record.2 (pink) to the Data Processing Section/Accounts Department and will retain Copy No. (d) Copy No. (b) Copy No. G.3 (Yellow copy) : To be retained by receiving stores depot. (e) Copy No.5 (Blue copy) : Book copy of receiving stores depot. Local purchase also includes local manufacture or local repair.4 (Green copy) : To be retained by issuing stores depot. (c) Copy No. To restore production without delay it would be justifiable to arrange local purchase of such items.5) for record. Copy No.PUNE .3 (yellow) will be retained by the receiving stores depot along with the book copy (No. The distribution of 5 copies of issue voucher (Depot transfer) will be as follows : (a) Copy No. where it is authorized.2 (Pink copy) : To be retained section/accounts department after issue of stores. trade center or metropolitan city by payment of cash. The issuing stores depot will send Copy No. MATRIX BUSINESS SCHOOL. which cannot await purchase in the normal course.4 (green) along with Copy No. It involves the purchase of stores or spare parts from the nearest market. Circumstances under Local Purchase may be effected Local purchase will be authorized and should be effected in really emergent cases only.

viz : (a) General and consumable stores required for production and in exceptional cases office requisites. (c) Medicines and medical stores. (c) Local Purchase Ex-Kolkata Through Kolkata Purchase Officer : Local purchases may be effected by the purchase executives of the Kolkata purchase office of the subsidiary company at the request of the projects/units and assisted by the representatives of the projects/units. it may become necessary to procure items of capital equipment by local purchase.200/-.INVENTORY MANAGEMENT 34 (b) An emergent situation may sometimes arise which may necessitate the immediate provision of certain items not available in stock. the same may be locally purchased provided no other item of the same class is required at the same time which can be combined in the same indent to make the total value of the indent more than Rs. Categories of Stores Purchased Locally Local purchase will be restricted to the following categories of items. in which case the procurement should be arranged by normal purchase action.PUNE . (d) In extreme cases. This includes situations where medical attention is immediately required which call for the purchase of certain medical supplies not available in stock. drilling and excavation machinery. In such cases the local purchase will be paid for by cash secured from the imprest maintained in Kolkata purchase office. MATRIX BUSINESS SCHOOL. which are of indigenous manufacture or of imported origin available ex-stock. (c) Where a requirement arises for an isolated item costing less than Rs. (d) In any other exceptional situations where receipt of stores through normal purchase methods cannot be awaited. No local purchases will be effected of any items on forward delivery basis. Types of Local Purchase Local purchase can be effected by any of the methods indicated below : (a) Local Purchase Ex-local Markets : Representatives of projects/units may effect local purchase of stores through local markets or nearby trade centers by payment of cash obtained through project imprests. (b) Spare parts applicable to mining. (b) Local Purchase Ex-Kolkata Market : Project/unit representatives may effect local purchase of stores through Kolkata market by payment of cash obtained through project imprests. with prior approval of General Manager/Chairman-cum-Managing Director.200/-.

& Date Receip t Vouch er No./ Part No. The form of this record is shown below : LOCAL PURCHASE REGISTER Sl. Local Purchase Records : (a) Register of Approved Local Contractors : This register will be maintained commodity-wise indicating the names and addresses of different approved suppliers on the basis of satisfactory supplies previously made. the Officer authorizing the local purchase will ensure that the total value of stores to be purchased at any one time is commensurate with the cost of local purchase. For purchases to be made from Kolkata market. Date of Local Purcha se 2 Code No.PUNE . the register of approved contractors will be maintained by the Controller of purchase/Purchase Officer. Descri ption of stores 4 Quantity Purchased Rate Name of Supplier Sancti on No.INVENTORY MANAGEMENT 35 Where the local purchase of stores involves deputing a representative to nearby trade centers of the Kolkata market. that is the TA/DA and other incidental expenditure to be incurred by the person deputed to effect the local purchase is not unduly large in relation to the value of stores to be purchased. Kolkata. (b) Record of stores Purchased Locally : This register will be maintained to provide a record of all local purchases effected by the project/unit concerned indicating the rats at which stores are purchased. & Date 9 Remarks 1 3 5 6 7 8 10 MATRIX BUSINESS SCHOOL.No. Project/unit representatives making direct local purchase in Kolkata will consult this register for obtaining questions from approved suppliers.

