A

STUDY REPORT
ON

RENUSAGAR POWER DIVISION

A SUMMER TRAINING REPORT
ON
MATERIAL MANAGEMENT (INVENTORY MANAGEMENT,) AT
RENUSAGAR.
DURATION OF TRAINING 6 WEEKS

GUIDED BY
SHRI VIJAY KUMAR SETHI, ASSISTANT MANAGER
(INVENTORY CONTROL CELL RENUSAGAR POWER DIVISION)
And
SHRI P.K. Burman (Officer-stores department Renusagar)

SUBMITTED BY
MR. PAWAN KUMAR PANDEY
(BBS Institute of Management & Technology, Allahabad)
UP
 VOCATIONAL EIGHT/ SIX WEEKS TRAINING OF MASTER OF
BUSINESSS ADMISTRATION NAMELY,

MR. PAWAN KUMAR PANDEY FROM BBS INSTITUTE OF MANAGEMENT

AND TECHNOLOGY -ALLAHABAD
(FROM 11TH. JUNE 09 TO 23rd JULY 09)
ON
MATERIAL MANAGEMENT (INVENTORY MANAGEMENT,) & INVENTORY
TURNOVER RATIO AT RENUSAGAR
AT
MANAGEMENT SERVICES DEPARTMENT
PROJECT GUIDE: SHRI V.K.SETHI ASSISTANT MANAGER
(INVENTORY CONTROL CELL)

2
 PREFACE

Stock control is the operation of continuously arranging receipts &

issues so that stock balances are adequate to support the current rate
consumption with due regards to economy. It is the mean by which
material of the correct quantity & quality is made to be available as &
when required in storage & ordering costs, purchase price & work in
economy.
It is imperative to manage efficiently & effectively in order to avoid
unnecessary investments in them. The study pattern used in this study
is face-to-face interaction. Experts of different departments have been
consulted. Most of the data has been gathered from stores department
of the company. The various aspects covered during the interaction
phase were need & features of inventory control, PARTA system,
supply chain management etc.
An attempt is made to cover each & every macros of functioning of
inventory cell.

3
 ACKNOWLEDGEMENT

I am very highly indebted to my parents and teachers

who have groomed me to stand the challenges of a
professional career and permitted to undergo summer training
at HINDALCO INDUSTRIES LIMITED, (Renusagar Thermal
Power Plant).
I am grateful to training division HINDALCO INDUSTRIES
LIMITED, (Renusagar Thermal Power Plant) for providing me
opportunity to undertake this learning work during our summer
training.
I am thankful to Shri Ranjan Kumar & Shri Mayank Srivastava
(Management services), Shri Nishant Gupta (TTMDC), Shri
Sita Ram Singh & Shri P.K. Burman (Store) My Project Guide
Mr. VK Sethi (Assistant Manager, ICC) & Mr. Sarvesh
Pandey (Programmer, MS) cooperation, guidance and hearty
support in training as well as in preparation of this report.
I am also hearty thankful to the entire staff member of TTMDC,
Management Services and Inventory Control Cell who always
have been a source of inspiration.

PAWAN KUMAR PANDEY FROM BBS INSTITUTE OF MANAGEMENT AND

TECHNOLOGY -ALLAHABAD

Date:
Place: Renusagar

4
 TABLE OF CONTENT
Page
S.NO. Description no.
1. Preface 3
2. Acknowledge 4
3. objective of the project 6
4. Introduction 7- 20
a) RPD location Map 7
b) Company Profile & Plant Detail of Renusagar 8-11
c) RPD Vision, Mission, TTMDC 12-15
d) Hindalco Vision, Mission, Group Value 16-19
e) Men Power strength 19-20
5. Material Management 21-23
A.
Definition 22
B.
objective of the Material management 22
C.
Function & Scope of Material Management 23
6. Concept Inventory Management 24-37
a) What is inventory, Need, Control of Inventory 25-26
b) Types of Inventory 27-29
c) Objective of Inventory control,& Causes of High Inventory at Renusagar 30-31
d) Selective Inventory Control, Classification 31-34

e) Inventory Turn over Ratio & It's Improvement 35-36

f) Abbreviation 37
7. Theoretical Perspective 38-82
a) Enterprise Resource Planning(ERP) 38-40
b) System For PR processing & PR Screening 41-43
c) Criteria For Insurance Items 43-44
d) Identification of Obsolete Items 45-48
e) Comparative ITOR Ratio 48-51
f) JIT Concept, Deployment 51-55
g) Some Formula For Inventory Reduction 56-65
h) Financial & Inventory Analysis 65-70
i) PARTA 71-74
j) Supply Chain Management at RPD 75-79
k) Vendor Development & Rating 80-82
8. CENTRAL STORES 83-88
I. Receipt Section 85
II. Bill Section 86
III. Issue Section 87
9. Others 92-109
a) Graphical Representation 92-98
b) Ash Disposal Area 99-100

5
 c) Green Belt 101-102
d) Strength Of Present System 103-104
e) Questionnaires of Inventory 105-107
10. CONCLUSION 108-109
a) Bibliography 109

OBJECTIVES OF THE PROJECT

 TO GET A PRACTICAL INDUSTRIAL EXPOSURE.

 THE TASK IS TO ANALYZE THE INVENTORY MANAGEMENT SYSTEM
OF HINDALCO INDUSTRIES LTD. & TRACE OUT THE DRAWBACK OF
THE CURRENT SYSTEM & GENERATING AN IDEA TO TOUCH HIGHER
LEVEL OF COMPETENCY IN CONTROLLING THE INVENTORY.
 TO ANALYZE THE CURRENT ERP SYSTEM IN MANAGING THE
INVENTORY.
 TO ANALYZE THE MAJOR PROJECT TO MINIMIZE THE INVENTORIES
AND KEEP SURPLUS & OBSOLETE ITEMS TO MINIMUM AT RPD.
 TO ANALYZE THE INDUSTRIAL SUFFICIENCY IN MANAGING THE
INVENTORY.

 TO ANALYZE THE MATERIAL REQUIREMENT PLANNING

PROCEDURE.

 TO ANALYZE THE CURRENT PROCEDURE OF VENDOR

DEVELOPMENT & RATING.

6
LOCATION OF RENUSAGAR POWER DIVISON

7
 Company Profile

Particular Details

8
 Company Name : Hindalco Industries Ltd.
Establishment year : Incorporates in 1958 but
Commercial production began
in 1962.
Address of Registered Office : Century bhavan, 3rd floor,
Dr. Annie Besant road, worli
Mumbai -40025
Address of company : Renusagar Power Plant
P.O.-Renusagar
Dist. – Sonebhadra,
U.P.
Turn over of the company : Rs. 18.5 thousand crore &
Asset Valued at Rs. 8.5
thousand crore.
Generation : 746 MW Captive Power Plant.

Telephone No. : 05446-277161/62/63

Fax No. : 05446-277164/278596
Website : http:// WWW.hindalco.com
: http:// WWW.adtyabirla.com
Types of Company : Power Generation Plant
Nature of Business : Produced Electricity for own
Plant, Consumption.

ABG Business : Electricity (Also Produced

Aluminum, copper, cement,
Carbon black, textiles,
Fertilizers Chemicals, Mining
Insulator, Gas, Software, BPO,
Finance insurance, Telecom, Retail)
Contact Person : Mr. Nishant Kumar Gupta
HOD of Stores : Mr. S.R.Singh
Types of stores under main Stores : 1. Raw material consists of
Coal & HSD.
2. spares parts stores
3. Consumable stores
4. CAPEX/ one- time / special
Sanction spares stores

Manpower statement:-

1. Technical Staffs 732

9
 2. Commercial Staffs 243
3. Total HOD’s 28
4. Temporary manpower / Contract Workman 2000-4000
(As per requirement)
5. No. of Department 52
6. Total Department with section 60

Total strength-
Staff : 975
Workers: 1790 2765

List of Machinery:-
Installed Capacity in MW : 742
Number of Units : 10
Unit Description:-
a. Boiler : 11 Nos.
b. Turbine : 10 Nos.
Production capacity : 742 MW

Fact File about the Company (Hindalco Industries Ltd.):-

1. India’s Largest & lowest cost aluminum producer

2. Largest Producer of White cement in India
3. Fastest Growing Copper Company in India
4. World Leader in Viscose Staple Fiber
5. Leading Private sector Mutual Fund & Insurance Company.
6. Successful Forays in to Software & BPO
7. World’s Third Largest Producer of Insulator.

PLANT DETAILS OF RENUSAGAR POWER

DIVISION

10
RenuSagar Power Division is a division of Hindalco Industries Ltd. for
Generating and supplying uninterrupted Power exclusively to the interact
Alumina Complex at Renukoot, UP. RenuPower is located at RenuSagar,
Almost at the pithead of Singrauli Coal Mines of Northern Coal Fields Ltd.
In the vicinity of Govind Vallabh Pant Sagar (popularly known as Rihnad
Lake) in the district of Sonebhadra of the State Uttar Pradesh, India. The
Total installed capacity of plant is about 742 MW and comprises of 10 T.G.
Set 11 Boilers. RenuSagar Power Plant is one of the most efficiently
Operating at a plant load Factor of around 90%.

Milestones in the construction of the Power plant

TG Commissioned On Boiler Commissioned On

No. of Sets Date of No. of Boiler Date of

Commissioning Commissioning

T.G. No.-1 04.10.1968 Boiler No.1 17.06.1967

T.G. No.-2 09.09.1967 Boiler No.2 21.11.1967

T.G. No.-3 02.11.1981 Boiler No.3 08.06.1982

T.G. No.-4 09.04.1983 Boiler No.4 01.02.1983

T.G. No.-5 31.03.1989 Boiler No.5 18.09.1981

T.G. No.-6 23.03.1997 Boiler No.6 06.05.1991

T.G. No.-7 27.03.1998 Boiler No.7 28.03.1997

T.G. No.-8 31.03.1998 Boiler No.8 27.03.1998

T.G. No.-9 29.11.2002 Boiler No.9 31.03.1998

T.G. No.-10 31.03.2003 Boiler No.10 31.03.2003

Plant Overview
Make
Sr.No. Unit Capacity(MW) Turbo Boiler
Generator
1. TG# 1 67.5 GE(USA) CE(USA)

11
 2. TG# 2 67.5 GE(USA) CE(USA)
3. TG# 3 77 SIEMENS/ BHEL
(Consortium) CE(USA)
4. TG# 4 77 SIEMENS/ BHEL
(Consortium) CE(USA)
5. TG# 5 68 BERGMANN BHEL
BORSIG
6. TG# 6 74 ABB(GERMANY) BHEL
7. TG# 7 74 ABB(GERMANY) BHEL
8. TG# 8 77 GE (USA) BHEL
9. TG# 9 80 SIEMENS BHEL
(GERMANY)
10. TG# 10 80 SIEMENS BHEL
(GERMANY)

Unique Features of Renusagar

• First captive power plant for Aluminum Industries established and
commissioned way back in 1967.
• Power plant established at the pithead of Coal Mines of Northern Coal
Fields Limited enabling coal transportation by ropeway.
• Renusagar Power Plant consistently opening at a Plant Load Factor of
above 90% for last three decades and is comparable to the best work –
wide.
• First Training Centre of the country recognized by Central Electricity
Authority, Govt. of India. Technical Training and Management Development
Centre (TTMDC) has been organizing structured training programs for
introduction and orientation level training for new entrants, skill
development programs for all levels, workers general development
programs, TPM and WCM training programs and managerial effectiveness
programs for staff.

12
RENUSAGAR POWER DIVISION

13
 ABOUT RENUSAGAR POWER DIVISION

INTRODUCTION
Renusagar power division is the power division of M/S HINDALCO industries
limited (HIL), at Renusagar and its power output is being fully utilized for the
production of aluminium and other prefabricated products at HINDALCO,
Renukoot. Therefore, the installed capacity of Renusagar is directly related to the
production capacities at HINDALCO. As HINDALCO is increasing its aluminium
productions, it has become necessary to augment the power capacity of its thermal
plant at Renusagar.
M/S HINDALCO industries limited (HIL) has an integrated aluminium complex with
a manufacturing capacity of 2,42,000 tonnes per annum of primary aluminium
metal and 4,50,000tonnes per annum of alumina at Renukoot. HINDALCO is also
producing rolled and extruded aluminium products with an annual production
capacity of 80,000 and 13,700 tonnes per annum respectively and properzie
redraw rods with an annual capacity of 40,000 tonnes per annum.
Renusagar power plant is ranked one among the best-operated captive power
plant with highest generation, plant load factor and utilization factor and lowest
specific oil consumption and D.M. water consumption.
Renusagar power division, a captive power plant of Hindalco Industries Limited
having installed capacity of 742 MW with 10 TGs (ranging from 68 MW to 84 MW)
and 11 PF fired Boilers is a Coal based thermal power plant located at Renusagar
in Sonebhadra district of U.P. The units have been commissioned in phases with
first unit being installed in 1967 and the latest being installed in 2003. The TG cycle
is based on regenerative principle with 5 heaters in operation for each TG cycle.
Being technology receptive, we have always advocated for latest efficient and
reliable technology in the field for improving the plant performance and during
successive expansion we have moved away from PLC based control to DCS
based control system, cross flow cooling towers to counter flow cooling towers,
Regenerative air preheaters to Tubular air preheaters etc.

