inventory management at nagarjuna fertilizers
TRANSCRIPT
A
Project Report on
INVENTORY MANAGEMENT
IN
Nagarjuna Fertilizers & Chemicals Ltd
Project submitted to the college of Management Studies & Madhira Institute of Technology &
Sciences (College of MBA) in partial fulfillment for the award of the degree of
MASTER OF BUSINESS ADMISTRATION
Submitted By
Ms. P. DHANALAXMI
Under Guidance of
Mr. NAGARAJU MBA
MADHIRA INSTITUTE OF TECHNOLOGY & SCIENCE
(Approved by AICTE, Affiliated to OU)
Madhira Nagar, Pale Annaram (VI), Chilkur (M), Nalgonda (Dt) - 508 206.
(2008-2010)
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DECLARATION
I hereby declare that the project report titled “A Study on “INVENTORY
MANAGEMENT” with reference to “Nagarjuna Fertilizers & Chemicals Ltd” though
my own work..
This project report is submitted in partial fulfillment of the requirement for the award
of MASTER OF BUSINESS ADMINISTRATION Degree from Osmania University,
Hyderabad for the year 2008-2010.
I also declare that this project is a result of my efforts and has not been submitted to
any other University for any other Degree or MBA.
Place:
Date:
(P. DHANALAXMI)
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ACKNOWLEDGEMENT
I take this opportunity to express my gratitude to Nagarjuna Fertilizers & Chemicals
Ltd, Hyderabad, who gave me this opportunity to carryout the work in
organization
I express my humble gratitude to Mr. PUVVULA SREEMANTH, Finance
Manager, for the opportunity and facilities provided to me for under going training in their
organization.
I am grateful to Mr. E. Anil Kumar, Principal of the college, for his support in
doing project work.
I sincerely praise the efforts of Mr. Nagaraju, faculty member, Madhira Institute of
Technology & Sciences for guiding and supporting me in completion of this project.
(P. DHANALAXMI)
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ABSTRACT
Chapter 1: This chapter deals with the Introduction. It sets forth the Objectives of the
project and also explains about the need, scope and importance of this project it also deals with
research methodology.
Chapter 2: This chapter gives the information about the organization where this project
was undertaken.
Chapter 3: This chapter deals with review of literature regarding inventory Management.
This chapter gives the theoretical base to the study. It introduces the concept of Inventory
Control Techniques.
Chapter4: This chapter deals with the analysis part. Analysis for the study is done using
ABC, XYZ Techniques.
Chapter5: This chapter deals with findings that were arrived at during the course of the
study.
Chapter 6: This is the final chapter of the project and it includes the suggestions and
conclusion made based on the findings of the study.
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CONTENTS
CHAPTER 1:
INTRODUCTION
OBJECTIVES of STUDY
NEED for STUDY
METHODOLOGY of STUDY
LIMITATIONS of STUDY
CHAPTER 2:
COMPANY PROFILE & INDUSTRY PROFILE
CHAPTER 3:
THEORITICAL ASPECTS of STUDY
CHAPTER 4:
DATA ANALYSIS
CHAPTER 5:
FINDINGS
CHAPTER 6:
SUGGESTIONS & CONCLUSIONS
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BIBLOGRAPHY
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CHAPTER-1INTRODUCTION
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INTRODUCTION
Materials Management gains momentum in this fiercely competitive global market.
In Fact, Materials Management gives the company a cutting edge by cutting costs on all
fronts thus having a great impact on the bottom line of the company. Every Endeavour of the
Manager should be to minimize costs both direct and hidden. There are various costs that are
associated with inventory. Selective techniques are there for today’s inventory managers to
do manage inventories effectively and efficiently. Supply Chain Management also gives
companies new opportunities to minimize costs. Spare Parts Management poses a great
challenge as the requirements cannot be predicted with accuracy. At the same Inventory
Managers must ensure that the equipment are put to optimum use with good maintenance and
spare parts support. It is all the more challenging to manage the inventory of spare parts in a
highly capital intensive or spares Intensive industry.
OBJECTIVES OF STUDY
Study has been taken up with the following Objectives.
To study the present system of Inventory Management
To study the present system of Replenishment
To study ABC analysis and to evaluate its performance.
To identify the Fast, Slow and None moving items of inventory.
To study and identify fast moving items which are or likely to be out of stock for
issue
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NEED, SCOPE AND IMPORTANCE
NEED OF THE STUDY
Benefits of holding inventories
Holding of inventories helps a firm in separating the process of purchasing, producing
and selling. In case a firm does not hold sufficient stock of raw materials, finished goods etc.
The purchasing would take place only when the firm receives the order from a customer. It
may result in a delay in executing the order because of difficulties in obtaining/procuring raw
materials, finished goods etc. Thus inventories provide cushion so that the purchasing,
production and sales functions can proceed at optimum speed. The specific benefits of
holding inventories can be avoiding losses of sales, reducing the ordering cost, achieving
efficient production runs.
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IMPORTANCE OF THE STUDY:
Management of inventory
Inventories often constitute a major element of the total work in capital and hence it
has been correctly observed, “Good inventory management is good financial management.
Inventory management covers a large number of issues including fixation of
minimum and maximum levels determining the size of the inventory to be carried deciding
about the issue price policy setting of receipt and inspection procedure. Determining the
ECONOMIC ORDER QUANTITY providing proper storage facilities keeping check on
obsolescence and setting up effective information system with regard to the inventories.
However, management of inventories involves two basic problems
Maintaining a sufficiently a large size of inventory for efficient and smooth
production and sales operations.
Maintain a minimum investment in inventories to minimize the direct-indirect costs
associated with holding inventories to maximize the profitability.
Inventories should neither exclusive nor inadequate if inventories are kept at high
level; higher interest and storage costs would be incurred. On the other hand a low level of
inventories may results in frequent interruption in the production should be resulting in
underutilization of capacity and lower sales. The objective of inventory management is,
therefore, to determine and maintain the optimum level of investment in inventories which
help in achieving the following objectives
Ensuring a continuous supply of materials to production department facilitating
uninterrupted production
Maintaining sufficient stock of raw material in periods of short supply
Maintaining sufficient stock of finished goods for smooth sales operation
Minimizing the carrying cost
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Keeping investment in inventories at the optimum level
RESEACRH METHODOLOGY
The Research Design used to undertake the study is exploratory research.
DATA COLLECTION
The data collection used to execute the project is both primary data as well as secondary data.
PRIMARY DATA
The primary data has been collected by interacting with the executives in NFCL.
SECONDARY DATA
The secondary data for the study has been collected from the sources like
Standard Reference Books
Company Fact Sheets
Nagarjuna Fertilizers & Chemicals Ltd.,
SCOPE OF THE STUDY
The scope of the study has been restricted to Nagarjuna Fertilizers ltd, Hyderabad.,
Stores Department. Further, as there are more that 7000 spares that are held for A 320 aircraft
itself, as on 31-03-2007. The study has been restricted to the various types of Seals in use for
A 320 aircraft.
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LIMITATIONS OF THE STUDY
1. Study is based at Hyderabad division only, though NFCL has its operations in Orissa,
Madhya Pradesh, West Bengal and Karnataka also.
2. Too much dependence on secondary data
3. A much of relevant data is inaccessible because of the data being confidential
4. The time taken to undertake the project is very short, hence only few parameters were taken for the study.
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CHAPTER-2
INDUSTRY &COMPANY PROFILE
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INDUSTRY OVERVIEW
Urea comes under the purview of essential commodity act and so its production,
pricing and distribution is controlled by the Department of Agriculture & Cooperation,
government of India under the Fertilizer (Control) Order, 1985(FCO), issued under the
Essential Commodities Act, 1955.
Fertilizer is a key ingredient in ensuring the food security of the country by increasing
the production and productivity of the soil. The domestic food grain production target has
been set at 320 million tonnes by 2011-12 from the present production of 210 million tonnes.
This target could be achieved by higher productivity through improved farming practices,
expansion of irrigation, better seeds and extensive and balanced use of fertilizers.
Towards this end, the Department is planning to raise the production of urea from the present
installed capacity of 197 LMT to 300 LMT by the end of 11 th Five Year Plan i.e., 2011-12 by
taking concrete steps to boost production and productivity, removing regional imbalances in
production and distribution, securing long term tie-ups for supply of feedstock and raw
material etc.
The demand for urea during 2005-06 was assessed at 234.25 LMT, the cumulative
availability at 239.78 LMT and sales at 221.91 LMT. In respect of DAP, the demand
assessment was 78.06 LMT, availability was 86.38 LMT and cumulative sales was 67.51
LMT. As regards MOP, the demand assessment was 28.88 LMT, the availability was 55.22
LMT and sales at 28.01 LMT.
This buoyant trend has continued during the current year with the demand during Kharif,
2006 in respect of urea at 122.37 LMT against which the availability was 125.04 LMT and
sales are estimated at 113.65 LMT. In respect of DAP, the demand during Kharif, 2006 was
33.10 LMT, the availability was 48.67 LMT and sales was 32.06 LMT. In respect of MOP,
the demand during Kharif, 2006 was 14.66 LMT, the availability is estimated at 20.47 LMT
and sales at 9.99 LMT.
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Similarly, in respect of Rabi 2006-07, the demand for urea, DAP and MOP is at
127.08 LMT, 48.19 LMT and 18.57 LMT respectively. The DOF has made plans for
ensuring availability at the level of 149.39 LMT of urea, 50.37 LMT of DAP and 26.31 LMT
of MOP. The availability during the year 2006-07 is being augmented substantially through
imports of over 52 LMT of urea, 27.16 LMT of DAP and 26.98 LMT of MOP.
The Government has accorded high priority to boosting agricultural production
through greater fertilizer usage, increasing efficiency in the fertilizer sector and regional
balance in the production and availability of fertilizers. One of the major decisions of the
Government was to halt the process of liquidation and closing of public sector fertilizer
companies and to take steps for their revival. It may be noted that there are 8 urea plants in
the Eastern Region of the country which are closed.
This region has a high population density and huge demand for fertilizers. The
Government is in an advanced stage of preparing a concrete action plan for revival of these
plants. The revival of these plants will lead to an additional urea capacity of about 60 lakh
tones and remove the existing regional disparity with regard to production and availability of
urea. The revival of the closed plants would also create an environment of industrial
development in backward regions of Bihar, Jharkhand, West Bengal and Chhatisgarh.
Further, it would also lead to employment generation in these regions.
