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CHAPTER 1
INTRODUCTION TO THE STUDY
Introduction:
This Report deals with the study of the supply chain management in fertilizer industry
with special reference to NagarjunaFertilizers and Chemicals Limited, Kakinada and more
specifically the supply chain activities such as sourcing of natural gas (inbound logistics),
manufacturing of ammonia and urea, product storage, dispatch of products (outbound logistics)
for distribution and sale. Business in the global environment should face opportunities and
threats regardless of location and market. Firms cannot isolate themselves from ignoring external
factors such as economic trends, technology innovations in other countries.
Companies are going global truly with the Supply-chain Management(SCM). A
company can design and develop the product in the United States, manufacture in India and sells
in Europe. The Companies have changed the methods by which they manage their operations
and supply chain activities. The spread and modernization of infrastructures and transport has
also changed the trade and the intensified competition has elevated the importance of supply
chain management to new levels.
SCM & OUTSOURCING:
Economics and institutional Liberalization, Privatization and Globalization (LPG)
increased the competitiveness of the corporate. A number of factors changed globalization
dramatically since the last decade. As a result the corporate faced increasing competition from
global firms. The drivers of globalization are the reduction of tariffs, improved transportation
systems, information and communication technology, and availability of global markets,
products and services. These changes have enabled the global competitors to make the products
and services available to customers worldwide. These pressures have led to increased emphasis
on re engineering internal business processes and improve services to customers and as a means
to reduce costs, and better supply chain throughout the planning and operations working in closer
collaboration with suppliers. Products and services, changes in technology and globalization
have increased the most dynamic markets and greater uncertainty in customer demand.
Users can access more goods and services in the market. Therefore, to understand the
company's competitive position, changes in customer demands and the requirements for the
goods and services depends on its ability to respond. SCM tools and technology allows
organizations to respond to the environmental changes and policies.
The secondary data was collected from organization records, management reports, the
department of fertilizers and the Fertilizer Association of India and the special project reports to
understand the present state of supply chain management primary activities.
Limitations of the study:
The major limitations for the study are
1. The study of inbound logistics i.e supply of natural gas is limited to the quantity and values as
they are under the control of Govt. of India.
2. The study of outbound logistics is limited as the allocation and distribution is under the control
market by the Govt. Of India.
3. The study of transportation is limited to the roadways as the railways are 100% controlled by
Govt. of India.
4. The study is limited to major part of secondary data as there is less scope for primary data.
CHAPTER 2
3C ANALYSIS OF THE COMPANY
(COMPANY,CUSTOMER,COMPETITION)
About the Company
Founder
Fig: NFCL Founder
Shri K V K Raju - An eternal source of inspiration Nagarjuna Group is a dream willed
into reality by its visionary Founder Shri KVK Raju. Shri KVK Raju a first generation
technopreneur was born in a humble agricultural family in Andhra Pradesh on November 28,
1928. On graduating from Banaras Hindu University and the Madras Institute of Technology he
went on to complete his Master's in Mechanical and Industrial Engineering from Michigan State
University and the University of Minnesota, USA.
After a short stint in the American Industry he returned to India and worked for short
periods at Caltex Oil Refinery, Orient General Industries and Associated Electrical Industries.
Finally, he joined Union Carbide of India and worked with them for 15 years. While working
with Union Carbide, KVK's deep-rooted urge to serve society through industry impelled him to
start out on his own. Thus was born Nagarjuna Group in 1973 with an investment of Rs. 50
million. The Group has since then come a long way to become a diversified conglomerate with
an asset base of Rs. 43 billion.
Board of Directors
Name Category
1992: Forayed into the Crop Protection Business with investments in Pesticide
Formulations manufacturing followed by Technical Grade Manufacturing in the year 1994.
1994: Micro irrigation business started to address the irrigation problems of farmers
living in water and energy scarce regions.
1995: Ventured into Energy sector. Entered into power generation by setting up
Nagarjuna Power Corporation Limited.
1997: Entered into petroleum by setting up Nagarjuna Oil Corporation Limited.