PERFORMANCE
As the aluminum smelter need continuously and steadily power supply, high plant
availability and operation at rated capacity, is the permanent importance for
Renusagar power plant availability factor (PAF) and plant Load Factor (PLF) of
around 95% and more consistently for over two decades (against the national
average of 55%) right from its inception. 11

14
It has dispelled the misconception that such a high PAF and PLF cannot be

achieved by the thermal power plant using a low-grade coal.

CONTRIBUTION IN THE FIELD OF POWER SECTOR

It is the credit of RENUPOWER that despite the fact it uses high ash (35%) and
abrasive coal, high PAF and high PLF has been achieved by it. Consistently
modification in the ID Fans, dust collectors and indigenous methodology of
prolonging the life of pressure port tubes was a trend-setter, its result oriented
approach to bring down tube leakage to less than per bottle per annum, has
world wide acclaim. Renusagar is an acknowledged leader to the thermal power
plant. It adopted modern touch techniques from initial stages itself and was able
to limit its planned overhaul duration by restrain to PERT/CPM.

ENERGY CONSERVATION
Renusagar is conscious of energy conservation has made concentrated effort to
reduce and limits its auxiliary power and oil consumption per unit generated has
been maintained at less than 0.8 ml per Kwh. Against the national average about
11 ml per Kwh for its size of units.

Renusagar Vision

“To be one of the best operated and maintained Captive Power Plant, with
enviable Plant Load Factor, to supply uninterrupted power to Hindalco
Renukoot at lowest cost.”

Renusagar Mission

“To pursue creation of value at all levels of plant Operations for our
customers, Shareholders, Employees and Society at large.”

Training & Development center (Renusagar)

15
All the training/ development related activities for employees at RPD is managed
by the State of the Art Technical Training & Management Development Centre
(TTMDC) recognized by Central Electricity Authority, Ministry of Power, Govt. of
India. To cater to the Functional/ Technical training requirement of its employees
TTMDC strives to create multiple learning opportunities for development.

TTMDC VISION
16
 “TO CREATE A LEARNING ORGANIZATION TO MATCH THE
TECHNOLOGICAL CHANGES AND FACE FUTURE CHALLENGES.”

TTMDC MISSION
“To develop TTMDC as a resource center and centre of excellence in power
sector Development.”

Hindalco Vision

“To be a premium metals major, global in size and reach, with a passion for
excellence.”
Hindalco Mission

“To relentlessly pursue the creation of superior shareholder value by

exceeding customer expectations profitably, unleashing employee potential
and being a responsible corporate citizen adhering to our values.”
Hindalco Safety Policy

Commitment to achieve heath of safety excellence by providing health and

safety wok environment.

THE ADITYA BIRLA GROUP: Taking India to the World

Group Vision: To be a premium global

conglomerate with a clear focus on
each business.

Group Mission: To deliver superior

value to our customers, shareholders,
employees and society at large.

17
 Values we Value: In the words of our chairman Mr. Kumar
Mangalam Birla: “Great and lasting businesses are never built
on quick sands of opportunism. For us, at The Aditya Birla
Group, if by living our values means, perhaps growing at a pace
slower than we would otherwise have liked, so be it. For us,
the key to Enduring leadership lies in knowing what we stand
for and in living by that. In essence, our values provide us
with a moral compass, our roots, as well as our wings.”

GROUP VALUES

The Purchase and Stores manual has been developed on the foundation of
following group values –

INTEGRITY

Integrity is honesty in every action. The Material Management team should

act and take decisions in a manner that are fair, honest and follows the
highest standards of professionalism. ‘Integrity’ should be the cornerstone
for all the deals, be it with customers, employees, suppliers, partners,
shareholders, the communities or the government.

COMMITMENT

Commitment is “Doing whatever it takes to deliver as promised”. Each one of

the material management team should take ownership for their work, teams
and the part of the organization they are responsible for. Through this value
they shall build an even sharper results oriented culture that is high on
reliability and accountability.
Their commitment is likely to make them a formidable leader and competitor
in every market that they are in.

PASSION

18
Passion is a missionary zeal arising out of an emotional engagement with work,
which inspires each one to give his or her best. All of the material
management team is expected to be energetic and enthusiastic in the pursuit
of their goals and objectives. Material Management team should recruit and
actively encourage employees with a ‘Fire in the belly’. With this Value, they
would build a culture of innovation and breakthrough
Thinking leading to superior customer satisfaction and Value creation.

SEAMLESSNESS

Seamlessness is understood as thinking and working together across

functional silos, hierarchy levels, across business lines and geographies. Each
one of the material management team shall demonstrate high level of
teamwork through sharing and collaborative efforts and garner the synergy
benefits from working together.
Before the material managers can truly benefit from a borderless world,
they need to build a borderless organization. They should visualize free flow
of knowledge and information across the Group.

SPEED

Speed is looked upon as responding to internal and external customers with a

sense of urgency. They should continuously seek to crash timelines and
ensure expeditious completion of their tasks. Through this Value they would
build an agile and proactive organization that is prompt to respond to the
present and future needs of their customers.
GROUP VALUES

19
 MEN POWER STRENGTH AT RENUSAGAR
SCHEDULE FOR MEDICAL CHECKUP OF STAFF

Sl.No DEPARTMENT 2008-09

.
Department Officer & Workm Badli Total
Staff en
1 OPERATION 268 445 48 761
2 CIVIL ENGG 52 29 38 119
3 CHEM.LABORATORY 48 12 7 67
4 STORES DEPTT 41 19 17 77
5 BOILER MAINTENANCE 40 68 12 120
6 D&D ENGG 38 0 0 38
7 HOSPITAL 37 8 4 49
8 COAL HANDLING (O) 37 152 59 248
9 D&D DESIGN 33 6 6 45
10 INSTRUMENTATION 31 43 4 78
11 GEN.ELECT. MAINT 31 52 6 89
12 D&D (CIVIL & STRU.) 22 5 2 29
13 AERIAL ROPEWAY (L/S) 22 41 66 129
14 SECURITY DEPTT 21 74 21 116
15 COAL CO-ORDINATION 21 0 0 21
16 PURCHASE DEPTT 20 5 0 25
17 AERIAL ROPEWAY (U/S) 20 41 82 143

18 TUBINE MAINT 19 46 16 81
19 TIME OFFICE 19 2 2 23
20 ACCOUNTS 18 3 0 21
21 MANAGEMENT SERVICES 17 2 0 19
22 GEN.MECH.MAINT 16 42 7 65
23 COAL MILL MAINT 16 20 17 53
20
24 AUTOSHOP 15 88 46 149
25 ESP (O&M) 14 1 0 15
26 CHP (MAINT) 14 20 16 50
27 TECHNICAL SERVICES 13 1 0 14
28 ASH PLANT MAINT 13 9 9 31
29 HR-(EMPLOYEE RELATION) 12 0 0 12
30 TTMDC 11 8 0 19
31 HR-(HR & PERSONNEL) 11 2 0 13
32 INFORMATION 9 1 0 10
TECHNOLOGY
33 WORKSHOP 8 37 12 57
34 SAFETY & ENVIROMENT 7 0 0 7
35 CANTEEN 7 0 0 7
36 J.P. (POWER) OFFICE 6 1 0 7
37 SUPER BAZAR 5 2 0 7
38 RURAL DEVELOPMENT 5 0 0 5
39 TELEPHONE & FAX 4 0 0 4
40 SR. VP (D) OFFICE 4 0 0 4
41 LAND & LIAISON 4 0 0 4
42 SANITATION 3 2 5 10
43 PURCHASE (KOLKATA 3 0 0 3
OFFICE)
44 MAINTENANCE OFFICE 3 1 0 4
45 GUEST HOUSE 3 12 9 24
46 A.V.P. (F&C) OFFICE 3 1 0 4
47 TRANSPORT (LV) 2 16 2 20
48 FIRE FIGHTING 2 13 6 21
49 DAIRY FARM 2 0 0 2
50 CENTRAL DESPATCH 2 1 0 3
51 PURCHASE (DELHI OFFICE) 1 0 0 1
52 HORTICULTURE 1 2 0 3
53 GENERAL TECHNICAL 1 1 0 2
1075 1334 519 2928

MEN POWER STRENGTH AT RENUSAGAR

1 STRENGTH OF STAFFS) 1041

2 STRENGTH OF WORKMEN 1847
3 STRENGTH OF TECHNICAL STAFF 735
4 STRENGTH OF COMMERCIAL STAFF 346
5 STRENGTH OF HODS STAFF 35
6 STRENGTH OF DEPARTMENTS 35
7 TOTAL NO OF SECTIONS 54

21
 Material
management

22
Materials management-
Definition: A process encompassing acquisition, shipping, receiving,
evaluation, warehousing and distribution of goods, supplies and
equipment
Each step is vital.

Objective of materials management-

Primary Objective of materials management

1. Low prices- to be lowest - includes transportation: enhances profit
2. High inventory Turnover- value of inventories to be low in relation to sales.
Reduces storage costs
3. Low cost acquisition and possession- reduced handling and storage costs.
4. Continuity of supply- alternative sources, , captive suppliers, flexible
suppliers
5. Low payroll costs- Low operating costs of material management personnel
6. Favorable supplier relations- supplier development

Secondary objectives of Materials management-

1. New materials and products- working closely with Design and research
departments for development of new materials and products
23
 2. Economic make-buy- Coordinating and assisting other departments in
Make-Buy decisions
3. Standardization- coordinating with Design departments in reducing no. of
items.
4. Product improvement- Contribution towards product improvement by giving
appropriate inputs and assisting Design department.
5. Interdepartmental Harmony- Success of materials management department
depends on the success of other departments. hence relations are to be
harmonious

Materials management functions:-

1. Material planning and programming

2. Purchasing and outsourcing
3. Inventory control
4. Storekeeping and warehousing
5. Codification
6. Standardization and evaluation of all products
7. Transportation and material handling
8. Inspection and quality control
9. Cost reduction through value analysis
10. Disposal of surplus / obsolete material
11. Distribution

Scope of Material Management:-

The scope of material management includes decision on purchasing

raw material, management & control of work in progress items, stores
and the shipping and distribution of finished products. The materials
24
flow is divided in to three different overlapping functions – Production
control, inventory control & the material handling function.

INVENTORY
MANAGEMENT
25
 WHAT IS INVENTORY?

- Inventory means stock of materials and control means regulate or check

- Inventory (dictionary) meaning is list of stock goods.
- Scientific definition of is Inventory is idle resources of any kind having
economic value
- Inventory is detailed list of moveable good which gives the quantity and
value of each items or moveable goods with quantity and value.
- From material management angle inventory is stock to meet future
demands of production, repairs, maintenance and construction.
- Inventory is defined as the sum of the value of (stock at any given point of
time)-
a) Spares Parts b) Fuels & Lubricants c) Consumables &
Tools
d) Semi-processed material e) Finished products f) Raw Materials
g) Work in progress Inventory h) Shop Floor Inventory

26
- Inventory control basically deals with -
a) When would an order be placed (order level)
b) How much should be ordered (order quantity)
c) When to order
d) How much to keep in stock without effecting generation

What is Need of inventory?

To improve inventory management techniques it is necessary to maintain

inventory with minimum investment (Blockage) but consistent with adequate
service level.

Why control inventory?

 Materials account for 30% of the cash outflow of most organization.

 Inventories are the single largest asset in balance sheet in many manufacturing

companies.

 If the inventory is not properly controlled, it results in obsolescence.

 The finance manager considers inventory as locked-up but the users always claims

for more capital, complaining of stock out.

 Inventory has to be controlled in order to optimize the cost of acquiring the items.

 An important factor to be considered in controlling the inventories is to reduce the

lead-time concept.

27
  Application of scientific techniques in inventory control increases the morale of

young executives.

- What are types of Inventory?

a) Maintenance Spares
b) Overhauling Spares
c) Insurance Spares
d) Rotate able Spares (For Example: Equipment removed, Repaired
and kept for use in future).

TYPES OF INVENTORY
1. INSURANCE INVENTORY

Insurance/Essential inventory are those spares of vital equipment / machineries which

are normally not required for routine maintenance, but may be required for unforeseen
breakdown causing stoppage of production or causes unsafe working conditions or
significant energy losses, directly or indirectly. Normally these items have high degree
of reliability having the same life cycle as equipment itself and are of high value and
long lead-time.

2. CRITICAL INVENTORY

Routine spares of vital equipment, having reliability lower than insurance spares,
non-availability of which could cause stoppage of plant or reduce production level
or cause unsafe working conditions or significant energy losses. A spare of
equipment having standby is supposed to come into operation instantaneously in
the event of stoppage of the main equipment.
Maximum holding period = 3 years
Review frequency = Once in a year

3. NON-CRITICAL INVENTORY

28
 All other spares required for normal maintenance, but do not fall into critical
category as above i.e. Non availability of which would not cause stoppage of
plant or reduction in production level or unsafe working conditions or significant
energy losses. It has low consequential losses and has short procurement lead-
time.
Maximum holding period = 2 years
Review frequency = Once in a year

4. AUTO INDENTING/STORES/ROL/ROQ ITEMS

This activity decides when inventory replacement is required and calculates

inventory replacement quantities. This category consist of
a) Regular consumption items
b) Fast moving items
c) Hug consumption annual movement items
d) Multi-user department items
e) Generally low value and low lead time items
Maximum holding period = 1 years
Review frequency = By 31st January every year (based on No. of issues)

5. OBSOLETE INVENTORY

Material and equipments which are not damaged and have economic value but are
no longer required by the company due to technological changes/replacement of
equipment/machine/other reasons.

