Inventory Management in Iffco V

PROJECT REPORT
INVENTORY MANAGENENT
ON INDIAN FARMERS FERTILIZERS CO- OPERATIVE LTD.
FOR THE PARTIAL FULFIILMENT OF REQUIREMENT OF SUMMER INTERNERSHIP
SUBMITTED IN
SUBMITTED TO PROF. SHYAM AGRAWAL FINANCE FACULTY MIMS
SUBMITTED BY VIVEK AGRAWAL PGDM (2009-11) ROLL NO: 091110153
SUBMITTED BY VIVEK AGRAWAL PGDM (2009- 11)
TO WHOMSOEVER IT MAY CONCERN

This is to certify that the Summer Project Study Report Title INVENTORY MANAGEMENT submitted by Mr. VIVEK AGRAWAL as partial fulfillment of requirement of the two year PGDM course is a bonafide work carried out by student at our Institute. This Summer Project Study is his original work and has not be submitted to any other University/Institute.
Project Mentor Prof. SHYAM KUMAR AGRAWAL
Prof. (Dr.) ANUPAM NARULA Director-Academics
Date-
CONTENTS
ACKNOWLEGDEMENT DECLARATION ABSTARCT INTRODUCTION OF COMPANY PLANT UNITS INVENTORY MANAGEMENT ROLE OF PURCHASE WAREHOUSE MANAGEMENT DATA ANALYSIS CONCLUSION & SUGGESTION BIBLIOGRAPHY
DECLARATION
I am VIVEK AGRAWAL, Roll no. 091110153, a student of PGDM fourth Trisemester MANGALMAY INSTITUTE OF MANAGEMENT STUDIES, Greater Noida, hereby declare that the summer training Project report titled INVENTORY MANAGEMENT is the original Work and not presented in any other university.
Place: Date: Agrawal) (Vivek
ABSTRACT
In every organization, management is that part of the organization, which is concern with planning, organization, directing and controlling of various marketing activities to attain the business objectives. It is the science and art of preparing plans and organize, then as well as direct the human being. As a integral part of the curriculum, all the PGDM students are required to undergo a practical training in some industry. The main objective of this training is to supplement students theoretical knowledge with exposure to practical operation of an organization. This provides the student with better understanding of all functional areas of management and skills applied in those functional areas. In pursuance of the said requirement, I had my summer training at INDIAN FARMERS FERTILIZERS COOPERATIVE LTD, one of the biggest producers of chemical fertilizers in Asia. The topic assigned to me for my project was Inventory Management. In IFFCO, I had a contrast of both happiness and anxiety and had undergo difficulties also but with the immense assistance proper guidance and enough encouragement from IFFCO officials and staff, the work went of smoothly and systematically.
INDIAN FARMERS FERTILIZERS COOPERATION LIMITED
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INDIAN FARMERS FERTILIZERS COOPERATIVE LIMITED

During mid- sixties the co-operative sector in India was responsible for distribution of 70 per cent of fertilizers consumed in the country. This Sector had adequate infrastructure to distribute fertilizers but had no production facilities of its own and hence dependent on public/private Sectors for 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 cooperative society created this new institution to safeguard their interests. The numbers of co-operative societies associated with IFFCO have risen from 57 in 1967 to 38, 155 at present.
Indian Farmers Fertilizers 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 fertilizers. The byelaw 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. 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 program of all the four plants under overall aegis of IFFCO VISION2000. The expansion projects at Aonla, Kalol, Phulpur and Kandla have been completed on schedule. Thus all the projects conceived as part of Vision 2000 have been realized without time or cost overruns. All the production units of IFFCO
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have established a reputation for excellence and quality. A new growth path has been chalked out to realize newer dreams and greater heights through VISION 2010 which is presently under implementation. As part of the new vision, IFFCO has acquired fertilizer unit at Paradeep in Orissa in September 2005. As a result of these expansion projects and acquisition, IFFCO's annual capacity has been increased to 3.69 million tonnes of Urea and NPK/DAP equivalent to 1.71 million tonnes of P2O5.
The distribution of IFFCO's fertilizer is undertaken through over 38155 co-operative societies. The entire activities of Distribution sales and promotion are co-ordinate 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 organizations to work for the welfare of farmers, strengthening cooperative movement, improve Indian agriculture. Indian Farm Forestry Development Cooperative Ltd (IFFDC), Cooperative Rural Development Trust (CORDET), IFFCO Foundation, Kisan Sewa Trust 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 agriculture extension activities for their benefit every year.
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LOGO OF IFFCO
The Logo any organizations is very important by which the company is Known to everyone or that is identity of the company. After one year of establishment in 1968 the organization has decide to make Logo of IFFCO. The executive of the company said that which can be easily fit any place or easily changeable according to the place & made by simple geometrical method. So the Logo is made by at last Mr. M.I.Gupta chief visualize developer is like that
Logos ratio is 1:2:5 and the color are green. The rectangle shows that the Indian economy is depend upon the agriculture & green color shows the faith of the farmers, they believe that after Using the urea their fields will always be green, the remaining white color shows that the quality of the IFFCOs product is very good & oval shape is meant for prosperity.
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VISION AND MISSION OF IFFCO

VISION:
To augments the increment income of farmers by helping them to increase their crop productivity through balance use of energy efficient fertilizers, maintain the environment health and to make co-operative societies economically & democratically strong for professionalized services to the farmer community to ensure and empowered rural India.
MISSION:
To provide farmers high quality fertilizers in right time and in adequate quantities with and objectives to increase crop productivity. To make plant energy efficient and continually review various scheme to conserve energy. Commitment to health, safety, environment and forestry development to enrich the quality of community life. Commitment to social responsibility for strong social fabrics. To institutionalized core values and create a culture of a team building, empowerment and innovation which would help in incremental growth of employees and enable achievement of strategic objectives. Foster a culture of trust, openness and mutual concerns to make working a stimulating and challenging experience for state holders. Building a value driven organization with an improved and responsive customers focus. A true commitment to the transparency, accountability and integrity in principle and practices.
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VISION 2015
In pursuit of its growth and development, IFFCO had embarked upon and successfully implemented its cooperate plan Mission 2005 and Mission 2010. These plans have resulted in IFFCO becoming one of the largest producers and marketers of chemical fertilizers by expansion of its existing units, setting up joint venture companies overseas and diversification into new sectors. IFFCO has now visualized a comprehensive plan titled VISION 2015 which will be guided by the following objectives: Production of fertilizers through expansion of existing units. \ Setting up of fertilizers production facilities in India and outside the country through joint ventures. Diversification into other profitable sectors. Strengthening its raw material sourcing through strategic joint ventures in India and abroad. Strategic alliances through IFFCO consortium.
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ISO CERTIFICATION:
IFFCO has been giving continuous thrust to quality movement in all functional areas. The Kalol unit was the first in the fertilizers industry to receive the ISO- 9002 international certification for quality assurance in production, installation and services in august 1996, and this was re-certified from time to time. Phulpur units were also certified by ISO-9002 international certificate in July 2000. Both the Kalol and Phulpur units were considered by M/S bureau VERITAS quality international (BVQI) for their quality system and awarded the certificate as per new ISO 9001-2000. The Kalol unit has been upgraded to ISO 9001-2008 and ISO 14001-2004 and OHSAS 18001-2007 has also been included. The Aonla unit has received international certifications ISO 9001-2000, ISO 14001:2004 and OHSAS 18001: 2007. The adoption of an integrated management system combining all the above systems is also in progress. The Kandla unit had received ISO 14001: 2004 certification.
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FINANCIAL PERFORMANCE
As per its tradition, the societies has again exhibited an impressive financial performance in all its major parameters, namely, Revenue growth and Resource utilization, testifying to the robustness of its corporate strategies of creating multiple drivers of growth in spite of constraints in the availability of raw materials, the Global economic meltdown and inordinate delays in receipt of large subsidy amount of government of India. The society achieved the highest ever sales turnover of Rs 32933 crores. This represents an increase of Rs 170 % over the previous year. While the sales volume of fertilizer materials increased by 20% to Rs 112.58 lacs MT fertilizers during 2008-09, as against 93.24 lacs MT in the previous year, the major increase in the sales turnover was on account of substantial increase in the commodity prices.
DIVERSIFICATION
IFFCO-TOKIO General insurance co. limited pursuant to IFFCOs plan to diversify into areas other than fertilizers, IFFCO & TOKIO marine and fire insurance company limited. Japan established a joint venture known as IFFCO-TOKIO GENERAL INSURANCE CO. LTD (ITGI) for undertaking general insurance business in India. IFFCO has subscribed to 51% equity in the share holding of ITGI followed by KRIBHCO with 20% and Indian Potash ltd. With 3% and 26% equity has been subscribed to Tokyo marine and fire insurance co. Ltd.
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INFORMATION AND COMMUNATION TECHNOLOGY

