project report ultratech cemnt
TRANSCRIPT
Prepared by:
ANURAG SHARMAB.E,8thSEM.
[2009-10]
College:
LUKHDHIRJI ENGINEERING COLLEGE,MORBI-2.
Submitted to:HR DEPARTMENT(ULTRATECH)
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DECLARATION
I undersigned ANURAG SHARMA student of BE 8th semester declares that I have prepared this project report on SUPPY CHAIN MANAGEMENT at “Ultra Tech Cement Limited” under Mr. RAVI SHAHI.
I also declare that this project report is my own preparation and not copied from anywhere else.
(SIGNATURE)
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Anurag Sharma
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ACKNOWLEDGEMENT
I would like to give my sincere thanks to Mr. BHAVESH PATHAK who permitted me for training. I would like to thank Mr. MILIND.J.PARIKH for his friendly co-operation during my training. My sincere thanks also go to Mr. UPENDRA JHUNJHUNVALA for providing me the necessary technical information & guidance regarding my case study about stores department. I would also like to thank Mr. RAVI SHAHI for information regarding Purchase. Finally, I would like to thank all the employees of UltraTech LTD. who shared their knowledge with me with utmost pleasure.
Signature of student
(8th SEM BE)
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SYNOPSIS
The men have passed from several stages right from the evolution of
humanity to this high-tech developed era. As soon as progressive changes took place
in Stone Age, it also affected to their man three needs: Food, Cloth & Shelter.
Finally, these progressive changes resulted in the invention of “CEMENT”.
The evolution of Cement was as important for the pilgrims as the invention
of fire. Cement is the substance, which walks with them from ages to ages. It has
been used as a building material since ancient times, e.g. the classic structure of
Rome, Pyramids etc. Therefore, we can say that the single component of this
revolution is “CEMENT” which can be truly considered as the basic need of our
rapid development.
In the field of cement manufacturing, Gujarat Cement Works Asia’s largest
producer of cement, which is located at Kovaya, district Amreli in Gujarat, the
western state of India, is a coastal-based plant with an overall capacity of 5.4
Million-Tone of cement p.a. Gujarat Cement Works is the identity of Indian
Cement Industry. It has always adopted latest techniques in the field of cement
manufacturing.
Consumer satisfaction is the first aim of GCW. They make only those
products that make India proud. However, to fulfill the aim and to set an ultra
modern plant on a least cost, they never compromise with quality, environment,
social responsibility, employees facilities etc.
Therefore, we can say that this cement industry of Ultra tech in Kovaya is
doorstep to modernization.
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CONTENTS
PARTICULRS PAGE NO.
1. Industry Profile
2. Company Profile3. Mfg. Process of Cement 4. Supply Chain Management5. SCM in Ultratech Cement Ltd.6. Research & Methodology 7. Findings8. Inventory control at Ultratech Cement Ltd..9. Case study & Recommendations10. Limitations & Bibliography.
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PREFACE
A Glimpse of an BE
The world is becoming smaller day by day. It is converting into a city.
Today there are number of ways for a man to position himself in this world.
But from these ways selecting the most beneficial option is very difficult
today. A very crucial for a man is to pick the suitable career option. There
are plenty of study courses which have been opened for us and new and new
are emerging. But form these bundle of courses, there are some courses
which are considered as the top most option for the best career. BE is one of
them. BE is the most suitable course for those who want to develop and
explore their skills in the techfull world. We are glad by selecting this option
for our better future.It helps to develop your technical & managing skills and
intelligence. The most and very important thing in this course is practical
studies and most of practical aspect is covered in the “Industrial project”. So
let’s have some brief about this project.
What is Industrial Project about?
A “Industrial Project” is practical study having the duration of about 2
months. It is the platforms where a BE student gets the opportunity to show
his or her different skills. Industrial project is considered as the object of 8 th
semester in the four year BE program. It is very helpful to the students when
they have to face real world, rather than theoretical world. In Industrial
Project what the students have to do is that they have to select a particular
topic regarding subjects from the study that they are doing in BE. Then they
have to select a specific company or industry according to that topic and
they have to make a research proposal.
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CEMENT INDUSTRY - INDIA (OVERVIEW)
1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar
with a capacity of 1000 tones
2. Currently, India is ranked second in the world with an installed capacity of 114.2
million tones. Industry estimated at around Rs.18, 000 cores.
3. Current per capita consumption is 85 kgs. As against world standard of 256 kegs
4. Cement grade limestone in the country reported to be 89 Bt. a large proportion
however is unexploitable.
5. 55 - 60% of the cost of production is government controlled
6. Cement sales primarily through a distribution channel. Bulk sales account for <
1percentage of the total cement produced.
7. Ready mix concrete a relatively nascent market in India
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HISTORYSoren Kristian Toubro, a civil engineer and Henning Holck Larsen, a
chemical engineer, the founder of Larsen & Toubro Company were schoolmates,
later attended the same engineering college in Denmark. After becoming engineers
both joined, the firm named ‘F. L. Smidth & Company’, which was Cement
machine manufacturing Company.
Then both came to India in 1935 to assess the value of various cement-
manufacturing groups on behalf of F. L. Smidth & Company M/S Copenhagen.
These groups later merged into the Associated Cement Companies. After
completing this task, they searched for proper places for F.L. Smidth’s local offices
in India.
In the course of their work, both visited India, observed Indian people, and
decided to start their own business here. They started a partnership concern on 1st
May 1938 and started undertaking repair jobs on the imported machinery like
pasteurizes, butter Chuns, creams separators since supply of these machines were
stopped due to world war II. Gradually, they began to develop and manufacture
several of these and other types of dairy equipments. Very soon, L & T was
acknowledged as a reliable fabricator with high standards.
L & T has entered in Cement business in 1980. L & T established its first
plant at Awarpur, Mahrashtra in 1983. Second plant was established in 1991 at
Hirmi, M.P. Third and largest plant was established in 1996 at Kovaya, Gujarat.
The fourth plant was established at Tadipatri, A.P. in 1998.
GCW’s operations started from 2 April 1996. It became Asia’s largest
cement producing unit with the capacity of 4.2 million-tone per annum.
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GENERAL INFORMATION
Cement and concrete might be synonymous as household terms, but are by
nature different: cement, an ultra-fine gray powder, binds sand and rocks into a
mass or matrix of concrete. Indeed, cement is the key ingredient of concrete.
Semantics aside, concrete is the signature material in driveways, patios,
basements, and a host of other American household items. It is also the world's most
widely used building material. Annual global production of concrete hovers around
5 billion cubic yards, a volume approximated by yearly cement production levels of
about 1.25 billion tons.
Concrete's global appeal is not accidental - the ubiquitous, stone-like
material is produced from some of the world's most abundant resources, as is
cement.
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A BRIEF HISTORY OF CEMENT
Cement is invented/developed by Joseph Aspelin of U.K. in 1824. Since
hardened cement plaster resembled Portland stone found in Portland, which is a
place in England. That is why it was named as ‘Portland Cement’.
In 1948, Mr. William Aspdin manufactured cement as a commercial product
for selling.
The cement has been in the existence for a long time in the historical
monuments. The evidence of this fact can also be seen in civilization of Mohan-Jo-
Doro.
In India, Portland cement was first manufactured in 1904 by south India
industrial limited. In 1914, new company named India Cement Co. was established
at Porbandar, which is even today in operation as ACC. Since 1904, cement
production is continued and expanded.
To define cement, we can say cement is a mixture of these main following raw
materials:
Limestone
Bauxite
Iron ore
Marl
Sweetener
Clay
Mineral Gypsum
In other way, when we add gypsum in clinker and refine it in small particles
it is called cement.
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Types of cement:
Ordinary Portland cement
(A) Blended cement
1. Portland pozzolan cement
2. Portland blast furnace slag cement
(B) Special cement
1. Sulfate resisting Portland cement
2. Low heat cement
3. Rapid hardening cement
4. Oil well cement
5. White cement
SWOT ANALYSIS OF INDIAN CEMENT INDUSTRY
OPPORTUNITIES
Huge infrastructure demand
Rapid urbanization
Increasing demand for consumer durables
Untapped rural demand
Increasing interest of foreign producers
THREATS
Slow growth in infrastructure demand
Global economic slow down
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STRENGTHS
Abundant resources
Low cost and efficient labour force
Strong managerial capability
Strong globalize industry and emerging global competitiveness
Modern new plant & modernized old plants
WEAKNESSES
High cost of energy
Higher duties and taxes
Infrastructure
Labour laws
Slow statutory clearness for development of mines
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CHAPTER 1
COMPANY PROFILE
VISION
To be INDIA’S largest cement manufacturing unit
at a single location, producing premium quality
cement with clear focus on all stake holders.
MISSION
GCW will be a vibrant enterprise focusing on
bench marking, sustainable development,
expectation
and aspiration of stakeholders and society.
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1.1 INTRODUCTION
Ultra Tech Cement Limited (Formerly known as L & T Cement Ltd.) is a
very well known name in the field of cement. The registered office and head office of
the company is at Mumbai.
This company’s reputation is based on a strong customer orientation, the
technological sophistication that characterizes its products, and an impressive
record of achievements. Ultra Tech has initiated a transformation process to ensure
that it emerges as a knowledge-based premium conglomerate in the shortest possible
time.
Ultra Tech is India’s cement leader, with over 17 Million-Ton p.a. installed
capacity. Each of its plants incorporated state-of-art technology. Ultra Tech Cement
has strong brand equity and commands a price premium in most markets.
Ultra Tech is committed to a high growth trajectory that will deliver
significant value to its customer and shareholders.
Out of six cement plants of Ultra Tech, GCW at Kovaya is the largest cement
plant in Asia. There are two phases in the plant, which are almost identical in layout
and production capacity. The reason for laying such a big plant near a small village
like Kovaya can be justified by the fact that this region is very rich of limestone
resources, which is the chief raw material for cement production. The estimated
resources of limestone mines are enough to supply raw material for next 40 years to
GCW. Ultra Tech is India’s largest manufacturer of premium quality cement. Ultra
Tech has nationwide network of factories, offices and sales centers. Authorized
stockiest dealing in the company’s product line, including cement, is located directly
or indirectly in every district of the country.
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Board of Directors
Mr. Kumar Mangalam Birla, Chairman
Mrs. Rajashree Birla
Mr. R. C. Bhargava
Mr. Y. M. Deosthalee
Mr. A. R. Gandhi
Executive President & Chief Financial Officer
Mr. K. C. Birla
Manager and Chief Executive Officer
Mr. Saurabh Mishra
Chief Manufacturing Officer
Mr. S. K. Maheshwariv
Chief Marketing Officer
Mr. O. P. Puranmalkav
Executive Vice President — International Business
Mr. Deepak Razdanv
Company Secretary
Mr. Sanjeeb Chatterjee
Auditors
S.B. Billimoria & co., Mumbai
G.P. Kapadia & co., Mumbai
Solicitors
Amrachand & magaldas& suresh a shroff & co.,
Advocates & solicitors, Mumbai
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1.2 AWARDS AND ACHIEVEMENTS
The company is doing a marvelous business in the entire field where it can put its
hand which is a great aspect related to any company. The company is also able to
achieve many awards from the Government of India as well as other institutions at
national and international level, which are as follows;
(1) The company has secured ISO 9002 certificate, which has been given for
the best quality and best production process capabilities.
(2) The joint venture between L&T and Ceylinco helps them to achieve the
SLSI (Sri Lanka Standard Institution) from the Sri Lankan Government.
(3) L&T has achieved Top Export Award from CAPEXIL (Chemical &
Allied Products Export Promotion Council) in the category of cement,
clinker and asbestos cement products for the year 1999-2000.
(4) L&T has achieved the Highest Export Award for cement from CAPEXIL
in the non-mineral sector for the year 2000-2001.
(5) L&T has achieved the International Award in the 52nd International
Calendar Show for their best calendar with the theme of “Brides of
India” for the year 2002.
Export awards
Worldwide, clients have consistently endorsed Ultra Tech’s highest quality
standards. The list of export awards it has won is testimony to Ultra Tech’s
uncompromising standards on product quality. We have been on the roll call of top
exporters of the Chemicals & Allied Products Export Promotion Council (Capexil),
year after year. Ultratech won the Capexil Certificate of Export Recognition - Top
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Exporter - Cement, Clinker, Asbestos and Cement Products for the years 2000, 2002
and2003.
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Highlights of some of the other awards of GCW plant are given below:
2004: Bhartiya Udyog Ratan Award presented to Sh. KYP Kulkarni
By Indian Economic Development & Research Association
(IEDRA), New Delhi
2002-03: Greentech Gold Safety Award By Greentech Foundation, New
Delhi
2002: Gujarat State Safety Award By Gujarat Safety Council (GSC),
Vadodaras
2001-02: Greentech Environment Excellence Award By Greentech
Foundation, New Delhi
2001: Awards for Excellence in "Industrial Relations" By
Federation of Gujarat Industries (FGI), Vadodara
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UNIQUE CHARACTERISTICS
UltraTech cement units are state -of- art technology dry process
plants in corroborating pre-calumniation technology. Advance instruments
system; computerized process control along with online quality control by x-ray
ensures consistently high quality. Process parameter are monitored and
controlled by computer-based systems.
UltraTech cement plants are Eco-friendly with elaborate pollution
control facilities like electronics precipitators, bad and dust filters.
Captive mines adjusted to the factories supply high grade limestone
Infrastructure includes all weather roads, and rail sidings as well as
port handling facilities at Gujarat plant.
All cement plants are based on the design of F.L. Smith & Co.,
Denmark.
SIZE OF UNIT & FORM OF ORGANISATION
UltraTech cement Ltd. Is large-scale industry according to new industrial
policy 1991,which defines that the firm having investment more than 5crores and
more than 100 employees is consider under large scale industry.
GCW is having investment more than 2600 crores and 600 employees, so GCW
is considered as a large-scale industry.
Public ltd means the company, which has an association not less than 7
members and registered under the Company Act. Public company must add the
word limited’ at the end of its name. A public limited company must have at least
three directors.
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Plants of UltraTech LTD
(1) GUJARAT CEMENT PLANT (GCW)
The plant GCW is located at southwestern coast of Saurashtra in Gujarat. It
is 150 kms from Bhavnagar & 75 kms from Diu. It has received ISO 9002 certificate
in October 1997 for its better quality system in manufacturing and dispatching of
clinker and cement. Clinker and cement are exported to Sri Lanka, Saudi Arabia
and a few European countries. This unit is largest and high production unit of Ultra
Tech. This unit has made record in production and quality of cement.
