outbound logistics of nfcl - shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/8669/15/15_chapter...

OUTBOUND LOGISTICS OF NFCL

The primary activity of the supply chain management is taken to

understand and analyze the various outbound logistics of NFCL. The outputs of

NFCL are Ammonia, Urea, Extruded Irrigation, Pool Urea, Specialty Fertilizers,

and other Fertilizers. Beside outputs of NFCL the total dispatches, rail and road

freight, transportation cost and mode of transportation, no of destinations and

distance travelled are also considered to study how effective and efficient they are

in the SCM of NFCL in reaching the end user the farmer.

580. 64 gm of ammonia is required to produce 1000 gm of urea

Formula

2NH3 + CO2 urea + H2O

Table 7.1 Installed capacities & Quantity of Ammonia produced for 10Years

Source: NFCL Annual Reports 2002 to 2011

INTERPRETATION:

Table 7.1 presents the Installed capacity & Quantity of Ammonia produced

for 10Years. It shows that the installed capacity for ammonia is 1800 MT/Day

from the year 2001 to 2009 and in the year 2009 to 2011 the installed capacity is

2100 MT/Day with an increase of 16.7%. Whereas the actual quantity of ammonia

produced per day is an average of 14.69% more than its installed capacity. From

the year 2004 – 05 to 2010 – 11 the ammonia produced per day is an average of 14

% more than its installed capacity i.e. in 2004 - 05 it is 22.3%, in 2005 - 06 it is

20%, in 2006 - 07 it is 15.2%, in 2007 - 08 it is 17.6%, in 2008 - 09 it is 19.2%, in

2009 - 10 it is 10.4% and in 2010 - 11 it is 23% more production per day this high

production is due to the completion of revamp in 2004 - 05 and debottlenecking

projects.

From this study it can be said that there is an average of 14.69% more

production of ammonia than its installed capacity. The company is performing

well in conversion of inputs to ammonia it is a sign that the industry with its

Financial Year

Installed capacity

(MT/Day)

% Change

Quantity produced p/a (MT)

% Change

Quantity produced MT/Day

% increase

2001 - 02 1800 706528 1935.693 7.542002 - 03 1800 0 689263 -2.44 1888.392 4.912003 - 04 1800 0 701927 1.84 1923.088 6.842004 - 05 1800 0 803482 14.5 2201.321 22.32005 - 06 1800 0 788471 -1.87 2160.195 202006 - 07 1800 0 756814 -4.01 2073.463 15.22007 - 08 1800 0 772584 2.08 2116.668 17.62008 - 09 1800 0 782861 1.33 2144.825 19.22009 - 10 2100 16.7 846533 8.13 2319.268 10.42010 - 11 2100 0 942487 11.3 2582.156 23Average 1860 779095 3.086 2134.507 14.699

indigenous output can reach self sufficiency without depending on exports. So it

is suggested that the govt. should sanction more capacity than the current installed

capacity to the existing firms so that the industry will gain self sufficiency for

ammonia.

Chart 7.1 Installed capacity & Quantity of Ammonia produced for 10Years

Table 7.2 Installed capacities & Quantity of Urea produced for 10Years


0

1000

2000

3000

2001 ‐ 02

2002 ‐ 03

2003 ‐ 04

2004 ‐ 05

2005 ‐ 06

2006 ‐ 07

2007 ‐ 08

2008 ‐ 09

2009 ‐ 10

2010 ‐ 11

Qua

ntit

y (M

T)

Financial Year

Installed capacity & Quantity of Ammonia produced for 10Yearse

Ammonia Installed capacity MT/Day

Ammonia Quantity produced MT/Day

Financial Year

Installed capacity

MT/Day

% Change

Quantity produced

(MT)