(iii) An authority letter requesting cancellation of same items on earlier indents giving particular references to indent/supply order number or if no such indent exists. a certificate to that effect will be rendered. in consultation with the Kolkata Purchase Office. : A copy of the sanction letter for the local purchase.INVENTORY MANAGEMENT 36 (c) Indent for Local Purchase : Where local purchases are effected in the Kolkata market. Kolkata as authority of purchase. To the Controller of Purchase/Purchase Officer. therefore.PUNE . DISPOSAL PROCEDURE General Disposal is a function of liquidating unnecessary holding in return for a price. The project/unit representative deputed for local purchase will hand over to the concerned officer the documents as indicated below : (a) (i) (ii) (b) (i) (ii) To the head of accounts of the Company at Kolkata. It releases valuable storage space and locked up investment. The form for indent for local purchase is shown in Annexure33. and A copy of the emergent indent for local purchase. and (iv) A letter requesting local purchase of the items required. Kolkata : A copy of the sanction letter for the local purchase. Unwanted Holdings MATRIX BUSINESS SCHOOL.. H. and A copy of the emergent indent for local purchase. with due regard to economy and administrative convenience. It is. necessary to resort to disposal of unwanted holdings. an emergent indent will be prepared and handed over to the Controller of Purchase/Purchase Officer.

Second-hand empties.Drilling Superintendent as the case may be) are termed as unserviceable stores. Items of perishable nature rendered unserviceable due to long storage. details of such surpluses will be reported to the Chief Materials Manager. ascertain possibility of utilisation in any other colliery/project in the area. Surplus Equipment The details of surplus equipment will reported by the Colliery Manager/Project Officer/Sub-Area Manager to the General Manager of the area concerned. Scrap of materials-arising in manufacturing process. borings and waste materials which are not reusable are termed as scrap. The reject of a material used in the manufacturing process like turning. Unserviceable and Scrap Items which have outlined their utility due to fair wear and tear or accident and equipment declared beyond economical repair by a competent technical authority (Executive Engineer-Excavation/Dy. Equipment and stores becoming unserviceable due to constant use and by fair wear and tear. Where the equipment are surplus to the requirements of an area.PUNE . stores and spare parts.INVENTORY MANAGEMENT 37 The unwanted holdings and arising consist of the following : (a) (b) (c) (d) Surplus serviceable equipment. The arising of unwanted holdings are due to the following : (a) (b) (c) (d) (e) (f) (g) (h) Obsoletion of serviceable equipment Discarding of old equipment which become unsuitable to the revised working methods of uneconomical to operate. Spare parts applicable to obsolete or old equipment which are rendered redundant. Old and unserviceable plant. and if so. Spare parts of current usage rendered surplus due to faulty and excessive provisioning. the same will be transferred to the colliery/project authorized to hold it or held temporarily in the area stores. MATRIX BUSINESS SCHOOL. If the equipment can be utilised elsewhere in the area. Equipment rendered unserviceable by accidents or severe damage in transit. Scrap. The General Manager will examine and confirm that the equipment is truly surplus to the colliery/project. machinery and equipment.

CMM (Store).CMM(Stores) will be associated as a member of the Survey Committee. approval of concerned Director will be sought for. the last sale value or depreciated value. the last sale value realized in the sale similar plant equipment and the replacement value or the current market value. MATRIX BUSINESS SCHOOL. Duties of Survey Committee Fixation of Reserve Value : The Survey Committee will carry out physical survey of all the equipment. The reserve value will be indicated only in one copy the survey report.PUNE . CE concerned and the CMM should also be associated. Survey Report The survey report and the proceedings of the Survey Committee will be signed by all members of the Survey Committee and will be approved by the concerned General Manager/CMM. the present condition of the equipment.1 lakh the CMM or Dy. The particulars of the equipment/stores surveyed will be recorded in the survey report to be prepared in sextuplicate in form shown in Annexure 39. CE(E&M) his representative will also be associated in the survey.INVENTORY MANAGEMENT 38 Survey Committee The Survey Committee in each area will consist of the following : (a) Concerned Sub-Area Manager/Project Officer. Agent or his authorized representative. The original copy the survey report containing the reserve value will be forwarded in a sealed of to the Dy. the Survey Committee will be constituted under the orders of CMM. in addition of the office copy. When equipment/vehicle of the headquarters are considered for disposal. In such Survey Committee. in red ink. (c) The Area Finance Manager. The long term usage of the equipment should be kept in view by the survey committee before accepting to condemn the plant and equipment. the representative of the Controller of Accounts. in addition to the representative of the holding department. In the case of important and costly items of plant and machinery. Where the value exceeds Rs.5 lakhs. Where the anticipated sale value exceeds Rs. and (d) The Area Stores Officer. stores and scrap materials put up for disposal and fix the reserve value in respect of individual lots. The reserve value or sale value should be carefully fixed taking into consideration all facts like the original purchase price. (b) The Area Engineer. At the time of carrying out survey the committee should determine the utility of the items to perform the original function or whether it could be rehabilitated for similar or alternative purpose.

