Kribhco

1 Anand Institute of Business Study

Anand Institute of Business Studies (Managed by Shri Ramkrishna Seva Mandal) Anand: 388 001 2008-2009 SUMMER TRAINING (JUNE-JULY '2009) 2008-2009

A

PROJECT REPORT

ON

INVENTORY MANAGEMENT AT

KRISHAK BHARTI CO-OPERATIVE

LIMITED

SUBMITTED TO:

SUBMITTED BY: Rahul N. Prajapati

Anand Institute of Business Studies(Managed by Shri Ramkrishna Seva Mandal)

Anand: 388 0012008-2009

SUMMER TRAINING (JUNE-JULY '2009)2008-2009

PREFACE

This project is prepared during the vocational training under taken at “KRIBHCO”,

SURAT. On partial fulfillment of the degree in “Master of Electronic Business.”

Hence, this report is designed with the objective to gain practical knowledge and is

undertaken on a chemical fertilizer manufacturing industry. According to an old saying there

is a huge difference between to say and to do. To take theoretical knowledge is important but

it becomes more valuable when we apply it in the practice. So there is a huge gape between

theory and practice. So, for fulfilling this requirement, training in the KRIBHCO was very

practical exposure for us. This training provides golden opportunity for all students,

especially when the management student does not have perfect understanding of the working

of a unit.

Hence, this report is designed with the objective to gain practical knowledge & is

undertaken on a fertilizer manufacturing industry.


Acknowledgement

Sharing our experience is one of the biggest honors, which every one cannot experience. To

share our experience at KRIBHCO as management student is a matter grate honor and pride.

We are grateful to KRIBHCO for letting us to do this project. We express our gratitude to

Mr.N.K.Sahoo (P&A Manager), Mr.K.Ashokan & Mr.Sampat (store department),

Mr.Thomas T.S. (F & A Deptt), Mr.J.Naik (Purchase department), Mr.Tondon

(Transportation department), Mr.M.N.Patel & Mr.Purbia (H.R.D department), Mr.M.S.Desai

(Marketing department).

We are really thankful to employees of KRIBHCO who have been guiding us in this path

Step by step and have made our path really simple to get through .we will use this experience

through out our career and will make our future bright. So once again we thank all of them.

In regard to this programmed, we would like to acknowledge our gratitude and

Thanks to coordinator,

“Anand Institute of Business Studies,

Sardar Patel University”

for catering us the opportunity of training. We also forward our special thanks to our All

Faculty Member for guiding us in training Programme. The valuable suggestion of our

faculty members during the course our Project work and giving us inspiration to achieve our

goal. The shape that project has been taken is due to our faculty member’s help, judicious

guideline and encouragement.

And the most precious part of our life, our parents who have showered their love and support

which can be never repaid in any form but can be commemorated without them this

achievement could not have been achievement.


Declaration

I the undersigned RAHUL N.PRAJAPATI this financial training report with

“KRISHAK BHARTI CO-OPERETIVE LTD” is the result of our study which carried

out during 1 June to 31 July, 2009 and has not been previously submitted to any

other university or institute for any other examination and for any other purpose by

any other person.

Place: SuratDate: 31/07/2009


EXECUTIVE SUMMARY

Today the significance of project work has greater importance in business world. Practical

knowledge is as important as theory so that one thing is said, “Practice makes a men Perfect “

I have made my project in “KRISHAK BHARTI CO-OPERETIVE LTD” which is basically

pharmaceutical company. I have made the report depicting the companies working

mechanism and the overview of its entire department. The companies mainly comprises of

following department:

- Production department

-Marketing department

-Finance department

-Human Resource Development

-Purchase & Store department

In the purview of Production department the process has been studied separately for 3

departments of the company (i.e) Bulk Packaging, Medium Packaging & Injection molding

Department, in production department we also describe the process of various products like

Ammonia, Urea, and Power plant. In order to understand the mechanism of Human Resource

department we took all relevant information of the functional field. The responses were

analyzed and suggestion was provided in order to make their entire working mechanism to

increase its efficiency considering the human perspective. In marketing department we study

the strategy which will be selected or adopted by KRIBHCO. In finance department I studied

capitalization, working capital management etc. In purchase & store department the activity

done by this department is covered under this report.

As a part of the project report a special topic was selected for studying and analyzing in detail

the entire working of the Company. I have done report on production planning & Control to

learn the entire production process of the company and basic operation of entire production

planning and control. The Process chart was used depicting the entire production process and

step-by-step planning of the process.

The topic of my project is Inventory Management. In next part of the project contain the data

regarding Inventory Management. In this the Process of Inventory Management means how

inventory should be maintain and the various techniques adopted by KRIBHCO for Inventory

management should be studied under it.


INDEX

SR NO. SUBJECT PAGE NO.

1 PART 1: GENERAL INFORMATION ABOUT

VARIOUS DEPARTMENT

2 INTRODUCTION 08

3 GLOBAL SCENARIO OF FERTILIZER INDUSTRY 10

4 INTRODUCTION OF KRIBHCO 13

5 ORGANIZATIONAL CHART OF KRIBHCO 23

6 HUMAN RESOURCE DEPARTMENT 25

7 MARKETING DEPARTMENT 37

8 TRANSPORTATION DEPARTMENT 45

9 PRODUCTION DEPARTMENT 47

10 MATERIAL DEPARTMENT 52

11 PURCHASE DEPARTMENT 53

12 STORE DEPARTMENT 56

13 FINANCE DEPARTMENT 59

14 PART 2: INVENTORY MANAGEMENT

15 METHODOLOGY 66

16 INTRODUCTION OF INVENTORY MANAGEMENT 67

17 INVENTORY MANAGEMENT IN KRIBHCO 70

18 CLASSIFICATION OF INVENTORY

MANAGEMENT

82


19 EOQ 86

20 COMPOSITION OF TOTAL INVENTORY 90

21 SUGGESTION 91

22 SWOT ANALYSIS 92

23 RECOMMENDATION 94

24 CONCLUSION 95

25 BIBLIOGRAPHY 96


India lives in villages” said Mahatma

Gandhi decades ago. It is true even today.

Like every developing economy, the economy

of India is also agro-based. Agriculture

accounts for nearly 1/4th of India's GDP and

more importantly, about 2/3rd of the country's

population is dependent on agriculture and

allied activities for their livelihood. As per

statistics nearly 175 lakh MT of fertilizer

nutrients are required every year in this country. The demand of fertilizers was so high

that India had to import almost 30% of its requirement from other countries.

Therefore, to achieve the economic growth, agriculture base of the country must be

strengthened. To attain this objective, agriculture practices have to be improved from

their traditional pattern to a higher technological track involving better irrigation and

use of better quality seeds, fertilizers, insecticides & pesticides. Therefore, chemical

fertilizers are key player in this process and fertilizer industries plays quite a major role

in increasing food production in the country and also helps to modernize the out look of

the common farmers and make them innovative and respective to the new technology

change.

A fertilizer is any material, organic, inorganic, natural or synthetic, that is

placed on or incorporated into the soil to supply plants with one or more of the

chemicals elements necessary for normal growth. Fertilizer is the material, which

supplies the chemicals elements required for plant growth. Primary nutrients like

nitrogen, phosphates and potassium (required for fertilizer land) are supplied through

chemical fertilizer. Fertilizer response studies have proved that one kg. of fertilizer

nutrient application can the food grain production by 8-10 kg.

Fertilizer production is of permanent importance for this country because

fertilizer increases agriculture productivity. One hand population increasing but on the

other the supply of land is totally fixed. So we have to produce more without any


increase in arable land area. This can be done if productivity goes up. And fertilizer

plays a major role in productivity escalation.

As this is a vital commodity it is in the interest of nation that farmers get

fertilizers at reasonable rate and in adequate quantity. Looking to the poor economic

condition of Indian farmers Government of India framed fertilizer policy in 1977 based

on Maratha committee report. The purpose behind introducing this policy was to

supply fertilizer to resource poor at a price they could afford, so as to increase the

consumption of fertilizer, to increase food production, and ensure fair return to

fertilizer producers.

With this twin objective, Retention Price Scheme (RPS) for fertilizers came into

picture. In this scheme government has brought the fertilizer under the preview of

Essential Commodities Act (ECA) in which the retail price of fertilizer to the farmer is

notified by the Government of India from time to time. This retail price to the farmer is

uniform throughout the country and is subject to local taxes applicable under the

respective States.

Further under ECA, the government also operates a system of distribution

control in which the manufacturers including the handling agents for the imported

fertilizers are directed to sell specified quantities of fertilizers in given states/union

territories. While doing so, the logistics of fertilizer distribution including storage,

transportation, handling etc. are also suitably regulated conforming to overall supply

plans of the government to meet the requirement in all the parts of the Country.

Now manufacturers also should get reasonable rate of return as all incentive for

producing fertilizers. Manufacturers should get at least that much, which call enable

them to remain in the industry.

Government of India fixes the price of fertilizers in such a way that

manufacturer's cost of production including cost of marketing is covered and the

manufacturer gets a 12% post tax return on net worth of the unit at a pre-defined

capacity utilization. Norms are fixed for consumption of raw material, utilities, services,

capacity utilization, depreciation etc. The price so fixed is called Retention Price (RP).

This price is reviewed every three years.

In a nutshell fertilizers can not be sold in open markets and producing unit has

almost nil say in fixing fertilizer price. Then how to increase profits? By operating plant

efficiently only.


3. GLOBAL SCENARIO OF FERTILIZER INDUSTRY

The United Nations projection indicate the world population has been increasing at very fast rate while the nature resource such as land remain the same so, to recover increasing demand for the food grain the productivity of the crop can be increased by using fertilizer.

Today 35% of the world fertilizer/production from developing countries. But

their consumption’s being 50% of the total global fertilizer consumption’s; the

developing countries are the net importer of the fertilizers. This is natural because they

are essential agro based economics. While Canada and U.S.A. are top exporters of

fertilizer in the developing countries. India and china are also develop/ping their

scenario in the world market.


-:: INDIA SCENARIO ::-

By fiscal year 1995, the fertilizer consumption in India touched 13.56 million

tons. In the same year, the total supply was 10.43 Million tons. With that become the

third largest producer after U.S.A. and china. To bridge the demand and supply gap

India has to import necessary fertilizer.

-:: WORTH OF FERTILIZER INDUSTRY ::-


1. Pro Green Revolution Period

2. Green Revolution Period

3. Post Green Revolution Period

● Pro Green Revolution :

The period is described in 1952-1953 era where increased growth of food grains

took place however this increased production in food grains took place due to increased

irrigation method. In this phase the land under agriculture was made more during this

period about 80%of the company’s population was involved in agriculture either

directly orindiretly.

● Green revolution Period :

During this phase government stated the programmer aimed at marking our

country self sufficient in food product this was the period between the year 1959-1960

this plan laid the emphasis on production of high yielding varieties. To make this plan a

success there was a high need to make sail fertile by providing it with nutrients like

phosphorus nitrogen and potassium.

● Post Green Revolution Period :

The words population along with Indian population has kept on growing at an

alarming rate the fertilizer companies all over India are trying to expand their scale of

operation in order to increase the production rate. The demand for fertilizer per year is

increasing. The current demand of fertilizer in India is 18 million tones.


4. INTRODUCTION OF KRIBHCO

Krishak Bharti Co-operative Limited

“KRIBHCO” the world’s premier fertilizer producing co-operative has an

outstanding track record to its credit in all spheres of its activities. Since 17th April 1980

as a national level co-operative society promoted by Government of India authorized to

manufacturing and distribution of fertilizers. Chemical fertilizer and allied farm

imputes “KRIBHCO” imbibed the co-operative philosophy fulfilling its commitment to

strengthening and promoting the cause of agriculture development and co-operative

movements in the country.

Krishak Bharti co-operative limited popularly known as “KRIBHCO”

has been registered as national level co-operative society under the provision of the

multi-state co-operative societies act, 1984.

The”KRIBHCO” hazira unit is located around 15 kms, west of Surat and

lies on the north of river Tapti. An all weather road from Surat to hazira connects the

plant site with the city. The cannel belonging to irrigation department is running on the

plant site and is feeding water from ukai. A railway feeder line apporx. 55 kms. Long

has connected the site with Bombay –Ahmedabad main line.

KRIBHCO multiunit co-operative societies were promoted jointly by

IFFCO and the agricultural co-operative all over the country.


KRIBHCO PLANT AT HAZIRA

Plant is based on Natural Gas from BOMBAY HIGH SOUTH BASSEIN. The

society massive Ammonia, Urea complex is situated at HAZIRA near SURAT in

GUJARAT.

KRIBHCO plant is one of the largest and most modern fertilizer compels in the co-

operative sector in the world. It has two phases on UREA plants consisting of two

streams of 1520 MTPP with an annual capacity to produce 14.52lakh.MT of urea

equipment to 6.68 lakhs MT interns of nutrient nitrogen.

KRIBHCO aims to fulfill the ever-growing fertilizer needs of the country. The

HAZIRA project with project zero date of 31st March, 1985. The estimated project cost

was Rs.957.71 crore However, the final project cost was Rs.885 crore resulting in hot

saving at Rs. 72.71 crore.


MEMBERSHIP: -

A cooperative thrives on the trust of, its members. Membership of

“KRIBHCO” is open to government of India, national state and district and village

level cooperative society. At the initial stage, way back in June, 1981 the total

membership in ”KRIBHCO” was only 221 cooperative societies which rose

significantly to 6044 cooperative societies as on march 31,2008 as against 5790 as on

march 31 2007. Phenomenal progress made by the society becomes a testimony to

the ever-increasing membership over the years.