1999: Was one of the first entrants into the Technology Enabled Agri-Informatics Space
through ikisan.
2003: Crop Nutrition and Crop Protection Businesses consolidated under Nagarjuna
Fertilizers & Chemicals Ltd and Nagarjuna Agrichem Ltd respectively.
2005: Investments in the Crop Protection Business along with long term tie-ups with
reputed MNCs.
2007: Ventured into setting up overseas Fertilizer Manufacturing Locations along with
investments into dedicated R & D setup.
2010: R & D efforts intensified in many new Agri-Domains space in India and Overseas.
2013: Investments into making the Fertilizer Bulks, Micro-Irrigation and Customized
Fertilizer segments diverse and comprehensive in the Nagarjuna Crop Nutrition Business.
2015: Initial investments into making a foray into the African Markets for the Nagarjuna
Crop Nutrition Business.
2018: Nagarjuna Fertilizers and Chemicals Ltd enters the Billion Dollar League in the
Crop Nutrition Business.
Fig: Urea Manufacturing Facility
Charting out an ambitious future, the plant has expanded its operating capacity from the
current 1.4 Million Tonnes to about 1.5 Million Tonnes per annum after completing the
debottlenecking and the revamp of the project. The expansion has been planned keeping in mind
the availability of additional Natural gas from huge Natural gas reserves in the nearby Krishna-
Godavari basin.
Fig: Bagging Plant of UREA
NFCL strives to adopt the global best practices in all areas of operations. The world class
operations have resulted in long uninterrupted runs of plants for over 365 days with maximum
availability of plant on-stream days. Minimum possible human interference and best
maintenance practices keep equipment and facilities fit for intended use under safe working
conditions. Process simulation software like ASPEN PLUS and drafting software like
AUTOCAD are being used for plant simulations / modifications and in turn to minimise energy
consumption, maximise production and maximise asset utilisation.
The plant also has an exhaustive documentation section and technical library with over
1300 Technical books and journals. The library also houses more than 1250 national and
international standards.
Maintenance
Best maintenance practices like predictive / proactive maintenance and reliability centred
maintenance are adopted in the plant to have zero equipment breakdown and zero accidents due
to equipment failure.
Quality Control
Strict adherence to quality in every aspect of production. Laying stress on technology, the
plant maintains strict quality control of products with online product sampling and product
quality monitoring. This has resulted in minimal fines and biuret in the product.
Fig: Quality Control Lab in NFCL
Certifications & Recognitions:
--NFCL has been awarded with Rashtriya Chemicals and Fertilizers Award by the FAI
for the best article in Production and Technology in 2014.
--NFCL has won the Best Technical Innovation Award from Fertilizer Association of
India for performance excellence in the field of production technology in 2010.
--Golden Peacock National Quality Award for 1995 by the Institute of Directors, New
Delhi in 1996.
--ISO 9002 Certification from BVQI, Netherlands in 1995.
Technical Services
To consistently achieve Global Manufacturing Excellence and to meet world benchmarks
in product quality, energy efficiency, production maximisation, environment control and plant
safety, the plant has adopted the best practices like Total Productive Maintenance (TPM),
Process Safety Management (PSM) and has also undertaken several other initiatives.
To achieve all these they have specialised and dedicated teams like Process Engineering,
General Engineering, Total Productive maintenance, Quality Control, Occupational Health &
Safety.
People
People are the most important asset of any organization and is the same case with NFCL.
Culture
NFCL believes in creating a culture that encourages values, teamwork, innovation,
leadership and performance.The plant site at Kakinada provides several employee friendly
facilities like well managed canteen, club house with most modern recreational facilities
including indoor games, swimming pool, theater etc. Several programs are regularly organised
for employees and their families like sports and cultural events. A school with most modern
facilities is being run for the children of employees.
Talent
The company has a pool of immensely talented people with wide experience in the
industry. Specialising in Operation and Maintenance, Project Management, Technical Services,
E H & S team has experience in large modern integrated process plants across the globe.
