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In partial fulfillment of the requirement for the

award of the degree of










Before I start introducing the adventures of my 4 weeks summer training, I

feel it obligatory to pay my humble thanks to those who made this
opportunity for me to undergo my summer training. For this, ofcourse,my
first thanks goes to my guide RAMESH GOEL who helped me to complete
this report.

Very many thanks to IFFCO Aonla Officers specially MR.D. KALIA

(Training department head), MR.K.K.PANDEY (Finance Department).
They were very helpful to me and always readily helped and guided me.

Thanking all of them again.


The successful completion of this project was a unique experience for
me because by visiting many place and interacting various person ,I
achieved a better knowledge about sales . The experience which I
gained by doing this project was essential at this turning point of my
career this project is being submitted which content detailed analysis
of the research under taken by me.
The research provides an opportunity to the student to devote his/her
skills knowledge and competencies required during the technical


 Acknowledgment
 History
 Board of Directors
 Rating
 Introduction
Finance Department
Material Department
Purchase Section
 Terminology used in Purchase Department
 Store section
Receipt section
Custody section
Spare section
 Inventory Control
Inventory Software
 Production Department
 Inventory Management
 Objective of the study
 Concept of Inventory Management
 Research and Methodology
 Conclusion


This is to certify that AKASH AGARWAL has completed the

IFFCO” under my guidance and supervision.

He is submitting the project in the partial fulfillment of the

requirement for the award of Bachelor of Business
Administration, H.N.B GARHWAL University, Dehradun.

This work is original and has not been published or

submitted elsewhere for any purpose what so ever. All
sources of information have been mentioned and dully

The performance was satisfactory during the development of

the project.

Dept. of Management Studies
GEIT, Dehradun.

History of IFFCO
IFFCO : Indian Farmers' Success Story

During mid- sixties the Co-operative sector in India was responsible for
distribution of 70 per cent of fertilisers consumed in the country. This Sector
had adequate infrastructure to distribute fertilisers but had no production
facilities of its own and hence dependent on public/private Sectors for
supplies. To overcome this lacuna and to bridge the demand supply gap in
the country, a new cooperative society was conceived to specifically cater to
the requirements of farmers. It was an unique venture in which the farmers
of the country through their own Co-operative Societies created this new
institution to safeguard their interests. The number of co-operative societies
associated with IFFCO have risen from 57 in 1967 to 38, 155 at present.
Indian Farmers Fertiliser Co-operative Limited (IFFCO) was registered on
November 3, 1967 as a Multi-unit Co-operative Society. On the enactment
of the Multistate Cooperative Societies act 1984 & 2002, the Society is
deemed to be registered as a Multistate Cooperative Society. The Society is
primarily engaged in production and distribution of fertilisers. The byelaws
of the Society provide a broad frame work for the activities of IFFCO as a
Cooperative Society.

IFFCO commissioned an ammonia - urea complex at Kalol and the

NPK/DAP plant at Kandla both in the state of Gujarat in 1975. Another
ammonia - urea complex was set up at Phulpur in the state of Uttar Pradesh
in 1981. The ammonia - urea unit at Aonla was commissioned in 1988.

In 1993, IFFCO had drawn up a major expansion programme of all the four
plants under overall aegis of IFFCO VISION 2000 . The expansion projects
at Aonla, Kalol, Phulpur and Kandla have been completed on schedule.
Thus all the projects conceived as part of Vision 2000 have been realised
without time or cost overruns. All the production units of IFFCO have
established a reputation for excellence and quality. A new growth path has
been chalked out to realise newer dreams and greater heights through Vision
2010 which is presently under implementation. As part of the new vision,
IFFCO has acquired fertiliser unit at Paradeep in Orissa in September 2005.
As a result of these expansion projects and acuisition, IFFCO's annual
capacity has been increased to 3.69 million tonnes of Urea and NPK/DAP
equivalent to 1.71 million tonnes of P2O5.

IFFCO has made strategic investments in several joint ventures. Godavari

Fertilisers and Chemicals Ltd (GFCL) & Indian Potash Ltd (IPL) in India,
Industries Chimiques du Senegal (ICS) in Senegal and Oman India Fertiliser
Company (OMIFCO) in Oman are important fertiliser joint ventures. Indo
Egyptian Fertiliser Co (IEFC) in Egypt is under implementation. As part of
strategic diversification, IFFCO has entered into several key sectors.
IFFCO-Tokio General Insurance Ltd (ITGI) is a foray into general insurance
sector. Through ITGI, IFFCO has formulated new services of benefit to
farmers. 'Sankat Haran Bima Yojana' provides free insurance cover to
farmers along with each bag of IFFCO fertiliser purchased. To take the
benefits of emerging concepts like agricultural commodity trading, IFFCO
has taken equity in National Commodity and Derivative Exchange
(NCDEX) and National Collateral Management Services Ltd (NCMSL).
IFFCO Chattisgarh Power Ltd (ICPL) which is under implementation is yet
another foray to move into core area of power. IFFCO is also behind several
other companies with the sole intention of benefitting farmers.

The distribution of IFFCO's fertiliser is undertaken through over 38155 co-

operative societies. The entire activities of Distribution, Sales and
Promotion are co-ordinated by Marketing Central Office (MKCO) at New
Delhi assisted by the Marketing offices in the field. In addition, essential
agro-inputs for crop production are made available to the farmers through a
chain of 158 Farmers Service Centre (FSC). IFFCO has promoted several
institutions and organisations to work for the welfare of farmers,
strengthening cooperative movement, improve Indian agriculture. Indian
Farm Forestry Development Cooperative Ltd (IFFDC), Cooperative Rural
Development Trust (CORDET), IFFCO Foundation, Kisan Sewa Trust
belong to this category. An ambitious project 'ICT Initiatives for Farmers
and Cooperatives' is launched to promote e-culture in rural India. IFFCO
obsessively nurtures its relations with farmers and undertakes a large
number of agricultural extension activities for their benefit every year.

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

IFFCO, to day, is a leading player in India's fertiliser industry and is making

substantial contribution to the efforts of Indian Government to increase
foodgrain production in the country.

Board of Directors
The Directors of IFFCO

Shri Surinder Kumar Jakhar, Chairperson

Shri. N. P. Patel, Vice-Chairperson

Shri Amal Kumar Verma
Shri S.L. Dharmegowda
Shri Sudhir Rajpal
Shri Harminder Singh Jassi
Shri Kartic Chandra Sarkar
Shri Umesh Tripathi
Shri Ramakant Bhargava
Shri Subhash Chandra Garg
Shri Ankushrao R. Tope
Shri Prem Chandra Munshi
Shri Tryambakrao G. Sirsath
Shri Vithalbhai H. Radadia
Shri Pramod Kumar Singh
Shri Sheesh Pal Singh
Shri Balvinder Singh Nakai
Shri Ravindra Pratap Singh
Shri Simachal Padhy
Shri K. Srinivasa Gowda
Shri A. Praveen Reddy
Shri B. S. Vishwanathan
Shri Raj Kumar Tripathi
Dr U.S. Awasthi (Managing Director)
Shri. Rakesh Kapur (Jt. Managing Director)
Shri. K.L. Singh (Director (Technical)
Dr. G.N. Saxena (Director (Coop. Development)
Shri R.P.Singh (Acting Director (HRD)
Shri. Arabinda Roy (Acting Marketing Director)

Ratings assigned by CRISIL:

(1) Rating for Governance and Value Creation (GVC) Practices of IFFCO:

CRISIL has, assigned a “GVC Level 2” rating to IFFCO. This rating

indicates that the capability of the Society with respect to wealth creation for
all its stakeholders, while adopting sound corporate governance practices, is

(2) Rating for the Rs. 100 crore Commercial Paper Programme of IFFCO.