The total paid up share capital as on March 31, 2008 was rs.39, 354.15 lakh as

against rs.49, 170.72lakh in the previous year. During the current financial year, the

society has refunded share capital of rs.9700 lakh to “IFFCO” and government of

India respectively .the state –wise membership with share capital contribution as on

March 31, 2008 vis-à-vis march 31 2007.

MISSION: -

A) To contribute to agriculture &rural development in the regins.

B) Services to members of cooperatives society by selecting financing

C) Managing society desirable and commercial profitable investment

opportunity preferable at multiple locations.


5188

56245732 5790

6044

460048005000520054005600580060006200

2003-04 2004-05 2005-06 2006-07 2007-08

Years

Kribhco Membership

VISION:-

They want to be a world class organization that represents the farmer

community and maximizes returns to them through specialization in agricultural

inputs and products and other diversified businesses that maximize

stakeholder value.

OBJECTIVES: -

a) To undertake the activities for he rural upliftment and agriculture development.

b) To promote economic interest of its members by undertaking manufacturing of

chemical fertilizer & allied product.


In furtherance of these objectives “KRIBHCO” may undertake one or more of the

following activities: -

(I) To undertake production processing, manufacture, sale distribution, marketing,

import export and to otherwise deal in agriculture production requisites.

(II) To set up storage units for storing fertilizer and other goods by itself or in

collaboration with other agency.

(III) To act as warehousing agency under the warehousing act and own go downs or

hire go downs for the storage of fertilizers and other goods.

AWARDS: -

The excellence performance of the society has brought a number of laurels from various

organizations .The awards received during year were as follows: -

(I) National productivity council has awarded productivity award the society for

bio fertilizer product for the year 1999-2000, 2001-2002 in the year 2003-

2004.

(II) Hazira ammonia extension project (HAEP) rotating shield winner and

certificate for lowest disabling injury index in group-c industries.

(III) Sardar Vallabhbhai Patel Agriculture and Technical University, Meerut – All

India Farmers Fair And agro Industrial Exhibition – First Prize To Kribhco on

10-03-2005.

(IV) Kribhco has won first prize for Bio-Fertilizer Production, Marketing And

Promotion Award For the year 2003 And 2004 by National Productivity

Council (NPC). Award Has been given formal function held on 10 th

May,.2005 by Honble Minister For Agriculture Shri Shard Pawar Ji.

(V) Special Participation Award in Corporate Sector Event “ Vyapar 2005” Event

Organized By Southern Gujarat Chamber OF Commerce And Industries From

February 11 – 16, 2005, the theme of pavilion was “ Development OF Bio-

Technology In Kribhco


KRIBHCO HAS WON ENTERPRISE EXCELLENCE AWARD

Managing Director Shri V.N. Rai is holding the Gold Plaque

KRIBHCO has won the Enterprise Excellence Award for the year 2003-2004 in thefertilizer sector from the Indian Institute of Industrial Engineering (IIIE) ,forfinancial and operational strength of the Society. The Award consisted of a gold plaque with certificate of Excellence was presented by Dr. T.S Vijayaraghavan, IAS (Retd), former secretary, Petroleum, Govt of India, at the 8th CEOs Conference at Kodaikanal.


The Prime Minister Shri Ataal Bihari Vajpayee is presented a dividend cheque by the Managing Director, KRIBHCO Shri V.N Rai in New Delhi on september 12, 2003 (Friday).

HISTORY OF KRIBHCO: -


Encourage with the successful operation of fertilizer plant of kalul, kandla and

phulpur in the co-operative Limited. (IFFCO) higher to the one and the only co-

operative in the fertilizer industry has promoted another co-operative namely

“KRIBHCO” Ltd to made the new giant plant of hazira.

MILE STONES: -

(I) Project zero Date : 31/03/1981

(II) Foundation stone laid by Smt. Indira Gandhi: 5/02/1982

(III) Project completion : 31/03/1985

(IV) Plan completion : 26/11/1985

(V) Commercial production : 1/3/1986

(VI)Percent capacity utilization : Urea 99%

Ammonia95%

(VII) Plant ready of production : January/September,1985

(VIII) Gas available by ONGC : PHASE 1 & PHASE 2

18-9-85 6-11-85

(IX) Trial production Ammonia : PHASE 1 & PHASE 2

14-11-85 30-11-85

Urea (stream 11/31) 26-11-85 13-12-85

Ammonia (stream 21/41) 31-12-85 01-12-85

(X) ISO certificate (I) KRIBHCO plant

ISO 9001-2000

(II) KRIBHCO plant

ISO 14001

(III) KRIBHCO Mktg office

ISO 9001-2000


DEPARTMENT AND MANPOWERS AT “KRIBHCO”

Financing & Accounting 62

Personnel & administration 82

HRD 09

Security 101

Material 55

Medical 32

Mechanical 210

Transportation 29

Fire safety 45

Purchase & store 56

Instrument 90

Electrical & civil 101

Laboratory 54

Production (HEAP Plant) 440

Total 1379

Contract labor 1600

Total manpower 2979


PERFORMANCE HIGHLIGHT:-

RECORDS 2007-08

Highest monthly urea dispatches from Plant Oct. 06 since inception

Earlier Record (Dec. 87)

1.98 Lacs MT1.94 Lacs MT

Highest monthly Urea Sales July 06 since inceptionEarlier Records (June 87)


Highest Total Annual Urea Sale 2006-07 since inception

Earlier Record (2005-06)


Highest Daily Bio Fertilizer Production from Hazira Unit ( 01-14.11.2006)

Earlier Record

3000 Kg2660 Kg

Highest Total Monthly Bio Fertilizer Production Oct 06 Since Inception

Earlier Record (Oct 06)

97.5 MT94.4 MT

Highest Monthly Bio Fertilizer Production from Hazira Unit Nov 06 since Inception

Earlier Period

80.1 MT71.8 MT

Highest Annual Bio-Fertilizer Sales 2006-07Earlier Record (2006-07)

784.4 MT714.4 MT

Highest Annual Total Bio Fertilizers Dispatches 2006-07


843.3 MT716.4 MT

Highest Annual Bio-Fertilizers dispatch from Hazira Unit 2006-07


638.8 MT491.4 MT

Highest Sales ProductivityEarlier Record (2006-07)

5388 MT/ EMP4315 MT/ EMP

5. ORGANIZATIONAL CHART OF KRIBHCO


QUALITY POLICY


GM (P)

GM(Material)

GM(F&A)

GM (P&A)

GM (Tech)

CM (MIS)

GM(Mai.)

JGM (P)

JGM(Material)

JGM(F&A)

JGM (P&A)

JGM (Tech)

JGM(Maintain)

CM (P)

CM(Material)

CM(F&A)

CM (P&A)

CM (Tech)

CM(Maintain)

Government of India

Ministry of Agriculture

Department of fertilizer & Chemical

Chairman

Board of Directors

Managing Director

Operational Director

Ammonia

Urea

Power

PHP

Transportation

Purchase

Store

Process

Project

Laboratory

F&S

Civil

Instrument

Mechanic

Electrical

Management of KRIBHCO, Hazira plant is committed to operate and maintain its fertilizer

manufacturing complex through quality assurance, environmental protection and to the

satisfaction of customers.

KRIBHCO, Hazira plant shall achieve this quality policy through following objectives:

1. Continually upgrading technology to improve plant efficiency & reliability.

2. Maintaining & improving the safety & environmental performance.

3. Improving the skills & knowledge of personnel.

4. Continuously improving the quality Management system.

FUTURE PLANS

A joint venture fertilizer project in Oman:

Society has invested US$ 80 million as equity in Oman India Fertilizer plant

which has achieved commercial production on 14th July 2005. The Project has annual

capacity of 16.52 lakhs MT Urea and 2.50 lakhs MT surplus ammonia and has been built at a

cost of US$ 969 million. Marketing of Urea produced by this plant has since been

commenced by the society.

Hazira Phase-II

Society is in the process of setting up a state of the art mega size ammonia plant of

capacity of 1850 MTDP and urea plant of capacity of 3250 MTDP at existing fertilizer

complex at Hazira. Existing infrastructure facilities will be utilized resulting in saving of cost.

Plant will be based on natural gas and we have energy consumption.

Gujarat state energy generation limited (GSEG)

Society has diversified to power sector and has invested Rs. 48.75 crores being 30%

equity in Gujarat State Energy Generation Limited, a joint venture company promoted by

government of Gujarat, GSEG is operating 156 MW Power Plant at Mora, District Surat.

.KRIBHCO’s Hazira plant is also going to be expanded. The society is also exploring

the possibilities to set up a 200 MW liquid fuel based power project at Jhunjhunu, Rajasthan.

Society has deposited a development security of Rs.25 lakhs with Rajasthan State Electricity

Board (RSEB). Minister of power has given No Objection Certificate (NOC).

6. HUMAN RESOURCE MANAGEMENT


Human Resource Management is that part of management which is concerned

with people at work & their relationship within the organization. The term Human Resource

Management refers to the management of personnel in the organization of any company to

achieve the predetermined goals. The duty of the personnel manager is to look after the

personnel department and various functions of the personnel like recruitment, selection,

promotion, transfer, etc.

In KRIBHCO, there is Personnel & Administration Department to carryout the

functions of Human Resource Management. Here, the term Personnel & Administrations

refers to the administration of personnel.

The objective of this department is as below:

(1) To ensure satisfaction to the workers so that they are freely ready to work.

(2) To attain maximum individual development.

(3) To improve efficiency of the human resources.

Realizing that employees are its greatest assets, KRIBHCO from its very inception

has been striving to build up a sound & transparent organizational culture to inclusive to

sense of belonging among its employees.

Personnel & Administration department mainly deal with:

Manpower Need – Why? Where? How? And When?

Recruitment & Establishment functions

Performance Appraisal

Welfare & other services

Loans & Claims

Human Resource Department


‘KRIBHCO’ considers its human resources as a the greatest assets. It invests

time and money to develop its employees through various HRD mechanisms. Regular in-

house training programs sponsorship to outside training institution, brainstorming, problem

solving workshops etc. are conducted for employees at all level.

Structure:-

Chief Manager (N.Bhatta)

Senior Manager (D.K Mandal)

Manager (H.D Desai)

Deputy Manager (P.T Solanki)

Sr. Assistant Manager (S.N Purabia)

Assistant Manager (M.N Patel)

Junior Manager (K.S Mohanan)

Average Employee Turnover rate--- NIL

Average Employee Absenteeism rate---NIL


HR Planning:-

HR planning includes estimation of how many qualified people are necessary to

carry out the assigned activities, how many people will be available and what if anything,

must be done to ensure that personnel supply equals personnel demand at appropriate point in

future. It is the foundation for all personnel functions.

In KRIBHCO, forecast of manpower is based on expected promotion and

retirement. In KRIBHCO, “bottom-up” approach is used i.e. manager or department head

submit their departmental proposal to Establishment Section, which is forwarded to corporate

office.


Training and DevelopmentFeedback and counselingEducational opportunitiesRewards and encouragement

Induction training on the job training refresher courses

Process simulator informationGallery conference room audio – visual aids

Orientation programIn house training

Evaluation and feedback

Technical libraryLecture hallauditorium

Facilities

Mechanism

Methodology

HRD

Performance appraisal

Proper communication

In house journals

Objectives of HRD at KRIBHCO:-

Maximize department contribution to KRIBHCO.

To increase KRIBHCO` s foundation through increasing in employees contribution.

Provide an opening of self- expression and self-development in congruence with

organization.

Provide need-based training to all employees of the organization.

Plan the right working condition for employee’s progress.

Plan and design appropriate training strategies to build competencies of employees

Ensure growth and development for all.

Personnel & Administration:-

Personnel Department is that part of management, which is concerned with

people at work 7 their relationship within the organization. The term personnel

management refers to the management of personnel in the organization of any company

to achieve the predetermined goals. The duty of the personnel manager is to look after the

personnel department and various functions of the personnel like recruitment, selection,

promotion, transfer, etc.

As there is so much important of the heart in the human being so much as

there is also importance of person in any organization. Person working in the organization

are considered as the blood and heart of the organization. The success of unit mainly

depends upon the personnel function in any organization. As in the organization there

must be maintain good relation between personnel of different department. Personnel

manager plays very important role between employers and employees.

The objective of this department is as below:

1) To ensure satisfaction to the workers so that they are freely ready to work.

2) To attain maximum individual development.

3) To improve efficiency of the human resources.

Personnel & Administration department is divided into two major departments.

1) Personnel Department

2) Administration Department


The personnel department is further sub divided into four sub-division:

a) Recruitment and Establishment cell

b) Tine office and Wage & Salary Administration cell

c) Industrial Relations cell

d) Contract cell

The Administration Department look after the following matters:

a) Canteen

b) Transportation

c) Township

d) Horticulture

e) Guest house/ temple/ garden maintenance etc

Grade system in KRIBHCO plant site HAZIRA

A Managing Director

B Director [Operations/ Marketing/ finance]

B1 Executive Director

C senior general manager/ General Manager

D Joint general manager / Chief Manager

E senior manager/ CMO

F Manager

F1 Deputy Manager/ senior M.O.

G Sr. Assistant manager/ Sr. area manager/ Sr. engineer/ foreman

G1 Assistant manager/ Engineer/ Assistant foreman

G2 Assistant Engineer/ Assistant manager

H Joint manager/ P.S.


