A SUMMER INTERNSHIP PROJECT REPORT

ON
A comprehensive study of INVENTORY MANGEMENT SYSTEM AT IFFCO, KALOL

For partial fulfillment of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Company guide: B.A SHAH

College guide: Miss Bhavna chaudhary

Submitted To:

Faculty of Management, SSESGI

GUJARAT TECHNOLOGICAL UNIVERSITY Submitted By: HARNAM SINGH RAJPUT ER NO: 107640592053

JULY2011

PREFACE

A comprehensive practical study of management is a supplement to the theoretical classroom knowledge. It helps to understand the subject more precisely. This report tries to outline idea of professional world & helps in understanding the pragmatic aspect of management function. Own observation are significant towards the contribution in learning the subject. The report is therefore designed as a reference of organization functioning rather than copy down instrument. The purpose of vocational training is to make management student familiar with day to day functioning of business. The present report is an effort in this direction. Our humble endeavor & motive in presenting the project report is to impart a balanced introduction & knowledge of functions of inventory management which is an important integral part of financial management. It is hoped that this project will serve as a supportive document to research worker as effort has been tried to make this report an informative, stimulating & self explanatory.

ACKNOWLEDGEMENT

I am thankful to Mr. G.N.PRASAD ( FINANCE Manager IFFCO, KALOL) for his expert guidance and encouragement for my project work. I would also like to thank B.A SHAH(G.M) of training department for providing whole hearted support required. I wish to express my deep and honorable sense of gratitude of Prof, Bhavna chaudhary for supported me with excellent faculty members who helped in building a strong concept regarding Research Methodology. I am thankful that power that always inspires me to take right step in the journey of my success life.

EXECUTIVE SUMMARY
This report is an A comprehensive study of INVENTORY MANGEMENT SYSTEM at IFFCO Kalol, as a part of the training of 6 weeks duration. This report contains the analysis of the Inventory of last five years and detail description of various Finance section and Inventory Management . Apart from this it also contains the data related the introduction of Fertilizer Industry, Introduction of IFFCO, especially Kalol Unit, Types of Budget its importance in the company etc. Inventories encompass finished goods produced or work in process being produced by the enterprise and include materials, maintenance supplies, consumables, loose tools awaiting use in the production process. The problem under study viz. how effective are the measures applied by IFFCO, kalol to control the inventory is basically studied through analytical research. Material is important for the efficiency of the system. It is a matter of great importance for inventory department. Inventory department of IFFCO, kalol is responsible for efficient inventory control. Thus the whole study was conducted under the guidance of officers of this department. From the Financial information PAT in 2010-11 is highest with 401.1 crore even though the cost of inventory 2010-11 is highest. Main reason for happening is high sale of fertilizer in 2010-11 and cost of inventory also increased. Production of Fertilisers in 2010-11 is highest with 81.97 lakhs m tonne even though the production of the 2009-10 is precious highest. From the cost and management account reports seen over all inventory level is efficiently maintained but from our scrutiny seen that Raw Materials, Stores and Spares Power, Fuel and Water there is much more inbalance of Power , fuel and Water, Row Material This report emphasized on the method that IFFCO follows to manage the Inventory. The facts and figures taken in the report were updated. This report serves the purpose of detail explanation of the each head also.

Apart from this report discloses last five years financial data in detail and last ten years highlights in brief. It is noted from the analysis that IFFCO has been judiciously utilizing its scare finance recourses and at the same time maintain its equipment for controlling the cost of production by updating with the latest technology to meet the challenges of changing pricing policy and fluctuating raw material prices.

LIST OF CONTENT

SR.NO

CONTENT

PARTICULARS

PAGE NO.

1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 7. 1. 2. 3. 4. 5. 8. 1. 9. 1. 10. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

CERTIFICATE PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY LISTOF CONTENT ORGANIZATION PROFILE VISION & MISSION OBJECTIVES OF IFFCO BUSINESS PRINCIPLES OF THE COMPANY BOARD OF DIRECTORS PLANT LOCATIONS EXISTING BANKERS IFFCO ASSOCIATES INVESTMENTS SIGNIFICANT HIGHLIGHTS SWOT ANALYSIS KALOL UNIT HIERARCHY OF IFFCO PLANTS OF KALOL UNIT PLANT LOCATIONS ORGANISATION CHART KALOL UNIT AWARDS RESEARCH METHODOLOGY OBJECTIVE OF THE STUDY FINANCE & ACCOUNTS DEPARTMENT FINANCIAL PERFORMANCE INVENTORY MANAGEMENT CONCEPT OF INVENTORIES GENERAL OUTLINES INVENTORY VALUATION AT IFFCO CLASSIFICATION OF MATERIALS INSURANCE OF STOCK & STORES PHYSICAL VERIFICATION OF MATERIALS OBJECTIVE OF INVENTORY CONTROL TECHNIQUES OF INVENTORY CONTROL INVENTORY SOFTWARE CLASSIFICATION OF STORE SECTION FINDINGS CONCLUSION & RECOMMENDATION BILBIOGRAPHY ANNEXURE

I II III IV V

ORGANIZATION PROFILE

Indian Farmers Fertilizer Cooperative Limited

Type Founded Headquarters Key people Industry Turnover Profit After tax Website

Cooperative New Delhi, India (November 03 1967) New Delhi, INDIA U.S. Awasthi, Managing Director Fertilizer Rs. 17300.00 Crore (2010) Rs. 401.10 Crore (2010) http://www.iffco.nic.in

Source: http://www.iffco.nic.in

The Chief Executive Officer of IFFCO, designated as Managing Director, is vested with the overall responsibility of the affairs of IFFCO's day to day activities.Dr. Udai Shanker Awasthi is Managing Director of IFFCO since 1993. Indian Farmers Fertilizer cooperation limited (IFFCO) was established on 3rd November, 1967 as a multi-unit cooperative organization with broad objectives of a augmenting, fertilizer production, ensuring fertilizer availability at farmers door step, strengthening cooperative fertilizer distribution system and educating, training and guiding the farmers for improving agricultural product. During mid sixties the cooperative sectors in India was responsible for distribution of 70% of fertilizers consumed in the country. This sector had adequate infrastructure to distribute fertilizers but had no production facilities of its own and hence

dependent on public/private sectors for supply. To over this lacuna, bridge the demand supply gap in the country, a new cooperative society was conceived to specifically center to requirements of the farmers. It is a federation of over 39,456 cooperative societies , most of them being village cooperation, spread over in 29 states and union territories & 158 Kisan Seva Kendra. IFFCO commissioned an ammonia - urea complex at Kalol and the NPK/DAP plant at Kandla both in the state of Gujarat in 1975. Ammonia - urea complex was set up at Phulpur in the state of Uttar Pradesh in 1981. The ammonia urea at Aonla was commissioned in 1988. IFFCOs all plants have been achieving the annual capacity utilization in the range of 122-120%. In 1993, IFFCO had drawn up a major expansion programmed of all the four plants under overall aegis of IFFCO VISION 2000 . The expansion projects at Aonla, Kalol, Phulpur and Kandla have been completed on schedule. Thus all the projects conceived as part of Vision 2000 have been realized without time or cost overruns. All the production units of IFFCO have established a reputation for excellence and quality. A new growth path has been chalked out to realize newer dreams and greater heights through Vision 2010 which is presently under implementation

As part of the new vision, IFFCO has acquired fertilizer unit at Paradeep in Orissa in September 2005. As a result of these expansion projects and acquisition, IFFCO's annual capacity has been increased to 3.69 million tones of Urea and NPK/DAP equivalent to 1.71 million tones.

IFFCO has made strategic investments in several joint ventures. Godavari Fertilizers and Chemicals Ltd (GFCL) & Indian Potash Ltd (IPL) in India, Industries Chimiques due Senegal (ICS) in Senegal and Oman India Fertilizer Company (OMIFCO) in Oman are important fertilizer joint ventures. Indo Egyptian Fertilizer Co (IEFCO) in Egypt is under implementation. As part of strategic diversification, IFFCO has entered into several key sectors. IFFCO-Tokyo General Insurance Ltd (ITGI) is a foray into general

insurance sector. Through ITGI, IFFCO has formulated new services of benefit to farmers. Sankat Haran Bima Yojana

Provides free insurance cover to farmers along with each bag of IFFCO fertilizer purchased. To take the benefits of emerging concepts like agricultural commodity trading, IFFCO has taken equity in National Commodity and Derivative Exchange (NCDEX) and National Collateral Management Services Ltd (NCMSL). IFFCO Chattisgarh Power Ltd (ICPL) which is under implementation is yet another foray to move into core area of power. IFFCO is also behind several other companies with the sole intention of benefiting farmers.

The distribution of IFFCO fertilizers is undertaken through over 36,000 cooperative societies. The entire activities of distribution, sales and promotion are coordinated by Marketing Central Office (MKCO) at New Delhi assisted by marketing offices in the fields. In addition, essential agro-inputs for crop production are made available to the farmers through a chain of 158 Farmer Service Center (FSC). IFFCO has promoted several institutions and organizations to work for the welfare of farmers, strengthening cooperative movement, improve Indian agriculture.

Indian Farm Forestry Development Cooperative Ltd (IFFDC), Cooperative Rural Development Trust (CORDET), IFFCO Foundation, Kisan Sewa Trust belongs to this category. An ambitious project 'ICT Initiatives for Farmers and Cooperatives' is launched to promote e-culture in rural India. IFFCO obsessively nurtures its relations with farmers and undertakes a large number of agricultural extension activities for their benefit every year.

At IFFCO, the thirst for ever improving the services to farmers and member cooperatives is insatiable, commitment to quality is insurmountable and harnessing of mother earths' bounty to drive hunger away from India in an ecologically sustainable manner is the prime mission. All that IFFCO cherishes in exchange is an everlasting smile on the face of Indian Farmer who forms the moving spirit behind this mission.