CRISIL has assigned a “P1+ (pronounced “P One Plus”) rating to IFFCO’s

Rs.100 Crore Commercial Paper Programme.This rating indicates that the
degree of safety with regard to timely payment of interest and principal on
the instrument is Very Strong.

(3) Rating for the Rs. 400 crore Bonds Programme of IFFCO.

CRISIL has assigned the rating on IFFCO’s Long Term Borrowing

Programme to AA/Stable.The rating indicates high degree of safety with
regard to timely payment of interest and principal on the instrument.

Ratings assigned by FITCH

(4) Rating for the Rs. 100 crore Commercial Paper Programme of IFFCO.

FITCH Ratings has assigned a National Short Term Rating of ‘F1+(Ind)’to

IFFCO’s Rs. 100 crore Commercial Paper Programme.

(5) Rating for Long Term Borrowing Programme of IFFCO.

FITCH Ratings assigned National Long - Term Rating of ‘AA+(ind)’ to the

Long Term Debt Programme of IFFCO. The outlook on the Long Term
Rating is “Stable”.


Money or capital being a scare as well as crucial resource in the working of

any organization, needs to be given prime importance. The financial
resources have been planned and controlled in a proper and continous
manner. As among the most crucial decisions of a firm are those which
relate to finance. Finance & accounts from an integral part of any
organization. Proper and smooth functioning of this section is very vital for
the organization to survive and grow.

Finance function are of two types:

 Managerial finance function

 Routine finance function

Managerial finance functions are so called because they require skilful

planning, control and execution of financial activities.

Routine finance functions on the other hand, do not require a great

managerial ability to carry them out. They are chiefly and are incidental to
the effective handling of the material finance functions.

Finance & Accounts Deptt. At A Glance

The Finance & Accounts Department. Of IFFCO, Aonla is divided into 3

sections, to facilitate smooth and easy functioning and control.

Organisation Structure




Supply Note Sheet Work

Section Payment Order

Indigeneou Service
Imported Works
s Contract
Supply Contract

Line Of Control In Finance & Account Department

D.G.M. (F &


(Account) (Account) (Account)

Deputy Deputy Deputy Deputy

Account Account Account Account
Manage Manage Manage Manage
r r r r

Senior A/C Officers





The various are covering under the preview of 3 subsections are as follows:

This section basically deals with accounting function, maintenance
and keeping of records.
The various functions include :
 Books : Preparing and Maintaining balance sheets.
 IFCC (Fertiliser Industries Coordination committee)

 Costing & Pricing Cells

 Reporting


This section deals with the payments of salary and wages to the
employees and extending various other benefits area covering under to
preview are –
 Salary
 Leave Travel Concession (LTC)
 Medical Allowance
 Conveyance
 Advances
 Loans to employees


Materials from the most critical inputs of any business firm organization
Proper handling and control of material inputs ensures the smooth running
of plant. Material management includes the procurement issuance and
control of materials in right quantity and at right time to facilities the
production function.

From this we can gather that material management includes two important

• Purchasing
• Storing and control of materials

Hence, it is divided into sections:

• Purchase section
• Stores section

Through performing two extent these two section are interrelated and work
in coordination.


The purchase department, in any organization, is at the interface of internal

and external environment. This department is responsible for purchase of
various machines, raw materials and other items required by the
organization. Purchase function from integral part of material management
and it plays very important function as it is through this procedure that the
right amount of material required is delivered at the right place and at the
right time so that the process of production or manufacturing goes on

There is a distinct difference between “ buying and purchasing”.The latter

involving knowledge of various vendors, their prices, comparison of the
prices, actual buying, after sale service and followup, besides payment terms

The purchase department of an organization must know following things:

• Knowledge of the materials
• Soucre of material- Vendors
• Reasonable price
The most important thing is that indenter must trust the vendor.


i) Recognition of need: The purchase function is perform whenever

something is neede and which not available in stores department at
the particular point of time.

ii) Requisition to purchase : This is an intimation to purchase

department by the indenter that the needed certain materials. He
raises request by filling form as ‘ material purchase requisition’
(MPR). In this he furnishes several information like:-

• Name of the item & its code no.

• Amount required.
• Technical and other specifications.
• Estimated price.
• Required delivery date.
• Suggested vendors.
• Section/ Deptt. Code No.

iii) MRP scrutiny : Next step involves scrutinizing of the MRP to

certified the genuinely of the need, for this, first approval to given
by immediate higher authority of the indenter. Next, the MRP is
send to the stores, to check wether the material is available or not.
If it is not available the MRP goes to the purchase deptt. For futher
action. Here it is scrutinize in three ways :-

• Approval scrutiny
• Budget scrutiny
• Technical scrutiny

iv) Sending or Enquiry/invitation to bid: Items can be classified in

to two categories keeping in view the purchasing function –

• Proprietary items : These are those items e.g. spares which

have to be bought from particular supplier or vendor.
• Nonproprietary items: These are those for which there is no
restriction on vendor.

Enquiry is sent in order to know the prices and other terms and conditions of
vendors. Bidding can be done in three ways

• Proprietary bidding : This is for the proprietary items and is

sent to only one vendor. Here the proprietor is invited to set a
competitive price.
• Limited tendor enquiry : This is done for non proprietory items
and bids are invited from a limited no. of vendors selected from
the registered vendors with the company.
• Press tendor/Open bidding : If the amount involved in
purchase is more than three lakhs and the item is non
proprietory then press tendors are issued in various news
papers. There may be global tendors also.

v) Receiving of offers: After all the bids have been submitted the
tendors are open before tendor committee to compare the
Quotations comparison statement (QCS) is made and bid with
lowest quotation is generally chosen. QCS is also send to the
technical deptt and in consultation with it one more than one offers
are chosen, giving quality and price the top priority.

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

vii) Receipt of materials: After the consignment reaches the

stipulated place, the payment is done by the orgaanisation
according to the purchase terms agreed upon by the two parties.
The material is checked for quality conditions and then sent to the
store where the

store release the “ Stores Receipt Voucher” (SRV). From here it is

delivered to the vendor.

viii) Follow up done for every order: It may be regarding delay in

supply, changes in price, defective or damaged items supplied
etc.For every indent, a separate file is opened and crrespondance
goes on. For every step, recommendations of indenter, manager
(F& A), materials manager & general manager are sought.

Payment against purchase

There are various modes of payment

 Advance payment to supplier :

Advance payment shall be made to the suppliers only in such cases where it
is specifically provided in the contract order. The advance payment to
contractors shall be made against submission of bank guarantee in the
Performa provided by IFFCO. Advance payment against indemnity bond
shall not be released as provided in the purchase procedure.

 Full payment / 90% to 95% payment :

In case the terms of payment provide for full paymeny or part payment
against dispatch documents through bank, the supplier will be negotiating
the documents through the bankers. After the documents are received by the
bankers, they are forwarding a bank intimation alongwith a copy of the
purchase order to ascertain that the invoice is raised for the material ordered
and conforms to the other terms and conditions of purchase order.