Function of Personnel & Administration Department

TIME OFFICE : Time office Management, Attendance & Leave, Wage Administration, Leaves travel Concession, Marketing Bus Coupons.

LOANS & CLAMS : HBL, Conveyance Loan, Salary Advance, Medical Bills, Accident Insurance Claims.

ESTABLISHMENT : Recruitment, Placement, Confirmation, Appraisal Report, DPC, Personnel Records, Employment Returns, Data Bank.

TRAINING & DEVELOPMENT

: Nominating In-House/Outside raining, Learning Group, Vocational Trainees.

PLANTHORTICULTURE

: Horticulture work in KRIBHCO & HAEP Plants

FURNITURE BUDGETINTERNAL AUDIT

: Procurement & Maintenance of office furniture & Equipment, Physical Verification of Furniture.

BUDGET & INTERNAL AUDIT, VIGILANCE MATTERS

: Preparation of Budget and matters related to it, Internal Audit coordination & replies, Vigilance matters.

RURAL DVELOPMENT PUBLIC RELATIPON

: RURAL Development, Release of Advertisement & Processing of Bills, Publishing of KRIBHCO DARPAN/ Kribhco Today Publicity/ Liaison with Press, Photography & Videography, Periodicals & Newspapers.

HOUSE KEEPING & DESPATCH

: House keeping and upkeep of Administrative Block, Dispatch Section, Courier Service,Attendant Service to various Sections.

INDUSTRIAL RELATIONS

: Industrial Relation, Union & Association matters, Collective Bargaining, Management of Industrial canteen, Review of Personnel policies, Wage Revision matters, Incentive payment, Sport & Games, Cooperative Stores, Unit Level Class, Management of Class, Management of Schools, Welfare matters.

IMPLEMENTATION OF HINDI

: Office Language Implementation

GUEST HOUSE LIVERIES LOCAL PURCHSE LAN PRINTING OF STATIONERY

: Management of Guest House-I & GH-II, training Hostel, Procurement of liveries, Gift & complimentary, local Purchase, Department Imp rest, Printing of Stationary & Visiting Cards etc.

TRANSPORTATION : Hiring of Cars/ uses, staff Cars/ Buses, excursion trips, Rail/Air Booking, Duplication Section.

ESTABLISHMENT : Township Horticulture, Maintenance of Public Building, House-keeping of Township House, Community Hall, Ladies Club, Celebration of Festivals, Township House & Shop Allotment, Hospital & security Administration, Fish culture, Horticulture of township


CONTRACT CELLLEGAL CELL

: Compliance of labour laws & contract Labour [R&A] Act, Verification & Witnessing Disbursement of Wages to Contract Labour, Matters related to HAIA, SUDA& Payment Legal Cases, Disciplinary matters.

PF & TERMINAL BENEFITS JMC

: DBF & terminal Benefits, Joint Management Council, Post Retirement Medical Assistance, Pf trust, Suggestion Scheme.

COMPUTERIZATION – NODAL OFFOCER

: LAN Implementation in P&A Department, computerization & other matters related to Computer.

HAEP ADMINISTRATION

: Day to Day Administration matters of HAEP

HOSPITAL ADMINISTRATION

: Day to Day Administration matters of Hospital

ESTABHLISHMENT

Organizations are dynamic, organic ongoing systems consisting of many

individual. A successful management focuses on the individual and then attempts to relate the

individual to the group and different groups to the organization. Individuals join organization

to fulfill their goal and aspirations within the framework of the organization. It is one of the

major functions of management to convert the goals and aspirations of the individuals into

the goals of the organization.

KRIBHCO in the formative stages inherited miles and practices from IFFCO.

Subsequently, need was felt to streamline and standardized the existing practices and to

envolve R&P guidelines for KRIBHCO.

In line with the above, R&P guideline were formed and revised from time to

time. There are only guideline for the management and do not contain the detailed procedure

to implement the same.

Salient feature of the guidelines are given below:

General:-

Vacant position in organization chart shall not automatically be treated as

operative to be filled by recruitment or promotion. The positions shown in the chart are

estimated, keeping in view current and future requirement and are to be operated only when it

becomes necessary to operate them with the approval of competent authority.

Recruitment from outside agencies shall be made when , in the opinion of the

management suitable persons are not available within the organization.


INCREMENT

Employees shall be entitled to annual increment in accordance with the

increment rates specified in various pay scales.

The first increment shall be awarded to KRIBHCO employees on initial

appointment subject to satisfactory completion of probation period in the following manner:

FOR EMPLOYEES JOINING BETWEEN DATE OF INCREMENT

a) 1st January to 30th June 1st January

b) 1st July to 31st December 1st July

In case of promotion to the next higher grade, the date of increment of an employee

arrived at on his initial appointment in KRIBHCO shall remain unaltered throughout his

service career in KRIBHCO unless otherwise specifically ordered by the Management to take

care of the anomaly in pay fixation and Leave Without Pay/ Absence from Duty.

If an employee remain absent from duty on account of leave Without Pay,

Unauthorized Absence, the date of award of next annual increment shall be postponed by the

corresponding period for which he remained on LWP/ unauthorized absence.

PROMOTION

Promotion means an improvement in pay, prestige, position and

responsibilities of an employee within organization.

In KRIBHCO, promotion is based on seniority cum merit basis. The

Establishment Section prepares the Eligibility List of employees for promotion twice in a

year on May 0 and November o1 of each year. Up to H/ H1 grade, promotion are done at

plant level by constituting committee which conducts personal interview to assess the

suitability of the candidate.

1. Preparation of list of eligible employees for promotion as per R&B Guidelines.

2. Annual Appraisal report of eligible employees to be got filled by the concerned

officers.

3. Competent Authority’s approval for constitution of the Department Promotion.

4. Bio-data of the eligible for constitution of the Department promotion Committee.

5. Bio-data of the eligible employees to be prepared for the DPC.


6. Communication to the Chairman of the committee for fixing the date of DPC.

Communication to the employees for attending the DPC.

7. Making physical arrangements to the interview.

8. Preparation of selection proceedings.

9. Approval of the competent authority to be obtained for the selection proceedings.

10. Vigilance clearance to be obtained giving the promotion order.

11. Promotion ordered.

For promotion of G grade and above, Establishment Section put before the

Committee the Bio-data of eligible employee, annual appraisal report with rating and

signature of each member of the committee and forwards it to Managing Directors’ approval.

WAGE & SALARY ADMINISTRATION

Wage & Salary Administration refers to the establishment and implementation

of sound policies and practices of employee compensation. Generally, the remuneration paid

to the workers known as wage while the payment made to office staff known as salary.

Wage is the remuneration paid for service of labour in production, skilled and

unskilled person or employer, worker technicians. Salary refers to the monthly paid to

clerical administrative and professional employees.

A sound wage & salary administration tries to achieve these objectives:

a) For employees:

Employees are paid according to requirement of their job. This eliminates

inequalities.

The changes of favoritism are greatly minimized.

Employee’s morale & motivation are increased because wage program can be

explained & based upon facts.

b) To Employer:

A wage & salary Administration reduces the likelihood of friction & grievance

over wage inequities.

It enhances an employee’s morale & motivation because adequate and fairly

administered wage are basic to his wants and needs.

It attracts qualified employees ensuring an adequate payment for all the jobs.

The information about employees, presentation and absence provided by the

tine keeping system is directly linked with computer section. Then after pay slip is preferred


with the Master-Date. Finally after all additions and deductions, pay is paid to the employees.

The productivity linked bonus and incentive schemes also introduced by the KRIBHCO. The

employees of KRIBHCO have been paid bonus linked with productivity i.e. annual capacity

utilization of the plant and materials.

In KRIBHCO calculation of wage and salary is done by establishment section

in Finance & Account Department. In this section, wage and salary is calculated on

computers. It is the responsibility of personnel department which has to handle wages and

salary distribution together with account department.

Salary are payable on the last but on working day of every month. In this

organization for the wage and salary administration, first prepared the Master-Date under the

personnel department. In this Master-Date there are various column like grade, employee

number, pay scale, code, P.P. Account, number, name, basic-pay, living-pay, house rent,

over-time pay, medical allowance and other facilities rate etc.

Demotion:-

Demotion in any organization is very rare. The same is the case in KRIBHCO.

Demotion in the company occurs only in case of major indiscipline. This action is taken after

much inspection of the fault made. A special committee is formed for the inspection of the

whole matter and then finally a report in generated whether the employee is found guilty or

innocent. It even involves legal and police formalities many times. Provisions of this

indiscipline are available under certified standing order. Some of the ‘Major Indiscipline’ is

as follows:

1. Breach or habitual breach of the provisions provided in the service rules framed or

instructions or orders issued by the management from time to time and in force.

2. Insubordination or refusal to obey.

3. Violation of any condition or term contract or employment.

4. Any big loss suffered by the company due to any employee’s disregard of operation

or carelessness in operation or maintenance.

5. Acting in a manner prejudicial to the interest or reputation of the organization.

6. International non-submission/ late submission of immovable property return in the

manner prescribe rules of complete account of movable or immovable properties

acquired by the employee or concealment of any material fact relating to acquisition

of such properties.


Discipline & conduct:-

1. An employee shall, at all times, conduct himself soberly and temperately and show

proper respect and civility to his superior and persons having any official dealings

with KROBHCO.

2. An employee shall serve honestly and faithfully and shall use his utmost endeavors to

promote the interest of the organization.

3. All employees shall be full time employees of KRIBHCO and will devote themselves

exclusively to the duties assigned to them from time to time when required to do.

4. During the period of employment with Kribhco, no employee shall hold any office of

profit outside the organization or engage himself in any other service, business and

trade.

5. No employee shall take with him for his own personal use, any photograph, sketches,

etc. regarding any business or activity of the organization, building, plant process,

work etc.

6. No employee shall use organization’s name or properties etc. for his personal use or

benefits.

7. An employee shall keep himself up to date with the knowledge, skill, information,

ability etc.

WELFARE FACILITIES IN KRIBHCO:-

(I) Housing:-

Townships facility to the extend of 99% of requirement of employees is

provided by KRIBHCO. KRIBHCO provided semi furnished accommodation with proper

housekeeping, security arrangements, repair and maintenance of houses in Township, cable

connection, electrical maintenance in the township for its employees. Park facilities with

equipments for playing of children, sitting arrangement in the garden, lawn maintenance,

plantation and maintenance of trees, maintenance of flower plants for beautification are also

being provided. Shopping canters in the township are provided to cater to the need and

requirement of residents of the township. Post Office, Bank and PCO facility are provided in

the township. Township of KRIBHCO, in overall provides facilities for modern life.


(II) Educational Facilities:-

KRIBHCO has provided two schools namely Sunflower School in Gujarati

Medium and Central School in Hindi / English medium. Theses two school are situated inside

the township and are having facilities up to 12th standard. Both pre-primary and pre-nursery

educational facilities are also provided in township. Apart from this, KRIBHCO provides

transport facilities and arrangement for the children of township to avail educational facilities

available outside township i.e. in Surat city or in other nearby areas. Coaching classes and

Entrance examination preparatory classes are also run by KRIBHCO provides grants to

Officers Club and Staff Club to maintain Library and Reading Room in the township.

Officers Club and Staff Club arrange Computer-learning classes.

(III) Medical Facilities:-

KRIBHCO provides free medical facilities to its employees, their spouses,

dependent members of his family, be eligible for reimbursement of:

1. Fees paid by him to an authorized medical attendant for consultation whether at is

cleaning or at he employee’s residence.

2. Fees paid for injection, dressing or minor surgery,

3. Fees paid for X-ray and pathological test etc.

4. Expenses of treatment for chronic or any specialized treatment or incase of

hospitalization, at actual.

5. Reimbursement of medical expenses for routine treatment Rs. 4500/- per annum

(2250/- for Township Residents)

In addition to above KRIBHCO is having its own hospital having both in-

patient and outpatient facility. Specialists from Reputed hospitals / practitioner visit

KRIBHCO visit KRIBHCO Hospital for Township Residents. In case of specialized and

chronic diseases cases are referred from KRIBHCO hospital to Empanelled Doctor/Hospital

in Surat or outside Surat.

(V) Other welfare Facilities:-

a. Employees Cooperative Society is there which is managing distribution of

Milk, LPG Gas, dealership, Provision Stores and credit facilities.

b. “Ashirvad” – Old age home for Township residents.

c. Workers Education Scheme is prevalent in KRIBHCO.


7. Marketing Department

Introduction: -

Marketing is the process of planning & executing the conception, pricing,

promotion and distribution of ideas, goods and services to create exchanges that satisfy

individual and organization goals.

In simple sense marketing is concerned with selling. But now a days the

concept has enlarged its meaning. We know that a product is provided with the aim of sale.

Marketing management covers marketing research, new product development and so many

other important functions.

The important responsibilities of the marketing departments are: -

Volume sales: - total production to be sold in each season.

Price realization: - selling price at level to the consumer (farmer) at

MRP.

Cost of marketing: - discounts, credit, distribution expenses, traveling

and communication &warehousing expenses, advertising& sales

promotion expenses, etc should be minimal.

In KRIBHCO marketing management has the task of regulation of level,

liming and character of demand in a way that will help the organization to achieve its

objectives. The aims of producer totally depend on marketing, without marketing not a single

unit can run.

