Operation Management Final Tp

8/8/2019 Operation Management Final Tp

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DEPARTMENT OF MANAGEMENT (LSM)

TERM PAPER

OF

OPERATION MANAGEMENT

ON

MANUFACTURING OPERATIONS IN CHEMICAL

INDUSTRIES

SUBMITTED TO: SUBMITTED BY:

MR. SANJAY JINDAL SHUJA QAMMER

REG NO: 10904442

ROLL NO: 03

SECTION: S1906

MBA (IT) 3rd Sem


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ACKNOWLEDGEMENT

The most precious moments are those when we get an opportunity to

remember and thank everyone who has in some way or the other

motivated and facilitated us to achieve our goals.

First of all I thank to GOD ALMIGHTY ALLAH for giving me power to

pen down the term paper in its present shape. I thank the entire

teaching staff especially MR. SANJAY JINDAL Lect. LSM for sharing

his valuable knowledge with me & for providing her able guidance

and support. I also thank to my classmate who every time helped me

out and encouraged me for carrying out the task.

I fall short of words to thank my family, who stood beside me while

completion of my task.

SHUJA QAMMER


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OVERVIEW

Chemical industry is one of the oldest industries that has contributed significantly to the

industrial and economic growth of India. It is estimated that the size of the Indian chemical

industry is around US$ 30 billion. Volume of production by chemical industry positions India as

third largest producer in Asia (next to China and Japan) and twelfth largest in the world. The

industry, comprising both small scale and large units (including MNCs), produces several

thousands of products and bi-products, ranging from plastics and petrochemicals to cosmetics

and toiletries. A significant share (around one-third) of production by chemical industry is

consumed by itself.

The chemical industry accounts for about 13% share in the manufacturing output and around 5%

in total exports of the country. The chemical industry contributes around 20% of national revenue

by way of various taxes and levies. The chemical industry produced around 8 million metric

tonnes each of basic chemicals and basic petrochemicals, and around 10 million metric tonnes of

petrochemical intermediaries in 2005-06.

Gujarat is the major contributor to the basic chemical as well as petrochemical production with

54% and 59% share in all India production, respectively. Other major states producing basic

chemicals include Maharashtra (9%), Tamil Nadu and Uttar Pradesh (6% each). Other major

states producing petrochemicals include Maharashtra (18%), West Bengal (12%), Uttar Pradesh

(4%), and Tamil Nadu (3%).

Indias export of basic chemicals amounted to over US$ 7 billion in 2005-06. India exported US$

4.85 billion worth of organic chemicals, US$ 775 million worth of inorganic chemicals, US$ 847

million worth of tanning and colouring materials, and US$ 649 million worth of pesticides, in the

year 2005-06. In addition, India exported petrochemicals valued nearly US$ 4 billion. India is

also an importer of basic chemicals and the import value amounted to over US$ 8 billion in

2005-06. The composition of Indias chemical imports includes organic chemicals (63%),

inorganic chemicals (28%), dyes (6%) and pesticides (3%). China, USA and Saudi Arabia are the

leading source countries for Indias chemical imports. In addition, India imported petrochemicals

valued over US$ 2 billion. The Indian chemical industry has been receiving significant


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investment intentions, including foreign direct investment (FDI). Since August 1991, and till

November 2006, chemical industry has received investment proposals worth Rs.274486 crores, a

share of 11.3% in total investment proposals received during this period. FDI, which is very

essential for modern manufacturing of chemicals, has also been flowing into the chemical sector

significantly. During the period August 1991 to October 2006, FDI inflows into the chemicals

sector amounted to US$ 2.2 billion, a share of around 6% in total FDI inflows into the country.

The chemical industry in India has the potential to grow to around USD 100

billion by 2010 according to KPM s analysis based on a survey of the

industry. This would imply an annual growth rate of 15.5 per cent.. At USD

100 billion, the industry s contribution to India s GDP will grow from the

current 6.7 per cent to 12.1 per cent and its share of the global industry will

increase from 1.9 per cent to 3.9 per cent. In order to fulfill this, the industry

needs to focus on new sources of growth like the Speciality and Knowledge


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segments. At the Base case, if the current growth rates are maintained, the

industry is expected to grow to USD 60 billion by 2010. In that case, the

industry s contribution to India s GDP would increase to 7.1 per cent and its

share of the global industry would increase to 2.3 per cent. The industry

would need to seek new directions in order to achieve the incremental USD

40 billion over the Base case scenario. This study seeks to discuss the

drivers and imperatives for the industry s growth.