IFFCO has set up a hybrid wide area network (WAN) connecting its head office, all production units, all zonal, state and area marketing offices using leased lines, VASTS and ISDN lines. The hub of the networks is the Resource Centre, Gurgoan. The WAN has been integrated with LAN at these offices and has become a lifeline of the organization for messaging, data transfer, online replication, voice communication, access to various remote applications and troubleshooting. Robust security with firewall protection to check unauthorized access has been setup. To provide uptime of WAN links near to 100 % for critical applications, for example, dispatch, e-procurement, sales and distribution systems etc, additional backup 2 Mbps links have been provided to all the units and the head offices, Delhi, with a redundant link to the township of Kandla unit. These are in addition to the links from BSNL and AIRTEL.
HUMAN RESOURCE MANGEMENT SYSTEM (HRMS)

Suite of 25 applications covering complete life cycle of an employee from recruitment till retirement including post retirement benefits. Integration with accounts. Replication/ sharing of data amongst all units/ office for consolidation , monitoring & MIS Bi-lingual report facility for employee communication. Unique ID for all employees. Data gets replication to other units in case of transfers, promotions etc.
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PROFILE OF PRODUCTS AND SERVICES

1. UREA IFFCO's Urea is not merely a source of 46% of nutrient nitrogen for crops, but it is an integral part of millions of farmers in India. A bag of IFFCO's urea is a constant source of confidence and is a trusted companion for Indian farmer. 2. BIO FERTILIZERS A biofertilizer unit was established at Cooperative Rural Development Trust, Phulpur (Uttar Pradesh) in 1996 - 97 and other at Kalol (Gujarat) in 2003-04 with an annual capacity of 75 MT and 165 MT respectively of different cultures such as Rhizobium, 3. AMMONIUM PHOSPHATE SULPHATE It is the most widely used fertilizer in the country. It is a white crystalline salt, containing 20 to 21 percent ammoniac nitrogen and 17 percent Phosphates. Being soluble in water, it acts quickly, but despite its high solubility, its nitrogen is not readily lost in drainage, because the ammonium ion is retained by the soil particles. it is, therefore, very suitable for wet-land crops 4. NPK (Nitro-Phospho-Potassium)/DAP (Diammonium Phosphate) As far as Indian farmer is concerned, IFFCO's NPK/DAP is a source of crucial nutrients N, P, K for the crops. The two grades of NPK produced by IFFCO, 10:26:26 and 12:32:16, indicating the content of N, P, K proportion, are tailor made to supply the exact composition required for replenishment of the soil.
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IFFCO ASSOCIATES AND SUBSIDIARY COMPANIES
1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16)
IFFCO-TOKIO General insurance company private ltd. IFFCO Sanchar private ltd. IFFCO Chhattisgarh power ltd. Indian Farm Forestry Development Cooperation Ltd Cooperative Rural Development Trust Oman Indian Fertilizers Company SOC, Oman National Commodity And Derivative Exchange Ltd Indian Potash Ltd Jordan Indian Fertilizers Ltd Kisan International Trading F Z E, Dubai IFFCO Kisan SEZ Legend International Holding IFFCO Kisan Bazaar Ltd Industries Chimiques DU Senegal, Senegal National Collateral Management Services Ltd IFFCO Foundation
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PERFORMANCE HIGHLIGHTS 2009-10

Highest Production of fertilizers 81.98 lacs MT (Previous best 71.68 lacs MT in 2008-09) Highest Production of Urea Production of NPK/DAP/NP 43.24 lacs MT (Previous best 40.68 lacs MT in 2008-09) 38.74 lacs MT (Previous best 32.26 lacs MT in 2006-07) Highest sales of Fertilizers 118.27 lacs MT (Previous best 112.58 lacs MT in 2008-09) Highest sales of Urea 63.35 lacs MT (Previous best 58.69 lacs MT in 2008-09) Highest sales of NPK/DAP/NP 54.92 lacs MT (Previous best 53.89 lacs MT in 2008-09 ) Profit before TAX Rs 567.28 crores (best PBT Rs 807.09 crores in 2002-03) Profit after TAX Rs 401.10 crores (best PAT Rs 557.21 crores in 2002-03) Total turnover Rs 16808 crores (previous best Rs. 32933 crores in 2007Plant Productivity 08) 1608 MT per employee (Previous best 1699 MT in 2005-06) Highest Marketing productivity 7885 MT per employee (Previous best 7397 MT in 2007-08)
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INTRODUCTION TO THE PLANT UNITS OF IFFCO