“KRIBHCO” marketing philosophy aims not to sell fertilizer but to help

farmers by education them the modern farming technology and the use of fertilizer for

optimum crop out. KRIBHCO sold urea mainly through co-operative societies. KRIBHCO


has been making celebrate arrangements for dispatch of urea from plant site to various

destinations as per requirement by optimum use of rail & road.

In KRIBHCO marketing is done by head office at Delhi. KRIBHCO has

nationwide marketing network and has covered all major stated in the countries. Presently it

is operating in the Uttar Pradesh, Himachal Pradesh, Delhi, Madhya Pradesh, Maharastra,

Karnataka, Tamilnadu, Punjab, Haryana, Gujarat, Rajasthan, Andhra Pradesh, West Bengal

and Bihar. (Chart) &marketing act ivies.

KRIBHCO Head offices

Central marketing offices co-operatives offices

State mkting offices state mkting offices state mkting offices

Area mkting offices Area mkting offices Area mkting offices

Field representative field representative field representative

Marketing Activities: -

1. Farmers Benefits programmes.

2. Sanket Haran bima yojana.

3. Marketing of BVFCL urea,

4. ISO 90001-2000

5. Seed multiplication programme

6. Gramin vikas trust. (Rural Development Trust)


Product mix: -

KRIBHCO, manufacturing nitrogenous fertilizer and allied product viz. urea,

Ammonia, Bio-fertilizer, 30 mega watt power plant operation & maintained of heavy water

plant of department of atomic energy, But KRIBHCO is having urea as its main product.

They use Ammonia as raw material &main input of urea& sale the excess production to other

non-fertilizer industries.

Product mix of KRIBHCO

Urea Bio-fertilizer Seeds

-Wheat

I Azotobacter -Paddy

II Azospirillum -Pulses

III Rhizobium 1. Gram

IV phosphorus solubilising 2. Pea

Miro-o rganism (P S M) 3. Arthan

4. Urd

5. Lentils

6. Moog-

Oil- seeds

1. Mustand

2. Soya bean

3. Castors


Kribhco urea production and sales

Year Production (Lack MT) Sales (Lack MT)

2003-04 16.31 15.72

2004-05 16.94 17.21

2005-06 16.03 16.38

2006-07 17.73 18.37

2007-08 18.06 17.37

KRIBHCO UREA PRODUCTION & SALES

14

14.5

15

15.5

16

16.5

17

17.5

18

18.5

19

2003-04 2004-05 2005-06 2006-07 2007-08

YEARS

LA

CK

MT

Production

Sales

Kribhco bio-fertilizer production and sales

KRIBHCO Bio fertilizer Production& Sales

0

100

200

300

400

500

600

700

2003-04 2004-05 2005-06 2006-07 2007-08

YEARS

Production (MT)

sales(MT)


YearProduction (MT) sales(MT)

2003-04 384 3542004-05 389 3732005-06 296 3512006-07 603 5162007-08 560 611

Kribhco ammonia production

8.5

9

9.5

10

10.5

11

11.5

2003-04 2004-05 2005-06 2006-07 2007-08

Years

KRIBHCO Ammonia Production

Production

Kribhco seeds production and sales

YearProduction (Lack -Qtls) Sales (Lack Qtls)

2003-04 1.04 0.762004-05 0.84 1.12005-06 1.08 1.062006-07 1.21 1.112007-08 1.54 1.49

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2003-04 2004-05 2005-06 2006-07 2007-08

Years

KRIBHCO Seeds Production & Sales

Production (Lack -Qtls)

Sales (Lack Qtls)


2003-04 9.632004-05 9.92005-06 9.922006-07 11.172007-08 10.92

Mode of Distribution: -

Proper planning and close monitoring enabled the society to dispatch it urea as per

ECA allocation from plant site to various destinations by optimal use of rail and road mix.

1. Railway: - major part of fertilizer almost 79% is transported through railway line to

the states like Maharastra, Madhya Pradesh, Punjab, Haryana and Uttar Pradesh.

2. Roadways: - the dispatch of fertilizer through roadway is limited to the state

like Gujarat, Rajasthan, Madhya Pradesh, and many other states

is round around 21%.

Details of competitors

KRIBHCO generally dose not face any stiff competition as the government

decides the major parts of its marketing activities. Chemicals and fertilizer ministry of India

decides the ratio of sales of fertilizer and chemical in the industry. Generally competition

exists in free trade. Some of the competitors of KRIBHCO are:

Sr. no Name Name1 GNFC Gujarat Narmada

Fertilizer Corporation 2 GSFC Gujarat State Fertilizer

Corporation 3 IFFCO Indian farmer Fertilizer

Corporation4 RCF Rashtriya Chemical

Fertilizer5 NFL National fertilizer Ltd

6 HFC Hindustan Fertilizer Corporation

7 FCL Fertilizer Corporation of India

8 Nagarjuna -

9 Chambal -


Sales promotions: -

In modern world there is very strict competition so for stand in the market,

strongly sales promotion program is very important. The main aim of sales promotion is to

increase the sales and increase the number of customer. KRIBHCO’ s promotional Programs

are carried to farmers field through technically qualified and trained field force under the

highly qualified agronomists and managers the major promotional activities consists of the

following.

1. Block Demonstration

2. Co-operative conference

3. Krishak Bharti Seva Kendra

4. Crop seminars

5. RGB Members visits

6. Farmer benefits programs.

1. Block Demonstration:-

In these demonstrations, latest agricultural production technology was

demonstrated visa-a visa local practice. The review demonstration were organized on

different crops on approximately 100 hectares of land and a large number of farmers

visited this plots various other field Programme like farmers meetings etc were organized

at the site of these demonstration. Block demonstration was conducted in the state of U.P,

M.P, Haryana, Punjab & Gujarat.

1. Co-operative Conference:-

All the product of KRIBHCO marketed by the co-operative societies, so their

mangers and salesmen are trained on better business, fertilizer and other agro- input

storage, soil testing etc. A group of 100 participants is trained in each co-operative

conference sufficient quality of crop folders and other technical material, provided to

each participant for further distribution to farmers through co-operative societies.

2. Krishak Bharti Seva Kendra

The society has established 10 Kendra in the state Haryana and Punjab. These

are successfully in operation and through these centers a package of inputs and services is

being provided to farmer’s right at their doorsteps. The society is already in process of

establishing 27 more seva Kendra’s in state of U.P, M.P, Rajasthan, Punjab, and

Maharastra.


4. Crops seminars

The society organized one crop seminar with collaboration of IIFCO in state

of Maharastra. In the seminar, experts I the field of agriculture were invited for

expressing their view points.

1. RGB members visit

Representative General Body (RGB) delegates are the representatives of

Kribhco member society. They act as KRIBHCO spokesperson art various platforms

throughout the country. It is in the interest of KRIBHCO to provide maximum

information about its programmes to its members. Short study visit of 1-3 days duration

in each term are arranged for these RGB members at Hazira plant or other project site.

Advertisement

Consumer is the king in the modern market. Without consumer the task of

business is incomplete. So consumer must know about the product of company. Now a

day, advertisement is the best way to introduce the product to consumer.

KRIBHCO’s advertising mainly depends upon its customer & their

customers are farmers and they are mostly illiterate. So, media gives advertisement in

regional language, but in present time farmers are also develop so advertising strategy

also taken into consideration. Company gives its advertisement in local newspapers also

like Gujarat samachar, loksata, and jansatta, sandesh etc T.V; Radio magazines are also

taken as a media for these purpose.

Different language like Hindi, Punjabi, Marathi and Gujarati over various

stations of all over India radio. For the popularity of KRIBHCO large no. Of holdings &

roadside boards are installed on highway, bus pan ness, wall paintings and glow sing at

airports have also been installed for above purposes. Advertisements have been realized

from time to time in the dealing newspapers, and other periodical, special supplements

were brought in English, Hindi and regional languages.


8. TRANSPORTATION DEPARTMENT

Transportation

Thus, customers are the aim of any business. The most important task of any

business unit or organization is to fulfill customers’ needs by providing them product or

service on right time, price and place. Customer satisfaction is the success of any

organization. For that material should be, reach on it is desired Place on right time and this is

possible only by any Transportation facility. Transportation is link between customer &

organization. Transportation is a most important function of any organization.


In KRIBHCO, Transportation alone accounts approximately 80% of the total

marketing cost. Hence, it requires utmost attention, careful planning and judicious approach

in finalization of transport contracts. In order to bring down the marketing expanses,

KRIBHCO is transporting its products (urea) by rail and road. Rail dispatches on an average

contributes 75% while road dispatches are 25% of the total urea produced and dispatched

from plant.

The Road Transportation from plant is presently undertaken for the states of

Gujarat, Maharashtra, and M.P & Rajasthan. These states fall in economy zone where road

transportation is cheaper as compared to rail. Dispatch instructions (DI’s) are given only to

such destinations where transportation by road is comparatively cheaper than rail. Hence,

annual contracts for road transportation for above states are performed.

The cheapest transportation mode is selected for dispatching the material to

the respective places. The production of the plant is more than 100%. For commercial sale

the price is Rs.7200 per metric ton, and for agricultural purposes its Rs.4800 which is

subsidized and sales tax free rate. There are 2 Silo’s where the materials can be stocked for 1

month. In Gujarat on average, an everyday 80-ton is dispatched. The economic zones are

Maharashtra, MP, and Rajasthan, which touch the boundary of Gujarat. The documentation

should reach the consignee before the consignment reaches the consignee. The document

which is of prior importance is RR (railway receipt-railway), BL (bill of lading-Ship), AB

(Airway bill-Air), and LR (Lorry receipt-Road).

The product is sold at fixes rate throughout India. There are two types

of transportation subsidy and the other one is gives by FICC. Government fixes the retention

price, which is cost of production given by the government. The production is controlled

according to FCO standards that are fertilizer control order.

Major players in Fertilizer Industry in Gujarat

1) KRIBHCO

2) IFFCO (KALOL)

3) IFFCO (KANDLA)

4) GUJARAT NARMADA FERTILIZERS CO. LTD, (BHARUCH)

5) GUJARAT STATE FERTILIZER CO. LTD., (VADODARA)


9. PRODUCTION DEPARTMENT

Production Department

Production is the process by which, raw materials and other inputs are converted into

finished products. It involves many functions such as manufacturing process, product and

process design, plant layout, inventory control, plant maintenance, etc. KRIBHCO has the

Production Department in the Plant Premises and it works in harmony with the Marketing

Department and Transportation Department as well as all other departments. It also includes

Stores and Purchase Department which take care of all the materials used in the production

process.


Production Performance:-

Ammonia Urea

Year Qty

(in lac MT)

Year Qty

(in lac

MT)

1998-1999 10.50 1998-1999 17.22

1999-2000 9.86 1999-2000 15.40

2000-2001 10.80 2000-2001 17.72

2001-2002 9.39 2001-2002 15.17

2002-2003 9.47 2002-2003 15.57

2003-2004 9.63 2003-2004 16.31

2004-2005 9.90 2004-2005 16.94

2005-2006 9.92 2005-2006 16.03

2006-2007 11.17 2006-2007 17.73

2007-2008 10.92 2007-2008 18.06


PLANT DETAIL:-

Plant-1 Plant-2 Ammonia 1520 MTPD 3040 MTPDUrea 1310 MTPD 5240 MTPDBio-fertilizer - - 250 MTPA (Per annum)


STEAM & POWER GENERATION

The steam generation plant supplied by FOSTER WHEEL POWER, UK

consist of 3 boilers (2 running & 1 stand by) capable of producing 275 MT steam per boiler

per hour at 105 ata pressure and 510°C to supply steam to the process plant and power

generation. The boilers are of single drum Monowall Balanced draft type, complete with all

accessories and mountings. The boilers can fired to 100% MCR with gas. All three boilers

are connected to a single common header and from their distribution of steam to different use

points.

In power plant with help of boiler, heater, deaerator and other instrument steam

is generated. From this steam about 65% is used in production plant and about 35% is used

for power generation. Power is generated with the help of two turbo generators.

The power plant consists of two extractions cum condensing type T.G. sets

each of 15 MW capacities, supplied by BHEL. Out of this KRIBHCO require 25 MW power

and remaining supplied to G.E.B.


OFF SIDE PLANT

“OFFSITES” is the “Off the Site” plant. All those plants, which are not within battery

limit of main process plants, are called Offsites facilities. All the supporting plants of Urea &

Ammonia plants are called offsites plants.

The major offsite plants at KIBHCO Hazira Complex are:

1. Raw Water Canal, Kakarapar Pump House & Reservoirs

2. Water Pretreatment Plant

3. D. M. Plant

4. Cooling Towers

5. Inert Gas Plant

6. Air Compressor House

7. Ammonia Storage & Handling

8. Effluent Treatment & Disposal System

9. Drinking Water Supply System

10. Sewage Treatment Plant

11. Emergency Power Generator Sets

12. Centralized Chemical Storage & Handling


10. MATERIAL DEPARTMENT

MATERIAL DEPARTMENT

PURCHASE STORES

RECEIPT SECTION CUSTODY SECTION DISPOSAL SECTION

Spare Section Scrap Section

.

11. Purchase Department

Purchasing is one of the basic functions of Inventory Management and forms a major

part of it. What to buy, when to buy, where it buy, how much to buy, how much to pay and how much


to stock are the fundamental of the Inventory control. It also involves creative functions such as

development of new resources, introducing new materials and sources in the undertaking etc. It needs

considerable expertise not only negotiating but also in the techniques of competition and studying of

economic trends in respect of materials to be purchased in large quantity. Every rupee saved by the

good purchasing goes directly in to the profit for the simple reason is that it is not spent at all .