6. SURPLUS INVENTORY

Items which do not have immediate use, but they have a usage value in future.
These items are in excess of the unit’s storage norms and are not likely to be used
within a reasonable period. Reasonable period will depend on the inventory carrying
cost, realizable value, shelf life etc. and is to be decided by the individual unit.

7. ZERO VALUE/CHARGED OUT ITEMS

Zero value items are items which have been returned by the user department or
charged with new equipments to stores. These items are reusable. The value
was booked against first consumption. Hence returned goods to stores do not
carry any value. However, only the quantity should be included in the stores
ledger.

29
 These items should be separately stored. The charge of the same should be
considered only for PARTA/Budgeting/MIS purpose.

- What is mean by Inventory Control?

Systematic procurement, Location, Storage and recording in such a way that
desired degree of services to operating shops at minimum ultimate cost.
- What is mean by Large Inventory?
a) Tie-up large amount
b) Deterioration
c) Damage
d) Obsolence
e) Increased overhead
- When to control the Inventory?
Positive approach is to control the inventory from beginning stage (procurement
stage or PR stage).
- Inventory is harder to move with longer it sits
- Increase in 20% sale = Reduction in 5% inventory so our aim should be to reduce
the inventory.

- Inventory accounts are a) price (required negotiation) b) Service Level (% of

demand fulfilling)
c) Lead time (time required from feeling need to availability).

WHY ORGANIZATION CARRY INVENTORY

Business constraints : Government regulations, monopoly of supplier minimum

quantity to accept, material availability in seasonal only, Transportation cost, once good will.
Smooth production: Often the demand of an item fluctuates widely owing to number Of
factors such as seasonally and production schedule.
Product availability; Many industrial goods are carried to promote delivery to the
Customer

Advantages of Production: If machine set-up time and production time is significant

saving can be achieved in large lots.

30
Buying in large quantities: Most of firms offer quantity discount of buying in large
Quantities.

Accuracy: Accuracy timeliness is critical factors, material control activities. Include

determining material needs
Hedge against long: Organization carry inventory to protect against possible loss of
Or uncertain lead time production against long and uncertain lead time.

Safe guard against: If material is scarce - move stock is kept

OBJECTIVES OF INVENTORY CONTROL

a) To minimize idle time caused by shortage of inventory and non-availability

of inventories as per requirement.

b) To keep down capital investment in inventories, inventory carrying cost and

obsolescence losses.

c) Physically verification of inventory items.

CAUSES OF HIGH INVENTORY AT RENUSAGAR

31
a) Variety of equipments
b) Project surplus

c) High lead time/sources of supply are to for flung

d) Modification/ improvement in design system

e) Obsolescence of machinery

f) Rate inflections (increased)

g) No proper policy to declare insurance spares (high)

h) Long duration of TG survey

i) Propriety spare

ABC Analysis is best tool to control the inventory which means –

- Avoid, Bluff, Confusion
- Always, Better, Control

If inventory is not controlled properly: -

- It is an idle resource
- It can wipe out due profit
- If effects quality (stock makes work careless handling)
- It is not buffer (thing to exchange)
- It is not an asset (properly to pay claim)
- It never optimized (wish or desired)
- It not only occupies space but also the mind
- It will not start earring
- It gathers dust
- Move inventory carrying cost is spend on it

32
 SELECTIVE CONTROL

WHY SELECTIVE CONTROL?

Literally thousands of items are kept in inventory by various organizations. Periodic
reviews of inventories of these items have to be under taken for effective inventory
control. The under-lying idea of such reviews is to keep stocks at a low level but at the
same time keep the service percentage high. The problem is how to review such a large
number of items. Is it necessary to have the same type of control for each and every
item? An equally critical analysis of all items is very expensive and time consuming.
Selective control of items with reference to particular function under examination is the
solution. Items should, therefore, be classified so that the more important amongst them
receive greater attention

CLASSIFICATION METHODS
Various methods of classification are adopted as shown below:-
Sr.No. Title Function

33
 1 ABC Annual usage value of items
2 XYZ Inventory holdings of items
3 HML (High, Medium, Low) Unit prices of items
4 VED (Vital, Essential, Desirable) Criticality of items- Particularly
components and spares
5 FSN (Fast Moving, Slow Moving, Consumption pattern of the items
Non-Moving)
6 SDE (Scare, Difficult, Easy to Problems in procurement
produce)
7 SOS (Seasonal, Off seasonal) Availability – whether in particular
season or in all seasons.
8 GOLF (Government, Ordinary, Source of availability
Local Foreign)
9 Age Analysis Shelf life of items

SELECTIVE INVENTORY CONTROL SYSTEM

Selective inventory control system means that we have various different methods of

inventory control from item to item and this differentiation should be on selective basis.

The importance of materials can be due to its cost, its criticality, its availability and its

consumption. There are a number of methods available for selective control of

inventory. Selective control can be divided into eight types:

ABC Classification:

ABC stands for always better control or avoid bluff confuse. This method is based on

annual consumption value, which is obtained by the multiplication of the unit price by
34
the annual consumption quantity. For example, on an adhoc basis, the items accounting

for an annual consumption value of more than Rs. (one) Lacs may be classified as ‘A’

category and below Rs. 10000 may be the ‘c’ category and in between these items will

be the ‘B’ category.

‘A’ Items: are the top 10% of the items and accounts for 60% of the consumption value.

‘B’ Items: are the next 30% of the items and accounts for 30% of the consumption
value.

‘C’ Items: are the next 60% the items and accounts for only 10% of the consumption
value.

H.M.L CLASSIFICATION

H.M.L stands for:

H – High cost items (all unit cost)

M – Medium cost items (all unit cost)

L – Low cost items (all unit cost)

Unit value is the criteria in HML classification.

V.E.D CLASSIFICATION:

VED stand for

V- Vital

E- Essential

D- Desirable

S.D.E. CLASSIFICATION:

‘S’ scare items –which are not easily available in the market

‘D’ Difficult items – which are non available in the market.

35
 ‘E’ Easy items – which are easily available in local market.

G.O.L.F CLASSIFICATION

G.O.L.F stands for

Government - open market – local market – foreign sources.

Materials are classified according to nature of suppliers.

F.S.N CLASSIFICATION

F-S-N stands for

‘F’ Fast moving items having consumption at least once in a year.

‘S’ slow moving consumption in alternative year.

‘N’ non-moving consumption in last 5-6 years.

X.Y.Z CLASSIFICATION:

X item is those items whose value is high while Z items are those items whose

values are low. Understandably Y items fall in between two categories.

S.O.S CLASSIFICATION

Some of items required are seasonal in nature and require special purchasing and

stocking strategies. Many commodities especially of agricultural origin and seasonal in

character have to be purchased at the best time. Operation research techniques would

have to be used to obtain optimum results. The inventory system will have to balance

between holding costs and lower prices at which it will be available.

36
 AN INVENTORY TURN OVER RATIO

Inventory turnover ratio may be defined as a ratio of Annual consumption (issue) in Rs.
divide by the average inventory in Rs.

Annual Consumption
ITOR = x 100
Average Inventory

This ratio is called Efficiency Indicator.

IMPROVEMENT IN INVENTORY TURN OVER RATIO PROJECT

AN INTRODUCTION TO INVENTORY TURNS OVER RATIO:

Inventory turn over ratio is defined as the ratio of annual consumption value divided by
average inventory holdings. This ratio is also called efficiency indicator. Hence, higher
the inventory turn over ratio the better is financial out look and system is considered
more efficient. There is considerable scope for improvement in this sphere.

Inventory turn over ratio= Annual issues in Rupees. / Average inventory in Rs.
Express as percentage the ratio is to be multiplied by hundred.
This ratio is called efficiency indicator

Case 1

Suppose an organization requires material worth Rs. 12 crores annually.

If purchased in 1 Lot and consumption is 1 crores per month.

Average inventory holding will be=6.5 crores

Inventory turn over ratio will be 2 approximate.

Case 2

Suppose an organization requires material worth Rs. 10 crores annually.

If purchased in 2 Lots and consumption is 1 crores per month.

Average inventory holding will be=2.5crores
37
Inventory turn over ratio will be 4 approximate
In second case capital locked up has been reduced from 5 to 2.5crores and inventory
turn over ratio increased to 4 from 2.
It shows in second case released capital becomes available and organization has
A) Borrow less capital.
B) Less interest charges
C) Fewer inventories carrying cost
Hence, higher the ITOR the better is financial out look and system is more efficient.

How to improve inventory turn over ratio.

A. Efficient reduction of inventories.

B. Discourage flabby inventory due to poor maintenance.
C. Discourage profit-making inventory held with speculative.
D. Reduction in critical & non-critical items lying in stock since long period.
E. Identification of obsolete/surplus items and their disposal/utilization.

ITOR in most of industries in India is around = 2

Most efficient one in India is around =3

ITOR in abroad-developed countries is between 6 to 8.

Our target for FY, 2006-07 is => 4

ABBREVIATION
38
 QCDIP : Quality, Cost, Delivery Innovation, Productivity

JIT : Just in Time

OTIF : On Time in full

VIS : Visual Information System

PDCA : Plan Do Check Act

CMS : Condition Monitoring System

LCC : Life Cycle Cost

MURI : Excess
MURA : Unevenness

MUDA: Waste
SMED : Single Minute Exchange of dies

QCO : Quick Charge Over

LLF : Look, Listen & Feel

PST : Problem Solving Tools

JAMS : Just a Minute Session

SQM : Strategic Quality Management

DOL : Delay On-line

39
ERP

ERP

40
 ERP stands for enterprise resource planning. It is a software solution that
helps companies to gain competitive edge by integrating all business process and
optimizing the resource available.
The traditional application system treats each transaction separately. It is build around
strong boundaries of specific functions that they are meant to cater to. ERP stops
treating these transactions separately as stand alone activities and consider them to be
part of inter linked processes that make up the business. An ERP system stores data
generated as a result of diverse transactions that are confined to any departmental or
functional boundaries, but are rather integrated to be used by multiple users, for
multiple purposes and at multiple places.
ERP should not be mistaken as a magic tool that can transform anything overnight. Its
successful implementation is a long journey towards enterprise excellence.
To support such a diverse system, companies need sophisticated information technology
infrastructure and other important enabling tools like workflow, Workgroup, Groupware’
Internet, Intranet, Data ware housing etc. These entire components together from the ERP
backbone.

ERP FOR HINDALCO

Today business is become an ever-changing phenomenon due to Large-scale
production facilities, new product development, technology up gradation, sales strategy,
capacity utilization, capacity expansion changing business scenarios, mergers &
acquisitions and opening of economies. These increasing business complexities
warrant fast response, which in turn requires accurate data. The organization needs to
be proactive and plan ahead of time. To do business optimization, HINDALCO on hand
requires tools such as extended ERP including and SCM applications, and on the other
hand, needs to change itself to a learning organization focusing on its people, skills,
core competency culture and practices.

IF DO NOT GO FOR ERP

41
Improved customer service by way of visibility of orders and order status, efficient
distribution system and reduced operational expenses are some of the important
business benefits which is derived from ERP.

In addition ERP initiative provides us an opportunity to re-look at existing processes,

remove redundancy by way of systemization and benchmarking, standardization of
process across units for seamless integration and provide foundation for e-commerce.
Ever since the advent of e-commerce, trade boundaries are becoming a history. Today,
a virtual store is a reality. Conducting on Internet business is no longer in choice.
Not that is happening only in developed countries, but also in India. In India total value
of Internet trade in the last year was Rs. 600 Cr. By the year 2008 it is expected to
cross Rs. 50,000 Cr. As per Mckinsey-Nasscom report to be successful e-commerce
enabled enterprise, having an Internet site is just not sufficient. We must have our
business processes and all the back-end mechanism like production planning, order
status & its visibility, predictable delivery date and customer service in place. To sell on
Internet we must know details of our stocks lying at any location

SYSTEM FOR PR PROCESSING

THROUGH
E.R.P.

Business Requirement:-

1. All the Purchase Requisitions will be routed through Inventory Control Cell (As
defined in the System)

2. The items and values within the sanctioning authority of Sr. Executive President
(Refer Order No. Sr.EP/00/81 dt. 29.08.2003) will be processed in sequential order
as under:-
2.1. ICC will submit hard copy of PR to Secretary to Sr. Executive President,
who will obtain approval from Sr. Executive President.
2.2. Shri Kurien Thomas will retain and maintain a file of such approved PRs
and will send a copy to ICC or communicate ICC about the status.
2.3. Routing PR will then be done by ICC.

42
 Note: PR amount above 20 Lacs and items i.e. imported, furnitures, Computers,
Telephones, Decorative electrical goods and House hold items/ House hold
electrical goods and the like are to be got approved by Sr. Executive President.

3. Procurement of IT related items will be done as per Sr. Executive Presidents Office
Order Nos. EP/010/105 dated 21.10.2000, EP/00/44 dated 6.4.2001, SrEP/00/81
dated 29.8.2003 and Director (Whole Time) circular dated 28.12.2001. Hence PR for
such items will be released only from IT department for which all requirements will
be sent to IT department.