MATRIX BUSINESS SCHOOL. I. Losses due to deterioration or change in condition of materials in storage.INVENTORY MANAGEMENT 39 The reserve value will be treated as strictly confidential till the disposal action is completed. Losses in handling the materials within or outside the stores depot including losses as a result of retail issues. the sale stores transfer note (IST) is prepared in the usual manner giving reference to the survey report and the sale value realized. Account of Disposal Stores In the case of equipment/stores sold by auction or tender.PUNE . on the authority of the above stores transfer note. The Accounts Officer will then necessary debit against ‘CV’ sundry debtors (purchasers) and afford necessary credit to ‘C-I’ stores and spare parts’ of the concerned stores depot.LOSS OF STORES How Losses are Caused ? Losses of stores can arise from any of the following causes viz: • • • Losses in transit. The item will be charged off from the ledger/tools and plant register.

the manner in which the loss is proposed to be adjusted and the remedial measures proposed to avoid recurrence of such losses in future. Where the value of the loss exceeds the power of the CMD. The report will indicate the full details of the loss. He will retain one copy of the report and forward one copy together with his recommendations to the Dy. drayage and shrinkage of materials. (b) Depending on the nature and value of loss involved the Controlling Officer will appoint an Enquiry Committee to investigate the loss and to pin point the responsibility. the following actions will be taken by the Depot Officer himself or instructions from the Controlling Officer viz: (a) A preliminary investigation will be carried out to determine the circumstances under which the loss occurred . leakage.INVENTORY MANAGEMENT 40 • • Losses due to evaporation. the case will be referred to Secretary to the Board with the CMDs order thereon for obtaining sanction of the Board of Directors.CMM (Stores) at the head quarters for obtaining the sanction for write off from the competent authority. (d) Simultaneously. whether the loss should be recovered from the person responsible for the same or whether it should be written off if it is not due to neglect on the part of any individual. He will also communicate the sanction together with any order of the competent authority to the General Manager and Depot Officer concerned for further action. Report on Losses Every case of loss of stores will be reported by the Depot Officer to the Controlling Officer. Action to be taken on Detection of Losses When the losses of stores are detected in a stores depot. (c) Based on the report of the Enquiry Committee the Project Officer/Agent/Controlling Officer will recommend the course of action to be adopted in dealing with the loss. Losses due to theft. the Project Officer/Agent will himself initiate or based on the suggestions made by the Enquiry Committee implement remedial measures to avoid recurrence of such losses in future. nature of the stores involved and their value and a descriptive report will be rendered indicating the circumstances under which the loss occurred. The Controlling Officer will ensure that adequate explanation have been furnished for the loss sustained. and the report will be submitted to the Controlling Officer. The CMM will examine the cause carefully on behalf of the competent authority and obtained sanction for the write off of the loss if there is full justification for the same. 12. fraud or neglect. whether an enquiry was conducted and if so. the recommendations of the Enquiry Committee. namely.1 On the receipt of the decision of the competent authority and sanction for the write off the Depot Officer will fill in columns 9 & 10 on the three copies of the report retained MATRIX BUSINESS SCHOOL.PUNE . The Depot Officer will retain three copies of the above report and forward two copies to the Controlling Officer.