LOGO OF IFFCO

The Logo any organizations are very important which the company is known to every one or that is identity of the company. After one year of establishment in 1968 the organization has decide to make Logo of IFFCO. The executive of the company said that which can be easily fit any place or easily changeable according to the place & made by simple geometrical method. So the Logo is made by at last Mr. M.R.Gupta chief visualize developer is like that

Logos ratio is 1:2:5 and the color are green. The rectangle shows that the Indian economy is depend upon the agriculture & green color shows the faith of the farmers, they believe that after Using the urea their fields will always be green, the remaining white color shows that the quality of the Iffcos product is very good & oval shape is meant for prosperity.

1 VISION & MISSION OF THE SOCIETY

1

VISION To augment the incremental incomes of farmers by helping them to

increase their crop productivity through balanced use of energy efficient fertilizers; and to make cooperative societies economically & democratically strong for professionalized services to the farming community to ensure an empowered rural India.
2

VISION 2010 In pursuit of sustained pace towards its growth, the societys perspective

plan VISION 2010 aims at attaining an annual turnover of Rs 15,000 crore at the end of 2010. For sustaining growth ensuring adequate return to the member shareholders on their
1 2

Source http://www.iffco.nic.in Source http://www.iffco.nic.in

investment, IFFCO is exploring opportunities for diversification into other profitable business areas apart from investment in fertilizer sector. Under the diversification plan, the society would retain focus on farmer-oriented schemes and strengthening cooperative infrastructure. Accordingly, the following business activities have identified under the VISION 2010: Installation of Ammonia Urea plants including acquisition of fertilizer units; Backward integration to meet feedstock requirements such as Phosphoric Acid, Natural Gas etc; Generation of Power; Production and marketing of micro-nutrients, seeds, bio-fertilizers, pesticides etc; Value addition to Agri-products and marketing; Information Technology and IT enabled services; Establishment of Retain Chain in Urban and Semi-Urban location.

MISSION
To provide to farmers high quality fertilizers in right time and in adequate qualities with an objective to increase crop productivity. To make plants energy efficient and continually review various schemes to conserve energy. Commitment to health, safety, environment and forestry development to enrich the quality of community life. Commitment to social responsibility for a strong social fabric. To institutionalize core values and create a culture of team building, empowerment and innovation which would help in incremental growth of employees and enable achievement of strategic objectives.

 Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for stake holders. Building a value driven organization with an improved and responsive customer focus. A true commitment to transparency, accountability and integrity in principle and practice. To acquire, assimilate and adopt reliable, efficient and cost effective technologies. Sourcing raw material for production of phosphates fertilizers at economical cost by entering into joint ventures outside India. To ensure growth in core and non-core sectors. To true Cooperative Society committed for fostering cooperative movement in the country.

2 OBJECTIVES OF IFFCO

The main objectives of the Society are as follows: IFFCO is a cooperative institution of the farmers by the farmers. Strengthening cooperation distribution system. Educating and guiding the farmers.

 Promoting nations growth through modern farming techniques. Improving agriculture productivity, through balance fertilizer applications. To promote the activity for enriching the life of rural. To achieve self reliant and self generated economy.

BUSINESS PRINCIPLES OF THE COMPANY

The principles of the company are as follows:

Appreciation of national need of generation up to optimum return of investment. To fair price of the product manufactured by the company is subsidy to the farmers.

 Total consumer satisfaction as a quality of product, price of the product and better service after selling the product. Effective management information system. To increase the efficiency of the workers. To maintain better human relation and discipline among all the employees. To develop good relation with customers.

4 BOARD OF DIRECTORS
Mr.Surinder kumar Jakhar Mr.N.P.Patel Mr.Vithalbhai Radadia Mr.Sheesh Pal Singh Mr.Balvinder Singh Nakai Mr.Ravindra Pratap Singh Mr.K.Srinivasa Gowda - Chairman - Vice Chairman - Director - Director - Director - Director - Director

 Mr. K.Somashekhar Rao Mr.Simachal Padhy Mr.Pramod Kumar Singh Mr. Sudhir Rajpal Mr. S.L.Dharmegowda Mr. Ramakant Bhargava Mr. Ankushrao R.Tope Mr. Harminder Singh Jassi Mr. Rajhans Upadhyaya Mr. Amal Kumar Verma Mr. Umesh Tripathi Mr. Kartik Chandra Sarkar Mr. B.S.Viahwanathan Mr. Rajkumar Tripathi Mr. (Dr.) U.S.Awasthi Mr. D.K.Bhatt Mr. Rakesh Kapur

- Director - Director - Director - Director - Director - Director - Director - Director - Director - Director - Director - Director - Director - Director - Managing Director -Dep.Managing Dir. cum marketing Director - Deputy Managing Director

IFFCO Sadan, REGISTERED OFFICE: C-1, District Centre Saket Place, New Delhi-110017

5 PLANT LOCATIONS

KALOL UNIT

P.O. Kasturinagar Dist. Gandhinagar - 382423 (Gujarat) Post Office: Kandla

KANDLA UNIT

Gandhidham - 370201 Kandla (Kachchh) Gujarat

P.O. Ghiyanagar PHULPUR UNIT Dist. Allahabad - 212404 (Uttar Pradesh) AONLA UNIT P.O. IFFCO Township Paul Pothen Nagar, Bareilly - 243403 (U.P.) PARADEEP UNIT Village: Musadia PO: Paradeep Dist: Jagatsinghpur- 754142

6 EXISTING BANKERS

 Indian Overseas Bank State Bank of India Bank of Baroda Standard Chartered Bank The Maharashtra State Cooperative Bank Ltd. The West Bengal State Cooperative Bank Ltd. Madhya Pradesh State Cooperative Bank Ltd. The Karnataka State Cooperative Bank Ltd. The Punjab State Cooperative Bank Ltd. The Hongkong and Shanghai Banking Corporation Ltd. ICICI Bank Ltd. IDBI Bank Ltd. HDFC Bank Ltd. Punjab National Bank

AUDITORS

M/s. G. S. Mathur & Co., Chartered Accountants, A-160, Defense Colony, New Delhi-110 024.

M/s S. Mohan & Co., Chartered Accountants, G-47, Connaught Circus, New Delhi-110 001.

M/s. S.K. Mehta & Co., Chartered Accountants 2682, Gali No. 2, Beadan Pura Ajmal Khan Road Market Karol Bagh New Delhi - 110 005.

M/s. S.C. Vasudeva & Co., Chartered Accountants B-41, Panchsheel Enclave New Delhi - 110 017

M/s. Arun Singh & Co., Chartered Accountants, F-7, Lajpat Nagar III, New Delhi-110 024.

7 IFFCO ASSOCIATES
IFFCO-Tokio General Insurance Company Ltd. National Collateral Management Services Ltd.

 Indian Potash Limited IFFCO Kisan Bazar Ltd. Indian Farm Forestry Development Cooperative Ltd. IFFCO Foundation Cooperative Rural Development Trust IFFCO Kisan Sewa Trust Indo Egyptian Fertilizers Company, SAE Jordan India Fertilizer Company, L.L.C. IFFCO Chhattisgarh Power Ltd. IFFCO Kisan Sanchar Ltd. IFFCO Kisan SEZ Ltd. Industries Chimiques Du Senegal Oman India Fertilizer Company S.A.O.C. Kisan International Trading, FZE National Commodity & Derivatives Exchange Ltd. Freeplay Energy India Pvt. Ltd. Aria Chemicals (Orissa) Ltd.

SHARE CAPITAL

As on March 31, 2010, the paid up Share Capital of the Society increased to Rs.426.24 crore from Rs.426.28 crore in the previous year.

Rs. In Crore
Category Government of India Co-operatives Total Equity Nil 426.84 426.84 % Share Nil 100 100

The Share Capital of the Society was Rs. to 426.24 crore as on March 31, 2008.

8 INVESTMENTS

1.

Godavari Fertilizers & Chemicals Limited. (GFCL)

The society has invested Rs. 8.25 crore in Godavari Fertilizers & Chemicals Limited. Which accounts for 25% of the paid up share capital of Rs.32 crore of the Company.

2.

Indian Potash Limited (IPL) IFFCO holds an investment of Rs. 2.68 crore in ICL with the shareholding of 34% in the paid up share capital of Rs. 9.53 crore of Indian Potash Limited.

3.

Industries Chiniques Du Senegal (ICS) IFFCO had entered into an agreement during the year 1982 with ICS Senegal for setting up a project for manufacturing Phosphoric Acid wit the production capacity of

3.13 MT. The Government of Senegal was amongst the other Co-promoters of ICS along with IFFCO. IFFCO had invested equity of US $ 10 million till 2006. 4. IFFCO Tokio General Insurance Company Ltd. (ITGI) IFFCO TOKIO GENERAL INSURANCE COMPANY LIMITED was established as a joint venture company in the year 2000 for undertaking general insurance business in India. Total paid up share capital of ITGI of Rs. 100 crore in which 51% share is held by IFFCO by investing Rs. 51 crore. 5. OMAN India Fertilizer Company IFFCO along with the other joint venture partners completed the OMAN India Fertilizer Company IFFCO had 25% Shareholding amounted US $ 80 Million. 6. Kisan International Trading Dubai IFFCO has set up a special purpose vehicle (SPV) VIZ Kisan International Trading as A fully owned subsidiary on April 16 2005 with equity of UAE Dirhans 1 Million.

7.

Acquisition of Paradeep Unit IFFCO acquired the phosphatic unit at ORISSA (Paradeep) in Sep. 2005. The plant has started complex fertilizer production in April 2006.