Fig: Employees in the Control Room
Fig: Training & Development section
Environment, Health & Safety(EH&S)
Environment
Laying utmost importance to Environment, Health and Safety standards, they have been
proactively adopting systems, implementing and effectively maintaining them.
Creating ecology in a barren saline infested marshy land, over two-thirds of the plant
complex (nearly 700 acres) was earmarked and has been completely developed into a green belt
which extends over 4 kilometres with more than 0.35 million trees of 170 species, eleven water
bodies with marine life, animals and birds. It is a favourite place for nearly 70 species of
migratory birds.
Health
At Kakinada plant premises they have a well equipped Occupational Health Center with
facilities for Spirometry, X-ray, ECG, Audiometry, testing of blood, urine etc. and availability of
Ambulance and medical assistance round the clock. The Medical officer at the plant is assisted
by qualified assistants. Medical equipment necessary for medical emergencies is also available.
Annual Medical Checkup, which is mandatory for each associate, is carried out regularly.
Safety
Their fertilizer plant at Kakinada has an excellent safety record with 1 Million safe man
hours being crossed on several occasions in the plant’s history of operations and reaching about
3 Million safe man hours. Regular internal and external audits are ensured so as to reduce urea
dust in the bagging plant, reduction of noise levels, improved air quality in working areas.
Personal protective equipment and related safety training is provided by the company to all the
concerned associates.
PRODUCTS OF NFCL
NFCL supply a broad portfolio of nutrition products and services that include both macro
and micro fertilizers. NFCL employs Information technology and soil and tissue analysis for
nutrient recommendation and NFCL plans include further strengthening of NFCL analysis
portfolio with advanced tools to measure the actual nutrient requirements and status and deliver
customized nutrition solutions to meet the exact needs of the customer.
1. Urea (46% N) (White free flowing) – Prilled
FIG: Urea Bag of NFCL
Application of Urea: Fertilizer
2. Anhydrous Ammonia
Application:
- Used for production of Urea, DAP, Ammonium Sulphate and Ammonium Nitrate (for
fertilizer, explosives, herbicides and insecticides)
- Used for water treatment, fermentation, tanning and food additives
Alliances
NFCL has been partnering with some of the well distinguished names in the global arena in the
areas of R&D, Product Development, etc
Company Country
Snamprogetti Italy
Yara Norway
Haifa Israel
Customers of NFCL
Farmers are the primary and only customers of the products of the products manufactured
in NFCL, Kakinada. To help the products reach the customers NFCL has a robust distribution
network with ample stock keeping units (SKU) to help the products reach the customers. The
250 people strong marketing force is committed to provide total customer satisfaction through
reliability, timeliness, courtesy, honesty and value for money.
This commitment has helped us in achieving the status of the leading player in plant
nutrition in the states of Andhra Pradesh, Bihar, Chattisgarh, Gujarat , Haryana, Karnataka,
Madhya Pradesh, Maharashtra , New Delhi , Orissa, Punjab , Rajasthan, Tamil Nadu, Uttar
Pradesh, West Bengal Servicing 15 states, The company has 3 zonal offices and 30 regional
offices including Specialty Fertilizers and Micro Irrigation regional offices.
Fig: Stocking Points of NFCL Company
Fig: Bulk Stocking points of NFCL across India
Competitors to NFCL in Public and Private Sectors
Top leading competitors in the public sector in India fertilizer industry are
-- National Fertilizers Limited
-- Fertilizers & Chemicals Travancore Limited
-- Rashtriya Chemicals & Fertilizers Limited
-- Madras Fertilizers Limited
-- Steel Authority Of India Limited
CHAPTER 3
ETT analysis (Environment, Technology, Terminology)
ENVIRONMENT IN THE INDIAN FERTILIZER INDUSTRY
Introduction
Fertilizer is defined as any substance which is organic or inorganic, natural or artificial,
supplies one or more of the chemical elements required for plant growth. Carbon, oxygen and
hydrogen are directly supplied by air and water and therefore not treated as nutrients by the
fertilizer industry. One of the vital industries for the Indian economy is the Indian Fertilizer
Industry as it manufactures a very critical raw material for agriculture which is the major
occupation of the country. The fertilizers especially like the ammonia urea plants are energy
demanding in their operation.