Objectives of Purchasing:-

The objective of Inventory purchasing can be enumerated as follows:

o To Maintain Continuity of production,

o To contribute to the competitiveness of the end product,

o To contribute towards higher productivity,

o To buy for the best ultimate value not necessarily at the lowest initial price,

o To contribute towards standardization, variety reduction and value analysis programs,

o To increase profits through effectiveness in purchase contract.

Existing Purchase Procedure in KRIBHCO:-

To study the existing purchase system, the purchase procedure followed by the purchase

department have been analyzed and evaluated on the basis of observation and discussions with

concerned personnel of KRIBHCO is as follows:

1. Responsibilities of the purchase functions are,

The purchase department issues the material manager purchase orders/ contract after the

approval of the competent authority. The purchase function in other offices (like head office at NEW

DELHI and its various branch offices) is headed by the single officer designated for that purpose. The

indenters from various departments are issuing inquiries, inviting bids, entering into correspondence

or negotiation with vendors / contractors. All requisition for purpose is duly processed in accordance

with procedure laid down, which is forwarded to purchase department for necessary action.

2. Registration / Selection of Suitable Vender:

Purchase department is responsible for developing a list of approved vendors for various

types of materials and service as per procedure. An advertisement is issued in all the leading news

papers inviting applications in the prescribed Performa for registration of suppliers and contractors


for listing out of various types of purchase and service that are likely to be made during the next three

to five years. The application received are scrutinized by a committee consisting of a representative

from technical, finance and purchase department nominated by General Manager and ascertained the

resources, capacity and quality of workmanship of the vendor. The committee also calls the vendors

and contractors for personnel discussion and clarifies the applications and obtains such other

information as may be considered necessary by the committee.

The list of approved vendors and contractors as to be up dated at least every five years by

issuing a press advertisement.

3. Requisition to Purchase:-

The indenters from various departments are raising a requisition called the Material Purchase

Requisition (MPR) for purchase in the prescribed Performa. It should be ensured that the requisition

for purchase is completed in all respect with regard to.

(a) Description of the material / equipment / scope of work.

(b) Material of construction / specification.

(c) Temperature / pressure / standard if anywhere applicable.

(d) Quality and chit of measurement.

(e) Date when delivery of material / service is required.

(f) Estimated value and budget head.

(g) Whether item is a stock item / non - stock item and fast moving / slow moving.

The requisition for purchase of stock items is raised by the stores department after the quality

in stock-.has reached the re-order level as determined for the respective items. Such requisition

amongst other-particular also indicates the minimum, maximum and reorder level, the date on which

last supply was received and average consumption per month since last purchase.

4. Purchase Function after Receipt of MPR:-

To enter requisition in indent register, the requisitions are checked for specification, quality,

code numbers, budget heads etc. This number is entered on all the four copies of indent, one copy is

for action by purchase department, second copy is sent to Finance department, third copy is returned

to indenter, and fourth copy is retained in the purchase department's master file.


5. Floating Inquiries:

Purchase department issue inquires to approved vendor or press advertisement depending

upon value of purchase which is followed as per the following guideline.

Estimated value of purchase order / work order/contract

Minimum of vendors to whom inquiry to be issued

Minimum No. of bids to be obtained.

UptoRs.20,00,000/- 5 3

Exceeding Rs 20 ,00,000/` All suppliers on the approved list

3

6. Purchase Order / Work Order:-

The recommendation of the tender committee is routed though the finance department to

enable them to record the value of commitment in the budget records confirms availability of funds

under the approved budget and also record financial concurrence.

As soon as the recommendation of tender committee is approved by competent authority, the

purchase department issues purchase/work order to the recommended successful bidder.

The purchase department is responsible for following up of the purchase order/contracts with

vendors and transporters until the material is reached and accepted at the plant/stores.

On receipt of materials at plant site/stores, the stores department will fill up the store receipt

voucher and arrange the inspection from the inspection department or indenters, as the case may be

necessary.

12. STORE DEPARTMENT

OBJECTIVE:-

To render materials service to the organization by receiving, issuing the

materials, preserving the materials which in custody, disposing the scrap/surplus materials.


To receive all types (i.e. stock & non stock) materials, to arrange inspection of

materials.

To keep materials safe custody, issue of the materials to user department.

To initiate action for procurement of stock items, custody & issue to user

departments.

Raising indent for hiring services of contractor for material handling,

transportation, grass cutting etc.

STORE DEPARTMENT IS ALSO DIVIDED INTO THREE SECTIONS:

RECEIPT SECTION

CUSTODY SECTION

DISPOSALSECTION

The stores have about 64663 Nos. of items out of which about 1800 items are stock

items. Stores initiate the procurement action of stock items. The store is spread over in 02

lakhs sq. Mtr. Of space out of which 12000 sq. Mtr. Is covered area. Normal working hours

of stores is general shift hours. However, in case of shut down, emergency service of stores is

made available as by the user departments.


STORESFLOW DIAGRAM

PROCEDURE FOR RECONCILIATION OF INVENTORY STATUS

It is a system for identifying the unwanted inventory and the deviation in physical stocks for

reconciliation of the stock and maintaining the accuracy in “management reporting system”

for inventory status.


CUSTODY SECTION

RECEIPT

SECTION

DISPOSAL

DEL. OF MATERIALS SOLD TO SUCCESSFUL BIDDERS (THROUGH MSTC)

SCRAP FROM PLANT HANDLING OVER SURPLUS MATERIALS FOR DISPOSAL TO

ISSUE OF MATERIALSTOUSER DEPT.

RECEIVING MATERIAL FROM VENDORS & OTHER UNITS. PROV. INSURANCE CLAIMS,

RETURN OF REJECTED MATERIALS TO VENDORS & DESPATCH OF MATERIALS FOR REPAIR

“J” FORM FOR CONTRACT OF MATERIALS HANDLING & TRANSPORTATION TO PURCHASE DEPARTMENT

RETURN OF MATERIAL THROUGH SRV

INSPECTION OF MATERIALS

SRV ACCEPTED MATERIALS

MPR FOR STOCK ITEM TO PURCHASE

PRESERVATION OF MATERIALS

All items in stocks are to be physically verified once in a year so that necessary

adjustments can be made in stocks after obtaining necessary approvals from competent

authority.

PROCEDURE:-

Every item will be verified under perpetual type of “inventory verification system”

once in a year.

The finance or their representative of nominated hired agency will prepare the group

wise list of the items.

On hand quantity against the individual item will be noted with their respective

location.

The physical stock is then verified with the representative of stores dep’t.

The deviation will be checked, scrutinized and sorted out.

The final list of unsettled item with deviation in quantity will be prepared.

Management approval for write-off / write on the stock is obtained.

Stock is adjusted through a voucher- SAV

13. FINANCE DEPARTMENT


INTRODUCTION OF FINANCE:-

Finance is the blood of the business. “Finance Management is that managerial activity

which is concerned with the planning and controlling of the firms financial resources.”

Finance management is the most important activity of the firm and it means that the firm

secures capital, if needs and employees it.

Finance management is mainly concerned with raising fund in the suitable

manner using the funds as profitably as possible, planning future operations and controlling

current performances and future developments through financial accounting, cost accounting,

budgeting and other functions.

Financial Planning

Planning is the design of a desired future state of an entity and of the effective

way of bringing it about. Also it involves the determination of the future causes or action for

accomplishing the objective of the enterprise.

Financial planning is essentially concerned with economical procurement &

profitable use of funds. It is used for determined by realistic investment decisions. Financial

planning should estimate the resources that will be required to carry out the operation of the

firm and determine how for these resources can be generated by the firm itself and how far

they will have to be attained externally.


KRIBHCO has a fixed policy for financial planning and it depends upon the

requirements of the fund whichever they use. Then a report is prepared by the finance

manager including total requirements. He collects the information and prepares the report and

submits it to the Managing Director.

Capitalization:-

Capitalization means total capital of the firm that introduced in business to carryout

commercial activity. Capitalization concerns with the decision regarding the total

requirements of long term funds of the firms. Capitalization means total amount of

company’s capital or total of its capital stock.

In KRIBHCO, the shares are very high and it has large amount of reserves and

surplus.

FINANCING PATTERNOriginal Final

Rs. Cr US$ million Rs. Cr US$ million

EQUITY

Government of India 344 202.59 328 193.17

Cooperative Societies 22 12.96 20 11.78

IFFCO 105 61.84 97 57.13

Sub Total 471 277.39 445 262.08

LOAN

Government of India 342.70 201.82 342.50 201.71

Internal Generation 15 8.83 ---- ----

IDBI & Other FInst. 129 75.97 102.50 60.36

Sub Total 486.70 286.62 445 262.07


Cooperative Societies

4%

IFFCO 22%

Government of India 74%

Government of India Cooperative Societies IFFCO

FINANCIAL ACHIEVEMENT FROM BEGINNING (RS. IN CORERS)

NET PROFIT:

YEAR Before

tax

Prov. For Income

tax

After tax

2003-2004 210.10 77.00 138.10

2004-2005 248.29 60.97 187.32

2005-2006 40 5.77 34.23

2006-2007 220.45 66.81 153.64

2007-2008 186.43 45.33 141.10

DIVIDEND PAID TO SHARE-HOLDERS:(Govt. India, IFFCO, Other Society)

Year Amount(Rs. in

Crores)

Dividend %

2003-04 58.56 12

2004-05 97.92 20.06

2005-06 34.39 8

2006-07 88.33 20

2007-08 74.50 15


CAPITAL BUDGET

The other major budget is capital budget. The formation of capital budget is on the

same pattern and follows same procedure as revenue budget.

It is important to understand distinction between capital and revenue expenditure. It

benefits of an expenditure are expected to accrue for long time; the expenditure is of capital

nature. Any expenditure whose benefit expires within the accounting year or expenditure that

merely seeks to maintain the business or keep assets in good working condition is revenue

expenditure.

On face of it, this distinction seems easy, but many of times it becomes quite

complicated to differentiate between these two expenditures.

Capital budget involves the planning to acquire worth while projects, together with

the timings of the estimated cost and cash flows of each project. Such projects require large

some of funds and have long term implications for the firm. Capital budgets are difficult to

prepare because estimate of the cash flows over a long period have to be made which involve

a greater degree of uncertainty.

The capital budgets are generally prepared separately from the operating budgets. In

many companies, there is a committee separate from the budget committee. To appropriate

funds for capital investment projects. In the capital budgeting, the profitability of each project

has to be carefully evaluated. Various techniques can be used to determine the profitableness

biases and capable of clearly indicating whether the project should be accepted or not.

REVENUE BUDGET:-

A letter duly signed by Chief Manager (F&A) is sent to all departments asking them

to submit the likely requirements of the year, before specific date (mostly last day of

November). They will also have to send the justification with adequate proof for the sum they

demand. Concerned department while submitting their proposals will also submit the report

containing details of expenditure done under the same head last year.

From all the information thus available, a preliminary budget formation takes place.

Subsequently discussions are held at various levels to check the validity of the budget so

formed and finally after passing through all checks it is presented before the Board of

Directors for final approval.


The above written procedure is not as simple as it seems and takes 4-5 months. The

concerned department also has to ensure that it neither asks for too much or too less amount

for in first case it would be questionable for excess amount lying unutilized, whereas in later

case they would not be given any additional amount to purchase in excess of budget.

Working Capital Management:-

Management of Working Capital refers to the management of current assets as

well as current liabilities. It mainly deals with managing the short term finance, negotiating

favorable credit terms, controlling the movement of cash, administering account receivable,

and monitoring the investment in inventories. Also it is changing with the change in current

assets and current liabilities. We can get the amount of working capital of KRIBHCO from

the following data of the year.

Current Assets - Current Liabilities = Working Capital

193,647.03 - 29,678.63 = 163,968.4

Working Capital Management involves a good deal of time in managing

Inventories, Receivables and Cash and Bank Management.


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED

MARCH 31, 2008

Particular Year ended 31.03.2008 Year ended 31.03.2007

Income From operation

Sales(Net of discounts) 140,002.80 135,383.39

Excise Duty (1,514.47) (986.29)

Concession from Government of

India

84,479.12 222,967.45 51,158.77 185,555.87

Other Revenue 26,730.12 24,811.70

Accretion in Finished Goods:

Closing Stock 11,020.20 14,696.98

Less: Opening Stock (14,696.98) (3,676.78) (6,376.20) 830.78

246,020.79 218,68835

Less: Cost of operation/other

outgoings

Consumption of Materials &

stores:

Raw materials 65,404.97 47,310.96

Packing materials 4,138.33 3,933.34

Chemicals & Catalysts 724.75 505.57

Power, Fuel & Water 40,848.15 111,116.20 30,793.20 82,453.07

Purchases:

Seeds & Chemicals 2,180.02 1,361.72

Urea, DAP & Other Fertilisers 43,270.05 45,450.07 61,343.31 62,705.53

Employees’ Remuneration &

benefit

17,340.21 12,149.55

Other Expenses on

Manufacturing,

Administration & Distribution 42,160.46 36,220.55

Interest 531.99 147.25

Depreciation / Amortisatio 2,279.20 1,762.54


218,878.13 195,527.99

Net Profit for the Year 27,142.66 23,160.36

Prior Period income 70.88 (6.92)

Profit Before tax 27,213.54 23,153.44

Provision for Taxation-

Current year 6,100.00 4,200.00

Deferred Tax (1,251.78) (570.52)

Fringe Benefit tax 200.00 200.00

Earlier Years 1,245.32 6,293.54 0.00 3,829.48

Profit after Tax 20,920.00 19,323.96

Profit Transferred to :

Capital Repatriation Fund 13.00 13.00

Dividend Equalization Fund 2,500.00 1,500.00

Net Profit As Per The Multi-State

Cooperative

Societies Act (MSCS Act) 18,704.00 17,810.96

Less: Proposed Appropriations:

Resave Fund As Per Bye-Low

58(i) of the Society

4,601.75 4,452.74

Provision for Contingency to

Cooperative Education Fund

184.07 178.11

Reserve Fund for Contingency as

per Bye-Low 58(iii) of the

Society

1,840.70 1,781.10

Reserve for Donation 40.00 25.00

Proposed Dividend 7,920.50 7,891.44

General Reserve 3,819.98 18,407.00 3,482.57 17,810.96

------------- -------------


14. INVENTORY MANAGEMENT

METHODOLOGY:-

The project was carried out under two heads, namely:

1) STUDY OF INVENTORY MANAGEMENT

2) EVALUATION OF INVENTORY MANAGEMENT

Taking the perspective of student from the finance point of view the

methodology used for study was to answer three questions covering broad area

of Inventory Management are as follows:

1) What is Inventory Management?