GLOBAL SCENARIO

The size of the global chemical industry is estimated at approximately USD 2.4 trillion in 2007.

The industry is currently under-performing due to the recession . Some of the emerging trends

of the global chemical industry that can be leveraged for growth are:

increasing globalisation as growth in mature markets drives leading players to explore

new developing markets;

consolidation to leverage economies of scale in the Basic and Knowledge segments;

increasing focus on core businesses, resulting in diversified chemical and

multi-product companies divesting businesses or exiting non-core product lines;

cost optimisation assuming critical importance in the face of slow growth coupled

with a pressure on prices due to competition;

increasing investments in R&D (especially in the Speciality and Knowledge segments)

to gain competitive advantage.


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MAJOR CHEMICAL PRODUCTS

The major products included in this sector are:

Alkali- Soda Ash, Caustic soda, Liquid Chlorine, etc

Inorganic- Aluminum Fluoride, Calcium Carbide, Carbon Black, Red Phosphorous, etc.

Organic- Acetic acid, Methanol, Formaldehyde, Citric Acid, Chloro Methane, Ethyl

Acetate, etc.

Pesticides-Pesticides/Insecticides registered under section 9(3) of the Insecticide Act

1968.

Dyes & Dye stuffs- Azo Dyes, Acid Direct Dyes, Basic Dyes, Ingrain Dyes, Oil Soluble

Dyes, Sulphur Dyes, Food Colours and Other Dyes.

CHEMICAL INDUSTRY IN INDIA


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Chemical Industry is an important constituent of the Indian economy having approx. US

$ 28 billion turnover which is approx. 7% of Indias GDP.

In terms of volume, it is 12th largest in the world, and 3rd largest in Asia

Within India, it constitutes about 15% of manufacturing capacity and20% of the Excise

revenue to the Government of India.Chemical industry has weightage of about 13% in the

index of industrial production.

The global chemical industry is valued at about US $ 2.4 trillion. Of which,

Indias chemical sector accounts for just 2%

Indias present share in Global Trade is 0.6% i.e. USD 45 Billion & it has been expected

to increase the same to 1% i.e. USD 80 Billion by 2011.

Chemical & Pharmaceutical Industry is the most important Foreign Exchange earner with

major value additions through out the value chain. The value is added using Knowledge,

energy and Capital.

The Indian Chemical sector accounts for 13-14% of total exports and 8-9% of total

imports of the country.


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SWOT ANALYSIS OF THE INDIAN CHEMICAL INDUSTRY

STRENGTHS

Diversified Manufacturing Base

Vibrant downstream industries in different segments

Competitive core industries

Capability to produce world-class end products

Strong presence in the export market in sub-segments

Large domestic market

Major raw material component sources within the country

Good R&D base

WEAKNESSES

Infrastructure

Cost Advantages


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Scale of

production

Technology

Multiplicity of taxes

Labor Laws

OPPORTUNITIES

Challenge to compete globally by concentrating on weaknesses

Markets in the developed countries

A large number of products going off patent.

Advantages in certain categories can be used for boosting exports.

Close to middle-east- cheaper and abundant source for petrochemicals feedstock.

Stringent environmental laws in the western countries

Climatic conditions in India

Competencies to utilize renewable resources

Cost Disadvantages - India vs. Other Developing Count

0

0.5

1

1.5

2

2.5

33.5

4

4.5

Power Interest Local Taxes Import Duties

Name of the Countr

Percentage

ofNetSal

es

India

Chin

Thail

Indon


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Competency to emerge as a global player in the area of Specialty chemicals.

THREATS

Imports of chemicals, intermediates and end products

Tariff levels for chemicals

Greater competition due to

Chinese products

Bilateral/multilateral trade agreements

The labor laws, power supply and infrastructure facilities

MAJOR PRODUCTION CENTERS

United Phosphorous Ltd, Mumbai

P.I Industries, Jaipur

Excel India, Mumbai

Colour Chem. Ltd., Mumbai

Sudarshan Chemical Industries, Pune


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Colourtex, Ahmedabad

Jubilant Organosys Ltd., New Delhi

Herdilia-Schentady Ltd. Mumbai

National Organics Chemicals Ltd., Mumbai

Gujarat Heavy Chemicals Ltd., Ahmedabad.