Size of the Industry
57 large-sized and 64 medium- and small-sized chemical fertilizer production units in India
producing urea, DAP, Complex fertilizer, Ammonium Sulphate (AS) and Calcium Ammonium
Nitrate (CAN)
World Ranking
India ranks third in the world of Fertilizer production
Market capitalization
25% to the GDP of India
Indian fertilizer industry's main objective is to ensure the supply of primary and
secondary nutrients in the required quantities. The Indian Fertilizer Industry is the most energy
intensive sectors according to the context of environmental discussions. As there is increasing
productivity through the implementation of competent and pollution free technologies in the
manufacturing sector it would be desirable in combining economic, environmental and social
development objectives. The Indian fertilizer industry in the past 50 years has grown in size and
stature as it ranks third in the world.
IT in Fertilizer Industry
The advent of Information Technology (IT) has lead to a stage that every organization, be
it big or small, government or private has over the years started using IT in some form or the
other in their day to day operation. The role played by IT in the fertilizer sector does not need
any introduction. Just to name a few departments where IT is playing a key role are HRD,
Production, Marketing, and Finance etc.
Acceptable Quality Level (AQL): In quality assessment, acceptable quality level, also
known as an assured quality level, describes the maximum number of defects acceptable during
the random sampling of an inspection.
Active Stock: Goods in active pick locations and ready for order filling.
Benchmarking: The process of comparing performance against the practices of other
leading companies for the purpose of improving performance. Companies also benchmark
internally by tracking and comparing current performance with past performance.
Batch Number: A code used to identify the specific production point, for a product or an
assembly, in a manufacturing or assembly process.
Consumables: A classification of stock used to describe items or products that are totally
consumed in use e.g. paper, oil, grease etc.
EDI: Electronic Data Interface is a method of transferring transactions from one
computer system to another, by converting the data into a standard that can be easily read by all
systems.
Expression Of Interest (EOI): Often the first stage in outsourcing which involves a
summary of the requirements being distributed to potential suppliers of goods and/or services.
Electronic Commerce (E Commerce): A way to execute transactions and share
information with other businesses, consumers or with government by using computer and
telecommunication networks, including the Internet.
Inventory Control: Consists of all the activities and procedures used to control and
maintain the right amount of each item in stock or to provide the required level of service at
minimum cost.
Lot Number: The allocation of a unique number, to one or more of a product during
manufacture or assembly, to provide traceability.
Outsourcing: An arrangement whereby an external party or ‘contractor’ undertakes
certain business processes on behalf of their client. In Supply Chain this would typically be
warehousing and transport.
Pareto Principle: The heuristic rule which states that where there is a large number of
contributors to a result, the majority of the result is due to a minority of the contributors.
Sometimes known as the 80/20 rule) which states that, in many cases, approximately 80% of the
turnover (stock etc.) can be ascribed to approximately 20% of the customers, articles or orders.
Part Number: A unique identification number allocated to a specific part either by the
manufacturer or user of the part.
Production Lead Time: The time taken to manufacture or produce an item after an
external order has been received until the item is available for packing.
Radio Frequency Identification (RFID): The attachment of transponders (which may
be read only or read/write) to products, as an alternative to linear barcodes, to enable product
identification some distance from the scanner or when out of line of sight.
Safety Stock: The stock held to protect against the differences between forecast and
actual consumption, and between expected and actual delivery times of procurement orders, to
protect against stockouts during the replenishment cycle.
Sales Forecast: The prediction, projection or estimation of expected sales over a
specified future time period.
Secondary Transport: The transport ‘leg’ from a distribution centre (DC) to the
customer. For example from the retailer DC to the retail store.
Supply-Chain Management (SCM): Organisation of the overall business processes to
enable the profitable transformation of raw materials or products into finished goods and their
timely distribution to meet customer demand.