The Department of Fertilizers has made huge strides in ushering in a new era of
efficiency, transparency and international competitiveness in the Indian fertilizer industry in
the last couple of years. The capacity utilization of urea units, which was only 92% in 2001-
02 and 96.2% in 2002-03 and 98.7% in 2003-04, increased to over 100% of the installed
capacity 2004-05 onwards. It has been 102% in 2005-06. Similarly, in the field of energy
efficiency, in 2005-06, 22 urea units achieved better energy consumption levels than their
pre-set norms.
In the context of its significance on subsidy and production efficiency, the Government has
put special emphasis on early conversion of non-gas based urea units to gas and in the last
two years, 3 naphtha based units namely, CFCL-Gadepan-II and IFFCO-Phulpur-I&II have
converted to gas and a 4th unit namely, SFC-Kota will convert by the end of the current
financial year. For the remaining 8 functional non-gas based units, the Department has made
strenuous efforts with the other stakeholders such as Ministry of Petroleum & Natural Gas,
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GAIL, gas producing companies, fertilizer companies and the Fertilizer Association of India.
As a result of these efforts, a concrete and cogent plan of action to ensure pipeline
connectivity and adequate availability of NG/LNG to the fertilizer sector has been agreed
upon. It will ensure availability of gas to the non-gas based urea units by 2008-09 and for the
revival of the closed urea units in the Eastern part of the country by the year 2009-10. A few
units are expected to use gas from new technologies such as coal gasification and Coal Bed
Methane. Conversion of all non-gas based units to gas will result in subsidy saving of Rs.
3300 crore per annum.
Steps are being taken for additional urea production beyond 100% of the installed
capacity of the functional units. Some brown field expansion of the existing plants is also in
the pipeline. A special revival package for FACT, Cochin has been approved by the
Government in March 2006. As a result, the company has increased its efficiency and
production levels. A financial restructuring package for MFL, Chennai, which is passing
through a financial crisis, is also under consideration of the Government.
The Government is carrying out reforms in the delivery mechanism of fertilizers. A
Fertilizer Monitoring System which will track the movement of de-controlled fertilizers as
also production, distribution and sales of all fertilizers under the Concession Scheme is
proposed to be activated from 1st December 2006. The same system will also monitor the
dispatch of urea to each State, district-wise.
An important component of the policy of the Government to ensure long term food
security for the country and availability of fertilizers at reasonable rates to the farmers is to
encourage setting up of Joint Ventures in countries abroad where feedstock for fertilizers is
available at reasonable prices. This is so because the country has to import substantial
quantities of raw material and finished fertilizers such as urea, ammonia, phosphoric acid,
rock phosphate, sulphur, Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP).
The Department has, therefore, adopted a very proactive approach of late in the
matter. A delegation led by Secretary (Fertilizers) visited Jordan and Morocco, countries
which are rich in phosphate deposits and are amongst the biggest producers of phosphates in
the world. Plans for cooperation and investment with major companies of these countries in
mining of rock phosphate and setting up of phosphoric acid plant were discussed.
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Possibilities of sourcing potash economically from countries like Argentina, Belarus
and Thailand are also actively being explored. Another delegation led by Joint Secretary
(Fertilizers) has visited Nigeria recently and has held talks for long term import of LNG to
India for its fertilizer plants. Another delegation led by Principal Secretary to the Prime
Minister and including Secretary (Fertilizers) visited Kuwait last month and as a result a
Kuwaiti delegation is coming to India this month to visit Indian fertilizer and petrochemical
plants to hold discussions on areas of collaboration.
The Kuwaitis have also offered to take India as a partner in their Joint Venture in
fertilizer sector in Algeria. Possibility of similar joint ventures in countries such as Saudi
Arabia, Egypt, Myanmar, Bangladesh, Libya, Syria, Iran etc is also being explored.
All the aforementioned steps taken by the Government with a long term perspective in view
will result in reduction in subsidy expenditure on fertilizers in the years to come. The
requirement of subsidy on all fertilizers in the year 2005-06 was Rs. 20475.78 crore, which is
expected to rise to a level of Rs. 27000 crore in 2006-07. The rise in subsidy expenditure has
been mainly on account of rise in the prices of feedstock and raw materials and increasing
consumption levels of fertilizers.
However, the Government has kept the Indian farmer protected from these rising
input costs by keeping the MRP/indicative MRPs of fertilizers unchanged for the last four
years and subsidizing the sale of chemical fertilizers in the interest of food security of the
country and for promoting growth in agriculture and food grain production.
Urea comes under the purview of Essential Commodity act and so its production, pricing and
distribution is controlled by the Department of Agriculture & Cooperation, government of
India under the Fertilizer (Control) Order, 1985(FCO), issued under the Essential
Commodities Act, 1955.
Urea industry consists of various players that are of public sector, private and cooperative
sector.
Main players of public sector are NFL (National Fertilizers Limited), RCF (Rashtriya
Chemicals and Fertilizers Limited)
Main players of private sector are NFCL (Nagarjuna Fertilizers And Chemicals
Limited), Chambal Fertilizers, Indo Gulf etc.
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Main players of cooperative sector are IFFCO (Indian Farmers Fertilizer Cooperative
Limited) and KRIBHCO (Krishna Bharti Cooperative Limited).
The market share of various players is as shown in the pie chart below
Percentage share in urea production in the year 2008-09:
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Percentage share of NFL in country’s urea production in the year 2008-09
PRICING OF UREA
Fertilizer comes under the purview of essential commodity and so its production,
pricing and distribution are controlled by the Department of Agriculture & Cooperation,
government of India. Under the Fertilizer (Control) Order, 1985(FCO), issued under the
Essential Commodities Act, 1955.
Earlier “retention pricing cum subsidy” scheme was implemented for pricing of urea
but a new pricing policy keeping in view the recommendation of Expenditure Reforms
Commission was approved by the Government which came into effect from 1-4-2003. A
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high powered fertilizer pricing review committee was constituted to review the existent
fertilizer subsidy scheme and propose a new methodology for subsidization of urea.
Accordingly the committee recommended that the unit wise RPS (retention pricing scheme)
to be discontinued and Normative Referral Price to be fixed for the gas based urea units and
DAP.
A Feedstock Differential Cost Reimbursement (FDCR) is given for a period of five
years for urea units. Expenditure reforms commission (Sep 2000) recommended dismantling
of existing RPS and in its place introduction of a Concession Scheme for urea units based on
feedstock used and the vintage of plants in respect of gas based units. Thereafter in
accordance with recommendations of Expenditure Reforms Commission, Government in
consultation with relevant department and ministry approved the new pricing scheme
replacing RPS (retention pricing scheme) in December 2002.
The new scheme came into effect in April 2003. The new policy aims at greater
uniformity, transparency and efficiency in distribution of subsidy to the urea units and
inducing them to take cost reduction methods on their own and become competitive. There
will be six groups based on vintage and feedstock for determining the group based
concession under the new Scheme, namely, pre-1992 gas based units, post-1992 gas based
units, pre-1992 naphtha based units, post-1992 naphtha based units, fuel oil/low sulphur
heavy stock (FO/LSHS) based units and mixed energy based units.
The mixed energy based group shall include such gas-based units that use alternative
feedstock/fuel to the extent of more than 25%.
The scheme was planned to be implemented in four phases to decontrol urea over a period of
six years: -
1. Stage I (2001/02) — adaptation of uniform concession for all five groups -pre-1992 gas
based plants, post-1992 gas based plants, naphtha based plants, fuel oil/LSHS based
plants and mixed feed plants. Concession rate to be determined taking weighted average
RP of plants in each group as of 1 April 2000.
2. Stage II (2002-2005) — further reduction in concessions on naphtha fuel oil/LSHS and
mixed feed plant based on reduction in energy consumption and lowering of capital
related charges (CRC).
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3. Stage III (2005/06) — concession on naphtha and mixed feed plants on basis of assumed
switch over to LNG.
4. Stage IV (w.e.f. 1.4.2006) — reduction in groupings from five to two namely naphtha
based plants being accepted for FDCR of Rs. 1,900 per ton. For all other plants,
concession to be NIL. Selling price of urea to be increased by 7 per cent per annum from
2001 to Rs. 6,900 per ton on 1 April 2006, which would also be the import parity price on
urea.
PRODUCTION
At present 57 fertilizer plants are operating of which 29 are producing urea, 20
DAP and rest other type of fertilizers. The amount of urea produced during April 2005 –
January 2006 is 17267000 MTs as against the target of 17281000 MTs1With permission of
government most of the companies are targeting more than 100 % capacity utilization.
Example – NFCL produced at the capacity of 116% of its capacity last year
The Indian fertilizer industry has come long way post independence. Being one of the
largest producers and consumer of fertilizers, India’s production in terms of nutrients (N&P)
reached a level of Sector & Nutrient wise capacity of Fertilizers155 lakh MT in 2005-06
from 0.39 lakh MT in 1951-52. Similarly,(As on 31.01.09)consumption of fertilizers in terms
of nutrients (NPK) has also grown from about 0.66 lakh MT in 1951-52 to nearly 184 lakh
MT in 2004-05. the fertilizer industry in India has played a pivotal role in achieving self –
sufficiency in food grains with rapid and sustained agriculture growth. For 2007-08, total
sales stood at 124.58 lakh MT of Urea, 36.14 lakh MT of DAP and 14.17 lakh MT of MOP
for the Kharif season. Similarly, for the Rabi season of 2007-08, sales stood at 126.60 lakh
MT of Urea, 41.59 lakh MT of DAP and 14.48lakh MT of MOP. The industry is capital
intensive and the production process energy intensive with the combined cost of feedstock
and fuel accounting for 55-80% of cost of production, depending on the type of fertilizers.
The industry has active participation of private entities along with public and cooperatives.
Private participation in the nitrogenous fertilizers is tuned at 44.73% and 62.08% in
phosphorus while the public enterprises hold in nitrogen and 7.65% in phosatic fertilizers.
1
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Apart from this, the companies have been forming joint ventures with foreign entities to
ensure adequate and cheap raw material availability and better efficiencies. Due to various
constraints faced by the sector, the ideal ratio between nitrogen, phosphorus and potassium
which should be 4:2:1 has got skewed to 20:6:1. The fertilizer space, given its strategic
importance in ensuring self– sufficiency of food grain production in the country, has for
decades, been under Government control. The Government has over the years, provided
subsidies/concessions through the fertilizer companies to farmers and the manufacturers have
been compensated through various schemes. Urea is under policy control whereas
phosphorus & potash have been decontrolled. Though the Government control helped in
meeting the objective of ensuring creation of capacities and ultimately achieving self-
sufficiency in food grain production, it did not encourage improving efficiencies in the
sector. The subsidy bill has risen to near Rs 95000 crores this year from Rs 25952 crores in
2006-07 due to sharp increase in international prices of fertilizer inputs and finished
fertilizers and increased consumption. Realizing the need to focus on fiscal prudence,
Government policies in recent times are aimed at encouraging efficiencies in the sector as
evident by the new fertilizer policy propounded by the government
.
