Professional Documents
Culture Documents
ON
“A comprehensive study of
At IFFCO, AONLA”
Submitted by:
KRISHAN KUMAR SINGH CHAUHAN
M.B.A. (F/T)
Roll No. 20
PREFACE
of my success life.
Date-
Place- (KRISHAN
KR. SINGH CHAUHAN)
LIST OF CONTENT
2 ORGANIZATION PROFILE
3 AONLA UNIT
5 INVENTORY MANAGEMENT
6 RESEARCH METHODOLOGY
8 BIBLIOGRAPHY
OBJECTIVE OF
THE STUDY
OBJECTIVE OF THE STUDY
The objective of this project is to study the inventory system and its
effectiveness in IFFCO. The purpose of this study is to know the system of inventory
held by the company and to know the various techniques used by the company,
related with inventory. The foremost thing is the company and its unit profile and
research methodology. Company and its unit’s profile have been generated to get well
familiar with the company and research methodology was required so that inventory
system could be known for analysis.
Finally, by gathering the data from various departments like store
department, finance & accounts department etc., work has been started. A system of
inventory has been drawn on the basis of collection of data and research. Another
work that was being carried out simultaneously was to know the current policies and
system regarding inventory.
Type Cooperative
Founded New Delhi, India
(November 03 1967)
Headquarters New Delhi, INDIA
U.S. Awasthi,
Key people
Managing Director
Industry Fertilizer
Turnover Rs. 32,933.30 Crore (2009)
Profit After tax Rs. 360.01 Crore (2009)
Website http://www.iffco.nic.in
The Chief Executive Officer of IFFCO, designated as Managing Director,
is vested with the overall responsibility of the affairs of IFFCO's day to day activities.
Dr. Udai Shanker Awasthi is Managing Director of IFFCO since 1993 .
During mid sixties the cooperative sectors in India was responsible for
distribution of 70% 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 supply. To over this lacuna, bridge the
demand supply gap in the country, a new cooperative society was conceived to
specifically center to requirements of the farmers. It is a federation of over 39,456
cooperative societies , most of them being village cooperation, spread over in 29
states and union territories & 158 Kisan Seva Kendra.
At IFFCO, the thirst for ever improving the services to farmers and member
co-operatives is insatiable, commitment to quality is insurmountable and harnessing of
mother earths' bounty to drive hunger away from India in an ecologically sustainable
manner is the prime mission. All that IFFCO cherishes in exchange is an everlasting
smile on the face of Indian Farmer who forms the moving spirit behind this mission.
LOGO OF IFFCO
Logo’s 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 Iffco’s product is very good & oval
shape is meant for prosperity.
VISION & MISSION OF THE SOCIETY
VISION
To augment the incremental incomes of farmers by helping them to
increase their crop productivity through balanced use of energy efficient fertilizers; and
to make cooperative societies economically & democratically strong for
professionalized services to the farming community to ensure an empowered rural
India.
VISION 2010
In pursuit of sustained pace towards its growth, the society’s perspective
plan “VISION 2010” aims at attaining an annual turnover of Rs 15,000 crore by 2010.
For sustaining growth ensuring adequate return to the member shareholders on their
investment, IFFCO is exploring opportunities for diversification into other profitable
business areas apart from investment in fertilizer sector. Under the diversification plan,
the society would retain focus on farmer-oriented schemes and strengthening
cooperative infrastructure. Accordingly, the following business activities have identified
under the “VISION 2010”:
MISSION
OBJECTIVES OF IFFCO
the value of the Rs.100 thousand and above, such delegate shall
be as per the provisions of the Multi-State Cooperative Societies
Act/ Rules as amend from time to time.
As on March 31, 2008, the paid up Share Capital of the Society increased to
Rs.423.93 crore from Rs.422.83 crore in the previous year. During the year, the
Society repatriated Share Capital of Rs.0.25 crore to weaker cooperative societies and
issued Shares valuing Rs.1.35 crore to member Cooperative Societies. The total
number of member shareholders of the Society as on March 31, 2008 was 39,564.
The Reserves and Surplus increased from Rs.3218.92 crore as on March 31, 2007 to
Rs.3264.73 crore as on March 31, 2008, indicating an increase of Rs.45.81 crore over
the previous year. Pursuant to adoption of Accounting Standard-15 (Revised) on
“Employee Benefits”, transitional liabilities of Rs.125.14 crore (Net of Deferred Tax)
was adjusted against General Reserve. The Net Worth of the Society as on March 31,
2008 increased to Rs.3688.66 crore from Rs.3641.84 crore in the previous year.
Rs. In Crore
Category Equity % Share
The Share Capital of the Society was Rs.423.93 crore as on March 31,
2008 and the distribution of shareholding was as under:
Value of shares No of Shareholders No. of share held
FINANCIAL RATINGS
The Society’s excellent credit rating with bankers and rating agencies allows
access to Short Term funds including foreign currency borrowings at competitive rates.