After the intimation from the bank is received the invoice of the suppliers
will be scrutinized by the finance and account department for the following-

 Purchase order number

 Whether materials supplied are as specified in the purchase
 Purchase order number
 Whether materials supplied are as specified in the purchaseorder.
 Quantity supplied.
 Price basis whether F.O.R. or Ex-works
 Whether excise duty, sale tax and other taxes are as per the order.

 Whether bank charges are claimed as per the purchase order.

 Other terms and conditions of the purchase order.

Where there is delay in supplying the material and the payment through
bank is 90 % to 95 %. It should be ensured that penality for delay, as
provided in the purchase order, is recovered before releasing the balance
payment. Where payment required to be made , a clarification is to be
sought from materials deptt and proper approval taken for waiving of
penality or otherwise before retiring documents.

The payments under the contracts must be regulated as per the expressed
terms and conditions. Any payment not covered by the contractual terms and
conditions should not be released.

 Full payment / Balance payment after receipt of materials :

In case the purchase ored provides the 100 % payment after receiving of
materials and accepted payment is to be released after the MRR is receised
from the stores department. In case the purchase order despatch documents
and the balance payment after receipt of materials, the balance payment may
also to be released after the MRR is received and it is confirmed that the
material has been accepted after inspection and taken on charge.

Before released of the payment, the invoices should be scrutinized as the

case of payments released through bank. In addition it should also be
verified whether all the items invoiced have been received, inspected and
accepted per the MRR.

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

1. Accept delayed delivery at price reduced by a sum equivalent to 0.5

% if the value goods not delivered for every week of delay or part
thereof limited to a maximum of 5% of the contract value.


2. Cancel the order in part or full and purchase such cancelled materials
from elsewhere on account and at the risk of the suppler without
prejudice to his right inspect of goods delivered.


Q.C.S. Quotations comparison statement

L.O.I. Letter of Indent

T.O.I. Telex of Indent

T.O.P. Terms of Payment

F.O.R. Free on Rail / Road

M.P.R. Material Purchase Requisition

E.X.W. Ex-Works(At the supplliers work)

F.A.S. Free Along Sideship

N.I.T. Notice Inviting Tender

S.O.R. Schedule Of Rates

B.O.Q. Bill Of Quantitiess

I.T.B. Invitation To Bid

F.O.B. Free On Board

C.I.F. Cost Insurance & Freight

5R’s Right Price, Right Quantity, Right Quality, Right Place, Right Source.

About Imported Materials

Materials procured may be either indigeneous or imported. For major
projects the foreign contracts are normally finalised at head office level and
payment against these contracts are made by the concerned unit. Where the
order have been placed by the unit directly, they will make the payment to
the foreign party by debiting to the appropriate advance account. If the
payments are made through L/C against documents, the same shall be
debited to advances to foreign suppliers account. On receipt of material at
site, project engineer shall prepared the MRR and sent same to project
accounts for clearing the supplier’s advance account for material.

Clearing and handling of imported material is the responsibility of material

department on the arrival of ship the materials will be cleared with reference
to the invoices and bills. For any short landing or brokage between the port
of dispatch and port of destination, claim action shall be taken by them.

Material Coding
In every organisation it is very difficult to maintain the stock items in case
of large number of items. So the need of coding is created. For the material
coding the account persons assign the codes for each item of stores. So in
this away every item has it’s code, and code is called material code.

Material coding facilitates the account persons and store manager or

incharge to maintain the transactions of the items whether of receiving or of

Every item maintained by itt’s code in the stode as well as in the store
accounting section. The item / material codes remains same in stores aand
accounting section. Whenever a transaction is done in store for the
inventories the full details of that transaction is send to inventories the full
details of that transaction is send to the store accounting section also,
because the computers of stores and accounting section are connected in
Local Area Network.(LAN)

In this way it is very comfortable task to maintian the inventories on the

inventory software with the help of material coding.

Packing & Despatch

All packing, boxing and crating and protection shall conform to the
specification or requirements of the order. The seller shall be held liable for
damage or brokagee to the goods due to defective or insufficient packing,
marking as specifically advised in the order or dispatch instruction shall be
done by seller in delible paint and in such manner to ensure that the same is
clearly visible.

All goods shall be dispatched by rail / road freight paid and the railway
receipt / lorry receipt shall be posted to the concerned incharge of IFFCO.

Inspection of Material

The material department shall coordinate with other departments and

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

Damages / Short / Rejected Materials

If the material are received short or in damaged condition there are some
conditions in this regard.

 In cases where the responsibility for the transit insurance is on IFFCO, a

claim should be lodged with insurance company for the value of material
plus incidentals. As soon as the shortage per damage of the materials is
noticed the material department will lodge the provisional claim with the
underwriters and pass on the relevant papers to the finance & accounts
department for lodging monetary claim.

 In respect of transit insurance claims bill section will pass an

adjustment entry debiting “claim recoverable account” and credit the “
Advance to
vendors account”. After the adjustments the billn section sent the copy
of journal voucher along with all necessary details such as P.O. No. ,
MRR No. quantity and value, name of the supplier to the insurance
section for following up the claim with the insurance company.

 Where the resposibility for short supply or damages in transit is of the

suppliers, the material department should taake up the matter with the
supplier for arranging replacement.

Accounting Of Raw Materials

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

Imported Phosporic acid and Ammonia

The consignment of phosporic acid and Ammonia are received at kandla and
the material actually received is valued at the contracted cost & freight
Where free on board (FOB) price is agreed, the ocean freight element is
loaded separately. All connected expenditure like customs duty, handling
charges etc. are also included in uinventory valuation.

The valuation of inventory at the month end is to be made on the basis of

exchange rates prevailing on the last day of the month. The difference if any
between the provisional rate and the actual payment rate shall be charged off
to the consumption account, if the material is already consumed.

The account department also ensure that all claim suppliers for shortage are
booked on monthly basis and necessary on quarterly basis for the pending

Indigenous Ammonia

The indigenous ammonia is supplied by KRIBHCO / GNFC to kandla unit.

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

fertiliser. This price is fixed at par with the landed cost of imported


Potash purchase orders are placed by the commercial department time to

time depending on the material requirement. The material received valued at
agreed price plus local sales tax and freight for transportation of material up
to plant site.

The finance department at head office ensure that payment for these raw
maaterials are released on due dates to avoid interest liability. After
releasing the paayments the inter unit debit advice is sent to plant. On
receipt of the payment advices the supplier’s account is adjusted in the plant.

Natural Gas

Kalol and Aonla plant consume as feed stock and fuel. As per the contract
with ONGC, gas is supplied to IFFCO at the price fixed by Govt. of India
from time to time.

The meters provided at the inlet point in the plants are the basis for monthly
billing. Meter reading is carried out jointly by ONGC / GAIL and IFFCO
representatives. The unit sends the telex to head office ffor making payment
to ONGC / GAIL after due certification of bill by the head of technical
department about quantity of gas received.


Naphtha is supplied by IOC aagainst advance payment terms. There are

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

Catalsts & Resins

The Catalysts & Resins are produced by the material department at the
palnt, on the receipt of the material the inventory is valued at the agreed
price. For Catalysts & Resins where IFFCO has pooling arrangement with
other companies, the material received is taken to inventory at the actual
price paid and equivalent amount is credited to “ material received on loan

This entry will be reverse when the material is procured by IFFCO and
replenished for return of loan. The inventory and consumption account then
shall be accounted at the actual procurement price.