(2) AWARPUR CEMENT WORKS (ACW)
ACW is located in Maharastra at Awarpur village, which is 212 km away
from Nagpur, and in Chandrapur district. Total capacity of plant is 2.5 MT per
annum. It produces OPC at 33, 43, 53 grade and PPC.
(3) ANDRAPRADESH CEMENT WORKS (ACW)
This plant is located in Tadpatri village, district Anantpur, Andrapradesh.
This plant is equipped with latest equipment to produce OPC of 33, 43, 53 PPC etc.
grades with consistency in the quality. It has its own railway track, which is from
Chennai to Delhi.
(4) HIRMI CEMENT WORKS (HCW)
It is located in Madhyapradesh at Hirmi village, which is 65 km away from
district Raipur. Its installed capacity is 1.45 MT per annum producing OPC at 33,
43, 53 grade.
(5) JHARSUGUDA CEMENT WORKS (JCW)
HCW located at Dhutra village of jharsuguda district in Orissa, which is 15
km away from jharsuguda. It is producing mainly high quality slag cements
according to ISO455-1989 norms. Installed capacity of this plant is 0.7 MT per
annum. This plant has sophisticated laboratory to maintain quality control goods.
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Besides these plants UltraTech has two grinding units located at
1) Magdalla (Gujarat)
2) Ratnagiri (Maharashtra)
Company has two domestic cement terminals at
1) New Mumbai
2) Mangalore
SUBSIDIARIES
Larsen & Toubro ceylinco (Pvt.) Limited.
Ceylinco insurance company limited and UltraTech have
incorporated this subsidiary in Sri Lanka.
Ceylinco is one of the most respected business groups in Sri Lanka
with activities in the field of banking, insurance and finance.
A bulk Cement terminal has been established near Colombo with
annual output of 0.5 MT.
Cement in bulk is sourced from Ultra Tech’s Gujarat Cement works
and transported by carriers to Colombo.
Narmada Cement Company Limited.
The Narmada Cement Company Ltd. At Jafarabad (Gujarat) and
two grinding units at Madgalla (Gujarat) & Ratnagiri (Maharastra) all are
port-based plants. Clinker is shipped by sea from Jafrabad to the grinding
units.
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LOCATION OF DIFFERENT PLANTS IN
INDIA
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ORGANISATIONAL STRUCTUREEVP’S OFFICE
HEAD ERP-CELL MATERIALS PERSONNEL&ADMINISTRATION
ACCOUNT
MANUFACTURING
STORES PURCHASE ACCOUNT
IT
PERSONNEL ADMINISTRATION MEDICAL
SECURITY
PRODUCTION ELECT.&INST. MINES MECHANICAL CPP DESP.&PACK. CIVIL JETTY
SAFETY
PLANT
PROCESS QUALITY MINES CRUSHER MECHANICAL CPP DESP.&PACK. CIVIL JETTY
SAFETY
PLANT
ELECTRICAL INSTRUMENTATION
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CHAPTER 2
MANUFACTURING PROCESS OF
CEMENT AT ULTRATECH CEMENT LTD.,
GUJARAT CEMENT WORKS KOVAYA
SECTION 1
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INTRODUCTION
The GCW Cement production process is here under:
Mines
L.S. Crusher
Belt Conveyor
L.S. Storage
Additives
Raw Mill
C.F. Silo
Preheater
Kiln
Coolax Cooler
Clinker Storage
Cement Mill To Jetty
Cement Silo
Packing Plant
SECTION 2
MINES
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2.1 INTRODUCTION:
The lime stone mine, belonging to the Larson & Toubro Cement Plant is situated 2.5 km. to the west of the plant. On its border, also lies the mines of the Narmada Cement Plant.
2.2 MINING:
Here in the Kovaya Lime Stone Mine mining is done in two
methods:
1. Conventional Mining
2. Surface Mining
1. CONVENTIONAL MINING
These explosives and detonators are stored is called the magazine.
No civilization is allowed to occur within the periphery of 500 m. Its
walls are made of First of all the top soil is removed with the bulldozer.
This soil is transported to the mines only when ordered, otherwise it is
heaped at the mines.
The drilling machine is used to make holes upto the depth of 10 m
and 150 mm diameter. It also takes samples of soil at various levels
for the assessment of the soil. According to the kind of earth i.e., soft
or hard the placing of explosive is decided.
If the soft earth is charge with an explosive, then the gases pass
through the porous soil and hole is not blasted, hence explosive is
wasted.
It is very important to ram and compact the earth after piling
explosive. Otherwise it might explode in the air. Even the rock develops
the cracks, so if the drilling machine is used in the area it might get
stuck up in crack.
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The blast explosive is manufactured by IDL Chemicals, Rourkela.
It is of 125 mm Diameter. and 83 mm Diameter. It is class 2 explosive
weighting 6.25 kg. The 83 mm Diameter explosive is Aqua dyne, also
manufactured by IDL Chemicals. It weighs 2.77 kg.
The explosive have following compositions:
Nitrate - 60 %
Ag Powder - 10 %
Water - 10 %
Nitroglycerine - 20 %
These explosive are Nitroglycerine based explosive and they are in
a thick paste form and contains salver. The cost is Rs.18/kg.
When we observed the blasting there were 19 holes of depth 10 m
each, so 35x15x10x1.5 tons of limestone is acquired against the usage of
1500 kg of explosive used.
Here the holes blasting affective area are 34 m long and 15 m
wide. The power factor ranges from 3 to 5 which are considered less.
A detonating chord is used to connect these holes to each other.
These are made up to Penta Ethylene Tetra Nitrate [PETN] coater with
plastic. A one meter long chord contains 10 gm of PETN. This is used in
a chord form so that the contact is not broken. It fires at the rate of 6000
m/sec.
A detonator is used to connect these holes and complete the
circuit. The wire is made of steel which is covered with plastic. This wire
is ignited. An Ohm’s meter is used to check whether the circuit is
completed or not. Then the dynamo is charged and the red light on it
lights frequently and fire button is pressed, and blast occurs.
The place where stones and it is 60 cm thick stacking of explosives
and detonators are done separately. In the case of accidents if explosives
ignite, they just burn, but if detonators ignite, they explode.
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The explosives are stacked on a wooden platform, 6 inch above
the ground, so that no harm is caused by rats also. Special care is taken
not to use any iron material in the magazine, instead of iron, Cu is used.
The stacking is done only upto 1.2 m. A red line is marked almost about
2.5 m above the ground which marks the maximum storage capacity. A
passage is left between the stacks, so that if one starts burning the others
might be removed.
These magazines have special Z type ventilators for the purpose of
security. These are also made from Cu.
The vehicle used for carrying the explosives is made from Al. It
has a partition between back part and front part and also a silencer in
front, so there will not any chance of fire.
Equipments:
Drilling machinesNo - 2
Approx Cost - 35 lacs
Make - IBH -10
Power - 210 HP
Dia. of drilling rod- 6 inch
There are 3 rods of 3 m each and hammer of 1.5 m. The hammers
have holes, from which air pressure is exerted so the soil is removed. It
consumes 20 lts of diesel/hr.
Loading EquipmentsHydraulic Excavators - 3
Approx Cost - 85 lacs
Make - L&T 300 CK
Power - 324 HP
Bucket capacity - 3.8 m3 [5 tons]
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Diesel consumption - 40 lts/hr
Transporting Equipment
BEML Hall pack - 8
Approx Cost - 55 lakes
Make - LW 35
Power - 380 HP
Diesel consumption - 20 lts/hr
DozersNo - 8
Make - BEML D355A3
Engine – Japanese
CrushingCrushing is done after the mining. Crusher is located outside the
mining lease area and is about 2.5 km away from stacking site at the
plant. The main aim of the crusher is to crush the lime stone to the
required size and transport the same to the stock pile through RBC.
Lime stone is dumped in the hopper which is of 160 tons capacity
by H-35 BEML dumpers of 35 tons capacity.
From hopper the material is then transferred into the crusher
through an Apron Feeder where the material is finally crushed.
Technical Specification:
1. Type : Single rotor impactor
2. Size : APPM 1822
3. Mass Flow rate : 950 TPH
4. Feed size : 1400x1300x1100 mm
5. End product size : 75 mm
6. Motor : 1425 KW at 1000 rpm
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Main Components of L.S. Crusher:
1. Apron Feeder
2. Scraper chain conveyor
3. Impactor
1. Apron Feeder
It comprises of specially fabricated frame on which two heavy
duty endless link assemblies are wounded. The apron flights are of
rolled steels and are bolted on the chains and are used for conveying the
material. The drive arrangement is a D.C. motor and a gear ox
connected to the drive shaft of the apron feeder. The link assembly and
the flight are supported and guided on the top of the frame by deck
rollers. The drive shaft has two sprocket hub assemblies which mesh
with the link assemblies and drive the apron feeder. On the return end
of the apron conveyor is the tail wheel assembly for guiding the link
assembly.
2. Scraper Chain Conveyor
The scraper conveyor consists of a trough assembly within with a
scraper chain assembly travels. The round link chain and fabricated
scraper flight runs on scraper trough while conveying the spillage load
on trough support assemble while returning.
Actual conveying of spillage is done by the bottom strand by
scraping material alone the trough bottom plate. The drive
arrangement consists of an A.C. electric motor and shaft mounted
reduction gear box which directly rotates the drive shaft. At the rear
end, the scraper tail wheel assembly guides the round ling chain
assembly.
3. Impactor
The crusher is Impactor Crusher. Crushing is done by impact and
it is a dynamic operation.
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The main size reduction is carried out by striking i.e., by impact
of the impeller bars to the crusher feed. The purpose of the breaker
plates arranged inside crusher is to function as deflecting plated. The
material thrown against them is reflected back into crushing
compartment, where it is again hit by the impeller bars, until it leaves
the crusher through slot between rotor and lower edge of breaker plate.
By the impact of material against roller plates and material gets
crushed and then material is supposed to crush by chunking against
each other. The material is ground to the size of 50-60 mm in first
phase.
2. SURFACE MINING
Mining lime stone with surface miner is of very recent origin in
India and it has got definite advantages over conventional mining.
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First of all the mining with surface miner eliminates totally
drilling and blasting. Surface miner performs in site crushing while
mining, which cases out the problems encountered in transportation of
limestone to crusher.
The system needs no separate loading arrangement and the
machine loads the material directly to the trucks or dumpers. The need
for haul road maintenance is drastically reduced, since the mine surface
with the surface miner is very gradual and uniform.
The biggest advantage with surface miner is that it eliminates
primary crushing, since the product size will be maximum 150 mm and
50 % will be less than 75 mm.
Surface miner provides scope of selective mining and hence gives
greater opportunity for exploiting the reserve where contamination is
more and where conventional mining is not possible. The elimination of
drilling and blasting provides environmental friendly mining operations
with utmost safety for the mine operators.
2.3 CONVEYOR BELT:
The crushed material from mines is transported to plant by a
Rubber Belt Conveyor (RBC).
This technology is first time in India with longest conveyor belt of
length 3.1 km. The width is 1000 mm, belt speed is 1.9 m/s. Degusting
rate of belt is 120 m3/min. Such rubber belt conveyor has minimum
power consumption. Here the material density is 1.5 kg/m3 and its mass
flow rate is 950 t/hr to 1300 t/hr.
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SECTION 3
STACKER & RECLAIMER
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3.1 STACKER:
The belt conveyor from mines to stacker contains in the way two
another crushers are there and material comes to stacker is grinded
upto size 25-30 mm.
The stacker type SU is used to stack raw material at the yard. The
stacker suns on the rails fixed at the right hand side of the pile in
longitudinal direction. The material are stacked with a certain
homogenizing effect normally according to Chevron method or
longitudinal stack piling method, with help of Boom stacker. Chevron
method is a roof like stock piling method.
The stacker consists of two main parts:
1. Tripper
2. Jib
1. TRIPPER
Tripper and jibs are linked together and are provided with RBCs.
For the traveling of stacker four drive motors of 5.5 KW are provided
which are attached with jibs rollers through gear boxes. The tripper is
fitted with four wheels which are mounted in wheel casing.
2. JIB
The stacker consists of a mobile rotable frame and a stacker
capable of lifting in the vertical plane. The hydraulic equipment serves
to move the stacker jib in step from the lower to the upper working
position. While the stacker lift the stacker jib according to the height of
the pile.
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3.2 RECLAIMER:
The bridge scraper is used for homogenization of particular
materials at longitudinal store and for conveyance of material from
piles to outgoing conveyor belt.
Reclaimer has a long scrapper chain through which homogenized
material is transported to outgoing conveyor.
Horrow carriage has cross conveyors on it and cross conveyors
have horrows on it. Horrows move horizontally by horrow carriage.
The horrows cut the stack horizontally and material falls down and
from the stacker chain material gets collected. The scrapper chain
moves ahead and material comes on conveyor belt and further goes to
additive silos.
Thus, reclaimer has an important role for homogenization of
material. And it helps to achieve good quality of final product.
3.3 RAW MILL ADDITIVE SILOS:
The raw mill should contain Al2O3-Alumina Fe2O3-Ferrous
content in a proper proportion.
If they are not in a right proportion then addition is necessary. So
additive silos for Alumina. Fe2O3 and sweetener are kept for addition if
required.
First, reclaimer raw mix is analyzed and if the alumina and iron is
less than addition is done to gain right proportion.
For alumina, additive is Bauxite and for iron, Laterite is used. For
sweetener Black cotton soil is used, which they getting from their mines,
which is the upper level of soil. The sweetener silo have diameter 6500
cm and Iron ore silo have diameter 5000 cm and alumina silo have also
5000 cm diameter.
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Density Capacity
Sweetener -1.4 t/m3 450m3
Iron ore -2.1t/m3 250m3
Alumina -1.4t/m3 250m3
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SECTION 4
RAW MILL
************************************************
***********************************
4.1 INTRODUCTION
Lime stone, clay, Iron ore fed into mill. The chemical composition
of raw materials is controlled by computer calculations based on
analyses of raw materials, as well as actual amount of compositions of
meal in the homogenizing silo.
During transport to mill inlet, magnetic objects are removed by a
magnetic separator, which is mounted over belt conveyor. Metal
detectors are also built in as further protection. If a metal is detected, a
pneumatically operated gate is activated for discharge of a portion of
materials containing metal piece. Another metal detector is placed near
box feeder, where belt stops for manual removal if a metal is detected.
The box feeder at mill inlet operates as a buffer and as an air
sluice to reduce false air intake. After box feeder, raw material drops on
rotary grinding table. Here, they are thrown under rollers by rotary
movement of table, and ground. The grinding table is driven by mill
main motor.