Quantity produced MT/Day

% Change

% increase

% Change

2001 - 02 3000 1221944 3347.792 122002 - 03 3000 0 1187259 3252.764 -3 8 -332003 - 04 3000 0 1193960 3271.123 1 9 132004 - 05 3000 0 1392538 3815.173 17 27 2002005 - 06 3000 0 1379220 3778.685 -1 26 -42006 - 07 3000 0 1324054 3627.545 -4 21 -192007 - 08 3000 0 1354490 3710.932 2 24 142008 - 09 3000 0 1378162 3775.786 2 26 8.32009 - 10 3620 20.7 1505484.65 4124.615 9 14 -462010 - 11 3620 0 1647766.15 4514.428 9 25 79Average 3124 1358488 3721.884 19.2

INTERPRETATION:

Table 7.2 shows the Installed capacity & Quantity of Urea produced for

10Years. It shows that the installed capacity for Urea is 3000 MT/Day from the

year 2001 to 2009 and in the year 2009 to 2011 the installed capacity is 3620

MT/Day with an increase of 20.7%. Whereas the actual quantity of Urea produced

per day is an average of 19.2% more than its installed capacity. From the year

2004 – 05 to 2010 – 11 the Urea produced per day is an average of 19% more than

its installed capacity i.e. in 2004 - 05 it is 27%, in 2005 - 06 it is 26%, in 2006 - 07

it is 21%, in 2007 - 08 it is 24%, in 2008 - 09 it is 26%, in 2009 - 10 it is 14% and

in 2010 - 11 it is 25% more production per day. Where as in 2005 – 06, -1%

change is there from the previous year and in 2006 – 07, -4% change from the

previous year. This lower production was on account of lower allocation received

by the Company from the Government of India. The supply of natural gas and

Naphtha was satisfactory throughout the year.

From this study it is clear that more production of Urea is possible than its

installed capacity and the company is performing well in conversion of ammonia

to Urea. So it is suggested that the govt. should allocate more than the current

allocations to the existing firms so that the industry will gain its self sufficiency

for Urea.

Chart 7.2 Installed capacity & Quantity of Urea produced for 10Years

010002000300040005000

2001 ‐ 02

2002 ‐ 03

2003 ‐ 04

2004 ‐ 05

2005 ‐ 06

2006 ‐ 07

2007 ‐ 08

2008 ‐ 09

2009 ‐ 10

2010 ‐ 11

Qua

ntit

y (M

T)

Financial Year

Installed capacity & Quantity of Urea produced for 10Yearse

Urea Installed capacity MT/Day

Urea Quantity produced MT/Day

Table 7.3 Quantity of Ammonia and Urea (MTs) produced and value of Urea

for 10Years


INTERPRETATION:

Table 7.3 presents the Quantity of Ammonia and Urea (MT) produced and

value of Urea for 10Years. It shows that in 2001 - 02 706528 Mts of ammonia

was processed to 1221944 Mts of Urea and its value is (Rs. Lakhs) 52811.73, in

2002 - 03 689263 Mts of ammonia was processed to 1187259 Mts of Urea and

its value is (Rs. Lakhs) 49035.17, in 2003 – 04 701927 Mts of ammonia was

processed to 1193960 Mts of Urea and its value is (Rs. Lakhs) 66547.83, in

2004 – 05 803482 Mts of ammonia was processed to 1392538 Mts of Urea and its

value is (Rs. Lakhs) 62699.18, in 2005 – 06 788471 Mts of ammonia was

processed to 1379220 Mts of Urea and its value is (Rs. Lakhs) 64167.97, in 2006 –

07 756814 Mts of ammonia was processed to 1324054 Mts of Urea and its value is

(Rs. Lakhs) 60484.16, in 2007 - 08 772584 Mts of ammonia was processed

to 1354490 Mts of Urea and its value is (Rs. Lakhs) 61808.72, in 2008 – 09

Financial Year

Quantity of

Ammonia (MT)

Quantity of Urea (MT)

Value of Urea (Rs.