4. The Central Stores will release PR for the ROL item. Apart from revised ROL item
(under ERP) following consumable are also added in ROL items:-

• Ribbon Cassettes
• Toner Cartridges
• Ink Cartridges
• Print Heads
• Floppy Diskettes
• Zip Disks
• Screen Anti Radiation

Process Requirement:-

5. All the Block sanction & special sanction items has to be processed in Oracle with
appropriate Task Codes as mentioned below:-
5.1. Block Sanction
• Department has to obtain Task Code from Accounts Department
• The entire PR will be raised in G19 organization in Oracle only.
5.2. Special Sanction
• Task Code has been fixed which will be 9500 for all the items & PRs.
• All the PR will be raised in G02, G05, G08, G11, G14 & G17 organization for
units 1-5, 6, 7, 8,9 & 10 respectively in Oracle only.
Note: HOD will contact Technical Cell for procuring the item under Block or
Specia1Sanction.
For rest of the procurement category and organization will be allocated by ICC.

6. Before raising PRs end users to ensure correctness in:-

• Item Description
• Unit Cost, Criticality, Legacy code
• Organization
In case of any discrepancy the same is to be got corrected from ICC before
processing PRs.

43
7. End users to fill in the information viz. Locator, Cost Code & Task Code (if any) at
Line level i.e. item wise while raising PRs.
8. The following to be strictly taken care while the PR is in review process:-
8.1. In case ICC has rejected all the items of the PR with necessary
justifications, end users should not reuse the PR.
8.2. If quantity of any PR line has been suggested to be reduced to zero, then
the line has to be deleted and may not be reused for any new item.
8.3. If PR for any additional Item(s) are required to be raised it may be done
with the help of Fresh PR. In no case it should be added in an existing PR sent
to Originator by ICC for review.
9. In order to keep a track of deptt. wise Survey/ Shutdown items Location and cost
code combination as suggested in the enclosed sheet to be used. In case, correct
combination is not used the PR will be rejected/ sent back to originator by ICC.
10. Alteration of PR after the approval from ICC has to be strictly avoided and end
users are requested not to alter any PR lines/Qty after being approved by ICC.
Under extreme circumstances, if Supervisor feels need of revision over the received
PR by ICC, it will be mandatory on part of Supervisor to re-route the PR through
Originator and ICC.
11. End users are further requested not to delete or overwrite the ICC comments in
the Long Description. If comments have to be added for their necessary reference, it
may be added in the end without changing the existing comments.

Cooperation of all concerned is solicited to strengthen the Inventory control activity.

44
 FLOW CHART OF PR SCREENING
Any one can raise the PR & will be originator of the PR

Mention
z supervisor – Say S1(To whom he wants to send it fo r approval)

Originator will save the PR

Now PR in the INBOX of Originator

Originator will route the PR through workflow

PR will reach to INBOX of mentioned supervisor (S1)

HOLD the PR PR ON
HOLD

PR under
Send to originator for REVIEW
REVIEW to
originator INBOX

Cancel the PR PR Cancelled

Approve the PR

PR APPROVED

Total cost of the all PR line > PR approval

. . limit of the No
. supervisor (S1) No

(Individual approval limit has to be

finalised )

Yes

45
 CRITERIA FOR INSURANCE ITEMS &
PROCEDURE FOR ITS REVIEW

Definition of Insurance Spares

Those spares of vital equipment/ machinery which applies to under noted attributes:
a) Unforeseen breakdown resulting stoppage of production.
b) Causing unsafe working condition.
c) Significant energy losses
d) High degree of reliability
e) Life cycle is almost same as equipment itself
f) High value and long lead time
g) Management decision, standby scenario, proprietary spares supplied with equipment.
h) Vital & Essential spares required for high plant availability factor.

Norms
- Stock minimum 01 No. or 1 set. Quantity can be more in view of batch size consumption
and more than 1 installed equipment.
Procurement
Once the stock is used, the item is procured through PR made by specific user, screened by
ICC and approved by the Unit Head..

System for Review of Insurance Spares

1. Fixing of Insurance Items as on 30.09.2008.
2. Review of inventory class done on regular basis as it is a part of PR screening process.
3. Procurement of Insurance spares are judiciously planned by users and approval is taken
from Unit Head.
4. Review the PR and Closing Stock every month for Insurance Items on regular basis in
inventory meeting and items not fulfilling criteria are deleted from Insurance class.
5. Update the Insurance List.
6. The equipment charged out/sold out and its spares lying as Insurance should be charged
out or sold out after declaring it obsolete.
7. Any New equipment or spares falls under the definition of Insurance items as suggested
by OEM against suspended manufacturing range, may also be kept as Insurance
8. Recommendation by OEMs
9. Update the category on yearly review of total items.

Authority
- Plant head approval is must.

46
 Sub: Procedure for Identification of Obsolete Materials

In order to identify the obsolete items/ spares/ equipments and inventories, the following
procedure is being followed:

GUIDELINE FOR IDENTIFICATION OF OBSOLETE ITEMS:

1.1 Items/Equipments, though in working condition but likely to be removed due to

change in design, location etc.
1.2 Equipment all ready sold and its spares are lying in Inventory
1.3 Items / spares procured for large no. of similar Equipments but subsequently
equipments sold off to the large extent.
1.4 Equipment declared un-reparable and its spares lying in Inventory.
1.5 Imported items whose Indigenous substitute has been developed.
1.6 Items Procured in excess but it has become almost non moving.
1.7 Items/Equipments, though in working condition but taken out from plant and not to be
used in the plant again due to change in design , location etc.
1.8 Items/Equipments, lying in charge out stores in working condition, with unpredictable
consumption period.
1.9 Items/Equipments, lying in charge out stores in non - working condition and also not
declared as scrap.
1.10 Non- moving Spares lying in Stores since long period except insurance spares.
1.11 Spares or Consumables which self- life has already expired or items are not worth
useable.

47
 Defination

Minimum Stock (Lower Limit)

Or Safety Stock

To avoid stock out position which can result into hampering of

production due to
 Variation in Rate of Consumption
 Variation in Lead time

And to guard against above uncertainties extra stock is maintained, this extra stock is called Safety stock/

Buffer stock/ Reserve stock or Minimum stock.

This stock comes handly in case of Generally for

slow moving and High moving
• Any excessive in process rejections lead time items
this quantity works
• Rejection at the time of receipt of goods as cushion.

Minimum or safety stock is = (Max. lead time – Normal

lead time) x Consumption rate + a little extra stock
Note : Items for which effect is negligible, minimum stock may
be - Nil
For vital, critical and scarce items highest safety stock
needed to maintain.

48
 ROL Ordering Level

It is the level at which ordering action is indicated in time for the material to be delivered before
the stock falls bellow the minimum quantity (keeping in view rate of consumption and estimated
time for procurement).

ROL = Re-order level means the stock position at which efforts should be initiated to process a
purchase order (Re-order Activities) for the economic order quantity of spare parts.
ROL = Demand + Safety (Min.) stock
Where demand means the Average Consumption of the spares during lead-time.
Concept of ROL is not applicable to Insurance spares, if any time the Insurance spare is replaced, the
decision for its replacement has to be specially taken by the management depending upon the
circumstances.

Hastening Stock Level

It is the level at which it is estimated that hastening action is necessary to request supplier to
make early delivery.

Hastening Level: It falls between minimum inventory and ordering level (ROL).

Maximum Level (Upper Limit)

It is the level at which stock should not be allowed to rise. Purpose of this level is to Curb Excess
Investments.

 When maximum level is reached, it is the signal to defer or cancel outstanding deliveries, if any.
 Large quantity in stock should be in the invest of economy.

Maximum Level = Minimum Level + Economic order quantity.

Ideal Level = Minimum Level + Economic order quantity/2

49
Re-Order Quantity (ROQ)
Wear and tear of spares have regular pattern of Consumption and they should be ordered on the
basis of ROQ or EOQ. To start with spare parts ROQ quantity should be fixed manually keeping
in view monthly consumption, lead time and past experience.
..3.
EOQ = √2LD/CI

Where L is ordering cost, D = Annual consumption level

C is price of an item, I = Cost of capital (Inventory holding cost)

While fixing ROQ all factors like Cost, Consumption, price and Inventory holding cost needed
to be considered in the interest of economy.

Standard Order Quantity (ROQ)

It is the quantity to be purchased at any time. Repeat orders for a given product are always for
the same amount, until order is revised.

Note: In setting minimum, maximum, order quantity and order point – economic size of
PO, Lock-up in capital, lead time, rate of demand, probable depreciation and
obsolescence are required to be considered.

POINTS TO REMEMBER

JIT APPROACH= to manage stock at various inventories.

Reservation against work order=Requirement of material is known before the actual use.
Principle behind ROL or ROP=Ordered in time such that they arrives before the last
remaining items are issued..
Formula= indicates usage or demand and Lead-time.
Lead time demand=Average monthly usage x Lead time in days/30.44
Safety stock=2 x standard deviation of lead time x LT x power

50
Comparative Inventory Turn Over Ratio At Renusagar

6.00

4.90
5.00 4.80 4.81
4.60
4.46 4.50
4.25
4.00
3.90
4.00

3.40 3.53
3.25
3.00
3.00 2.70 2.67
2.60 2.68
2.50 2.54

2.00

1.00

0.00
0.00
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

TARGET SET 2.50 2.60 2.70 3.00 3.40 4.00 4.25 4.50 4.80 4.90
ACTUAL 2.54 2.68 2.67 3.25 3.53 3.90 4.46 4.60 4.81 0.00

TARGET SET ACTUAL

51
 IDEAL & ACUTAL REGULAR INVENTORY
TREND MONITORING
(Amt. Rs. In Lacs)
Sl. Description Present Actual Deprication Balance
Stock
No. ideal Stock Value as on
30.06.2009 30.06.20
09
1.0 STOCK ITEMS: STORES 101.50 94.57 0.00 94.57
ROL/ROQ ITEMS
2.0 P.R. STORES :
2.1 Critical Spares for normal
operation
2.1.1 Boiler (AP+BM+CM+CHP) 189.00 237.36 0.08 237.28
2.1.2 Turbine (GM+TM) 102.00 113.15 0.42 112.73
2.1.3 Electrical 55.00 38.96 0.51 38.45
2.1.4 Instrument 37.00 22.07 0.03 22.04
2.1.5 Rope for ARW 61.00 17.37 0.00 17.37
Sub-total : 444.00 428.92 1.04 427.88
2.2 Non-Critical Spares for
normal operation
2.2.1 Boiler (AP+BM+CM+CHP) 59.00 90.55 0.00 90.55
2.2.2 Turbine (GM+TM) 46.50 39.62 0.14 39.48
2.2.3 Electrical 36.00 58.00 0.00 58.00
2.2.4 Instrument 16.00 33.16 0.00 33.16
2.2.5 Services 62.50 82.63 0.00 82.63
Sub-total : 220.00 303.96 0.14 303.82
2.3 Miscellaneous
2.3.1 Others 10.50 9.79 0.00 9.79
Sub-total : 10.50 9.79 0.00 9.79
Total (2.1+2.2+2.3) : 674.50 742.66 1.18 741.48
3.0 INSURANCE SPARES :
3.1 Boiler (AP+BM+CM+CHP) 160.00 135.58 0.63 134.95
3.2 Turbine (GM+TM) 620.00 517.72 6.13 511.59
3.3 Electrical 245.00 235.56 0.26 235.30
3.4 Instrument 165.00 152.41 0.37 152.04
3.5 Services 10.00 10.89 0.00 10.89
Sub-total : 1200.00 1052.16 7.39 1044.77
Total (1.0+2.0+3.0) 1976.00 1889.40 8.57 1880.83

52
 JIT CONCEPT UNDER WCM APPROACH

World Class Manufacturing

In an ever-changing environment, with falling trade barriers, our mission is to establish
ourselves on a global basis, as the First choice of our customers and stakeholders by
adding value to their business and exceeding their expectations.
Word Class Manufacturing (WCM) programs are meant to promote excellence in
manufacturing as a means of delighting our customers, employees and other
stakeholders on a sustainable basis.

Just In Time CONCEPT

In global environment our customers shall continue to challenge us with Quality at the
right cost. This requires our suppliers to be source of competitive advantage by
systematically meeting our needs with products at the right price.
Just In Time (JIT) is state of mind for achieving competitive excellence by creating an
attitude of continuous improvement through 100% involvement to eliminate all waste,
institutionalizing only value adding activities with 100 percent quality

Aim of JIT
To provide fast, reliable and flexible response to customers requirement at least cost
and minimal dependence on inventory.

Objective
Rationalization of Inventory is important activity for stores & spare parts management.
The main thrust on the activities required are as under :

1. Reduce inventory of obsolete items, Insurance Items and other stores to the
optimum level.
2. Reduce Shop floor Inventory.
3. Increase turnover ratio.

Approach

1. PR Screening
This is very strong process to control the inventory at PR stage instead of after
receipt of material.

2. Inventory Reduction
Stores & Spares are categorized as Critical, Non-Critical, Insurance and auto indent
items (Stock replacement). All categories are controlled through parta system (standard
pre-fixed by the Management).

53
Perpetual Inventory System

A System to verify physically and survey the health of items/ spares.

Inventory Analysis
Inventory analysis tools used are as under:

a) ABC b) XYZ c) C/NC d) Age

e) FSN

Inventory Turnover Ratio

Calculation and monitoring of Inventory turnover ratio to keep it higher.