The material might contains some moisture upto 4%. This is
dried by hot kiln exit gases supplied through nozzle ring surrounding
grinding table.
The reflected material from mill is returned to mill inlet. The
ground and dried materials i.e., raw meal are carried by air flow to
dynamic separator. Here, coarse particles are returned to grinding table
while finer particles pass for separator in dedusting cyclones.
There are a number of oil pumps for Lubrication and cooling of
gear unit and bearing of grinding table. Grinding pressure between
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three rollers and grinding table. A constant and correct lubrication of
bearing in three rollers.
There are nozzles installed in front of rollers and on grinding
table, for use when temperature or grinding process makes it necessary.
Here, in raw mill hot gas blow is taken from kiln string. It helps
material to dry and thus to less moisture content. Yet moisture content
remains 0.5%, which is necessary for easy operation.
The mill is automatically stopped when very strong vibrations
occur. The air flow to mill is supplied by fan. A gas recirculation duct
with damper is also installed to ensure sufficient constant air flow. The
air from mill fan is drawn through bag house for cleaning by filter fan.
The raw meal produced is carried by fluxosides and elevators to
C.F. silo for storage. The dust precipitated in bag house filter and
function box is transported to C.F. silo or directly back to kiln
preheater.
The most important feature of raw mill is that instead of balls, it has rollers. There are three rollers of 50 tons each around centre shaft. The production of a ball mill can’t exceed more than 150 tons, where as the kiln needs 450 tons of raw meal. The production of raw mill is 500 tons/hours.
CONTROLLED FLOW SILO:
FLS have developed a new, continuously operated silo for
blending and storage of cement raw mix, called C.F. silo. It extracts
material simultaneously at different rates from a number of outlets in
silo bottom.
The C.F. silo bottom is divided into seven identical hexagonal
sectors. Each of these sectors is divided into six triangular sub sectors.
Thus, the bottom consists of a total of 42 sub sectors. These sub sectors
represent 42 individual areas from which are provided with aerating
units. These 42 separate sub sectors represent 42 individual areas from
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which material can be extracted accurately to a predetermined
program.
In actual operation, homogenization is performed by using three
of seven discharge outlets simultaneously, each blower aerating only one
sub sector at a time.
The raw meal flow stream from extraction points of part silos is then blended in a tank placed after silo.
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SECTION 5
PREHEATER
************************************************
***********************************
5.1 PREHEATER AND CALCINER:
A decisive factor in heat economy of cement dry production
process was development of preheater. With this, it was possible to
obtain very low exit gas temperature of about 250oC which were not
attainable before. At the L&T, Gujarat cement works the preheater is
of F.L.Smidth Company.
ADVANTAGES OF FLS PREHEATER:
The kiln dimensions can be considerably reduced.
The calciner can be supplied with combustion air from clinker cooler
at a temperature of approximately 900oC. Since control devices are
located in gas stream behind preheater.
The process control allows for a suitable margin of safety against
overheating, even at a calciner stage of 90-95%.
The high degree of calcinations and regular feeding of kiln ensure
stable kiln operation without kiln upset conditions.
The characteristic feature of calciner is through blending of raw
mix and fuel prior to introduction of combustion air and subsequent
initiating of combustion process. The combustion air is drawn from
clinker cooler at a temperature of about 900oC. The air flows from inlet
to outlet of calciner, with only a low pressure drop.
The heat generated in calciner is utilized partly to raise raw
mixture temperature to calcining level and to implement actual
calcining process. The preheater here has a double string-kiln string
and calciner string 6-stage preheater with low pressure type cyclones.
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Kiln string: 3x6 m + 3x6.3 m cyclone.
Calcining string: 1x2x5.4 m + 1x7.5 m + 2x7.8 m + 2x8 m
By using separate strings for kiln and calciner important
operational advantage of independent and accurate draught control is
obtained.
The raw meal feed is extracted from the C.F. silo into feed bin.
The feed control is based on schenck impact weigher concept. The feed
bin is placed on load cells.
After the feeding system, raw meal is transported to the preheater
inlet by means of elevators and air slides. At preheater inlet, feed is split
into two preheater strings in such a way that outlet temperatures are
equalized.
The preheater is operating as a counter current heat exchanger
with raw meal passing downwards by gravity and air going upwards by
the INDUCED DRAUGHT (ID) fans.
After fifth stage of the calciner string and sixth stage of kiln
string, combined raw meal enters calciner vessel. Here, about 55% of
fuel is fired. The combustion for the calciner is hot atmosphere air
drawn from coolax cooler through a separate tertiary air duct mixed
with combustion has from kiln. The calciner is designed for a gas
retention time of more than 3 seconds. In calciner, raw meal will be
calcined to about 90-95%.
The material from calciner is routed onwards to sixth cyclone
stage of calciner string from where it slides into kiln.
Part of gases leaving top stage of preheater cyclones is taken to
raw mill for drying and transporting raw material before it is taken to
bag house.
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5.2 BAG HOUSE:
Reversible air bag house has an important role to deal with
environmental pollution problems. As the whole preheater system
works on the negative draft system by ID Fans, the air goes upward
direction.
These gases contains material or particle form material and if
they are directly send or vented out on the air, then pollution problems
will occur and even lot of material loss will be there in the
manufacturing process, so it is very necessary to do something with this.
The system consists of a sixteen compartments bag houses with
associated safety device.
A reverse air system
And necessary access ladder
Walt ways
Support structures
Each bag house consists of,
Bag house casing
Filter Bags
Bag cleaning system
Hopper
Conveyor system
Dampers
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SECTION 6
KILN
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*********************
6.1 INTRODUCTION:
The kiln is 75 m long and it have 4.75 m diameter. The kiln is
supported on three types of 2 rollers each. It rotates at a speed of 3 to 4
rpm. The burning zone temperature in kiln is around 1400-1500oC.
Pulverized coal is used as fuel in kiln and calciner. The fuel supply rate
to kiln installation is determined on basis of an evaluation of clinker
quality and current status of kiln.
The exit gas analysis is done for evaluation of combustion process.
The smoke gases must not contain any unburnt substances i.e., C or Co.
They may cause fire and also waste latent heat of unburnt part of gases.
A certain surplus air is supplied during the combustion process, because
of inadequate air is supplied, smoke may contain unburnt gases.
There are alarm limits set up to monitor CO and O2 levels in exist
gases. If due to any reason there is a blockage in cyclones, kiln is shut
down.
The lubrication between supporting rollers and kiln type must be
provided by means of dry graphite lubrication. Providing an oil bath
can prove fatal as kiln is almost floating in air.
Usually refractory lining of kiln is replaced if the thickness of
bricks is reduces to half of its original size due to wear. Hence, kiln shell
must not be overheated. If kiln shell temperature rises above 400-500oC,
affected area must be cooled by means of fans. There are 14 fans for this
purpose.
In event of a further rise in temperature kiln must be shut down
for a repair of lining. A radiation pyrometer (scanner) has been
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installed for purpose of checking condition of kiln lining during
operation.
If there are any hot spots observed, kiln motor is run at lowest
speed until temperature of hot spot has been reduced. In burning zone,
the temperature reaches up to 1400oC and clinkerization occurs.
BURNING PROCESS IN KILN:
For burning purpose firing is done in kiln. The firing is done
through nozzle, coal is fired, reaching temperature of flame up to
1800oC and maintaining temperature in kiln up to 1400-1500oC of
material.
KILN SPEED:
Slowing kiln will heat kiln up through out its length. It will also
increase draft, which will tend to reduce rate of heating in burning zone
and increase temperature at feed end.
Speeding kiln up will have opposite effect. When a kiln is slowed
down for longer period of time, increase in draft should be controlled by
regulating damper, to avoid overheating of feed end, fuel rate is
decreased.
The kiln should be controlled by change in fuel rate, as sight
increase in fuel which is not enough to overheat burning zone will, if left
on long enough, heat up feed end and correct slowly dropping back end
temperature.
CHEMICAL PROCEDURE:
During burning and decarbonation of carbonates of Mg and Ca
and removal constitutional water, there are schematically three
consecutive stage of clinker mineral formation. During burning of first
stage up to 990oC all aluminum oxide reacts with lime, generating
monocalcium alluminate silica also starts to combine with lime
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generating dicalcium silicate. At this phase of clinker compounds
dicalcium silicate concentration is low.
At second stage of formation, when the material is heated to a
range from 1190oC to 1285oC, monocalcium alluminate formed during
first stage is further saturated with lime reacts with iron oxide creating
dicalcium alluminoferrit which is also called browmmillerite. Formation
of dicalcium silicate which started first stage is now being completed.
At third stage, material reaches temperature above 1285oC, at this
stage of clinker formation, known exothermal effect occurs, which
produces generally 120-150 kcal/kg clinker. The rapid heating of
material by this effect causes clinker to behave in this kiln section
similar to fluidized material, thus increasing the transport velocity of
material which can disturb the regular kiln operation. The partially
fused condition of material permits one part of dicalcium silicate to be
saturated with remainder of the uncombined lime, and thus be
converted to tricalcium silicate. The formation of clinker is completed
with third stage.
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SECTION 7
COOLAX COOLER
************************************************
*********************
7.1 COOLAX COOLER:
The coolax cooler receives approximately 1450oC. Hot clinker
from rotary kiln, cooling clinker down to a temperature which is
approximately 80oC at a production of 6500 tone/day.
Some of thermal energy contained in clinker is simultaneously
recuperated. The thermal energy is transmitted to cooling air which is
subsequently utilized in kiln and calciner.
Grate-1 is designed as CFG system while grate 2 and 3 are
designed as RFT system. From kiln outlet, clinker drops down onto the
inclined grate plates, latter being alternately stationary and moveable.
CONTROLLED FLOW GRATE
The airstreams to first grates is very powerful so that clinker is
well distributed across the entire width of the grates. This will prevent
clinker from being backed together at very high temperature.
The air flow is adjusted so that clinker is kept bubbling on surface
of layer. Hence, heat recuperation will be optimized.
A controlled flow means that air is fed to grates, individually
controlled to smaller units of grate. This is accomplished by means of
ducts, with damper of adjusting flow and hence air pressure, to single
zones.
All cooling air is forced upward through narrow gaps in grates to
clinker bed. High air velocity will prevent dust and small clinker
particles from dropping into gaps of grate while cooler is operating.
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As mentioned, air ducts are connected to supporting beams which
are also configured as air ducts.
REDUCED FALL ZONE:
In RFT zone, the clinker is cooled further down to the desired
temperature. In RFT zone, entire airflow is injected under grates,
penetrating up into clinker bed at gap between grates and via openings
at bottom of hollow girders. A pressure loss, corresponding to one-third
of pressure in the components, is allowed for in design of RFT grates
and the hollow girders so as to ensure favorable distribution of air.
The grates carry clinker down to outlet where clinker is pushed
onto and outlet grate, where clinker less than 25 mm, drops through
grate and down into clinker conveying system, whereas remaining
others are pushed off grates and they pass under hammers of crusher
and down to clinker conveying system.
7.2 CLINKER STORAGE:
The reason for storing clinker is, because kiln operation does not
always run simultaneously with finish mill operation. Also, in many
cases, high temperature of clinker leaving cooler does not allow direct
grinding, because hot clinker causes high grinding temperatures, which
impair not only mill operation but also cement quality so, far cooling
and as a production buffer clinker is stored in various storage facilities.
The storage time of a good quality clinker, stored in protected
facilities does not influence grinding process nor the quality of cement.
Even clinker stored for many years in dead space of clinker holes did
not show a drop in quality.
Here, for purpose of clinker storage, they have a clinker yard
erected with aluminium sheets and a clinker silo of R.C.C. The bottom
diameter of silo is 80mts and capacity is 67,000 tons. From the clinker
yard, it is taken to cement mill with help of trucks, whereas from silo, it
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is taken via conveyor belt, clinker is also stored in open space. Size of
clinker is 2 to 25mm.
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SECTION 8
CEMENT MILL
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*********************
8.1 INTRODUCTION:
Cement clinker and 2-5% raw gypsum is ground together to form
cement. The purpose of grinding mills:-
Creation of larger reactive surface, so that clinker minerals can react
with water.
Controlling of setting properties of cement by adding gypsum.
At L&T, there are four cement mills of capacity 133 t/hr. It
consists of two chambers divided by double wall. This wall allows
particles of 4 mm size to pass through. About 27 % of volume consists of
grinding media. The first chambers has high chrome ball of 60 to 90
mm diameter whereas second chamber has 15-20 mm diameter high
chrome balls In first chamber grinding takes place due to impact and in
second due to attrition. The product is taken to air separator where
coarse particle are recirculated to mill. The mill converts majority of
energy input into heat. Gypsum is dehydrated at 130oC at high
temperature. Gypsum loses its property as cement setting retarded and
becomes false set cement. Hence temperature inside mill is 70-80oC. For
this water is injected into hottest part of mill where it evaporates
instantly. Water is carried into mill by compressed air through a simple
nozzle which breaks up water into very small drops; from where
material goes to air separator.
8.2 ELECTOSTATIC PRECIPITATOR:
In plate type electric precipitator, only electrical precipitation is
employed. This ESP is used after Coolax Cooler and Cement Mill.
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In addition to precipitation by action of the electrical dust
collection also precipitation of a certain quantity of dust particle by
action of gravity as well as direction and by impact. During the
elimination of every supply, the electrical precipitator works as the dust
settling chamber with collection of 30 to 70 %.
The size and velocity with which the dust is attracted by the
collecting electrodes is of importance for the collection efficiency. High
resistivity and is difficult to remove from the collecting electrodes and
often it may cause a detrimental operating condition known as return
throw of sparks or as back ionization.
ESP is less efficient than bag house, as it fails to work at high
temperature.
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SECTION 9
PACKING PLANT
************************************************
*********************
9.1 INTRODUCTION:
A rotary packing machine is used here having 12 filling spouts.
This machine completes 2.5 rotates per minute. Hence filling 30
bags/minutes or 1800 kg/hour.
The spouts are mounted at the bottom of cylindrical container.
The manual work comprises of placing the empty bags on the spouts as
they pass it. Fluidized cement flows into the rotating container. At the
bottom of the container. Certain amount of fluidized air is added to the
cement to increasing flow ability through the filling spouts into the bags.
Each spout has its own weighing device. By the time the spout
finished one rotation 50 kg of cement is filled into the bag. It is dropped
off on the conveyor belt. All the extra cement falls in the hopper from
where it is transported to the cement silo.