Lakhs)

% Change

Average value in Rs/Mt

Ammonia : Urea

2001 - 02 706528 1221944 52811.73 4322 1 : 1.7 2002 - 03 689263 1187259 49035.17 -7.15 4130 1 : 1.7 2003 - 04 701927 1193960 66547.83 35.7 5574 1 : 1.7 2004 - 05 803482 1392538 62699.18 -5.78 4503 1 : 1.7 2005 - 06 788471 1379220 64167.97 2.34 4652 1 : 1.7 2006 - 07 756814 1324054 60484.16 -5.74 4568 1 : 1.7 2007 - 08 772584 1354490 61808.72 2.19 4563 1 : 1.8 2008 - 09 782861 1378162 64813.2 4.86 4703 1 : 1.8 2009 - 10 846533 1505484.65 69920.21 7.88 4644 1 : 1.8 2010 - 11 942487 1647766.15 84550.5 20.9 5131 1 : 1.7

782861 Mts of ammonia was processed to 1378162 Mts of Urea and its

value is (Rs. Lakhs) 64813.2, in 2009 – 10 846533 Mts of ammonia was processed

to 1505484.65 Mts of Urea and its value is (Rs. Lakhs) 69920.21 and in 2010 – 11

942487 Mts of ammonia was processed to1647766.15 Mts of Urea and its value is

(Rs. Lakhs) 84550.5 the ratio of ammonia and urea is 1: 1.7

From this study it is clear that more production of Urea is possible than its

installed capacity and the company is performing well in conversion of ammonia

to Urea. So it is suggested that the govt. should allocate more than the current

allocations to the existing firms so that the industry will gain its self sufficiency

for Urea.

Chart 7.3 Quantity of Ammonia and Urea (MT) produced and value of Urea

for 10Years

0

500000

1000000

1500000

2000000

2001 ‐02

2002 ‐03

2003 ‐04

2004 ‐05

2005 ‐06

2006 ‐07

2007 ‐08

2008 ‐09

2009 ‐10

2010 ‐11

Financial Year

Quantity of Ammonia and Urea (MT )produced and value of Urea for 10Years

Quantity Urea (MT)

Value (Rs. Lakhs)

Quantity Ammonia (MT)

Table 7.4 Quantity and value of Extruded Irrigation (Lakh Meters) produced

for 10 Years

Financial Year

Installed capacity

(Lakh Mtrs/An

num)

Quantity Produced

(Lakh Mtrs/Ann

um)

% capacity

utilization

%

Change Value (Rs. Lakhs)

%

Change

2001 - 02 NA 2002 - 03 NA 2003 - 04 NA 2004 - 05 295 359 122 529.932005 - 06 295 174.29 59 -52 1077.19 1032006 - 07 573 229.08 40 -32 1485.22 382007 - 08 827 378.63 46 15 2648.58 782008 - 09 874 511.25 58 26 4221.53 592009 - 10 874 796.4 91 57 7057.26 672010 - 11 874 1032.83 118 30 9508.58 35


INTERPRETATION:

Table 7.4 presents the Quantity and value of Extruded Irrigation (Lakh

Meters) produced for 10 Years. It shows that till 2004 there is no production of

Extruded Irrigation but in 2004 – 05 the installed capacity is 295 lakh meters and

the output is 359 lakh meters which is 122% capacity utilization but in 2005 – 06

the output of Extruded Irrigation is only 174.29 lakh meters against its installed

capacity of 295 lakh meters which is only 59% of capacity utilization. In 2006 –

07 the installed capacity is 573 lakh meters of Extruded Irrigation but the output is

only 229.08 lakh meters which is the lowest capacity utilization since its inception.

From 2007 to 2011 the installed capacity is 874 lakh meters of Extruded Irrigation

except in the year 2010 – 11 the capacity utilization is less than its installed

capacity the reason behind this is lack of demand from the farmers and low

subsidy from the govt. though the capacity utilization of Extruded Irrigation is less

than the installed capacity the value is increased with an average of 50% which is

due to the high values of inputs.

From this study it is said that more production of Extruded Irrigation is

possible than its installed capacity but the company is not performing well in using

its installed capacity. So it is suggested that the govt. and the company should

create awareness about the uses of Extruded Irrigation to stimulate more demand

for it.