CRISIL Ratings
AA-/ Stable rating on IFFCO’s Long Term Borrowing Programme. The rating
indicates high degree of safety with regard to timely payment of interest and principal on
the instrument.
“P1+ (pronounced “P One Plus”) rating to IFFCO’s Rs.100 Crore Commercial
Paper Programme. This rating indicates that the degree of safety with regard to timely
payment of interest and principal on the instrument is Very Strong.
Governance and Value Creation (GVC) rating at “GVC Level 2”. This rating
indicates that the capability of the Society with respect to wealth creation for all its
stakeholders, while adopting sound corporate governance practices, is high.
FITCH Ratings
CARE Ratings
PR 1+ (PR One Plus) rating to IFFCO’s Short Term Loans having tenure upto
one year.
‘CARE AA’ (Double A) rating to External Commercial Borrowings and other
existing long term borrowings having tenure of over one year.
INVESTMENTS
The society has invested Rs. 8.25 crore in Godavari Fertilizers & Chemicals
Limited. Which accounts for 25% of the paid up share capital of Rs.32 crore of the
Company.
SIGNIFICANT HIGHLIGHTS
Phulpur unit was awarded the prestigious “Rajeev Ratna National Award-2005” for
excellence in Indian industries-“Best Pollution Control Gold Award” by a national
magazine ‘WHAT HALLS PUBLIC SECTOR TODAY’.
Kalol unit has bagged “Rotating Shield (Winner Award)” with certificate for the
lowest Disability Injury Index from Gujrat safety Council.
Kandla unit received the “FAI Award for the year 2004-05” for the best overall
performance of in complex fertilizers category.
Aonla unit received “National Safety Award” as runner-up based on largest
accident free area.
Prestigious “National Energy Conservation Award-2005” certificate of merit in the
fertilizer sector to phulpur unit”.
OPERATION RESULT
TOTAL PRODUCTION FERTILIZER
Production 71.68
72
71
70 Production 68.47
Lakh M Tonne
69
68
67
66
2008-09 2007-08
Production
PRODUCTION OF UREA
40.8 40.68
40.6
40.4
40.2
40
Lakh M Tonne
39.8 39.63
39.6
39.4
39.2
39
2008-09 2007-08
PRODUCTION OF UREA
SALES-UREA
60
58 58.69
Lakh Tonne 56
54 54.29
52
2008-09 2007-08
SALES-UREA
PERFORMANCE HIGHLIGHTS
Of IFFCO performance during 2008-09.
Investment : Rs 651.6 Cr
Investment : Rs 945.7 Cr
Plant Capacity Consultant
IFFCO Aonla unit is one of the most efficient and quality-wise as well as
environment oriented unit so that M/s KPMG Peat Marwich, a quality registrar has
certified it as ISO: 9002 unit and M/s BVQL London has accredited as ISO:14001 unit.
At present 1150 employees are enrolled in the payroll of the unit.
HIERARCHY OF IFFCO
CHAIRMAN
BOARD OF DIRECTORS
MANAGING DIRECTOR
1. AMMONIA PALNT
2. UREA PLANT
3. PRODUCT HANDLING PLANT
4. STEAM AND POWER GENERATION PLANT
1. AMMONIA PLANT:
There are two streams of Ammonia Plant having the capacity to produce
2x1520 MTPD of liquid ammonia. The technology is based on Haldor Topsoe,
Denmark process with natural gas and naphtha as main raw material.
2. UREA PLANT:
There are four streams of Urea Plant having the capacity to produce
2x1310 MTPD of urea fertilizers. The technology is based on snamprogetti, Italy
on ammonia stripping process.
3. PRODUCT HANDLING PLANT:
Product handling plant is composed of Urea storage known as Silo and
packing and transport activities. Two silos of 45,000and 30,000 MT capacity
have been provided to Urea product to ensure continuous urea production even if
it is not taken off due to non- availability of rail wagons or seasonal demand
fluctuations.
4. STEAM AND POWER GENERATION PLANT:
To meet the continuous power supply needs of the main plants, captive
power plant and stem generation facilities have been provided. In this plant, two
gas turbines each having the capacity of 18MW along with heat recovery steam
generation unit has been provided to cater to the plant needs of power and
steam. Additionally, HRU unit of Ammonia –II add to the steam supply of the
complex.
COMMISSIONING
INVESTMENT
COMMERCIAL PRODUCTION
PRODUCT CAPACITY
TECHNOLOGY
AMMONIA PLANT Haldor Topsoe, Denmark
LOCATION
System
Design
Urea Plant & Offsite
Electrical Store
Drawing
Traffic
General
Engg.
AONLA UNIT HAS BAGGED FOLLOWING AWARDS
Indian industry (CII) and as been certified as ‘Excellent Energy Efficient Unit.’