India Glycols Ltd., New Delhi

Gujarat Alkalies and Chemicals Ltd., Baroda

ICI Calcutta

MAJOR EXPORTERS IN INDIA

Indian Petrochemical Corporation Limited (IPCL)

Gas Authority of India Limited (GAIL)

Haldia Petrochemicals Limited

Tata Chemicals

Asian Paints

Ciba

Rallis

Hindustan Organic Chemicals (HOCL)

MAJOR EXPORT DESTINATIONS

UAE

United States

United kingdom


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China

SEGMENTS OF THE INDIAN CHEMICAL INDUSTRY

The Indian chemical industry is divided into 3 segments which are :

1.Basic Chemicals

2.Speciality and fine chemicals

3.Knowledge chemicals

Segments Characteristics Constituent Industries


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Basic High Volume

Limited product differentiation

Petrochemicals

Fertilizers

Organic Chemicals

Other Industrial Chemicals

Specialty Typically small production units

High product differentiation

Low capital investments

Adhesive sealants

Catalysts

Industrial gases

Plastic additives

Knowledge Differentiated chemical and

biological substances.

High investments in R&D and

marketing.

Agrochemicals

Pharmaceuticals

Biotechnology

CHEMICAL MANUFACTURING PROCESS & PRODUCT

FORMULATION


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Chemical manufacturing is the process through which a chemical is synthesized from raw

materials or other chemical feed stocks. Product formulation is the process by which chemical

products composed of one or more ingredients, are prepared according to the product formula.

(1) describes the process for manufacturing the chemicals in the use cluster; and (2) describes the

chemical product formulation process, if applicable. In both cases, the descriptions focus on the

industrial or laboratory means of synthesis, the necessary starting materials and feed stocks, by-

products and co-products, isolated or non-isolated intermediates, and relevant reaction conditions

(e.g., temperature, pressure, catalyst, solvents, and other chemicals).

GOALS:

Describe the processes for manufacturing chemicals in the use cluster.

Describe the process for formulating chemical products used in the use cluster, if

applicable.

Compile chemical manufacturing and product formulation data to be used by subsequent

modules if the impacts of these up-stream processes are being evaluated in a CTSA.

PEOPLE SKILLS: The following lists the types of skills or knowledge that are needed to

complete this module.

Knowledge of chemical feed stocks, synthetic chemical reaction catalysts, and reaction

conditions.

Understanding of chemical manufacturing processes, including both batch and continuous

processes, as well as chemical equilibrium, kinetics, and heat and mass transfer.

Within a business or DfE project team, the people who might supply these skills include a

chemist and a chemical or process engineer. Vendors of the chemicals or chemical formulations

may also be a good resource.

DEFINITION OF TERMS:

Catalyst: A substance that accelerates a chemical reaction but which itself is not consumed in the

reaction.


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Chemical By-product: An unintended chemical compound that is formed by a chemical

reaction.

Chemical Intermediate: A chemical substance that is formed during the reaction and then

undergoes further reaction to produce a product.

Chemical Product: In a CTSA, refers to products in the use cluster composed of one or more

chemicals for which product formulation data must be obtained.

Chemical Reaction: The process that converts a substance into a different substance.

Feedstock: A raw material, pure chemical, or chemical compound that is used to synthesize a

chemical.

Unit Operation: A process step that achieves a desired function

.

APPROACH/METHODOLOGY:

The following presents a summary of the approach or methodology for describing the chemical

manufacturing processes and product formulation methods of chemicals or chemical products.

CHEMICAL MANUFACTURING:

Step 1: Obtain chemical information, including CAS RNs, synonyms, melting points, and

boiling points from the Chemical Properties module.

Step 2: Determine the primary industrial mode of synthesis for each chemical in the use cluster

Step 3: Develop a chemical manufacturing process flow diagram for the primary mode of

synthesis. The diagram should identify the major unit operations and equipment, as well as all

input and output streams.

Step 4: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or by-

products involved in the synthesis that have the potential for release.

PRODUCT FORMULATION:

Step 5: Obtain chemical product formulation data for any chemical products being evaluated in

the CTSA from the Performance Assessment module. When proprietary chemical products are

being used, only generic formulations may be available.


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Step 6: Determine the primary industrial method of formulation for each chemical product being

evaluated. Mixing operations, with or without the addition of heat or pressure, are typical

manufacturing processes for product formulations.

Step 7: Develop a process flow diagram for the primary industrial method of formulation. The

diagram should include the unit operations, material flows, and equipment used in the

formulation process.

Step 8: Identify any chemical intermediates, catalysts, feed stocks, and chemical products or by-

products involved in the product formulation process that have the potential for release.

TRANSFERRING INFORMATION:

Step 9: Provide the following information to the modules listed below:

Energy usage resulting from the chemical manufacturing and product formulation

processes (e.g., heat, pressure, etc.) to the Energy Impacts module.