Stock Keeping Unit (SKU): A category of unit with unique combination of form, fit,
and function (i.e. unique components held in stock). For example, if two items are
indistinguishable to the customer, or if any distinguishing characteristics visible to the customer
are not important to the customer, so that the customer believes the two items to be the same,
these two items are part of the same SKU
Waybill: A document prepared by the seller, on behalf of the carrier, that specifies the
shipment’s point of origin, the details of the transacting parties (the buyer and seller), the route,
and the destination address.
CHAPTER 4
SUPPLY CHAIN MANAGEMENT PRACTICES IN NFCL
POLICY ON SUPPLY CHAIN MANAGEMENT
Nagarjuna Fertilizers and Chemicals Limited (NFCL) is the largest gas based
manufacturer and marketer of agri-inputs in South India and its production of over a million
tonnes of Urea and the imported urea is marketed by the company. which is a wide and big
basket of products touching farmers in Andhra Pradesh, West Bengal, Orissa, Chhattisgarh,
Karnataka, Tamilnadu, Maharashtra, Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh, Kerala,
Gujarat, Punjab, Rajasthan and Haryana.
` This product portfolio is delivered to farming community through a large network of
transportation, handling and storage activities at various places near the markets. To serve our
customers to their satisfaction, we deliver best quality fertilizers consistently. Supply Chain is
accordingly a strategic activity.
SUPPLY CHAIN GOALS OF NFCL
Supply Chain Goal is to ensure delivery of our products through a network of suppliers,
locations, activities and vendors in order to maintain and develop the business. The values of the
activities depend on the considerations of quality, reliability, logistics and operating costs.
To achieve the above, the company follows the underlined thumb rules:
-- The quality of product delivered to end customer is at par with national standards. The
product is delivered to customer when he needs it. NFCL strives to improve the service levels.
-- NFCL is innovative in solving its day to day problems.
-- The quantity of Urea supplied to Indian states meets the requirements given by the
Department of Fertilizers, Government of India (DoF/ GoI). The documentation at various levels
meets the requirements of DOF for reimbursement of freight.
-- The cost of operations is competitive so that the Supply Chain helps create a
competitive strength to the organization. For Urea, the equated costs and equated leads are within
the limits prescribed by GOI policies from time to time.
-- The transportation and warehousing agents are reliable and they are able to manage the
risks at their end.
-- The vendors and suppliers engaged with NFCL have the same goals as them. Together
they effectively and efficiently manage the entire supply chain.
-- It ensures that its activities meet the ethical standards set by law and society.
SCM IN NFCL
SCM in NFCL or in the fertilizer industry should work as a circulatory system of the
human beings. It collects deoxygenated blood from various organs and parts of the human body
and circulates it to the lungs for purification and receives oxygenated blood and sends it to all
parts of the human body. It’s a continuous process that’s why human beings stay alive. Hence
there should be a similar process here in SCM of NFCL and in the fertilizer industry itself. The
inbound logistics of NFCL is a continuous process as it supplies natural gas and other inputs for
manufacturing of Urea, the process is nonstop process throughout the clock, and round the
week.(except maintenance days about 25days in the year).
The output is continuous process i.e. 4300 tons per day. Department of Fertilizers says
‘Since one decade there has been no new urea capacity addition in India. The demand supply-gap
has widened over the past decade. Currently indigenous urea production is of about 22 million
tons and the consumption is of some 29 million tones, the 7 million tons shortfall is bridged
through imports’.63 The demand for urea by the farmers in India is also continuous demand. So
the firm should meet the demand in continuous process.
BOTTLENECKS IN THE SUPPLY CHAIN OF NFCL
In production and project management, a bottleneck is one process in a chain of
processes, such that its limited capacity reduces the capacity of the whole chain. The result of
having a bottleneck are stalls in production, supply overstock, pressure from customers and low
employee morale. There are both short and long-term bottlenecks. Short-term bottlenecks are
temporary and are not normally a significant problem. An example of a short-term bottleneck
would be a skilled employee taking a few days off. Long-term bottlenecks occur all the time and
can cumulatively significantly slow down production. An example of a long-term bottleneck is
when a machine is not efficient enough and as a result has a long queue.