PRODUCTION OF FERTILIZERS
With a sharp increase in the consumption of fertilizers in the last 3-
4years without any corresponding increase in the domestic production, imports have catered
to around 25% of urea requirement. Steep increase in the price of phosphoric acid and
sulphur along- with insufficient availability has adversely affected indigenous production of
phosphatic fertilizers. Although the indigenous capacity for phosphatic fertilizers has been
developed but the raw materials and intermediaries are imported. MoP (Muriate of Potash)
requirements are met through imports only as there are no viable sources/reserves in the
country. Fertilizer production in the country has grown by 8.6% to 1.24 MMT in May 2008.
This can be attributed to healthy growth in production of both nitrogenous and phosphatic
fertilizers. Production of nitrogenous fertilizers grew by 5.7% to 0.88 MMT in May 2008
against decline of 11.20% in the corresponding period in the last year. On the phosphatic
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fertilizer front, the production has surged by 16.2% to 0.35 MMT in May’08 compared to a
6.75 decline in the previous year.
Sector & Nutrient wise capacity of Fertilizers
(As on 31.01.09)
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FERTILIZER TYPES
Fertilizers may be divided into two broad groups: organic and inorganic, or
chemical. An organic fertilizer is derived from a living plant or animal source. Chemical
fertilizers are usually manufactured and have the advantage of low cost. The commonly used
synthetic fertilizers consist almost entirely of nitrogen, potassium and phosphorus in forms
that are readily utilized by plants. In contrast, the organic fertilizers are more likely to have
significant amounts of micronutrients, and the macronutrients are likely to be in forms that
are not as readily absorbed. Nitrogen in an organic fertilizer is slow in becoming available for
plant use because the organic nitrogen must be reduced by micro-organisms to ammonium
(NH4) and nitrate (NO3). Thus, the inorganic fertilizers are “fast,” while the organic
fertilizers tend to be more “time- release.” A potential drawback of organic fertilizers is that
they may not release enough of their principal nutrient at a time to give the plant what it
needs for best growth. Because organic fertilizers depend on soil organisms to break them
down to release nutrients, most of them are effective only when soil is moist and the soil
temperature is warm enough for the soil organisms to be active. Microbial activity is also
influenced by soil pH and aeration.
The use of organic fertilizers increases the soil’s organic matter content and improves the
soil’s physical structure.
Inorganic fertilizers can be one of the major sources of groundwater pollution. The nitrogen
is in such a soluble form that it tends to leach from the point of application. Water-soluble
chemical fertilizers will injure plants if not washed or brushed off the foliage. Slow-release
fertilizers are less susceptible to leaching and are preferred on sandy soil types, which tend to
leach.
Inorganic Fertilizers: Various salts and minerals can serve as fertilizer materials. Examples
are ammonium sulfate, potassium nitrate, super- phosphate, potassium chloride and
potassium sulfate.
Synthetic Organic Fertilizers: These are human-made organic materials used for
fertilization. Examples are urea and urea form.
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Natural Organic Fertilizers:
Cottonseed meal is a by-product of cotton manufacturing. Formulas vary slightly but
generally contain 7% nitrogen, 3% phosphorus and 2% potash. Cottonseed meal is
frequently used for fertilizing acid-loving plants, such as azaleas, camellias and
rhododendrons.
Blood meal is dried, powdered blood collected from cattle slaughterhouses. It is a rich
source of nitrogen, and it supplies some of the essential micronutrients, including
iron.
Fish emulsion, a well-rounded fertilizer, is a partially decomposed blend of
pulverized fish. The odor is intense but it dissipates within a day or two.
Manure is a complete fertilizer, but low in the amounts of nutrients it can supply.
Manures are best used as soil conditioners instead of nutrient suppliers.
Sewage sludge is a recycled product of municipal sewage treatment plants. Two
forms are commonly available, activated and composted. Activated sludge has higher
concentrations of nutrients than composted sludge and is usually sold in a dry,
granular form for use as a general purpose, long-lasting fertilizer. There is some
question about the long-term effect of using sewage sludge products in the garden,
particularly around edible crops. Heavy metals, such as cadmium, are sometimes
present in sludge, and may build up in the soil. Sludge use should be guided by results
of chemical analyses of the sludge in question.
ANALYSIS OR FERTILIZER GRADE
All fertilizers are labeled with three numbers that indicate the guaranteed
analysis, or the fertilizer grade. These three numbers give the percentage by weight of
nitrogen (N), phosphate (P2O5) and potash (K2O). Often, to simplify matters, these numbers
are said to represent nitrogen, phosphorus and potassium, or N-P-K. Remember that it is not
N-P-K, but N-P2O5-K2O. For example, in a 100 pound bag of fertilizer labeled 10-10-10,
there are 10 pounds of N, 10 pounds of P2O5, and 10 pounds of K2O.
Fertilizer Ratio: The ratio describes the relative proportions of N, P2O5, and K2O in a
fertilizer. For example, the ration of 16-4-8 fertilizer is 4:1:2 or 4 parts nitrogen to 1 part
phosphorus to 2 parts potassium.
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To choose a fertilizer formulation, follow the recommendations in the soil test report.
Complete Fertilizer: A fertilizer is called “complete” when it contains each of the major
plant nutrients: nitrogen, phosphorus and potassium. If plants need only one of these
nutrients as indicated by the soil test report, a complete fertilizer is not called for.
Balanced Fertilizer: A fertilizer is called “balanced” only because it contains equal amounts
of N, P2O5 and K2O. A 10-10-10 fertilizer is a balanced fertilizer.
Fertilizer Label: The law requires that the manufacturer guarantees what is claimed on the
label. In some cases a fertilizer will contain secondary nutrients or micronutrients not listed
on the label because the manufacturer does not want to guarantee the exact amounts. The
gardener can rest assured that nutrients listed on the label are contained in the fertilizer.
Special-purpose Fertilizers: There are fertilizers packaged for certain uses or types of plants
such as “Camellia Food,” “Rhododendron and Azalea Food.” These fertilizers belong to the
“acid plant foods.” Some of the compounds in these fertilizers have an acidifying reaction so
they are beneficial to acid-loving plants growing in soil that is naturally neutral or alkaline.
Slow-release Fertilizers: Slow-release fertilizers contain one or more essential elements.
These elements are released or made available to the plant over an extended period. This is
done in three different ways:
• Material dissolves slowly, such as granite meal and rock phosphate;
• Use of materials from which nitrogen is released by microorganisms;
• Granular material is coated with resin or sulfur, which controls the rate of nutrient release
from the granules in the soil.
Slow-release fertilizers need not be applied as frequently as other fertilizers. Plants may use
the nitrogen in slow-release fertilizers more efficiently than in other forms. Caution should be
used in applying slow-release fertilizers around trees and shrubs because they may keep the
plant growing late in the summer. Late-season growth may not harden off completely and
excessive winter damage may occur.
Fertilizer/Pesticide Combinations: The major reason for buying a fertilizer combined with
a pesticide is convenience. The problem is that the timing for a fertilizer application often
does not coincide with the appearance of a disease or an insect problem.
Fertilizer-herbicide combinations are available for both pre-emergence crabgrass control and
broadleaf weed control on lawn areas.
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Fertilizer Formulation: Fertilizers come in many shapes and sizes. The type or form the
fertilizer comes in is called the formulation. Some of the formulations available to the
homeowner include water-soluble powders, slow-release pellets, slow-release spikes, liquids,
tablets and granular solids.
APPLYING FERTILIZERS
Timing of Applications: Soil type dictates the frequency of fertilizer application. Sandy
soils require more frequent applications of nitrogen and other nutrients than clay-type soils.
Other factors affecting frequency of application include the plants being grown, the
frequency and amount of irrigation, the type of fertilizer applied and its release rate.
Root crops require less nitrogen fertilization than leafy crops. Corn is a heavy nitrogen-
feeder, while most trees and shrubs perform nicely with one good application every year.
It is important to group plants with similar fertilizer needs close together to avoid improper
rates of application.
In the landscape, plants should be fertilized in late winter or spring.
Late fertilization (after July 1) of trees and shrubs can cause new flushes of growth on woody
tissue that are normally adjusting themselves for the coming winter. This may delay
dormancy of woody plants and cause severe winter dieback in new growth.
If you anticipate major insect damage (perhaps a hatch of grasshoppers), decrease
fertilization. Tender plant tissues are more subject to damage than tissues that grew more
slowly.
Application Methods: Methods of applying fertilizer depend on the formulation and the
plant’s need.
Broadcasting: A recommended rate of fertilizer is spread over the growing area and left to
filter into the soil or is incorporated into the soil with a rot tiller or spade.
Banding: Narrow bands of fertilizer are applied in furrows several inches to the side and
below the seeds or plants to be planted. Putting the fertilizer bands too close to seeds will
burn seedling roots. Banding is one way to satisfy the phosphorus needs of many plants as
the first roots develop. When fertilizers are broadcast and worked into the soil, much of the
phosphorus is locked up by the soil and is not immediately available to the plant. By
concentrating the phosphorus near the roots, the plant is given what it needs even though
much of the phosphorus stays locked up.
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Starter solutions: One can also use a liquid fertilizer high in phosphorus as a starter solution
when setting out transplants.
Side dressing: Dry fertilizer is applied as a side dressing after plants are up and growing.
Scatter fertilizer 4 to 6 inches from the plants. Work it into the soil and water thoroughly.
Foliar feeding: Soluble fertilizers are becoming popular for foliar fertilization. They are
usually applied diluted in large quantities of water, using a hose-end sprayer or proportioning
device. Foliar feeding is used when:
• Insufficient fertilizer was applied before planting;
• A quick growth response is desired;
• Micronutrients (such as iron and zinc) are locked in the soil;
• The soil is too cold for plants to extract or use the fertilizer applied to the soil.
Foliar-applied nutrients are absorbed and used by the plant quite rapidly. While this method
can give relief from nutrient deficiency symptoms, it is temporary relief at best, only
affecting the existing leaves and only giving good results if applied in the spring. Foliar
application does not address the underlying cause of the deficiency, which is generally an
imbalance of the soil pH value or nutrient availability.
WHAT’S A GOOD FERTILIZER TO BUY?
When shopping for a good fertilizer, look for a few key things:
Nitrogen Sources: For quick results, look for a fertilizer that contains the majority of the
nitrogen in the nitrate, Ammoniacal and/or urea forms. For long-lasting results with a low
potential of leaching, shop for a high percentage of water-insoluble nitrogen, which will be
more expensive than the readily soluble forms. The best buy for routine garden maintenance
is a combination of fast- and slow-release nitrogen.