H.O.D.
Chief Manager (F & A)
Account Officers
Senior Accounts
Junior Accounts
The various area covering under the preview of 3 subsections are as follows:
BOOKS SECTION
This section basically deals with accounting function, maintenance and
keeping of records.
Aonla Unit undertakes processing of salary and other staff related payments
of all employees through Human Resource Management System (HRMS). It is an
integrated package based on Oracle DBMS. The System integrates Personnel &
Administration Department and Finance & Accounts Department.
As per the status and operations of the society, It deals with the following Taxes:-
It is often said that now a days, financial mgt. Watches &cases various
development activities liquidity & profitability of the firm.
Few activities to be cased for:-
Last but not the least, the sound financial decision not only affect the
production and distribution but also affect the organization’s profitability and liquidity.
FINANCIAL PERFORMANCE
33432.3
35000
30000
25000
20000 12517.59
Rs. in Crore
15000
10000
5000
0
2008-09 2007-08
TOTAL INCOME
360.01
400
258
350
300
250
Rs. in Crore 200
150
100
50
0
2008-09 2007-08
PROFIT AFTER TAX
CASH PROFIT
900
838
800
700 620 725
600 642
Rs. in Crore
500
483
400
300
200
100
0
2004-05 2005-06 2006-07 2007-08 2008-09
CASH PROFIT
NET WORTH
3959
2007-08
426.28
2008-09
17,303.77
18,000.00
16,000.00 10,998.49
14,000.00
12,000.00
10,000.00
Rs. in Crore
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2008-09 2007-08
NET ASSETS EMPLOYED
INVENTORY
MANAGEMENT
Concept of Inventories
Accounting Standard -2
Types of inventory
The inventory level at which the firm places order to replenish inventory is called
re-order level. It depends on lead time, usage rate
Re-order level = lead time * usage rate
Lead time is the time normally taken in replenishing inventory after the order
has Placed.
Under uncertainty about lead time. Therefore firms maintain safety stock
which provide buffer or cushion to meet contingencies.
Re-order level = safety stock + lead time * usage rate
A firm which carries number of inventories that differ in value, can follow a
selective control system. ABC analysis classifies- A category consists
highest value, B category consists high value items, C category consists
lowest value item. Tight control may be applied for high value item and loose
control for low value item.
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.
CLASSIFICATION OF MATERIALS AT IFFCO
Inventory Consolidation
A data warehouse has been created at HO where the Inventory data of all
the Plants except Paradeep is being replicated automatically due to which information
like availability of any item of stores & spares at any Unit, status of surplus and non-
moving inventory can be accessed on line by the persons to whom access rights have
been assigned. The System is expected to help in optimizing the inventory of stores &
spares at the Units.
New Material Management System (MMS)
PMMS Phase-I having modules on Equipment Data Bank, MWR, Log Book,
History card, Preventive Maintenance Schedules and Shutdown have been
successfully implemented in all the Units except for Paradeep. It is expected to help
effective Planning and Decision making related to Plant Equipment Maintenance.
Consumption of Raw Materials, Stores etc.
2008-09 2007-08
Raw Materials 13997.22 6,646.44
6,646.44
96.26 22222233345fsdafsdfdscx
38.22
170.4
756.4
Besides these raw materials, certain stores and spares must be considered.
General Spares
General Stores
Chemicals
Steal
Cement
Catalyst
MATERIAL HANDLING
Material Handling includes moving, packaging and storing all the materials
used by the firms. The material handling systems is judged by how it serves the
production into most economical cost.
Stores section
PURCHASE SECTION
MRP SCRUTINY: Next step involve scrutinizing of the MRP to certify the
genuine of the need. For this, approval is to be given by higher authority of the
intending department. Next, MRP is sent to the store department to check whether the
material is available or not. If it is not available, then MRP is sent to the purchase
department for further action. Basis of scrutiny is of three types, namely:
Approval Scrutiny
Budget Scrutiny
Technical Scrutiny
SENDING OF ENQUIRY / INVITATION TO BID:
Items can be classified in to two categories keeping in view the
purchase function:
Proprietary Items: These items are bought from a particular
supplier/vendor.
Nonproprietary Items: These items are those items for which there is no
restriction on purchasing from a particular supplier/vendor. Enquiry is sent in
order to know the prices and other terms and conditions of vendors. It
should stipulate that:
1. IFFCO reserve the right to accept or reject any /all bids without
assign any reason.
2. FFCO shall have the right to place the order/award the work to one
or more vendor/contractor.
PURCHASE ORDER:
After selecting the best offer, purchase order is sent to that vendor with all
the terms and conditions specified and details of the material to be purchased are also
given. A bank guarantee of performance is taken from the vendor in advance which is
usually 5% of the P.O.A. time limit is set for delivery of consignment and in case of
delay a penalty is imposed @ 5% of P.O. per week.