DEPARTMENT OF IFFCO PLANT UNITS
IFFCO department unit is divided into following parts: Ammonia plant Urea plant Power generation plant Off site Product handing plant
Ammonia Plant
There are 2 plants of Ammonia, Ammonia-I and Ammonia-II. Each ammonia plant is designed 1350 MTPD liquid Ammonia. Raw material, for producing Ammonia is NATURAL GAS.
PRODUCTION PROCEDURE
Hydrogen and Nitrogen are mixed in the ratio 1:3 to produce Ammonia N113. Source of nitrogen gas is supplied from GAIL (Bombay High). These gases are mixed with stream and then send to primary reformer, further refining is done as secondary reformer where we add air to it. Hot gas from secondary reformer is cooled by heat recovery plant. Now this process gas is introduced to shift converters. Here CO is converted to CO2, and then gas sends it to G.V CO2 removal tanks, where CO2 is removed. This CO2 is then sent to Urea plant to produce Urea.
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UREA PLANT
Physical and chemical properties:Molecular weight = 60.25 Melting point = 132.60 Boiling point = decomposes at atmospheric pressure.
USES
As fertilizers in agriculture. As cattle feed. As an important raw material of industrial household product.
MATERIAL DEPARTMENT
Materials are the most important inputs of any business firm organization. Proper handling and control of material inputs ensures the smooth functioning of plant. Material management included the procurement issuance and control of material in right quantity and at right time to facilities the production function. From this we can gather that material management includes 2 important functions: Purchasing. Storing and control of materials.
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PERFORMANCE OF PLANTS
Production:
Since its inception, the plants have cumulatively produced 1109.03 lacs MT fertilizers materials compromising 671.70 lacs MT of urea and 437.33 lacs MT of NPK/DAP up to the period ending 31st march09 . During the year 2008-09, IFFCO has produced highest ever 71.68 lacs MT of fertilizers consisting of 40.68 lacs MT of Urea and 31 lacs MT NPK/DAP.
UNIT
2008-09
2009-10
PRODUCTION (LACS MT) UREA
CAPACITY UTL. (PER CENTAGE)
PRODUCTION (LACS MT)
CAPACITY UTL. (PER CENTAGE)
Kalol
5.60
102.8
6.00
110.2
Phulpur I
6.63
120.3
7.23
103.5
Phulpur II
8.40
97.2
10.00
100.0
Aonla I
9.87
114.1
10.00
100.0
Aonla II
10.18
117.8
10.01
100.0
Sub Total
40.68
110.3
43.24
101.9
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NPK/DAP
Khandla
17.94
74.3
23.74
98.3
Paradeep
13.06
68.0
15.00
78.1
Sub Total
31.00
71.4
38.74
89.4
Total Production
71.68
89.2
81.98
95.6
Sales Performance
The rain in the current year was not very conductive from agriculture point of view. The food grains production in the year 2008-09 is estimated at about 228 million tonnes as against 247 lacs tonnes in 2007-08. The fertilizers consumption in the country during 2008-09 is estimated at 247 lacs tonnes of NPK as against about 226 lacs tonnes as against 226 lacs tonnes of NPK achieved during 2007-08 representing 9% increase.
SALES OF FERTILIZERS MATERIAL
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MATERIAL
2009-10
2008-09
UREA -Own
43.22
40.71
imported
20.13
17.98
Sub total
63.35
58.69
NP/NPK
27.94
24.47
DAP/MAP own
11.14
6.88
imported
15.84
22.54
Sub total
26.98
29.42
Total (NPK/DAP)
54.92
53.89
TOTAL (UREA + NP/NPK+DAP)
118.27
112.58
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DISTRIBUTION NETWORK:
IFFCO distribute its fertilizers in 29 states/ UTs in the country through the cooperative system. As a policy, IFFCO is channelizing its entire production and imports through the cooperative network. IFFCO sells its fertilizers through a network of about 39.862 cooperative societies in different states. Nearly 60 percent of the material was sold directly to societies whereas 35 percent was routed through federations. About 5 % fertilizers are sold through 158 farmers service centers (FSC) run by IFFCO.
HIERARCHY IN IFFCO
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LINE OF CONTROL IN FINANCE ACCOUNT DEPARTMENT
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AWARDS WON BY IFFCO

Prestigious Economic Times, Acer and Intel Smart Workshop Award in the manufacturing and industrial segment. Best Content Service as well as the Best Project Management in respect of IFFCO Kisan Sanchar Limited at the World Communication Award Held At London. Best Cooperative Society Award from Public Relation Society of India (PRSI) At Its Golden Jubilee Ceremony in Mauritius.
IFFCO UNITS: KALOL UNIT

National Energy Conservation Award -2008(2nd Prize) From Ministry Of Power, Govt. Of India. Gujarat state safety award 2007 for lowest disability injury index (DII) in the category of chemicals, fertilizers and distillers for the fourth conservative year.
PHULPUR UNIT
First prize for National Energy Conservation Award -2008 in fertilizer Golden Jubilee Award in recognition and appreciation of extraordinary
sector instituted by bureau of energy efficiency, ministry of power, govt. on India. accomplishment and contribution to the nation from Chamber Of Commerce & Industry (Eastern U.P)
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AONLA UNIT
Golden Peacock Environment Management Award-2008 during convention on climate changes by world environment foundation. National Award for Excellence in Energy Management-2008 from Aonla unit bagged TERI Corporate Environment Award 2009 for its confederation of Indian industry (CII) as Energy Efficient Unit. effort towards environmental management and inanition initiative.
PARADEEP UNIT
PARADEEP UNIT has won the FAI award for Improvement in Overall Performance for the year 2008-09. FAI Award for Best Technical Innovation implemented in the field of fertilizers technology for the year 2008-09. Paradeep unit also been awarded the The Best Importer for the year 2008-09 from the Paradeep Port Trust.
KANDLA UNIT
SUN and NDTV Green It Award under category of technology for a greener workplace (1st prize).
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ROLE OF INVENTORY MANAGEMENT

Management inventories constitute the most significant part of all the companies. On an average, inventories are 60% current assets in India. Because of large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is therefore, absolutely imperative to manage inventories effectively in order to avoid unnecessary investment. It is possible for a company to reduce its level of inventories to a considerable level without any adverse effect on production and sales, by using simple inventories planning and control techniques. It was the period of mid 60s the cooperative sectors in India, was holding the responsibility for distribution of 70% of fertilizers consumed in the countries. Te sector had adequate infrastructure to distribute fertilizers. But no production facilities of its own and hence was dependent on public private sector for supply. To overcome this lacuna and bridge the demand and supply gap in country, a new co-operative society was conceived to specifically cater the requirement of the farmers. The number of co-operative society attached with IFFCO has risen from 57 in 1967 to 37333 in March 2005. IFFCO Indian Farmers Fertilizers Co-operative Limited was established on 3rd Nov.67 as a multiunit co-operative society engaged in production and distribution of fertilizers. The bylaws society provides a broad framework from act of IFFCO as a co-operative society. The emphasis is on production and distribution of fertilizers. In order to fulfill these objectives IFFCO has set up KARLOL plant for manufacture of nitrogenous fertilizers and KANDLA for manufacture of phosphates fertilizers. IFFCO has emerged as ASIAs largest fertilizers co-operative with its four modern sophisticated plant at KALOL and KANDLA in Gujarat and PHULPUR and AONLA in U.P. IFFCO is countrys largest producers of nitrogenous and complex fertilizers with the total production capacity of 5.88 million tons and contributes aprox. 20% of the fertilizers produced in the country. The distribution of IFFCO fertilizers is undertaken through over 37337 co-operative societies. The entire activities of distribution, sales are assisted by marketing offices in the fields. In addition, essential agriculture inputs for crop production are made available to the farmers through a chair of 167 service canter also. The total paid up share capital as on the date stands at over Rs 456.87crores.
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What Does Inventory Mean? The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners. Inventory management forecasts and strategies, such as a just-in-time inventory system, can help minimize inventory costs because goods are created or received as inventory only when needed. Types of inventory Inventory of raw materials Inventory of stores and spare parts Inventory of work-in-progress Inventory of finished goods
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Inventory Management
Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment. Management of the inventories, with the primary objective of determining/controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock holding and handling costs.
The Reasons For Keeping Stock: There are three basic reasons for keeping an inventory: 1. Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amount of inventory to use in this "lead time". 2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. 3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.
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Purpose of Inventory Management:

Inventory management must be designed to meet the dictates of market place and support the companys Strategic Plan. The many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control.
Inventory Management system provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers. Inventory Management does not make decisions or manage operations; they provide the information to managers who make more accurate and timely decisions to manage their operations. It is strategic in the sense that top management sets goals. These include deployment strategies (Push versus Pull), control policies, the determination of the optimal levels of order quantities and reorder points and setting safety stock levels. These levels are critical, since they are primary determinants of customer service levels.
VMI reduces stock-outs and optimize inventory in supply chain . Some features of VMI include: Shortening of Supply Chain Centralized Forecasting Frequent communication of inventory, stock-outs and planned promotions Trucks are filled in a prioritized order. Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.
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Benefits of Inventory Management:
Help reduce purchasing and inventory costs. Connect inventory control, purchasing, and
sales order processing with demand planning and help reduce costs, improve cash flow, and help ensure that you have the right stock available when you need it. Gain visibility into inventory processes. Effectively balance availability with demand and track items and their possible expiration dates throughout the supply chain to help minimize on-hand inventory, optimize replenishment, and increase warehouse efficiency. Improve customer satisfaction. Make more accurate order promises and intelligent lastminute exceptions with access to up-to-date inventory information. Respond quickly and knowledgably to customer queries for improved customer service. Reduce time to market. With integrated order, inventory, and distribution processes, as well as item tracking capabilities, your business can reduce manual data entry and get your goods to market fast.
Symptoms Of Poor Inventory Management: A certain numbers of symptoms allow discovering poor inventory management. They are as follows: Increasing number of back orders.
High customer turnover rates.
Increasing numbers of cancelled orders.
Large quantities of obsolete items. Page 39
Periodic lack of sufficient space.
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Inventory Management Improvement:

It has been identified that there are six activities which may help in improvement of inventory management. These activities will be explained in order to provide some background information on improvement of inventory management. Top management commitment. Because lower inventories have impact on many different parts of logistic systems, senior leadership must ensure that all of those activities are working together to meet customer needs without the luxury of excess stock. ABC analysis of all inventory items. Management must first understand that the goods in inventory are the most important in terms of their contribution to the objectives of the organization. Improved performance of other logistics activities. Manager should ensure that the rest of the logistic system is functioning efficiently. It may be those inventories policies have evolve as a way to obscure other problems that should be dealt with directly. By reviewing transportation, order processing and warehousing functions, for example, management may find order- cycle variability can be reduced by improving those activities that would lower the need for inventory. Improved demand forecasting. Demand forecasting is also a way of reducing variability, this time in terms of expected versus actual sales. Better forecasting techniques can be utilized to more accurately predict actual sales. Inventory management software. Software is currently available for inventory management situation and allows managers to tracks sales by items, costs length of time in inventory and other vector as well.
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Inventory Management Policies:

Inventory control is the managerial procedure for implementing inventory policies. The accountability aspect of control measure units on hand at a specific location and tracks additions and deletions. Accountability and tracking can be performed a manual or computerized basis. Inventory control defines how often inventory levels are reviewed to determined when and how much to order. It is performed on either a perpetual or a period basis. To the most effective, the inventory control system must also provide information in timely manner to allow you to make decisions while problems can still be corrected.
Two models are usually used to control inventories:
Perpetual review: a perpetual inventory control process reviews inventory status daily to determine inventory replenishment needs. To utilize perpetual review, accurate tracking of all stock keeping units is necessary. Perpetual review is implemented through a re-order point and other quantity.
Periodic review: periodic inventory control review, the inventory status of an item at regular time intervals such as weekly or monthly. For periodic review, the basic re-order point must be adjusted to consider the extended intervals between reviews.
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Reactive methods: the reactive or pull system, as name implies, responds to a channel members inventory needs by drawing, the products through the distribution channel. Replenishment shipments are initiated when available warehouse stock level fall below a predetermined minimum or order point. The amount ordered is usually based on some lot- sizing formulation, although, it may be some variable quantity is a function of current stock levels and a predetermined maximum level. Classical reactive inventory logic is rooted in the following assumption. Firstly, the system is founded on the basis assumption that all customers, market areas and products contribute equally to profits. Secondly, reactive inventory logic assumes infinite capacity at the source. This assumption implies that products can be manufactured as desired and stored at the production facility until required throughout the supply chain. Mostly reactive system decision rules assume demand patterns based on standard normal, gamma or Poisson distribution. When the actual demand function does not resemble one of the above functions, the statistical inventories decision rules based on these assumptions will not operate correctly. Planning methods: inventories planning methods use a common information base to coordinate inventory requirements across multiple locations or stages in the supply chain. Planning activities may occur at the plant warehouse level to coordinate inventory allocation and delivery to multiple destinations. Planning may also occur to coordinate inventory requirements across multiple channel partners such as manufactures and retailers. a) Fair share allocation: Fair share allocation is a simplified inventory management planning methods that provided each facility with an equitable or fair share of available inventory from a common source such as a plant INDIAN FARMERS FERTILIZERS COOPERATION LIMITED Page 43
warehouse. Using fair share allocation, the inventory planner determines the amount of inventory at the plant. b) Distribution requirements planning (DRP): DRP is a more sophisticated planning approach that considers multiple distribution stages and their unique characteristics. DRP is the logical extension of manufacturing requirement technique (MRP), although there is one fundamental difference between the two techniques. Adaptive logic: a combined inventory management system may be used to overcome some of the problems inherent in rising either or a planning method. The factors that might make a reactive system better in one situation may change over time to favor the use of an inventory planning system. Thus, the ideal approach is an adaptive inventory management system that corporate elements of both types of logic and allows different strategies to be used with specific customer or product segments.
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Cost formulae for determining cost of inventories

Weighted Average Method
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IFFCO are using weighted average method. Under this method the issue price is calculated by dividing the value of materials in hand by the number of units in hand. Thus it takes into account both quantities and money value for arriving at the issue rate. Whenever a new consignment is received, a new weighted average price is calculated by adding the value of the consignment to the cost of stock in hand. The rate thus, calculated is used to price all issues until a new consignment is received. The method is more scientific as it smoothens the fluctuations in purchase price. Further, inventory is valued at one rate.INVENTORY VALUATION AT IFFCO
Inventories are valued at lower of cost or net realizable value. a) The cost in respect of various items of inventory is computed as under: Raw Materials, Packing Materials, Construction Materials, Loose Tools in Stock, Chemicals & Catalysts in Stock and Stores & Spares at monthly weighted average cost. Stock-in-Process at direct cost and an appropriate portion of overheads. Finished Goods:
- Manufactured Nitrogenous Fertilizers covered by Group Concession Scheme at Annual Cost of Production at Plant after adjustment of subsidy as determined as per the Revised Norms of the Fertilizer Industry Coordination Committee (FICC). - Manufactured Phosphatic Fertilizers at Annualized Cost of Production at Plant plus freight unto the warehouses after adjustment of subsidy as estimated in accordance with known policy parameters in this regard. - Imported Nitrogenous Fertilizers at procurement cost plus direct expenses less reimbursement of handling cost as fixed by the Government of India.
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- Imported Phosphatic Fertilizers at procurement cost plus direct expenses after adjustment of subsidy as estimated in accordance with known policy parameters in this regard. b) Net realizable value of Finished Goods is determined at estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
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INVENTORIES CONTROL
Inventory control is a systematic control and regulation of purchase storage and usage of materials in such a way as to maintain an even flow of production and at the same time avoiding excessive investment in inventories. An efficient material control reduces loses and wastage of material that otherwise pass on notice. Inventory control is an important part of material management. The need and importance of inventories various in direct proportion to idle time cost of men and machinery and the urgency of requirement. If men and machinery and the factory could wait and so could customers, materials would not lie in want for them and no inventories needs to be carried. But it is highly uneconomical to keep men and machinery waiting and requirement for modern life are so urgent that they cant wait for materials to arrive after the need for them has arisen. Hence, firms must carry inventory. NEED OF INVENTORIES ORGANISATIONAL: inventories are maintained to widen the latitude in planning and scheduling successive operation. Raw material inventories enables a firm to decoupage its purchase and production. PROCESS: inventory provides flexibility in production schedule so that an efficient schedule and high utilization of capacity may be attained. Without work in progress inventory, a bottleneck at any stage in the production process may be render ideal the machine and facility at subsequent stages. In adequate process inventory may result in delay of production and ideal facilities. FINISHED GOODS: inventories enable a firm to decoupage its production programmers and marketing activities so that desirable result may be achieved on both the fronts. If the adequate finished goods are available, the marketing department can meet the needs of the customer promptly, irrespective of the quality and composition of goods flowing out of the production line currently. Thus, firm may established a programmed inventory monitoring and control consisting of the following elements:
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Exercise of vigilance against imbalance of raw materials and work in progress which tends to limit the utility of stocks. Vigorous efforts to expedite completion of unfinished production jobs to get them into salable conditions. Active disposal of good that is surplus, obsolete or unusual. Strict adherence to production schedule Special pricing to disposal of unusually slow moving items. Change in design to maximize the use of standards parts and components, which are available off the shelf.
OBJECTIVES OF INVENTORY CONTROL

