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Production Cost Management & MIS Formulation Summer Internship at Adhunik Metaliks

Limited, Rourkela Click to edit Master subtitle style

Srikanth Kumar Konduri 10FN-109 PGDM Finance 4/14/12



Adhunik Group About Organization Project Overview Solution Framework Product Cost back tracing Operational improvement suggestions Customer Classification Pilot Linear Programming Model

Adhunik Group

Its flagship company Adhunik Metaliks Limited (AML), is one of the fastest growing Alloy, Special & Construction steel companies in India. Got significance presence in Mining & Power sectors through its subsidiaries. Emerged as integrated manufacturer 4/14/12 of special steel with downstreamGo to Agenda

Companys Philosophy

Vision Statement

To attain leadership in all our businesses through relentless pursuit of excellence, while delivering superior value to our stakeholders.


To be one of India's fastest growing conglomerates To be among the top 5 in India4/14/12Go to across all Agenda

Business Environment

Steel industry contributes around 2% of Indian GDP and is poised to grow at a CAGR of 10% during FY2010FY2013 It is surpassing the Indias GDP growth of 8.6% for FY2010 and 9% for FY2011 AML established in FY2002, now earning a PAT of $40.65 million in 4/14/12Go to FY2011, recording a y-o-y growth of Agenda

Production Capacities

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AML Facilities

0.45MTPA integrated steel plant at Sundergarh, Orissa Company has its corporate office in Kolkata Has marketing offices in 7 states viz., West Bengal, Jharkhand, Orissa, Punjab, Haryana, Maharashtra and Karnataka Its customers span across the 4/14/12Go to categories Automotive OEMS, Agenda

Steel Grades Produced

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Integrated Steel Making process at AML

Figures within the braces indicate installed4/14/12Go to capacities Agenda

Project Overview

Back tracing product costing from Rolling Mill to that of raw-materials Analyzing major cost drivers of DRI and Sinter plants Studying Coke Oven plant and suggesting possible technological up gradations Classifying customers and grades into quantity-contribution matrices

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Solution Framework

Phase -1: Understanding and analyzing product costing system based on the data of March 11 for identifying yield affecting components Phase-2: Live field study to observe working of production houses and interacting with HODs to know their perceived expectations if the possible process improvements are 4/14/12Go to


Product Cost back tracing

Based on the per unit costing statement, the equations are back traced to understand the material flow and cost components. Process standard costing is followed here, since a production campaign is meant for producing single uniform type of steel grade. Allocation of overheads is done 4/14/12Go to according to the proportion of Agenda

Fixed Cost allocations

The fixed costs of individual plants will be accumulated as the materials move across the value chain from raw-material stage to SpongeIron/Pig-Iron/Semi-finished Ferro Alloy/Billet or Bloom/Rolled Product stage; these costs will be treated as captive consumption costs as they are consumed within the plant operations.
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Costing of a 40CR4B Rolled Billet

Per Unit Cost calculations of Rolled product:

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Costing of a 40CR4B Billet from SMS

Per unit cost calculations of a steel grade billet from SMS

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Operational Improvement Suggestions Part1

Sinter Plant

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Operational Improvement Suggestions Part2

Coke Oven

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Operational Improvement Suggestions Part3

DRI Plant

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Customer Classification

List of Companies that buy high quality Alloy steels

Name of the Company

% contribution
5.70 2.94 1.95 1.94 1.83

They pay more than Rs. 60000/- per ton A 1% increase in sales of these companies result in 0.7% increase in total revenue from Ferro Alloys

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Grade Classification

Grade wise classification matrix based on Contribution, Invoice Quantity, P/L

No. of Total INV Measure Orders QTY


Total Cont.

Total P/L

Avg. Per unit Cont.

Avg. Per unit P/L

19319588.8 4284.03 6 1232740.429 24940 24940 AML350P SA181-CL60- SA181-CL60G 40CR4C SAE1541 01 01 10344615.0 8 25520705.47 -9122.165907 15576.79604 MS 20MNCR5 CLI CLI

Overall products Scenario MIN GRADE AVG 1 1.085 CLIII

15.406976 300.3123 1237972.30 74 721 3 1083238.045 5744.706539 -2237.26709

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Customers at the extreme end of scale

Class Sum of INV QTY

Identification of customers contributing Maximum, Minimum values of Contribution, P/L, Quantity, No. of Orders, per unit value
No. of Orders Sum of Tcont. Sum of Tp/l Avg. pu Cont. Avg. pu P/L

Avg. po Cont.

Avg. po P/L

11956.9966 4000.7079 246416.57 80315.389 7 67 84 12 TALBROS TALBROS KEC TALBROS PARTH OSHO CUSTOME NEEPAZ VNEEPAZ VENGINEERI ENGINEERI INTERNATION ENGINEERING ENGINEERIN FORGE R FORGE(I)LTD FORGE(I)LTD NG NG AL LIMITED G LTD LIMITED LIMITED MIN 1.9 1 -20445767.2 7178.96284 16926.259 426753.80 973607.96 8961830.005 7 13 98 2 LAKSHMI AMTEK AUTO JAY AMBEY SATNAM SATNAM JAY AMBEY JAY AMBEY CUSTOME JAY AMBEY STEEL LIMITED ( UNIT- ENTERPRISE STEELS PVT STEELS ENTERPRIS ENTERPRIS R ENTERPRISES AGENCIES II) S LTD PVT LTD ES ES 4924.17114 67485.687 AVG 204.9751111 10.51587302 844965.2224 -739352.9516 3517.8227 59515.252 5 23 37 57 MAX 2454.21 147 14016068.49 1365361.615

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Overall Material Type classification

Material Type Billet

Below table shows the cumulative details of Invoice Quantity, Contribution, No. of Orders along with their average values Avg. Cont. per Avg. P/L per No. of
Orders Inv. Qty. T Cont. T P/L 284 655 386 1325

Rolled Product - AML Roller Product - Zion Overall Materials

Red indicates minimum and Green indicates maximum for those 4/14/12Go to

unit unit 38604542.7 8961.3556441180.574 8 718.7730621 -4307.891249 41256884.0 11852.25570260770.42 2 5928.050858 -3480.931184 13297045.0 5013.25429763667.03 9 5936.995618 -2652.378095 25826.864 106465618 -93158471.9 4122.282056 -3607.037691


Pilot Linear Programming Model - FAD

Objective was to optimize the input-mix of FAD plant for minimizing the cost of production of Ferro Alloys using Solver The constraints were related to that of Mn/Fe ratio and Total Mn quantity produced.
3.5 <= Mn% / Fe% <= 3.55 and 750 <= Mn Quantity M1 M1M1 M1 (Slag) (in Kg.) <= 755 Quantity Produced (in Kg.) 44 444 1 44.444 4.4444 44 444 1

Final results obtained were as follows:

Total Cost Mn/Fe Ratio Total Mn Quantity 111 11 11.11 4 .4 11 1

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