Get the most for your money: If there are two or more fertilizers that fit your needs, but the
prices vary, calculate the actual cost per pound of plant nutrients. One way of comparison
shopping for fertilizer is to compare the cost per pound of primary nutrients in the various
products. Add the nitrogen, phosphorus and potassium percentages; multiply by the net
weight of the package to approximate the pounds of nutrients contained. Then divide the cost
of the package by the pounds of N+P2O5+K2O in the package to obtain the per-pound cost.
For example, a 50 pound bag of 20-3-7 fertilizer would contain 15 pounds of nutrients (that
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is, 20% N + 3% P2O5 + 7% K2O = 30% of 50 pounds). If the bag of fertilizer costs $6.00, the
average cost of the nutrients would be $0.40 per pound ($6.00 per 15 pounds).
A higher analysis fertilizer such as 16-4-8 will probably cost more but will cover more area
than a lower analysis.
Just because a fertilizer is labeled as a lawn fertilizer (or tomato or camellia or whatever)
doesn’t mean it cannot be used on everything in your yard if it meets the nutritional
requirements of the other plants. The exception of course is if a fertilizer also contains a
weed killer or insecticide, which might injure certain plants. Don’t buy six different
fertilizers if one will fit the bill.
NAGARJUNA FERTILIZERS AND CHEMICALS Ltd
Industry in Harmony with Nature
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THE GROUP
Foundation in 1973 by Late Shri K V K Raju, a technopreneur, with a modest
investment of Rs 180 Million (USD 24 million), the Nagarjuna Group is a prominent
business house in India. A diversified conglomerate, with interests in agriculture and energy,
the Group has as asset base close to Rs 30 Billion (USD 600 million).
In pursuit of its mission - serving society through industry, the Group is guided by its
values: commitment, Excellence, Ethics, Learning and Concern and is accountable to its
stakeholder’s viz., Customers, Investors, Business Partners, Associates and Community.
At Nagarjuna, dreams for the future are unending. Growth for us is journey to explore
areas of endless possibilities. If is this spirit of enterprise that propels The Nagarjuna Group
to look for challenging opportunities helping it surpass itself.
GROUP CHAIRMAN
Mr. K S Raju, born on June 29, 1950 at Nidadavole, West Godavari District,
was groomed in an agriculture family by his grandfather and father, Shri KVK Raju. He
completed Mechanical Engineering from University of Mysore in 1973 and dedicated
himself to the dream his father had natured. K V K realizing the zeal and dedication of his
son encouraged him.
He moved in as director to the flagship company of the Group Nagarjuna Fertilizer
project. He was proactive in doubling its capacity and leading the Group's foray in to core
sectors while structuring the businesses to meet the customer's needs.
Mr. K S Raju, like his father continued to emphasize the philosophy of industry in
harmony with nature. The 667 acres of sandy, salt barren land, devoid of vegetation around
the Group's Fertilizer Complex was turned into a vast green belt, under his leadership. He has
supported community development activities in areas of environment, health, education and
community asset creation. He has been closely associated with the world Business Academy
and State of the World Forum. In association with their forums and ILO he founded the K V
K Raju International Leadership Academy, to enable managers to become value based
leaders.
The Nagarjuna Group under the stewardship and guidance of Mr. K S Raju is
emerging as an enterprise based on values and commitment to the society at large.
AGRI:
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India is primarily an agrarian economy and agriculture to be a dominant force in the
foreseeable future. The strong potential for growth this sector offers can be gauged by the
fact that presently, Indian crop yields are among the lowest in the world. Despite being a
major producer, the country's presence in would trade is negligible.
For Nagarjuna this sector is on the top of its priority list. The Group has made
significant investments and presently derives a large percentage of its turnover and profits
from Agri business. Adopting an integrated approach, the Group has involved itself in key
aspects of the farming cycle through plant nutrition, plant protection, micro irrigation
products and Agri research and development. The objective of the Group is not only farm
productivity improvement but better returns for the farmers as well.
The close association that Nagarjuna has maintained with the farming community has
seen it become an integral part of their lives. In turn for the Group, it has meant a strong
presence in growth are and enabled it to establish vital linkage as India prepares to become a
major international player in Agri products.
PLANT NUTRITION BUSINESS
Enormous pressure to produce more food from less land with shrinking natural
resources is a challenge for farmers. As a transition from the past, the need for providing
balanced and customized nutrition from the past, the need providing balanced and
customized nutrition to enhance agricultural productivity exists. Nagarjuna Fertilizers and
Chemicals Limited, the flagship company of the group, endeavors to fulfill this market need.
NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED.
Nagarjuna Fertilizers and Chemicals Limited (NFCL), is among the largest fertilizer
companies in India with a turnover of about Rs. 10 billion (USD 200 million). Located at
Kakinada on the East coast NFCL's fertilizer facility is the single largest private sector
investment in South India. The first has-based fertilizer unit in the region, the facility unit in
the region, the facility produces 11, 94,600 MT Urea and 6, 90,000 MT Ammonia in two
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streams. The plants are the best operated fertilizers units with one of the lowest energy
consumption rates in the world.
Spread over 1130 acres, two-thirds of the plant site is completely developed as a
green belt with trees and water bodies from virtually a barren and saline land. The Green Belt
extends over a kilometer with more than three lakh fifty thousand trees of 175 species, a
number of large water bodies with marine life, birds and animals. This is a humble tribute
towards our philosophy of industry in Harmony with Nature. NFCL has implemented a
comprehensive environment plan in the fertilizer plant at Kakinada, resulting in near zero
pollution of air water through treatment of chemical pollutants, recycling and effluent
control.
With over 4200 strong dealer network, spread around the country, the company's
efforts at customer interface include spot demonstrations, adoption of villages, farmer
training and kisan Meals. The company has also set-up Krishi Vigyan Kendras to impact
regular training in scientific agricultural practices and procedures for improving farm yield.
The Company markets a wide range of plant nutrients - Urea, MOP, Zinc Sulphates, Micro
Nutrient mixes, Growth Regulators and Organic Fertilizers under the Nagarjuna brand.
"Nagarjuna" is a synonym for quality, trust and well being among its customers.
Nagarjuna's market shares ranging from 27-50% in the areas of presence is hardly
surprising considering the above efforts at providing a better product range and convenience
to its customers. NFCL is also the best fertilizer unit in India in terms of operating profit
margin.
The company has achieved excellence in quality, plant safety and environmental
protection and has been conferred various recognition and awards. Some of these are
ISO 9001: 2002 by BVQL, Netherlands.
National Safety Award 1994, 1995, 1996, & 1997 by British Safety Council.
Award for Environmental control Strategies and Safety in Chemical Plants for the
year 1994 by Indian Chemical Manufacturers Association.
Golden Peacock Environment Management award for 1998 by World Environment
Foundation, New Delhi.
Vana Mitra Award for the year 1999 for outstanding efforts made in developing and
sustaining the Green Belt by Govt. of AP.
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ISO 14001 by BVQL, Netherlands.
OHSAS - 18001 certification by BVQL, India.
Environmental protection Award in Nitrogenous Fertilizer plants category for the
year 2002 - 02 by Fertilizers Association of India, New Delhi.
With a plethora of credits of its favor NFCL endeavors to be a total solution provider in
the plant nutrition segment in the near future. A range of customized nutrition products will
be developed and offered in increased number of markets in the time to come.
PRODUCTS
Manufactured products –
Urea (46 % nitrogen) – used as fertilizer
Anhydrous ammonia – used for production of urea and several other products
Marketed products –
Diammonium phosphate (DAP) – used as fertilizer
Muriate of potash (MOP) – used as fertilizer, water softener and in the manufacturing of
KOH
Zinc sulphate heptahydrate- used as fertilizer
Zinc sulphate monohydrate – used as fertilizer
Services offered---KVK Raju krishi vigyan kendram for imparting knowledge, technology
and latest agricultural practices to farmers to increase farm output
Trading products – Specialty Fertilizers imported from Israel and China
Micro irrigation – providing water management services. Company ranks third in providing
micro irrigation solutions in the country
Operations (manufacturing)
The company has its manufacturing operations at Kakinada, East Godawari District, and
Andhra Pradesh. There are two manufacturing units. The gas based plant was established
with the help of technical expertise of Snamprogetti, Italy and Haldor Topsoe, Denmark.
Plant 1 Plant 2
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Gas based 40% gas 60% naphtha
Urea: 1500 mt/day urea: 1500mt/day
Ammonia: 900mt/day ammonia: 900mt/day
In the year 2004-05 the company produced 13.93 lakh tons of urea as against the
target of 11.94 tones, which was an all time high. The British Safety Council conducted an
audit of company’s plants at Kakinada and awarded Five Star Rating to the Plants. During
the year, 2004-05, the company registered cumulative accident free days of 388 days as on
March 31, 2005. During the year under review the company’s plant received
ISO 9001:2000 upgraded certification for Quality Management System and ISO 14001:1996
re-certification for Environmental Management System.2
The Plant Protection Business
Plant protection chemicals are the next most important inputs affecting agricultural
productivity. The growing use of these agro chemicals has increased the resistance of pest,
rendering the products ineffective. Consequently, a market change to high value low dosage
products is evident in the market, Nagarjuna Agrichem Limited, focuses on bringing in such
valued products to the market to deep pace with the evolving plant diseases and pests.
Nagarjuna Agrichem limited.
As an integrated approach to agribusiness, the Group ventured in the manufacture of
highly effective plant protection products through Nagarjuna Agrichem Limited (NACL).
BASED ON Srikakulam district on the eastern coast of India, NACL has a modern
Agrochemical manufacturing facility set up at a total capital investment of Rs 570 million.
(US$ 13 million). The manufacturing facility has been built on an area of 25 acres and
another 75 acres has been developed into a green belt. NACl also has a government
recognized R&D Laboratory for developing process technology to manufacture various
chemicals.
A wide range of products including insecticides, Fungicides and Herbicides are
manufactured by the company. NACL is the first Indian manufactures of the Fungicides,
2
36 | P a g e
Tricylazole and Propiconazople. In the domestic market the company's products are sold in
retail packed formulations in sixteen States and also to several reputed companies. Apart
from catering to the Indian market, NACL exports to various countries in Asia, Europe,
Africa and Latin America.
During the last three years NACL has introduced several new products, many of
which were previously imported. Nagarjuna Agrichem is among the top five Indian
companies in the agrochemical industry with a turnover of Rs 2 Billion (USD 40 million) and
is slated to elevate into the top three Indian companies, in the next few years.