Material streams usage resulting from the chemical manufacturing or product formulation

processes (e.g., chemical feedstock, catalysts, etc.) to the Resource Conservation module.

FTP PROVISIONS FOR THE CHEMICAL INDUSTRY

Exports and Imports shall be free, except where regulated by FTP or

any other law in force.


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The procedure for facilitating foreign direct investment has been

simplified. Most of the chemical items fall under the RBI automatic

approval route for FDI/NRI investment up to 100 per cent.

Expansion of FMS Focus Market Scheme (FMS) has been expandedby adding 26 new markets, out of which 16 are in Latin America and 10

in Asia-Oceania. Incentive under the scheme has been enhanced from

2.5% to 3%.

Expansion of FPS Incentive under the scheme has been enhanced

from 1.25% to 2%.

Duty free import of specialized inputs /chemicals and flavoring oils is

allowed to the extent of 1% of FOB value of preceding financial years

export.

Free imports of samples by exporters - Number of free samples

allowed is increased from 15 to 50 as per para 49 of Highlights of

Foreign Trade Policy announced on 27-8-2009. It seems the change will

be effective after relevant customs notification is suitably modified.

Customs Duty

1.)The peak rate of Customs Duty on most Chemicals is 7.5%

2.)On basic raw materials like sulphur, rock phosphate, natural borates

is 5%

3.)On most building blocks & feedstock the duty is 5% (ethylene,

propylene, benzene, toluene, xylene )

Excise Duty-On almost all chemicals the excise duty is 16%.

EPCG scheme


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Zero duty EPCG scheme - A zero duty EOCG scheme has been

introduced in FTP 2009-14 for a limited period i.e. upto 31-3-2011.The

scheme is available for exporters of engineering and electronic

products, basic chemicals and pharmaceuticals, apparels and textiles,

plastics, handicrafts, chemicals and allied products and leather and

leather products, except those excluded in HBP Vol. 1.

Manufacture under Bond -Under the Manufacture under Bond

Scheme, all factories registered to produce their goods for export are

exempted from import duty and other taxes on inputs used to

manufacture such goods. Against this the manufacturer is allowed to

import goods without paying any customs duty. The production is

made under the supervision of customs or excise authority.

Duty exemption and remission schemes-The Government has

been taking various steps for augmenting the export. Some of the

important measures taken by the Government are as follows:-

1. Extension of the Duty Entitlement Pass Book (DEPB) Scheme up to

December 31,2009;

2. Providing pre and post-shipment credit assistance in rupees as well as

in dollars;

3. Reduction in import duties of raw materials; and

4. Reduction in interest rates on export finance; etc


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SUPPLY CHAIN:

The supply chain structure of chemical industries:

Raw

materials

Supplier


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GRAPH: SUPPLY CHAIN STRUCTURE

Manufactur

e

Distributo

Inventory

Dealer Direct Sale

Consumer


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QUALITY CONTROL IN CHEMICAL SECTOR

The chemical industry is one of the most regulated activity sectors, where

regulation includes specific quality systems such as good laboratory practice

(GLP), good clinical practice (GCP) and good manufacture practice (GMP). On

the other hand, accreditation to these practices covers technical

performance and is not suitable for pharma research and development (R&D)

as it is almost impossible to comply with the requirements of the European

standard in the pharma environment. The challenge is, therefore, to develop

quality systems, compatible with various principles, that not only cover

formal quality items, but also ensure good scientific and technical

performance.


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Quality Assurance (QA): is the activity of providing evidence needed to

establish quality in work, and that activities that require good quality are

being performed effectively all those planned or systematic actions

necessary to provide enough confidence that a product or service will satisfy

the given requirements for quality. QA introduces the rules'fit for purpose'

and 'do it right the first time'. It can be achieved by introducing appropriate

standard operating procedures (SOPs) in-house.

SOPs: An SOP is a set of instructions having the force of a directive, covering

those features of operations that lend themselves to a definite or

standardized procedure without loss of effectiveness. Every good quality

system is based on its SOPs.

The International Conference on Harmonization (ICH) defines SOPs as

'detailed, written instructions to achieve uniformity of the performance of a

specific function'. SOPs are necessary for chemical products development-

whether it concerns a pharmaceutical company, a contract research

organization, an investigator site, or any other party involved to achieve

maximum safety and efficiency of the performed clinical research operations.

SOPs provide procedural information about what needs to be completed to

fulfill the obligations of the regulations and provide auditors and regulatory

authority inspectors a tool to monitor adherence.