Original + 1st and 2nd copy to the Vendor- with a request to return 1st and 2nd
copy duly signed as a token of his acceptance.
3rd copy to the Material Department
4th copy to the Store Section
5th copy to the Accounts Department
6th copy to the Indenting Department
As soon as 1St and 2nd copies are received from the vendor duly accepted,
they will be distributed as under:-
1St copy to the Accounts Department
2nd copy to the Materials Department
RECEIPT OF MATERIALS
After the consignment reaches the stipulated place, the payment is done by
the organization according to the purchase terms agreed upon by the two parties. The
material is checked for quality conditions and then sent to the store where the store
releases the “STORES RECEIPT VOUCHER” (SRV). From here it is delivered to the
vendor.
Quantity supplied.
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. OR
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.
ABOUT IMPORTED MATERIALS
MATERIAL CODING
In every organization it is very difficult to maintain the stock items in case of
large number of items. So the need of coding is created. For the material coding the
account persons assign the codes for each item of stores. So in this away every item
has its code, and code is called material code. Material coding facilitates the account
persons and store manager or anchorage to maintain the transactions of the items
whether of receiving or of issuing.
Every item maintained by its code in the stood as well as in the store
accounting section. The item / material codes remain same in stores and accounting
section. Whenever a transaction is done in store for the inventories the full details of
that transaction is send to inventories the full details of that transaction is send to the
store accounting section also, because the computers of stores and accounting
section are connected in Local Area Network (LAN). In this way it is very comfortable
task to maintain the inventories on the inventory software with the help of material
coding.
MATERIALS: PACKING & DISPATCH
All packing, boxing and crating and protection shall conform to the
specification or requirements of the order. The seller shall be held liable for damage or
brokerage to the goods due to defective or insufficient packing, marking as specifically
advised in the order or dispatch instruction shall be done by seller in decibel paint and
in such manner to ensure that the same is clearly visible. All materials shall be
dispatched by rail / road freight paid and the railway receipt / lorry receipt shall be
posted to the concerned anchorage of IFFCO.
INSPECTION OF MATERIAL
The material department shall coordinate with other departments and
arrange inspection of material at vendor’s shop prior to dispatch. Inspection of
materials in other cases shall be carried out on receipt of materials at site. Only
materials those cleared by the inspection will be taken on charge in stores. The person
inspecting the material will sign on the stores receipt voucher in token of having
inspected and accepted the material.
DAMAGES/SHORT/REJECTED MATERIALS
If the materials are received short or in damaged condition there are some
conditions in this regard. In cases where the responsibility for the transit insurance is
on IFFCO, a claim should be lodged with insurance company for the value of material
plus incidentals. As soon as the shortage per damage of the materials is noticed the
material department will lodge the provisional claim with the underwriters and pass on
the relevant papers to the finance & accounts department for lodging monetary
claim.In respect of transit insurance claims bill section will pass an adjustment entry
debiting “claim recoverable account” and credit the “Advance to vendors account”.
After the adjustments the billion sections sent the copy of journal voucher along with
all necessary details such as P.O. No. , MRR No. quantity and value, name of the
supplier to the insurance section for following up the claim with the insurance
company.
Where the responsibility for short supply or damages in transit is of the
suppliers, the material department should take up the matter with the supplier for
arranging replacement.
INDIGENOUS AMMONIA
The finance department at head office ensure that payment for these raw
materials are released on due dates to avoid interest liability. After releasing the
payments the inter unit debit advice is sent to plant. On receipt of the payment advices
the supplier’s account is adjusted in the plant.
NATURAL GAS
Kalol and Aonla plant consume as feed stock and fuel. As per the contract
with ONGC, gas is supplied to IFFCO at the price fixed by Govt. of India from time to
time.
The meters provided at the inlet point in the plants are the basis for monthly
billing. Meter reading is carried out jointly by ONGC / GAIL and IFFCO
representatives. The unit sends the telex to head office for making payment to ONGC /
GAIL after due certification of bill by the head of technical department about quantity of
gas received.
NAPHTHA
The inventory is valued based on the quantity received as per MRR received
from production department on monthly basis. The price payable to IOC for naphtha is
fixed by the Govt. by time to time the naphtha is supplied to kalol unit from Mathura
refinery.
The Catalysts & Resins are produced by the material department at the
plant; on the receipt of the material the inventory is valued at the agreed price. For
Catalysts & Resins where IFFCO has pooling arrangement with other companies,
the material received is taken to inventory at the actual price paid and equivalent
amount is credited to “material received on loan account”.
This entry will be reverse when the material is procured by IFFCO and
replenished for return of loan. The inventory and consumption account then shall be
accounted at the actual procurement price.
ACCOUNTING REQUIREMENT FOR STORES AND SPARES
INVENTORY LOOSE TOOL ACCOUNT: consists of hand tools, M/C tools, Rigs
and fixtures.
