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APRESENTATION
ON
“A comprehensive study ofINVENTORY MANGEMENT SYSTEM AT IFFCO, KALOL”
Submitted to:
(Kalol Institute of Management) IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OFMASTER OF BUSINESS ASMINISTRATION
In
Gujarat Technological University
UNDER THE GUIDANCE OF Asst. professor : Ms. AVNI PATEL
Presented by:RAVI SHARMA
Enrolment No.: 117250592103
FARHAN GHANCHI
Enrolment No.:117250592074
Batch : 2011-13
Flow of Presentation
Industry OverviewSWOT AnalysisAims and ObjectivesSources of DataSampling Technique And Sample SizeScope and MethodologyQuestionnaire AnalysisFindings and SuggestionConclusion
INDUSTRY OVERVIEW Introduction to the Fertilizer Industry of
India:The Indian fertilizer industry is broadly
divided into nitrogenous, phosphatic and potassic segments. In addition to these, nutrients are combined to produce several complex fertilizers. To express the nutrient constitution of fertilizers, the grade of a fertilizer is expressed as a set of three numbers in the order of percent of Nitrogen (N), Phosphate (P) and Potash (K).
COMPANY PROFILE The Indian Farmers Fertilizer Co-operative Limited
(IFFCO) is one of the largest producers of fertilizer in India .
The first plant of IFFCO was commissioned at Kalol in November 1974 to produce Ammonia .
Urea plant was commissioned in January 1975, which began its commercial production on 1st April 1975. Kalol plant has a capacity of 300300 tones of ammonia and 396000 tones Urea per year.
The Kandla plant was commissioned on 26th November 1974
The ammonia plant at Phulpur started its commercial production on 10th October 1980
The Aonla plant, fourth in the series, started commercial production in July 1988.
SWOT ANALYSISSTRENGTHS
1.Largest producer of fertilizers in the Country.
2.Five strategically located plants with cutting edge production technologies.
3.Most plants achieve capacity utilization in excess of 100% .
4.A large number of co-operative societies are associated with IFFCO (38,155 at present).
5.Vast Marketing and distribution network due to the high number of co-operatives associatedwith IFFCO.
WEAKNESS1.IFFCO has a bureaucratic
organisational structure.2.Organisational setup is
very rigid. 3.Excessive sub-divisions.
SWOT ANALYSISOPPORTUNITYGROWTH PLAN
• 1.Installation of Ammonia/Urea plants and also acquisition of fertilizer units.•2.Generation of Power •3.Production and Marketing of micro-nutrients, seeds, bio- fertilizers, pesticides etc.•4.Value addition to agri-products and marketing•5.Banking and Financial Services•6.Information Technology and IT enabled services•7.Establishments of Retail Chain in urban and semi-urban locations
THREATKRIBHCO Private CompaniesGovt. Of India influence.Government policies on
Import of fertilizers.
RESEARCH METHODOLOGYOBJECTIVETo analysis the level of investment in
inventory by IFFCO. To study and analyze the policies and
practices regarding inventories adopted by the unit.
To observe the effectiveness of company’s inventory management system.
To understand the different sections of company’s inventory management system.
RESEARCH METHODOLOGY
◦ DATA COLLECTION◦ Primary data:
Basic information collected from the company staff like accountants and officers. Moreover information gathered through practically preparing the data for Inventory.◦ Secondary data:
From the Balance Sheet of the company
From Cost & Management Accountancy report
From Internet
INVENTORY VALUATION
Cost formulae for determining cost of inventories Weighted Average Method
CLASSIFICATION OF MATERIALS AT IFFCONaphthaNatural Gas (O.N.G.C.)RLNG
MATERIAL HANDLING
Purchase section Knowledge of the materials Source of material- Vendors Reasonable price
Stores section Main Store. Cement godown. Petrol Pump. Cable yard. Chemical godown. Paint godown.
Purchase ProcessRecognition Of
Need
Requisition To Purchase
Record And Numbering Of Requisitions
Mrp Scrutiny
Sending Of Enquiry / Invitation
To Bid
Receiving Of Offers
Purchase Process Cont..Purchase Order
Receipt Of Materials
Follow Up Done For Every Order
Payment Against Purchase
Inspection Of Material
Full Payment / Balance Payment After Receipt Of
MATERIALS
PHYSICAL VERIFICATION OF MATERIALSRaw material & Packing materialsStores, Chemicals & Spare partsFinished Products
ABC ANALYSIS FOR PHYSICAL VERIFICATION OF MATERIALS
CATAGORIES VALUE(Rs.PER
UNIT)
QUANTUM OF
VERIFICATION
CATEGORY A Above Rs. 50000/- 100%
CATEGORY B 10001 to 50000/- 70%
CATEGORY C Below Rs. 10000/- 25%
OBJECTIVE OF INVENTORY CONTROL To provide the continuous flow of required materials&
spares parts and components for efficient uninterrupted flow of production.