The micro irrigation business.
The importance of water management to an agricultural economy like India cannot be
over emphasized. Sprinkler and micro irrigation are well known ways of effective utilization
of water in the farmland. However, the area covered by their systems in India is abysmally
low as compared to the global averages. The Government of India has also recognized this
need and is taking a series of measures including subsidizing micro irrigation systems. With
renewed thrust, the market for micro irrigation systems is all set to reach a historical zenith.
The Nagarjuna group, with a field learning of over a decade in this market is well placed to
service the micro irrigation needs through Micro Irrigation Division.
Agri research and development
The Nagarjuna Group recognized the need for scientific study; testing and
validation of various Agri inputs in different agro climatic zones throughout the country
ensure the best yields. Nagarjuna Agricultural research and development institute signifies
this commitment of the Nagarjuna Group to enhance value delivery to the customer.
Nagarjuna agriculture research and development institute
The Nagarjuna Group established Nagarjuna Agriculture Research and
Development (NARDI), a private sector agricultural R&D institute, in 1995. The Department
of Scientific and Industrial Research (DSIR), Govt. of India has recognized NARDI as a non-
profit, scientific and industrial Research Organization (SIRO). Eminent academicians,
37 | P a g e
administrators and management professionals govern NARDI while eminent scientists from
agriculture and allied fields, guide its research.
The well-developed laboratory-cum-office complex of NARDI is organized along
with farm service facility of 107 acres at Gowraram, Medak District, Andhra Pradesh, and 50
km away from Hyderabad. NARDI under takes field and laboratory testing of all agricultural
inputs at multi-location testing centers spread all over the country. Its facilities are available
for performance evaluation of hybrid varieties, transgenics and new technologies.
Strict scientific conditions are ensured during testing by qualified and experienced
field staff. NARDI provides scientific validation services to help agri-business companies
market their products. NARDI also generates backup data for patenting or registration under
the sui generis systems.
Fuels
India is not only a net importer of crude oil but is also faces increased demand of
petroleum products. The shortage is expected to be acute in South India, the location of the
group's refinery project.
Nagarjuna Oil Corporation Limited
Nagarjuna Oil Corporation Limited ( NOCl ) is implementing a 6 million tonnes per
annum Refinery Project at Cuddalore, a coastal town in Tamil Nadu, with a capital outlay of
Rs. 39 billion (US$ 867 million). The refinery will have integrated facilities like Captive
power plant, dedicated water sources, Single point Mooring for import of crude by Very
Large Container Carriers (VLCC), two jetties and facilities for product evacuation by road,
rail and pipeline.
The project has been appraised and approved by Industrial development Bank of
India (IDBI).The land acquisition process is almost complete while Mobil's Refinery from
Woerth, Germany, is being relocated. Most of the equipment has arrived at the site and
infrastructure works at the site are in progress. A competent project team is also in place.
The detailed engineering is nearing completion and leading organizations like ABB
Lumus and Krupp Uhde have associated themselves in different aspects of the project. All
major contracts like equipment supply, project management and licensor agreements have
38 | P a g e
been finalized while oil major IBP has tied up for marketing arrangement with NOCL. The
refinery is expected to be commissioned within 30 months from the date of financial closure.
Corporate Social Responsibility
The Nagarjuna Group is a socially responsible corporate citizen. The Group
supports community development programs covering a wide range of activities like
environment, health, education; income generation and community assert creation. These
activities have created awareness of environment, good health and opportunities for a better
life among communities it is associated with.
Service Organizations
The service organizations of the Group include KVK Raju International
Leadership Academy, Nagarjuna foundation and Lakshmi Memorial Cancer Research
Foundation.
The KVK Raju International Leadership Academy is a non-profit center for
excellence in leadership training. The academy endeavors to incorporate ethics and innate
spiritual values in management.
The Nagarjuna Foundation focuses on promoting sustainable development,
humanities, culture preservation, spiritually, philanthropy, philosophy and education. Recent
publications of the Foundations are "Cheluva Kannada Nadu" [A comprehensive publication
on Karnataka] and "Maa Telugu Talli" [A comprehensive publication on Andhra Pradesh].
The Lakshmi Memorial Cancer Research Foundation (LMCRF) established in
November 1996 in memory of Late Smt. Lakshmi Raju, wife of Mr. K.S.Raju, promotes
early cancer detection, prevention and cancer research.
NAGARJUNA GROUP OF COMPANIES:
1985 Nagarjuna Fertilizers and Chemicals Limited
1992 Nagarjuna Investors Services Limited
1993 Nagarjuna Agrichem Limited
1995 Nagarjuna Agricultural Research & Development Institute
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1997 Nagarjuna Oil Corporation Limited
SET UP OF STORES DEPARTMENT:
A typical hierarchy of Stores & Purchase Department is as follows____
DIRECTOR
↓
GENERAL MANAGER
↓
DEPUTY GENERAL MANAGER
↓
CHIEF MANAGER
↓
SENIOR MANAGER
↓
MANAGER STORES & PURCHASE
↓
DEPUTY MANAGER STORES & PURCHASE
↓
ASSISTANT MANAGER S & P
↓
S & P OFFICER
↓
STAFF
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CHAPTER-3
THEORITICAL ASPECTS of STUDY
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INVENTORY MANAGEMENT IN NCFL (STORES AND
PURCHASES)
Introduction:-
Progressive modern industry reckons management of Materials as
an important area of activity since all a judicious and well planned investment in
material and can result in increased profitability besides increased production and sales.
Material management functions covers material planning, procurement, receiving, stocking,
issuing, accounting, inventory control, scrap page and disposal of unwanted and slow
and non -moving inventories. For all the above functions there is a need for coordination and
better financial control. It is thus an integrated activity of ensure optimum investments of
material by way of coordinated planning, judicious purchasing, proper storing and timely
movement and control of items so as to provide a predetermined service level to the
users, production department in particular.
Objectives of Stores Department
Optimum investment in inventories.
Timely provisioning, procurement and supply of equipment,
Material and services to meet the operational needs.
Control of expenditure within budget.
To maintain foreign vendors account and obtain better
Credit terms.
Develop competitive sources to maintain sustained supplies.
Emphasis on Quality management.
Identification of areas for import substitution and development of indigenous sources.
Progressive identification/segregation and disposal of surplus, redundant & obsolete
spares and assets.
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Development of Personnel /Infrastructure frame work of system and procedures to
achieve the objectives.
The main function of Stores & Purchase Department is procurement of raw material &
‘intermediaries and equipment to meet the operational requirements of the production
department which maintains the requirement.
PRODUCT SPECIFICATIONS AND THE REQUIRED RAW
MATERIAL
1. Urea (46% N) (White free flowing) – Prilled
SPECIFICATIONS AS PER THE FERTILIZER CONTROL ORDER- 1985
Moisture per cent by weight, maximum 1.0
(ii) Total nitrogen, per cent by weight, (on dry basis) minimum 46.00
(iii) Biuret per cent by weight, maximum 1.5
(iv) Particle size--90 per cent of the material shall pass through 2.8 mm IS sieve and not
less than 80 per cent by weight shall be retained on 1 mm IS sieve.
Raw material:
Urea is produced commercially from two raw materials namely: Ammonia (NH3) and carbon
dioxide (co2).
Specifications for Prilled Urea 46%N:
Nitrogen: 46.0% min.
Moisture: 0.3% max.
Biuret: 1.0% max.
Granulation: 1 – 4 mm 90-94% min.
Melting Point: 132 Degrees Celsius
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Colour: Pure White Prilled
Radiation: Non-Radioactive
Free Ammonia: 160pxt ppm max.
Prilled, Free Flowing, Treated against caking, 100% free from harmful substances.
Specifications for Granular Urea 46%N:
Nitrogen: 46.0% min.
Moisture: 0.5 % max.
Biuret: 1.4% max.
Granulation: 2 – 4 mm 90-94% min.
Melting Point: 132 Degrees Celsius
Colour: Standard White or Pure White
Radiation: Non-Radioactive
Free Ammonia: 160pxt ppm max.
Free Flowing, Treated against caking, and 100% free from harmful substances.
Packaging:
Urea is sold in shipload quantities (minimum 12,500 mt). We ship the product in three (3)
modes:
Bulk (loose in shiploads)
Bulk in 1 ton, 1.5 mt, or 2 mt woven polypropylene Jumbo Bulker Bags
50 kg “poly” Bags wet proofed for ocean freight/shipping new 2 ply woven bags,
polypropylene outside and polyethylene inside
The Buyer must descript the packing or packaging method in the delivery schedule within
thirty (30) days of signing the contract. Any changes to these initial packing or packaging
instructions thereafter can only be done with sixty (60) days notice prior to the scheduled
shipment.
Packaging in 50 kg bag will have markings using English Language of seven (7) lines in
black colour on one side with the word “UREA” to be printed in double size of other six (6)
lines. Price includes cost of custom artwork and lettering on bags, however Buyer to provide
draft wording and logo artwork. Sample as below:
Essential Elements:
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Modern chemical fertilizers include one or more of the three elements most important in plant nutrition: Nitrogen (N) - Phosphorus (P) - Potassium (K)
In fact, with most fertilizers, the analysis of the approximate nutrient content is usually expressed as a percentage called the N.P.K. ratio. For example
Nitrogen (N) - Phosphorus (P) - Potassium (K)
(N) (P) (K)
Fowl manure is: 2.1: 1.6: 1.0
Cow manure is: 1.0: 0.4: 0.5
NPK
15.0: 15.0: 15.0
16.0: 16.0: 16.0
17.0: 17.0: 17.0
19.0: 19.0: 19.0
20.0: 20.0: 20.0
MAP (Mono-Ammonium Phosphate) 11.0: 44.0: 0.0
MAP (Mono-Ammonium Phosphate) AG 12.0: 52.0: 0.0
MAP (Mono-Ammonium Phosphate) Tech. 12.0: 61.0: 0.0
MKP (Potassium Phosphate Monobasic) 0.0: 52.0: 34.0
Lawn Fertilizer or for leafy crops such as cabbages etc.which take a lot of Nitrogen out of the soil:
17.0: 0.5: 5.0
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Water soluble fertilizers Thrive and Zest: 31.0: 5.0: 9.0
Urea: 46.0: 0.0: 0.0
Elements of secondary importance: Sulphur (S) - Magnesium (Mg) - Calcium
(Ca)
Other elements needed in small quantities that may be present in specially blended fertilizers
include:
Silicon (Si) - Iron (Fe) - Chlorine (Cl)
Elements in trace amounts may be: Boron (B) - Copper (Cu) - Manganese (Mn) -
Molybdenum (Mo) - Zinc (Zn)
NITROGEN fertilizers are mostly obtained from synthetic ammonia, used either as a gas or
in water solution, or converted into salts such as Ammonium Sulphate, Ammonium
Nitrate, and Ammonium Phosphate; but packinghouse wastes, treated garbage, sewage,
manure, and cottonseed meal are also common sources.