CHEMICALS
Chemicals are surely most important part of materials used in the
production process. The different chemicals constitute the following:-
Hydrochloric acid (HCL): procured from either United Alkalies or from Bhatia Acid.
Caustic Soda (NaOH): is procured from United Alkalies
Sulphuric Acid (H2SO4): is purchased from K.L.Singhania& Sons.
Liquid Chlorine: is purchased from Kanoria Chemicals
Alum
Ferrous Sulphate
Hydrated Lime
Liquid Nitrogen
Furnace Oil
High Speed Diesel (HSD)
PACKING MATERIAL
HDPE/Jute Bags are procured from Kanpur Plastipack Ltd. and Modern
Laminators Ltd. they are in 2 different forms:- 25 kg. And 50kg. For both units of Aonla.
STORE SECTION
Main Store.
Cement godown.
Petrol Pump.
Cable yard.
Chemical godown.
Paint godown.
PDIL store.
Accounting of receipts, issues, returns and transfer of materials
1. The 2nd copy of material receiving report after the pricing shall be
posted on to the stores accounts section to scrutinize. The final check list entry
in Price Stock Ledger is processed. The section shall ensure that all receipts,
issues, returns and transfers vouchers raised by the stores section are finally
posted in PSL.
RECEIPT SECTION
This section is responsible for receiving the materials and inspecting them.
The process involves following steps.
The document regarding the material may be sent to the stores, purchase, concerned
dep’t. But ultimately they have to be send to stores. The following
documents are:
Goods receipt / railway receipt / challan
Form 31
Excise duty
Toll tax
The particulars of the document are noted in the carriers receipt register (CRR)
After the entry in the register, the document is given to an agent termed as handling
contractor. He will collect the material Consignment’s cases are intact. If not he will ask
for open delivery. He then has to deliver the goods to stores. In case of damage he has
to give a certificate. Some consignment may without document i.e. door delivery and is
some cases it may be face to face delivery.
If any discrepancy is found during checking, the accounts section is informed for
necessary action and getting claim from insurance company. The date of receipt is filled
in CRR
The next operation is filling the stores receipt vouchers (SRV) here the quantity
mentioned in challan and purchase order are compared, SRV Has 7 copies, two for
accounts and one for each purchase, stores, indenter, master file & custody section.
Suppose all items are accepted then the material is handed to custody section after
putting identification & giving a SRV control number.
If some items are defective then the accepted items will be sent to custody and for
defective ones, information is sent to supplier, accounts, indenter & insurance company
and the particulars noted in rejection register.
If there is some breakage then either item may be replaced by company or claim against
insurance is obtained, when an item is replaced, its dispatch advice is made.
Direct charge SRV (DCSRC) is prepared when indenter wants material directly from
receipt section.
CUSTODY SECTION
This section is responsible for proper keeping of materials and issuing them
when required by different department and contractors. The material received here
is first checked as per SRV for every material there is a card. These cards are located
in bins according to code of material is received in custody the card information is
updated.
When some one wants to issue certain material he has to fill the store issue
voucher (SIV). Once the item is issued again information is updated in the card. When
a particular part is returned then this received in stores, by internet stores return
voucher (ISRV). After issuing the material the number of issue and the quantity issued
is noted in SIV control registers.
The authority of receipt, store and issue of all material is centralized in the
materials department subject to exception in permitted in certain cases.
The 2nd copy of the material receiving reports after pricing, shall be passed on to
the stores accounts sections to scrutinized the same with reference to store item code
quantity of measure etc. and process it for accounting of receipt of materials. After
issue / return of materials, issue section of stores department arranges data entry on the
daily basis. Checklist processed is sent to stores accounting section for scrutiny in
respect of store item code, cost / service code, expense code and unit measure etc.
The corrections and financial and financial adjustments are made to arrive at final
check list after scrutiny of final check list entry in priced store ledger is to be processed.
The section shall ensure that all receipts, issues and returns / transfer voucher raised by
the stores section are finally posted in the price store ledger.
For clearance of imported materials, amount deposited for custom duty in the PD
account etc. Shall be cleared against individual MRR’s on receipt bill of entryThe issue
notes shall be priced on the weighted average rate basis after accounting the last
receipt of material. After ascertaining the nature of expenditure, the job for which
material is issued; an appropriate account code shall be given in accordance with the
chart of account.
In case of material like steel plates etc. where materials are received
on actual weight basis and the issues are accounted are on theoretical weight
basis as per sectional measurements, the quantity accounting shall be kept on
weight basis. The difference in quantity in weight basis, if any, shall be adjusted
to revenue / capital account, as then case may be, in consultation with
consuming department, incase the shortage is more than the consumption
norms, the same should be recovered from the contractor.
For all issue notes relating to works contracts, one copy of the price issue notes
may be sent to the work accounts section to enable them to debit the contractor’s
account.