SIGNIFICANT HIGHLIGHTS

Guidelines on identification, Obsolete, Surplus items. IFFCO Manual

Phulpur unit was awarded the prestigious Rajeev Ratna National Award-2005 for

excellence in Indian industries-Best Pollution Control Gold Award by a national magazine WHAT HALLS PUBLIC SECTOR TODAY. Kalol unit has bagged Rotating Shield (Winner Award) with certificate for the lowest

Disability Injury Index from Gujrat safety Council.

Kandla unit received the FAI Award for the year 2004-05 for the best overall

performance of in complex fertilizers category. Aonla unit received National Safety Award as runner-up based on largest accident

free area.

Prestigious National Energy Conservation Award-2005 certificate of merit in the

fertilizer sector to phulpur unit.

SWOT ANALYSIS

STRENGTH Over the years, IFFCO has grown in strength from a modest membership of 57 societies in 1967-68 to 33260 as on March 31, 1997. The society derives strength from the invaluable contribution made by its talented and dedicated employees, who is well accomplished to deliver in the dynamic economic scenario for gaining competitive advantage. WEAKNESS IFFCO are going only straight forward direction, i.e. produce only fertilizers. The use of fertilizers is depending only on rain and irrigation facilities. If both are not good it will directly affect to the use of fertilizers. IFFCO is Multi State Co-operative Society registered under Bombay Co-operative Societies Act (Act 7 of 1925) and under Multi Unit Co-operative Societies Act 2002. Being a Co-operative Society it can not issue the equity share capital as company. Pricing policy of the IFFCO has totally formulated by the government of India. IFFCO has not any power to decide the price of its fertilizers. IFFCO can not sale its fertilizer at higher price than price decided by central government. IFFCO is the co-operative society so it could not sale its fertilizers directly to the customers.

OPPORTUNITIES Expand the market by globalization.

IFFCO has a good distribution network by which he will sale pesticides, bio fertilizer, research seeds etc Sourcing raw materials for production of phosphatic fertilizers at economical cost by entering into Joint Ventures outside India. In India more than 65% population are live on agriculture and the fertilizer is the main source of increasing the agriculture productivity and the production of Indian agriculture. Government are now more concentrate on agriculture by more and more irrigation facilities like Narmada Saradar Sarovar Yojana, Suzlam-Suflam Yojana, Micro Irrigation with 50% subsidy etc.

THREAT When any change in crop patent it will directly affected to the use of fertilizers, The fertilizers use is directly depending on the irrigation facilities, if irrigation is less then the use of fertilizers is also less. IFFCO run by share capital of co-operative branches if branches are become weak it will directly affect to the IFFCO. Increasing input costs of feed stock i.e. Fuel Oil/NG/Naphtha Slow growth in urea consumption during last 7-8 years.

ABOUT KALOL UNIT

Year of Commissioning Investment Year of Expansion Investment

1967 Rs 710million 1997 Rs 1500million

HIERARCHY OF IFFCO

CHAIRMAN

BOARD OF DIRECTORS

MANAGING DIRECTOR

FINANCE DIRECTOR

MARKETING DIRECTOR

EXECUTIVE DIRECTOR (PROJECT)

EXECUTIVE DIRECTOR (GENERAL MANAGER) M)

TRANSPORT ADVISOR

GENERAL MANAGER (KALOL)

GENERAL MANAGER (KANDLA)

GENERAL MANAGER (AONLA)

GENERAL MANAGER (PHULPUR)

Source POWER OF OFFICERS manual by IFFCO

2 PLANTS OF KALOL UNIT

There are mainly TWO plants in the unit namely 1. AMMONIA PALNT 2. UREA PLANT

1.

AMMONIA PLANT: There are two streams of Ammonia Plant having the capacity to produce 2x1520 MTPD of liquid ammonia. The technology is based on Haldor Topsoe, Denmark process with natural gas and naphtha as main raw material.

2.

UREA PLANT: There are four streams of Urea Plant having the capacity to produce 2x1310 MTPD of urea fertilizers. The technology is based on snamprogetti, Italy on ammonia stripping process.

3 LOCATION

State State Capital Distance From Gandhi Nagar Distance from New Delhi Distance from Mumbai Nearest Airport Railway Station Road Area Under Plant Area Under Township Temperature ( o C ) Rainfall

Gujarat, India Gandhi Nagar, is about 18 Km from the plant site. 18 Km. 912 kms 514 Km Ahmadabad (About 25 Km. away from Plant) Kalol (7 Km from the plant) On Ahmedabad Mehsana State Highway(SH) 96 Hectares 22 Hectares 45 (Maximum) in summer to 4 (Minimum) in winter. 742(mm)

45 ORGANISATION CHART AT KALOL UNIT

Sr. General Manager

General Manager

General Manager

JGM/CM System System

JGM/CM Production

JGM/CM Maint

JGM/CM Technical

JGM/CM Utility

JGM/CM Communication

JGM/CM F &A

Ammonia Plant

Mechanic al

Process

Power

Purchase

F&A

Urea Plant

Electrical

Design & Drawing

Offsite

Store

Product Handling

Instrumental

Library & Document

Fire & Safety & Env.

Civil

Laboratory Training & Devp.

Traffic

General Engg.

Source POWER OF OFFICERS manual by IFFCO

5 6KALOL UNIT HAS BAGGED FOLLOWING AWARDS

Source http://www.iffco.nic.in

TIME

NAME OF AWARD

National Energy Conservation Award

FAI Award for Best overall performance& Technical innovation

Productivity Council Award

Indo-German. Greentech Environment

National safety council Award

Gujarat State Safety Council Award

20

Gujarat Horticultural Award

Vishwakarma Rashtriya Puraskar

RESEARCH METHODOLOGY
Research represents a systematic method of exploring actual persons and groups, focused primarily on their experience within their social worlds, inclusive of social attitudes and values, the mode of analysis of these experiences which permit stating proposition in the form.Research covers the search for and retrieval for a specific purpose. Basically research is a search for knowledge with the help of objective and systematic method of finding solution to a problem. Steps followed to conduct the study.

1 OBJECTIVE OF THE STUDY

The objective of this project is to study the inventory system and its effectiveness in IFFCO. The purpose of this study is to know the system of inventory held by the company and to know the various techniques used by the company, related with inventory. The foremost thing is the company and its unit profile and research methodology. Company and its units profile have been generated to get well familiar with the company and research methodology was required so that inventory system could be known for analysis. Finally, by gathering the data from various departments like store department, finance & accounts department etc., work has been started. A system of inventory has been drawn on the basis of collection of data and research. Another work that was being carried out simultaneously was to know the current policies and system regarding inventory. The main objective of this report is to check the efficiency and effectiveness of inventory management system. To analysis the level of investment in inventory by IFFCO. To understand the working of different sections of finance & accounts department To study and analyze the policies and practices regarding inventories adopted by the unit.

To observe the effectiveness of companys inventory management system. To understand the different sections of companys inventory management system.

FORMULATING RESEARCH PROBLEM:

The problem under study

viz. how effective are the measures applied by IFFCO, kalol to control the inventory is basically studied through analytical research. Material is important for the efficiency of the system. It is a matter of great importance for inventory department. Inventory department of IFFCO, kalol is responsible for efficient inventory control. Thus the whole study was conducted under the guidance of officers of this department.

METHODS OF DATA COLLECTION:a) Primary data: Basic information collected from the company staff like managers, accountants and officers. Moreover information gathered through practically preparing the data for Inventory. b) Secondary data: i. ii. iii. iv. From the Balance Sheet of the company From Cost & Management Accountancy report From Internet From Reference books

FINANCE & ACCOUNTS DEPARTMENT

Money or capital being a scare as well as crucial resource in the working of any organization needs to be given prime importance. The financial resources have been planned and controlled in a proper and continuous manner. Finance & Accounts from an integral part of any organization, proper and smooth functioning of this section is very vital for the organization to survive and grow. Finance functions are of two types:

1. 2.

Managerial finance function Routine finance function Managerial finance functions are so called because they require skilful

planning, control and execution of financial activities. Routine finance functions on the other hand, do not require a great managerial ability to carry them out. They are chiefly and are incidental to the effective handling of the material finance functions.

Finance & Accounts Dept. At A Glance

The Finance & Accounts Department. Of IFFCO, Kalol is divided into 3 sections, to facilitate smooth and easy functioning and control.

Finance and Account Deptt. Source The Financial Journal of IFFCO

Bill Section

Financial Concurrence Section/ Budget

Books Section

Payroll & Taxation Section

PSL Section

Supply Section

Note Sheet Payment Sec.

Work order section

THE VARIOUS AREA COVERING UNDER THE PREVIEW OF 3 SUBSECTIONS ARE AS FOLLOWS: BOOKS SECTION This section basically deals with accounting function, maintenance and keeping of records. The various functions include: Books: Preparing and maintaining balance sheets. FICC (Fertilizer Industries Coordination committee) Costing & Pricing Cells Reporting

PAY ROLL SECTION

Kalol Unit undertakes processing of salary and other staff related payments of all employees through Human Resource Management System (HRMS). It is an integrated package based on Oracle DBMS. The System integrates Personnel & Administration Department and Finance & Accounts Department. Simultaneously, Financial Accounting System (FAS) which is also based on Oracle DBMS has been launched in F&A DEPARTMENT through which General Ledger Sub Ledger of Employees is maintained and Trial Balance and Financial Accounts are generated. There is also inter- relation of HRMS and FAS so that cash payment/receipt vouchers, Bank Payment Vouchers and Journal Vouchers generated in HRMS are automatically posted online to Payroll Section of Finance & Accounts Department.

