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 !!!