3. Parta System
Parta is a strong tool for spares management. MIS are generated accordingly, which
gives trend analysis for proper monitoring. It is subjected to increase/ decrease on
need basis depending upon the addition/ reduction of new/ old equipments.

4. Shop floor Inventory

Shop floor inventory is also captured which gives proper idea about the fresh items
requirement to be procured, considering entire inventory in hand.

5. Identification of Obsolete Spares

Due to change in design, modification, sale of equipment, equipment replaced etc.
some items become obsolete/ surplus. These are also reviewed and identified on
regular basis for disposal.

54
 Deployment

1.0 PR Screening

Any PR raised by originator should be screened in respect of:-

 Quantity
 Stock
 Alternate use
 Category
 Budget and Business Rule
 Other mandatory parameters.

2.0 Reduction in Inventory

2.1 Non-Critical Inventory:

a) Strict monitoring from initial stage of PR review.

b) Tracking of inventory with parta.
c) Age analysis of non-critical items on continuous basis.
d) Finding root cause for non-moving inventory and sustainable measures to reduce
the same.
e) Items, which are declared as obsolete by user department, with proper
justification are transferred into obsolete inventory.
f) Should be level of inventory Min-Max defined within parta for continuous
monitoring through forecast.
g) Planning of items for earliest use.
h) Identified items contributing excess stock to be discussed with deptt.

2.2 Critical Inventory :

These are vital equipment/ machining spares or generation spares so scope of
reduction is not so high even following actions to be taken to keep inventory
within parta limit.
a) Purchase requisitions are screened at initial stage to check the availability and
consumption plan etc.
b) Discussion with user department, regarding High value Critical items and
inventory forecasting system introduced to keep inventory within parta.

2.3 Insurance Spares:

a) Every efforts is made to keep Insurance spares within parta.

b) Existing stock position is intimated to user deptt.
55
c) Procurement of insurance spares subject to management policy, so before
releasing PR of Insurance Items prior approval from higher authorities to be
taken.

2.4 Auto Indent/ROL/ROQ Items:

- Identification of items for including in ROL/ROQ category, fulfilling following

criteria:

a) Fast moving and huge consumption items

b) Having multi user department.
c) Generally low value

- Impact of these items is worked out on the basis of ROL calculation.

- Finalized items are transferred to ROL/ROQ category on need basis.
- Revision of existing ROL/ROQ of items if seems necessary.
- Kicking out items if not fulfilling the ROL/ROQ Criteria.
- Efforts is being made to avoid stock out and excess stock of these items.

2.5 Perpetual Inventory System :

Physical verification of Inventory

Following checking’s made:

a) Physical balance
b) Physical conditions
c) Correlation with stock ledger and department regarding the specifications &
shelf life of the items.

2.6 Inventory Analysis:

For monitoring of entire stores inventory following analysis are done:

ABC Analysis - Consumption indicator item wise

XYZ Analysis - Stock value indicator item wise
Critical/
Non-critical Analysis - On the basis of criticality of items
Age Analysis - On the basis of shelf life of items
FSN Analysis - On the basis of movement of items

2.7 Inventory turnover Ratio:

Inventory Turn Over Ratio may be defined as ratio of Annual Consumption in
Rupees as divided by the average Inventory in Rupees.
Inventory Turn Over Ratio = Annual Consumption in Rupees
Average Inventory in Rupees
Expressed as a percentage the ratio is to be multiplied by hundred. The ratio is
also called efficiency indicator.

56
 Parta Revision

a) Parta (Standard) is used as a tool for spares management.

b) Comparison of actual stock against set standards.
c) Parta is reviewed with addition of New Units and any New System (as a whole).
d)
Obsolete Spares

The purpose of adopting the procedure for disposal of obsolete materials is to reduce
obsolete spares causing unnecessary increase in inventory.

The obsolete items to be identified by originator (HOD & Area Incharge) with adequate
reasons on yearly basis.

Conditions for identification of obsolete items:

• Items/Equipments though in working condition but likely to be removed due to
change in design, location etc.
• Equipment already sold and its spare are lying in inventory.
• Items/spares procured for large no. of similar equipments but subsequently
equipments sold off to the large extent.
• Equipment declared un-repairable and its spares lying in inventory.
• Imported items whose indigenous substitute has been developed.
• Items procured in excess but it has become almost non-moving.
• Items/Equipments, though in working condition but taken out from plant and not
to be used in the plant again due to change in design, location etc.
• Spares or consumables whose shelf life has already expired or items are not
worth useable.

Declaration of obsolete items:

Assessment Committee reviews the recommendation of the originator giving detail
about the usefulness of the spares/equipments and possibility of there uses
elsewhere. Then, the list of obsolete items for the purpose of disposal is finalized.
Inventory Cell updates the records and assigns value of the finalized items.
Shop floor Inventory
Monitoring of Shop floor Inventory done for the following reasons:
• To reduce the hidden inventory
• For systematic records of buffer stock at shop floor
• Help Purchase Requisition Screening process, keeping in view total inventory
(including shop floor)

57
Based on the departmental shop floor inventory list, regular Shop floor Inventory Audits
should be conducted by Inventory Control Personnel, Observations should be recorded
and Corrective Action Plan to be implemented.

Inventory Meetings
Inventory meetings to be conducted for:-

a) Review of department wise existing inventory.

b) Comparison with parta.
c) Reasons for High Value Inventory are ascertained.
d) Bottlenecks if any are discussed.
e) Suggestion for improvement discussed.
f) Reasons for items not drawn at schedule time are discussed.
g) Action plans for consumption in future is ascertained.
h) Responsibility and targets are set.

SOME FARMULAS FOR INVENTORY REDUCTION AND ECONOMICAL

PURCHASING & Codification
No.of Stores Items Codified
Codification Index = ×100
Total No. of Stores Item

 Purchase Section Production Efficiency

# No. of Purchase Made/Month Say X

# No. of Equated Purchase Made/Month Say Y
# No. of Staff in Purchase Section Say Z
# No. of Working Day in the Month Say N
Y
Production Efficiency =
NZ

 Quantum of Purchase/Rupees of Purchase

Total Purchase Value

Cost = Total Expenses Of Purchase Department

 Cost Per Order

Total Purchase Department Cost

Cost Per Order = Total No. Of PO Placed

58
 Indigenous Context and Imported Contents

Value Of Indigenous Spares Purchased

Indigenous Context =
Total Purchase Value

*Note:-Higher is better try to reach at 100%.

Value Of Imported Spares Purchased

Imported Contents =
Total Purchase Value

*Note:-Lower is better try to reach at 0%.

By intensive effort towards Imported Substitution one has to try and achieve Zero
Percent (0%) as possible. Every year there must be progressive improvement in
both these ratios.

 Planning Efficiency
# Purchase will be complined within time with no regulations. The four ratios are:
%age Order Materiali zed In Time
×100
Total No. Of Purchase Order
*Note: - Higher Percentage is better.
No. Of Order Rejection Made
# Purchase Order not confirms to Quantity = Total No. Of POs
×100

*Note: Lower Percentage is better.

No. Of Order Not Materiali zed

# PO not Materialized = Total No. Of POs
×100

*Note: Lower Percentage is better.

No. Of Rush Order Placed

# Rush Order Purchases = Total No. Of POs Placed
×100

 Vendors Performance or Vendors Efficiency

No. Of Lots Accepted

# Quality Index Q = No. Of Lots Delivered
×100

No. Of Lots Delivered In Time

# Delivery Index D = Total No. Of Lots Delivered
×100

Lowest Acceptable Price Bid

# Price Index P = Price Bid By Vendor
×100

# Overall Vendor Efficiency Index = Q X A + D X B + P X C

59
 Where A, B and C are weights allotted by organization and the three
characteristics: Quality, Delivery and Price, the sum of these weights must be
equal to 1.

 Inventory Turnover Ratio

Inventory Efficiency of an organization is judged by the ratio. We have to maintain
low inventory and yet give good service i.e. make more issues.

ValueOfAnn ualIssues
Inventory Turnover Ratio (ITOR) = ValueOfInv entoryHold ing
The higher the ratio, higher will be the efficiency indicating the effectiveness of
techniques used for inventory control.
It should however be seen that lower figure is not achieved at the cost of service,
the ratio varies from industry to industry. One has to ensure that it is progressively
raised. A ratio implies on the average the store is being held for 3 months. Since it is
not possible to where cut the ratio often, it is usually calculated at the end of the
financial year. This ratio has to be calculated, first it is calculated on an overall
manner for all the inventory items thereafter it should be calculated departmental
wise or group wise and also for A, B and C items individual ratio will enable the
organization to pin point the areas where intensive effort for the inventory are called
for.

 Service Level Percentage Compliance Ratio

No. Of Demand Complied
Service Level = No. Of Demand Received
×100

*Note: Keep it High.

 Item Out of Stock Percentage

Number Of Items Out Of Stock
OFSP = No. Of Items In Stock
×100

*Lower Percentage is better.

 Idle/Down Time Booking
Hrs. Production Schedule Not Met
Idle/Down Time Booking = ×100
Total Schedule Production In Time
*Higher the figure Lower is the work done.

 Lead Time Ratio

Average Lead Time This Year
Lead Time Ratio = Average Lead Time Last Year
*Should be less than 1.

 Work in Progress Inventory

The best way to compare the average work in progress inventory with Production
achieved during this year.
60
 Average Work In Progress
Work in Progress Inventory =
Total Production Value In Year

*The ratio should be brought down progressively year after year.

 Spare Part Inventory

It is compared with the value of capital equipment for which inventory is held.
# Ratio Of Spare Parts Inventory
Value Of Spare Parts Inventory
 First Way = Value Of Capital Equipments
Value Of Spare Parts Inventory
 Second Way = Total Inventory
×100

Both these ratios have to be progressively brought down (Not Exceeding 3% - 4%).

Value Of Spare Parts Considered

ITOR for Spare Parts = Spare Parts Inventory In Hand

 Receipt and Inspection

No. Of Supplier Challan Cleared
Receipt and Inspection = No. Of Supplier Challan Received
*Higher is better.

 Cash Discount
Cash Discount Actually Achieved
Cash Discount =
Cash Discount That Should Have Beeen
*Higher is better.

 Storage
Claim with Carriers
No. Of Claims Settled In Organisati on Favour
# OR
Total No. Of Claims Preferred
Value Of Claims Settled In Organisati on Favour
#
Total Value Of Claims Preferred

Above Ratio determines how efficient the organization is in the month of preferring
its claim and subsequent follow up.

Storage Loss: Losses in inventory occur due to deterioration in storage,

Obsolescen ce Pilfirate etc
obsolescence, pilferage etc… The index can be: Average Value Of Inventory
×100

*Note: Lower Figure is more efficient.

Obsolescence: A large number of NM claims are held in inventory.

No. Of NMI In Inventory
= Total No. Of Claims In Inventory
×100

61
 Item ratios indicate how alert the organization is in this respect. The lower the ratio
the organization is more alert and is taking proper steps to wipe out the Non
Meaning Inventory.

Value Of Scrap Disposed Off

Scrap Disposal: Scrap should be disposed off promptly = Value Of Scrap Arising
*Ratio should be higher.

Manpower: Manpower and Cost of Manpower in Material Management Organization

are defined by two ratios. They are:
Total Staff In Material Managemen t Department
#
Total Staff In Whole Organizati on
Wage Bill Of Material Managemen t Department
#
Total Wage Bill Of Organisati on

Inventory Control Manual:

 Fixation of stocking limits based on LT, Usage, Safety Stock, EOQ.
 Maintenance of numerical ledger
 ABC Analysis
 Value Analysis
 Surplus and Average Stock
 Periodical Inventory Statements
 Calculation of Inventory Turnover Ratio. Etc…

Responsibility of Purchase Department

 Purchase of all materials including construction requirement.
 Receipt and Inspection.
 Storage and Design of Warehouses.
 Issues, Transportation, Preservation.
 Inventory Control.
 Disposal of Surplus.
 Stock Verification.
 Material Handling.
 Data Processing etc…

Purchase Research
 Locating New Supplier.
 Locating Substitute Materials.
 Import Substitution.
 Study Behavioral Pattern of important items of stores which should lead to
decision regarding the best time.
 Reduction of Transport Cost.
 Forecasting General Economic conditions and study their impact on commodities
market.

62
 (IN LAST 5 YEARS)

Seniors are doing lots of efforts & middle management and inventory control cell to
control interaction with all HODS to reduce inventory further. Stores Inventory has
reduced during last 4 (four) years, due to implementation of WCM concept by
HINDALCO, Renusagar and reduce the stores inventory. Stores inventory data’s of last
5 (five) years of various stock items, critical & non-critical spares, survey & shutdown
spares and insurance spares indicates that inventory is towards decreasing trend
continuously. Daily monitoring is being done by Inventory Control cell before approval of
purchase requisitions and monthly.

What is WCM?
The purpose of WCM (World class Manufacturing) is improvement in overall
performance on a long-term sustainable basis, creating value for business, creating a
work environment, devoid of waste and abnormalities.

WCM denotes excellence in every sphere of the corporation activity-matching the best
in the world. It has enough focus on

• Waste elimination
• Just In Time & Stock Reduction
• Market orientation & customer drive

63
JIT

64
Just In Time & Stock Reduction

Good inventory Management contributes significantly to the organizations performance.