The Depot Officer will report in writing the details of fraud/loss/theft to the Controlling Officer with copies to the CMM. RETURN OF STORES Materials and machinery/equipment returned to Stores Depot will be classified as follows • New and unused materials and machinery/equipment originally drawn for various jobs but subsequently found surplus to requirements. Chief of Finance and Accounts. although the self life may not be prescribed by the manufacturer. J. Losses due to deterioration of stores Items like rubber goods. • Unserviceable red list items. common tyre. • Used but serviceable materials and machinery/equipment. Fraud or Neglect The occurrence of losses. The Depot Officer will visit the place of occurrence along with representative of the Security Department and make a joint investigation report which will be forwarded to the Controlling Officer within 24 hours of the time of occurrence of he incident.INVENTORY MANAGEMENT 41 by him. In all such cases the Depot Officer along with security officer will carry out spot investigation and findings submitted to the higher officer within 2 days. The Depot officer will then post the adjustment vouchers in the numerical ledgers. as a result of theft. it is desirable that self life of such items is determined by the stores depot as a result of their past experience and quantities should be so ordered that they are consumed before the expiry of their life. In case the final stock adjustment vouchers initiated as a result of Accounts stock verification. For necessary action in the price ledgers. The Depot Officer will therefore ensure that items having prescribed self life are ordered in quantities which are sufficient for consumption during the self life period only. The date of expiry of such items should be clearly indicated on racks containing these stores so that the items are consume before the date of expiry of their life. chemicals. In case of theft/fraud a complaint will be lodged with the Police. Chief of Security. New and Unused Surpluses MATRIX BUSINESS SCHOOL. These items are likely to deteriorate in storage if the are store for periods in excess of their self life. fraud or neglect should be reported by the Depot Officer to the Controlling Officer on telephone as soon as the incident comes to his notice. rethreading materials. • Empties. In respect of certain other items like black adhesive tapes. have normal self life as prescribed by the manufacturer. He will then arrange to prepare the final stock adjustment vouchers in the forms shown in the chapter on stock verification for adjusting the loss on the basis of the write off sanction of the competent authority. chemical coated materials etc. Two copies of the report of loss along with two copies of the final stock adjustment vouchers will then be forwarded to the Accounts Deptt. one copy of the final stock adjustment vouchers will be forwarded to the Accounts Officer (SV) by the Area Finance Officer for his information and record.PUNE . Losses due to Theft.

I K. INVENTORY CONTROL Introduction Although the broader concept of materials management includes inventory control as a whole. it is usual for the Materials Department to be primary concerned with stock control or stores inventory of regular stock items. The Return Store Voucher will show the following: • • • • • • • Name of the colliery returned the stores with colliery code number. The material will be received in the Regional Store/Area Stores with two copies of returns store vouchers. Price of the item.PUNE .Quadruplicate Copy. Area Finance Manager-Triplicate copy. The return store vouchers will be signed by the Managers/Agent of the colliery.INVENTORY MANAGEMENT 42 The colliery stress will draw materials to cater for their weekly/fortnightly consumption. Regional Stores/Area Stores will treat this returns as received and raise store received vouchers for the receipted material in normal manner.” MATRIX BUSINESS SCHOOL. The material with two copies of the returned store voucher will be delivered to the regional store/area stores. Regional stores/Area stores Material code and description of the item. Book Copy. Accounting unit Quantity returned Original issue vouchers number and date under which the item was drawn by the colliery from the stores depot. one copy of which duly signed in taken of having received the material will be handed over to the colliery representative. Any item held in colliery stores over and above one month requirement will be returned to the respective Regional Stores/Area Stores on the Return Store Voucher Returns Stores Vouchers will be prepared in quadruplicate and distributed as under: (a) (b) (c) Original and Duplicate Receiving Store Depot. We can very well define the inventory as “All things which have been bought for reselling after some modification or used for such modification of used to produce and sell altogether different commodity (like coal in coal industry). On the basis of the receipt vouchers in question the Area Finance Manager will adjust his record and give credit to the colliery. If the original price is not available. the assessed value will be given.

Level (a) Safety Stock Level : A certain amount of stock maintained to take any sudden fluctuation of demand or of supply is known as safety stock level. In coal industry the safety stock may be taken as 1 to 4 months consumption depending upon the critically/availability of stores. One common way is to calculate the standard deviation which is maximum consumption less the average consumption/3. It is known as minimum level in stock holding. If the order is placed once in a year. The safety stock acts as cuslrion or buffer. As a precaution against any eventuality of procurement. 2 & 3 depending upon the stock out cost.INVENTORY MANAGEMENT 43 The main reasons for keeping inventory are :(a) (b) (c) Un-interrupted transactions of stores items. it means the Order Quantity which is economic for the whole system. The principal elements of the inventory carrying cost are detailed below : (a) Interest on the investment (b) Storage cost (c) Physical deterioration or its prevention (d) Obsolescence cost (e) Insurance cost (f) Handling & distribution. (d) Re-order Level or Re-order Point : This is represented by safety stock and lead time consumption. MATRIX BUSINESS SCHOOL.e. Alternatively it may be taken as 1/3rd of lead time consumption.T. (e) Lead Time (L. Terminology Inventory carrying cost – The hidden cost which normally does not appear in the documents but is accrued on acquisition and maintaining the inventory. (f) Lead Time Consumption (L. This level can be determined as stock level and twice the lead time consumption.PUNE . To procure at an opportune time at minimum price. as the ordering cost goes down.T.C.5 for normal distribution and square root of average consumption for poission distribution and multiply standard deviation by a factor which in our condition may be taken as 1. It should normally vary from 3 to 8 months consumption depending upon the lead time and safety stock level. (c) Maximum Level : The maximum amount of allowable stock which can be kept . the order cost will be low but the inventory carrying cost will go up i. (b) Minimum Level : For most of the items it is taken as the same as safety stock level but for some insurance/imported stores. the level may be higher than the safety stock level.) : It is the time that elapses between voicing of a need for anything and the time taken to satisfy that need by supplying the stores.) : The average consumption of any item during the lead time is known as Lead Time Consumption. Economic Order Quantity (ECQ) : As the term indicates. There are many sophisticated ways to calculate safety stock level.