A monthly abstract also be prepared and passed on to works accounts group for
check.
Details for receipts and issue of materials received / issued on loan shall be
maintained by the store account section loan transactions shall be approving by the
competent authority. It is the responsibility of material department to take action to
square up the transactions within the reasonable time.
Inter unit transfer of material shall be accounted at cost basis freight and other
incidental charges shall be borne by the transferee unit.
For material returned to stores, return note shall be priced by the stores
accounting section at the same rate which it was issued and the value shall be debited
to the relevant code of stores and spares parts inventory accounts by credit to the cost
center / job number where the material is received back. The return note shall be priced
on the basis of the original issue requisition against which the material was drawn if
such reference is available, otherwise the same should valued at the prevailing
average monthly rate applicable to that material.
No material shall be transferred to one card to another card without giving proper
information to the stores account section. Such transfers shall be made by means of a
transfer voucher on receipt of such transfer voucher and pass adjustment entries by
debiting and crediting respective accounts.
The price store ledger balance for each category store shall reconciled value wise
with the control account balance in the ledger wherever possible. The accounts
For stocks of ammonia, naphtha, general stores, bags, phosphoric acid, and
finished products held at plants, insurance shall be taken to cover the risks arising out
of fire explosion, riot, strike terrorism, malicious damage, earthquake, etc. The stock of
finished products lying at different marketing warehouses should also be adequately
covered through the warehousing agencies.
According to the value of stores and finished products keeps on varying from
time to time, insurance shall be obtained in the form of declaration policy whereby the
average daily stock for each product held during the month shall be declared to the
insurers in the first week of the next month.
According to the declaration policy, the insured amount foe each product
shall be stated separately. The liability of the insurers is limited to the insured amount.
At any time if it is found that the actual stock is more than the insured amount to avoid
less amount of insurance. In case of a declaration policy, insurance premium is
payable for minimum 35 % of the insured value. Before insurance is obtained, various
categories of stores shall be reviewed with a view to select such items for which
insurance is considered necessary.
The officer of stores will coordinate the job of physical verification and the
accounts officer in charge shall render all assistance to ensure that the physical
verification of inventories is carried out as per the policy and the policy and the
approved program. The store department will ensure that the posting in the Kardex are
updated before the verification of inventories.
Finished Products
The stocks of raw materials, packing materials are to be verified on quarterly
basis by an independent surveyor by the society. No adjustments need be carried
out in the books of accounts unless the discrepancies in liquid raw materials and
solid raw material are in excess of 1% to 5% respectively. This is as per guidelines
issued by the head office.
In case of finished goods also the same principle applied except that no
adjustments in the books of accounts shall be made. However the stock registers shall
be adjusted on the basis of actual stock in order to replace the notional figures of
stocks by more accurate estimate based on physical verification.
A team of stock verifiers shall prepare a stock verification sheet giving the
kardex balance and the physical balance of each item covered in the stock verification.
After filling up the particulars of the value and quality discrepancies with reference to
the priced stores ledger balance, the stock verification sheets shall be forwarded to the
materials department for scrutiny and reconciliation and adjustment in consultation
with finance department accepted shortage shall be processed for the approval of the
competent authority. After each physical verification by the custodians of inventories
and suitable adjustment action has to be taken. It is desirable to complete the physical
verification work by March every year so that reconciliation / adjustment action can be
completed within the year itself.
INTERNAL CHECK
One set of document for receipts, issues and return of materials shall be
sent to the accounting section of finance department. Based on these documents,
priced store ledger shall be prepared for each item for stores. The material code
number between stores and accounts shall be identical. The priced store ledger shall
provide value of each receipt, Issue and return transaction along with quantity ledger.
The quantity balance appearing in priced store ledger shall serve as counter check for
accuracy of bin card balance in store which is essential for proper functioning of
inventory control system.
The priced store ledger shall not be maintained for large number of low
value items such as stationery, medicines, canteen stores etc. in this case the
expenditure shall be charged to the appropriate expense account at time purchase.
Quantitative record shall be kept by the concerned department and shall be produced
as and when required for audit purpose.
To ensure that finished goods are available for delivery to customers just to
fulfill the order.
Min-Max plan
Min-Max plan
In this plan analyst lays down a maximum and minimum for each stock
item. Minimum level establishes the reorder point and order is placed for quantity of
material, which will bring it to the maximum level.
Maximum Level
It represents minimum quantity above which stock should not be held at any
time.
It represents the minimum quantity of stock that should be held at all the
time.
Safety Level
Normal issues of stock usually stopped at this level and made only under
specific instructions.
Ordering Level
OR
= Maximum Consumption* Maximum re-order period.
Inventory turnover ratio = Days during the period /Inventory turnover ratio.