2) Why Inventory Management?

3) How the Inventory Management is done?

To obtain answers to the first two questions, the discussions were carried out

with various personnel of M/s. KRIBHCO.

However, to obtain the answer to the third question (i.e. how the

Inventory Management is done?) the existing Inventory control techniques

were studied, a relationship and link was sought between theory & practice

and it was found that many aspects from Theory can be and are being used in

practice and necessary suggestions were made to promote existing Inventory

Management at various level.

Finally at the evaluation store beside the Inventory “Interview technique,

secondary data was collected from trial balance etc. which were rearranged,

regrouped so as to meet the requirement of situation”.


INTRODUCTION TO INVENTORY MANAGEMENT

The dictionary meaning of the word “Inventory” means stock of goods. In the

financial terms, Inventory means the value of raw materials, consumables spares, work in

process, finished goods, and scrap in which company’s funds have been invested.

It can also be identified that Inventory are those goods which are placed, stored and

used for day to day functioning of the organization.

Thus Inventory can be defined “ an ideal resource of any kind having an economic

value.”

NEED TO HOLD THE INVENTORIES :

There are the four major reasons for holding inventories.

1. TRANSACTION PURPOSE :

This emphasized the need to maintain inventories to smoothen

production and sales operations, which is for the day-to-day use.

2. SAFETY PURPOSE :

Which necessities holding of inventories to guard against the risk of

unpredictable changes in the market.

3. SPECULATIVE PUROSE :

There is a speculative element which influences the decision to increase or

decrease Inventory levels to take advantage of price change.


TYPES OF INVENTORIES:-

Inventories can be classified in terms of its different uses, which will enable one to

appreciate the peculiarities and problems in its uses. Secondly the differentiation based on

uses of inventories will enable one to adopt control techniques to suit the needs.

Inventories are classified according to uses and point of entry in the alteration is as

follows:

o Raw Material

o Stores, Spares and Consumables

o Work in Process Goods and

o Finished Goods

Raw Materials: Raw materials are those basic input materials that are converted into

finished product through manufacturing process. The importance of raw materials can be

easily visualized when any break in its supply will keep the production lines idle. There are

two important factors, which determine the size of raw materials Inventory.

o Consumption rate;

o Importance of item.

Under the head of the raw material maintained in KRIBHCO is Carbon Dioxide and

Ammonia which are obtained from the Natural Gas.

Consumables: There are the materials which act as catalysis in the production process and

are not directly found in the output. This enables the production process to function smoothly.

In KRIBHCO, various chemicals like HCL, NaOH, K2CO3, DEA, V2O5, H2SO4, Alum,

Ferrous Sulphate, etc., fall under this category. It requires different treatment of Inventory

control than raw material.

Spares: Spares form an importance class of inventories by themselves. Their consumption

pattern defers from that of raw materials, consumables and finished goods, consequently the

stocking polices are different necessitating special methods for solving their peculiar

Inventory problems. KRIBHCO is having a huge store of speciality spare parts which can not

be usually available in short time. To avoid break down in plant due to fault in spare parts,

the KRIBHCO is maintaining huge stock of spare parts, from a small circuit board and

bearing to a large engines, since the time of its commence.


Work-in-Process Goods: They represent products that need more work before they become

finished products for sale. Work-in-process goods acts as a buffers within the manufacturing

sub-system, which may consist of group of machines and assembly lines, i.e. work centres.

The raw material passes through the work center for final production. Since KRIBHCO

producing using continues process plant, it having very less work-in-process inventory.

Finished Goods: Finished Goods is the final or stable products which act as a buffer between

the production department and marketing department. The level of inventory depends on the

production and behaviour of the market. Normally these inventories are controlled by the

Marketing Department. Urea is the final product of KRIBHCO. KRIBHCO have two silos

each capacity of 45,000 MT for storing Urea.

The Inventory Control includes controlling while purchasing through implement

proper purchasing policy and a good system of warehousing. This includes controlling

through controlling inventory ordering costs, carrying costs, capital costs, storage space costs,

risk costs, etc. Let us understand purchase procedure of KRIBHCO.

Cost Associated With Inventory:-

Managing inventories to increase net income requires effectively managing costs that fall into

the following five categories:

1. Purchasing Costs:

The cost of goods acquired from suppliers, including incoming freight or

transportation costs. These costs usually make up the largest cost category of

inventories

2. Ordering Costs:

The cost of preparing and issuing purchase orders, receiving and inspecting the items

included in th4e orders and matching invoices received, purchase orders and delivery

records to make payments. Ordering costs include the coast of obtaining purchase

approvals, as well as other special processing costs.

3. Carrying Costs:

These are the costs that arise, while holding inventory. Carrying costs include the

opportunity cost of the investment tied up in inventory and the cost associated with

storage; such as space rental, insurance, obsolescence and spoilage.


4. Stock Out Costs:

These are costs that result when a company runs out of a particular item for which

there is customer demand. A company may respond to a stock out by expediting an

order from a supplier. Expediting costs of a stock out include4e the additional

ordering costs plus any associated transportation coasts. Ort the company may lose

sales due to the stock out. In this case, the opportunity cost of the stock out includes

the lost contribution margin on sales not make due to the items not being in the stock,

plus any contribution margin lost on future sales due to customer ill will caused by the

stock out.

17. INVENTORY MANAGEMENT IN KRIBHCO

The efficiency of any business activity depends upon having materials supplies, and

equipments available in proper quantity with the proper quality, at the proper place and time

at proper cost. Failure ay any of these points adds to the costs and decreases the profit.

Being a chemical processing industry, the inventory pattern in KRIBHCO is very vast and

varied. It is therefore, the purpose to lay down the best practices methods and strategies that

are necessary to enable the materials department to carry out established policies uniformly

which will not only help in reducing the material costs and working capital but also increase

the productivity of the corporation.

Functional Strategies/ Objectives:

a) Evolve and implement a scientific inventory control system to achieve

optimization of inventory levels.

b) Standardize and improve equipment design.

c) Create and sustain computer culture.

d) Bring more common items under centralized procurement system to get better

control.

e) Develop alternate source of supply of materials.

f) Identification and development of vendors.

g) Annual rate contract with the approved vendors for regular supply of material to

reduce the inventory levels of such consumables.

h) Preservation of materials to avoid damages/ deterioration during storage.


i) Improvement in purchase procedure for reduction in procurement lead-time.

To study the inventory management the several of interview techniques

depending on the situations were followed. Discussions were carried out with

various personnel of the company to study the following 3 broad areas.

1. PURCHASE CONTROL

2. STORAGE CONTROL

3. ACCOUNTING CONTROL

A study in KRIBHCO was carried out taking into consideration the concept of

total material control, which significant that efficiency of any organization is

contingent upon having the right material of right quality or right place in the

right quantity at the right time and place.

PURCHASE CONTROL:-

It involves creative functions such as development of new resources, introducing new

materials and sources in the undertaking etc. It needs considerable expertise not only

negotiating but also in the techniques of competition and studying of economic trends in

respect of materials to be purchased in large quantity. Every rupee saved by the good

purchasing goes directly in to the profit for the simple reason is that it is not spent at all.

The scope of purchase in Kribhco includes below items.

a) Capital items – like plants and machinery, office equipment, furniture and

fixture, mobile equipment, electrical equipment, communication

equipment, vehicles etc.

b) Row materials and semi finished goods.

c) Consumables items required for the plant and office like tools, catalysts

chemicals and oil lubricant, office stationary and sanitary items.

d) Spear parts

e) Items required for repairs and maintenance of buildings, plant and

machinery, office equipment.

f) Rate contract for procurement of laboratory glass ware chemicals.


EXISTING PURCHESH PROCEDURE

1. Registration of vendors

An advertisement should be assure in the leading news papers inviting applications in the

prescribed proforma for registration of supplier and contractors listing out various types of

purchase that are likely to be mad during the next three years. The applications received

should be scrutinized by a committee consisting of a representative each from technical,

finance, and purchase department for ascertaining the resources, capacity and quality of

work man ship of the vendor.

The committee can also call the vendors for personal discussions and seek clarification on

the applications and obtain such other information. Wherever, felt necessary committee can

visit vendors work also.

2. Requisition to purchase

The indenters from various departments will raise requisition called the Material Purchase

Request for purchase. It should be insured that the requisition for purchase should be

complete in all respects with regard to,

Each item of purchase shall have a precise, complete and unambiguous identification.

Indenting department is responsible for identification of items in its indents.

Identification sell include the generic name of the material as recognized commercially

and physical dimensions (weight, size, volume, chemical composition, capacity and

other technical specifications) and code number as relevant.

Required date of delivery

Estimated value and approved budget head

Whether the item is a stock item/non-stock item/capital item

The stores section will raise the requisition for purchase of materials, which have been

declared as stock item, after the quantity in stock has reached the ‘reorder level’ as

determined for the respective items. Such requisition amongst other particulars should also

indicate the ‘maximum’, ’minimum’ and ‘re-order’ level, the date on which last supply was

received and the average consumption per month since last purchase.

The requisition for purchase non-stock items will be invariably routed through the stores

section that will endorse on the requisition the availability/ non-availability. In case the

item is available, the quantity thereof is indicated on the purchase requisition so that the


quantity to be purchased can be adjusted by the head of the purchase dept. in consultation

with the indentors.

The finance & Account dept. would ensure that the purchase requisition must indicate:

a) The budget provision

b) The amount utilized / committed unto the previous requisition

c) The estimated value of the present requisition (by departmental head), and

d) The balance available under the budget head after booking the present requisition.

3. Inquiries/ invitations to bid

On receipt of the requisition from the various indenting departments, enquiries shall be issued

by the purchase dept. as per the procedure detailed.

Inquiries shall be issued in the prescribed proforma(e). The enquiry document should be

suitably modified to conform to the equipments and materials proposed to be procured. It is

important that the inquiry documents should describe in detail the description of the material,

the technical specifications, and preferred delivery time, various general and special terms

and conditions governing the purchase.

Normally, bids shall be asked in two envelops in cash of the single sage bidding as below:

Envelop 1 Earnest Money Deposit

Envelop 2 Base Price Bid as per the Terms and Conditions of ITB and alternate

price bid, if any. Alternate Bids shall be based on the alternative

designs, materials, completion schedule, payment and other terms and

conditions. The alternate bid shall be considered, if not accompanied

with base bid.

However, in case of purchase is in which it may be undesirable or in impracticable to prepare

complete technical specifications in advance or wherever it is deemed necessary, two stage

bidding procedure shall be followed i.e. first inviting technical and un-priced commercial

proposal along with priced bid. These shall be subject to clarifications and adjustments to be

followed by the submission of revised priced bids in the second step, if required.

In this case bids shall be asked in three envelops as below:

Envelop 1 Earnest Money Deposit

Envelop 2 Technical and commercial un-priced bid

Envelop 3 Base Price Bid as per the Terms and Conditions of ITB and alternate

price bid, if any. Alternate Bids shall be based on the alternative designs,

materials, completion schedule, payment and other terms and conditions

a list of deviations should be given separately. The alternate bid shall be


considered, if not accompanied with base bid.

4. Time allowed for submission of bids and EMD to be deposited

Normally three weeks time should be given to the vendors for submitting their bids however,

the time limit for submission of bids may be increased with due consideration of the

particular circumstances with the approval of the competent authority.

(i) For value of purchase up to Rs. 5 lakhs Nil

(ii) For value o f purchase up to Rs. 10 lakhs

for proprietary items

Nil

(iii) For value of purchase up to Rs. 5 lakh (10

lakh`s for proprietary) & up to Rs. 1 cror

1% of estimated value or Rs. 1 cror,

which ever is less

(iv) For value of purchase above Rs.1 cror &

up to Rs. 5 cror

Minimum Rs. 1 lakh, 0.75% of

estimated value but limited to

maximum Rs.2 lakh

(v) For value of purchase exceeding Rs. 5 cror 0.5%of estimated value of purchase

limited to Rs. 10 lakh

5. Quotation Comparison Statement (QCS)

After the tender are opened a QCS of all the bids opened, shall be prepared by the purchase

department. the purpose of bid evaluation is to determine the cost of each bid to the society in

a manner that will permit a comparison of bids on the basis of their evaluated cost factor,

which may be taken into consideration, include inter-alia the cost of transportation unto each

unit along with other expenditures incidental to the transportation, the payment schedule, the

delivery or time of completion, the operating cost, the efficiency, the compatibility of

equipment, the availability of spare parts.