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

Store have following warehouses:

 Main Store
 Cement godown
 Petrol Pump
 Cable yard
 Cemical godown
 Paint godown
 PDIL store


This section is responsible for receiving the materials and inspecting them.
The process involves following steps.

1) The document regarding the material may be sent to the stores,

purchase, concerned deptt. But ultimately they have to be send to stores.
The documents may be :
 Goods receipt / railway receipt / challan
 Form 31
 Excise duty
 Toll tax

2) The particulars of the document are noted in the carriers receipt

register (CRR)

3) After the entry in the register, the document is given to an agent

termed as handling contractor. He will collect the material.

4) Consignment’s cases are intact. If not he will ask for open delivery.
He then has to deliver the goods to stores. In case of damage he has to give a
certificate. Some consignment may without document i.e. door delivery and
is some cases it may be face to face delivery.

5) If any discrepancy is found during checking, the accounts section is

informed for necessary action and getting claim from insurance company.
The date of receipt is filled in CRR

6) The next operation is filling the stores receipt vouchers (SRV) here
the quantity mentioned in challan and purchase order are compared, SRV
Has 7 copies, two for accounts and one for each purchase, stores, indenter,
masterfile & custody section.

7) Inpection is done by the indenter:

 Suppose all items are accepted then the material is handed to

custody section after putting an identification & giving a SRV
control number.
 If some items are defective then the accepted items will be sent to
custody and for defective ones, information is sent to supplier,
accounts, indenter & insurance company and the particulars noted in
rejection register.

 If there is some breakage then either item may be replaced by

company or claim against insurance is obtained, when an item is
replaced, its dispatch advice is made.

8) Direct charge SRV ( DCSRC) is prepared when indenter wants

material directly from receipt section.


This section is responsible for proper keeping of materials and issuing them
when required by different department and contractors. The material
received here is first checked as per SRV for every material there is a card.
These cards are located in bins according to code of material is received in
custody the card information is updated.

When some one wants to issue certain material he has to fill the store issue
voucher ( SIV). Once the item is issued again information is updated in the
card. When a particular part is returned then this received in stores, by
internet stores return voucher (ISRV). After issuing the material the number
of issue and the quantity issued is noted in SIV control registers.


Around 30000 spares are housed in stores, spares have been classified plant
wise. The first digit of the code of item is numbered according to given

 Ammonia
 Urea
 Product handling
 Power
 Sp. Equipments
 General items


General Outline of stores Fuction

 The authority of receipt, store and issue of all material is centralized

in the materials department subject to exception in permitted in certain
cases. In certain cases a nominal stock of few consumable items can be
permitted with uses departments such as maintenance, laboratory,
administration department for meeting emergencies. In addition certain
chemicals are permitted to be stored in production department due to the
operational needs.

 The authority of storage of packing materials like bags is vested with

bagging department. The bagging department receives the material, gets it
inspected in laboratory, issued the same for product bagging and maintain
the stocks.

Maintenance of records for all quantitative transaction of packing material is

the responsibility of bagging department. Similarly the raw material are
handled by production department with all responsibilities in respect of
quantity accounting.

Fuctions of stores Accounting Section

The section dealing with accounting of stores in the finance department shall
have following functions :-

Accounting of receipts, issues, return and transfer of materials.

Accounting of imported materials for capital works

and operations.

Associating with stores section for stock


Valuation of stores items should done on weighted

average basis.

Receipt /Isues/ Returns Transfer of Materials

 The 2nd copy of the material receiving reports after pricing, shall be
passed on to the stores accounts sections to scrutinized the same with
reference to store item code quantity of measure etc. and process it for
accounting of receipt of materials. After issue / return of materials, issue
section of stores department arranges data entry on the daily basis. Checklist
processed is sent to stores accounting section for scrutiny in respect of store
item code, cost / service code, expense code and unit measure etc.

 The corrections and financialand financial adjustments are made to

arrive at final check list after scrutiny of final check list entry in priced store
ledger is to be processed. The section shall ensures that all receipts, issues
and returns / transfer voucher raised by the stores section are finally posted
in the price store ledger.

 For clearance of imported materials, amount deposited for custom

duty in the PD account etc. Shall be cleared against individual MRR’s on
receipt bill of entry

 The issue notes shall be priced on the weighted average rate basis
after accounting the last receipt of material. After ascertaining the nature of
expenditure, the job for which material is issued, an appropriate account
code shall be given in accordance with the chart of account.

In case of material like steel plates etc. where materials are received
on actual weight basis and the issues are accounted are on theoretical
weight basis as per sectional measurements, the quantity accounting

shall be kept on weight basis. The difference in quantity in weight

basis, if any, shall be adjusted to revenue / capital account, as then
case may be, in consultation with consuming department, in case the
shortage is more than the consumption norms, the same should be
recovered from the contractor.

 For all issue notes relating to works contracts, one copy of the price
issue notes may be sent to the work accounts section to enable them to debit
the contractor’s account.

A monthly abstract also be prepared and passed on to works accounts

group for check.

 Details for receipts and issue of materials received / issued on loan

shall be maintained by the store account section loan transactions shall be
approve by the competent authority. It is the responsibility of material
department to take action to square up the transactions within the reasonable

 Inter unit transfer of material shall be accopunted at cost basis freight

and other incidental charges shall be borne by the transferee unit.

 Materials issued to contractors shall be priced at the monthly

weighted average rate and debited to materials issued to contractors account.
The accounting for the difference between issue price and recovery price
provided in the contract shall be cleared by the accounts section dealing with
the works. Recovery should be predefined basis and must be uniform.

 For material returned to stores, return note shall be priced by the

stores accounting section at the same rate which it was issued and the

value shall be debited to the relevant code of stores and spares parts
inventory accounts by credit to the cost center / job number where the
material is received back. The return note shall be priced on the basis
of the original issue requisition against which the material was drawn
if such reference is available, otherwise the same should valued at the
prevailing average monthly rate applicable to that material.

 No material shall be transferred to one card to another card without

giving proper information to the stores account section. Such transfers shall
be made by means of a transfer voucher on receipt of such transfer voucher
and pass adjustment entries by debiting and crediting respective accounts.

 Under the mechanized system of store accounting, all documents,

such as MRR’s issue notes return notes and transfer vouchers shall be sent
to the EDP section after exercising the prescribed checks. The EDP section
shall prepare the all accounting abstracts with the summary figures with
monthly journal entry. In addition, it shall prepare the priced store ledger.
Ledger abstract for all items trasacted during the month giving the opening
stock, receipts, issues and past closing balance shall also be prepared. A
copy of this statement shall be forwarded to store section for verification of
the bin card balances. Discrepancy if any shall be reconciled by the store
section with the stores accounts section.

 The price store ladger balance for each category store shall reconciled
value wise with the control account balance in the ledger wherever possible.
The accounts section shall draw out reconciliation on monthly basis. After
reconciliation a monthly material consumption statement, cost center wise,
is prepared and circulated to concerned department by the 10th of following
month for verification of its correctness and for monitoring the budgeted
expenditure, if any discrepancy is reported, the same is adjusted in the
ensuring month.

Insurance of Stock & Stores

For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and
finished products held at plants, insurance shall be taken to cover the risks
arising out of fire explosion, riot , strike terrorism, malicious damage,
earthquake, etc. The stock of finished products lying at different marketing
warehouses, should also be adequately covered through the warehousing

According to the value of stores and finished products keeps on varying

from time to time, insurance shall be obtained in the form of declaration
policy whereby the average daily stock for each product held during the
month shall be declared to the insurers in the first week of the next month.