The percentage of slow moving stores = Slow moving stores / Total Inventory
With the numerous parts and materials that enter into each and every
industrial production, inventory control leads itself, inventory and foremost, to the
problem of analysis. Such analytical approach is popularly known as ABC (ALWAYS
BETTER CONTROL) Analysis.
This Plan is based upon segregation of arterial for selection control. It
measures money value i.e. cost significance for each materials item in relation to total
cost and inventory value. The logic behind is that the management should study each
item of stock in terms of its usage , lead-time , technical or other problems and its
relative money value in the total investment in inventories. Critical, i.e. high value items
deserve very close attention, and low value items need to be devoted minimum
expense and effort in the task of controlling inventories.
INVENTORY SOFTWARE
Data entry
Queries
Reports
Processing
Calculator
Exit
Surplus items:-
i) items which are in excess of the needed consumption can be considered as surplus
items, if such items are lying in inventory beyond 4 years and there anticipation of
the consumption in the next 3 years
ii) items may not be declared as surplus where purchase order has been issued and
such items are required during the period under review .
The non moving items of stores and spares should be evaluated based on
estimated realizable value as under.
ii) Items not moved for five years and above 60% of he
Original cost
iii) Items not moved for seven years and 55% of the
Above but less than ten years. Original cost.
iv) Items not moved for ten years and above. 50% of the
original cost.
Surplus items :-
b) Exchange the list of obsolete /surplus among their fertilizer plants having
same machine time frame of two months.
c) Exchange the list of obsolete/ surplus items of captive power plant with the
other power plant.
d) The list of surplus items can be offered to OEM under buy back
arrangements if any.
DATA ENTRY MENU
Data Entry
Document Entry
The very first menu that is data entry is used for the various types
of entries of transactions. In the data entry menu there are several options shown in
above diagram.
DOCUMENT ENTRY: This option is used to enter the data in various types of
documents like SRV, SIV, ISRV, and STV (in), STV (out) etc.
ADJUSTMENT ENTRY: With the help of this option we may easily make the
adjustments in the stock issue voucher (SIV), due to any previous adjustment.
ADJUSTMENT ISRV: This option of data entry menu has the same working in
issue stock return voucher (ISRV).
PHYSICAL VERIFICATION: In case of verification of stock the people
responsible for stock verification estimates a range of items for verification and after
verify the selected range of items; they punched the quantity verified or lock the verified
quantity till the next verification.
Entry of Surplus: This option is used for adjust the surplus items which are
declared by the plant. The surplus items means, the items which are exceeds from the
records. So in case of this situation the accountants make an entry @ of 1 Rupee per
unit of items.
REPORTS MENU
Reports
PSL JV
Month reports after PSL run
SUMMARY A/C HEAD WISE: This option creates the summary reports of all the
PSL JV: After processing of PSL run all the documents becomes updated
and all the transactions also gets updated. So that by this option we can see all the
journal voucher of the entries of inventories.
KARDEX: The kardex is the very useful tool for showing the current status
of all the items. Kardex shows the update inventory and also shows the past status of
every past tears. The accountant may see the past status as on any past date.
Processing
Processing is the most important task of this software, because all the reports
which are forwarded to the concerning authorities and are the basis for the further
actions are made only after the processing or the PSL run. PSL processing makes
update all the documents.
PSL PROCESS I: The option process I updates and calculates the values for
all documents and makes available to create the final reports. Once a PSL run is
processed the data can not be changed, So that this task is very sensitive so the
operating person should have the great care and responsibility in processing task.
CALCULATOR: The calculator menu has no sub option we can use the
calculator only by clicking on the calculator menu. It helps much in manual
calculations make the surety of correctness.
EXIT: Apart from this the exit menu is simply for quitting the software,
whenever we click over the exit menu, we exits from the software.
MATERIAL MANAGEMENT
1) Material Planning and Programming. As Introduction
2) Purchasing.
3) Inventory Control.
Receipts, issues
Warehousing
Inventory control
Maximum level , minimum level, reorder level, and safety stock level
List of
registered
Store section vendor
20 Lacs Exceeding
2 Lacs
Checking of MPR
MPR
script Purchase depts.
Bids
3min
Enquiry
Approval of
indentor/finance
Purchase Is
Order/ Tender QCS
Purchas
Letter committee
es
6 Copies
Sto
p
Purchasing
This includes selection of sources of supply finalization of terms of
purchase, placement of orders follow up, maintenance of smooth relations with
suppliers, approval of payments to suppliers, evaluating and rating suppliers.
I. RECEIPT SECTION
II. CUSTODY SECTION
Aonla unit has total inventories of about 58 crores currently. It has been
reducing from previous years using effective stock verification, maintenance of stock
levels and inventory control.
Urea is the main product. The raw material for this ammonia and CO2.
Aonla unit has both ammonia and urea plant for making urea, procuring raw materials
to urea plant . Bagging deptt. is concerned with packing of urea in bags and dispatch
through rail wagons daily on the recommendation of the H.O. or on prescribed
guidelines.