Scientific control of inventories should serve the following purpose: To provide the continuous flow of required materials, part and component efficient and uninterrupted flow of production. To minimize investment in inventories keeping in view of operating requirement. To provide facility for efficient storage of materials so those inventories are protected from loss fire and theft & handling time and cost keep minimum.
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TECHNIQUE OF INVENTORY CONTROL:

Reduction of surplus stock is an essential requirement effective inventory control. Various techniques of controlling the inventories are as follows:1. Mini- max plan. 2. The two bin system. 3. Order cycling system. 4. Fixation of various levels. 5. Control ratio.
o Mini Max Plan:

This is the oldest method of inventory control. In this plan, analysis lays down a maximum and minimum for each stock item. Minimum establishes the reorder point and order is placed for quantity of material, which will bring it to the maximum level.
o The Two Bin System:

The basic procedure is that for each item of stock, two piles or bundles of bins are maintain. The first bin stocks that quantity of first, which is sufficient to meet its usage during the period that elapses between receipt of order material and the placing of next door. The second bin is tapped, a requisition for new supply is prepare and given in purchase department.
o Order cycling system:

In this system, quantities in hand of each items or class of stock are received periodically (30/60/90 days). 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 entire probable rate of depletion, an order is placed to replenish its supply.
oFixation of various levels:

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Certain stock levels of fixed level are given below: A) Maximum level: It represents minimum quantity above which stock should not be held at any time. Stock above maximum leads to a higher, Inventory cost to the organization. Maximum stock = re-order + reorder quantity (minimum level consumption * minimum reorder period)
B) Minimum level: It represent minimum quantity of stock that should be held at all the time. Stock below minimum level my lead to the interruption in production scheduled. The minimum level can be calculated by the following formulas: minimum level = reorder level-(normal consumption + normal reorder period).
o Control ratios: Inventory turnover ratio helps management to avoid capital being locked of unnecessarily. This ratios revels the efficiency of stock keeping. Inventory turnover ratio is given by: cost of material consumed / cost of average stock held during the period.
Where cost of average stock = (cost of opening stock + cost of closing stock)/ 2
Calculation in days: Days during the period/inventory turnover ratio reveals the number of days for which the stocks are held.
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OBJECT
Inventories have to be properly valued because of the following Reasons: o Determination of current income. o Determination of financial position. o Computation of ratios.
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E-COMUNICATION AND CONTROL ON INVENTORY IN IFFCO

E- RAIL FACILITY:
IFFCO is a regular client of Indian Railways. So, they have given a special facility to IFFCO, by providing a separate website attached with Indian railway sites so that they can easily track the location of their rakes, which have been loaded with Ureas and fertilizers, travelling from plant location to the respective rake points. From there, the material would transfer to the warehouses for storage. In IFFCO, there are 2 modes of supply of inventories from plant location to the warehouses and respective societies. They are as follows: a) Railways b) Roads
Railways:It is widely used mode of transport, used by IFFCO for the supply of fertilizers and urea. Generally, as soon as the goods are loaded in the rakes, a Dispatch Advice (D.A) is generated by the stock manager of the plant, which contains all the required information related to the materials i.e. quantity, type of fertilizer, rake number, date of dispatch etc. As, the rake arrives to the regional rake point, the RR is handed over to the authority i.e. field officer of that point and officer got responsible to send the Rake Receipt (RR) to the plant, after proper checking of quantities with DA, through their WAN communication network i.e. E-VIKAS. This whole process is completely computerized. The web site which railway has given to the organization, help them in tracking the rake position on time and it save lots of resources of them.
ROAD:
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Another mode of transport used by IFFCO is road. It is generally used to transfer the material to the nearby areas of the plants. IFFCO use this mode to distribute its finished goods to the warehouses within the range of 100 150 kms. This done through trucks along with the dispatch advice and the same procedure is being used. This mode of supply is not very much profitable for the company because No feasibility Not economical Time taking
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OVERVIEW OF INTERNAL CONTROL RELATING TO INVENTORY

Internal control refers to the norms through which a particular activity can be carried out. In IFFCO, the material is purchased in the following norms: Steps: 1. For raw material, the particular department will issue MRP (material purchase requisition) notes, to the purchase department. 2. On the basis of MRP note, the purchase will be issue tender or will intimate to registered parties for the quotation. 3. On the basis of quotation the committee will decide which party is competent for the requisite material. 4. After decision the purchase department will issue purchase order to the competent party. 5. These purchase order will be issued to for the concern partiesa) Suppliers b) Account section c) Purchase account d) Store 6. After purchase and supply of material, the indent department will inspect the material. 7. After inspection, all the material will be issue according to their own norms. 8. After storing , the store department sends SRV (store receipt voucher) notes to the following department a) 1 copy to the purchase department b) 1 copy to the indent department c) 2 copy to the accounts department d) 1 copy to lies to the store department itself. 9. After pricing the SRV by the billing section of F & A department and after receipt of invoice from the supplier, the accounts section will issue the cheque to the concerned party for the value received.
DIFFERENT VOUCHERS IN IFFCO

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In IFFCO, there are 3 types of receipt and issue vouchers, generally used for the particular receipt and issue materials. The lists are as follows: Receipt vouchers: a) SRV (store receipt voucher) b) ISRV (internal store receipt voucher) c) DCSRV (direct consumer store receipt voucher) Issue vouchers: a) SIV (store issue voucher) Adjustment vouchers: a) SAV (stock adjustment voucher) b) STV (stock transfer voucher)
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ROLE OF PURCHASE FUNCTION IN IFFCO