In case of transportation by ship, they are carried to the jetty by 4%
less, long belt conveyor; otherwise they are slide down and loaded in to the trucks standing underneath.
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3.1 INTRODUCTION
3.1.1. Supply Chain:
“The supply chain is the process of moving goods from the
customer order through the raw materials stage, supply, production
and distribution of products to the customer.”
3.1.2. Supply Chain Management:
Managing the chain of events in this process is what is
known as supply chain management. It includes:
1. Managing supply and demand.
2. Sourcing raw materials and parts.
3. Manufacturing and assembly.
4. Warehousing and inventory tracking.
5. Order entry and order management.
6. Distribution across all channels and delivery to the customer.
Effective management must take into account
coordinating all the different pieces of this chain as quickly as
possible without losing any of the quality or customer satisfaction,
while keeping costs down.
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3.1.3. A Model of Supply Chain Management
Retailers
Distribution centers
Assembly/Mfg.
Customers
1st Tier supplier
2nd Tier supplier
1st tier supplier
2nd Tier supplier
2nd Tier supplier
Product and Material Flow
Information and Financial Flow
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3.2. WHY TO MANAGE SUPPLY CHAIN?
In recent years it has become clear that many companies have
reduced their manufacturing costs as much as is practically possible
while manufacturing quality- a long time competitive differentiate – is
at a high standard across the board. So meeting customer’s specific
demands for product delivery is seen as the next critical opportunity for
competitive advantage. By managing the supply chain companies will
able to maintain competitive advantage and at the same time
significantly reduce costs. Companies had to turn to more advanced
supply chain management due to shortened product life cycles,
increased competition and heightened expectations of customers.
Implementing an effective supply chain management function,
usually through software, facilitates enhanced customer services,
management of inventories, transportation systems and whole
distribution networks in addition to cost savings. Rapid developments in
information communications technology has been and is crucial for the
development of modern, cost-effective supply chain management
through use of databases, communication systems and advanced
computer software. By analyzing the supply chain, businesses are able
to identify which parts of their supply chain process are not competitive,
understand which customer needs are not being met, establish
improvement goals and rapidly implement necessary improvements.
The supply Chain Council, an independent, not for profit global
organization, which is open to all companies that are interested in
applying and advancing the state of the art in supply chain management
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systems and practices. The SCC founded in 1996 with 69 voluntary
members, now has over 650 members world wide and seeks to promote
use of one standard model for managing supply chains in order to
provide benchmarking capabilities.
3.3. BENEFITS OF AN EFFECTIVE SCM
1. Reduced inventories.
2. Lower operating costs.
3. Product availability.
4. Customer satisfaction.
5. Flexibility.
3.4. SUPPLY CHAIN DECISIONS
There are four major decision areas in supply chain management:
Location decisions
Production decisions
Inventory decisions
Transportation decisions
3.4.1. Location Decisions:
The geographic placement of production facilities, stocking
points, and sourcing points is the natural first step in the creating a
supply chain. The location of facilities involves a commitment of
resources to a long term plan. Once the size, number and location of
these are determined, these are the possible paths by which the product
flows through to the final customer.
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These decisions are of great significance to a firm since they
represent the basic strategy for accessing customer markets, and will
have a considerable impact on revenue, cost and level of service. These
decisions are determined by an optimization routine that considers
production costs, taxes, duties and duty drawback, tariffs, local content,
distribution costs, production limitations etc. Although location
decisions are primarily strategic, they also have implications on an
operational level.
3.4.2. Production Decisions:
The Strategic decisions include what products to produce and
which plants to produce them in allocation of supplier to plants to DC’s
and DC’s to customer markets. As before, these decisions have a big
impact on the revenues, costs and customer service levels of the firm.
These decisions assume the existence of the facilities but determine the
exact path through which a product flows to and from these facilities.
Another critical issue is the capacity of the manufacturing
facilities and this largely depends the degree of vertical integration
within the firm. Operational decisions focus on detailed production
scheduling. These decisions include the construction of the master
production on machines and equipment maintenance. Other
considerations include workload balancing and quality control
measures at a production facility.
3.4.3. Inventory Decisions:
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These refer to means by which inventories are managed.
Inventories exist at every stage of the supply chain as either raw
material, semi finished or finished goods. They are also in process
between locations.
Their primary purpose to buffer against any uncertainty that
might exist in the supply chain. Since holding of inventories can cost
anywhere between 20 to 40 percent of their value, their efficient
management is critical in supply chain operations. It is strategic in the
sense that top management sets goals. However, most respondents have
approached the management of inventory from an operational
perspective. These include deployment strategies (push versus pull),
control policies, determination of the optimal levels of order quantities
and reorder points and setting safety stock levels at each stocking
location. These levels are critical, since they are primary determinants
of customer service levels.
3.4.4. Transportation Decisions:
The mode choice aspect of these decisions is the more strategic
ones. These are closely linked to the inventory decisions, since the best
choice of mode is often found by trading off the cost of using the
particular mode of transport with the indirect cost of inventory
associated with that mode.
While air shipment may be fast, reliable and warrant lesser safety
stocks, they are expensive. Meanwhile shipping by a sea or rail may be
much cheaper but they necessitate holding relatively large amounts of
inventory to buffer against the inherent uncertainty associated with
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them. Hence transportation by roads is the common mode of
transportation in cement industry.
Therefore customer service levels and geographic location play
vital roles in such decisions. Shipment sizes (consolidated bulk
shipments versus Lot-for-Lot), routing and scheduling of equipment are
key areas in effective management of firm’s transport strategy.
3.5. INVENTORY MANAGEMENT
Management of inventory has received considerable attention
over the years. Managers ascribe different reasons for holding or not
holding inventory. Some of the major reasons for holding inventory are:
To improve customer service.
To hedge against price changes and contingencies.
To achieve production, purchase and transportation economies.
To protect demand and lead time uncertainties.
3.6. WAREHOSING AND DISTRIBUTION
MANAGEMENT:
One of the most important aspects of supply chain design is the
selection of go-to-market, i.e. the distribution channel.
Traditionally, distribution channels comprising intermediaries
were developed with the primary objective of reducing the number of
market contact points. Besides this, the intermediaries also took up the
functions of sorting, accumulating, allocating and assorting.
Faced with growing complexity in customer preferences, trading
partner dynamics, product line expansions and fresh options for
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interfacing with customers, manufacturers have come up with
innovative distribution channels as a tool for business success.
3.7. SUPPLY CHAIN RISKS
Managing supply chain in today’s world is increasingly
challenging. The greater the uncertainties in supply and demand,
globalization of market, shorter product and technology life cycles and
the increased use of manufacturing, distribution and logistics partners
resulting in complex international supply network relationships, have
led to higher exposure to risks in the supply chain.
Further, it is essential to understand the risks your company
bears versus your suppliers and customers. The supply chain is not
necessarily win/win environment. Supply chain risks come in many
different forms.
First, the financial risks can be huge. Inventory costs due to
obsolescence, markdowns and stock outs can be significant.
Mismanaged supply chains leading to excessive or mismatched
inventory are thus liable to huge financial risks. Financial risks can also
present themselves through the risk of reworking stock and penalties
for non delivery of goods.
The complexity and uncertainties forces of a supply chain can also
drive the “chaos” risks of a supply chain. These chaos effects result
form overreactions, unnecessary inventions, second guessing, mistrust
and distorted information throughout a supply chain. The well known
bullwhip effect, which describes increasing fluctuations of order
patterns from downstream to upstream supply chain, is an example of
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such chaos. This increased nervousness will of course lead to higher cost
inefficiencies through over ordering and squirreling inventory. The
existence of nervousness and chaos in a supply chain also means that it
is impossible to make the right decisions for every player in a supply
chain.
Ultimately, the supply chain is exposed to market risks i.e. missing
the market opportunities presented. A supply chain cannot be
responsive to changing market trends and customer references if the
right market signals cannot be obtained.
Finally, market opportunities can be missed when customer
orders with short order lead times could not be met. A supply chain
with high risk exposure cannot be efficient. A manager running a
supply chain with these risks lacks confidence in the supply chain.
3.7.1. Lack of Supply Chain Confidence:
No confidence in:
Order cycle time.
Order current status.
Demand forecasts given.
Suppliers capability to deliver.
Manufacturing capacity.
Quality of the products.
Service delivered.
3.7.2. The Risk Spiral:
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Where do these supply chain risks come from? These are
evidently tangible risks in the supply chain which lead to its poor
performance, but what are not recognized in the same way are the
intangible elements that of the attitudes and perceptions of the users
and members of the supply chain. The intangible lack of confidence in a
supply chain leads to actions and interventions by supply chain
members, which collectively, increases the risk exposure.
For example, a sales team believes that order cycle and order
fulfillment times are not reliable: they devise their own means of
addressing this. They order stock so as to have supplies to report their
key customers and put in phantom (i.e. their own private buffer stock)
orders to secure supply, all causing inefficiencies.
3.8. DEPLOYMENT CONSIDERATIONS AND
QUESTIONS
Following five areas has been considered before deploying an e-
procurement solution:
3.8.1. Strategy
Have a clear vision of your procurement operations and obtain
senior management sponsorship.
What are your purchasing needs?
With how many of your suppliers can realistically employ
automated purchasing processes?
Is your purchasing process automated? Is it internet based? Is it
secured to protect sensitive financial data? Are you large enough
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to require that your partners use e-procurement if they want to
do business with you?
Does senior management support that initiative?
3.8.2. Process
Consider your process and those of your suppliers in the areas of
customer service, quality and integration.
Do you have product and service standards for the goods bought?
Can you easily maintain old supplier relationships while
establishing new ones?
Can you easily bring in new suppliers to your purchasing process?
3.8.3. People
Training, organizational culture and organizational structure
must support the change in purchasing process. Staff support is crucial
to success.
Who will use the purchasing system?
Have you created the appropriate security procedures and
policies for controlling who has access information?
How web enabled is your purchasing department? Do they have
the skills and equipment they need?
3.8.4. Technology
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Reliable, scalable, secure, accessible and manageable computer
networks, applications and tools are essential to support these activities.
Is your existing purchasing system compatible with your
suppliers?
Do you have any type of an enterprise resource planning, ERP
tool? If so, how much of your business does it cover?
How well equipped is your network to support purchasing
automation?
How do these e-procurement systems link to credit and financial
authorization systems?
3.8.5. Service and Support
In addition to people and technology you have to consider outside
services for rapid deployment (planning, design and implementation)
and operation of your e-procurement solution. Consider:
Can I reduce my time to market and/or costs if I hire service
organization with expertise and experience deploying e-
procurement solutions rather than training staff to perform this
one time task?
What is the cost to my business if the system is not available? How
can I proactively identify and resolve problems?
How can I protect my customer/business data, applications and
network from ongoing security threat?
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4.1 PROBLEM STATEMENT
What is the role of supply chain management in cement industry?
4.2 OBJECTIVES
To understand the entire network of supply chain and the
decision making process.
To measure the role of technology and its impact on the players
involved in supply chain.
To understand the different processes involved in manufacturing
and assembly.
To analyze the vendor management as the important aspect of
SCM.
To study and analyze the methodology adopted by ULTRATECH
CEMENT LTD.,GUJARAT CEMENT WORKS for inventory
control.
The difficulties if any, which were faced while implementing
different inventory techniques.
4.3 RESEARCH METHODOLOGY
Exploratory research and Descriptive research. And I have taken
permission from authorities of ULTRATECH CEMENT LIMITED to
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carry out my study on “pareto analysis for inventory consumption in
ULTRATECH CEMENT LIMITED for the year 2009-10”.
I had studied the consumption of various inventories and arrange
them in descending order of their consumption value. Categorize the
inventories in A, B, and C category depending on the fact that they
constitute 90%, 70-90%, or 10-15% of the total consumption value. For
this I had gone through different types of inventories used in
ULTRATECH CEMENT LIMITED.
I also studied the methodology adopted by ULTRATECH
CEMENT LIMITED for implementation of inventory control and
progress made in this condition.
4.4 DATA COLLECTION
Sources of data collection
Primary Data
Through interviews
Through observations
Secondary data
Internet
Magazines
Newspaper
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SUPPL-IERS
STRATEGICINVENTORIESLOCATIONS
PROCUREM-ENT ORDERS
MFG.ORDERS
FACTORY ORDERS
DISTRIBUT-ION ORDER
CUSTOMER ORDER
CUST-OMER-S
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5.1 MATERIAL DEPARTMENT
5.1.1 DEPARTMENT STRUCTURE
Material Department is divided into three parts.
Purchase, Material Planning and Control and Stores. These three
departments work for procurement of the raw material of the right
quality, at the right time, from the right source and in the right
quantity for the production departments of the company.
Responsibility and Authority of HOD (MATL)
To specify the responsibilities and authorities for
functional positions in the department who have to:
Initiate action to prevent any non conformities in the
Material department;
Identify & record any problem;
Initiate, recommend or provide solutions through
designated channels;
Verify implementation of solutions;
Control the situation until the deficiency or
unsatisfactory condition has been corrected.
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To form, document, establish and implement procedures
& instructions for:
Procurement to the extent possible of eco-friendly
materials & services from right source, at right time
and of right quality & quantity and at right prices.
Coordination with other units for procurement of
various materials/services from or through them as
and when required.
To ensure proper procedures for specifying
conditions defining the procurement of eco friendly
materials / services and packaging.
To monitor and evaluate the performance of vendors,
to ensure timely supply of proper quality and eco
friendly materials & services for uninterrupted
operations.
Ensuring procedures for proper receipt, issue, storage
and handling of materials, and disposal of packaging
and scrap.
To ensure proper accounting of materials and ensure
return of nonconforming materials to respective
vendors.
To ensure proper classification and codification of
materials and replenishment of stock of materials
controlled by material control section.
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To issue guidelines periodically, so as to ensure
efficient and proper working of Materials
Department. These guidelines may be in the form of
written circulars, procedures or verbal instructions to
Materials personnel.
5.2 PURCHASE DEPARTMENT
Purchase department comes under purview of Material
Department.
Purchase Department’s main area of work is to find the suppliers
of raw material and spare parts of machinery, then to negotiate the
prices and to ensure the quality of material.
Purchase Department coordinates with the production department
in order to know the requirement of raw material to manufacture
the demanded item.
Process followed by the department:
1) Proper Communication with supplier
2) Negotiation
3) To form an Agreement
4) Follow up actions
Responsibility and Authority of HOD Purchase
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The HOD (PUR) shall be responsible for establishing,
implementing and maintaining the Instructions of
Materials Department related to Purchase activities, in
line with the Quality Procedures and Environmental
The HOD (PUR) shall be responsible for procuring
Materials and Services, as required by the user
departments, in time, of the right quality, at optimum
cost and which are eco friendly.