completely inoperative or cause damage to them. the efforts of nonavailability of the time of requirement on the operation.e. it should be of the order of 2 Lakhs) are termed as B items and items having low usage value Say (below Rs.000/. If the controls are exercised on the basis of ABC analysis only. It has been seen that the balance between these two costs is struck when the ordering cost is equal to Inventory Carrying Cost. This classification is known as ABC Analysis.50. from the view point of functional utility. limits of unit costs should be fixed for high cost items (H). medium cost items (M) and low cost items (L) and all items should be segregated into H. The decision regarding the stock of spares to be maintained will depend not only on the critically of spares from the functional point of view (VED Analysis) but also on the annual consumption cost of spares (ABC) spares.INVENTORY MANAGEMENT 44 inventory carrying cost soars up. ABC Analysis : For the purpose of selective control. For the purpose. Importance of certain spares is so great that non-availability of the same would render the equipment or a number of equipment in a process line. the items having medium annual usage (Say Rs. M & L category depending on their unit cost. we may come across a few items which fall in ‘C’ or ‘B’ category. 10% and 85% respectively. This analysis is quite helpful in deciding the safety stock in relation to the availability of the material (SDE analysis). Items are classified as under for VED Analysis :MATRIX BUSINESS SCHOOL. all the items are divided into three main classes depending upon their annual usage value. The levels of A. the importance of these items will be much less than ‘A’ or ‘B’ items even though the inventory as transaction involves considerable amount. The main advantage is that by controlling 5% or 10% of the total number of items. production plant or equipment and the urgency of replacement. In other words. it is the optimum lot size of an item which should be ordered anytime to balance the procurement cost and inventory carrying cost.000/-) are termed as C items. Both VED and ABC analysis are combined for this purpose. If lead time is 3 months and safety stock is 1 month’s consumption (i. From the above principle the formula of calculating EOQ had been derived as follows: Quantity to be ordered will be twice the difference between lead time and the safety stock.2 lakhs per item are termed as A items. HML Analysis : Since the total annual usage is considered in case of ABC analysis. The items having higher annual usage value say more than Rs. This classification is irrespective of quantity consumed. It is. in case of break down. The spares are split into three categories if importance. process. VED Analysis : This analysis specially pertains to the classification of maintenance spare parts denoting the essentiality of stocking spares. B & C items should constitute approximately 70%.PUNE . therefore. 20% and 10% of the total annual usage value but as a percentage of the total number of items.50. While on the other hand some spares would be non-functional. although the unit cost is quite high. necessary that unit cost of an item is also taken into account in deciding its importance. 70% to 90% of the inventory is controlled. and vice versa. 1/3rd of lead time) the ordering quantity will be 2(3-1) = 4 months consumption.

