A

PROJECT REPORT
ON
INVENTORY MANAGEMENT .

. RENUSAGAR POWER DIVISION

(UTTAR PARDESH)

Submitted To Symbiosis Centre for Distance Learning

Post Graduate Diploma in Business Administration

Session (2006-2008)

Under the guidance of Submitted by:

SARDAR VALALBH INSTITUTE SWARUP DAS
OF MANAGMENT ,U.P. 200616925
HEENA SHARMA PGDBA (OPERATION)
(FACULTY MEMBER) PGDBA 4TH SEMESTER
 DECLARATION BY THE LEARNER

This is to declare that I have carried out this project work myself in part fulfilment of the
PGDBA (Operation) Program of SCDL.

The work is original, has not been coSpied from anywhere else and has not been
submitted to any other University/Institute for an award of any degree/diploma.

Date: Signature:

Place: Name

2
 CERTIFICATE OF SUPERVISOR

Certified that the work incorporated in this Project Report INVENTORY MANAGMENT
RENUSAGAR POWER DIVISION submitted by SWARUP DASS is his/her original work
and completed under my supervision.

Material obtained from other sources has been duly acknowledged in the Project Report

Date: Signature of Guide:

Place:

3
 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.

SWARUP DASS

4
 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 MISS HEENA
SHARMA 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.

5
 TABLE OF CONTENT
Page
S.NO. Description no.
1. Preface 4
2. Acknowledge 5
3. objective of the project 7
4. Introduction 7- 22
a) RPD location Map 8
b) Company Profile & Plant Detail of Renusagar 9-14
c) RPD Vision, Mission, TTMDC 16-19
d) Men Power strength 22-24
5. Material Management 23
A.
Definition 23
B.
objective of the Material management 24
C.
Function & Scope of Material Management 24
6. Concept Inventory Management 25-38
a) What is inventory, Need, Control of Inventory 25
b) Types of Inventory 27
c) Objective of Inventory control,& Causes of High Inventory at Renusagar 32
d) Selective Inventory Control, Classification 34

e) Inventory Turn over Ratio & It's Improvement 38

7. Theoretical Perspective 41-59
a) Enterprise Resource Planning(ERP) 41
b) System For PR processing & PR Screening 43
c) Criteria For Insurance Items 45
d) Identification of Obsolete Items 50
e) Comparative Ratio 51
f) JIT Concept, Deployment 55
g) Some Formula For Inventory Reduction 59

8. Others 65-80
a) Graphical Representation 65-75
b) CONCLUSION 76
c) Annexure -Questionnaire 77
d) Bibliography 80

6
 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.

7
LOCATION OF RENUSAGAR POWER DIVISON

8
 Company Profile

Particular Details

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
9
 Manpower statement:-

1. Technical Staffs 732

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

10
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.

11
12
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 insstalled
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
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
 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
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)
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.
 “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.

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

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.
 4 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
 Material management

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
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

flow is divided in to three different overlapping functions – Production control, inventory

control & the material handling function.

INVENTORY MANAGEMENT

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

- 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.

 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
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.

. 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.
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

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

 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

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
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.