PHOSPHORUS fertilizers include Calcium Phosphate from phosphate rock or bones.
The water soluble Superphosphate and Triple Superphosphate are obtained by treatment
of Calcium Phosphate with Sulphuric Acid and Phosphoric Acid respectively.
POTASSIUM fertilizers, namely Potassium Chloride and Potassium Sulphate, are mined
from potash deposits.
Packaging:
Blended fertilizers are usually packaged in 50 kg bags but still only sold in large quantities.
So we mainly ship in ISO Containers. Please check with us in early stage of negotiation.
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THEORITICAL BASE
MANAGEMENT OF INVENTORIES
Inventories are goods held for eventual sale by a firm. Inventories are thus one of the major
elements which help the firm in obtaining the desired level of sales.
Kinds of inventories
Inventories can be classified into three categories
Raw materials: these are goods which have not yet been committed to production in a
manufacturing firm. They may consist of basic raw materials or finished components.
Work in process: this include those material which have been committed to production
process but have not yet been completed
Finished goods: these are completed products awaiting sale. They are the final output of
the production process in manufacturing firm. In case of wholesalers and retailers, they
are generally referred to as merchandise inventory.
The levels of the above three kinds of inventories differ depending upon the nature of
the business. For example, a manufacturer will have levels of all the three kinds of
47 | P a g e
inventories. While the retailer and the wholesaler will have a high level of inventories of
finished goods but will have no inventories of raw materials or work in progress.
Moreover depending upon the nature of the business, inventories may be durable or non-
durable, valuable or inexpensive, perishable or non-perishable, etc.
Risks and costs associated with inventories
Holding of inventories exposes the firm to a number of risks and costs. Risk of holding
inventories can be put as follows:
Price decline: this may be due to increase in market supply of the product, introduction
of a new competitive product, price cutting by the competitors, etc
Product deterioration: this may be due to holding a product for too long a period or
improper storage conditions.
Obsolescence: this may be due to change in customer’s taste, new production technique,
improvements in the product design, specifications, etc.
SELECTIVE INVENTORY CONTROL TECHNIQUES
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SL. NO.CLASSI-
FICATIONCRITERIA MAIN USES
1 ABC ANNUAL CONSUMPTION VALUE
TO CONTROL RAW MATERIAL
COMPONENTS AND WIP
INVENTORY
2 HML UNIT PRICE OF MATERIAL MAINLY TO CONTROL PURCHASE
3 XYZ VALUE OF ITEMS STORED
TO REVIEW INVENTORIES
AND THEIR USES AT SCHEDULED
INTERVALS
4 VED
CRITICAL NATURE OF
COMPONENTS OR MATERIAL
WITH RESPECT TO PRODUCTION
SPARE PARTS MANAGEMENT
5 SDEPURCHASING PROBLEMS IN
REGARD TO AVAILABILITY
LEAD TIME ANALYSIS AND
PURCHASE STRATEGIES
6 FSNCONSUMPTION PATTERN
OF COMPONENTSTO CONTROL OBSOLESCENCE
7 GOLFSOURCE FROM WHICH MATERIAL
IS PROCURED
DETERMINING PROCUREMENT
STRATEGIES
8 SOS SEASONALITYPROCUREMENT / HOLDING PLANS
FOR SEASONAL ITEMS
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COMMON PROBLEMS OF SPARE PARTS MANAGEMENT ARE:
FREQUENT FAILURES
LONG LEAD TIMES
SHORT LIFE OF SPARES - RUBBER
HIGH RATE OF OBSOLESCENCE
NON AVAILABILITY - SPARES / DESIGN / SPECIFICATION / SOURCES
UNECONOMICAL TO PRODUCE
MANUFACTURERS RECOMMENDATIONS
MFRS DON'T PART WITH TECHNOLOGY
STOCKOUT COSTS ARE VERY HIGH
PLAY SAFE ATTITUDE OF MAINTAINANCE ENGRS.
IMPROPER INITIAL PROVISIONING
WRONG SELECTION OF EQUIPMENT
SPURIOUS SPARES
MFRS RECOMMENDED MAINTENANCE PRACTICES
DELIBERATE CHOICE OF OPERATING WITH OLDER MACHINES - STRATEGIC
CHOICE
ABSENCE OF RECONDITIONING FACILITIES
REPLENISHMENT SYSTEMS
Periodic System of Review
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In a fixed period system, the period between placing of orders is fixed and the quantity
ordered is varying. The procedure is that at periodic intervals the then amount of inventory is
reviewed and an order is placed one has to consider two aspects:
Stock in Hand
Stock on Order.
This Periodic system of stock replenishment is more suitable for C Class of items.
Quantitative System of Review
By the very words Fixed Quantity, we can understand that a fixed quantity is
ordered at a certain point. The quantity is usually the economic order quantity. The Lead Time to
replenish, Safety Stocks to take care of variation in Lead time is also considered. Reorder Levels
are also fixed. This is a very dynamic situation. More suitable for A and B Class of items.
EOQ – Economic Order Quantity
Economic Order Quantity is the point at which the total costs are the least. These inventory
costs are opposing costs. If the ordering costs come down carrying costs go up and if
carrying costs come down ordering costs go up. They need to be balanced. Similarly,
attempts have to be made to balance the stock out costs and overstocking costs.
Costs of holding inventory:
One operating objective of inventory management is to minimize cost. The costs associated with
inventory fall into two categories:
Ordering or acquisition or set-up cost
Carrying cost
These costs are important element of the optimum level of inventory decisions
ORDERING COST:
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This category of costs is associated with the acquisition or ordering of inventory.
Firms have to place orders with suppliers to replenish inventory of raw material or spares. The
expenses involved are referred to as ordering costs. Any expenditure involved here is also a part of
the ordering cost. Included in the ordering costs are costs involved in
Preparing a purchase order or requisition form and
Receiving
Inspecting
Recording the goods received to ensure both quantity & quality
Clerical costs
Cost of stationary & many more.
They are generally fixed for order placed, irrespective of the amount of the order.
More the number of orders placed, more will be the cost.
From a different perspective, lesser the number of orders placed, less will be the ordering costs, but
they result in more carrying costs.
CARRYING COST:
Carrying costs are involved in maintaining or carrying inventory. The cost of holding inventory
may be further divided into two:
Those which are arise due to the storing of inventory. The main components of this category of
carrying costs are:
Storage cost that is tax, depreciation, insurance, maintenance of the building, utilities &
janitorial services.
Insurance of inventory against fire & theft.
Detoriation in inventory because of pilferage, fire, technical obsolescence, style
obsolescence & price decline.
Serving costs, such as, labour for handling inventory, clerical and accounting costs.
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THE OPPORTUNITY COSTS OF FUNDS-
This consists of expenses in raising funds (interest on capital) to finance the acquisition of
inventory. If funds were not locked up in inventory, they would have earned a return. This is the
opportunity cost of funds or the financial cost component of the cost. The carrying cost & the
inventory size are positively related and move in the same direction. If the level of inventory
increases, the carrying costs also increases & vice versa. The sum of the order and carrying costs
represents the total cost of inventory. This is compared with the benefits arising out of inventory to
determine the optimum level of inventory.
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CONFIDENCE LEVEL
This in theory is also called as the SERVICE LEVEL.
Confidence Level is measured in many organizations which are a reflection of the number of items
requisitioned and met – usually expressed in percentage terms. The higher the level of the
confidence desired, higher will be the inventory requirements, thus higher the costs. Confidence
level increases not proportionately but more than that.
MINIMUM ORDERING MAXIMUM LEVELS
Minimum Level takes care of the variation in consumption in lead time and variations in
lead times also. The Ordering Level is usually obtained by adding the lead time requirements to the
safety stock. The Maximum Level is calculated by taking care of the variations in consumption,
variations in lead time, the normal lead time plus the requirements between the two review periods.
Thus the same can be shown as:
MININUM LEVEL:
SAFETY STOCK
ORDERING LEVEL –SAFETY STOCK + LEAD TIME
MAXIMUM LEVEL – SAFETY STOCK + LEAD TIME + REVIEW PERIOD
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Hyderabad is a production base which maintains inventory broadly for:
Raw Materials and Intermediates
Sr. No. Intermediate Raw Materials
1 Ammonia (NH3)
Natural Gas
Associated Gas
Naphtha
Fuel oil
Coal
COG
Power
Water
2 Sulphuric Acid (H2SO4)
Sulphur
Pyrites
Power
Water
3 Phosphoric Acid(H3PO4)
Rock phosphate
Sulphuric acid
Power
Water
4 Nitric Acid (HNO3)
Ammonia
Power
Water
PROCUREMENT:-
(A) Procurement of capital items/equipments:-
Procurement of capital items are nominated by management or as may be decided by
from time to time on the basis of company policy. The Stores and Purchase
Department at Headquarters will be associated in the process of negotiation with a
view to ensure compliance of procedure.
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(B) Non Capital Items :-
(a) Distribution of work load:-
The distribution of the workload is to be in line of raw materials and intermediaries
decided by the management from time to time.
(C ) Purchase function:-In order to facilitate necessary coordination and liaison with
production facilities at different regions maintaining each type of fertilizers and chemicals
as allotted by management, Purchase Orders will be directly released by the regions
provided the unit value does not exceed the following limit.
Orders or contracts per unit exceeding Rs 20 lakhs at Headquarters and Rs 5 lakhs at
region in respect of raw material and intermediaries will require prior concurrence of
General Manager (Finance)/Dy General Manager (Finance).
Purchase orders per unit exceeding Rs 5 lakhs at the regions will be intimated to
DSP/General Manager ( Stores and Purchases) Headquarters.
Raw Materials and Intermediates Requirements in the Manufacture of fertilizer Materials
\
Intermediate Raw materials/Intermediate
Ammonia(NH3)
Natural gas 860Nm3/te or
Naphtha 0.9-1.02 or
*Fuel Oil 0.91 or
*Coal 3.62
Sulphuric acid (H2SO4)Sulphur 0.345 or
Pyrites 0.9
Phosphoric acid (H3PO4) as P2O5Rock(73-75%BPL) 3.3 and
H2SO4 2.85
Nitric acid(HNO3) NH3 0.292
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The Manufacturing Process
Fully integrated factories have been designed to produce compound fertilizers. Depending on the
actual composition of the end product, the production process will differ from manufacturer to
manufacturer.