TAXATION SECTION

As per the status and operations of the society, It deals with the following Taxes: Central Excise Duty Income Tax Service Tax Sales Tax

CENTRAL EXCISE DUTY

As we know that this duty is charged by Central Government on the goods manufactured. IFFCO mainly produce ammonia and urea at Kalol plant. So duty on ammonia is charged. In this relation monthly production report is prepared and all documents and accounts are prepared by the Finance & Accounts Department. The duty is deposited in the Government bank account on the 5th day of the month. EXCISE Duty is not charged on production of Urea.

1. FINANCIAL PERFORMANCE
In spite of constraints in availability of raw materials, and inordinate delays in receipt of large subsidy amounts from Government of India, IFFCO has yet again delivered an impressive financial performance in all its major parameters, namely, Revenue Growth, Operating Margins and Resource Utilization testifying to robustness of its Corporate Strategy of creating multiple drivers of growth. This was possible due to higher production, sales volume and improvement in operating efficiencies. The Society achieved the highest ever Sales turnover of Rs.12163 crore. This represents an increase of 18 per cent over the previous year. It was brought out by higher volume of Sales of Fertilizer materials,

which increased to 93.24 lakh tonne fertiliser during 2008-09 as against 86.10 lakh tonne in the previous year. The performance is even more satisfying when viewed in the light of challenging business environment of fertilizer industry. Some of the key financial ratios highlighting the Financial Performance of the Society were as under:

Key Parameters Operating Profit to Sales (%) Return on Capital Employed (%) Pre-tax Return on Net Worth (%) Current Ratio Debt Equity Ratio

2010-11 10.43 4.15 13.28 2.66:1 2.70:1

2009-10 6.54 3.12 11.16 2.41:1 3.23:1

PERFORMANCE HIGHLIGHTS
8

IFFCO performance during 2010-11.

Highest Production of Fertilizers 10) Highest Production of Urea

8

81.97 Lakh MT (Previous Best 68.47 Lakh MT in 200943.23 Lakh MT

Source IFFCO Companys Annual Report 2009-2010

(Previous Best 40.68 Lakh MT in 200910) Production of NPK/DAP/NP 10) Highest sale of Fertilizers 10) Highest sale of Urea 10) Highest sale of NPK / DAP/NP 10) Highest Turnover Profit before Tax 10) Profit After Tax 10) Highest Marketing Productivity 2009-10) Plant Productivity 2009-10) Lowest Energy Consumption - Urea 5.832 Gcal / Tonne (Previous Best 5.941 Ton in 2009-10) 1608 MT/ per employee (Previous Best 1376 MT /employee in 7887 MT per employee (Previous Best 7397 MT/employee in 401.10 Crore (Previous Best Rs. 360.01 Crore in 200917300 Crore (Previous Best Rs.32933 Crore in 2009-10) 550 Crore (Previous Best Rs. 441.95 Crore in 200954.2 Lakh MT (Previous Best 53.89 Lakh MT in 200963.8 Lakh MT (Previous Best 58.69 Lakh MT in 2009118 Lakh MT (Previous Best 112.58 Lakh MT in 200938.74 Lakh MT (Previous Best 31.00 Lakh MT in 2009-

From the above chart it can be seen that total income in 2009-10 is highest with 33432.3 crore even though the production of the 2010-11 is highest. Main reason for above

happening is high sale of fertilizer in 2009-10 and cost of inventory is low. In 2010-11 sale of fertilizer is highest but in 2010-11 cost of inventory also increased.

From the above chart of profit after tax it can be seen that PAT in 2010-11 is highest with 401.1 crore even though the cost of inventory 2010-11 is highest. Main reason for above happening is high sale of fertilizer in 2010-11 and cost of inventory also increased.

From 2006-07 to 2010-11 the net worth of the company increased by 20% . Main reason for the increasing the net worth of the company can be seen from previous graph of Equity Share capital. Equity share capital also increased from 422.73 Rs.crore to 426.24 Rs.crore As on March 31, 2008, the paid up Share Capital of the Society increased to Rs.423.93 crore from Rs.422.83 crore in the previous year. During the year, the Society repatriated Share Capital of Rs.0.25 crore to weaker cooperative societies and issued Shares valuing Rs.1.35 crore to member Cooperative Societies. The total number of member shareholders of the Society as on March 31, 2008 was 39,564. The Reserves and Surplus increased from Rs.3218.92 crore as on March 31, 2007 to Rs.3264.73 crore as on March 31, 2008, indicating an increase of Rs.45.81 crore over the previous year. Pursuant to adoption of Accounting Standard15 (Revised) on Employee Benefits, transitional liabilities of Rs.125.14 crore (Net of Deferred Tax) was adjusted against General Reserve. The Net Worth of the Society as on March 31, 2008 increased to Rs.3688.66 crore from Rs.3641.84 crore in the previous year.

From the above chart it can be seen that Production of Fertilisers in 2010-11 is highest with 81.97 lakhs m tonne even though the production of the 2009-10 is highest.

The main product of the IFFCO is UREA and other products are NPK/DAP/NP. The production of the both the products urea 43.23 Lakhs M Tonne and NPK/DAP/NP 38.74 Lakhs M Tonne /is highest during 2010-11

1 CONCEPT OF INVENTORIES
Accounting Standard -2 Accounting Standard 2 determines the valuation of inventories, on the basis of cost price or net releasable value which ever is low. AS-2 provides for valuation of inventories. What are inventories? Inventories are assets: Hold for sale in the ordinary course of business. In the process of production for such sale. In the form of materials or supplies to be consumed in the production process or in rendering of services. Inventories encompass finished goods produced or work in process being produced by the enterprise and include materials, maintenance supplies, consumables, loose tools awaiting use in the production process.

Types of inventory 1. Inventory of raw materials 2. Inventory of stores and spare parts 3. Inventory of work-in-progress 4. Inventory of finished goods

2 GENERAL OUTLINES
Inventories constitute about 60% of current assets of companies of India. The manufacturing companies hold inventories in the form of raw materials, work in process, finished goods, stores and spares, chemicals, lubricants etc. Three motives for holding inventories: To facilitate smooth production and sales operation (transaction motive), To guard against the risk of unpredictable changes in usage rate and delivery time (precautionary motive) To take advantage of price fluctuation (speculative motive) Inventories represent investment of a firms funds. The objective of the inventory management should be the maximization of the value of the firm. The firm should therefore consider costs, return, and risk factors in establishing its inventory policy.

Two types of cost are involved in the inventory maintenance:1. 2. Ordering cost requisition, placing of order, transportation, receiving, inspecting, Carrying cost warehousing, handling, clerical staff, insurances and taxes. storing, clerical staff, are fixed per order. Therefore, they decline as the order size increases. Carrying costs vary with inventory holding. As order size increases, average inventory holding increases and therefore the carrying costs increase.

The firm should minimize the total cost (ordering + carrying). The economic order quantity of inventory level occur at point where total cost is minimum EOQ = 2AS/C,

Where A= annual requirement, S = ordering cost per unit, C = carrying cost per unit per annum When should the firm place an order to replenish inventory?

The inventory level at which the firm places order to replenish inventory is called reorder level. It depends on lead time, usage rate Re-order level = lead time * usage rate Lead time is the time normally taken in replenishing inventory after the order has Placed. Under uncertainty about lead time. Therefore firms maintain safety stock which provide buffer or cushion to meet contingencies. Re-order level = safety stock + lead time * usage rate A firm which carries number of inventories that differ in value, can follow a selective control system. ABC analysis classifies- A category consists highest value, B category consists high-low value items, C category consists lowest value item. Tight control may be applied for high value item and loose control for low value item. Large number of companies these days follows the total quality management (TQM) system which requires companies to adopt just in time (JIT) and computerized system of inventory.

How are inventories valued under AS-2 Inventories are valued at the lower cost and net realizable value. The cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of purchase consists of the purchase price including duties and taxes freight inwards and other expenditure directly attributable to the acquisition. Trade discount, rebate, duty drawback and other similar items are deducted in determining the cost of purchases.

The cost of conversion of inventories includes costs directly related to the units of production such as direct labor.

3 INVENTORY VALUATION AT IFFCO

Inventories are valued at lower of cost or net realizable value. a) The cost in respect of various items of inventory is computed as under: i) Raw Materials, Packing Materials, Construction Materials, Loose Tools in Stock, Chemicals & Catalysts in Stock and Stores & Spares at monthly weighted average cost. ii) Stock-in-Process at direct cost and an appropriate portion of overheads. iii) Finished Goods: - Manufactured Nitrogenous Fertilizers covered by Group Concession Scheme at Annualized Cost of Production at Plant after adjustment of subsidy as determined as per the Revised Norms of the Fertilizer Industry Coordination Committee (FICC). 0 - Manufactured Phosphatic Fertilizers at Annualized Cost of Production at Plant plus freight unto the warehouses after adjustment of subsidy as estimated in accordance with known policy parameters in this regard. - Imported Nitrogenous Fertilizers at procurement cost plus direct expenses less reimbursement of handling cost as fixed by the Government of India. - Imported Phosphatic Fertilizers at procurement cost plus direct expenses after adjustment of subsidy as estimated in accordance with known policy parameters in this regard. b) Net realizable value of Finished Goods is determined at estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Cost formulae for determining cost of inventories

Weighted Average Method
IFFCO are using weighted average method. Under this method the issue price is calculated by dividing the value of materials in hand by the number of units in hand. Thus it takes into account both quantities and money value for arriving at the issue rate. Whenever a new consignment is received, a new weighted average price is calculated by adding the value of the consignment to the cost of stock in hand. The rate thus, calculated is used to price all issues until a new consignment is received. The method is more scientific as it smoothens the fluctuations in purchase price. Further, inventory is valued at one rate.

4 CLASSIFICATION OF MATERIALS AT IFFCO

IFFCO is engaged in the production of fertilizers. It is one of the leading industries of India. The final product of the company is UREA; which is produced with the help of Ammonia and Carbon dioxide. CO2 is obtained directly from air and Ammonia is produced at Ammonia plant using the following materials: Naphtha Natural Gas (O.N.G.C.) RLNG (Where inventory for Natural gas and RLNG is nil.)