Apart from reducing the material procurement, storage and handling cost, it also
contributes to good housekeeping and lesser space requirement. Procuring or
manufacturing and parts just on time can help preventing wastages, obsolescence and
capital locked in inventory. It makes the workplace more organized and result into
lesser confusions for managing the work.

Just In Time (JIT) concept

To create Just-in-time is a state of mind achieving competitive excellence by creating
an attitude of continuous improvement, through 100% involvement to eliminate all
waste, institutionalizing only value-adding activities with 100% quality-NOTHING ELSE!

BENEFIT OF JIT

 Low stock
 More Space
 Short Lead-Time
 Low Ordering Cost
 Manpower
 Energy
 Maintenance Cost
 Improved Quality
 Increased productivity
 Greater Flexibility
 Better relations and Control Activities
 Simplified Scheduling
 Increased Capacity
 Better Use Of Human Resources
 More Product Variety

65
JIT IMPLEMENTATION AT RENUSAGAR

At Renusagar, 8 (eight) main committees have been formed for implementation of JIT &
WCM. They are:

 Just In Time (JIT) material handling and logistics.

 Planned Maintenance
 5-S & MUDA (Work Environment)
 Skill, education & training
 Early Management of assets
 Individual equipment improvement

66
Financial Analysis

67
 Financial Analysis (Inventory)
Introduction
Inventories are viewed by most of the business world as a large potential role and not
as a measure of wealth as was prevalent in old days. The inventory stocked in excess
of demand may lead to drastic price cuts, so as to be saleable before it becomes
worthless because of obsolescence. The inventory stocked less than the demand may
lead to the business out of the market. There is a constant fear in the minds of
businessmen because of uncertainty in the market situations, whether to stock or not to
stock. With rather tight monetary market, optimization of resources through proper
inventory control becomes one of the major challenges for the material managers in
every organization. Widening gulf between theory and practice has become remarkable
phenomena in this age of science and technology. When the frontiers of knowledge are
widening and the theory is developing at fast rate, the practice is lagging far behind.
This is probably true about all branches of knowledge and specially true for inventory
management area. The material function in power Industry has a distinct importance as
every power plant, along with the transmission and distribution system, is committed to
provide the consumers at his premises, the uninterrupted supply of electrical power
adequately as and when required ensuring the quality, reliability and economy of supply
at the same time with emphasis on overall economy. The entire power system is one
line process and failure of any vital component in the process results into partial or total
outage of the Industry. Inventories play essential and pervasive role in the power sector.

68
RenuSagar Power Division Accounts as per Accounts Division
Profit & Loss A/c
Hindalco Industries Ltd.
(RenuSagar Power Division)
Estimated EBIDTA
Business Unit
Rs. In Lacs
Details Actual Projected & Budgeted
2007-08 2009-10
Generation (MU) 6327.17 6284.73
Sent Out (MU) 5665.28 5650.31

Net Sales 101975.03 101705.60

Electricity Charges Recoverable from Employee 37.38 38.40
Bardana Sales (Scrap) 423.57 216.00
Others 72.34 -
Total Sales 102508.32 101960.00
EBITDA 23462.88 19536.32
Interest 1.04 -
Depreciation 8319.10 8630.32
PBT 15142.74 10906.00

Important Parameters:
Coal Consumption
Quantity (MT) 5768125.00 5682105.00
Coal Stock Adjustment 25000.00 -
Total Coal Consumption 5793125.00 5682105.00
Rate (Per MT) 1085.51 1145.14
Heat Rate (Kcal/Kg) 2724.00 2711.00
CV (Kcal/Kg) 3027.00 3052.00
Amount 62885.14 65068.07

Other Expenditure:
Stores 1169.78 1221.88
Repair Maintenance 5373.18 5974.16
Water 237.77 236.65
High Speed Diesel (HSD) 1105.92 881.54
Salary & Wages 6411.13 6660.24
Contn. Towards Gratuity Fund 78.86 433.02
Welfare Expenses 1450.52 1593.79
Administrative. Expenses 333.14 354.33

Total Cost 87365.58 91054.00

69
INVENTORY
ANALYSIS

70
Problems Studied
In the study, efforts have been made to conduct a detailed analysis of inventory
management functions in the RPD.
For this purpose, detailed research has been conducted as follows:
1. ERP System, Oracle System, Maximo System architecture was studied in
detailed.
2. Existing purchase system of the Board was observed. In which organization
structure of procurement department, purchase policies, records relating to
purchases were analyzed.
3. Detail organization structure of stores of Controller of Stores Department, were
studied. Inventories held in the stores, their receiving, issuing procedures,
techniques of stores control adopted by the board were analysed.
4. Treatment given to wastages, spoilage and dead inventory by the stores were
taken.
5. Existing system of inventory control adopted by the Board was studied.
6. New Inventory control technique applied to improve the efficiency of material
management department and to reduce cost of inventory.

Research Methodology
The relevant data and information have been collected from primary as well as from
secondary sources. For collection of information software, pertaining to raw-material
management general and purchase control as well as stores control. Level employees
of the material Managerial Services, IT, Central stores (Receipt & Issue), Human
Resource Development, Rural Development, Finance & Accounts Department of RPD
(RenuSagar Power Division). Direct interviews were also conducted from the concerned
71
department, of the board. This helped together actual prevailing conditions of
purchasing, maintaining and controlling of materials/components. Moreover the Power
Plant was also visited many times to study the Inventory Management Systems in
RenuSagar Power Plant Division (RPD).

RenuSagar Power Division (RPD) uses ERP System, Maximo System and Oracle
Application as there complete management system of the power division. Taking an
instance of management at the main gate the security system to the management at
higher level or the management at stores, everything is management by the ERP
system.

Concept/Theory of Inventory Management:

Analysis can be made through these eight techniques for the purpose of inventory
analysis. We can classify them and there basis as follows:
 XYZ Analysis (On the basis of Inventory Holding Cost).
 ABC Analysis (On the basis of Consumption Cost).
 VED Analysis (On the basis Criticality or Importance of the Goods).
 HML Analysis (On the basis Unit Cost).
 FSN Analysis (On the basis Movement of the Goods).
 AGE Analysis (On the basis Age of the Spares Being Stored in Stores).
 SDE Analysis (On the basis Problem in the Procurement of Goods).
 GOLF Analysis (On the basis Availability of Goods in the Market).

Items Classification
The overall no. of items used in the RenuSagar Power Division (RPD) is 540 out of
which only 142 are the highly consumable items which also include the ROL/ROQ
items. The items can be classified in following categories:
 Spares/Bearing
72
 Highly Consumable Items

73
PARTA

74
 PARTA SYSTEM
INTRODUCTION
INSURANCE PARTA SYSTEM was introduced by founder chairman of Birla group and
is applicable in all Birla concerns. It is one of the tools of (management information
system). It is setting targets for revenues and expenditures and comparison of actual
against set standards. It is generally prepared for one financial year, but when there is
any substantial hike in prices of raw materials and other expenses, it can be revised
accordingly. Monthly variances in the expenses and the revenues are disclosed in the
monthly MIS report and measures are taken accordingly.
PREPRATION OF PARTA
CAPACITY (GENERATION/ EXPORT FROM POWER PLANT)
For preparing a PARTA, first of all target is to be set of power generation export for
which maximum operating capacity of each unit is taken. Presently Renupower plant
has 10 units and 11 boilers and their operating capacity are taken more than their rated
capacity in PARTA.

AUXILIARY CONSUMPTON &TRANSMISSION LOSSES

Auxiliary consumption in Renusagar power plant is fixed by engineers base on their
experience and as per consumption of equipment in line that comes to about 11.1% at
present.
SHUT DOWN POINT
As per statutory guidelines, each boilers has to undergo & overhauling once in a year
and for turbine it is once in five year, and shut down provision for schedule maintenance
is also taken while deciding the annual generation & send out. In the PARTA SYSTEM,
they do not take transmission losses because they are supplying power at their BUS
BARS to their consumer HINDALCO but in other cases, it can be one supplier account
in their supplying power up to consumers BUS BAR. Accordingly loses have to be
calculated transmission loss i.e. any that should be reduced from the generation and
balance is actual sale of power of plant
REVENUE
Sale price of electricity varies from plant to plant. In this case, after meeting all the
expenses including repayment of loan and interest and after adding a certain purchases
of return set by govt. on net worth, sale price is taken as 120 paisa. Per unit in the
PARTA.
GENERATION:
Now expenses of coal, water, H.S.D.oil, stores & spares, salary/wages, overheads,
insurance and depreciation etc. are to be calculated. Stores and spares, salary &
wages, HSD oil expenses can be divided into two parts one for regular operation of the
plant and other for survey/shutdown. Survey/shutdown expenses are provided as

75
provision and are to be utilized as and required during the year and at the end of the
year adjusted in the profit.

COAL
Coal is basic raw material for power generation. Coal requirement for the plant is
calculated on the basis of power export and heat rate of boiler and TG set and calorific
value of coal after considering efficiency. In this case heat rate of turbine and boiler
come to 12400 BTU/UNIT and average CV coal is taken as 6200 BTU propound.
CV of coal is very important matter as CV should be taken in PARTA.this can be of two
basis- one is per coal &other as decided by suppliers. Renusagar power plant is getting
coal from Jhingurda colliery, which is declared E grade coal. But for PARTA averages
CV of coal is declared by colliery & not on the basis of receive.
HSD OIL
The second raw materials of power generation are HSD OIL. The PARTA consumption
oil is fixed for the normal operation. The average consumption is set out in PARTA are
based on past experience & in consultation of technical people.
WATER
The third major raw material for power generation is water. Water is consumed for
generation of steam, ash disposal and for colony. The rate of water is fixed by GOVT.,
which are presently 229 Rs.
STORES&SPARES
PARTA for stores spares consumption and operation store are fixed for normal as well
as shut down. Store consumption is calculated by engineers seen the previous year
consumption &looking life spares.continious effort are taken to reduce the consumption
of store & spares through residual life assessment studies &by improving life period
stores &spares.
SALARY / WAGES & FRINGE BENEFITS
For controlling manpower expenditure time to time manpower studies are conducted
through engineers. Salary & wages PARTA is based on MANPOWER &AVERAGE
SALARY. In the wages entire benefits such as PROVIDIENT FUND, BONUS etc.,
which come 42-45% of, total wages in PARTA.
OVERHEAD EXPENSES
Over headed expenses divided into 20-25 category ie.generation expenses telephone
welfare, traveling expenses etc. mentioned in PARTA seat. Each head of exp. is divided
into various sub head & minimum exp. For each expense are taken in PARTA.
Renusagar power plant is having policy for fire, cash & bank, vehicles. Presently it is
having an insurance expenses to the extent of 7 Crore. Annual seminars are organized
at group level for inter unit comparison of insurance expenses and if any are perceived
through insurance company and thus saving in insurance premiums attained.

76
INTREST
Actual interest is to be calculated on the cash credit account & longs.
SURVEY &SHUT DOWN
For annual survey period, dates are to fix in the beginning of the year to arrange store,
oil labour, and technical persons to complete the work in time. For survey of boiler 300-
400 persons of different category are required. All these expenses are considered in
PARTA.
GRATUITY CONTRIBUTION
It is base on prime reading rate of the bank and as per payment of gratuity act.
MERITS OF PARTA SYSTEM
 It is the main tool for planning and budgeting.
 It helps the management in monitoring the day-to-day affairs of the company.
 It is a tool for motivating employees for achieving the set targets.
 It helps in assessing the overall performance of the unit.
 It helps in financial working i.e. alluring any expenditure or taking any expenditure
or taking any new project etc.
 It helps in monitoring the cost, as targets are well defined therefore the plant as
well as commercial people tries to improve their efficiencies.
 It helps in reducing the variances.
 It helps in taking decision regarding payment of advance taxes etc.
 Since Renupower is the Captive Unit of HINDALCO Industries Ltd., this PARTA
system helps in planning the PARTA for its parent unit i.e. HINDALCO Industries
Ltd.
DEMERITS OF PARTA
None
LIMITATION OF PARTA
 It is very difficult to anticipate the plant activities in advance.
 It has a bearing of certain government and legal regulation so it is very difficult to
precisely project any price etc.
 Due to nature of the plant, it is very difficult to predict the plant Shutdown etc.
 People do not come out honestly.
SUGGESTION
77
 Use of Zero base budgeting method.

SUPPLY CHAIN
MANAGEMENT
AT RPD

78
 SUPPLY CHAIN MANAGEMENT AT RENUSAGAR
PRELIMINARY PURCHASE REQUISITION

• Experience has proved that no inventory control mechanism can be effective

and fruitful unless material procurement is controlled and regulated at the very
procurement plan stage itself.
At Renusagar, maintenance department prepares the preliminary purchase requisition
in the proposal from (rough/hand written) and sends it for review to the inventory control
cell. This PR mentions the type of spares or consumables and its criticality in terms of
purpose for which it is proposed to be procured.

The inventory control cell first determines the PR value on the basis of last procurement
rate or quotation and assigns ERP number/ code. It also supplements information in
respect of:
 Stock in stores

 Pending PR quantity with expected delivery

 Consumption pattern for past 3 years, and

 Delivery schedule suitability, considering consumption plan.

The industrial engineer associated with the inventory control cell ascertains availability
of material or it’s equivalent with other departments and gets same spares for use. He
also explores possibility of using alternative material which may be available in stock or
purchase value of which would be comparatively lower.
MANAGEMENT INFORMATION SYSTEM

Inventory control cell prepares following monthly MIS report:

 Comparative stock statement under- critical, non-critical and insurance for various
departments and identifies increase/reduction vis-à-vis previous month as also
ideal.