Nitrogen fertilizer component
Ammonia is one nitrogen fertilizer component that can be synthesized from in-expensive
raw materials. Since nitrogen makes up a significant portion of the earth's atmosphere, a
process was developed to produce ammonia from air.
Natural gas and steam are pumped into a large vessel. Next, air is pumped into the system,
and oxygen is removed by the burning of natural gas and steam. This leaves primarily
nitrogen, hydrogen, and carbon dioxide.
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The carbon dioxide is removed and ammonia is produced by introducing an electric current
into the system. Catalysts such as magnetite (Fe3O4) have been used to improve the speed
and efficiency of ammonia synthesis. Any impurities are removed from the ammonia, and
it is stored in tanks until it is further processed.
While ammonia itself is sometimes used as a fertilizer, it is often converted to other
substances for ease of handling. Nitric acid is produced by first mixing ammonia and air in
a tank. In the presence of a catalyst, a reaction occurs which converts the ammonia to nitric
oxide. The nitric oxide is further reacted in the presence of water to produce nitric acid.
Nitric acid and ammonia are used to make ammonium nitrate. This material is a good fertilizer
component because it has a high concentration of nitrogen. The two materials are mixed together
in a tank and a neutralization reaction occurs, producing ammonium nitrate. This material can then
be stored until it is ready to be granulated and blended with the other fertilizer components.
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Phosphorous fertilizer component
To isolate phosphorus from phosphate rock, it is treated with sulfuric acid, producing
phosphoric acid. Some of this material is reacted further with sulfuric acid and nitric acid
to produce a triple superphosphate, an excellent source of phosphorous in solid form.
Some of the phosphoric acid is also reacted with ammonia in a separate tank. This reaction
results in ammonium phosphate, another good primary fertilizer.
Potassium fertilizer component
Potassium chloride is typically supplied to fertilizer manufacturers in bulk. The
manufacturer converts it into a more usable form by granulating it. This makes it easier to
mix with other fertilizer components in the next step.
Granulating and blending
To produce fertilizer in the most usable form, each of the different compounds, ammonium
nitrate, potassium chloride, ammonium phosphate, and triple superphosphate are
granulated and blended together. One method of granulation involves putting the solid
materials into a rotating drum which has an inclined axis. As the drum rotates, pieces of the
solid fertilizer take on small spherical shapes. They are passed through a screen that
separates out adequately sized particles. A coating of inert dust is then applied to the
particles, keeping each one discrete and inhibiting moisture retention. Finally, the particles
are dried, completing the granulation process.
The different types of particles are blended together in appropriate proportions to produce a
composite fertilizer. The blending is done in a large mixing drum that rotates a specific
number of turns to produce the best mixture possible. After mixing, the fertilizer is emptied
onto a conveyor belt, which transports it to the bagging machine.
Bagging
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Fertilizers are typically supplied to farmers in large bags. To fill these bags the fertilizer is
first delivered into a large hopper. An appropriate amount is released from the hopper into
a bag that is held open by a clamping device. The bag is on a vibrating surface, which
allows better packing. When filling is complete, the bag is transported upright to a machine
that seals it closed. The bag is then convey red to a palletizer, which stacks multiple bags,
readying them for shipment to distributors and eventually to farmers.
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CHAPTER-4
ANALYSIS of INVENTORY MANAGEMENT
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ABC ANALYSIS
ABC analysis is a business term used to define an inventory categorization technique often used
in materials management.
ABC analysis provides a mechanism for identifying items which will have a significant impact
on overall inventory cost whilst also providing a mechanism for identifying different categories
of stock that will require different management and controls.
When carrying out an ABC analysis, inventory items are valued (item cost multiplied by quantity
issued/consumed in period) with the results then ranked. The results are then grouped typically
into three bands. These bands are called ABC codes.
"A class" inventory will typically contain items that account for 80% of total value
"B class" inventory will have around 15% of total value
"C class" inventory will account for the remaining 5%
The ABC classification process is an analysis of a range of items, such as finished products or
customers into three categories:
A - Outstandingly important; B - of average importance; C - relatively unimportant as a basis for
a control scheme.
Each category can and sometimes should be handled in a different way, with more attention
being devoted to category A, less to B, and still less to C.
Popularly known as the "80/20" rule ABC concept is applied to inventory management as a rule-
of-thumb. It says that about 80% of the Rupee value, consumption wise, of an inventory remains
in about 20% of the items.
The ABC classification system is to grouping items according to annual issue value, (in terms of
money), in an attempt to identify the small number of items that will account for most of the
issue value and that are the most important ones to control for effective inventory management.
The emphasis is on putting effort where it will have the most effect.
A Items: These Items are seen to be of high Rupee consumption volume. "A" items usually
include 10-20% of all inventory items, and account for 50-60% of the total Rupee consumption
volume.
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B Items: "B" items are those that are 30-40% of all inventory items, and account for 30-40% of
the total Rupee consumption volume of the inventory. These are important, but not critical, and
don't pose sourcing difficulties.
C Items: "C" items account for 40-50% of all inventory items, but only 5-10% of the total Rupee
consumption volume. Characteristically, these are standard, low-cost and readily available items.
ABC classifications allow the inventory manager to assign priorities for inventory control. Strict
control needs to be kept on A and B items, with preferably low safety stock level. Taking a
lenient view, the C class items can be maintained with looser control and with high safety stock
level. The ABC concept puts emphasis on the fact that every item of inventory is critical and has
the potential of affecting adversely production, or sales to a customer or operations. The
categorization helps in better control on A and B items.
In addition to other management procedures, ABC classifications can be used to design cycle
counting schemes. For example, A items may be counted 3 times per year, B items 1 to 2 times,
and C items only once, or not at all.
SUGGESTED POLICY GUIDELINES FOR A, B&C CLASSIFICATION OF ITEMS
A Items (high consumption)
Very strict usage control
No or very low safety stock
Phased delivery (weekly)
Weekly control report
Maximum follow-up
Control purchasing and storage
To be handled by senior officers.
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B Items (moderate consumption)
Moderate control
Low safety stock
Monthly control reports
Periodic follow-up
Estimates on past dates
Handled by middle level.
C Items (Low consumption value)
Loose control
High safety stock
Quarterly report
Rough estimates
Decentralized
Can be delegated to clerical people.
ABC Analysis of Primary Fertilizers
Primary fertilizers include substances derived from nitrogen, phosphorus, and
potassium. Various raw materials are used to produce these compounds. When ammonia is used as
the nitrogen source in a fertilizer, one method of synthetic production requires the use of natural gas
and air. The phosphorus component is made using sulfur, coal, and phosphate rock. The potassium
source comes from potassium chloride, a primary component of potash.
S.NO % of Total Qty Raw material Category
1 72 Nitrogen A
2 20 Phosphorus B
3 8 Potassium C
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TOTALS 100
ABC Analysis of Secondary nutrients Added in the Fertilizers
Secondary nutrients are added to some fertilizers to help make them more
effective. Calcium is obtained from limestone, which contains calcium carbonate, calcium sulphate,
and calcium magnesium carbonate. The magnesium source in fertilizers is derived from dolomite.
Sulfur is another material that is mined and added to fertilizers.
S.NO % of Total Qty
Category Raw Material
1 71 A Calcium Carbonate
2 20 B Calcium Sulphate
3 9 C Calcium magnesium carbonate
TOTALS 100
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ABC Analysis of other type of Fertilizers
The magnesium source in fertilizers is derived from dolomite. Sulfur is
another material that is mined and added to fertilizers. Other mined materials include iron from
ferrous sulfate, copper, and molybdenum from molybdenum oxide.
S.No % of Total Qty Category Raw material
1 76 A Ferrous Sulphate
2 19 B Copper
3 5 C Molybdenum
Total 100
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CONCLUSION FOR ABC ANALYSIS:
A Items (high consumption): To this kind of inventory we need to have very strict usage control,
no or very low safety stock. These are very costly inventory so we need to maintain weekly control
report and maximum fallow up. The most and important aspect of this category of inventory is
these should be handled by senior officers because they will plan according to the demand and
consumption level.
B Items (moderate consumption): To this category of inventory moderate control is required
because they will have a low safety stock level. For this kind of inventory monthly report is
required and periodic fallow up is required and estimates of demand for future must be made under
past data and these should be handled by middle level management because the stock level or
inventory level is moderate.
C Items (Low consumption value): To this category of products or inventory loose control is
required because the cost of the product is low. So quarterly report is sufficient and the demand can
be estimated based on the rough estimates.
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XYZ Analysis:
XYZ analysis highlights the ratio of stock versus consumption to effect better stocking and
reordering policy. XYZ analysis is calculated by dividing an item's current stock value by the total
stock value of the stores. The items are first sorted on descending order of their current stock value.
The values are then accumulated till values reach say 60% of the total stock value. These items are
grouped as 'X'. Similarly, other items are grouped as 'Y' and 'Z' items based on their accumulated
value reaching another 30% & 10% respectively. The XYZ analysis gives, you an immediate view
of which items are expensive to hold. Through this analysis, you can reduce your money locked up
by keeping as little as possible of these expensive items.
XYZ Analysis
One of the basic supply chain techniques.
Enables the inventory manager in exercising maximum control over the highest stocked
item, in terms of stock value.
X class items represent 70% of the stock value.
Y class items fall between 70% to 90% of the annual stock value.
X class items, which are critically important and require close monitoring and tight control.
Y class items, which are of low critically requiring standard controls and periodic reviews
of usage.
Z class requires the least control, are sometimes issues as “Free Stock” or “forward
holding”.
The XYZ analysis is a procedure of stock management in the management economics, with which
on the basis empirical experiences, results are usually assigned to a classification by bill explosions
or by the determination by variation and/or fluctuation coefficients of goods and articles concerning
its turnover regularity (consumption and its predictableness).
Articles, which are sold very regularly and in to some extent constant numbers of items (e.g.
Bulbs), are called X-articles, while the Z-class contains such articles, whose sales runs very
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irregularly or even stochastically (like e.g. Spare parts). Sometimes the XYZ analysis is called also
RSU analysis, with R for regular, S for and U for irregular.
Classes become summarized as follows:
X constant consumption, fluctuations are rather rare
Y stronger fluctuations in consumption, usually for trend-moderate or seasonal reasons
Z completely irregular consumption
XYZ Analysis of Primary Fertilizers
Primary fertilizers include substances derived from nitrogen, phosphorus, and
potassium. Various raw materials are used to produce these compounds. When ammonia is used as
the nitrogen source in a fertilizer, one method of synthetic production requires the use of natural gas
and air. The phosphorus component is made using sulfur, coal, and phosphate rock. The potassium
source comes from potassium chloride, a primary component of potash.