Consumption of Raw Material, Utilities and Stores The Societys greatest strength is its cost competitiveness and customer focus. During the current year, the Society further reduced its manufacturing costs by better production management, which has contributed to increase in Operating Margin. The Society is also pursuing many operational excellence programmes so as to optimize the costs and achieve higher operational efficiency. Inventory Consolidation A data warehouse has been created at HO where the Inventory data of all the Plants except Paradeep is being replicated automatically due to which information like availability of any item of stores & spares at any Unit, status of surplus and non-moving inventory can be accessed on line by the persons to whom access rights have been assigned. The System is expected to help in optimizing the inventory of stores & spares at the Units.

Besides these raw materials, certain stores and spares must be considered. General Spares General Stores Chemicals Steal Cement Catalyst

MATERIAL HANDLING Material Handling includes moving, packaging and storing all the materials used by the firms. The material handling systems is judged by how it serves the production into most economical cost. Hence, it is divided into sections: Purchase section Stores section

PURCHASE SECTION

The purchase department, in any organization, is at the interface of internal and external environment. This department is responsible for purchase of various machines, raw materials and other items required by the organization. Purchase function from integral part of material management and it plays very important function as it is through this procedure that the right amount of material required is delivered at the right place and at the right time so that the process of production or manufacturing goes on unhampered. There is a distinct difference between buying and purchasing, the later involving knowledge of various vendors, their prices, comparison of the prices, actual buying, after sale service and follow-up, besides payment terms etc.

The purchase department of an organization must know following things: Knowledge of the materials Source of material- Vendors Reasonable price

PURCHASE PROCESS RECOGNITION OF NEED: The purchase function performs whenever something is needed and which is not available in store department at that particular time. REQUISITION TO PURCHASE: This is intimation to the purchase department by the indenting department regarding the requirements of material. The indenting department gave its requirement on Material Purchase Requisition (MPR). In MPR no. of information required from intending department: Name of items and their code no. Section & Department code no. Amount required Technical and other specifications Estimated price Delivery date Suggested vender RECORD AND NUMBERING OF REQUISITIONS: All purchase requisition received in the Material/ Purchase Department shall be entered department wise in the computer using materials management system module. The indenting Department shall allot a number to each requisition and endorse the same on all copies of the requisition. MRP SCRUTINY: Next step involve scrutinizing of the MRP to certify the genuine of the need. For this, approval is to be given by higher authority of the intending

department. Next, MRP is sent to the store department to check whether the material is available or not. If it is not available, then MRP is sent to the purchase department for further action. Basis of scrutiny is of three types, namely: Approval Scrutiny Budget Scrutiny Technical Scrutiny

SENDING OF ENQUIRY / INVITATION TO BID: Items can be classified in to two categories keeping in view the purchase function: Proprietary Items: These items are bought from a particular supplier/vendor. Nonproprietary Items: These items are those items for which there is no restriction on purchasing from a particular supplier/vendor. Enquiry is sent in order to know the prices and other terms and conditions of vendors. It should stipulate that: 1. 2. IFFCO reserve the right to accept or reject any /all bids without assign FFCO shall have the right to place the order/award the work to one or any reason. more vendor/contractor. Bidding can be done in three ways-: I. Proprietary bidding: This is for the proprietary items and is sent to only one

vendor. Here the proprietor is invited to set a Competitive price. II. Limited tender enquiry: This is done for non-proprietary items and bids are

invited from a limited no. of vendors selected from the registered vendors with the company.

III.

Press tender/Open bidding: If the amount involved in purchase is more than

three lakhs and the item is non proprietary then press tenders are issued in various news papers. There may be global tenders also. Normally, bids shall ask in two envelopes in case of single stage bidding as below: 1.Envelope I 2.Envelope II Earnest Money deposit Base price as per the terms and conditions of ITB and alternate

price bid, if any Alternate bids shall be based on alternative designs, materials, competition schedule, payment and other terms and conditions. The alternate bid shall not be considered, if not accompanied with base bid.

RECEIVING OF OFFERS After all the bids have been submitted the tenders are open before tender committee to compare the quotations-Quotations comparison statement (QCS) is made and bid with lowest quotation is generally chosen. QCS is also sent to the technical depth and in consultation with it one more than one offer are chosen, giving quality and price the top priority.

PURCHASE ORDER: After selecting the best offer, purchase order is sent to that vendor with all the terms and conditions specified and details of the material to be purchased are also given. A bank guarantee of performance is taken from the vendor in advance which is usually 5% of the P.O.A. time limit is set for delivery of consignment and in case of delay a penalty is imposed @ 5% of P.O. per week.

The Purchase Order shall be raised by the Purchase Department in six copies shall be numbered in the same manner as Purchase Requisition. Original + 1st and 2nd copy to the Vendor- with a request to return 1st and 2nd copy duly signed as a token of his acceptance. 3rd copy to the 4th copy to the 5th copy to the 6th copy to the Material Department Store Section Accounts Department Indenting Department

As soon as 1St and 2nd copies are received from the vendor duly accepted, they will be distributed as under:1St copy to the 2nd copy to the Accounts Department Materials Department

RECEIPT OF MATERIALS After the consignment reaches the stipulated place, the payment is done by the organization according to the purchase terms agreed upon by the two parties. The material is checked for quality conditions and then sent to the store where the store releases the STORES RECEIPT VOUCHER (SRV). From here it is delivered to the vendor.

FOLLOW UP DONE FOR EVERY ORDER It may be regarding delay in supply, changes in price, defective or damaged items supplied etc. For every indent, a separate file is opened and correspondence goes on. For every step, recommendations of indenter, manager (F& A), materials manager & general manager are sought.

PAYMENT AGAINST PURCHASE There are various modes of payment1. ADVANCE PAYMENT TO SUPPLIER:- Advance payment shall be made to the suppliers only in such cases where it is specifically provided in the contract order. The advance payment to contractors shall be made against submission of bank guarantee in the Performa provided by IFFCO. Advance payment against indemnity bond shall not be released as provided in the purchase procedure. 2. Full payment / 90% to 95% PAYMENT:- In case the terms of payment provide for full payment or part payment against dispatch documents through bank, the supplier will be negotiating the documents through the bankers. After the documents are received by the bankers, they are forwarding bank intimation along with a copy of the purchase order to ascertain that the invoice is raised for the material ordered and confirms to the other terms and conditions of purchase order. After the intimation from the bank is received the invoice of the suppliers will be scrutinized by the finance and account department for the following:Purchase order number Whether materials supplied are as specified in the purchase order.

Quantity supplied. Price basis whether F.O.R. or Ex-works Whether taxes are as per the order. Whether bank charges are claimed as per the purchase order. Other terms and conditions of the purchase order.

Where there is delay in supplying the material and the payment through bank is 90 % to 95 %. It should be ensured that penalty for delay, as provided in the purchase order, is recovered before releasing the balance payment. Where payment required to be made, a clarification is to be sought from materials depth and proper approval taken for waiving of penalty or otherwise before retiring documents. The payments under the contracts must be regulated as per the expressed terms and conditions. Any payment not covered by the contractual terms and conditions should not be released.

FULL PAYMENT / BALANCE PAYMENT AFTER RECEIPT OF MATERIALS: In case the purchase red provides the 100 % payment after receiving of materials and accepted payment is to be released after the MRR is recessed from the stores department. In case the purchase order dispatch documents and the balance payment after receipt of materials, the balance payment may also to be released after the MAR is received and it is confirmed that the material has been accepted after inspection and taken on charge. Before released of the payment, the invoices should be scrutinized as the case of payments released through bank. In addition it should also be verified whether all the items invoiced have been received, inspected and accepted per the MRR..

DELAY IN DELIVERY In case of project purchases, the time and date of the delivery is the contract. In the event of delay in the execution of the order beyond the date of delivery as stipulated in the order, the project authorities may take following actions

 Accept delayed delivery at price reduced by a sum equivalent to 0.5 % if the value goods not delivered for every week of delay or part thereof limited to a maximum of 5% of the contract value. OR Cancel the order in part or full and purchase such cancelled materials from elsewhere on account and at the risk of the suppler without prejudices to his right inspect of goods delivered.

ABOUT IMPORTED MATERIALS Materials procured may be either indigenous or imported. For major projects the foreign contracts are normally finalized at head office level and payment against these contracts are made by the concerned unit. Where the order has been placed by the unit directly, they will make the payment to the foreign party by debiting to the appropriate advance account. If the payments are made through L/C against documents, the same shall be debited to advances to foreign suppliers account. On receipt of material at site, project engineer shall prepared the MRR and sent same to project accounts for clearing the suppliers advance account for material. Clearing and handling of imported material is the responsibility of material department on the arrival of ship the materials will be cleared with reference to the invoices and bills. For any short landing or brokerage between the port of dispatch and port of destination, claim action shall be taken by them.

MATERIALS: PACKING & DISPATCH All packing, boxing and crating and protection shall conform to the specification or requirements of the order. The seller shall be held liable for damage or brokerage to the goods due to defective or insufficient packing, marking as specifically advised in the order or dispatch instruction shall be done by seller in decibel paint and in such manner to ensure that the same is clearly visible. All materials shall be dispatched by rail / road freight paid and the railway receipt / lorry receipt shall be posted to the concerned anchorage of IFFCO. INSPECTION OF MATERIAL

The material department shall coordinate with other departments and arrange inspection of material at vendors shop prior to dispatch. Inspection of materials in other cases shall be carried out on receipt of materials at site. Only materials those cleared by the inspection will be taken on charge in stores. The person inspecting the material will sign on the stores receipt voucher in token of having inspected and accepted the material.