The bids conforming to the specifications and lowest in value will be rated in the QCS as

lowest (L-1), second lowest (L-2), and third lowest (L-3) etc.

6. Tender Committee:-

All purchase orders whose individual value does not exceed Rs.10 lakhs, will be finalized on

the basis of the recommendations of the indentor and the purchase dept. after obtaining the


concurrence of the Finance Dept. by circulation of file. However, in case of purchase order,

whose individual value does not exceed Rs.10 lakhs but are proposed to be procured

stipulated hereunder:

The reviews of QCS and selections of successful bidder in respect of all purchase orders,

whose individual value is above Rs.10 lakhs, will be done by a tender committee specifically

constituted for the purpose in each case. The tender committee shall be constituted consisting

members from following departments:

a) Indenting department – department from where the requirement has come up and for

which action is required to be taken.

b) Finance department

c) Purchase department

7. Selection of successful bidder:-

Normally, the lowest bid, which conforms, to the specifications will be accepted. However,

where the lowest bid even though it conforms to the specifications is not accepted, full

justification for accepting other than the lowest bid shall be recorded in writing and approval

of the competent authority will be obtained.

While forwarding the recommendations for award of work, the recommending authority/

tender committee, as the case may be, must ensure the reasonability of the prices on which

the order is proposed to be placed. In case the bid of the successful bidder is far from the

estimated cost, full justification to be given in the recommendation. Particularly for case

where the prices offered are substantial lower than the estimated cost and no proper reasons

could be ascertained, the amount of the performance security may be increased.

EVALUATION OF EXISTING PURCHASE SYSTEM OF KRIBHCO:

The existing purchase procedure gives fair chances of competition to all the vendors. It leaves

no room for malpractices or favoritism of employees i.e. nobody oblige any one out of way.

It is not very rigid. In time of urgency of requirement, competent authority so as to avoid

stoppage of work approves necessary deviations. The procedure is based on democratic way

of working. Good suggestions to improve efficiency are always considered. Various annual

rate contract running contracts are entered for regular consumable items, like oil and

lubricants, stationery, chemicals, medicines, printing job etc. This is reducing the repetitive

job times and money of company.


But there are shortcomings also, which are evaluated taking into consideration the five

essentials of purchase functions are as follows:

(1) Purchase time,

(2) Purchase quantity,

(3) Purchase quality,

(4) Purchase price and

(5) Source of supply

1. PURCHASE TIME :-

The purchase time indicates the lead-time i.e. time taken to physically receive the material

from the date of its indent.

To find out the lead-time five cases different items have been studied randomly, and analyzed

its fact, which indicates that by following the existing procedure, the administrative lead-time

is very long i.e. 5 to 7 months; while supplier’s lead-time is about 2 to 3 months.

SUGGESTIONS:

(1) Approved vendor list should be maintained so that wastage of time to get vendor list

approved every time could be avoided.

(2) Contract system should be followed to purchase stock items with approved vendors so

that the continuity of supply can be maintained without following such long procedure

and waste of time. It this case the economic order quantity should determined for each

item and a list of order per year with specific time limit should be given to contractors in

advance, fixing the maximum, minimum inventory levels.

(3) For non-stock items, the limits for issuing inquiry should be fixed maximum to seven

days. Similarly time limit for recommendations and concurrence by technical department

and finance department also is fixed. In case of delay beyond this time limit, competent

authority should be informed for necessary instructions.


2. PURCHASE QUANTITY AND QUALITY:

It has been observed that the quantity of material is being purchased considering 6 to 12

months consumption that means no economic order quantity has been fixed for different

types of material. Due to the existing system:

Company is incurring cost of carrying inventory interest of capital rent etc.

Company is also incurring loses due to the depreciation in quantity, deteriorations in

quality and obsolesce of materials during storage.

Company is also incurring avoidable expenditure such as holding and keeping of

surplus material, financial losses due to fall in the price of materials, extra expenditure

on excess of materials required.

It is suggested that before taking final decision economic order quantity should be determined

for each item and order should be placed accordingly. The determination of economic order

quantity techniques has been discussed on succeeding pages.

3. PURCHASE PRICE

The price of each item is being compared with supplier’s quotations considering the quality

of material to be supplied. Although, purchase department should keep itself informed of the

price trends, with the help of market reports, trade papers and journals, report by purchase

against and sales representative of the suppliers, published catalogue and price list.

4. SOURCE OF SUPPLY

The selection of a particular supplier is made after inviting tenders from possible source of

supply. There are four types of tenders commonly used, which are

(a) Single tender,

(b) Limited tender,

(c) Open tender and

(d) Global tender

The tender received are opened on the date and time stipulated and compared


STORAGE CONTROL :-

The Store has about 64,663 numbers of items, out of which about 2400 items are ‘ Stock

Items ‘. The procurement action of stock items is initiated by store. The store is spread over

in 2 lakhs sq.mtrs. of space, out of which 12000 sq.mtrs is covered area. Normally working

hours of store is general shift hours. However, in case of shut down, emergency service of

stores is made available as requested by user department.

OBJECTIVE OF STORES

To render materials, services to the organization by receiving issuing the materials,

preserving the materials in custody, disposing the scrap/ surplus materials. The objective is

achieved through following function. Stores function is basically a service function. The main

functions of the stores are:

1) To receive all types (Stock and Non-Stock) materials, to arrange

inspection of materials.

2) To keep materials safe custody, issue of materials to user departments.

3) To initiate action for procurement of stock items, to keep in custody and issue to

user department.

4) Disposal of Non-moving item, surplus item, and scraps item.

5) Implement stores related policies and functions.

6) Coordinating with different sections for preparation of capital/revenue budget.

7) Coordinating with other departments for stores related activities.

8) Vendor registration and evaluation for disposal.

9) Identification of different training needs of stores personnel.

10) To maintain records/ files of all stores activities, issue vouchers/ internal stores

issue vouchers (ISIV), internal stores receipt vouchers (ISRV), stock adjustment

vouchers (SAV), material exception reports (MER), claims/ dispatch advice etc.


For convenience in working, the department is divided into three sections

A) Receipt and Inspection Section

B) Custody and Issue Section, and

C) Disposal Section

STORES FLOW DIAGRAM

Receipt Section

Custody Section

Disposal Section


Receiving of materials

from vendors,

contractors & other units.

Return of rejected materials

to vendor & dispatch of

material for repairing

Return of material

through ISRV-Inspection of material.

-SRV

-Accepted material.

MPR for stock

item to purchase

Issue of material to

User Dept.

The preservation

of material

Scrap from

plants

Handing over surplus

material for disposal

to Disposal sec.

Accounting Control

Inventories are the assets of a company and such as their valuation get reflected in the

balance sheet and profit and loss account. These can be valued at actual, at the last price paid,

on the basis of an average price, current market price, and so on. A company may adopt a

particular method of inventory valuation, but it is obligatory to follow it for a minimum

period of three years. Any changeover to a new method requires the approval of the board.

Inventories measured by money value usually constitute the major element in the working

capital of manufacturing companies. Only proper stores accounting procedure can

successfully achieve control of inventory.

A good system of stores accounting is found to be necessary for certain other purposes like:

a) Preparation of accurate cost accounts

b) Evaluation of purchase performance

c) Working out important management ratio like sales to inventory, consumption to

inventory, purchase to inventory, inventory turnover etc.

d) Preparation of materials budget

When a material is purchased, received, inspected, and placed in the stores, an entry is

made about the purchase through a Goods Receipt Voucher. The entry for the quantity

received is simple, but the entry for the value of a purchase is a vexed problem because the

value is the sum of a number of items like:

a) Invoice price

b) Sales tax/ octroi

c) Excise duty/ custom duty

d) Insurance

e) Freight, carriage, handling charges etc.


Delivery of material sold

to a successful bidder

through MSTC

The goods receipt voucher is priced from the appropriate invoice and the material account is

debited in the stores ledger.

Valuation of the Material Issue

The method of valuation followed KRIBHCO is the weighted average pricing

mechanism. In this method the total quantities and total costs are considered, unlike simple

average method where only total costs are considered. This pricing mechanism is quite

advantageous as the price is fixed for a particular period say for one month and the system

takes care of price fluctuations.

Material requirement planning and vendor rating performance are another two important

techniques used in inventory management and control.

Preparation of Bin Cards

Bin card is ca quantitative stock ledger. It shows the on-line stock position. Whatever any

basic document relating to movement of stores (SIV, SRV, SAV etc) is punched into system,

automatic-posting goes into Bin-Card.

Pricing of Receipts (SRV)

The custody section sends SRV to finance for purpose of pricing. Finance prices the SRV on

the basis of terms and conditions of the purchase order and bill of vendor. SRV for which

bills are not received from the vendor are valued provisionally at the month end. Preparing a

SR amendment voucher does adjustments for variation in value.

Pricing of Issues (SIV)

Issues are valued on monthly weighted average basis. The issue of material or spare will be

valued at monthly weighted average method.

Preparation of Price Store Ledger (PSL)

The PSL is an item wise stores ledger. It shows both quantity and value.


18. CLASSIFICATION OF INVENTORY:

The universal problem can be solved taking in to consideration its important aspects.

Similarly, in Inventory Management classification is meant for solving the Inventory control

problem from its important angle. The inventories having huge amount of use in the

organization has to be controlled very strictly and low amount of use should be kept low

control. The importance can be due to the cost; it’s criticality, its availability and its

consumption.

EXISTING CLASSIFICATION SYSTEM:

The existing classification system is based on its use, i.e. inventories classified

as stock items and non-stock items.

The list and amounts of stock and non stock items is described in Annexure-

The existing system keeps strict control on the item that are of recurring

nature. It takes in to consideration only the amount use of quantity not in value. While

for non-stock item low control is being kept. This system has following shortcomings.

The classification gives importance to only those items, which are of recurring

natures. It excludes from the control point of view the items that are high value in

stock.

It considers the quantity used not the money value of the material used.

Control kept on stock items a give equal weightage to all items, which neglects the

benefit of selective control technique.

Considering the practical use of classification techniques, two important methods

are suggested as follow.:-

(1) ABC classification and


(2) VED classification

ABC CLASSIFICATION:

ABC classification is a basic analytical Management tools which enables top

Management to direct their effort where the result will be maximum. This technique properly

knocks as “ALWAYS BETTER CONTROL” has universal application in many areas of

human endeavor. The technique tries to analyze the distribution of any characteristic by

money value of importance in orders to determine its priority. In materials Management, this

technique has been applied in areas needing selective control. Such as Inventory critically of

items, obsolence. Stock purchases order, receipt of materials, inspection, storekeeper and

billing verification.

ADVANTAGES OF ABC CLASSIFICATION :-

This approach helps the material manager to exercise selective control and

focus his attention only on a few items. When he is dealing with lacs of store items. ABC

analysis has to be reported to equal extension to A, B and C items will not worth while and

would be very expensive. Concentrating on all items it is likely to have diffused effect

irrespective of the priorities.

It provides a sound basis on which to allocate funds and time of personnel with

respect to their importance of the individual items.

TECHNIQUES OF ABC CLASSIFICATION:-

The techniques of classifying the items into A, B and C categories as described in the

following steps:

(1) Classify the items of inventories, determining the expected use in units and the price per

unit for each item.

(2) Determining the total value of each item by multiplying the expected units by its unit’s

price.

(3) Rank the items in accordance with the total value, giving first rank to the item with

highest total value and so on.

(4) Compute the ratios (percentage) of number of units of each item to total units of all items

and the ratio to total of each item to total value of all items.


(5) Combine items on the basis of their relative value to form three categories A, B and C.

PURPOSE OF ABC CLASSIFICATION:-

The object of carrying out ABC classification is to develop policy guidelines for

selective control.

Normally, once A.B.C.classification has been done the following broad policy

guidelines can be established in respect of each category.

EXHIBIT 1.1

Sr.No. A-ITEMS B-ITEMS C-ITEMS

1. Very strict control Moderate control Low control

2. No safety stock Low safety stock High safety stock

3. Frequent ordering or

weekly deliveries

Once in four months Bulk ordering once in six

months

4. Weekly control statements Monthly reports Quarterly control reports

5. Maximum follow up and

expediting

Periodic follow up Follow up and expediting

exceptional cases

6. Strict value analysis Moderate value analysis Minimum value analysis

7. As many sources as

possible for each item

Two or more reliable

sources

Two reliable sources for

each items

8. Accounts forecast in

material planning

Estimate based on past

data on present plan

Rough estimate for planning

9.

Minimization of waste

obsolete and

surplus(review every 15

days)

Quarterly control over

surplus and obsolete

items

Annual reviews over surplus

and obsolete items

10. Individual posting Small group posting Group posting

11. Central purchasing and

storage

Combination purchasing Decentralized purchasing

12. Maximum efforts to reduce

lead time

Moderate Minimum clerical efforts

13.