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 play very important function as it through this procedure that the right amount of material required is delivered at the right place and at the right time so that the process of production or manufacturing goes on unhampered. The purchase department of an organization must know following things: Knowledge of the material. Source of material vendors Reasonable price The most important things is the indenter must trust the vendors. Purchasing can also be seen as either strategic or transactional. Also the word direct and indirect have been used to distinguish the two types: strategic (direct) buying involve the establishment of mutually beneficial long term relationship between buyers and sellers. Usually strategic buying involves purchase of material that are crucial to the support of the firms distinctive competence. This could include raw material and components normally used for production process. Transactional (indirect) buying involves repetitive purchases from same vendor, probably through a blanket purchase order. These orders could include products and service not listed on the bills of materials but is used indirectly in producing the items.In more specific terms, todays purchasing departments are responsible for: Coordination purchase needs with user departments. Identifying potential suppliers. Conducting market studies for material purchases Proposal analysis Suppliers selection Issuing purchase orders Meeting with sales representatives
PURCHASE PROCESS
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Recognition Needs: The purchase order is made by the purchase department when it feels necessary and on the request of indenting department. Requisition to purchase: this is an intimation to purchase department by the indenter that the needed certain material. He raises request by filling form as material purchase requisition (MRP). In this he furnishes various information:a) Name of the item & its code no. b) Amount required c) Estimated price d) Required delivery date e) Suggested vendors f) Section/ department Code no. MRP security: in this step, 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 whether the material is available or not. If it is available the MRP goes to the purchase deptt. For further action. Here it is scrutinize in three ways: a) Approval scrutiny b) Budget scrutiny c) Technical scrutiny Sending or enquiry/invitation to bid: Proprietary items: these are those items e.g. spares which have to be brought from particular supplier or vendor. Non proprietary 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 3 ways:
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Proprietary bidding Limited tender enquiry Press tender/open bidding: if the amount of purchase involves more than 3 lacs and item is non proprietary then press tender is issued in newspapers.
Receiving Of Offers: after all bids have been submitted the tenders are open before tender committee to compare the quotations. Quotation comparison statement (QCS) is made and bid with lowest quotation is generally chosen. 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 materials to be purchased are also given. A bank guarantee of performance is taken from the vendor in advance which is usually 5% of the P.O.A time limit is set for delivery of consignment and in case of delay a penalty is imposed @5% of the P.O per week. Receipt of Material: after the consignment reaches the stipulated place, the payment is done by the organization according to the purchase terms agreed upon the two parties. The material is checked for quality conditions and then sent to the store where the store releases the Store Receipt Voucher, from here it is delivered to the vendor. Follow Up Done For Every Order: it may be regarding delay in supply changes in prices, defective or damaged items supplied etc. For every indent a separate file is opened and correspondence goes on.
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FACTORS FOR PURCHASING

The importance of purchasing is any firm is largely determined the four factors: Availability of materials Absolute dollar volume of purchases % of product cost represented by material Types of material purchased.
Purchasing must concern itself with whether or not the materials used by the firm are readily available in the competitive market or whether some are brought in volatile markets that are subject to shortages and price instability. If the form spends a large percentage of its available capital on materials, the sheer magnitude of expense means that efficient purchasing can produce a significant savings. Even small unit saving add up quickly when purchased in large volume. When a firms material costs can increase profit margins significantly, in this situation, efficient purchasing and purchasing management again can make or break a business. Perhaps the most important of the four factors is the amount of control purchasing and supply personnel actually have over material availability, quality, costs and services.
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PAYMENT AGAINST PURCHASE

There are various modes of payment1. Advance payment to suppliers: Advance payment shall be made to the suppliers only in such cases where it is specifically provide 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 release as provided in the purchase procedure. 2. Full Payment / 90% To 95% Payment: In case the terms of payment provide for full payment or part payment against dispatch document through bank, the suppliers will be negotiating the documents through the bankers. After the documents are received by the bankers, they are forwarding bank intimation along with a copy of the purchase order to ascertain that the invoice is raised for the material ordered and conforms to the other terms and condition of purchase orders. After the intimation from the bank is received the received the invoice of the supplier will be scrutinized by the finance and account department for the following: Purchase order number Whether material supplied are as specified in the purchase Quantity supplied Whether excise duty, sale tax and other taxes are as per the order
Where there is delay in supplying the material and the payment through bank is 90% to 95%. It should be ensured that penalty for delay, as provided in the purchase order, is recovered before releasing the balance payment.
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FULL PAYMENT / BALANCE PAYMENT AFTER RECEIPT OF MATERIALS:

In case the purchase red provides the 100 % payment after receiving of materials and accepted payment is to be released after the MRR is recessed from the stores department. In case the purchase order dispatch documents and the balance payment after receipt of materials, the balance payment may also to be released after the MAR is received and it is confirmed that the material has been accepted after inspection and taken on charge. Before released of the payment, the invoices should be scrutinized as the case of payments released through bank. In addition it should also be verified whether all the items invoiced have been received, inspected and accepted per the MRR.
DELAY IN DELIVERY
In case of project purchases, the time and date of the delivery is the contract. In the event of delay in the execution of the order beyond the date of delivery as stipulated in the order, the project authorities may take following actions Accept delayed delivery at price reduced by a sum equivalent to 0.5 % if the value goods not delivered for every week of delay or part thereof limited to a maximum of 5% of the contract value. Cancel the order in part or full and purchase such cancelled materials from elsewhere on account and at the risk of the suppler without prejudices to his right inspect of goods delivered.
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ROLE OF WAREHOUSING AND DISTRIBUTION IN INVENTORY MANAGEMENT:

Without warehousing and distribution, stores and restaurants would be empty of both products and customers. All of us depend on warehousing, distribution, and inventory management to provide us with what we want, when we want it, at a price we can afford. Whether your warehouses pallet rack holds shampoo or computer parts, you play a key role in a supply chain that millions of people depend upon to maintain their standard of living. This means warehousing and distribution are worth the time and effort of analyzing the way you manage your inventory. In the chain of events that leads to putting products in the hands of consumers, your warehouse is responsible for receiving, storing, and shipping items. Despite the warehouses important role in inventory management, to this day, warehouses are often a misunderstood and underestimated asset. Here are some key areas where your warehousing and distribution methods affect the profitability of many other companies:
Help businesses avoid lost sales. Since you keep goods on hand, businesses are able to sell those goods and avoid losing valuable customers. Help provide discounts. Bulk inventory often equates to discounts for your company and consumers alike. The larger the order and the inventory, the smaller the price is per item. Keeps production rolling. To manufacture an item, factories need all the pieces in sufficient quantities. Warehouses keep those pieces on hand for factories, avoiding the huge expense of halting production.
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WAREHOUSE MANAGEMENT SYSTEM:

Warehouse management deals with receipt, storage and movement of goods, normally finished goods, to intermediate storage locations or to final customer. In the multi-echelon model for distribution, there are levels of warehouses, starting with the Central Warehouse(s), regional warehouses services by the central warehouses and retail warehouses at the third level services by the regional warehouses and so on. The objective of warehousing management is to help in optimal cost of timely order fulfillment by managing the resources economically. A warehouse management system, or WMS, is a key part of the Inventory management and supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving and picking. The systems also direct and optimize stock put away based on real-time information about the status of bin utilization. The objective of a warehouse management system is to provide a set of computerized procedures to handle the receipt of stock and returns into a warehouse facility, model and manage the logical representation of the physical storage facilities (e.g. racking etc), manage the stock within the facility and enable a seamless link to order processing and logistics management in order to pick, pack and ship product out of the facility.
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NEEDS FOR WAREHOUSING:

Warehousing is necessary due the following reasons:
I. Seasonable production: you know that agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year. Therefore, there is need for proper storage or warehousing for these commodities, from where they can be supplied as and when required.
II. Seasonal demand: there are certain goods, which are demanded seasonally, like woolen garments in winters or umbrella as in the rainy season. The production of these goods takes places throughout the year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them available at the time of need.
III. Large scale production: in case of manufactured goods, now a days production takes place to meet the exiting as well as future demand of the products. Manufacturing also produce goods in huge quality to enjoy the benefited of large scale production, which is more economical. So the finished products, which are produced on a large scale, need to be stored properly till they are clearly by scales.
IV. Quick supply: both industrial as well as agricultural goods are produced at some specified places but consumed throughout the country. Therefore, it is essential to stock goods are made available to the consumers at the time of their need.
V. Continuous production: continuous production of goods in factories requires adequate supply of raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouse to ensure continuous production.
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VI. Price stabilization: to maintain a reasonable level of the price of the goods in the market there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in the markets. Again, excess production and supply may be also leads to fall in prices of the product. By maintaining a balance of supply of goods, warehousing leads to price stabilization.
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FUNCTIONS OF WARHOUSES:
WAREHOUSES provide protection to goods against heat, wind storm, moisture etc. and also cuts down losses due to spoilage, wastage etc. This is the basic functions of every warehouse. In addition to this, warehouses now a day also perform a variety of other functions.
Storage of goods
Protection of goods
Risk bearing
Financing
Processing
Grading and branding
Transportation
ADVANTAGES OF WAREHOUSING:
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WAREHOUSING offers many advantages to the business community. Whether it is industry or trade, it provides a number of benefits which are listed below:
Protection and preservation of goods.
Regular flow of goods Continuity in production Convenient locationEasy handlingUseful for small businessmen Creation of employment
VENDOR MANAGED INVENTORY

In its simplest form, Vendor Managed Inventory is the process where the vendor assumes the task of generating purchase orders to replenish a customers inventory. VMI is a term that is used to describe many types of supply chain initiatives. VMI means of optimizing supply chain performance in the manufacturer is responsible for maintaining the distributors inventory data and is responsible for generating purchase orders. VMI is a family of business models in which the buyer of a product provides certain information to a supplier of that product and the suppliers takes full responsibility for maintaining an agreed inventory of the material, usually at the buyers consumption location (us ually at the store). A third party logistics provider is involved who makes sure that the buyers have the required level of inventory by adjusting the demand and supply gaps. Under The Typical Business Model: when a distributor needs product, they place an order against a manufacturer. The distributor is in total control of the timing and size of the order being placed. The distributor maintains an inventory plan. INDIAN FARMERS FERTILIZERS COOPERATION LIMITED Page 70
Vendor Managed Inventory Model: The manufacturer receives electronic data that tells about the distributors sales and stock levels. The manufacturer can view every item that the distributor carries as well as true point of sales data. The manufacturer is responsible for creating and maintaining the inventories plan. Under VMI, the manufacturer generates the order, not the distributor.
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Advantages of VMI: Higher service degree Higher responsibility & more liberty of the suppliers when disposing the supplies. More economical lot sizes Small stocks with the dealers Shortening of the supply chain. Centralized forecasting Frequently communication of inventory, stock out and planned promotions. No manufacturing promotions Trucks are fulfilled in a priority order.
VMI reduces stock outs and reduces inventory in the supply chain. Some features are:
VMI implementation challenges: VMI can be made to work, but the problem is not just one of logistics. VMI often encounters resistance from the sales force and the distributors. At issue are roles and skills, trust and power shifts. Some of the sales force concerns are: Loss of control Effects on compensation incentives, bonuses may be depends on how much is sold, but sales force has less influence under VMI. Possible loss of jobs Skepticism that it will function well technical problems.
Concern that reduced inventory will result in less shelf space and therefore loss of market share. This concern can be addressing, by filling the self space with other stock keeping units from the same vendor.
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Operational cost of purchase department from 2008-09

Sr. no. 1. A B
Name of the location
Phulpur 03-04 22 04-05 22 06-07 22 07-08 26 08-09 25
Wages of officials per annum
Total no. of employees
Wages of officials per annum CM (MAT) Workers level employees
380231
402882
435008
469035
505734
Middle level officer 2330502 2463453 2347417 3414768 4739228
1884399 1979625 1900161 1994622 1725412
2. A B 3. A B C D E
Value of machines (16.21% dep. Per year)
PCs Network printer

Misc. expenditure
384596 213925
488247 209748
409102 175747 73535 38889 4800 6810933
533409 275960 86050 32289 4800 7880964
446943 231227 154617 34306 38697 34306 4800
Stationary 109852 94096 Postal cover Fax charges 80639 91059 Telephone charge Books/periodical/ 4800 4800 newspaper Total 5388944 5733910 5384659
expendit ure of purchase 4. Total no. of orders processed per year
1296
1421
1672
1383
1324
Internal Lead Time

Sr.no.
Types of order
Up to Rs
No. of days 242
Total value of orders (in lacs)
Average lead time in days
12.93
69
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15000
2 3 4
Rs 15000 to 1 lacs Rs 1 lacs - Rs 10 lacs
413
193.91 1639.74 9504.56

7 0 D A Y S
81 78 54
481 160
Above Rs 10 lacs
OVERALL AVERAGE
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SUPPLIERS EVALUATION CRITERIA SHOULD BE USED

Q: 1 HOW TO EVALUATE SUPPLIERS? Ans: We can evaluate suppliers on the basis of: Prices Quality Services Delivery
Q: 2 How to measure the performance of the suppliers? Ans: Though the little change in their DFD i.e. data floe diagram are: Purchasing Management with SAP Business One. Q: 3 Why to use SAP BUSINESS ONE? Ans: the Material management system which IFFCO using is in house built and it is not as professional and reliable as SAP BUSINESS ONE, thats why employees there more rely on paper work rather than using the software. SUPPLY BASE REDUCTIONS Q: Why supply base reduction is necessary in IFFCO? Ans: IN IFFCO, the numbers of supplier are as follows: Sr. no. 1. A. B. Name of Location Total no. of vendors Domestic vendors Foreign vendors Phulpur 3161 2921 240
Since there are large number of suppliers in IFFCO, so they are not properly managed and the result is increment in lead time and there is a gap in supply chain. They should review the performance of suppliers every year and reduce accordingly. Q: 4 what methods can they use to reduce supply base? Ans: they can be: Twenty/ eighty rule Improve or Else approach Page 75
Triage approach
CAN GO FOR ANNUAL RATE CONTRACTS Q: What is the benefit for annual rate contracts? Ans: annual Rate Contracts can help in the establishment of mutually beneficial long term relationships between buyers and suppliers. So, purchasing departments determine what to buy, where to buy it, how much to pay, and ensure its availability by managing the contract and maintaining strong relationships with suppliers. It helps: In reducing lead time In reducing inventory levels, no need to block money in inventory. One time bidding.
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COMPARATIVE ANALYSIS OF INVENTORY AVAILABLITY IN IFFCO

UREA
JANUARY FEBURARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
2008-09 (LACSMT)
0.25 0.25 0.24 0.25 0.26 0.26 0.25 0.26 0.20 0.23 0.24 0.28
2009-10 (LACS MT)