5.3 STORES DEPARTMENT
Stores Department is one of the most important departments for any
company because it is the department where the purchased items are
stored.
The main work of Stores Department is to take the delivery of the
purchased goods and to store it in a proper manner. Stores Department
also issues this material time by time as per the requirement of every
department.
Responsibility and Authority of HOD (STORES)
The HOD (STORES) shall be responsible for establishing,
implementing and maintaining Instructions for
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activities of the stores in line with the Quality Procedures
and Environmental Procedures of Materials
Department.
He will also be responsible for amending the instructions,
as and when required, to ensure continued suitability
and effectiveness of the Quality Procedures and
Environmental Procedures for Material Department.
He will be responsible for Making available Materials/
Services, as required by the user departments, in time, of
the right Quality, and quantity, at optimum cost and
without damaging the environment.
He will be responsible for proper collection, movement,
storage and disposal of scrap materials in environment
friendly manner.
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5.4 MATERIAL PLANNING & CONTROL DEPARTMENT
Material Planning & Control Department is very much
related with the stores department of the company. The main work of
this department is to make the strategy of warehousing the goods in
such a way that it becomes very easy to issue that material at the time of
requirement. For the big companies like UltraTech this department is
as valuable as other departments.
Responsibility & Authority of Materials Controller:
The Material Controller will be responsible for
establishing, implementing and maintaining Instructions
for activities of the material control section in line with the
Quality Procedures and Environmental Procedure of
Materials Department.
He will also be responsible for amending the instructions,
as and when required, to ensure continued suitability and
effectiveness of the Quality Procedures and
Environmental Procedures for Materials Department.
He will be responsible for classification and codification of
all Stores and spares, and maintaining and replenishing
stock of all materials controlled by him.
Co-ordination with users for review of spares
Co-ordination with other units for common inventory
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5.5 PRODUCTION DEPARTMENT
Production means creation of utility and the framework
within which the creation of utility can occur is termed as
production system at one end of system there are input and at
the other hands out put. Certain process of operation of activity
called as production system links inputs and outputs. The
nature production system differs from company to company or
from plant to plant in the some concern.
UltraTech Cement Limited Gujarat Cement Works is
engaged in manufacturing of Clinker and Cement for dispatch
to Domestic & International markets.
The raw materials are limestone from captive mine and other
additives such as Iron Ore, Bauxite, High-grade limestone,
Gypsum and Fly ash procured from other sources. Other
products, which are purchased, are spares & consumables for
the maintenance of plant and machinery.
The manufacturing process for clinker consists of crushing,
grinding and preprocessing of raw materials. This clinker is
either dispatched as product or further grinded to make cement.
Both the products are tested in quality control department, with
national and international standards.
These products are dispatched either by Road or Rail to
destination specified by internal customer i.e., cement
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marketing division. Clinker is dispatched in bulk whereas the
cement either in bulk or in bags.
Major portion of the land under plant and colony was
unproductive land without history of any industrial usage. The
leased land for the captive mine consists of both agriculture and
unproductive land.
5.5.1 MATERIAL HANDLING:
Material handling refers to the moving of materials from store to
machine and machine to next machine during production process. It is
main and specialized activity of storehouse. It has been estimated that
about 50% to 75% of cost production is spent in material and material
handling activity and cost can be reduce by proper selection and
maintenance of material handling equipment.
RAW MILL
The raw mill plant include
Atox mill 45
Dynamic separator
Four cyclones
Mill fan
KILN
Portland cement clinker is produced from a mixture of typical
70-80% limestone, 10-30% clay and 0-10% corrective materials by
burning in rotary kiln. The temperature in burning zone is typical 1600
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to 1800 degree Celsius and residence time in the kiln is 10-30 minutes.
The raw material is coming from pre-heater, where some 400-450
degree Celsius temperature is given to raw materials. Because these
much of temperature is required for kiln. And advantage of this pre-
heater is that, capacity of kiln is increased by 2-2.5 times.
COAL MILL
The operating principal and the equipment are same as of the raw
mill. Coal of 50mm is ground into 90by coal mill roller. Raw coal comes
in this sheep from foreign and stopped in coal yard by stacker. Through
trucks, it is collected in ground hopper and through grid; the big coal is
separated out manually. Through RBC circuit, the raw coal is drawn to
mill plant. From magnetic separator metal is separated from coal and
coal collected into raw coal hopper.
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GCW EQUIPMENT CAPACITY
Crusher 2*900 TPH
Raw mill 2*450TPH
Kiln 2*6000 TPH
Coal mill 2*56 TPH
Cement mill 3*133 TPH
Packers 5*120 TPH
Cement mill 1*161 TPH
Limestone piles 4*6,700M.T
CF silos 2*28,000 M.T
Clinker silos 60,000 M.T
Cement silos 6*6,000 M.T
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5.6 QUALITY CONTROL DEPARTMENT
The quality control department works on two following basis.
1. Product Control
2. Process Control
5.6.1 PRODUCT CONTROL
During the whole process of manufacturing of cement in the plant
samples are taken at various stages of manufacturing like raw material
sample, clinker sample and cement sample, just in order to improve the
quality of the product. The sample is bought to laboratory of product
control department. In that various physical & chemical tests are
performed on the samples. Chemical includes checking chemical
composition of raw material & final product. For this process chemical
analyzer and other equipments are imported from Denmark, which
gives result very fast without much of manpower.
The cement, which is exported, is again tested in special laboratory
having instruments as per standard of respective countries. Here the
total environment is maintained just like the environment of that
country where the goods is going to be exported.
5.6.2 PROCESS CONTROL
In the Process Control various technicians check & visit to the
various location of plant to observe the process and make necessary
changes in it. This task is performed just to improve the process of
manufacturing and optimum utilization of resources.
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PACKING PLANT
Equipment and their application
Equipment Application
1.extraction screw conveyor bucket elevator feeding
2.bucket screen cement transport
3.rotary screen cement screening
4.rotary packer packing of cement
5.discharge conveyor cement sacks movement
6.spillage air sluice air sluicing
7.spillage screw conveyor spillage cement
8.truck loader sacks loading into trucks
OPERATIONS AT PACKING PLANT
The packing plant operations are planned on the basis of dispatch
information described from the dispatch section of distribution dept.
The sequence of different physical activities starts from extraction of
cement from the silos up to discharge of filled cement bag from the
nozzle of packer machine.
All these activities in the sequence are mechanized and controlled
from the packing machine panel and control panel near packer
machine. Exception to the above is the placement of bag over the
nozzle of packing machine by the operator.
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The cement extracted from silo is fed into the feed hopper with the
help of bucket elevator. The bucket elevator, feed hopper and tank of
packing system comprise of jet pulse filters.
Similarly the chamber of packing machine is maintained under a
negative pressure for avoiding the dust coming out of packer
machine.
Hence, the operating criteria for the packer machine shall be the
effective functioning of deducting system including the suction pump.
In the event of failure of dedusting system including the suction
pump, immediate corrective action are initiated to restore the system
in the minimum possible time. Despite the provision of this dedusting
system, there are other chances of air pollution due to improper
placement of empty bags as also release of loaded bags. There are 4
packers and 8 loading points for bagged cement into trucks. This
transport system consists of 8 belt conveyors with appropriate
transfer chutes.
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5.7 MARKETING DEPARTMENT
GCW is production unit of cement and clinker. So, at plant there is no
marketing department. Marketing department is working separately
than production unit. There are total 9 Cement Branch Offices (CBO) in
Gujarat. And head office at Ahmedabad. CBO are as follow
1. Ahemedabad (Head Office) 6.Mehasana
2. Rajkot 7.Valsad
3. Vadodara 8.Anand
4. Surat 9.Kutch
5. Bhavanagar
Management of all nine CBO is performed at head office -
Ahmedabad.
CBO are responsible for all marketing activities.
Moreover, they dispatch bill to customer and collect
payment from them.
All payments are transferred to metro office.
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5.7.1 STRUCTURE OF MARKETING
DEPARTMENT
CEO
President (mark.)
Vice president (mark.)
S.D.G.M. (mark.)
Regional in charge
Unit Head
Sales officer
Distributors
Dealers
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5.7.2 INTRODUCTION TO MARKETING
FUNCTION & ITS ROLES
Marketing is very vital function in any organization. To get high
position in market and advantage over competitors, every company has
to handle its marketing function very carefully. As the whole world is
turning into a global market, marketing function is getting more &
more importance in every company. The term marketing is taking new
shape in changing world. Now just mere selling the product by
advertising is not only a function of marketing but it has to be more
customers oriented. Now a day if company produces the products
according to the needs of the consumer then it can easily sell its
products.
Marketing is a social and managerial process by which individuals and
groups obtain what they need and want by way of exchanging things for
mutual benefits.
Marketing means managing markets to bring about exchange and
rotation ship for the purpose of creating value and satisfying needs and
wants. In simple words, marketing means ‘exchange process involves
works’. Seller must search for buyer, identify their needs, design good
product and service, set price, promote them, store and deliver them.
Activities such as Product development, Research, Communication,
Distribution, Pricing and after sales Services are included in marketing.
Following figure show marketing environment.
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Ultra Tech Cement is marketing its cement in domestic market as well
as in export market. Company is the second largest seller in domestic
market. Company achieved 24% market share. The company is largest
exporter of cement and clinker in India, with remarkable 2.41 MT of
cement and clinker export. The company’s cement and clinker has good
brand image in Western Europe, Middle East and neighboring
countries. Ultra Tech is also known as Indian cement giant. Company
has obtained accreditation from Bureau varieties quality international
Espanasa, Spain which is a perquisites for supply of cement to Europe.
Ultra Tech is one of the Asian cement Companies to receive this
recognition.
Supplier
Company
Competitors
MarketingIntermediaries End user
Market
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5 P’s for Ultratech Cement ltd.
PRODUCT
Ultra Tech Cement Ltd. has two products
1. Cement
2. Clinker
Company markets both cement and clinker in domestic market as well
as foreign countries also.
PRICE
Company has their own price policy for the Cement and Clinker.
Right now price of one bag of cement is 149 Rs.
PLACE
Company has wide distribution channel network in state and
within the country. Company has also the dealers outside the country
for export market.
PROMOTION
Company is using various promotional methods for enhancing its
sales and market share. The company is using various elements of
promotion mix like Advertising, Direct Selling very effectively. This
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company has a good advantage of mouth publicity by the consumers
due to top quality production with good brand equity.
PRICE MIX
Price is the amount of money the consumer has to pay to obtain
the product. Price policy is an important tool for marketing the product.
Cement price depends upon various components like current market,
environment condition, competitor price, company’s objective and cost
of production.
Ultra Tech cement’s prices are considered as premium prices,
based on the good reputation. Company sets its own price and other
players follow.
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Market share of company
COMPANY NAME PERCENTAGE
ULTRA TECH24 %
AMBUJA 24 %
HATHI 19 %
BINANI 12 %
KAMAL 10 %
SIDDHI 03 %
TATA 04 %
OTHERS04 %
In Gujarat, Ultra Tech and Ambuja both secure 24% of total market
i.e. almost half of whole market. Therefore, Ultra Tech and Ambuja
both are at a first position in Gujarat.
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Branding and labeling
Company has its own brand as Ultra Tech. Labeling on the
cement bags are also as Ultra Tech. Company uses plastic and paper
bags for packing cement. The Metro office purchases these bags. The
Metro office also does labeling. Then from the Metro office, only these
bags are provided to all plants of Ultra Tech.
After branding and labeling the product is delivered to the dealers and
through them it reaches to the target audience. Above whole description
shows the supply chain of the Ultratech Cement Ltd.
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6.1. FACILITY AND LOCATION
Location is decided on the bases of how dispersed the processing
partners, Raw Material suppliers and consumers are.
Decentralized locations focusing on suppliers and customers.
Optimal capacity utilization by manufactures to serve expected
forecasted demand.
6.2. PROCESS
Operational designs to make finished product.
At every phase of manufacturing, the wastage is very low.
Functional focused operational designs- single function for
multiple products.
e.g. Packaging of utensils.
6.3. INVENTORY MANAGEMENT
Inventory management, or inventory control, is an attempt to balance
inventory needs and requirements with the need to minimize costs
resulting from obtaining and holding inventory. There are several
schools of thought that view inventory and its function differently.
These will be addressed later, but first we present a foundation to
facilitate the reader's understanding of inventory and its function.
WHAT IS INVENTORY?
Inventory is a quantity or store of goods that is held for some purpose
or use (the term may also be used as a verb, meaning to take inventory
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or to count all goods held in inventory). Inventory may be kept "in-
house," meaning on the premises or nearby for immediate use; or it
may be held in a distant warehouse or distribution center for future use.
With the exception of firms utilizing just-in-time methods, more often
than not, the term "inventory" implies a stored quantity of goods that
exceeds what is needed for the firm to function at the current time (e.g.,
within the next few hours).
The objectives of Inventory Management are:
To identify and track all data processing assets in an Inventory System Repository.
To define the process by which assets are identified and maintained in the
Inventory System. To provide Inventory System access to all necessary personnel (data
entry, update and deletion). To provide a full range of reports that will satisfy informational
requirements. To document the Inventory Management System within the Standards
and Procedures Manual. To provide training to personnel responsible for supporting the Inventory
Management
In this age of cut throat competition material and Inventory control in practical is seen as as a green pasture where cost reduction can production an edge to any company I n competing with its rivals.
The materials executive handles a large number of items in actual practice, In any Organization. For example a cement industry has over 40,000 items consisting of spares,Refectories, consumables, components, chemicals, stationary& other items, where as the defense services deal in millions of items. The importance of each item is a major parameter while deciding about its inventory quantity. Some of these items may be very critical or difficult to purchase or may have to be imported while other items may be easily or off the shelf available. Even in every day life we see that
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housewifes does not pay the same attention to salt as she pays to oil or butter.
Moreover as the number of items increases,the effective time spent on each item diminishes. To overcome this deficiency we adopt selective techniques to improve the overall effectiveness of inventory control function.