DAMAGES/SHORT/REJECTED MATERIALS If the materials are received short or in damaged condition there are some conditions in this regard. In cases where the responsibility for the transit insurance is on IFFCO, a claim should be lodged with insurance company for the value of material plus incidentals. As soon as the shortage per damage of the materials is noticed the material department will lodge the provisional claim with the underwriters and pass on the relevant papers to the finance & accounts department for lodging monetary claim.In respect of transit insurance claims bill section will pass an adjustment entry debiting claim recoverable account and credit the Advance to vendors account. After the adjustments the billion sections sent the copy of journal voucher along with all necessary details such as P.O. No. , MRR No. quantity and value, name of the supplier to the insurance section for following up the claim with the insurance company. Where the responsibility for short supply or damages in transit is of the suppliers, the material department should take up the matter with the supplier for arranging replacement.

ACCOUNTING OF RAW MATERIALS

Based on the projected consumption requirement of raw materials, the procurement action is taken by the commercial department at head office. Described below is the accounting requirement of major raw material.

IMPORTED PHOSPORIC ACID AND AMMONIA The consignment of phosphoric acid and Ammonia are received at kandla and the material actually received is valued at the contracted cost & freight price. Where free on board (FOB) price is agreed, the ocean freight element is loaded separately. All connected expenditure like customs duty; handling charges etc. are also included in inventory valuation. The valuation of inventory at the month end is to be made on the basis of exchange rates prevailing on the last day of the month. The difference if any between the provisional rate and the actual payment rate shall be charged off to the consumption account, if the material is already consumed. The account department also ensures that all claim suppliers for shortage are booked on monthly basis and necessary on quarterly basis for the pending claims.

INDIGENOUS AMMONIA

The indigenous ammonia is supplied by KRIBHCO / GNFC to kandla unit. The quantity received is accounted at the price payable to the party which is fixed by the Govt. of India. This price is fixed at par with thee landed cost of imported ammonia. However after the abolition of price control on complex fertilizer. This price is fixed at par with the landed cost of imported ammonia.

POTASH

Potash purchase orders are placed by the commercial department time to time depending on the material requirement. The material received valued at agreed price plus local sales tax and freight for transportation of material up to plant site. The finance department at head office ensure that payment for these raw materials are released on due dates to avoid interest liability. After releasing the payments the inter unit debit advice is sent to plant. On receipt of the payment advices the suppliers account is adjusted in the plant.

NATURAL GAS

Kalol and Aonla plant consume as feed stock and fuel. As per the contract with ONGC, gas is supplied to IFFCO at the price fixed by Govt. of India from time to time. The meters provided at the inlet point in the plants are the basis for monthly billing. Meter reading is carried out jointly by ONGC / GAIL and IFFCO representatives. The unit sends the telex to head office for making payment to ONGC / GAIL after due certification of bill by the head of technical department about quantity of gas received.

NAPHTHA

Naphtha is supplied by IOC against advance payment terms. There are excise duty concessions available for these items provided they are consumed for manufacture of fertilizers. Accounts department in coordination with production department shall ensure that all the excise duty requirements are fulfilled that the duty concessions are fully availed. The inventory is valued based on the quantity received as per MRR received from production department on monthly basis. The price payable to IOC for naphtha is fixed by the Govt. by time to time the naphtha is supplied to kalol unit from Mathura refinery.

CATALYSTS & RESINS

The Catalysts & Resins are produced by the material department at the plant; on the receipt of the material the inventory is valued at the agreed price. For Catalysts & Resins where IFFCO has pooling arrangement with other companies, the material received is taken to inventory at the actual price paid and equivalent amount is credited to material received on loan account. This entry will be reverse when the material is procured by IFFCO and replenished for return of loan. The inventory and consumption account then shall be accounted at the actual procurement price.

ACCOUNTING REQUIREMENT FOR STORES AND SPARES A summary account is maintained monthly to analyze the difference in quantity as well as value of each item. GENERAL STORES AND SPARES: The stores and spares in Material Department

of IFFCO are divided into different groups; where each group as well as individual items is given specific code. They are enumerated below: INVENTORY SPARES: This group consists of Ammonia and other spares. There Specific fittings Valves Bolts, nut ,stud, fasteners O-Rings , gaskets, sheets, packing Welding material Abrasives Industrial gases Adhesives, cleaning, chemicals Instrument items

are number of items in total under Inventory General Stores i.e.

Electric items General items

INVENTORY LOOSE TOOL ACCOUNT: consists of hand tools, M/C tools,

Rigs and fixtures. INVENTORY CATALYST ACCOUNT: Catalyst INVENTORY CONSTRUCTION MATERIAL CEMENT ACCOUNT: Cement

is an important material for construction purposes.

INVENTORY CONSTRUCTION MATERIAL STEEL ACCOUNT: Structural CHEMICALS Chemicals are surely most important part of materials used in the production

process. The different chemicals constitute the following:-

Hydrochloric acid (HCL): procured from either United Alkalies or from Bhatia Acid. Caustic Soda (NaOH): is procured from United Alkalies Sulphuric Acid (H2SO4): is purchased from K.L.Singhania& Sons. Liquid Chlorine: is purchased from Kanoria Chemicals Alum Ferrous Sulphate Hydrated Lime Liquid Nitrogen Furnace Oil High Speed Diesel (HSD) PACKING MATERIAL

HDPE/Jute Bags are procured from Kanpur Plastipack Ltd. and Modern Laminators Ltd. they are in 2 different forms:- 25 kg. And 50kg. For units of Kalol.

STORE SECTION

Store of any organization is of vital importance. It is the responsibility of stores to receive the material required by the organizations operations to keep it properly & to issue it as when required. The stores are divided in to three subsections for greater flexibility like receipt, custody, issues and spares.

Store has following warehouses: Main Store. Cement godown. Petrol Pump. Cable yard. Chemical godown. Paint godown. PDIL store.

Accounting of receipts, issues, returns and transfer of materials

1.

The 2nd copy of material receiving report after the pricing shall be

posted on to the stores accounts section to scrutinize. The final check list entry in Price Stock Ledger is processed. The section shall ensure that all receipts, issues, returns and transfers vouchers raised by the stores section are finally posted in PSL. 2. The issues of notes shall be price on monthly weighted average rate

basis after accounting the last receipt of material. 3. basis. 4. The PSL balance for each category of stores shall be reconciled valueInter unit/ division transfer of materials shall be accounted at cost

wise with the control account balance in the ledger wherever possible. Stores accounts section shall draw out reconciliation on monthly basis. 5. Roper classification regarding the nature of expenditure (whether

capital or revenues) shall be given for capital expenditure, job description/ cost centre in detail shall be given. Job details shall also be given for works maintenance account. 6. If the materials are issued to operation or maintenance account, the

cost centre code/ the service centre where the material has been consumed, drawing cost centre code is to be given in issue note and return note. For material returned to stores, return note shall be priced by the stores accounting system. Section at the same rate at which it was issued and the value shall be debited to the relevant code of stores and spare part inventory account by credit to the cost center from where the material is received back.

ACCOUNTING FOR STORE DEPARTMENT

The authority of receipt, store and issue of all material is centralized in the materials department subject to exception in permitted in certain cases. In certain cases a nominal stock of few consumable items can be permitted with uses departments such as maintenance, laboratory, and administration department for meeting emergencies. In addition certain chemicals are permitted to be stored in production department due to the operational needs. The authority of storage of packing materials like bags is vested with bagging department. The bagging department receives the material, gets it inspected in laboratory, issued the same for product bagging and maintains the stocks. Maintenance of records for all quantitative transaction of packing material is the responsibility of bagging department. Similarly the raw materials are handled by production department with all responsibilities in respect of quantity accounting.

FUNCTIONS OF STORES ACCOUNTING SECTION The section dealing with accounting of stores in the finance department shall have following functions:Accounting of receipts, issues, return and transfer of materials. Accounting of imported materials for capital works and operations. Associating with stores section for stock verification. Valuation of stores items is done on weighted average basis.

5 INSURANCE OF STOCK & STORES

For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and finished products held at plants, insurance shall be taken to cover the risks arising out of fire explosion, riot, strike terrorism, malicious damage, earthquake, etc. The stock of finished products lying at different marketing warehouses should also be adequately covered through the warehousing agencies. According to the value of stores and finished products keeps on varying from time to time, insurance shall be obtained in the form of declaration policy whereby the average daily stock for each product held during the month shall be declared to the insurers in the first week of the next month. According to the declaration policy, the insured amount for each product shall be stated separately. The liability of the insurers is limited to the insured amount. At any time if it is found that the actual stock is more than the insured amount to avoid less amount of insurance. In case of a declaration policy, insurance premium is payable for minimum 35 % of the insured value. Before insurance is obtained, various categories of stores shall be reviewed with a view to select such items for which insurance is considered necessary.

6 PHYSICAL VERIFICATION OF MATERIALS

The officer of stores will coordinate the job of physical verification and the accounts officer in charge shall render all assistance to ensure that the physical verification of inventories is carried out as per the policy and the policy and the approved program. The store department will ensure that the posting in the Kardex are updated before the verification of inventories. The inventories are classified in three categories for verification purpose. Raw material & Packing materials Stores, Chemicals & Spare parts Finished Products

The stocks of raw materials, packing materials are to be verified on quarterly basis by an independent surveyor by the society. No adjustments carried out in the books need be of accounts unless the discrepancies in liquid raw

materials and solid raw material are in excess of 1% to 5% respectively. This is as per guidelines issued by the head office. In case of finished goods also the same principle applied except that no adjustments in the books of accounts shall be made. However the stock registers shall be adjusted on the basis of actual stock in order to replace the notional figures of stocks by more accurate estimate based on physical verification.