The bottlenecks in the process are due to deficit in supply. The Government of India is
importing urea to meet the additional demand. But this is not a continuous process so the farmers
are facing a shortage of urea in right time for cultivation.
In this study the major bottlenecks in this SCM of fertilizer industry can be the supply of
natural gas, over control of government on the distribution and their policies related to
expansion of industry and allocation of natural resources.The bottlenecks in SCM of NFCL are
lack of company’s won vehicles, and TPL (third party logistics).
The supply of natural gas as input for production of Urea
At present there is a plan with the Indian authorities to go ahead with a new investment
strategy for the fertilizer sector, especially urea. This policy seeks to create a 1.5 million-tons
capacity for the production of urea over a five year-period. The new policy may provide gas
linkage for up to 75 percent of new capacity created from domestic gas resources, while the rest
will have to be met through imports. if these policies are implemented properly the bottlenecks
related to inbound logistics can be rectified.
Over control of government on the Input Raw material and distribution network of Urea
-- The distribution and movement of fertilizers along with imports of finished fertilizers,
fertilizer inputs and production by indigenous units will continue to be monitored through the
online web based “Fertilizer Monitoring System (FMS)” there by not giving autonomy to the
companies.
--Urea continues to be under the regulatory regime and this continues to affect the Company
adversely. The risk of adverse effect of government policy remains difficult to mitigate.
-- This factor is also a limitation for this study so it is only suggested that some liberal policies
pertaining to distribution and movement of fertilizer will help the industry overcome these
bottlenecks of distribution.
Third Party Logistics as a bottleneck for outbound logistics for Urea
Plan of distribution in NFCL is pending daily due to the following reasons
1. Insufficient no of RAKEs for train transport.
2. Lack of company’s own warehouses (multipurpose)
3. TPL: The cherry pickers are selecting only the commercial routes but not the non commercial
routes.
4. The road problems to the Truck Drivers are external bottlenecks (with clear information we
can reduce the problems associated with the roads)
5. Another reason for the shortfall in supply can be the dealers who are creating artificial
shortage in peak demands so that they can enjoy more profits by rising prices. So the government
and the company should maintain a transparent distribution control system which is accountable
for both the public at large and the industry and the government itself.
SCM MODEL OF NFCL COMPANY
These problems are solved when the SCM in NFCL and in the fertilizer industry works as
the circulatory system and distribution as the pumping organ (the heart). The SCM in NFCL and
(or) in fertilizer industry consists of the primary activities like inbound logistics, operations,
outbound logistics and marketing sales and services with the supportive activities of firms
infrastructure, HRM and the procurement.
The SCM system should work as a circulatory system and distribution as the pumping
organ (the heart). The heart collects deoxygenated blood from various organs and parts of the
human body, and circulates it to the lungs for purification and receives oxygenated blood, and
sends it to all parts of the human body. As long as it’s a continuous process and the heart
receives both the inflow and outflows of blood without any hurdles in its channels the heart
function healthily. But any hurdle in its channels of both inflows and outflows can result heart
stroke. Hence there should be a similar process in SCM of NFCL and (or) in the fertilizer
industry itself.
Fig: SCM Depicted as a Circulatory System of human beings
INBOUND LOGISTICS OF NFCL
580. 64 gm of ammonia is required to produce 1000 gm of urea
Formula
2NH3 + CO2---> urea + H2O
The inbound logistics of NFCL is a continuous process as it supplies natural gas and
other inputs for manufacturing of Urea, the process is nonstop process throughout the clock, and
round the week.(except maintenance days about 25days in the year). The output is continuous
process i.e. 4300 tons per day. Department of Fertilizers says ‘Since one decade there has been
no new urea capacity addition in India. The demand supply-gap has widened over the past
decade. Currently indigenous urea production is of about 22 million tons and the consumption is
of some 29 million tones, the 7 million tons shortfall is bridged through imports’.63 The demand
for urea by the farmers in India is also continuous demand. So the firm should meet the demand
in continuous process.