The fundamental idea behind selective control techniques is to put the efforts where the results are worth it. It is wellknown that even though world consists of millions of people,But only a few of them deter mines the destiny of all human being. Similarili even if any organization uses millions of item, only a few become important from the finance view,Availability considerations, reasonability, criticality of performance etc…
In the literature of materials management many methods of selective inventory control are available at the disposal of inventory controller i.e. ABC analysis, HML analysis, VED analysis, SDE/SOS/GOLF analysis, XYZ analysis. All of these are explained as follows:
ABC ANALYSIS: Basis of analytical materials management tool is ABC analysis, in general ABC analysis may be applied to any branch of management. It is an easy method for application and also gives method for effective control. It is a selective inventory control technique popularly known as Always (A), Better (B), Control(C). it controls always the best,then better and finaly the good. Its importance lies in the characteristics distribution of anything which can be measured in monetary terms. The speciality of this analysis lies in the determination of priority, which enables the management to exercise the control over the management subject, on the basis of priority fixed by the analysis. The reason behind the same is that it is neither possible nor worthwhile to extend control over all the management subject of the large organization by giving equal attention to each & every subject. This analysis provides the selective basis for extending control where maximum possible benefit can be derived. This method is based on annual consumption value,
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which is obtained by the multiplication of unit price by the annual consumption quantity. ABC classification is obtained by following procedure:
A) Obtain the number of items,
B) Record unit price & quantityconsumed in a year against each item,
C) Obtain annual consumption value by multiplying price and the quantity,
D) Arrange the items in a decreasing order of annual consumption value,
E) Cumulate the annual consumption value,
F) Plot the cumulative percent of consumption value on X-axis and percent number of items on Y-axis,
G) The graph shows that initially there is steep increase and finally it levels off to the axis,
H) Where the curve turns, the points are marked for A,B and C category,
I) Alternatively on the basis of experience we can mark items as A class where cumulative consumption value is about 70% of total consumption, B class items for which cumulative consumption value is between 71-90% of total consumption value balance items as C class items. It is normally observed that about 15-20% of items covers 20% consumption value & balance 70-75% of number of items accounts for 10% of total consumption value.
J) Organization can even fix these categories on the basis of thumb rule, as A class items where annual consumption value is above one lac rupees. These varies between organization to organization,
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K) It should be noticed that annual consumption value and not the unit value is the basis for classification.
After making the items as A, B, and C class items, following control measures are exercised:
1. The consumption value A category items should be strictly controlled by the Highest level.
2. The policy for A items should be very low inventory combined with frequent ordering and/or staggered deliveries with effective follow up.
3. Norms of consumption should be tight with materials planning formulated on an accurate and upto date information.
4. A concentrated efforts must be made to apply various cost reduction methods like value engineering, waste reduction, identification of obsolete items, lead time reduction, standardization & vendor rating etc..
5. The number of sources must be increased with centralized purchase and stores for A category items.
6. Medium control to be exercised for moderate consumption value items very little control on low consumption value C category items.
Main problem with this method is that importance is imputed on the
basis of consumption value and not on its functional criticality. Hence
this classification can lead to over looking the needs of spare parts
whose criticality is high but annual consumption is low or vice versa.
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HML CLASSIFICATION:
This method is similar to ABC classification, but in this method unit
value of item instead of annual consumption value is the basis for items
classification. Materials are classified according to the unit price as
high, medium, or low value items. The cut off point varies upon the size
of organization. For example kerosene will be a low value item for a
jeweler, but high value item for a shopkeeper. The focus in this
classification is so directed as to control unit price of high value item
and to negotiate the price.
FSN ANALYSIS:
Movement analysis forms the basis for this classification. Items are
classified as Fast moving(F), Slow moving(S) and Non moving(N) based
on consumption pattern of items. If there is a rapid change of
technology then this classification will have to be updated more often.
FSN analysis is specially used to combat obsolete items particularly for
spare parts. The cut of points of three classes are usually in terms of
number of issues in the previous few years. For example zero issues in
the past five years may be placed in non moving class. Here 80-20 rule is
applicable with unit value HML analysis in classical ABC analysis.
XYZ ANALYSIS:
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While the ABC analysis has the value of consumption as basis, XYZ has
the value of inventory of stores as the basis for differentiation. This
analysis is used to review the inventories and their uses at scheduled
intervals, this study is undertaken once a year during annual stock
taking exercise. X items are those few items accounting for the major
portion of the total inventory value. Where Z items are those items with
low inventory value. Obviously Y items fall in between these two
categories, this classification helps in identifying the items which are
extensively stocked and is also based on the 80-20 rule. This analysis can
be applied for work in progress and finished goods as well.
VED ANALYSIS:
VED, defined as Vital, Essential and Desirable is a classification based
on the criticality of the component as defined by the users, non
availability of the vital parts, may result in closure of the entire factory
and is based on consideration such as stock out cost, safety, security,
design, functional reliability, maintainability, guarantee, performance
etc.
The user has the responsibility to classify these and the temptation to
categorise all items as vital must be avoided. This is particularly
applicable for machine spares, which has a distinct different behaviors
compared to raw materials. The vital category of spares have to be
stocked adequately to ensure continuous operation of the plant because
by definition non availability of vital spares can cause havoc and stop
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the wheels of the organization. Some risk can be taken in the essential
class of spares can be done away with if the lead time for procurement is
low. It is difficult to specify the percent of critical items but the 80-20
rule may be applied to start with, keeping in mind that 205 of spares
accounting for 80% of criticality of performance.
Just as VED is applied for spare part, machineries can be classified as
Vital, Essential, Important & Normal (VEIN). This classification is of
particular importance for capital intensive & maintenance intensive
industries, for instance a spare part for the generator supplying power
to the factory when power cut is imposed is most critical than any other
item. VED and VEIN can be combined to give more importance to a
vital part in the vital equipment.
SDE/SOS/GOLF ANALYSIS:
Selective inventory control methods discussed earlier are based on value
of items or their consumption pattern. There are methods which are
directed towards controlling inventory, purchase and supply related
problems. It should also not forgotten that inventory levels are also
dependent on the source of supply. For instance a scarce item with long
lead time, will surely have a higher safety stock than a locally available
item for the same consumption level.
In SDE classification materials are stored as Scarce to obtain, Difficult
to get and Easy to get. GOLF is another system where the materials are
classified according to nature and suppliers. The classification is based
on source such as Government controlled, Ordinary available anywhere
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in the country, Locally available items and Foreign items. Based on the
above source of supply inventory policy may be decided.
Raw materials for the finished goods can be classified as seasonal and
off seasonal items. Agricultural products have a seasonal pattern
depending upon the monsoon during the year and the production
activity or sales will be at its peak, the prices will be lower during the
harvest and the inventory manager will have to balance the holding
costs and lower prices in deciding the levels for these classes of items.
From all the methods discussed earlier it is evident that these methods
of classification help the manager to selectively control the materials &
effectively apply his energies to the problem areas. Obviously the
executive has to make the best of all methods in the optimum manner
and should not be guided by a tunnel vision of pursuing only one
method. Some organization uses two or more methods in combination at
a time to decide inventory levels.
In ULTRATECH CEMENT LTD.the items can be grouped basically on
three considerations i.e.consumption value, criticality and availability.
These three considerations are from the view point of finance,
maintenance and materials, so there was a need of a system which can
take care of all these three considerations at a time and provide suitable
guidelines to materials manager to effectively control the inventory. The
integerative approach which can take care of these consideration is
called MUSIC-3D (MULTI UNIT SELECTIVE INVENTORY
CONTROL-THREE DIMENSIONAL).
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INVENTORY CONTROL TECHNIQUE AT ULTRATECH
CEMENT LTD.: MUSIC 3-D TECHNIQUE
Traditional ABC classification and control of inventorybased on
formulae is inadequate for spares, as regular consumption pattern for
spares is generally not available. It also does not emphasizes on critical
items, whose non availability may cause production loss, significant
energy loss or cause unsafe working condition. So need of system which
can take care of all these factors was felt. MUSIC-3D inventory control
methods can take care of all these aspects.
Three dimensions which are taken care simultaneously by classifying
the items for inventory control in MUSIC-3D method are:
Cost
Criticality
Availability.
If we adopt three level for each criteria such as ABC, SDE, VDE then 27
groups would be formed. It becomes difficult job in practice to follow
up 27 groups. Hence two levels for each criteria can be developed using
80-20 rule i.e. low /high consumption value, critical/non-critical items,
long/short lead time item. This integrated approach resulting in eight
groups is called MUSIC-3D as shown in table:
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HIGH CONSUMPTION
VALUE
LOW CONSUMPTION
VALUE
LONG
LEAD
TIME
SHORT
LEAD
TIME
LONG
LEAD
TIME
SHORT
LEAD
TIME
CRITICAL
NON CRITICAL
The categorization to start may be arbitrary based on technical
competence, knowledge and skill. These classifications should be
reviewed periodically at least once in a year. It may be ideal to carry out
this analysis separately for each class of items i.e. raw materials, spares,
etc.
This approach has a simple method of fixing ideal stock levels for items
as under:
IDEAL STOCK LEVEL=K x (LEAD TIME CONSUMPTION)
Ideal stock can be defined as the apparent optimum inventory we have
to keep to meet production requirements to maintain optimum levels.
Ideal inventory=1+k x (LTC)
Minimum inventory=ideal – (LTC/2)
Maximum inventory=ideal + (LTC/2)
Here K is a safety factor varying between 0.5-3.0 which is assigned to
each group based on its criticality, consumption value and lead time.
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In order to optimize the inventory, the key action areas are:
1. LEAD TIME: Internal lead time should be carefully examined,
monitored and reviewed periodically and controls exercised.
Attempt should also be made to reduce the external lead time,
there by reducing the total lead time.
2. STORES AND SPARES: Items should be classified as per
definition into following categories:
a) Insurance
b) Critical
c) Non critical
3. Strict control on consumption norms for high consumption value
items should be exercised.
4. For optimizing inventory other control measures and action plan
are given
So the traditional ABC analysis discusses only the consumption value
without considering the criticality or availability and failed to help
inventory controller, where as MUSIC-3D, which considers all the three
aspects i.e. Criticality, Lead time and Consumption value has been of
immense help to inventory controller. Some of the advantages of
MUSIC-3D are as follows:
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1. This system incorporates all features of selective inventory control
methods and divides all items in manageable eight groups.
2. It provides scientific and logical basis for fixing inventory levels.
It is helpful to inventory controller in following areas of
operations:-
a) Setting effective follow up and chasing system.
b) Deciding tighter procedure and systems.
c) Deciding safety stock and average inventory.
d) Delegation of power.
e) Designing proper MIS and purchase intelligence system.
f) Posting in clerical efforts.
g) Vendor development and vendor rating.
h) Central purchase and central stores.
i) Minimizing obsolescence.
j) Deciding service level and implementing JIT(Just In
Time)and zero stock.
k) Deciding consumption norms.
l) Size of working capital required and purchase budget.
So this system can provide proper guidelines and way to design effective inventory control management to inventory controller.
Problems faced and their solutions:-
During the course of implementation of different methods for materials management, management of ULTRATECH CEMENT LIMITED
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noticed many problems but these are solved with joint efforts. Some of the problems are:-
Long and time consuming exercise:
Categorization of 18000 items was a very long exercise and too when no. of departments involved were numerous. This problem complicated further more due to incomplete and ambiguous description of items. Codification of materials was not equipment based. Hence to identify place of use of any item itself was very difficult. After proper identification of spares it could be categories as critical/Non critical/ Insurance. Volume of work was very large. List of items has to take two to three times to complete this exercise. But with lot of effort and hard work this exercise was complete.
Difficulty in categorization of items:-
Categorization of the items into one of the category was very difficult task because definition was very subjective and opinion may differ between one to other person. No one wanted to take risk in declaring any item as non critical because wrong categorization could lead to stock out of that item and can cause stoppage of plant and production losses. Difficulty was also experienced due to incomplete description and lack of information about place of use. But dedicated efforts of user department made this exercise success. Continuous review of flags was also decided.
Difficulty in calculation of lead time and lead time consumption:-
It was very difficult job to provide lead time to about 18000 items. Database was also not having authenticity of correct indent date.GRN with the help of which actual past lead time could be calculated. It was very difficult to calculate lead time manually from each kardex card and that too taking care of past 2-3 years data. Further it was not made
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clear in recommendation that while calculating lead time and lead time consumption, minimum lead time is to be considered, maximum lead time is to be considered or average lead time is to be considered.
Past data about lead time of imported items which were earlier restricted items might have later included in OGL and lead time might have decreased or vice versa. Due to liberalization imports become easy, so there has been drastic cut in lead time. So estimation of correct lead time was also difficult. Average lead time was taken to start with continuous efforts of purchase department and EDP department helped in completing this exercise.
Difficulty in deciding High/Low consumption:-
At the time of introduction of MUSIC-3D many project work also in progress, so deciding High/Low consumption value on the basis of past consumption data could also provide misleading information. So while deciding High/Low flag project job consumption has to be deducted from total consumption. To solve this problem instead of using 80-20 rule through statistical analysis ULTRATECH CEMENT LTD. selected a value limit of Rs.50.000/-on the basis of past experience to start with consumption value flag.
Difficulty in calculating ideal inventory level:-
When ideal inventory level were calculated on the basis of safety factor and lead time consumption, these were coming on very higher side, so management decided to calculate ideal inventory level on the basis of past experience. This exercise was again very long and difficult exercise. So it was decided that after preparing of ideal inventory, continuous of ideal inventory norms should be done and this resulted in optimizing inventory. Ideal value also varies every month due to changes in rates, addition/ deletion of items in inventory. With lot of efforts ideal inventory was calculated on the basis of experience and was found suitable.
Computerization pre-requisite:
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Due to multiplicity of dimensions and lot of permutations and combination it was very difficult to implement, monitor and maintain MUSIC-3D system without online computerization of materials management. So ULTRATECH CEMENT LTD. completed its computerization program.
All the problem enumerated above have been faced by ULTRATECH CEMENT LTD. and any organization who is interested in implementing this system will have to pre[are strategy to overcome this problems. Strong will power, dedicated efforts and hardwork are the key factors in implementation of any system and MUSIC-3D is no exception to it. ULTRATECH CEMENT LTD. also started efforts in this direction simultaneously and was able to do so.
System implementation
To start all item should be provided Critical/Non critical & Insurance category flags based on the definition given afterwards
High consumption and Low consumption value flags should be decided by applying 80-20 rule or on adhoc basis i.e. say items with annual consumption value Rs.50,000 and above as high consumption value items and balance items as low consumption value items. This limit can vary according to size/ nature of operations of a unit.
By analyzing past data of lead time or on the basis of lead time provided by the purchase department for various classes of items long lead time or short lead time flags should be given to each item. To start with item with lead time more than six months can be decided as long lead time items balance items as short lead time items.
Above analysis will enable the inventory controller to identify the items in eight groups of MUSIC-3D.