FSN Analysis (Fast. Temporary repairing also some times possible. Easily Available Items) This analysis indicates the market estimations of the various items/in terms of their availability. Slow & Non-moving) Also called the movement analysis. this is applicable mainly in the case of spares where the speed at which the inventory is turned over varies within a vasr range. Replacement can be delayed without effecting the equipment performance seriously.PUNE . Method MATRIX BUSINESS SCHOOL. This will be done by the technical cell of the Purchase Department. The applicability of this analysis lies in the procurement of spares which can. (iii) D – (Desirable) : Items which are mostly non-functional and do not affect the performance of the equipment. Periodicity This will be a yearly exercise. It focuses the attention of the management on the materials which have been procured at a faster rate than their consumption and hence its procurement policy needs a review or have become obsolete and hence have to be disposed off.INVENTORY MANAGEMENT 45 (i) V – (Vital) : Items which render the equipment or the whole line operation in a process totally and immediately inoperative. (a) (b) (c) ‘X’ items – Items having stock of more than 12 months consumption. ‘Y’ items – Items for which no issues have been made for 2 to 3 years. This forms the basis on which speculative purchasing can be done in the face of different market conditions. It is the counterpart of ABC in stock. (ii) E – (Essential) : Items which reduce the equipment performance but do not render it in-operative. ‘Z’ items – Items which have never been issued after procurement. SDE Analysis (Scarce. Difficult. in some cases be few and far in between. (iv) XYZ Analysis : XYZ analysis is to stock what ABC analysis is to consumption. Non-availability of these items may result in temporary loss/dislocation of production. Non-availability of these spares would result in loss of production.

This may be nil to anything.g. (a) (b) (c) Two bin system. most of the materials will fall in the critical or difficult class and there will be very few termed easily available. Two Bin System The two bin system though effective.INVENTORY MANAGEMENT 46 1. iron & steel. These have a definite positive lead time attached to their procurement. These items are separated which are either controlled by the Govt. Periodicity This will be a continuous exercise. for which the lead time can be practically put as zero.e. i. one or combination of the following systems are practiced. As of new. Items which are available ex-stock can be obtained without any difficulty. Stock Out Cost The loss incurred by way of production or otherwise due to non-availability of items Is known as a stock-out-cost. Those items fall on one end of the S & E scale. To achieve the above goal. conveyor beltings. cement etc. suitable value of N is given while calculating the safety stock level as stated earlier. Periodic review system Stock level system. or have a very long lead time (more than 2 years) e. The remaining items for the difficult class. 2. System of Inventory Control The objectives of inventory control is : (a) Economy or provisioning at minimum investment and cost without jeopardizing essential production. Stock Level System MATRIX BUSINESS SCHOOL. Average inventory : It is the sum of half the ordered quantity and safety stock. (b) Insurance against losses due to stock-out of Stores.PUNE . fall on the other end of the scale. is very much labour intensive and also postdated as compared to other two systems. 3. To counteract the stock outs. depending upon the essentiality of the stores.

Inventory Control and Provisioning of Spares Parts This is a very important subject. It is commonly used for disbursements from the petty cash account. larger quantities of spares should be procured. reorder. often used in place of or supplementary to the journals or registers. Only indenting of first set of spares for the equipment should be done on the basis of the manufacturers recommended lists of spare parts. FINANCIAL Journal Voucher A document that provides written authorization for a financial transaction.PUNE . each such transaction is called a Journal Entry. There is every possibility that we loose track of those crucial transactions. the inventories are maintained within upper and lower limits.INVENTORY MANAGEMENT 47 Stock level system is now a days widely used. to indicate the levels. The indents covering the 1st set of spares will be processed simultaneously along with the indents for equipment in order to ensure availability of full backing of initial spares for preventive maintenance when the new equipment are put into commission. In terms of Business we do a lot of Financial Transactions on a day to day basis. The provisioning of subsequent requirements of spare parts will be done by the users based on the consumption pattern duly projected to cover the anticipated requirements and taking into consideration the actual working conditions and the maintenance scales. L. all such transactions are logged here. if the red is meant for safety stock level. kardveyor or kardex cards) and flags are attached to these cards of different colour. The range of spares indented will be based on the manufacturer’s recommendations suitably adjusted in the light of experience gained in the first two years of equipment operation and the maintenance scales developed by engineers. in as much as. It is very important to build up proper consumption data right from the stage of commissioning the equipment which should from the basis for all further indenting. MATRIX BUSINESS SCHOOL. most part of the surpluses that accrue constitute the spare parts. maximum and minimum are fixed along with economic order quantity.. Once the level of safety stock. So we post/maintain them in a Book "book keeping system" is an accounting term. The levels are translated in the stock cards. Here also it would be desirable to order smaller quantities in the initial stage and only after gaining experience by maintaining proper records of consumption for each type of equipment. (Bin Card. duly trimmed and adjusted so as not to exceed 10 to 15% of the total value of the equipment. The second set of spares will be provided to cover the maintenance requirements for the third and fourth year of operation of the equipment. immediate action is taken when the stock level is indicated by red flag. For example.