Must be handled by senior

officers

Can be handled by

middle Management

Can be fully delegated


GRAPHICAL REPRESENTATION OF ABC ANALYSIS

VED CLASSIFICATION :-

The Ved classification is applicable largely to spare parts. Stocking of spare

parts will be based on strategies different from those for raw materials, because their

consumption pattern is different, while the consumption of raw materials depends directly on

the market demand on production the demand for spare parts depends on the performance of

the plant and machinery. Therefore, the method of classification designed for one type of

Inventory will not be compatible for selective control of another type of Inventory to over

come this draw back the VED classification is used.

Spares are classified as vital, essential desirable. This implies that V

classes of spares have to be stocked adequately to ensure the operation of the pant, because

by definition the non-availability of vital spares can cause havoc and stop the wheels of the

organization. Some risk can be taken in the case of ‘E’ class of spares. Stocking of desirable

spares can be even done if the lead-time for their procurement is law. It is essential that this

classification be done by technical department or by those in charge of the maintenance of the

plant. This classification will be very useful to KRIBHCO if it is implemented.


Moreover, ABC and VED classification can be a combined advantage, in

order to control the stocking of spare parts. The control action for the class AV, BE, CD, etc

are given in exhibit No. 2.1

EXHIBIT NO 2.1

CLASSE

S

V ITEM E ITEM D ITEM

A Items Constant control &

regular follow up

Moderate stock Nil stock

B Items Moderate stock Moderate stock Very low stock

C Items High Stocks Moderate stock Low stock

19. EOQ Model:-

The basic assumptions of EOQ model are following:

1 ) The forecast usage/demand for a given period usually one year, is known.

2 ) The usage/demand is even throughout the period.

3 ) Inventory orders can be replenished immediately, there is no delay in placing and

receiving orders

4 ) There are only two distinguishable costs associated with inventory costs, ordering

costs and carrying costs.

5 ) The cost per order is constant regardless of the size of the order placed.

6 ) The cost of carrying inventory is fixed percentage of the average value of inventory.

Given these assumptions, EOQ model ignores purchasing costs and stock out costs. For

determining the EOQ formula we shall use the following symbols:

A = annual demand/usage,

Q = quantity ordered,

O = cost per order,

C = carrying costs per unit,


Given the above assumptions and symbols, the total costs of ordering and carrying

inventories are equal to

In the equation, the first term on the right hand side is the carrying cost, obtained as the

product of average value of inventory holding and the carrying cost per unit. The

second term on the right hand side is the ordering costs, obtained as the product of the

number of orders and the cost per order. The total cost of ordering and carrying is

minimized when

The formula may be illustrated with the help of the following data relating to Ace Company.

A = annual demand/usage/sales = 20,000 units

O = ordering cost per order = Rs. 2,000

C = carrying costs per unit = 25% of inventory value

P = purchase price/unit = Rs. 12

Here carrying cost/unit in is = Rs. 12 X 25% = Rs. 3

= 5,164 units

Graphical Approach of EOQ Model

The economic order quantity can also be found graphically. Figure illustrates the EOQ

function. In figure costs –carrying costs and ordering costs and total costs – are plotted on

vertical axis and horizontal axis is used to represent the order size. We note that total carrying

cost increases as the order size increases, because on an average a larger inventory level will

be maintained and ordering costs decline with increase in order size because larger order size

means a less number of orders. The behavior of total costs line is noticeable since it is a sum


TC = QC

+ AO

2 Q

Q = 2AO

C

EOQ = 2AO

C

= 2 X 20,000 X 2,000

3

of the two types of costs, which behave differently with order size. The total costs decline in

first instance, but they start rising when the decrease in average ordering cost is more than

offset by the increase in carrying costs.

The EOQ occurs at the point Q* where the total cost is minimum. Thus the firm’s operating

profit is maximized at point Q*

It should be noted that the total costs of inventory are fairly intensive to moderate changes in

order size. It may be appropriate to say, therefore, that there is an economic order range, not a

point. To determine this range, the order size may be changed by some percentage and the

impact on total costs may be studied. If the total costs do not change very significantly, the

firm can change EOQ within the range without any loss.

Quantity Discount & Order Quantity

Many suppliers encourage their customers to place large orders by offering them quantity

discount. With quantity discount, the firm will save on the per unit purchase price. However,

the firm will have to increase its order size more than the EOQ level to avail the quantity

discount. This will reduce the number of orders and increase the average inventory holdings.

Thus, in addition to discount savings, the firm will save on ordering costs, but will incur


Total Cost

C O S T

Carrying Costs Ordering Cost

EOQ

additional carrying costs. The net return is the difference between the resultant savings and

additional carrying costs. If the net rerun is positive, the firm’s order size should equal the

quantity necessary to avail the discount; if negative its order size would be equal to EOQ

level.

Let’s assume the following data for a firm:

A = estimated annual demand 1200 units

P = purchasing cost per unit Rs. 50

O = ordering cost per order Rs. 37.50

C = carrying cost per unit Rs. 1

The firm is offered 0.5% (0.0005) or Rs. 0.05 per unit quantity discount on order of

400 units or more.

First we will calculate EOQ, assuming that the quantity discount does not exist

= 300 units

Now, the net return should be calculated for deciding whether the order size should be

increased from 300 to 400 units

The net return is given by the flowing equation:

= Discount savings + savings on ordering costs – additional carrying costs

= [d X p X a] + O [A/Q* - A/Q’] – [C/2 (Q’ - Q*)]

= [0.005 X 50 X 1200] + 37.50[1200/300 – 1200/400] – [1/2 (400-300)]

= 300 + 37.50 – 50

= 287.50 Rs.

Since the net return is positive, the firm should have an order quantity of 400

units.

Reorder Point:

Yet the answer should be sought to the second question, when to order? This is a problem of

determining the reorder point. The reorder point is tat inventory level at which an order

should be placed to replenish the inventory. To determine the reorder point under certainty,

we should know:

a) Lead time


Q* = 2AO

C

= 2 X 1,200 X 37.50

1

b) Average usage and

c) EOQ

Lead time is the time normally taken in replenishing inventory after the order has been

placed. By certainty, we mean that usage and lead time do not fluctuaye. Under such a

situation, reorder point is simply that inventorty level which will be maintained for

consumption during the lead time. That is Reorder point= Lead time X Average usage

20. Composition of Total Inventory:-

I n v e n t o r y C o m p o s i t i o n

o th e r s0 %

S te e l2 %

In s t r u m e n ta t i on S p a r e s ( 6 4

to 8 0 )1 4 %

E le c t r i c a l S p a r e s ( 5 1 to

6 3 )2 %

L o o s e T o o ls0 %M e c h a n i c a l

S p a r e s ( 8 1 to 9 0 )

5 3 %

G e n e r a l S to r e s ( 0 1 to

4 9 )2 9 %


21. SUGGESTIONS:-

Considering the entire situation discussed above following points should be taken in to

consideration for the effective Inventory Management.

First taking into consideration the purchase control of KRIBHCO, they

should introduce Vender Performance Rating system for vendor

development and to spot out good reliable source of supply.

As I have visited the dockyard, where the most of the scrape, wastages,

and obsolete items are being stored, it is necessary for them to reduce the

disposable items and should make cash out of it as soon as possible.

Their codification system is really good but as far as main group is

concerned. They should modify the system as such that it can

accommodate more main group, if the necessity arises. E.g. main

group101 for newly invented spare part.

In addition to ABC classification, they should introduce other widely used

classification systems also so as to have greater control over inventories

like VED analysis and FSN analysis.

The production planning should be done according to the demand so that

there should not be over stock during off-season and stock out during the

season.

The investment in stores and spare parts Inventory should be kept as law

as possible, considering demand of stores and spare parts.

Optimum planning should be maintained in transportation to reduce

storage of finished product (Urea), which reduces warehousing cost.

Reduction in material handling as far as possible.


22. Swot Analysis:-

Strength

Kribhco is having Sound financial position.

The Management of Kribhco is very professional.

Kribhco has larger proportion of reserves and surplus and further it has no

debt capital.

Kribhco has long standing reputation in the Indian Fertilizer Market.

Staff of Kribhco is very co-operative and hard working.

Kribhco is having skilled employees staff.

Good cooperation between employees.

Kribhco is having own Training Centre for training of employees as well as

apprentice students of different discipline.

It is having a full support of the Government of India.

Kribhco having strong and wide marketing network towards country.

High Production capacity of Kribhco leads to low production cost.

Savings in Production cost because Kribhco is having own Nitrogen and

Ammonia Plant.

Capacity Utilization more than 100%.

Still the starting of production, Kribhco plant has no major break down in

Plant.

Kribhco has extra land and fully developed infrastructure facilities so it can

be further developed.

Thus, we can say that the position of Kribhco in the Fertilizer Market is

Satisfactory.


Weaknesses

Government interference in the management is more comparatively private

units.

Due to Government’s interference it takes longer time in decision making. So

the decisions delayed and thus sometimes bias decision are also taken.

Kribhco is having overstaffing.

Kribhco is having demotivated employees because of job security and safety.

Kribhco is having no debt capital so the advantage leverage can not be taken.

Thus, we can say that the Kribhco will must be careful regarding its staff

and to government also.

Opportunities

Investment in Oman Project will raise the profit of Kribhco.

Expansion of existing plant at Hazira.

Look for newer Market with diversified product.

Diversifying the business.

Threats

The price of the Row material, i.e. Natural Gas, is increasing continuously.

There is a chance of sharp reduction in Government subsidy in near future.

Kribhco is having very little market share.

In the era of Free Trade, the import of fertilizers may affect the business of

the Kribhco.


BALANCE SHEET AS AT MARCH 31, 2008

Particulars Schedul

e

As at 31.03.2008 As at 31.03.2007

SOURCES OF

FUND

Shareholders’ Funds:

Share Capital 1 39,607.93 39,610.68

Reserves & Surplus 2 198,243.1

5

237,851.08 189,141.7

3

228,752.41

Secured Loan from

bank

75.63 40.69

Unsecured Loan from

bank

22,396.87 0.00

Deferred Tax

Liability

0.00 2,461.18

Total 260.323.5

8

231,254.2

8

Application of

funds

Fixed Assets: 3

Gross Block 122,432.3

4

105,280.8

9

Less:Depreciation 85,629.8

2

84,476.5

4

Net Block 36,802.52 20,804.35

Capital Work-in-

progress

726.23 6,228.62

Investment 4 87,056.46 80,756.46

Deferred Tax asset 418.38 0.00

Net Current Ast.

Current Ast. , Loans 5 185,178.3 157,699.6


& Advance 0 7

Less: C.L. &

Provision

6 49,858.31 135,319.99 34,234.82 123,464.85

Total 260,323.5

8

231,254.28

23. Recommendation

After having completed our general training in Krishak Bharti Co-

operative Limited, Hazira, we have come to know its working and understand various

departments therein. The training makes us able to understand the various aspects of

management.

After having a detailed study of the various departments of KRIBHCO,

we are giving our conclusion.

By looking at various financial ratio of the KRIBHCO, we are able to

conclude that the company is having a sound financial position with a good liquidity but

KRIBHCO is not having long-term debt which is necessary for leverage. In other words

the KRIBHCO is not using it capacity to raise long term debts.

Personnel in the KRIBHCO are treated very well. KRIBHCO is having

proper manpower planning and a good policy of Recruitment & Establishment with

good training opportunities for its employees as well as for students from different

disciplines. It is also running various cultural activities for the total development of its

employees. At last, KRIBHCO is having a very low man power turn over ratio from last

few years.

The company is also having good marketing channels to promote its

products. The KRIBHCO is promoting its products through train the farmers,

launching campaigns, releasing jingles on Radio, TV, etc.

The KRIBHCO is achieving more production capacity than installed. On

an average, the KRIBHCO is running on 108 % capacity utilization. It is having a

skilled staff to running the plant. The KRIBHCO is also implementing the good


Inventory Control Techniques to control the stocks of materials with a good purchasing

policy.

Finally, KRIBHCO is having a professional management to control all the

activities carried out therein. So, we would like to conclude that KRIBHCO is having a

bright future to expand and diversify.

24. CONCLUSION

During our Summer Training in KRIBHCO, We studied various components of the different

department. we observed different activities of them.

The network design of KRIBHCO is comparatively beneficial, because it is located at the

north of the Gujarat which covers the Gujarat side and near states like Rajasthan, Maharastra,

Uttarpradesh, etc. So it has location advantage with its competitors.

Inside the company, the all material handling system is designed in such a manner that it

minimizes the handling of material in maximum possible manner. Railway and road transport

handles the transportation of urea bags trucks. This is the most efficient system that

dispatches at its highest possible speed. Everyday, around 5500 MT urea is dispatched by

railway and trucks.

The finance and purchase departments under the personnel and administration department

handle the purchase functions and inventory management. Several steps are followed for the

contract of the purchase and long term service. Inventory is handled by two ways, first is

stored in the stores department, while other is handled inside the Silos, which is finished

good-Urea.

All the training activities are carried out by human resource department in prescribed way. It

also takes care of employee relations. Good employee & customers relations are the great

ingredient in the success of KRIBHCO.

In short, KRIBHCO handles its logistics functions efficiently. It operates at its effective level

by performing the sequence of operations, and acquires the maximum profits among leading

manufacturers of fertilizers- urea.


25. Bibliography

1. Kribhco Manual

2. Annual Report 2007-08 of KRIBHCO

3. KRIBHCO at Glance

4. KRIBHCO Pragati

Websites:-

http://www.kribhco.org.

http://www.kribhcosurat.com

http://www.google.com


http://www.google.com/

http://www.kribhcosurat.com/

http://www.kribhco.org/

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