For the purpose better control and fixing responsibilities have been classified into following categories:
a) Stores and spares- Departmental requisitioned/ indented.
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b) Stores and spares- Auto indented (Controlled by Materials Department)
c) Insurance items.
STOCKING POLICY:
Departmental indented items:-
Stores and spares for which definite pattern of consumption can not be established; the requisitioning/indenting may be done by user department based on the consumption of items and stock levels.
While indenting, care should be taken to ensure that total of quantity in stock, under purchase order indent quantity should not exceed the ideal stock levels. Indent of these items shall be processed by inventory control cell after interaction with users.
Ideal stock levels may be calculated with the help of following method, which takes care of criticality, availability and consumption value.
Ideal stock level = K x (Lead Time Consumption)
“K” Factor
K is a safety factor, which is decided on the basis of eight group of items formed by taking consumption value, criticality and lead time into account. Proposed ‘K’ factor is available afterwards. Safety factor is used to avoid position of stock out caused due to fluctuation in supply and consumption.
CONSUMPTION VALUE
The High/Low consumption value can be determined on the basis of 80-20 rule. Its accounting for about 80% of total yearly consumption, which are about 20% of number of items can be classified as high consumption value items and rest 80% of items accounting for 20% of
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total consumption value can be termed as low consumption value items. This analysis should be carried out every year and classification reviewed accordingly.
AVAILABILITY
It can be defined as High and Low on the basis of location and nature of industry. It may also be decided by rule of thumb to start with.
CRITICALITY
It can be decided by users department by taking into considerations parameters of definition afterwards.
LEAD TIME CONSUMPTION
Lead time for each items can be calculated based on passed data base and can be provided by purchase department where data is not available. Consumption data can be taken from past data bank in case unit is new,to start with anticipated consumption can be considered. Department requisition items can be of two types:
a) Items to maintain ideal inventory level.
b) Specified items indented for specific job/overhauling/shutdowns and are consumed during a specific period. Ideal inventory for such items are zero.
Auto indented (Controlled by Materials Department):-
These items would include regular consumption stock items which are being monitored by materials department based on Minimum/Maximum stock levels and reordering level (which can be calculated by users with the help of statistical method given afterwards).
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Materials department themselves prepares the indents and place orders for these items.
INSURANCE ITEMS
Based on the definition of insurance items the maintenance department will classify items under this category. Any new addition under this category shall be done with approval of unit head. Stock level for such items shall be one unit or one set as the case may be. Insurance spares will have to be stored with special care, as these are not anticipated to be used for a very long time.
REPLENISHMENT POLICY
Replenishment policy suggested for all the three categories of items is as under:
Departmental Indented
The user department will raise indents as per status of stock and pending indents, on receiving feedback from materials department. The suggested frequency for review of stock levels etc for raising indents if required for various groups of items is as under:
Critical Items (High consumption value) – Very frequency (Daily/ Weekly)
Critical Items (Low consumption value) – frequently (once in a month)
Non Critical items (High consumption) – Should be intended on the basis of need and when required.
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Non Critical (Low consumption value) – Less frequently (once in a month)
Exception reporting to head of maintenance should be provided by materials department on the monthly basis for following categories of items:
a) Critical stock out items.
b) Critical items below ideal stock and not covered by indent.
Materials department should provide stock position in monthly consumption statement of critical items to user department.
Units can also decide frequency and system as per status of computerization in the units
Auto indented (controlled by materials department)
For this category items indents should be raised by materials department on the basis of review of stock position v/s reordering level further following measures can also be used:
1) Yearly/half yearly indented will phase deliveries.
2) Deliveries should be post-ponded / expedited / advanced based on stock level over max near / below min respectively.
3) For high consumption value items more frequent deliveries shold be asked for.
4) Users should inform materials department for any specific requirement of this category of items.
Insurance items
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Maintenance should review and if required raise indents as soon as an insurance category items is consumed. The user department should review on monthly/ weekly basis for insurance category stocked out items not yet indented.
Exception reported to head of maintenance department should be provided by materials department covering issues and stocked out of insurance items. This will facilitate immediate follow up action.
Other measures for optimizing inventory
Following measures can also help in effective control of inventory and better services:-
1. Users should provide feedback to materials department on continuous basis on following:
a) Regarding materials required on priority, delivery to be postponed, indent/ order to be cancelled.
b) Equipment already modified/ being modify to identify surplus / obsolete items from stock of spares of these equipments.
c) Quality of materials received v/s expected quality.
d) New vendor identification.
e) Development of drawing for OEM spares.
f) Changes or addition required in specification of items and function required to be performed by spares, wherever essential.
2. Materials department should provide feedback on following to user:-
c) Status of P.O/ indents.
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d) Materials received in stores, against specific requirement.
3. Standardization of equipments/ spares.
4. Review of K factor, criticality, lead time and stock norms on continuous basis.
5. Proper Storage and Maintenance: Materials are money in physical form, safe storage and prevention, therefore, Safeguard Company’s money and ensure delivery of materials for use in the same quantity as received from the suppliers.
6. Import substitutes: Import substitutes means that if some costly component is purchased by import then it can be made within our country so that it becomes cheaper for us and in this way it reduces the cost.
7. OEM Substitution: Better and cheap import substitutes can be used for the non critical parts of a machine or spares.
Latest trends
Entering into partnership arrangements with vendors. Reduction of supplier base to minimum numbers. Use of quickest mode of transport to reduce transit inventory. Choice of vendors located near to factory. Use of logistics to optimize cost of delivery, packaging, transit etc. Entering into open ended rate contracts. Use of latest information technology by requesting vendor to
install modern equipments like FAX or mode which can ensure better communication through computer.
6.4. TRANSPORTATION
Each player has its own logistics management. Transport is through outside transport agencies.
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6.5 VENDOR EVALUATION
6.5.1 Evaluation Criteria
Vendor evaluation is used to rate the performance of Vendor on
various criteria in SAP.
1. Price
2. Quality
3. Delivery
4. Service
S6.5.2. Weightage - Criteria wise.
Main Criteria Sub Criteria Weightage%
Quality(W1) Quantity accepted
(Q1)
Quantity accepted
with deviations(Q2)
Quantity
rejected(Q3)
Total quantity
supplied(Q)
65%
Delivery(W2) Quantity promised
to deliver within
stipulated time (D)
Actual qty supplied
within stipulated
15%
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time (D1)
Promised delivery
time for full
consignment (T)
Actual delivery time
for full consignment
(T1)
Service(W3) Cooperativeness and
readiness to help in
emergencies(20) S1
Readiness to replace
rejected material(20)
S2
Providing
supporting
document in
time(20) S3
Promptness in
reply(20) S4
Avoiding recurrence
of
defects/complaints(2
0) S5
10%
EHS Env., Helth, Safety(W4) Compliance of no
child labours & no
forced labours(20)
E1
Compliance of
health and safety
10%
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system(20) E2
Freedom of
association &
disciplinary
practices(20) E3
Working hours &
remuneration(20) E4
Management
system(20) E5
Overall Score Maximum
(W1xQR + W2xDR +
W3xSR + W4xEHSR) /
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100%
6.5.3. Material wise break up of Overall Score
The overall score of the vendor will depend upon the broad category of material supplied by the vendor. The weightages
for the overall score for the different class of material shall be as tabled below.
Material Quality Delivery Service EHS
Capital goods 30 40 20 10
Spares 20 30 30 20
Raw Materials 30 30 30 10
General stores 10 40 40 10
Fuels 20 30 40 0
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6.5.4. Calculating overall score
The SAP system drives the overall score from the scores of
various main criteria, taking the weightage factors assigned to each
main criterion into account.
Example:
The table below displays the scores for a vendor in raw materials category and
their weighting factors.
Main Criteria Score Weightage% Criteria wise point
Quality
Delivery
Service
EHS
70
80
20
10
65
15
10
10
21
32
16
7
Total 100 76
6.5.5. Classifications of Vendors
Vendor Evaluation
Score (points)
Classification of
Vendor
Remarks
100
Above 90
60 to 90
Less than 60
Excellent
Very good
Good
Unsatisfactory
Should keep it up
Could improve
To be delisted
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7.1 ADOPTING PULL BASED SYSTEM
In order to make the system more responsive, organizations
should adopt pull based systems for inventory replenishment.
Though it would be temping to say that a pull system should be
followed, it is not possible to follow an entirely pull system in this sector,
considering the large volumes sold.
A pure pull system would increase transportation cost
considerably and would not give business advantage. Hence a
combination of push and pull system is suggested for this sector.
7.2 FORECASTING &DEMAND MANAGEMENT
As observed error in demand forecasting in this sector is very
high contributing to most of the supply chain inefficiencies. Hence there
is a need for improving forecasting accuracy.
To improve supplier responsiveness, suppliers can be informed
about expected demands 2-3 months in advance and in what range
demand is expected to vary.
Demand Side
- Strengthening of delivery chain.
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- Interface between producers, designers of cement intensive
products, fabrication ultimate user.
- Creating awareness about cost effective and technically
efficient end use of cement.
Supply Side
- Enhanced and easy access to critical inputs.
- Expansion and improvement in quality of infrastructure.
- Well developed financial market.
- Increased focus on R&D, training of manpower and integrated
information services.
7.3 SHOULD GO FOR ORGANISED RETAILING
THROUGH MALLS
Tie up with reputed malls for the marketing and selling of cement.
7.4. DEPLOYEMENT OF E-PROCUREMENT BY
CONSIDERING FIVE ASPECTS.
Strategy
Process
Services and Support
Technology
People
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MUSIC-3D “K factors”
SR NO. CATEGORY SUGGESTED FACTORS
1 CRITICAL High Consumption ValueLong Lead Time
1.5 to 1.8
2 CRITICAL High Consumption ValueShort Lead Time
1.2 to 1.5
3 CRITICAL Low Consumption ValueLong Lead Time
2.5 to 2.8
4 CRITICAL Low Consumption ValueShort Lead Time
1.8 to 2.4
5 NON CRITICAL High Consumption ValueLong Lead Time
0.8 to 1.0
6 NON CRITICAL High Consumption ValueShort Lead Time
0.5 to 0.8
7 NON CRITICAL Low Consumption ValueLong Lead Time
1.5 to 1.8
8 NON CRITICAL Low Consumption ValueShort Lead Time
1.5 to 1.8
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MUSIC-3D GROUPWISWE CONTROL & ACTION PLAN
Sr no.
CATEGORY CONTROL & ACTION PLAN
1 CRITICAL High Consumption ValueLong Lead Time
1. Strict control on consumption norms.
2. Use full material intelligence system. (Expediting & follow up efforts maximum)
3. Multiple sources4. Minimum working
capital(stock as low as possible)
5. No stock outs
2 CRITICAL High Consumption ValueShort Lead Time
Same as above.
3 CRITICAL Low Consumption ValueLong Lead Time
1. Large qty. to be ordered- orders for annual or two years requirement
2. Adequate level of inventory(qty- plenty)
3. No stock out (100% service level)
4 CRITICAL Low Consumption ValueShort Lead Time
Same as 3 above, however order qty may be for quarter to six months requirement, being short lead time.
5 NON CRITICAL
High Consumption ValueLong Lead Time
1. All cost reduction technique to be applied
2. Stockout possible.
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3. Delegation of power- Highest level.
4. Low inventory level.5. Service level- Moderate
6 NON CRITICAL
High Consumption ValueShort Lead Time
Same as 5 above.1. Purchases on just-in-time basis2. Zero % inventory or very low
inventory3. Service level- Minimum.
7 NON CRITICAL
Low Consumption ValueLong Lead Time
1. Moderate inventory level2. Stock out possible3. Routine efforts4. Service level- Moderate
8 NON CRITICAL
Low Consumption ValueShort Lead Time
Same as 7 above
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DEFINITONS
INSURANCE
Insurance spares are those spares of vital equipment/ machineries
which are normally not required for routine maintenance, but may be
required for unforeseen break down causing stoppage of production or
cause unsafe working condition or significant energy losses. Normally
these items have high degree of reliability having the same life cycle as
equipment itself and are of high value and long lead time.
CRITICAL
Critical items are those spares of vital equipment having reliability
lower than insurance spares. Non availability of which could cause
stoppage of plant or reduce production level or cause unsafe working
condition or significant energy losses. A spare of equipment having
stand by will also come in this category as stand by is supposed to come
into operation instantaneously in the event of stoppage of the main
equipment.
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NON CRITICAL
All other spares required for normal maintenance but do not fall into
critical category as above .i.e. non availability of which would not cause:
I. Stoppage of plant or reduction of production level or
II. Unsafe working conditions or
III. Significant energy losses.
STATISTICAL METHOD FOR SETTING LEVELS
This method should be adopted for items with a definite pattern of consumption. It shall operate as follows:
MINIMUM LEVEL: It can be defined as the stock to cater to uncertainties at a desired service level on account of variations in consumption & lead time in procurement.
Demand and variation in demand shall be derived from the actual past consumption data of past two to three years consumption and current trend may be considered with provision for future refinement. Lead time and deviation to lead time at item level may be taken as suggested by the purchase department where actual past data is not available.
FORMULA
Min. level: = S
Where TD is standard deviation of monthly consumption TK is standard deviation of lead time in months ‘S’ is safety factor taken at different service level based on
criticality of item (e.g. for 95% service level the factor is 1.64) Lead time in months.
MAXIMUM LEVEL: Minimum level + Lead time consumption(LTC)IDEAL LEVEL: Minimum level + ½ LTC
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LEAD TIME: For items with staggered deliveries The duration between two consecutive approved receipts.
For items with one time delivery: This can be defined as the duration that lapses between the
recognition of the need for an item and its receipt.
NOTE: The above levels can be further refined by taking into consideration.
i. Lot size, standard packing quantity, discount rate.ii. To account for eventualities requiring quantity needed for
replacement in critical services due to plant upset operation.
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PREFACE
Case study is the part of our project training which enhances the analytical ability of a student. In line of this, every student has to undergo in depth case study along with the training program of eight weeks in an organization.
With reference to above course I had also gone through a case study in ULTRATECH CEMENT LIMITED, GUJARAT CEMENT WORKS on the topic “Pareto Analysis for Inventory Consumption in ULTRATECH CEMENT LIMITED, GUJARAT CEMENT WORKSfor the year 2009-10”.
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PARETO ANALYSIS FOR INVENTORYCONSUMPTION IN INVENTORY IN ULTRATECH CEMENT LIMITED, GUJARAT CEMENT WORKS FOR THR YEAR 2009-10.