According to the declaration policy, the insured amount foe each product
shall be stated separately. The liability of the insurers is limited to the
insured amount. At any time if it is found that the actual stock is more than
the insured amount to avoid less amount of insurance. In case of a
declaration policy, insurance premium is payable for minimum 35 % of the
insured value.

Before insurance is obtained, various categories of stores shall be reviewed

with a view to select such items for which insurance is considered

Verification of Inventories
The officer of stores will coordinate the job of physical verification and the
accounts officer in charge shall render all assistance to ensure that the
physical verification of inventories is carried out as per the policy and the
policy and the approved program. The store department will ensure that the
posting in the Kardex are updated before the verification of inventories.

The inventories are classified in three categories for verification purpose.

Raw material & Packing materials

Stores, Chemicals & Spare parts
Finished products

The stocks of raw materials, packing materials and finished products are to
be verified on quarterly basis by an independent surveyer by the society. No
adjustments need be carried out in the books of accounts unless the
discrepancies in liquid raw materials and solid raw material are in excess of
1% to 5% respectively. This is as per guidelines issued by the head office.

In case of Finished goods also the same principle applied except that no
adjustments in the books of accounts shall be made . However the stock
registers shall be adjusted on the basis of actual stock in order to replace the
notional figures of stocks by more accurate estimate based on physical

The inventories for other items such as stores, spares, construction materials
etc. are also verified every year keeping in view ABC analysis of stock
items value and exercise of verification may be completed by March every

For the purpose of verification of stores, chemicals & spare parts shall be
classified in to A, B, C categories.

Categories Value(Rs. Per unit) Quantum of verification

A Above Rs.50,000/- 100 %

B 10,001 to 50,000/- 70 %
C Below Rs.10,000/- 25 %

A team of stock verifiers shall prepare a stock verification sheet giving the
kardex balance and the physical balance of each item covered in the stock
verification. After filling up the particulars of the value and quality
discrepancies with reference to the priced stores ledger balance , the stock
verification sheets shall be forwarded to the materials department for
scrutiny and reconciliation and adjustment in consultation with finance
department accepted shortage shall be processed for the approval of the
competent authority.

Reconcilation and adjustment etc.

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

Internal Check

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

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

Inventory Control
Inventory control is a systemetic control and regulation of purchase and
usage of materials in such a way so as to maintain an even flow of
production at the same time avoiding excessive investment in inventories.
Efficient material control reduces losses and wastage of materials that
otherwise pass unnoticed .

Inventory control is the core of material management . The need and

importance of inventories varies in direct proportion to the idle time cost of
men and machinery , and urgency of requirements. If men and machinery in
the factory could wait and so could the customers , materials good not lie in
want for them and no inventory need to be carried. But it is highly
uneconomical to keep the men and machine waiting and the requirements
for modern life are so urgent that they can not wait for materials to arrive
after the need for them has arisen .

Because materials constitute a significant part of the total production cost of

the product thus , cost is controllable to some extent; proper planning and
controlling I=of inventories are of great importance .

Inventory control is planned method of determining what to indent , so that

purchasing and storing cost is minimum without affecting the production or
sales. Without proper control inventories have a tendency to grow beyond
economic limits. Funds are tied up unnecessarily in surplus stores and stocks
productive operations are stalled, and finances of the plant are severely
srained . Lack of control over inventory also leads to excessive consumption
and wastage , as operatives are liable to becom careless with irrational
supply of materials.

A good inventory management policy should ensure smooth and

uninterrupted supply without making unnecessary investment of funds in
inventory. This requires that inventory management policy must balance the
requirements of the following two opposing and conflicting ends:

i) To maintain a large quantity for smooth operation and efficient

customers’ services.

ii) To maintain only a minimum possible inventory because holding

costs and opportunity cost of funds invested in inventory.


Scientific control of inventories should serve the following purposes:

1) To provide the continuous flow of required materials, parts and

components for efficient uninterrupted flow of production.
2) To minimize investment in inventories keeping in view operating
3) To provide for efficient store of materials so that inventories are
protected from losses by fire and threat and handling time and costs are
kept at minimum.
4) To keep surplus and absolute items to minimum.
5) To protect the inventory against deterioration, obsolescence and
unauthorized use.
6) To ensure that finished goods are available for delivery to customers just
to fulfill the orders.


Reduction of surplus stock is an essential requirement inventory control.

Various techniques are available to solve the various types of problems
associated with inventory control :-

1) Min-Max plan
2) Order cycling system
3) Fixation of various levels
4) Use of control ratios
5) Review of slow and non-moving items
6) The ABC Analysis

Min-Max plan:

In this plan analyst lays down a maximum and minimum for each stock
item. Minimum level establishes the reorder point and order is placed for
quantity of material , which will bring it to the maximum level.

Order Cycling System:

In this system , quantities in hand of each item or class of stock are reviewed
periodically (30,60.90 days ). In that , if it is observed that stock level of a
given item will not be sufficient till the next schedule review keeping in
view of its probable rate of depletion , an order is placed to replenish its
supply .

Fixation of Various Levels:

Certain stock levels or fixed levels are given below :-

a). Maximum Level

It represents minimum quantity above which stock should not be held
at any time .

Maximum stock = Re-order level + Reordering quantity – (Minimum

level consumption * Minimum Re-order period)

b). Minimum Level

It represents the minimum quantity of stock that should be held at all
the time

. Minimum Level = Reorder level – ( Normal consumption * Normal

Re-order period)

c). Safety Level

Normal issues of stock usually stopped at this level and made only
under specific instructions.

Safety stock level = Ordering Level – (Average rate of consumption

* Re-order level )
OR = (Maximum rate of consumption – Average rate
of consumption) * Lead Time.

d). Ordering Level

It is a level at which indents should be placed for replenishing

Order Level =Minimum level + Consumption during the lag period

OR =Maximum Consumption* Maximum re-order

Use of Control Ratios:

Inventory turnover ratio helps management to avoid capital being locked up

unnecessarily. This ratio reveals the efficiency of stock keeping .

Inventory turnover ratio =Cost of materials consumed / Cost of average

stock held during the period
Cost of average stock = [Cost of opening stock + Cost of closing stock] /

Inventory turnover ratio [in days] =Days during the period /Inventory
turnover ratio .

Review of slow moving and non- moving items:

Stock turnover ratio should be as high as possible. Loss due to obsolescence

be eliminated or these items used in some profitable work.. Slow moving
stock should be identified and speedily disposed off . The speed of
movement should be increased . The turnover of different items of stock can
be analyzed to find out the moving stocks.

The percentage of slow moving stores = Slow moving stores / Total


The ABC Analysis :

With the numerous parts and materials that enter into each and every
industrial production, inventory control leads itself, inventory and foremost,
to the problem of analysis. Such analytical approach is popularly known as



For all inventories (finished goods, raw materials, packaging, spare parts,
utility items, and the like ), multiply the average annual usage of the item by
the cost per unit.That number will be TOTAL USAGE VALUE.

List all items in descending order of usage value. Then add all the values to
reach a total start at the top of list , then add each value until we reach 80 %
of total. Those are the items which comprise our “A” list.In general 15–20
% of the items fall into this category.