Inventories Spares
Ammonia Mechanical Instrument Electrical
Urea ” ” ”
Offsite 1
Offsite 2
Product handling
Power plant
I. Receipt section
When goods are bought in the receipt section a CRR (Consignment
Receipt Register) no. made for the above material. CRR No. is being made in the
computer itself. Goods are inspected by the store keeper from the purchase order and
challan to verify the quantity of the goods received. The SRV is prepared. Indentor is
asked to inspect the material and verify the material with quality inspection. Getting
verification from indentor material is being tagged.
ITEM TAG
P.O. No. ______
CRR No. _______
Item Code ________
Centre Code ______
Inspection Mark _____________________
Signature Indenture _______________
1) ID: These vouchers bare issued by the particular department for general
item.
2) IB: These vouchers are issued by the department for the spares.
3) IC: Such type of voucher is generally issued by the contractor for the
issue of requisite material.
4) IE: Such vouchers are issued by the particular department for the
stationery items.
5) IA: These vouchers are generally used by the contractor for the issues of
spare parts.
The copy of these SIV will be dispatched to the following department such as :
(a) One copy to purchase department.
(b) One copy to indenter.
(c) Two copy to account department.
(d) One copy is lie with the store itself.
(e) One additional copy to security.
ISRV ( INTERNAL STORE RECEIPT VOUCHER)
The 100% of the issued material have not been utilized by the particular
department or parties, in this stage the concerned party or department will revert that
the remaining raw material to the store by using such type of issue voucher.
These ISRV can be of five types such as:
1) BD: Such type of ISRV is generally used by the particular department for the
general item.
2) BB: These ISRV are used for the spare return by the particular department.
3) BC: Such type of ISRV is generally used by the contractor for the return of
remaining raw material.
4) BE: These vouchers are used for the stationery items.
5) BA: These are also used by the controller for spares.
The copy of these ISRV will be send to the following department such as:
(a) One copy to store.
(b) Two copy to account department.
(c) One copy lie with indenter itself.
The issue note shall be priced on the weighted average rate basis after
accounting the last receipt of the material. After ascertaining the nature of expenditure
the job for which material is issued, an appropriate account code shall be given in
accordance with the chart of accounts.
RESEARCH
METHODOLOG
Y
RESEARCH METHODOLOGY
and groups, focused primarily on their experience within their social worlds,
inclusive of social attitudes and values, the mode of analysis of these experiences
which permit stating proposition in the form. ”Research covers the search for and
retrieval for a specific purpose. Basically research is a search for knowledge with
the help of objective and systematic method of finding solution to a problem. Steps
FINDINGS
FINDINGS
Majority of the farmers are using IFFCO product and rest are using other
including Tata, Narmada &others.
Most of the farmers are selecting the fertilizers on brand basis and second
major criteria to select the fertilizers is availability
90% of the farmers desired for the plastic bag and only 10%for the jute bag
70% of farmers desires 50kg pack & rest 30% prefer 25kg pack.
I found that farmers are satisfied with the IFFCO fertilizers even in unadopted villages.
Moisture control
LIMITATION
LIMITATION
In IFFCO, there employees are not having that much time to give us the
information about the topic.
Some employees are not that much qualified according to the job profile.
inventory level is going down. But the fact is that, if inventories are minimized without
substantial usage (in terms of monetary value and annual consumption) and a large
proportion of items accounts for a small usage. ABC analysis based on this empirical
reality advocates in essence a selective approach to inventory control, which calls for
a greater concentration of efforts on inventory items accounting for the bulk of usage
value.
Responsibility for control of inventories is of the top management, though
decisions in this regard might well be based upon the combined judgment of the
production manager, the sales manager and the purchasing manager. This is desired
in view of the financial considerations involved in the problem and also because of
need for coordinating the different kinds of inventories and conflicting viewpoints of
may be constructed for inventory monitoring and controlling, which consists some
following elements:
of raw material and work in progress which tends to limit the utility of
stocks.
items.
BIBLIOGRAPHY
BILBIOGRAPHY
Website
• www.iffco.nic.in
Search Engine
• www.google.com
Books
• IFFCO Company’s Annual Report 2006-07
• Guidelines on identification, Obsolete, Surplus items. IFFCO
Manual
• Students’ Guide to Accounting Standards: Rawat,D.S (2003)
• GopalKrishnan, P; Sudershan,M.- An Integrated Approach on
Material
Management ( Prentice Hall )
• Doler, W. Donald; Lee Jr, Lamer; Burt, N David, Inventory
purchasing& material management system.
• Pandey; I.M – Inventory Management (Vikas Publications)
• ++ Valuation of Inventories AS-2
Indian Accounting Standards and GAPP by Dolphin, D’Souza
(Snow White Publisher)