“Take care of the pound, the penny wil take care of itself”, must be the motto of the inventory controller. This is also known as “Vital few and trivial many” principle and is the logic of 80-20 rule which implies that 80% of the value is accounted by 20% of items. We observe the prevalence of the 80-20 rule in politics, religion, social status, language, economics, work nature etc. When we here the statement that 20% of people do 80% of work, 20% of people enjoys the 80% of wealth, 20% of executives work is accounted by 80% of total time etc. This is based on the principle that five fingers cannot be equal. This common sense approach to solve any problem is to tackle the important aspect more vigorously.
Similarly in inventory management also the 80-20 rule is a major fundamental step. Here classification of items, restored so that a major portion of effective time is spent on those materials, which are more important. The motive behind any selective control is that an equally critical analysis of all items will be very expensive as it is not possible to have an socialistic pattern of society, where all citizen are equal in every aspect. Moreover such a concentration on all items will have a diffused effect regardless of the priorities. Therefore a concept of pareto analysis is used.
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Pareto analysis is a ranked comparison of factors related to a quality problem. It helps a quality improvement project team to identify and focus on the vital new factors. The quality cost factors are very helpful in telling us whether we have a very big problem or not. They also help us to decide whether we should have to dig deeper or not.
PARETO PRINCIPLE
It states that “In any group of factors contributing to a common effect, a relative few account for the bulk of the few”.
OR
“In any series of elements to be controlled, only a small fraction in terms of elements will usually account for a large fraction in terms of result”.i.e. any assortment of species follows the rule of “Vital Few, Trivial Many”. For example a relative few of our customers (about 20%) accounts for most of our sales (80%). It is same for different parts of human body also. About 20% of the total number of organs is vital to our life i.e. we could not live without our heart, lungs, or kidneys, but certainly we could live without our eyes, ears, hands or legs.
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This relationship prevails widely an application to oppurtinities for cost reduction. This is the Pareto Principle which is identified decades ago and named after the Italian economist who had formulated some mathematical relationships of vital few and trivial many as applied to distribution of wealth.
IMPORTANCE OF PARETO ANALYSIS
Pareto analysis leads a quality improvement team to focus on the vital few problems or cause of problems that have the greatest impact on the quality effect that the team is trying to improve. In Pareto analysis we gather facts and attempt to find the highest concentration of quality improvement potential in the fewest projects or remedies. These offer the greayest potential gain for the list amount of managerial and investigative effort.
The main goal of Pareto Analysis is to separate the numerous problems or causes of problems in to two categories i.e. the vital few and the useful many.
OBJECTIVE OF CASE STUDY:-Our objective of Pareto analysis is to use the facts to find the highest concentration of quality improvement potential in the fewer number of
80%
20%
20%
80%
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projects or remedies. These offer the greatest potential gain for the least amount of managerial and investigate effort and highest return on investment in the following ways;
1. To have stocks available as and when they are required.
2. To decide which items to stock and which items to procure on
demand.
3. To the enable the management to make costs and consumption
between operations and periods.
4. To provide, on item by item basis, for re-order points and order
such that quantity as would ensure that the aggregate result
confirm with the constraints and objectives of inventory control.
5. To facilitate purchase economies.
6. to utilize available storage space, but prevent stock levels from
exceeding space availability.
7. To maintain adequate accountability of inventory assets.
8. To keep all the expenditure within the budget authorizations.
Benefits from the study:
The following list covers the major type of benefits that can be achieved
from a well planned, completely administered system of inventory
control:-
1. Reduction in manufacturing cost:-
A well balanced inventory system can reduce the manufacturing
costs in the following ways;
a) As it reduces raw materials shortage, and so the labour is
better utilized.
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b) The idle times of machines are minimized as the machines are
never kept idle
for the want of raw materials.
c) Constant rescheduling and expensive set up cost are
minimized because right
quantity of the raw material is supplied at right time and hence
production lags are averted
and a steady production rate is always maintained.
2. Improvement of customer relations:-
This is achieved through faster, more reliable delivery service
which results from the maintainenance of a better balance among
the qualities of finished items at hand.
3. Improvement of labour and community relations:-
This results from a greater leveling of production peaks and
valleys and consequent increase in stability of employment.
4. Increase in effectiveness of key personnel:-
Effective inventory can save considerable executive time which
might other wise be wasted on problems involving raw materials
shortage, back order etc.
5. Reduction of purchased material cost:-
This results from eliminations of overstocking and reduction of
inventory costs and inventory losses. These are achieved by:
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a). By improving the inventory mix and thereby reducing the total
quantity of finished goods needed to provide competitive service
to customers.
b). By maintaining a economical balance between inventory
carrying cost and acquisition cost on purchased items.
c). By minimizing inventory losses that results from:
- decline in market values of raw material and finished
goods
- spoilage of deterioration
- product obsolescence
6. Strengthening of financial position:
Streamlining the inventory results in more working capital and
reduced overall capital requirements in storage space and
warehouses.
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INVENTORY AN OVERVIEW:-
Inventory, it’s a detailed list of those movable items which are necessary
to manufacture a product to maintain the equipment and machinery in
good working order.
Inventory is actually the money kept in the showroom in the shape of a
high speed steel bit, a mild steel rod, milling cutter etc.
TYPES OF INVENTORIES:-
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RAW MATERIAL:- To hold stocks of raw materials, an
organization deploys its primary production sections or process to
obtain raw materials from manufacturers and stockists.
WORK IN PROGRESS:- The holding of both raw materials and
stocks of finished goods is generally a planned activity. In process stocks
however, are likely to exist in any manufacturing organization, whether
they are planned for or not.
FINISHED GOODS:- The stock of finished goods provides a buffer
between customers demand and the manufacturers supplies.
FLABBY INVENTORY:- It comprises of finished goods, raw
materials and store held because of poor working capital management
and inefficient distribution.
PROFIT MAKING INVENTORY:- It represents stock of raw
materialsand finished goods held for realizing stock profits.
SAFETY INVENTORY:- It provides for failures in supplies,
unexpected spurt in demand etc. although there may be an insurance
cover.
NORMAL INVENTORY:- It is based on production plan, lead time
of supplies and economic ordering levels. Normal inventories fluctuate
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primarily with change in production plan. Normal inventory also
includes a reasonable factor of safety.
EXCESSIVE INVENTORY:- Even an efficient organization may
be compelled to build up excessive inventory for reasons beyond its
control as in the case of a strategic import or as a measure of a
government price support of a commodity.
Pareto Analysis and Inventory control methods:
All inventory control methods uses the pareto analysis principle based on
different criteria of classification:
Methods of Classification Criteria
1. ABC Analysis(Always Better Control) : Annual consumption value of items.
2. HML Analysis(High, Medium, Low) : Unit price of the item.
3. VED Analysis(Vital, Essential, Desirable): Technical nature of the part or component
in relation to the production operation.
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4. SDE Analysis(Scarce, Difficult to get, : Purchasing problems and availability
Easy to get)
5. GOLF Analysis(Government, Ordering, : Source of material supplier.
Local, Foreign)
6. FSN Analysis(Fast, Slow, : Issue for production from stores.
Non-moving items)
7. SOS Analysis (Seasonal, Off- Seasonal) : The time of availability generally for
commodities.
8. XYZ Analysis : Inventory value of the item stored.
ABC Analysis of Inventory Consumption:
As the size of the organization increases the number of items to be purchased or stored, to maintain the production flow also increase. All the items to be stored are taken care of, but to give equal importance to all the items stored in a large organization is neither possible nor worthwhile. Similarly purchase of materials is also done in bulk with a predetermined frequency as well as number of different items purchased at a time are also more. To control all the purchases which are in bulk, well in advance before they are issued, for use inside the production department is sometimes uneconomical. Moreover in
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inventory procurement problems, price fluctuations, blocks in supply and receipt are more.
There to reduce the cost of control over the inventory maintained in large organization in such a way is economical. So selective control techniques are adopted and pareto principle is applied. One of the selective inventory control technique for inventory consumption value is ABC Analysis.
ABC Analysis segregates the items on the basis of value and tells how much the item is and to what extend it can be controlled. This method takes into account the consumption value of each item and priority is fixed on the basis of consumption value of that item.
This method takes into considerations following points:
a) Different inventory levels.b) Order quantities.c) Monetary value of the material.d) Extend and closeness of the control desired.
It is generally felt that in an organization most of the inventories have much higher usage values than other inventories. This necessitates the study of the value of the materials to be used before deciding upon the extend and closeness of the control to be exercised.
In ABC Analysis the high value item are classified as “A Class Item” and would be placed under tight control. “C Class Item” represents relatively very low value and would be under simple control. “B Class Items” fall in between the two categories and requires reasonable attention of management for effective control.
In general, all inventory control methods results in three type of items .ie. A, B, C. Where A and B class items are vital few and C class items are trivial many. A class items generally accounts for 70 to 80% of the total consumption. B class results for 50-70% & C Class results results for remaining 5 to 10% of total consumption.
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RESEARCH FINDINGS AND SUGGESTIONS:-
1. For ‘A’ category items:-a) The high value items or A class items are limited and few in
numbers or quantity needs careful and close control.b) For the control to be effective for A class items, minimum
level, maximum level and reorder level are to be set.c) For a class items, the purchase procedures and the quantity
are to be thought of well in advance and to be purchase well in time and not only this, handling must also be carried out properly.
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d) A class items are costly and generally accounts for 70-80% of total inventory. So they are purchased in small quantity but often and just before their use.
2. For ‘B’ category items:-
a) ‘B’ class items are medium valued items and lie between ‘A’ and ’C’ category items. Such items needed moderate control.
b) ‘b’ class items are purchased on the basis of past requirements and according to the planned production schedule.
c) ‘B’ class items are ordered whenever the quantity reaches the re-order point.
d) ‘B’ class items are comparatively less costly than ‘A’ class items and stock upto three months may be maintained.
3. For ‘C’ category items :-a) ‘C’ class items constitute major portion of the inventory in
quantity with the least value on the total inventory cost.b) Controlling ‘c’ class items with intensive or moderate care
is uneconomical due to the percentage of total items.c) ‘C’ class items are procured just before they are finish and
detail expediting is not necessary for them.
Control Measures:-
1. The consumption value of ‘A’ category items should be strictly controlled by the highest level.
2. The policy for ‘A’ category items should be very low inventory combined with frequent ordering and / or staggered deliveries with effective follow up.
3. Norms of consumption should be tight with materials planning formulate on an accurate and upto date information.
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4. A concentrated efforts must be made to apply on various cost reduction methods like Value engineering, Waste reduction, Standardisation and vendor rating.
5. The number of sources must be increased with centralized purchase and stores for ‘A’ category items.
6. Medium controlled exercised for moderate consumption value items, very little control on low ‘C’ category items.
SUGGESTIONS ON THE BASIS OF CASE STUDY
By the pareto analysis of the consumption value of inventory in
ultratech cement ltd. Gujarat cement works, I concluded that 21872
major items out of 45600 items accounts for 84% of the total
consumption. So to control such a large group it is required to control
the major ‘A’ category items by improving the quality and reducing the
cost of the items. Following methods can be utilized for this purpose:-
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1. Life Value Analysis : Life value analysis of critical items has a
potential to reduce consumption and turn reduction in inventory. It is a
meaning ful amalgamation of LIFE CYCLE ANALYSIS and VALUE
ANALYSIS.
a). Life Cycle analysis- it is a methodological approach to analyse
and identify the reason for failure, to take corrective measure to
improve the life of a component defects and others reasons such as
process, lubrication etc.
b). Value analysis- It is a systematic investigation of selected
components with the goal of discovering and eliminating unnecessary
costs with out interfering with their function and reliability.
Life value analysis results in two major things:-
- Improve life of component.
- Reduce cost of component.
2. Reduction in lead time- reduction in lead time can be done by
using quickest mode of transportation for timely supply of materials.
Time to time delivery can reduce the extra blockage of inventories and
hence reduce the cost.
3. Vendor Selection and Appraisal:- In today’s competitive
environment with a customer oriented approach source development is
given highest importance for quality materials, timely procurement at
competitive prices.
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4. Vendor Rating: - Periodic vendors assessment and performance
monitoring on quality and delivery so that only those vendors who meet
company’s requirements and standards constantly are retained as
vendors in approved vendor list.
CONCLUSIONS
As we all know that all items are not of equal importance. Some of them
are more important than others. These more important items
constitutes only 20% of the total inventory and results in the 80% of the
total inventory and results in the 20% of total consumption. In this way
pareto is proved in every case same is the case in ULTRATECH
CEMENT LTD., GUJARAT CEMENT WORKS.
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On the basis of pareto analysis of inventory consumables it is concluded
that near about 20% of the item is responsible for more than 80% of the
total consumption value. So pareto analysis is better proved in case of
ULTRATECH CEMENT LTD., GUJARAT CEMENT WORKS.
The main 20% of the inventory is formed by the A and B category items
and the major consumables of these category mechanical spares, DG
Sets, Heavy earth moving m/c spares and instrumentation spares.
Inspite of good pareto curve of inventory for consumption in
ULTRATECH CEMENT LTD., GUJARAT CEMENT WORKS, it is
also concluded that there are still options of betterment in this area as
only 21872 items are responsible for 84% of the total consumption. So
these items can be further easily controlled or improved to reduce the
consumption cost.
ITEMS IN DESCENDING ORDER OF CUMULATIVE
CONSUMPTION VALUE
Dept Amount(Rs in lacs) No of items
Mech 4420.27 8491
Process 1448.06 921
Electrical 796.86 5018
Mines 611.68 3080
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Instrument 476.95 1116
DG SET 105.43 539
CPP/TPP 58.5 1526
RO Plant 36.56 1181
Total 7954.31 21872
Others 1515.11 23728
Grand total 9469.42 45600
% of total consumption 84%
TREND OF STORES & SPARES INVENTORY
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LIMITATIONS OF STUDY
As the primary data collected through tight scheduled of
personal interview, it may happen that bias attitude of the
respondents has been entered into data collection.
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Time constraint: Many of the respondents have given same
appointment time to give response. Some of them did not
respond very well due to their busy schedule.
Research was aimed to study the supply chain but most of the
respondents gave response related to sales and marketing. So it
was very difficult to bring them on track.
BIBLIOGRAPHY
1. Books
MATERIALS MANAGEMENT BY A.K.DUTTA
SUPPLY CHAIN MANAGEMENT OF
G.K.PUBLICATIONS.
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2. Websites
WWW.GOOGLE.COM
WWW.ADITYABIRLA.COM
WWW.ULTRATECHCEMENT.COM
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