Contiuning down the list, determinewhich of the items constitute next 15 %

of total value. Usually 15 – 30 % will fall in this “B” group. The remaining
50 – 70 % is the “C” category, normally accounting for only about 5 % of
usage value.

When using ABC Analysis, remember that it is intended as a tool for setting
inventory priorities and as a method for determining which areas will offer
the highest return on inventory controls.

Inventory Software
There is a very powerful software in IFFCO for inventories of the various
items. This software holds all the transactions of the stocks. So this software
helps much in maintenance of stocks. It makes very easy to account persons
to maintain the transactions of inventories.

A part of this software is installed on the systems of the stores, whenever a

transaction is made in the store, the details of that transaction is reaches to
the systems of the store accounting section, because both the systems are
connected in the local area network (LAN). So with the help of LAN
environment it is very easier to accountants to retrieve the information
regarding the transactions made by the stores.

Apart from this, this software have the variety of qualities which we can
discuss with the help of menus of software. There are six different menus in
this software these are as follows:

 Data Entry
 Queries
 Reports
 Processing
 Calculator
 Exit

Data Entry Menu

Data Entry

Document Entry Adjustment SIV Adjustment ISRV

Entry of Surplus
SRV verification

The very first menu that is dataentry is used for the various types of entries
of transactions. In the data entry menu there are several options shown in
above diagram.

Document Entry:
This option is used to enter the data in various type of
documents like SRV, SIV, ISRV, STV(in), STV(out) etc.

Adjustment Entry:
With the help of this option we may easily make the
adjustments in the stock issue voucher (SIV), due to any previous

Adjustment ISRV:
This option of data entry menu has the same working in
issue stock return voucher (ISRV).

Physical Verification:
In case of verification of stock the person responsible for
stock verification estimates a range of items for verification and after verify
the selected range of items, they punched the quantity verified or lock the
verified quantity till the next verification.

Entry of Surplus :
This option is used for adjust the surplus items which is
declared by the plant. The surplus items means, the items which are exceeds
from the records. So in case of this situation the accountants makes a entry
@ of 1 Rupee per unit of items.

Reports Menu


Summary A/C head wise Month report before PSL run

PSL JV Month report after PSL run

Kardex Inventory consumption

Code wise inventory status

Summary A/C head wise :

This option creates the summary reports of all the
A/Cs in respect of A/Cs heads like
 Inventory spares ( Ammonia, Urea etc. )
 Loose Tools
 Chemicals
 General Stores
 Construction Materials etc.

Monthly report before PSL run:

This option creates the monthly report of all the
documents like – SIV, ISRV, SAV, STV (in), STV (out) etc. so that the
account persons may check whether the documents are correct or not.,
because if there is any mistake in any document and PSL run is performed it
will create the wrong final reports.

Monthly report after PSL run:

The working of this option is same as the previous
option but the difference is that the reports made after the PSL run are more
accurate updated and non volatile in nature.

After processing of PSL run all the documents
becomes updated and all the transactions also gets updated. So that by this
option we can see all the journal voucher of the entries of inventories.

The kardex is the very useful tool for showing the
current status of all the items. Kardex shows the update inventory and also
shows the past status of every past tears. The accountant may see the past
status as on any past date.

Inventory consumption:
This option of the report menu shows the data
regarding the consumption of materials according to the date. We can see
the consumption of a particular item. This report helps in forecasting of
material purchasing for the future consumption of the materials.

Code wise inventory status:

This option creates a report inventory code wise.
We can create report for selected codes.

Queries Menu


Brows Inventory Master

This menu has single option that is brows inventory master. In this option
we may see the status of various materials or items.

As the name of this menu, we can perform the query task, on the basis of
material codes, that are of ten digits number. This option is very helpful in
search of any particular transaction in inventories. In a query task we are
supposed to enter the material code in the material code box and then click
over the retrieve button. As soon as we click over the retrieve button the
whole in formation regarding that code is appears on the screen.

The appearing statement contains the material code, material description,

opening quantity, closing quantity, values, PSL rate that is the per unit price
and also the location of that material.

Processing Menu


PSL Process I Put A/C group in IM

Reverse stock for PSL Reverse stock for physical

kardex mismatch kardex mismatch

Processing is the most important task of this software, because all the
reports which are forwarded to the concerning authorities and are the basis
for the further actions are made only after the processing or the PSL run.
PSL processing makes update all the documents.

PSL Process I:
The option process I updates and calculates the values
for all documents and makes available to create the final reports. Once a
PSL run is processed the data can not be changed, So that this task is very
sensitive so the operating person should have the great care and
responsibility in processing task.

Put A/C group in inventory Master:

This option also a processing task when we executes this
option it assigns the A/C group to all the inventory / item codes so that these
codes may link to a particular A/C group.

Reverse stock for PSL kardex mismatch:

It is very important processing because it creates a list of
all the items which are mismatching in respect of units / quantity between the
PSL and kardex. If there is any mismatch in PSL and Kardex the report
shows those mismatches on the screen.

Reverse stock for physical kardex mismatch:

This option creates a list of mismatches of karedx and
physical verification. This processing performed once in year, because the
physical verification of the inventories is done once in a year.

Calculator & Exit Menus

The calculator menu has no sub option we can use the calculator only by
clicking on the calculator menu. It helps much in manual calculations make
the surety of correctness.

Apart from this the exit menu is simply for quitting the software, whenever
we click over the exit menu we exits from the software.

Production Department
IFFCO Aonla is town to production of Urea. It is carried out with the help of
two ammonia plants. For every ammonia plant there are two urea plants each
of 1100 MTPD capacity. Urea Plant are linked with two product handling
plants. So, we can study the production department into three parts as

1. Ammonia Plant
2. Urea
3. Product handling Plant

Ammonia Plant:

Ammonia plant is designed to produce 1380 MTPD liquid ammonia based on

Haldore Topsoe Process with Natural Gas the main raw material. For the
production of Ammonia Hydrogen & Nitrogen are required in the ratio 3:1.
The source of hydrogen is Natural gas, water and the source of nitrogen is
atmospheric air. Nitrogen gas is supplied by GAIL through HBJ pipe line
from Bombay High and is used as feed stock which contains large percentage
of Methane, along with Ethane, Propore, Butane, Pentane, CO2, Nitrogen
and Sulphur compounds. Small quantity of Sulphur compound in the gas is
removed by passing the gas through de-sulphurisation unit. Sulphur free gas
is yhan mixed with steam and sent to primary reformer where reforming
reaction takes place in the presence of catalyst and produces a gaseous
mixture of hydrogen, carbon mono-oxide and carbon- dioxide. Further
reforming takes place in the secondary reformer where air is added to furnish
the nitrogen required for ammonia synthesis. Hot reformed gases from
Secondary reformer are cooled by heat recovery in Waste Heat Boilers, and
introduced in the shift converters where most of the CO get converted into
CO2. Carbon dioxide from gaseous mixture is separated in CO2 absorber
using benefield process and sent to urea plant. Residual of oxides of carbon
in synthesis gas leaving absorber are converted to methane in the

Pure synthesis gas from methanator exit is compressed and sent to Ammonia
converter where ammonia is formed ammonia product obtain in sent to urea
plant for manufacturing urea.