0.45 0.38 0.35 0.39 0.37 0.41 0.42 0.39 0.40 0.39 0.43 0.44
ANALYSIS: According to this analysis, IFFCO has increased its production and sales capacity. Though they have enough closing stock of materials in their warehouses as compare to 2008-09. The sales of the urea is very much high in September and October month, though they have enough material in hand to supply.
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ANALYSIS: This analysis shows that the inventory in the hand of IFFCO was very much constant in volume. In the month of December, company was having 10% of the total product as a stock; this shows the decrease in the sales of the urea in the market.
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NPK/DAP
2008-09
2009-10
0.55 0.58 0.57 0.56 0.57 0.56 0.57 0.56 0.50 0.45 0.56 0.50
JANUARY 0.95 FEBURARY 0.91 MARCH 0.92 APRIL 0.88 MAY 0.82 JUNE 0.93 JULY 0.87 AUGUST 0.95 SEPTEMBER 0.83 OCTOBER 0.90 NOVEMBER 0.91 DECEMBER 0.94 CLOSING STOCK (MONTHLY)
ANALYSIS: This analysis shows that the production of nap/dap is much higher than 2009-10. There is a stable control over storage of finished unsold product.
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ANALYSIS: In the month of September and October , the sale of the NPK/DAP was on peak. So the demand of the product goes high and the volume of available resource had goes down. Only 7% of the NPK was retained with the hand of company.
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SWOT ANALYSIS
STRENGTH:
Largest producer of fertilizers in the country. Five strategically located plants with cutting edge production technologies. Most plants achieve capacity utilization in excess of 100%. A large number of co-operative societies are associated with IFFCO (38,155 at present). Vast marketing and distribution network due to the high number of co-operative associates with IFFCO. Their service network and feedback network is also pervasive in INDIAN RURAL AREAS. Highly diverse and strategic portfolio of external investments. No external trade union exercises any power within IFFCO.
WEAKNESS:
IFFCO has a bureaucratic organizational structure and therefore, is obsessed with working within set a framework defined by rigid rules and regulations. This is often discourages innovation and may also cause sub unit conflicts, in some cases, blind adherence to rules and regulations may limit the perspective of a manager and result in functional unit goals overriding organizational goals. The organizational setup is very rigid and not very efficient in handling sudden changes in business environment. There is excessive sub divisions in some departments and this results in inefficiency.
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OPPURTUNITES:
IFFCO has embarked upon a growth plan titled vision 2010to achieve annual turnover of Rs. 15000 crores (USD 3400 million) by the year 2010. Installation of Ammonia/Urea plants and also acquisition of fertilizer units. Generation of power. Production and marketing of micro nutrients, seeds, bio fertilizers, pesticide etc. Value addition to Agri-Products and Marketing. Banking and Financial Services. Information Technology and IT enable Services. Establishments of Retail Chain in Urban and Semi- Urban locations.
THREATS:
Competition from KRIBHCO i.e. Krishak Bharti co-operative another government under taking which also produce fertilizer and is very similar to IFFCO in nature. Aggressive competition from private companies which are now entering the fertilizer sector. The government of India has a major influence on the functioning of IFFCO. It is the government which decides what to produce?, how much to produce? and where to sell?. This factor often becomes IFFCOs major weakness as it sometimes has to functions undue political pressure and takes steps which are nonprofitable. Government policies on import of fertilizers from foreign nations and decrease in subsidies.
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SUGGESTIONS:
The organization should establish a national level committee which can familiarize the government with the ground realities in the Fertilizer sector and also advise the government in formation of Policies regarding distribution of fertilizers, import of fertilizers and subsidies.
There should an Entrepreneurship Development Cell at all plants which should encourage innovation amongst employees. This would infuse some of the positives of an organic design in to the organizational environment. This cell should lay new business ideas and innovations in front of the top levels of management.
Unnecessary sub-divisions in departments should be eliminated to promote efficiency. In the Personnel & Administration department one sub-division can handle both Legal Matters and Contract Laws.
The Inspections & Plant Health Department can be dissolved. The Maintenance Department can have an additional sub-division for Inspections & Plant Health. This will streamline the organizational structure and also increase the efficiency of overall maintenance.
The Co-operation should not be rigid in its approach and should be ready to face sudden variations in business environments. Managers should not limit themselves to following regulations blindly but should proactively analyze situations.
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Inventory management is one of the important key activities of business logistics. Because of its role in business organizations, inventory is one of the most important instruments of logistics planning and control. Inventory on work in process is linked to the production process, physical inventory on stock or in buffer storage is unnecessary from the standpoint of added value and is considered as waste of time and money. It might seem axiomatic that inventory control is efficient as long as inventory level is going down. But the fact is that, if inventories are minimized without adequate operations, inventories have been mismanaged rather than controlled efficiently. Thus, the basic objectives of inventory management appear to be conflicting in nature. Inventories should increase or decrease in amount or time as related to sales requirements and production schedules. IFFCO is in the business of fertilizer manufacturing and in this sector a huge investment in plant and machinery is required. Therefore IFFCO should efficiently use various inventory management tools to control the stock levels like ABC analysis, monitoring of stock levels i.e. ROL, EOQ, Min-Level, Max-Level system of verification of inventory etc.
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BIBLIOGRAPHY
Books: Management Accounting Financial Accounting References: Marketing News Paper Magazine Philip Kotler The Economic Times Business Today Dr. S.P.Gupta Khan And Jain
Annual Report Of IFFCO 2009-10 Marketing News Of IFFCO (Weekly) Website : www.iffco.nic.in
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Inventory Management in Iffco V

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PROJECT REPORT

FOR THE PARTIAL FULFIILMENT OF REQUIREMENT OF SUMMER INTERNERSHIP

SUBMITTED TO PROF. SHYAM AGRAWAL FINANCE FACULTY MIMS

SUBMITTED BY VIVEK AGRAWAL PGDM (2009-11) ROLL NO: 091110153

SUBMITTED BY VIVEK AGRAWAL PGDM (2009- 11)

TO WHOMSOEVER IT MAY CONCERN

Project Mentor Prof. SHYAM KUMAR AGRAWAL

Prof. (Dr.) ANUPAM NARULA Director-Academics

Place: Date: Agrawal) (Vivek

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATIVE LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

VISION AND MISSION OF IFFCO

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INFORMATION AND COMMUNATION TECHNOLOGY

HUMAN RESOURCE MANGEMENT SYSTEM (HRMS)

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

PROFILE OF PRODUCTS AND SERVICES

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

IFFCO ASSOCIATES AND SUBSIDIARY COMPANIES

1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16)

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

PERFORMANCE HIGHLIGHTS 2009-10

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INTRODUCTION TO THE PLANT UNITS OF IFFCO

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

PRODUCTION (LACS MT) UREA

CAPACITY UTL. (PER CENTAGE)

PRODUCTION (LACS MT)

CAPACITY UTL. (PER CENTAGE)

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

SALES OF FERTILIZERS MATERIAL

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

TOTAL (UREA + NP/NPK+DAP)

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

LINE OF CONTROL IN FINANCE ACCOUNT DEPARTMENT

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

AWARDS WON BY IFFCO

IFFCO UNITS: KALOL UNIT

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

ROLE OF INVENTORY MANAGEMENT

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

Purpose of Inventory Management:

INDIAN FARMERS FERTILIZERS COOPERATION LIMITED

Benefits of Inventory Management:

High customer turnover rates.

Increasing numbers of cancelled orders.