plant and machinery. to the basic price and pass the supplier’s bill.INVENTORY MANAGEMENT 48 Purposes of Journal Vouchers Journal Vouchers are a common transaction prepared in all University units and are used to initiate a variety of accounting transactions: • Transfer Funding for projects or initiatives • Make corrections to previously recorded transactions • To record sales of services and products to other University units • To record sales of services and products to external customers of the University on Accounts Receivable Important Features of Journal Vouchers When preparing journal vouchers. The green copy will be sent to Kardex Section for filling. packing/handling charges etc.PUNE . White copy will be retained by the Accounts and green copy sent to data processing section for carrying out adjustments in the value of stores received. freight charges. now a mini ratna company. Finance Manager. 4. Accounts Department (Internal Audit) will be responsible for stock verification of stores. excise duty. It is only possible to record transactions to open accounting periods • Descriptions are important to identify the nature of the transaction and to provide reference to any document numbers that are being corrected or adjusted • Identify the journal type that is appropriate for the transaction you wish to process. Total value will be shown in both the copies of receipt vouchers. ERROR CHECKING As produced by office. Find some mistake or errors which have been informed to Dy. there are a number of pieces of information that are important in preparing a complete transaction: • The transaction date will determine the accounting period that the transaction is recorded to. Orient Area. materials. when established as the Eight subsidiary of Coal India limited (CIL) in MATRIX BUSINESS SCHOOL. (MCL). It will be carried out departmentally under instructions from the Area Material Manager by the stores personnel of the stores depots/units independently Accounts Department will carry out valuation of the receipt voucher by adding sales tax. wharfage/demurrage. Error checking of issue transaction and received material receipt and issue and received transaction records of April 2010 to June 2010. COMPANY PROFILE MAHANADI COALFIELDS LIMITED. EVOLUTION: MCL.

were carved out from their respective Companies and brought into the fold of SouthEastern Coalfields Limited in 1986.INVENTORY MANAGEMENT 49 1992. Eventually . 2 joint venture projects namely M/s MNH Shakti Ltd & MJSJ. the Coalfields were taken out from SECL and restructured into a separate entity. comprising 9 mining area.34 million tonne in 2008-09.14 million tones in 1992-93 to 96. and has become the second largest coal producing company in the country next to SECL only. called the Mahanadi Coalfields Limited (MCL) with head quarter at Sambalpur. MCL the largest coal producing company in the world. 2 Central Workshops and 2 Central Hospitals and sales offices at Kolkata and Bhubaneswar. ORGANISATION : The organization of MCL comprises 2 coalfields. GROWTH: Within a short span of just 15 years its Coal production has grown from 23.PUNE . the former being a part of Western Coalfields ltd and the other a part of the Central Coalfields Limited . was the smallest amongst the seven producing company of CIL . with the passage of time and due to expansion in the capacities. being the only Coalfields in Orissa . The Coal fields of IB valley and Talcher. ORGANISTION OF MCL TALCHER COALFIELD • JAGANNATH AREA IB VALLEY COALFIELD ORIENT AREA MATRIX BUSINESS SCHOOL. There are 7 underground and 15 open cast mines in the two coalfields.

a Mini Ratna (PSU) and Subsidiary of Coal India Limited (A Navratna PSU) is engaged in Extraction of Coal through Open Cast and Under Ground Mines in the province of Orissa (India) and has already produced 100 MT coal in the financial year 200910. FUTURE PLAN Mahanadi Coalfields Limited (MCL). The activities of MCL are MATRIX BUSINESS SCHOOL.INVENTORY MANAGEMENT 50 • • • • • BHARATPUR AREA TALCHER AREA LINGRAJ AREA HINGULA AREA CWS(X) TALCHER IB VALLEY AREA LAKHANPUR AREA BASUNDRA & GARJANBAHAL AREA CWS(X) IB MCL has nine areas in two coalfields with 7 underground mines and 15 opencast mines. ORIENT AREA Orient Sub Area Rampur Sub Area Mine No 2 Mine No 3 Mine No 4 Rampur Mine Bundia Mine 5.PUNE . In the current financial year it is going to produce 105 MT coal.