INSPECTIONS AND AUDITS

Before any inspection or audit starts, it is customary for the inspector or the

auditor to read the current SOPs for the relevant field. This is to judge the

compliance of SOPs, as to how sincerely they are used by the related

personnel, following ICH and other applicable regulatory guidelines.

During inspection the inspectors generally ascertain that appropriate SOPs

are available; edition numbers are correct and all obsolete editions have


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been withdrawn from circulation; distribution lists are still correct; SOPs are

effective, not leaving parts of the working procedures uncontrolled; whether

the SOP conveys a process that is effective in achieving compliance with

requirements/standards, whether the process that is described in the SOP is

an efficient way of performing the task; can the requirements of the SOP be

enforced; and whether the SOP training records for the staff are in place.

QA paradigms: One of the most widely used paradigms for QA

management is the PDCA (Plan-Do-Check-Act) approach. In order to have the

PDCA approach, SOPs may be tailored for--pre-clinical, clinical, bio-analysis

and pharmacokinetics, regulatory affairs, pharma-ovigilance/drug safety,

project management, data management, quality assurance including

inspections by competent authorities, external vendor management, crisis

management (including product recall), supply chain management and

change control procedures. In a nutshell, all that can be said is 'write down

what you do, do what is written down'.

ISO STANDARDS FOR CHEMICALS

Inorganic chemicals: ISO 1552:1976 & ISO 3425:1975

Organic chemicals: ISO 1995:1981 & ISO 5280:1979


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Risk Management for Chemical Industries

The chemical industrial sector is highly heterogeneous encompassing many sectors like organic,

inorganic chemicals, dyestuffs, paints, pesticides, specialty chemicals, etc. Some of the

prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic

acid, methanol and azo dyes. Chemical manufacturing sector in India is well established and has

recorded a steady growth in the overall Indian industrial scenario. The Chemical and allied

industries have been amongst the faster growing segments of the Indian industry. The Indian

chemical industrial sector had a turnover of around Rs.1200 billion in 2001-2002. The chemical

exports also accounts for more than 16.20% of the total Indian exports during 2001-2002.


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The risks associated with the chemical industry are commensurate with their rapid growth and

development. Apart from their utility, chemicals have their own inherent properties and hazards.

Some of them can be flammable, explosive, toxic or corrosive etc. The whole lifecycle of a

chemical should be considered when assessing its dangers and benefits. Though many of

chemical accidents have a limited effect, occasionally there are disasters like the one in Bhopal,

India, in 1984, where lakhs of people were affected and LPG explosion in Vizag refinery where

huge property damage in addition to 60 deaths was experienced. Therefore chemicals have the

potential to affect the nearby environment also.

Design and Pre-modification review : Improper layout like location of plant in

downwind side of tank farm , fire station near process area , process area very close to

public road and wrong material of selection had caused severe damages to the work andoutside environment

Chemical Risk Assessment:Not assessed for new chemicals from the point of view of

compatibility, storage, fire protection, toxicity, hazard index rating, fire and explosion

hazards

Process Safety Management: HAZOP, FTA, F&E Index calculation, reliability

assessment of process equipment, incorporating safety trips and interlocks, scrubbing

system, etc. not done before effecting major process changes, lack of Management ofChange procedure (MOC), etc.

Electrical Safety: Hazardous area classification , protection against static electricity ,

improper maintenance of specialized equipment like flameproof etc were ignored.

Safety Audits: Periodical assessment of safety procedures and practices, performance of

safety systems and gadgets along with follow up measures were not carried out.

Emergency Planning: Lack of comprehensive risk analysis indicating the impact of

consequences and specific written down and practiced emergency procedures along with

suitable facilities had increased the severity of the emergency situations.

Training: Safety induction and periodical refresher training for the regular employees

and contract workmen were not carried out.


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Risk Management & Insurance Planning : Thorough identification and analysis of all

risks and insurance planning were not done so that interruption risks and public liability

risks could also be managed effectively.

REFERENCES

Department of chemicals and petrochemicals, Chem Report 2008

Overview of the chemical industry, KPMG report 2008

Organic chemicals annual review, Crisil Research, December 2008

Datamonitor, Chemicals in India, October 2007

WTO international trade statistics, 2007

Chopra Sunil, Meindl Peter-2006 Supply Chain Management third edition, Dorling

Kindersley(India) Ltd.


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Websites

www.chemindia.org/1934hoc-asf87-ch

http://commerce.nic.in/trade/national_ftpp.asp?id=3&trade=n

http://en.wikipedia.org/wiki/Chemical_industry

explore.oneindia.in/detail/2/chemicals-nic-in.html

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