Urea Plant:
Two streams of Urea plant each having capacity of 100 MTPD has been
provide. Urea process is based Snamprogetti Ammonia Self Stripping

Ammonia and CO2 obtain from NH3 plant are sent to Urea Reactor
operating at 150 ATM pressure and 180o C temperature. In urea Reactor
Ammonia and CO2 react to form Ammonium Carbonate a part of which
dehydrates to urea. Reactor product from urea reactor flow to a steam heated
H.P stripper where most of them converted carbamate get stripped of as
gaseous ammonia and COS. Urea solution having the bottom of stripper still
contains some amount of carbamate. Further purification of urea to about 72
% concentration takes place in medium and low pressure decompressors.
Vapour of ammonia and CO2 obtained from the above purification section
are converted into ammonium carbamate and recycled back to Urea Reactor
for production of Urea Vaccum concentration are provided to concentrate 72
% Urea solution to 99.8 % in two stages operating at 0.3 atm and 0.03 atm
respectively. Urea melt ( 99.8 % concentration) from the concentration
section is pumped to the top of natural draft Prilling Tower and sprayed by
the means of rotating pril bucket. The fine droplets while descending through
the lower come into contact with cold air are solidify to form prills. Product
Urea from the bottom of prilling tower is sent to Urea Silo or Product
handling plant.

Product Handling Plant:

Homogeneous and freely flowing urea from the bottom of Prilling Tower is
transported to Urea silo by means of belt conveyors at the rate of 220 TPD.

Three weeks factory production equivalent to 45,000 MT can be stored in

Urea Silo. This ensured uninterrupted Urea Plant operation even when there
is no off take for product urea due to non-availability of railway wagons or
irregular seasonal defacilities.

Product from Silo is reclaimed by means of Scrapper Reclaimer Urea from

Silo is made free from lumps ( due to its prolonged storage ) by passing it
through vibrating screens and delumbers. The product is transported to
Bagging House by means of various Belt Conveyors. The system can also
take fresh urea from prilling tower to Bagging House by Urea Silo through a
stream of various Belt conveyors.

Bagging House mainly consist of 8 bagging stations. Each station has two
weighing and filling machines and one stiching machine. These weighing
and filling machines are fully automatic, sophisticated and computerized
based on latest technology from M/S Richard Simon and Sons U.K. There
are such 16 number of computapae Unit. Each is capable 10 weight to 50 kg
or more weightments at the rate of 600 bags per hour.

The system is equipped with Data logge facility which can display and
record various figures and fact from the plant. The field bags from these
automatic bagging machine are moved on slate conveyor and mouth is closed
by industrial stitching machine supplied by M/S Unimee, Calcutta. The
product in filled bags can be transported for various purposes such as :

1. Stacking on filled bag storage.

2. Loading directly into truck.
3. loading directly into wagons.
Product handling plant is designed to load a rack of 2,400 MT of fertilizer in
8 hrs. Plant is equipped with covered platform three in number. One for

stacking filled bags which can store equivalent to 2 rack loads i.e. 5,000 MT
and another two platform which are equipped with 6 Nos. of automatic
wagon loader ( 3 on each platform ), each has capacity of automatic laoding
of wagons at the rate of 1,200 bags per hr. These 3 covered platforms are
sufficiently long to accommodate a complete rack so as to load from filled
bags storage as well as directly from bagging stations. These automatic
wagon / lorry loading machines are supplied by M/S Mollers, West
Germany. Average time taken for each wagon loading is 20 to 25 min. An
average time in loading a lorry is 10 to 12 min only. Wagon on average will
carry 450 bags and 2 truck on an average will carry 200 bags approximately.

Empty Bags:
Empty bag’s size is 36.25 in inches or 915 X 610 in mm, weighing 10 gms
in case HDPE bags made out of 10 X 10 mash per inch using. Denier of tape
equal to 1,000 and width of tape 1.5 mm. The monthly requirement of bag is
around 10 Lakhs. There are 2 million bag storage capacity in 1400 m2 area.
The cost of bags varies from Rs 7.90 to 8.40 for HDPE and around 6.5 for
Jute bag. The consumption ratio of HDPE : Jute bag is 50:50. The bag will be
supplied various vendors based at Kanpur, Calcutta, Hydrabad, Ahmedabad,
Aurangabad etc. The movement of empty bags from these destinations to out
side is by road. Average daily traffic will be two to three trucks. IFFCO has
very strict quality control of bags. The bags once are ready for dispatch from
vendor’s workshop are got inspected by various up to date inspection
agencies sponsored by us. The consignment on its arrival at site is also
screened by our Laboratory before it is piled for storage. Storage is equipped
with EOT crimes two in number, each having lifting capacity of 1 tonne.

Railway Siding:
From main track of Chandausi- Barely broad quage, NR section tapping has
been taken at Basharat Ganj Railway, Take-up station. Two additional loop
lines and simultaneous reception facilities have been incorporated at Take-up

station. Railway track has been laid which is 09.38 km long through major
one villages acquiring 110 acre approx. of land.

Inplant, yard forms 2.3 km in length and is equipped with :

 3 loading lines ( from 700-715 mtr. In length).

 4 lines for dealing incoming and out going traffic ( from 715-803 mtr
 1 Engine escape line ( 685 mtr. Long ).

In addition to it, the plant has:

 2 lines each 340 mtr. Long accommodating one rake length for fuel
oil stock. These lines are laid over ballast less platform and have
concerts floor in order to recover spillage / leakage while handling
fuel oil stock.
 2 line each 340 mtr. Long to accommodate off loading of completing
Naphtha rake, an alternative fuel for power plant.

An Introduction

Inventory Management is a scientific method of determining what, when

and how to purchase and how much to have in stock for a given period to

“Managing the level of inventory is like maintaining the level of water in

a bath tub with an open drain. The water is flowing out continuously.
If water is let in too slowly, the tub is soon empty. If the water is let in
too fast, the tub over flows.”

Inventories are the important part generally in most of the companies today.
In India inventories constitue the major portion (i.e. 60 %) of current assets.
Due to this much large portion of inventories in the firms, a good amount of
fund are associated with it. So, it is required to pay a considerable attention
towards the management of the inventories so that efficient and effective
control can be possible.

It is possible for a company to reduce its levels of inventories to a

considerable degree, without any adverse effect on production and sales, by
using simple inventory planning and control techniques. The reduction in
excessive inventories carries a favorable impact on a company’s

Objective of the Study

This study of the inventory management is done in IFFCO Aonla Unit to

serves the following purposes :

 To analyse the investment of funds in inventory.

 To give suggestions to ensures smooth and uninterrupted supply

without making unnecessary investment of funds in inventory.

Concept of Inventory Management

Dictionary meaning of inventory is “detailed list of movable articles”.

According to International Accounting Standards-2, inventory is a tangible
property which is held :

 For sale in the ordinary course of business;

 In the process of manufacture for such a sale;
 For consumption in the process of production of goods and services
for sale including maintenance supplies and consumables other than
machinery spares.

The term ‘inventory’ includes :

 Inventory of Raw Materials :

In the case of manufacturing concerns, various
types of raw materials are being used in the production system. Just to
ensures smooth production function and also to avoid any kind of
production delays the concern has to keep inventory of raw materials.

 Inventory of Work-In-Process (W.I.P.) :

Sometimes the manufacturing system involves
various various processes for converting raw materials into finished
goods. As such, some materials might have been issued to the production
process but might not have been completed as finished goods. This is
known as work-in-process.

 Inventory of Finished Goods :

All goods manufactured during a particular period
may not be sold immediately. These are to be kept in warehouse. The

idea is to uncouple the production and sales function so that it is no

longer necessary to produce the goods before a sale can occur.