6. of Angul (Orissa) and IB Valley Coalfields in the distt. REVIEW OF FINANCIAL PERFORMANCE (APRIL 2009 – MARCH 2010) Profit Before Tax(PBT) of 2009-10 (QE) as compared to 2008-09 (Actual) (Rupees in Crore) (Quick 2008-09 (Actual) -2105.36 402.99 MATRIX BUSINESS SCHOOL. Presently the dispatch of coal in MCL is through Road to railway siding and thereafter through Rail and directly through road also.70 -1376. in 2011 – 2012 and 180MT Per Annum coal at the end of 12th plan period. The Company is committed to produce 137MT Per Annum coal at the end of the 11th plan i.e.PUNE Company ECL BCCL 2009-10 estimate) 152. of Jharsuguda & Sundargarh (Orissa).INVENTORY MANAGEMENT 51 located mainly in two coalfields namely Talcher Coalfields in the distt.29 .

chaoter-29. by Donald Waters Purchasing And Inventory Management by K.10 7.htm MATRIX BUSINESS SCHOOL.04 2743.INVENTORY MANAGEMENT 52 CCL NCL WCL SECL MCL CMPDIL Sub-Total NEC/CIL DIVIDEND Financial Management. Inventory Management.12 1817. Cost & Management Accounting. p-50-75.M.74 3371.25 6.htm http://www. K.32 3010.01 516. S.47 763. Adjustment Total 1500.15 3657. chapter – 3. S.68 12201.00 16.45 601. Menon.67 64.00 12396. WEBSITES:• • • http://www.68 3329.htm http://www.93 2580.73 83.azinventorymanagement.40 3502. PANDEY.PUNE .73 5333.26 3775.L(2004). Sarika Kulkarni Cost Accounting by Jawahar Lal & NARANG. BIBLOGRAPHY Inventory Control And Management.80 3131.P. I. Material Control.00 5744.

serviceability and most important the training in the use of these equipments are equally important for effective control of fire in their initial stages. The persons selected to man fire fighting organization should be carefully selected and properly trained in the use and maintenance of the fire fighting equipments. Timely actions by all concerned and co-ordination at different levels will ensure optimum utilization of inputs.htm http://www.azinventorymanagement.mapsofindia..azinventorymanagement. (b) (c) MATRIX BUSINESS SCHOOL.PUNE . programming and indenting are integrated functions of materials management involving most of the departments of the subsidiaries of CIL headquarters.INVENTORY MANAGEMENT 53 • • • • • • http://www. CONCLUSION & RECOMMENDATION Conclusion:(a) All fires have small beginning and can be effectively tackled at this stage if suitable fire fighting equipments are readily available.elearning. Material planning.doc trainee report/preso to store http://www.htm http://www. Unless every officer/department/section carry out their respective functions in time and with company objectives in mind. Ofcourse suitability.azinventorymanagement. Unit of measure.htm http://www. resulting in reduction I costs and efficiency all round Accounting and consuming units should prepare proper type of document carefully indicating the correct item code run out.asp?date=3/26/2009&story=2 8. problems of overstocking and stock-outs cannot be tackled successfully.

instrumentation spares are the materials which are one of the reasons for high inventory as these are either slow moving or non moving items. RECOMMENDATIONS • We have seen that through selective control techniques stores can dispose the non moving items which are increasing inventory but this process does not eliminate all non moving items. Thus. Thus. • Spares such as mechanical. electrical. • Automatic procurement items are fast moving but duplicate indent may cause high inventory. inventory control techniques should be used for spares and better planning for procurement for storing should be made. quantity and value. So selective control techniques should be better used so that most of the non moving items are disposed off immediately. company should review the automatic procurement list from time to time and check the list precisely for double indent. The initial check list should be promptly scrutinized within 48 hours and return to fully corrected to EDP. Error list should be attended to by all concerned immediately and corrective action initiated within 10 days of receipt. MATRIX BUSINESS SCHOOL. Other selective control techniques such as VED can also be used. Accounting units should submit the documents to Data Processing Center strictly as per the laid down time schedule.PUNE . Failure to do this results in creation of errors and reporting of incorrect inventory figures.INVENTORY MANAGEMENT 54 (d) (e) (f) accounts code. This is the essence of computerization and is very important.

inventory etc to help follow better inventory management. This can increase the total cost of inventory. Thus company should use EOQ model for procurement of raw materials as this provide right level of inventory with minimum cost.PUNE . • SAP software and ERP technology provides better maintenance of data and records through internal control. If one department finishes the items stock can be refilled by transfer from other department having surplus items.INVENTORY MANAGEMENT 55 • There are some items which are required by different departments. Thus avoiding unnecessary of those items • The company orders the raw materials every months. MATRIX BUSINESS SCHOOL. These technologies can provide easy accessibility to authorized employee of the organization to go through the record of data.