USE OF ABC ANALYSIS FOR PHYSICAL VERIFICATION OF MATERIALS

The inventories for other items such as stores, spares, construction materials etc. are also verified every year keeping in view ABC analysis of stock items value and exercise of verification may be completed by March every year. For the purpose of verification of stores, chemicals & spare parts shall be classified in to A, B, C categories.

CATAGORIES CATEGORY A CATEGORY B CATEGORY C

VALUE(Rs.PER UNIT) Above Rs. 50000/10001 to 50000/Below Rs. 10000/-

QUANTUM VERIFICATION 100% 70% 25%

OF

A team of stock verifiers shall prepare a stock verification sheet giving the kardex balance and the physical balance of each item covered in the stock verification. After filling up the particulars of the value and quality discrepancies with reference to the priced stores ledger balance, the stock verification sheets shall be forwarded to the materials department for scrutiny and reconciliation and adjustment in consultation with finance department accepted shortage shall be processed for the approval of the competent authority. After each physical verification by the custodians of inventories and suitable adjustment action has to be taken. It is desirable to complete the physical verification work by March every year so that reconciliation / adjustment action can be completed within the year itself.

RECONCILATION AND ADJUSTMENT ETC After all physical verification by the custodians of inventories and suitable adjustment action has to be taken. It is desirable to complete the physical verification work by March every year so that reconciliation / adjustment action can be completed within the year itself.

INTERNAL CHECK One set of document for receipts, issues and return of materials shall be sent to the accounting section of finance department. Based on these documents, priced store ledger shall be prepared for each item for stores. The material code number between stores and accounts shall be identical. The priced store ledger shall provide value of each receipt, Issue and return transaction along with quantity ledger. The quantity balance appearing in priced store ledger shall serve as counter check for accuracy of bin card balance in store which is essential for proper functioning of inventory control system.

The priced store ledger shall not be maintained for large number of low value items such as stationery, medicines, canteen stores etc. in this case the expenditure shall be charged to the appropriate expense account at time purchase. Quantitative record shall be kept by the concerned department and shall be produced as and when required for audit purpose.

EFFICIENT INVENTORY CONTROL

Inventory control is a systematic control and regulation of purchase and usage of materials in such a way so as to maintain an even flow of production at the same time avoiding excessive investment in inventories. Efficient material control reduces losses and wastage of materials that otherwise pass unnoticed Inventory control is the core of material management. The need and importance of inventories varies in direct proportion to the idle time cost of men and machinery, and urgency of requirements. If men and machinery in the factory could wait and so could the customers, materials good not lie in want for them and no inventory need to be carried. But it is highly uneconomical to keep the men and machine waiting and the requirements for modern life are so urgent that they can not wait for materials to arrive after the need for them has arisen. Because materials constitute a significant part of the total production of cost thus, cost is controllable to some extent; proper planning and controlling of inventories are of great importance. Inventory control is planned method of determining what to indent, so that purchasing and storing cost is to be minimum without affecting the production or sales. Without proper control inventories have a tendency to grow beyond economic limits. Funds are tied up unnecessarily in surplus stores and stocks. Productive operations are stalled, and finances of the plant are severely sprained. Lack of control over inventory also leads to excessive consumption and wastage, as operatives are liable to become careless with irrational supply of materials. A good inventory management policy should ensure smooth and uninterrupted supply without making unnecessary investment of funds in inventory. This requires that inventory management policy must balance the requirements of the following two opposing and conflicting ends: To maintain large quantity for smooth operation and efficient To maintain only a minimum possible inventory because holding customers services. costs and opportunity cost of funds invested in inventory.

7 OBJECTIVE OF INVENTORY CONTROL

Scientific control of inventories should serve the following purposes: To provide the continuous flow of required materials& spares parts and components for efficient uninterrupted flow of production. To minimize the investment in inventories stock keeping in view operating requirements. To provide for efficient store of materials so that inventories are protected from losses by fire and threat and handling time and costs are kept at minimum. To keep surplus and absolute items to minimize uncertainty.. To maintain inventory against deterioration, obsolescence and unauthorized use. To ensure that finished goods are available for delivery to customers just to fulfill the order.

8 TECHNIQUES OF INVENTORY CONTROL; USED AT IFFCO Reduction of surplus stock is an essential requirement inventory control. Various techniques are available to solve the various types of problems associated with inventory control: Min-Max plan Order cycling system Fixation of various levels Use of control ratios Review of slow and non-moving items The ABC Analysis

Min-Max plan In this plan analyst lays down a maximum and minimum for each stock item. Minimum level establishes the reorder point and order is placed for quantity of material, which will bring it to the maximum level. Order Cycling System In this system, quantities in hand of each item or class of stock are reviewed periodically (30, 60.90 days). In that, if it is observed that stock level of a given item will not be sufficient till the next schedule review keeping in view of its probable rate of depletion, an order is placed to replenish its supply.

Fixation of Various Levels

Certain stock levels or fixed levels are given below:Maximum Level It represents minimum quantity above which stock should not be held at any time. Maximum stock = Re-order level + Reordering quantity (Minimum level Consumption * Minimum Re-order period) Minimum Level It represents the minimum quantity of stock that should be held at all the time. Minimum Level = Reorder level (Normal consumption * Normal Re-order period) Safety Level Normal issues of stock usually stopped at this level and made only under specific instructions. Safety stock level = Ordering Level (Average rate of consumption * Re-order level) OR = (Maximum rate of consumption Average rate of Consumption) * Lead Time.

Ordering Level It is a level at which indents should be placed for replenishing stocks. Ordering Level = Minimum level + Consumption during the lag period. OR = Maximum Consumption* Maximum re-order period.

USE OF CONTROL RATIOS

Inventory turnover ratio helps management to avoid capital being locked up unnecessarily. This ratio reveals the efficiency of stock keeping.

Inventory turnover ratio =Cost of materials consumed / Cost of average stock held during the period Where, Cost of average stock = [Cost of opening stock + Cost of closing stock] / 2,

Inventory turnover ratio = Days during the period /Inventory turnover ratio.

(All figure in crore) Raw Materials Stores and Spares Loose Tools Chemicals Catalysts Packing Materials Power, Fuel and Water

2010-11 718.66 259.58 1.96 77.73 30.50 72.89

2009-10 823.39 290.21 2.03 72.49 37.49 42.30

2008-09 950.8 336.42 1.83 28.94 33.26 14.72

2007-08 551.27 311.74 2.25 30.81 28.08 12.45

2006-07 595.41 246.74 1.75 44.69 26.10 11.62

(From IFFCO Companys Annual Report 2009-2010)

YEAR Total INVENTORY

2006-07 964.03

2007-08 977.13

2008-09 1413.95

2009-10 1347.7

2010-11 1264.71

From the above chart it can be seen that over all inventory level is efficiently maintained.

year Raw Materials

2006-07 595.41

2007-08 551.27

2008-09 950.8

2009-10 823.39

2010-11 718.66

From the above chart it can be seen the Imbalance of raw material which tends to limit the utility of stocks this type of situation require more row material required to be stock.

Year Stores and Spares

2006-07 246.74

2007-08 311.74

2008-09 336.42

2009-10 290.21

2010-11 259.58

Stores and spare parts at Iffco Kalol is efficiently maintained it results in over all inventory level efficiently maintained.

Year Power, Fuel and Water

2006-07 72.89

2007-08 42.3

2008-09 14.72

2009-10 12.45

2010-11 11.62

Power, fuel and Water is main inventory for any type of production for the fertilizer industry high water consuption requred. From the above chart it can be seen that there is much more inbalance of Power , fuel and Water.

Inventory Turnover Ratio:

The ratio is aimed at checking how vigorous the entity is trading. It measures approximately the number of times an entity is able to acquire the inventories and convert them into sales. A lengthening inventory turnover period from one accounting year to the next indicates: 1) A slowdown in trading; or

2) A build in inventory levels, perhaps suggesting that the investment in inventories is becoming excessive. The higher turnover ratio is good for the firm, but several aspects of inventory holding policy have to be balanced. Lead times Seasonal fluctuations in orders. Alternative use of warehouse space. Bulk discounts.
Inventory turnover ratio = COGS/Avg.Inventory 2010-11 15859.92 1516.805 10.46 2009-10 31496.75 1654.23 19.04 Rs. In Crore 2008-09 11,336.77 1930.52 5.87 2007-08 9,578.09 1901.79 5.04

COGS Avg.Inventory Ratio(Times)

Inventory Turnover Ratio(Times)

From the above Graph it can be seen that Inventory Tornover Ratio fluctuating this shows the inefficient management of inventory

REVIEW OF SLOW MOVING AND NON- MOVING ITEMS Stock turnover ratio should be as high as possible. Loss due to obsolescence be eliminated or these items used in some profitable work. Slow moving stock should be identified and speedily disposed off. The speed of movement should be increased. The turnover of different items of stock can be analyzed to find out the moving stocks. The percentage of slow moving stores = Slow moving stores / Total Inventory

THE ABC ANALYSIS

With the numerous parts and materials that enter into each and every industrial production, inventory control leads itself, inventory and foremost, to the problem of analysis. Such analytical approach is popularly known as ABC (ALWAYS BETTER CONTROL) Analysis. This Plan is based upon segregation of arterial for selection control. It measures money value i.e. cost significance for each materials item in relation to total cost and inventory value. The logic behind is that the management should study each item of stock in terms of its usage , lead-time , technical or other problems and its relative money value in the total investment in inventories. Critical, i.e. high value items deserve very close attention, and low value items need to be devoted minimum expense and effort in the task of controlling inventories.