The application of managerial function on the basis of management

principles in the field of inventory is termed as inventory management.
Managerial functions are performed with respect to inventory, it may be
called inventory management.

The objective of inventory management is to plan the optimum size of

inventory which is neither excessive nor deficient and is timely available.
For timely availability alongwith optimum size, there is need for
controlling as well.Only on the basis of various control techniques one
can ensures whether inventory would be timely available. But effective
control in itself depends upon organizing and coordination. Thus,
inventory management comprises the functions of planning, controlling
and organizing the types of all goods, quantity, status, flow and time-
sequence etc.

Need for inventory management

Inventory management is an integral part of general management. Three
important functional aspects of a business are closely related to inventory
management. These are :

 Production management
 Marketing management
 Financial management

Here the production management and marketing management are related to

the physical aspect of inventory management and ; financial management is
concerned with the financial aspect of the inventory management.

In production management, production manager will always strive to have

a large inventory of raw materials and of such a good quality as to ensure
stable production operations.

In marketing management , marketing manager aims at satisfying ever

increasing demands for improved customers’ service by having large
inventory of inside goods.

In financial management, finance manager will effort towards to keep

investments in different types of inventory at a minimum possible level so
that the business concern may earn maximum return.



No Date P.O. Bill Bill No. Date of Amount M.R.R.

Name of amount Amount Dt. – Paid No Dr. –
party Payment Remarks



MRR No B.Vr. No Name of P.O. No. Bill No Adv.To Ledger tools stores Steel
& Date & Date Party & & Date & Date vendors/ Folio
Place Suppliers No.
Rs. P.

1 2 3 4 5 6 7 8 9 10

Cement Spares Claims Capital Others Amount Taxable Register Delears Purchase
Recover Items Amount Code Amount ed S.T. Form Form
able Amount Code Form Amt. S.C. within
Code Amt state
SC Amt
Rs. P. Rs. P. Rs. P. Rs. P. Rs. P. Rs. P.
11 12 13 14 15 16 17 18 19 20

Gross Party’s Taxable C.S.T. Other Gross C. Form Descriptio Remarks

Amt CST/St Amount Amt Charges Amt of No & n of
Reg. No. bill Date Goods

Rs. P. Rs. P. Rs. P. Rs. P. Rs. P.

21 22 23 24 25 26 27 28 29


Significance of Research
“All progress is born of inquiry. Doubt is often better than overconfidence. For it leads to
inquiry, and inquiry leads to invention” is a famous Hudson Maxim in context of with the
significance of research can will of research can will be understood. Increased amounts
of research make progress possible. Research includes scientific and inductive thinking
and promoted the development of logical habits of thinking and organization. The role of
research an several fields of applied economics, whether related to business or to the
economy as a whole, as greatly. Increased in modern times. The increasingly complex
nature of business and government has focused attention on the use of research and
solving operational problems. Research, as an aid to economic policy, has gained assed
importance, both for government and business.

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them. It is necessary for the researcher to know not only the
research methods/ techniques but also the methodology. Researcher not only need to
know a develop certain indices or tests, how to calculate the mean, the median or the
standard deviation or chi-square, how to apply particular research techniques. The scope
of research methodology is wider than that of research methods. Thus, when we talk of
research methodology we not only talk of the research but also consider the logic behind
the methods following order concerning various steps provide a useful procedural
guideline regarding the research process :

These guidelines are :

 Formulating the research problem

 Extensive literature survey
 Developing the hypothesis
 Preparing the research design
 Determining design
 Collecting the data
 Execution of the project
 Analsis of data
 Hypothesis testing
 Generalisation and interpretation
 Preparation of the report of presentation of the result, i.e. formal write up of
conclusions reached.

Meaning Of Research:

Research in common parlence refers to a search for knowledge. One can also define
research as a scientific and systematic search for pertinent information on a specific
topic. In fact, research is an art of scientific investigation.

According to Clifford Woody research comprises defining and redefining problems.

Formulating hypothesis or suggested solutions, collecting, organizing and evaluating
data; making deduction and reaching conclusions; and at last carefully testing the
conclusions to determine whether they fit the formulating hypothesis.

Objective Of Research

The purpose of research is to discover answers to questions through the application of

scientific procedures. The main aim of research is to find out

the truth which is hidden and which has not been discovered as yet. Though each
research study has its own specific purpose, we may think of research objectives as
falling into a number of following broad groupings:

 To gain familiarity with a phenomenon or to achieve new insights into ( studies

with this object in view are termed as exploratory or formulative research

 To portray accurately the characteristics of a particular individual, situation or a

group ( studies with this object in view are known as descriptive research

 To test a hypothesis of a casual relationship between variables ( such studies are

known as hypothesis- testing research studies).


It might seem axiomatic that inventory control is efficient as METHODOLOGY ADOPTED

The methodology adopted by me during my summer training which was of four – five
weeks was based on the Principles and concept of Research Methodology.

Problem :

The problem which was discussed in this training was to check the effectiveness and
efficiency of the inventory management in IFFCO Aonla Unit and to analyse the
investment of funds in inventory and to suggest the measures for more effective control
and smooth supply without unnecessary investment of funds in inventory..

Research Design :

I prepared Research Design of my project which is a conceptual structure within which

project is conducted. To facilitates the smooth sailing of the various research operations,
thereby making research as efficient as possible yielding maximum information with
minimum expense of efforts & time.

It is a blue print for the collection, measurement and analysis of data, my design focuses
attention on the following aspects:
What the study is about and why is it being made ?

1. To study the investment of funds in the inventory.

2. To mesure the effectiveness and efficieny of the inventory management.
3. For smooth supply without unnecessary investment in inventory.

Information Required:

Based on the objectives of the study the following information is required :-

 The inventory control technique used in the unit.

 To know the investment of funds in inventory.
 To study the material management in the unit.
 How the information is recorded.
 What is the procedure for the receiving of material.
 How the maintenance of inventory is done.

Data Collection Method:

The data collection method includes –

Primary Data collection through the Depth Interview with the Managers, Account
Officer, and Survey of peoples in Purchase department and store section.
The execution is done in the following ways :-

 Personal Interview

Secondary Data collection from the concern’s internal sources and the other sources like
Internet, IFFCO Magazines and the Account Manual and Annal Reports of the unit.
Long as inventory level is going down. But the fact is that is if inventories
are minimised without guaranteeing adequate operations, inventories have
been mismanaged rather than controlled efficiently. Thus, the two basic
objectives of inventory control appear to be conflicting in nature.
Inventories should increase or decrease in amount or time as related to sales
requirements and production schedules.

In most inventories a small proportion of items accounts for a very

substantial usage (in terms of monetary value and annual consumption) and
a large proportion of items accounts for a small usage. ABC analysis based
on this empirical reality advocates in essence a selective approach to
inventory control, which calls for a greater concentration of efforts on
inventory items accounting for the bulk of usage value.

Responsibility for control of inventories is that of the top management,

though decisions in this regard might well be based upon the combined
judgment of the production manager, controller, the sales manager and the
purchasing manager. This is desired in view of the financial considerations
involved in the problem and also because of need for coordinating the
different kinds of inventories and conflicting viewpoints of different
departments. While decision relating to inventories are primarily taken by
executives in production, purchasing and marketing departments, the finance
manager should try to ensure that inventories are properly monitored and
controlled. He must emphasise the financial point of view and initiate
programmes with the participation and involvement of others for effective
management of inventories.

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