S.NO % OF CATEGORY
Raw material CATEGORY
1 61 Nitrogen X
2 30 Phosphorus Y
3 9 Potassium Z
TOTALS 100
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From the above data 61% of the total units i.e., 4 items are in X category, 30% of the total
units i.e., 12 items are in Y category and 9% of the total units i.e., 198 items are in Z
category.
XYZ Analysis of Secondary nutrients added fertilizers
Secondary nutrients are added to some fertilizers to help make them more
effective. Calcium is obtained from limestone, which contains calcium carbonate, calcium sulphate,
and calcium magnesium carbonate. The magnesium source in fertilizers is derived from dolomite.
Sulfur is another material that is mined and added to fertilizers.
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S.NO % OF TOTAL
ITEMS
% OF CATEGORY Category Raw Material
1 18 62 XCalcium Carbonate
2 68 31 YCalcium Sulphate
3 13 7 ZCalcium magnesium carbonate
TOTALS 100 100
From the above data 62% of the total units i.e., 7 items are in X category,31% of the total units i.e.,
26 items are in Y category and 7% of the total units i.e., 75items are in Z category
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XYZ Analysis of other type of Fertilizers
The magnesium source in fertilizers is derived from dolomite. Sulfur is another material that is
mined and added to fertilizers. Other mined materials include iron from ferrous sulfate, copper, and
molybdenum from molybdenum oxide.
S.NO% OF TOTAL
ITEMS
% OF
CATEGORYRaw material CATEGORY
1 22 60 Ferrous Sulphate X
2 30 31 Copper Y
3 48 9 Molybdenum Z
TOTALS 100 100
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From the above data 61% of the total units i.e., 12 items are in X category,29% of the total
units i.e., 27 items are in Y category and 10% of the total units i.e., 45 items are in Z category
XYZ ANALYSIS CONCLUSIONS:
X class items, which are critically important and require close monitoring and tight control.
X constant consumption fluctuations are rather rare.
Y class items, which are of low critically requiring standard controls and periodic reviews
of usage. Y stronger fluctuation in consumptions, usually for trend moderate or seasonal
reasons.
Z class requires the least control, are sometimes issues as “Free Stock” or “forward
holding”. Z completely irregular consumption.
To study in detail, the consumption pattern, the stock list containing exhaustive details covering the
under mentioned fields has been analysed:
a) Part Number
b) Key word
c) Unit of measure
d) Repair code
e) Shelf life code
f) Class of item
g) Shop code
h) Vendor code
i) End Identification Part Number
j) Previous Part Number
k) Location
l) Bin
m) New Stock
n) Old Stock
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o) AVR
p) Purchase Price
q) Purchase Date
r) Issue Date
s) Consumption (Last Year)
Confidence Level:
The number of items requisitioned and met expressed as a percentage is known as
confidence level. High level of confidence is generally maintained by NFCL. It is worth
mentioning that a very high level of 99% is maintained to meet the line requirements, high level of
about 95% is maintained for Major Checks and a moderate 85 to 90% is maintained for the Shop
requirements.
After many items studied, evaluation has been done under two types, viz,
STOCK LEVEL DESIRED IS 3 YEARS AVERAGE: If the stock level desired to be held is 3
years average the deficiency part number wise in numbers or quantity required to be replenished
and the acquisition value of the same has been arrived at. The Average Rate multiplied by the
deficiency level gave the Acquisition Value.
Based on the study carried out, it was found that there is a deficiency in respect of 150 items in
total. The acquisition value of these 150 items works out to Rs. 4478732.45
Out of this 150 items, action to be taken now can be as under:
No action
Base Transfers
Purchase action.
No Action: It has been found that there are 10 items where order balance quantities are
there. Hence no action needs to be taken except follow up of the already released purchase
orders. The list of 10 items for which orders are outstanding and hence no action is required
is at annexure___
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Base Transfers: It has been found that there are 63 items which can be base transferred
without any procurement action resulting in outflow of cash and at the same time utilizing
the funds already spent in other regions.
Purchase Action: It has been found that there are 77 items which need procurement action
as the stock is deficient, other bases cannot be asked to transfer keeping their own stock on
hand and consumption based on Last financial year. The acquisition value of these 77
items would be Rs. 4137805.57. The list of 77items proposed for Purchase / procurement
action is at annexure ___.\
STOCK LEVEL DESIRED IS HIGHEST OF 3 YEARS CONSUMPTION:
If the stock level desired to be held is highest of 3 years consumption,
the deficiency part number wise in numbers or quantity required to be replenished and the
acquisition value of the same has been arrived at. The Average Rate multiplied by the deficiency
level gave the Acquisition Value.
Based on the study carried out, it was found that there is a deficiency in respect of 198 items in
total. The acquisition value of these 198 items works out to Rs. 7046241.47
Out of this 198 items, action to be taken now can be as under:
No action
Base Transfers
Purchase action.
No Action: It has been found that there are 6 items where order balance quantities are there. Hence
no action needs to be taken except follow up of the already released purchase orders. The value of
these 6 items is Rs. 15546.21. The list of 6 items for which orders are outstanding and hence no
action is required is at annexure___
Base Transfers: It has been found that there are 84 items which can be base transferred without
any procurement action resulting in outflow of cash and at the same time utilizing the funds already
spent in other regions. The acquisition value of these 84 items is Rs.582002. The list of 84 items
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for which base transfer is proposed is at annexure___. While suggesting base transfers, care has
been taken to indicate as to from which base stock transfer has to be effected viz Hyderabad/
Kakinada etc.,
Purchase Action: It has been found that there are 108 items which need procurement action as the
stock is deficient, other bases cannot be asked to transfer keeping their own stock on hand and
consumption based on Last financial year. The acquisition value of these 108 items would be
Rs.6448693.26. The list of 108 items proposed for Purchase / procurement action is at annexure __\
However, it was noted that there are a few part numbers with alternate part numbers in stock. In
view of the time constraint, details in respect of alternate part numbers could not be noted. But, it is
felt that the same could be considered at least in respect of items proposed to purchase to avoid
purchase of items for which there is stock in alternate part numbers. The same came can be
considered for review reports which are computer generated for more convenience.
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CHAPTER-5
FINDINGS
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FINDINGS
The results of the detailed study can be summarized as under:
Group Reviews of Hardware items would be more suitable for items and the advantages
could be not only be monetary, but also improves the confidence level in respect of such
items, as a whole group.
It is felt that stock outs if any, for such small / low value / low consumption items falling
under category of hardware, could be more costly than the cost of the material.
It is also seen that even if opt for the highest of the three year consumption, there would be
an increase to the extent of only Rs. 3,26,181.96 only which would work out to 0.40 % of
the existing inventory. But this would increase the confidence level of all 618 part numbers
in total.
Based on the Ordering Cost calculated @ Rs. 5,000 per order, even if we assume that there
is at least one part number in every review covering part number starting with NAS or NSA,
there would be at least 52 orders to cover the purchase of such items. Hence the total
ordering cost would be Rs. 2, 60,000/-.
Moreover, when we consider the 66 items being considered for purchase, the total
acquisition cost would be Rs. 2, 52,629.28. Hence it can be concluded that it would be
better to spend an amount of Rs. 2, 52,629.28 (actual cash out flow) and obtain a much
higher service level. Which would increase the effectiveness of inventory control?
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Advantages of Group Review would be:
Reduction in number of Reviews
Reduction in number of Request for Quotes
Reduction in number of Base Transfers and documentation costs
Reduction in the number of Orders resulting in availability of time for other
Important or high value purchases
Reduction in Ordering Costs (estimated Ordering Costs – Rs. 5,000/- per order
Reduction in number of incoming Consignments,
Reduction in Freight Charges
Availing of consolidated Freight Charges;
Reduction in number of consignments for Customs Clearance
Advantages of sourcing all items at least cost from single source rather than on Multiple
sources at different periods spread over a year at varying rates.
Advantages with vendors not insisting on Minimum Order Value;
Reduction in Inspection Costs; Increasing of Confidence level at any given period of time
Centralized purchase on All India basis of such group of items would help tide over The
Minimum Packing Constraints which are faced when orders are released Regionally and
separately.
The requirements of all types of raw materials can also be combined to purchase for further
Economic advantage.
Advantages of minimizing the number of GRANS (Goods Receipt and Acceptance Notes )
Advantages of minimizing the number of Invoices that are centralized at Foreign Payment
section in Headquarters.
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CHAPTER-6
SUGGESTIONS & CONCLUSIONS
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SUGGESTIONS
Indian Airlines needs to be complimented for all the efforts it is putting in managing the inventory
and plans for further improvement. Special mention can be made for the following:
Production process should be improvised
E procurement for easier and faster ordering
Reviews to identify and transferring items from non moving regions to moving regions on
a yearly basis
Facilities to download the review sheets in an XLS format to effectively track items
progressively which have been identified for base transfers or orders proposed to be
released on Price Catalougue available or Items for which Competitive quotes are to be
obtained.
Bar Coding for easier stock taking
Purchase Committee deciding for high monetary commitment items
Policy for Disposal of obsolete spares when the macine is out of operation.
Policy for identification of surplus not by elapsed time from the date of purchase but based
on quantity excess to requirement as theory suggests.
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.
CONCLUSION
Materials Management as a profession is gaining recognition all over the world and is well
recognized in NFCL and the head of Stores & Purchase Department is at the Director level. Entire
functions of Materials (Goods and Services) to meet all the requirements of all the departments are
well taken care of by the Stores & Purchase Department. Huge inventory in terms of range and
quantum for all raw material and Intermediary items is indeed a challenging task. No stone is left
unturned to bring in latest concepts of Materials Management and computerization for effective and
efficient management. Stores Manual clearly spells out the procedures to be followed for all the
Stores & Purchase activities. Management policies and guidelines are given from time to time in
tune with the changing needs.
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BIBILIOGRAPHY
REFERENCES
http://www.nagarjunafertilizers.com/
http://www.google.co.in/
www.eetd.lbl.gov/EA/IES/iespubs/41846.pdf
www.osti.gov/energycitations/product.biblio.jsp?osti_id=5173008
www. fertilizer .org/ifa/publicat/PDF/2008_sydney_awashti.pd
www. fertilizer .org/ifa/publicat/PDF/2008_biblio_56.pdf
www.catalogs. india mart.com/category/chemicals- fertilizer s.html
BOOKS:
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1. Fertilizer Statistics, various issues, The Fertilizer Association of India, New Delhi.
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