Imports(To bridge the gap between Supply and Demand)
India is importing 7 million tons of urea to bridge the gap between the demand and
supply. Nevertheless the farmer is facing shortage of urea in right time. The reason for this
problem can be irregular periods of imports. So it can be suggested that the government should
make available of imports in right time as the production of this product in this industry
worldwide is a continuous process.
OUTBOUND LOGISTICS OF NFCL
This system can work well with the help of a sound IT in the distribution system. After gaining
the knowledge pertaining to demand and the supply of both indigenous and imports a sound
planning of distribution will work as the pumping organ the heart. First of all collect the product
needed to meet the demand from both the sources of indigenous and imports in right time
continuously. Secondly Stock it in B/SKUs in the factory premises for indigenous and near the
ports for imports. And thirdly the product can be distributed to the destinations by following
ways of distribution continuously.
Rail ways are recommended when there is availability of RAKEs, priority of demand and
for long distances. It should send or distribute more to the working organs (where demand is
more). Information system should provide information about demand / crop / season/ type of
fertilizer required/ the quantity required. It should maintain BSKUs to stock for a long time
without any loss. ZSO (Zonal Sales Officers) and ASO (Area Sales Officers) are responsible for
product information.
Bulk Stock Keeping Units(BKSU)
Why this BSKUs?
Along with the regular mode of transportation the pool or bulk urea can be transported
and stocked safely with cost effectively and efficiently. The firm is used to store the bulk urea
near its bagging plant when there are no rail or road transportation wagons. The same is retrieved
from the bulk storage house to bagging plant and bag it and transports when there are the wagons
for transportation. This can be implemented to far reaching destinations also when there is low
demand for fertilizer (after harvesting to new plantation) the bulk or pool urea can be transported
and stocked until the demand for fertilizers rise. It can save the time for bagging, space of
transportation, and cost of labor involved. And also the product is distributed evenly to all the
destinations based on the demand and the stipulated movement of fertilizers by the government.
The firm is acting as the Clear and Forward agents for imports in the same manner it can bag and
distribute the bulk stocked urea as and when required.
Location of warehouse
Is should be near to rail, market (cultivated land), and road facilities
Design of BKSU
It should be just like a tomb or a water tank with large input and output openings
Advantages of BKSU
Cost effective in building, less maintenance cost, optimum utilization of capacity, use of
conveyor belts, less loading and unloading time, cost, moisture free and safe from rain water,
stored for a long time when stored with good ventilation and in a dry place and used for other
food grains after cleaning with a proper agent and acts as multipurpose
Maintenance:
It can be maintained by the company or it can be leased from the TPL vendors or from the
government
Fig: Marketing Segmentation for Nagarjuna Urea( District wise)
Fig: Market Segmentation based on region wise.
Priority to Railways for transportation of urea should be given as follows.
1. First priority should be given to the destinations which covered maximum
Distance.
2. Second priority should be given to the destinations which are having high
and irregular demand.
3. Last but not least priority should be given to the destinations where there
are no ports and less no of rail stations available.
Priority to road transportation should be given to the immediate (nearest) destinations which
cover mass markets as there are regulations in govt. reimbursement.
Why roads should be preferred over train transport?
Freight reimbursement on account of primary movement of P&K fertilizers (except SSP)
by railway shall be paid as per actual on the basis of railway receipts. No freight reimbursement
shall be made on account of secondary movement of P&K fertilizers. Freight reimbursement on
account of direct road movement of P&K fertilizers (except SSP) shall be paid as per the actual
subject to maximum of equivalent rail freight. Maximum allowable distance under direct road
movement shall be 500 km. Thus there is no such restriction for Nitrogenous (N) Fertilizer but
the freight reimbursed by the government to the road movement is confidential to the company.
This is the reason why the company wants to improve its cost effectiveness to gain its
competitive advantage. The study related to railways mode of transportation is limited as it is
100% reimbursement railway shall be paid as per actual on the basis of railway receipts so the
study is limited to the road transportation as it is the only mode of transportation we can make it
cost effective and there is great scope of operations as and when it is deregulated by the
government. The road map or the road web can help in identifying critical paths. The table gives
an idea about the movement and freight for each mode of dispatches of urea. There is no doubt
that the road freight only can reduce the transportation cost when compared to rail freight.