9 INVENTORY SOFTWARE There is very powerful software in IFFCO for inventories of the various items. This software holds all the transactions of the stocks. So this software helps much in maintenance of stocks. It makes very easy to account persons to maintain the transactions of inventories. A part of this software is installed on the systems of the stores, whenever a transaction is made in the store, the details of that transaction is reaches to the systems of the store accounting section, because both the systems are connected in the local area network (LAN). So with the help of LAN environment it is very easier to accountants to retrieve the information regarding the transactions made by the stores. Apart from this, this software has the variety of qualities which we can discuss with the help of menus of software. There are six different menus in this software these are as follows:

Data entry Queries Reports Processing Calculator Exit

Guidelines for identification, valuation /disposal of obsolete, surplus non moving items of stores and spares. The society is following a system for identification and valuation of surplus, slow, non moving and obsolete items of inventory of spares and stores at the end of each financial year and thereby making a suitable adjustment based on estimated realizable value of such inventory. 1) Identification of obsolete, non moving and surplus items:The identification of obsolete surplus and slow /non moving items of spares and stores is proposed to carried at after complete technical evaluation of all such items of stores and spares etc. by a committee constituted by the unit manager/headed as per following criteria. Obsolete items :- i) Redundancy items of existing equipment/ system. ii) Obsolescence of spares. iii) Aging of machinery and equipment. Non moving/slow moving items:The non moving and slow moving items are to be identified for the period of five years ,seven years and ten years by the committee subject to conformation that no transaction has taken place through SRV and SIV in the same code. Surplus items:i) items which are in excess of the needed consumption can be considered as surplus items, if such items are lying in inventory beyond 4 years and there anticipation of the consumption in the next 3 years ii) items may not be declared as surplus where purchase order has been issued and such items are required during the period under review .

2) Valuation of obsolete items, non moving , surplus items & Obsolete items :The items should be evaluated considering their technically realizable sale value for the purpose of sale the book value should be considered nil in the books of accounts with the approval of competent authority. Non moving items :The non moving items of stores and spares should be evaluated based on estimated realizable value as under. i) Items not moved for less than five years ii) Items not moved for five years and above at cost 60% of he Original cost iii) Items not moved for seven years and Above but less than ten years. iv) Items not moved for ten years and above. 55% of the Original cost. 50% of the Original cost.

Surplus items:The surplus items should be evaluated considering their technically realizable value. Any sort fall between the book value and as per the technical valuation may be written off in books of accounts after obtaining approval of the competent authority. It is further recommended that where the shift life of item has already been completed, its realizable value may be considered as nil with the approval of the competent authority. 3) Disposal of obsolete /surplus /non moving items:a) Exchange the list of obsolete /surplus items among IFFCOs units review and decide on their possible usage within time frame of one month.

b) Exchange the list of obsolete /surplus among their fertilizer plants having same machine time frame of two months. c) Exchange the list of obsolete/ surplus items of captive power plant with the other power plant. d) The list of surplus items can be offered to OEM under buy back arrangements if any. Scope of Material Management Materials Planning and Control Based on the sales forecast and production plans the material planning and control is done. This involves individual requirements of parts, material budgeting, forecasting the levels of inventories, scheduling the orders and monitoring the performance in relation to production and sales.

Purchasing This includes selection of sources of supply finalization of terms of purchase, placement of orders follow up, maintenance of smooth relations with suppliers, approval of payments to suppliers, evaluating and rating suppliers.

9 CLASSIFICATION OF STORE SECTION Stores and Inventory Control This includes physical control of materials, preservation of stores, minimization of obsolesce and damage through timely disposal and efficient handling., maintenance of stores records, proper location and stocking. Stores are also responsible for physical verification of stocks and reconciling then with the book figures. The inventory levels, ABC analysis, Fixing EOQ, setting safety stock levels lead time analysis and reporting. Stores section In Kalol unit stores department have two sections I. RECEIPT SECTION II. CUSTODY SECTION Kalol unit has total inventories of about 58 crores currently. It has been reducing from previous years using effective stock verification, maintenance of stock levels and inventory control. Here inventories are in spares and general items, chemical lubricants. Urea is the main product. The raw material for this ammonia and CO2. Kalol unit has both ammonia and urea plant for making urea, procuring raw materials to urea plant . Bagging deptt. is concerned with packing of urea in bags and dispatch through rail wagons daily on the recommendation of the H.O. or on prescribed guidelines. Inventories Spares In Mainly Three Items Ammonia Urea Power plant Spares are used by its concern department.

General items are used by all departments like nut bolts, pipes, electric wires, chemicals, lubricants, flangs, belts, paints, etc. IFFCO KALOL unit has near about 50,000 items of inventory. Stores department maintain stores levels like reorder level, safety lock, maximum minimum level of just 711 items, these are fast moving items. Insurance spares: - Insurance spares are capital items/ proprietary items which are in single quantity. These are expensive like heat converter, boiler, chemical tank, etc. Receipts/ Issues/ Warehousing At IFFCO KALOL all purchased materials receipt at receipt section, issues from custody section, kept at their location. I. Receipt section When goods are bought in the receipt section a CRR (Consignment Receipt Register) no. made for the above material. CRR No. is being made in the computer itself. Goods are inspected by the store keeper from the purchase order and challan to verify the quantity of the goods received. The SRV is prepared. Indentor is asked to inspect the material and verify the material with quality inspection. Getting verification from indentor material is being tagged. ITEM TAG

P.O. No. ______ CRR No. _______ Item Code ________ Centre Code ______ II. Custody Section Inspection Mark _____________________ Signature Indenture _______________

The function of custody section is to maintained the stock received from the receipt section maintains its recorder level and issue to the required indentor or user of the items. After receiving the SRV and goods from the receipt section materials are stored in the racks according to the location and code assigned to each part. Materials are checked physically before they are kept. Codification MA - 09 - 033 - 4E Dept. Rack Column DIFFERENT ISSUE NOTES In IFFCO 4 types of receive as well as issue voucher are generally used for the particular issue or receipts of the material such as : 1) SRV 2) SIV 3) ISRV 4) SAV (store receipt voucher) (store issue voucher) (inward store receipt voucher) (store adjustme

nt voucher) 5) STV 6) DCISRV (store transfer voucher) (direct consumer internal store Receipt voucher)

SRV(STORE RECEIPT VOUCHER )can be of two types: (a) RS (receipt from supplier voucher): These vouchers are generally issued by the store whenever the material is received from the supplier at the store gate. (b) RD (receipt voucher for direct consumption):

These vouchers are generally issued by the store for the direct consumption of raw material by the concerned department. The copy of these SRV will be dispatched to the following department such as:-

(A) (B) (C) (D)

1 copy to purchase department. 1 copy to indent department. 2 copy account department. 1copy lies with store itself.

STORE ISSUE VOUCHER can be of 5 types such as: 1) ID: These vouchers bare issued by the particular department for general item. 2) IB: These vouchers are issued by the department for the spares. 3) IC: Such type of voucher is generally issued by the contractor for the issue of requisite material. 4) IE: Such vouchers are issued by the particular department for the stationery items. 5) IA: These vouchers are generally used by the contractor for the issues of spare parts. The copy of these SIV will be dispatched to the following department such as : (a) One copy to purchase department. (b) One copy to indenter. (c) Two copy to account department. (d) One copy is lie with the store itself. (e) One additional copy to security. ISRV (INTERNAL STORE RECEIPT VOUCHER) The 100% of the issued material have not been utilized by the particular department or parties, in this stage the concerned party or department will revert that the remaining raw material to the store by using such type of issue voucher.

These ISRV can be of five types such as:

1) item. 2) 3) 4) 5)

BD: Such type of ISRV is generally used by the particular department for the general BB: These ISRV are used for the spare return by the particular department. BC: Such type of ISRV is generally used by the contractor for the return of BE: These vouchers are used for the stationery items. BA: These are also used by the controller for spares.

remaining raw material.

The copy of these ISRV will be send to the following department such as: (a) One copy to store. (b) Two copy to account department. (c) One copy lies with indenter itself. The issue note shall be priced on the weighted average rate basis after accounting the last receipt of the material. After ascertaining the nature of expenditure the job for which material is issued, an appropriate account code shall be given in accordance with the chart of accounts.

FINDINGS

(1) Reasons to prefer the plastic bag: Moisture control Reused and strong (2) They are using silos for the storage of finished goods in a case of uncertainty (strike, machine failure, transportation problem) (3) Total income in 2009-10 is highest with 33432.3 crore even though the production of the 2010-11 is highest. Main reason for above happening is high sale of fertilizer in 2009-10 and cost of inventory is low. (4) There is much more inbalance of Power , fuel and Water consumption because insufficient availability of Power , fuel and Water. (5) The inefficient management of inventory because fluctuating In Inventory Tornover Ratio as mentioned in graph.

CONCLUSION & RECOMMENDATION

More effective exercise should be followed of vigilance against imbalance of

raw material and work in progress which tends to limit the utility of stocks.

To change in design to maximize use of standards parts and components,

which are available off the shelf. Items which are in excess of the needed consumption can be considered as surplus items, such items are lying in inventory beyond 4 years. For the efficient Inventory Management the period for this should be Reduced More efforts should be made to completion of unfinished production jobs to

get them in to sellable condition. The software holds all the transactions of the stocks. So software helps

much in maintenance of stocks. IFFCO should use Inventory software to maintain the transactions of inventories and to manage the Inventory

BILBIOGRAPHY

Website

http://www.iffco.nic.in Books & Other Materials IFFCO Companys Annual Reports From 2006-07 to 2009-2010 Guidelines on identification, Obsolete, Surplus items. IFFCO

Manual Doler, W. Donald; Lee Jr, Lamer; Burt, N David, Inventory

purchasing& material management system . Pandey I.M Inventory Management (Vikas Publications) ++ Valuation of Inventories AS-2

Indian Accounting Standards and GAPP by Dolphin, DSouza (Snow White Publisher)