79
  Statement on specific items with details, which contributed to increase in the
inventory in the particular month along with the consumption plan.

 The above report is discussed amongst the HOD’S during MPR (monthly
performance review meeting). These are discussed with the president during
monthly financial review meeting.

Inventory control cell also prepare following quarterly report

 XYZ ANALYSIS
 INSURANCE STOCK REVIEW
 AGE ANALYSIS OF SPARES
PERIODIC (ANNUAL) REVIEW FOR REGULAR ITEMS

In case of high regularly used data is collected abut their past consumption and unit/
boiler/ department-wise requirement for the next financial year, as projected by the user
department. The entire requirement for is consolidated and after deliberation, the
composite quantity with phased deliveries is communicated to the purchase department
for placement of annual/bi-annual orders. Items covered under the above exercise
include:

 Boiler tubes.
 Grinding rolls
 Bearings
 Ariel ropeway spares etc.
Based on the ABC analysis, consumable regular items are reviewed and their
ROL/ROQ are revised annually. In certain cases if there is a departure from the
norms/practices, ROL/ROQ are reviewed and revised midterm ROL/ROQ formulated for
auto-identifying by stores department, cover the following major consumable groups:
 Battery, types, tubes etc.
 Oil & lubricants
 Chemical
 Steel

80
  Welding electrodes & accessories etc.
For removing abnormalities and to introduce more effective system, even for
low value regular spares and consumables, ROL/ROQ are being determined in
place of the prevalent maxima/ minima system.75

FUNCTIONAL FEATURE OF MATERIALS MANAGEMENT AT RENUSAGAR

PURCHASE DEPARTMENT

The method of purchase can be subdivided into four methods:

 Comparative bids
 Annual rate contract
 Proprietary items
 Repeat orders

The purchase department work involves:

 Making purchases

 Vendor development & rating

 Product development
 Market development

PROCEDURE OF VENDOR DEVELOPMENT

• DISCUSSION WITH ORIGNAL EQUIPMENT MANUFACTURES

 Enquiry floatation.
 Negotiation & order placement
 Sample analysis & approval
 Review & registration.

• DISCUSSION WITH ORIGINATOR/USERS

 Enquiry floatation.
 Comparison & trill order placement.

81
  Sample analysis & approval
 Review & registration

• BY INFORMATION / APPLICATION FROM MANUFACTURES VENDOR FOR

ENLISTMENT
 Scrutiny of information
 Identifying of areas of vendor development
 Scrutinizing the reference
 Selected vendor send vendor assessment form
 Vendor evaluation
 Enquiry floatation
 Comparison & analysis & approval
 Review & registration

82
VENDOR
DEVELOPMENT
& RATING

83
VENDOR DEVELOPMENT & RATING:

Vendor development has been done and there rating is done on the basis of quality,
price service & lead-time. For new vendors the preliminary survey and revaluation is
done in the quietest possible time.
VENDORS DEVELOPMENT AND RATING
Vendor’s development has been done and their rating is done on the basis of quality,
price, service & lead time. For new vendors the preliminary survey and evaluation is
done in the quietest possible time
Vendor rating plan - Quality = 40% points
Price = 35% points
Service = 20% points
Lead time = 5% points
A) Quality 40 x No. Of lots accepted

Say “A
No. Of lots received

B) Price 35 x lowest quotation

Say “B” Amount quoted

C) Service 20 x No. of lots delivered on time

Say “C”
Total no. of lots delivered

D) Lead Time 5 x lowest lead-time

Say “D”
Lead-time quoted
84
Sum : A+B+C+D = “x”
If “X” = 100 points, vendor is excellent. If “X” = 93-99 points, vendor is good.
If “X” = 83-92 points, vendor is satisfactory. If “X” = below 83 points, vendor is
Unsatisfactory

VENDOR RATING PLAN

QUALITY - 40% POINTS

PRICE - 35% POINTS

SERVICE - 20% POINTS

LEAD TIME - 5% POINTS

X = 100 point vendor is excellent.

X = 93-99 point vendor is good.
X = 83-92 points vendor is satisfactory.
X = below 83 point vendor is unsatisfactory.

85
CENTRAL
STORES

86
 CENTRAL STORES

The central store is headed by manager (stores) and is supported by

two deputy managers. It is divided into two sections viz. running stores

& expansion stores.

Both these stores are further divided into three sections:

 Receipt section

 Bill section

 Issue section

87
 RECIEPT SECTION

Receipt of raw material

Physical verification & reconciling with challan

Tagging of material

If damaged excess/short entry in material receipt

Log sheet (3 copies)

Damage/excess
Report (3 copies) inspection report i.e. arrival notice

Rejected approved

Separate tagging receipt voucher is

Prepared

Rejection report is prepared

(Action taken as per advice of purchase deptt.)

88
Recorded in rejected register subsequently accepted
after approval from Asst. vice president
(F&C)

Delivery note & goods sent to parties

Receipt voucher
Prepared

BILLS SECTION

RECIEPT OF BILLS

STAMPING OF DATE OF RECIEPT OF BILLS

ENTRY IN BILLS REGISTER

DISTRIBUTION OF BILLS TO THE CONCERNED PERSONS

EXAMINATION OF BILLS WITH RELATED PO FOR RATE

AND QUANTITY ORDERED AND WITH RECIEPT JOURNAL
FOR ACUAL QUANTITY RECEIVED.

POSTING RATES IN RECIEPT JOURNAL

ATTESTING WORK DONE IN RECIEPT VOUCHER AND BILL

89
 EXAMINATION BY STORES Dy. SUPDT.

APPROVEDS BY MANAGER FOR BILL<Rs.5 LACHS.

ENTRY IN BILLS REGISTERS AND SENT TO ACCOUNT

DEPARTMENT

ISSUE SECTION
RECIEPT OF MATERIAL

TAKING RECIEPT OF MATERIAL FROM RECIEPT SECTION AS PER

RECIEPT VOUCHER

POSTING RECIEPT, STORING OF MATERIALS, SPECIFING LOCATION

ADDRESS IN KARDEX & TAGGING

PRICING OF KARDEX FROM RECIEPT VOUCHER (BASIC COST CONSIDERED,

SALES TAX ETC. TAKEN AS OVERHEAD BUT FOR IMPORTED MATERIAL ALL
COSTS ARE INCLUDE)

ISSUE OF MATERIAL

COLLECTION OF VARIOS DEPARTMENT DULY APPROVED BY AUTHORIZED

PERSONS

ENTRY OF SLIPS IN ISSUE REGISTER

ISSUE AGAINST VALID SLIPS

90
 PRICING OF ISSUE SLIPS

ADJUSTMENT OF UNDER CHARGE/OVER CHARGE

FUNCTION OF GENERAL SECTION

• Checking and posting of issue in consumption register.

• Preparation of monthly consumption statement and sending it to
accounts department.
• Weekly consumption report for Joint president and accounts department.
• Monthly stock statement.
• On receipt of scrap calculating the approximate weight under the
supervision of Sr. stores manager & assistant stores officer.
• Preparing comparative chart.
• After approval by Asst. Vice President (F&C) and. D.G.M (Accts.) /
assistant stores officer selected party required to submit demand draft.
• Supervision at the time of loading and weightment.
• Supervision at the time of weightment of coal.
• Preparation of consumption /receipt statement daily for coal.
• Ensuring that all vehicles have loaded the coal in colliery has unloaded
the coal at the factory.
• Charging the transport of coal in case shortage exceeds 100 tons.
91
Sub: JIT Material Handling & Logistics Plan in Renusagar Stores

As you are aware that Stores Monitoring is very essential job for Thermal Power Plant.
It facilitates to know how much to keep stock for making future planning for better
services to operating units on lowest cost basis.

Optimum utilization of resources is on important aspect in Power generation. Stores

Deptt. is on analyzing, fact finding, simplifying and controlling of stock as well as
reduction in material handling cost. Hence major challenger are dealing with
subordinating staff, enhancement in labors productivity, cost reduction through proper
Stores function, Inventory analysis, system development for improvement in existing
work procedure, adopting JIT concepts and providing support services to various
departments “ON LINE”.

“MATERIAL HANDLING”

Material handling in Stores is major challenging Task where the direct cost effect
involment is there. Un-necessary movement of material within the plant is wasteful
activity. It does not plus (adds) value but adds to delays. We have taken several
initiatives in this regard to reduce material handling.

“ON LINE DELIVERY OF MATERIALS”

DOL delivery of various items has started and the material is directly being unloaded at
site instead of first unloaded at Stores and then again being shifted to site. The same
has resulted in reduced material handling as well as faster delivery of material to user
department. An illustrative list of material under DOL delivery is as follows: -

1. Rope 63 mm, 53 mm, 42 mm & 26 mm dia.

2. Cement.
3. Tor Steel.
4. Equipment. – Transformer, BFP Motors, Pumps, Panels, Distribution Boards,
92
 Generators, MCC & PCC etc.
5. Building materials – Aggregate, Boulders, Sand & Bricks.
6. Wood & Furniture
7. Sludge – for Brick making plant.
8. Hydrochloric Acid

9. Sulphuric Acid
10. PAC
11. Liquid Ammonia
12. Condenser

The concept has been taken further and recently RPD has taken initiative to further
increase the list of items under “Inspection Waivel List”. The concept being introduced is
of “Self Certified Vendors”. Self Certified Vendor basically means that reputed, ISO
certified vendor who has good manufacturing as well as Inspection facilities in place
and hence material procured directly from it does not requires inspection at customer’s
end. Ground work is currently on the same.

Departmental Quality Objective

Sl.No. Quality Objective Parameter to Current Value Target

Be measured (FY06-07) (07-08) (08-09)

01. Reduction in left over Left over Stock 56.76 lacs 30.52
24.52
Stock of Expansion value
Stage IV & V.

02. Reduction in inspection inspection time 7 5 3

time of material received (days)

93
ROL Items
RPD Stores has work out details of Items transaction more then three times in a years
and used by different departments. The Items comes under this category is approx.
1500 and try their best to cover all the items under ROL head gradually. In first step it
has been decided to cover approx. 800 Items in this category & list for the same
submitted to Inventory Control Cell for updating in Maximo.

Revise Material Arrival Information

Earlier, RPD Stores prepare Arrival Information manually based on material received in
Stores against individual receipt. But now we have generated report “HINDALCO
REQUESTOR WISE RECEIPT DETAILS” and on the basis of this report requester can
easily run the report and take out the list of Arrival Items on daily basis. This led to
reduce in lead-time as well as improve in delivery.

WASTE

Waste is anything other than minimum amount of equipment,

materials, parts, space and time, which are absolutely essential
to add value to the product.
1. Waste in excess production
2. Waste in waiting
3. Waste in conveyance
4. Waste in processing
5. Waste in inventory
6. Waste in motion
7. Waste in defects
8. Waste in tentative placement
9. Waste in communication and administration
10. Waste in untidiness
94
 11. Waste in bottle necks
12. Waste in timings.

Team exercise needed on waste identification and elimination.

GRAPHICAL
REPRSENTATION

95
 OVERALL INVENTORY TREND AT RENUSAGAR

5 0 0 0 .0 0

4 5 0 0 .0 04 3 1 3 .0 4
3 7 1 3 .5 0
4 0 0 0 .0 0
4 2 9 9 .5 0
3 5 0 0 .0 0 3 1 4 8 .4 0
3 0 0 0 .0 0 2 6 0 3 .0 7
3 1 4 1 .1 8
2 5 0 0 .0 0 2 9 2 8 . 7 82 7 5 8 . 0 7
2 6 1 9 .9 4
2 0 0 0 .0 0

1 5 0 0 .0 0

1 0 0 0 .0 0

5 0 0 .0 0

0 .0 0
M a r ' 2 0 0 M2 a r ' 2 0 0 M3 a r ' 2 0 0 M4 a r ' 2 0 0 M5 a r ' 2 0 0 M6 a r ' 2 0 0 M7 a r ' 2 0 0 M8 a r ' 2 0 0 A9 p r ' 2 0 0 9

S e r ie s 1

96
97
 COMPARATIVE STOCK OF REGULAR INVENTORY

2 2 0 0 .0 0

1 9 7 6 .0 0 1 9 7 6 .0 0 1 9 7 6 .0 0
2 0 0 0 .0 0

1 8 4 7 .7 2
1 7 6 1 . 0 0 1 7 6 1 . 0107 6 1 . 0 0
1 8 0 0 .0 0
1 7 1 0 .0 0 1821.01
1648.57
1 7 5 8 .7 6
1 7 3 9 .5 8
1 6 0 0 .0 01 5 3 5 . 1 1 1 5 5 0 . 0 0
1 6 6 4 .7 8 1 6 3 6 .7 5
1 5 8 3 .8 4
1 5 5 0 .0 0
1 4 0 0 .0 0 1 4 8 5 .2 9
14 1 0.00

1 2 0 0 .0 0

1 0 0 0 .0 0
M a r '1 9 9 6M a r '2 0 0 M2 a r '2 0 0 3M a r '2 0 0 M
4 a r ' 2 0 0 5M a r '2 0 0 M6 a r '2 0 0 7M a r '2 0 0 M
8 a r '2 0 0 9A p r '2 0 0 9