To minimize the investment in inventories stock keeping in view operating requirements.
To provide for efficient store of materials so that inventories are protected from losses by fire and threat and handling time and costs are kept at minimum.
To keep surplus and absolute items to minimize uncertainty..
To maintain inventory against deterioration, obsolescence and unauthorized use.
To ensure that finished goods are available for delivery to customers just to fulfill the order.
TECHNIQUES OF INVENTORY CONTROL:USED AT IFFCOMin-Max plan Order cycling system Fixation of various levelsUse of control ratiosReview of slow and non-moving
items The ABC Analysis
DATA Analysis
USE OF CONTROL RATIOS
2007-08 2008-09 2009-10 2010-11 2011-120
200400600800
1000120014001600
YEAR 2007-08 2008-09 2009-10 2010-11 2011-12
Total INVENTORY
964.03 977.13 1413.95 1347.7 1264.71
Imbalance of raw material Year 2007-
082008-09
2009-10
2010-11
2011-12
Raw Materials
595.41 551.27 950.8 823.39 718.66
2007-08 2008-09 2009-10 2010-11 2011-120
100200300400500600700800900
1000
Stores and spare parts at Iffco Kalol
Year 2007-08
2008-09
2009-10
2010-11
2011-12
Stores and Spares
246.74 311.74 336.42 290.21 259.58
2007-08 2008-09 2009-10 2010-11 2011-120
50
100
150
200
250
300
350
Inventory Turnover RatioInventory turnover ratio =
COGS/Avg.Inventory
Rs. In Crore
2011-
12
2010-11 2009-10 2008-09
COGS 15859.
92
31496.7
5
11,336.7
7
9,578.0
9
Avg.Inventor
y
1516.8
05
1654.23 1930.52 1901.79
Ratio(Times) 10.46 19.04 5.87 5.04
Inventory Turnover
2011-12 2010-11 2009-10 2008-090
2
4
6
8
10
12
14
16
18
20
Power, fuel and Water
2007-08 2008-09 2009-10 2010-11 2011-120
10
20
30
40
50
60
70
80
IFFCO performance during 2011-12.
2007-08 2008-09 2009-10 2010-11 2011-120
5000
10000
15000
20000
25000
30000
35000
Profit After Tax
2007-08 2008-09 2009-10 2010-11 2011-120
50
100
150
200
250
300
350
400
450
SHARE CAPITAL
2007-08 2008-09 2009-10 2010-11 2011-12420
421
422
423
424
425
426
427
NET WORTH
2007-08 2008-09 2009-10 2010-11 2011-123300
3400
3500
3600
3700
3800
3900
4000
4100
4200
Highest Production of Fertilizers
2010-11 2011-120
10
20
30
40
50
60
70
80
90
Highest Production of Urea
2011-12 2010-1136
37
38
39
40
41
42
43
44
Findings(1) Reasons to prefer the plastic bag:
Moisture control
Reused and strong
(2) They are using silos for the storage of finished goods in a case of uncertainty (strike, machine failure, transportation problem)
(3) Total income in 2010-11 is highest with 33432.3 crore even though the production of the 2011-12 is highest. Main reason for above happening is high sale of fertilizer in 2010-11 and cost of inventory is low.
(4) There is much more inbalance of Power , fuel and Water consumption because insufficient availability of Power , fuel and Water.
(5) The inefficient management of inventory because fluctuating In Inventory Tornover Ratio as mentioned in graph.
CONCLUSION & RECOMMENDATION More effective exercise should be followed of
vigilance against imbalance of raw material and work in progress which tends to limit the utility of stocks.
To change in design to maximize use of standards parts and components, which are available off the shelf.
Items which are in excess of the needed consumption can be considered as surplus items, such items are lying in inventory beyond 4 years. For the efficient Inventory Management the period for this should be Reduced
More efforts should be made to completion of unfinished production jobs to get them in to sellable condition.
The software holds all the transactions of the stocks. So software helps much in maintenance of stocks. IFFCO should use Inventory software to maintain the transactions of inventories and to manage the Inventory
Bibliography Website http://www.iffco.nic.in Books & Other Materials
◦ IFFCO Company’s Annual Reports From 2007-08 to 2010-2011
◦ Guidelines on identification, Obsolete, Surplus items. IFFCO Manual
◦ Doler, W. Donald; Lee Jr, Lamer; Burt, N David, Inventory purchasing& material management system
◦ Pandey I.M – Inventory Management (Vikas Publications)
◦ + Valuation of Inventories AS-2 Indian Accounting Standards and GAPP by
Dolphin, D’Souza (Snow White Publisher)
Thank You !!!