Nevertheless the government policies on the movement of fertilizers are biased to the
railways. It’s suggested that if it can deregulates these policies it can help the industry in cost
competitive advantage. The current method of freight master used by NFCL is doing well in
addition to the current method it should consider the following to the more cost effective. In
Andhra Pradesh there are 4,89,379 goods vehicles are there So prefer high capacity trucks for
transportation as there are 6tns, 8tns, 10tns, 12tns, 14tns, 16tns, 18tns, 20tns and 25tns capacity
trucks are available68. So that bulk amount can be distributed for the same cost of transportation.
And Prefer new trucks than old trucks so that km/liter increases and the TPL will quote for less
as vendors are invited through tenders and sealed bid quotations. If the firm can maintain its own
vehicles it works more cost effective than TPL.
CHAPTER 5
FINDINGS AND SUGGESTIONS
FINDINGS:
-- The input material to the company is not provided in a regular manner. Hence it plays
as a bottleneck in the output of Urea.
-- The other firms like NFCL which are manufacturing specialty fertilizers like Urea are
also facing the same output problems due to irregularity of inputs.
-- The company is trying to offer the consistent product mix by sourcing traded products
from other firms.
-- The company is doing its best to reduce the cost of power, fuel, packaging materials
etc.
-- The regions which are close to the firm are having more Stocking points than the
region which are away from the firm.
-- The company has a robust supply chain network.
SUGGESTIONS TO THE COMPANY
-- The Fertilizer Companies should implement the SCM strategies in an effective and
efficient manner to meet the demand from the industrial users and the ultimate end user the
farmer.
-- The investments in purchasing electricity should be reduced and the same should be
invested to produce more electricity by own generation.
-- If the company can use alternative resources like solar energy and wind energy as the
company is located in the coastal region, it can help the company to meet its objective of
reducing the cost of power and fuel.
-- If the company can source its inputs from multiple suppliers, it can gain cost effective
supplies which results the lower costs.
-- It is suggested that if the company can manufacture the PVC bags for packaging, it
will gain cost competitive advantage in the industry.
-- The Company should concentrate on more movements through road than the present
mode of transportation though trains.
-- The company can maintain its own logistics and its operations to gain more advantages
than depending on third party logistics.
SUGGESTIONS TO THE GOVERNMENT
-- The govt. should make more Natural gas allocations to fertilizer industry so that the
industry can increase its production.
-- The govt. should pursue the demand and supply very keenly so that it can fill the gap.
--The company and the govt. should see that these inputs should flow consistently to
meet the demand from the end user
-- The govt. should sanction more capacity than the current installed capacity to the
existing firms so that the industry will gain its self sufficiency for ammonia.
-- It is suggested that the govt. should permit the companies to allocate more road
coefficient than the present allocation of 20% as road transport is more economical.
CONCLUSIONS
“Jai Kissan”, the slogan was meant for praising the farmer who produces food grains
sufficient to the Indians, and encouraging the farmers to continue in this field. But today the
farmer refuses to do agriculture the primary sector of India as he is facing many problems
including the shortage of fertilizers. The fertilizer industry which produces inputs to agriculture
is facing problems with the shortage of inputs for processing fertilizers.
NFCL is major urea producer for the Andhra Pradesh and plays a vital role in the
fertilizer industry. Hence the present study focused on the primary activities of Supply Chain
Management in Fertilizer industry with special reference to Nagarjuna Fertilizers and Chemicals
Limited, Kakinada. In order to find out and analyze the bottlenecks in SCM of NFCL and
Fertilizer industry the secondary data of inbound and outbound logistics for 10Years (2009 –
2018) was collected from organization records, management annual reports, the department of
fertilizers and the Fertilizer Association of India and the special project reports.
Future study
The recommended future studies may be on the use of I.T and technology like vacuum loaders,
flexible closed conveyor belts which are used in bagging plants for bulk urea loading for imports,
flexible transport vehicles and multipurpose warehousing system.
REFERENCES
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