P r e s e n t I d e a l V a Al ucetu a l S to c k V a l u e

Revision of Ideal Parta From Time to Time due to Following Reasons :

- Ideal Fixed for 4 Units in FY-1984-85 = 1410.00
- Ideal Fixed for 5 Units & Blr#6 on 17.12.96 = 1550.00
- C & NC Ideal Revised on 17th Oct.'03, due to addition of New Spares for Unit # 7-10 = 1710.00
- Ideal Revised due to addition of haulage rope in INS. Category in the month of June'04 =1761.00
- Internal setup of parta due to ERP Limitation & rope setup in the month of August'07 = 1761.00
- Insurance Ideal Revised in the month of January'08, Due to addition of new Insurance Spares for
Unit # 7-10 = 1976.00

98
 STOCK ITEMS

1 3 0 .0 0
1 2 0 .0 0 117 . 3 8 117 .3 6

1 1 0 .0 0 1 0 1 .5 0
1 0 0 .0 0
9 0 .0 0
9 4 .2 8 9 7 .2 8
8 0 .0 0 9 3 .2 4
8 6 . 11
7 0 .0 0 8 4 .8 6
6 0 .0 0
6 5 .7 4
5 0 .0 0
4 0 .0 0 4 6 .6 8
3 0 .0 0
M a r'2 0 0 2M a r'2 0 0 3M a r'2 0 0 4M a r'2 0 0 5M a r'2 0 0 6M a r'2 0 0 7M a r'2 0 0 8M a r'2 0 0 9A p r'2 0 0 9

P r e s e n t I d e aSl t o r e s S t o c k It e m s

INSURANCE SPARES

1300.00
1200.00
1200.00
1083.69
1100.00

1000.00 1098.26
842.07 859.46 1021.44
900.00 967.34
800.00 916.64

700.00 783.02 799.08

600.00
M ar'2002 M ar'2003 M ar'2004 M ar'2005 M ar'2006 M ar'2007 M ar'2008 M ar'2009 A pr'2009

Pres ent Ideal Insuranc e spares

99
 CRITICAL SPARES

4 6 0 .0 0
444.00
4 4 0 .0 0
412.12
4 2 0 .0 0
4 3 4 .9 7
4 0 0 .0 0
410.53
3 8 0 .0 0 3 9 5 .1 0 396.83
3 8 1 .9 4
3 6 0 .0 0 376.24

3 4 0 .0 0
M a r '2 0 0 4 M a r '2 0 0 5 M a r '2 0 0 6 M a r '2 0 0 7 M a r '2 0 0 8 M a r '2 0 0 9 A p r '2 0 0 9

P re s e n t Id e a l C ritic a l S p a re s

BLOCK/ONE TIME SPL. SANCTION

2000.00
1800.00 1618.26
1600.00 1780.171825.37
1256.46
1400.00
1200.00 859.35
1000.00 759.69
700.00
800.00
600.00
400.00 578.64 588.58 598.11
200.00
0.00
M ar'2002M ar'2003M ar'2004M ar'2005M ar'2006M ar'2007M ar'2008M ar'2009A pr'2009

Present Ideal Bloc k/One Time

100
 N O N -C R IT IC A L S P A R E S
(A m t. R s. I n )L a c s
4 0 0 .0 0
3 7 7 .3 6
3 4 7 .8 2
3 5 0 .0 0
2 9 0 .1 7
3 0 0 .0 0
2 7 9 .3 9 2 4 2 .6 9 2 4 4 .6 5
2 5 0 .0 0 2 3 0 .5 0 2 2 0 .7 9

2 0 0 .0 0
2 1 9 .9 1 2 1 2 .7 2

1 5 0 .0 0
M a r '2 0 0 2M a r '2 0 0 M
3 a r '2 0 0 4M a r '2 0 0 5M a r '2 0 0 6M a r '2 0 0 7M a r '2 0 0 M
8 a r '2 0 0 9A p r '2 0 0 9
P r e s e n t Id e a l N o n - c r i tic a l S p a r e s

C AP E X /P RO J E C T S P ARE S
(Am t.Rs. In L a)cs
1200.00
1000.00 1047.58

800.00 825.56
600.00 500.00 652.30

400.00
430.46 300.88 429.51 183.95
200.00 420.67

0.00 183.64
02

9
00

00

00

00

00

00

00

00
'20

r'2

r'2

r'2

r'2

r'2

r'2
r'2

r'2
r

Ma

Ma

Ma

Ma

Ma
Ma

Ma

Ma

Ap

Pres ent Ideal Capex /Projec t

101
 ASH DISPOSAL AREA

Renusagar Power Division is allotted an area measuring 61.2 Hectares (151.25 acres)
for construction of new Ash pond by the Forest Department under Govt. Grant Act
after due approval from MOEF on 10 years lease basis. The State Environment
Department while recommending the case for transfer the land to Renusagar has
imposed a condition to develop a Green Belt of 100 meters on Eastern Side and 50
meters on Southern Side of the pond which was duly adhered. This Green Belt now
covers an area of about 36 acres. The construction of embankment of the pond covers
an area of approx. 45 acres. The available area of storage of ash out of the land
transferred to Renusagar Power Division is about 70 acres.
The above land is in the form of a valley and uneven hilly terrain. The volume
available for ash storage after construction of the embankment is about 107 Lacs M 3.
The quantity of ash produced from all the ten units is around 17.6 Lacs M3 per year
which is average of 36% in the coal consumed in a year.
On the basis of average ash content produced, the pond is expected to be full
within 12-13 year. Expert consultants of CBRI Roorkee have helped RPD in planning
the future requirements of Ash Disposal Area for the future years and 151.25 acres as
allotted for new ash pond is the bare minimum to meet the Renusagar Power Division
requirement for the total utilization of ash.

102
103
 Green Belt

We have been conscious to development and maintain greenery within and

around our plant and colony area. We utilized around 33 hectare of land in
our plant and colony only for the plantation purpose. Where more than Rs.
1lacs trees have been planted and are being maintained by our in - house
Horticulture Department. The service rate of tree with in our colony and
plant area is above 90%. It has always been our effort to plant more trees to
maintain green and healthy environment.
As already submitted to your kind self during our expansion program
we have the planned for a green belt all around or new ash pond which will
cover an area of about 40.5 hectares where we will plant around 35000 trees
of various species.
We have also planned that after the new ash pond is put into operation
and the present ash pond where ash is being stored is dried up, we will put a
layer of soil over the ash and will plant the area. We expected to cover about
18 hectare of the land by plantation where about 40000 to 45000 trees will
be planted.
After the expansion work is completed we have also planned to plant
trees around our power plant. About 17 hectares land in the form of strip is
expected to be available for plantation all around the plant where about 400
trees will be planted. Thus after completion of our expansion project and
operation of the new ash pond we will be able to plant around 120000 trees in
our plant and colony premises.
A major portion of trees required for additional plantation as above
are being developed in our own nursery besides we have also contacted
Forest Department and other private nursery for supply of good quality
plant of specified species for plantation on this green belt.

104
GREENERY IN COLONY

105
 STRENGTH
OF PRESENT
SYSTEM

106
 STRENGTH OF PRESENT SYSTEM

At RPD various project are being carried out to control the inventory as
discussed earlier & the success story of these analysis are quite satisfactory
such as:
 Last three years data of non/slow moving items shows declining trend
from 161.62 (in lacs) in 2006-2007 to 111.45 in 2007-2008 to 94.32 in
2008 -2009.
 In order to keep the stores items as per ROL/ROQ and avoiding stock
out position.
 Purchase requisition is simplified in terms of no. of destination traveled
from originator to buyers.
 Purchase requisition is being sent online, hence tremendous time saving
achievement.
 PR status is updated on-line.
 PR internal lead-time reduced through ERP system.
 Assessment committee and disposal committee is formed by RPD
management on October 2003. for disposal of obsolete items
 By the continuous monitoring efforts, shop floor inventory reduced from
Rs. 250 lacs to 86 Lacs.

107
 QUESTIONNAIRE ON INVENTORY
Sl.No. Questions Options Answers
1 How many no. of production units 8 10 10
at Renusagar?
2 TGs Overhauling frequency at 2 5 5 YEARS
Renusagar in years?
3 Proprietary spares having no Y N Y
alternative sources
4 FIFO means lost in first out? Y N No, First in First
out
5 Factor K is safety factor and it is Y N No, depend upon
same for all items criticality of items
6 Suppose one items falls in Cat `A' Y N No, It can fall in
will it always remain in same any category
category
7 Excess inventory is value adding Y N No, Blockage of
activity money
8 Better planning of procurement Y N No- Less
would lead to higher inventory inventory
9 Greater lead time means lower Y N No-Higher
inventory inventory
10 Inventory is kept to avoid Y N YES
unforeseen breakdowns
11 Total Lead time is equal to internal Y N No, Internal Lead
lead time Time + External
Lead Time
12 Music 3D System have 3 Y N Yes
dimensional
13 Music 3D combines all selective Y N No, 8 GROUPS
approach in 6 groups

108
14 High lead time is equal to 3 Y N No, > 3 months
months
15 VED Analysis is done on the basis Y N No, Vitality of
of consumption items
16 For high value non-critical items Y N Yes
policy of JIT procurement should
be adopted
17 MIS Stands for material indenfying Y N No, Management
system Information
System
18 What is Inventory? Idle items in store
having economic
value
19 What is mean by control? Regulate, check
20 What is lead time? Time between
feeling of
requirement to
materials receipt
in store.
21 Write full form of ROL/ROQ? ROL- Re-ordering
Level, ROQ- Re-
ordering Quantity
22 What is factor k? k is safety factor
for inventory
required for plant
operations.
23 Stores represent money on which Y N N
interest is paid?
25 Store stock and inventory terms Y N Y
meaning the same thing
26 Store keeper purchases the Y N N
materials for an organization
27 Acids should be stored in a Y N Y
separate space
28 Checking or examination of Y N Y
materials is same thing as
inspection

109
29 An organisation need not hold Y N N- hold for
inventories unforeseen break
down & lead time
consumption.
30 Building up of big inventories is Y N N
profitable
31 Longer the lead time lager will be Y N Y
inventory
32 The wages paid to the store staff Y N Y
is part of inventory carrying cost
33 Safety stock is minimum inventory Y N Y
a store must hold at all time
34 Low price item cannot be Cat `A' Y N No, If depends
items upon value of item
consumption
35 High value items lying in store Y N NO ,X items.
since last 4 years is Cat 'A' items
36 Inventory control department need Y N N
not to maintain any record
37 Forecasting is essential for sound Y N Y
functioning of a firm
38 Negotiation means finalization of Y N Y
purchase and sale contact of
goods and services
39 Import substitutions refers to Y N Y
indigenous source development
40 Inventory turnover ratio should be Y N Yes
high
41 Non critical items are generation Y N N
items.
42 Objective of inventory control is to Y N N
keep inventory high
43 Low value stock items are called y Y N No-Z ITEMS
items
44 fast moving items should be Y N Y
stored need to gate of store room.

110
 CONCLUSION

INVENTORIES CONSTITUTE THE MOST SIGNIFICANT PART OF CURRENT

ASSETS OF A LARGE MAJORITY OF COMPANIES IN INDIA.ON AN AVERAGE
INVENTORIES ARE APPROXIMATELY 30% OF CURRENT ASSETS IN PRIVATE
LIMITED COMPANIES IN INDIA. IT IS POSSIBLE FOR A COMPANY TO REDUCE
ITS LEVEL OF INVENTORIES TO A CONSIDERABLE DEGREE e.g. 10 TO 20%
WITHOUT ANY ADVERSE EFFECT ON PRODUCTION AND SALES.
THE RENUSAGAR POWER PLANT OFFERS INDIA A CHANGE TO LEAP FROG
FROM ABOVE DEPRESSION TO AREA OF GLOBAL COMPETITIVENESS AND
PROSPERITY AND REGAIN INDIA’S COMMERCIAL VALUE. IN THE LIGHT OF
THESE FACT THE STORES OF RENUSAGAR IS MAINTAINING INVENTORY OF
NEARLY 35,000 ITEMS.
THE STORES HAS BEEN DONE REMARKABLE JOB SO FAR RELATING TO
INVENTORY CONTROL FUNCTION BUT WITH THE CHANGING SCENARIOS THE
IMPORTANCE OF INVENTORY MANAGEMENT HAS ACQUIRED ENORMOUS
DIMENSIONS. DESPITE OF THE FACT THAT INVENTORY MANAGEMENT SYSTEM
BEING FOLLOWED IN THE COMPANY HAS STRONG STRUCTURE, IT SUFFERS
FROM LACK OF AUTOMATION AND SOPHISTICATED TECHNIQUES. IN NEAR
FUTURE DUE TO THE EXPANSION & OTHER STRINGANT MEASURES OF
QUALITY PROGRAMME LIKE TPM, WCM, and ISO THE COMPANY SHALL HAVE
TO ADOPT LATEST TECHNIQUES OF INVENTORY CONTROL.

111
 BIBLIOGRAPHY

 Inventory & working capital management

• By – P.Gopal Krishnan

 Stock control in manufacturing Industries

• By –Adin.B. Thomas

 Purchasing & Supply Management

• By – Donald. W.Dobler &
• David N.Burt

 Data & other information

112
• (From Renusagar finance department, inventory control
cell and central stores manuals & records)

113