Chart 7.4 Quantity and value of Extruded Irrigation (Lakh Meters) produced

for 10 Years

0200400600800

10001200

2001 ‐ 02

2002 ‐ 03

2003 ‐ 04

2004 ‐ 05

2005 ‐ 06

2006 ‐ 07

2007 ‐ 08

2008 ‐ 09

2009 ‐ 10

2010 ‐ 11

Qua

ntit

y (L

akh

Mtr

s/A

nnum

)

Financial Year

Installed capacity & Quantity of Extruded Irrigation produced for 10Yearse

Extruded Irrigation Installed capacity (Lakh Mtrs/Annum)

Extruded Irrigation Quantity produced (Lakh Mtrs/Annum)

Table 7.5 Total quantity of pool urea purchased, sold, Balance & Total value

of pool urea purchased, sold & % gain / loss for 10 Years

Financial Year

Total quantity of pool urea purchased

(MT)

Total quantity of pool urea sold(MT)

Balance (MT)

Total value of pool urea

purchased(Rs. Lakhs)

Total value of

pool urea

sold(Rs. Lakhs)

% gain / loss(Rs. Lakhs)

2001 - 02 20100 11919 8181 793.548 5512.132 47.19

2002 - 03 21354 155264 -133910 843.0559 7486.193 66.43

2003 - 04 22354 169626 -147272 905.9629 8578.449 76.72

2004 - 05 20144 201440 -181296 8050.24 10187.37 21.37

2005 - 06 38418.45 38418.45 0 1516.76 1852.38 3.35

2006 - 07 711591.64 695185.77 16405.87 28839.69 32276.78 34.37

2007 - 08 1460879.09 1256269 204610.1 58307.23 58098.17 -2.09

2008 - 09 706572.15 911094.81 -204523 27914.55 42135.06 142.2

2009 - 10 606947.05 613903.92 -6956.87 28223.03 28540.14 3.17

2010 - 11 558435.78 554923.95 3511.83 28647.86 28461.05 -1.87


INTERPRETATION:

Table 7.5 presents the Total quantity of pool urea purchased, sold, Balance

& Total value of pool urea purchased sold & % gain / loss for 10Years. It shows

that except in the years 2001 – 02, 2006 – 07, 2007 – 08, and 2010 – 11 in all the

years the balance of sales for pool urea is negative, whereas in these years the

balance of pool urea is 8181MTs, 16405.87MTs, 204610.1MTs, and 3511.83MTs

respectively, though this is the balance of current years it was added to the

opening stock to the next years. And the % of gain(Rs. Lakhs) in the financial

years 2001 - 02, 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08,

2008 - 09, 2009 - 10 and 2010 – 11 is 47.19, 66.43, 76.72, 21.37, 3.35, 34.37, -

2.09, 142.2, 3.17 and -1.87 respectively. The company has suffered minimum

losses in the years 2007 - 08, and 2010 – 11 is due to shortage of supply in

delivery time.

From this study it can be said that the purchased pool urea has sold out with

an average gain of Rs. Lakhs 39. The company is performing well in selling of

pool urea is a sign the product is having full demand. Hence it is suggested that the

company should deliver the product in due time.

Chart 7.5 Total quantity of pool urea purchased, sold, Balance & Total value

of pool urea purchased, sold & % gain / loss for 10 Years

‐400000

‐200000

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2001 ‐ 02

2002 ‐ 03

2003 ‐ 04

2004 ‐ 05

2005 ‐ 06

2006 ‐ 07

2007 ‐ 08

2008 ‐ 09

2009 ‐ 10

2010 ‐ 11

Financial Year

Total quantity of pool urea purchased, sold, Balance & Total value of pool urea purchased, sold & Total gain / loss for 10 Years

Total quantity of pool urea purchased (MT)

Total quantity of pool urea sold(MT)

Balance (MT)

Total value of pool urea purchased(Rs. Lakhs)

Total value of pool urea sold(Rs. Lakhs)

Total gain / loss(Rs. Lakhs)

Table 7.6 Value of Specialty Fertilizers & Other Fertilizers produced for

10Years


INTERPRETATION:

Table 7.6 Illustrates the Value of Specialty Fertilizers & Other Fertilizers

produced for 10Years. It shows that in the year 2002 – 03 the value of Specialty

Fertilizers is 134% more than the value in 2001 – 02 where as the %change in the

value of Other Fertilizers produced are -82.3. In the year 2003 – 04 the value of

Specialty Fertilizers is -12% less than the value in 2002 – 03 where as the

%change in the value of other Fertilizers produced is -61.2. In the year 2005 – 06

the value of Specialty Fertilizers is 142% more than the value in 2004 – 05 is the

result of the revamp to increase its output which reversed the gare of less

production and also the %change in the value of other Fertilizers produced is 48.5.

Financial Year Specialty

Fertilizers Value (Rs. Lakhs)

% Change

Other Fertilizers Value (Rs.

Lakhs)

% Change

2001 - 02 1764.22 6542.43

2002 - 03 4120.71 134 1157.48 -82.3

2003 - 04 3627.73 -12 449.18 -61.2

2004 - 05 1001.25 -72.4 1421.21 216

2005 - 06 2423.66 142 2110.06 48.5

2006 - 07 2892.65 19.4 3359.67 59.2

2007 - 08 4111.49 42.1 4641.15 38.1

2008 - 09 4632.83 12.7 5081.49 9.49

2009 - 10 4689.49 1.22 9077.92 78.6

2010 - 11 5156.55 9.96 10135 11.6

In the year 2006 – 07 the value of Specialty Fertilizers is 19.4% more than the

value in 2005 – 06 and the %change in the value of other Fertilizers produced is

59.2. In the year 2007 – 08 the value of Specialty Fertilizers is 42.1% more than

the value in 2006 – 07 and the %change in the value of other Fertilizers produced

is 38.1. In the year 2008 – 09 the value of Specialty Fertilizers is 12.7% more than






is 11.6.

From this study it is clear that an average of 27.6% more value of specialty

fertilizers and an average of 31.8% more value for other fertilizers produced is

increased for 10 years. So it is suggested that if the govt. can facilitate more to

produce both specialty and other fertilizers the product mix offered by the

company help the farmer in shortage of these fertilizers also.

Chart 7.6 Value of Specialty Fertilizers & Other Fertilizers produced for 10Years

0

5000

10000

15000

2001 ‐ 02

2002 ‐ 03

2003 ‐ 04

2004 ‐ 05

2005 ‐ 06

2006 ‐ 07

2007 ‐ 08

2008 ‐ 09

2009 ‐ 10

2010 ‐ 11V

alue

(Rs.

Lak

hs)

Financial Year

Value of Specialty Fertilizers & Other Fertilizers produced for 10Years

Specialty Fertilizers Value (Rs. Lakhs)

Other Fertilizers Value (Rs. Lakhs)

Table 7.7 Nagarjuna Urea Production V/S Dispatches & Freight for 10 Years

Financial year

Production

(Mts)

Mode of Dispatch (Mts) Freight in RsCrores

Rail Road Total Rail

Average Freight

in Rs/Mt

Road

Average Freight

in Rs/Mt

Difference b/w

rail & road

Freight in Rs/Mt

2001 - 02 1221944 951530 243066 1194596 29.47 309.71 7.96 327.48 -17.8

2002 - 03 1187259 980581 214019 1194600 36.15 368.66 8.21 383.61 -15

2003 - 04 1193960 963968 230098 1194066 38.24 396.69 7.86 341.59 55.1

2004 - 05 1392538 1123675 269284 1392959 44.03 391.84 7.99 296.71 95.13

2005 - 06 1379220 1106282 272938 1379220 45.46 410.93 8.24 301.9 109

2006 - 07 1324054 1079232 244809 1324041 61.55 570.31 9.12 372.54 197.8

2007 - 08 1354490 1204662 149838 1354500 78.80 654.13 9.48 632.68 21.44

2008 - 09 1378162 1221598 156535 1378133 80.44 658.48 7.45 475.93 182.5

2009 - 10 1482103 1151348 330472 1481820 81.37 706.74 6.65 201.23 505.5

2010 - 11 1655042 1278514 376648 1655162 92.71 725.14 6.89 182.93 542.2

Source: Company Internal Records

INTERPRETATION:

Table 7.7 presents the Nagarjuna Urea Production V/S Dispatches &

Freight for 10 Years. It shows that the mode of dispatch (mts) via rail and road are

given in the years 2001 - 02, 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07,

2007 - 08, 2008 - 09, 2009 - 10 and 2010 – 11 are 951530, 980581, 963968,

1123675, 1106282, 1079232, 1204662, 1221598, 1151348 and 1278514 for

railways and 243066, 214019, 230098, 269284, 272938, 244809, 149838, 156535,

330472 and 376648 for roadways respectively. And also it presents that the

difference between the rail freight and road freight in Rs/Mt in the years 2001 - 02,

2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08, 2008 - 09, 2009 -

10 and 2010 – 11 are -17.8, -15, 55.1, 95.13, 109, 197.8, 21.44, 182.5, 505.5 and

542.2 respectively. In the years 2009 to 2011 the difference between rail freight

and road freight is more than Rs. 500 per Mt because of heavy vehicles used

instead of small vehicles for road transportation.

From this study it can be said that the Rs.17 negative difference freight

between rail and road in the year 2001 – 02 has increased to Rs. 500 in the year

2009 to 2011 is the benefit to road transportation over rail transportation. So it is

suggested that the govt. should permit the companies to allocate more road

coefficient than the present allocation of 20% and the company should concentrate

on more movements through road than the present mode of transportation.

Chart 7.7.1Nagarjuna Urea Production V/S Dispatches & Freight for 10

Years

Chart 7.7.2Nagarjuna Urea Production V/S Dispatches for 10 Years

0200000400000600000800000

10000001200000140000016000001800000

2001 ‐ 022002 ‐ 032003 ‐ 042004 ‐ 052005 ‐ 062006 ‐ 072007 ‐ 082008 ‐ 092009 ‐ 102010 ‐ 11

Nagarjuna Urea Production V/S Dispatches for 10 Years

Production (Mts) Mode of Dispatch (Mts) Rail

Mode of Dispatch (Mts) Road Mode of Dispatch (Mts) Total

0

500000

1000000

1500000

2000000

2001 ‐02

2002 ‐03

2003 ‐04

2004 ‐05

2005 ‐06

2006 ‐07

2007 ‐08

2008 ‐09

2009 ‐10

2010 ‐11

Mts

Financial year

Nagarjuna Urea Production V/S Dispatches

Mode of Dispatch (Mts) Rail Mode of Dispatch (Mts) Road Mode of Dispatch (Mts) Total

Chart 7.7.3Nagarjuna Urea Freight for 10Years

Chart 7.7.4Nagarjuna Urea Freight – for 10Years

29.4736.15 38.24

44.03 45.46

61.55

78.8 80.44 81.3792.71

7.96 8.21 7.86 7.99 8.24 9.12 9.48 7.45 6.65 6.89

2001 ‐ 02 2002 ‐ 03 2003 ‐ 04 2004 ‐ 05 2005 ‐ 06 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009 ‐ 10 2010 ‐ 11

Nagarjuna Urea Freight for 10Years

Rail Freight in Rs Crores Road Freight in Rs Crores

309.71

368.66396.69 391.84 410.93

570.31

654.13 658.48706.74 725.14

327.48

383.61

341.59296.71 301.9

372.54

632.68

475.93

201.23 182.93

‐17.8 ‐15

55.195.13 109

197.8

21.44

182.5

505.5542.2

2001 ‐ 02 2002 ‐ 03 2003 ‐ 04 2004 ‐ 05 2005 ‐ 06 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009 ‐ 10 2010 ‐ 11

Nagarjuna Urea Freight for 10Years

Average rail Freight in Rs/Mt Average road Freight in Rs/Mt

Difference b/w rail & road Freight in Rs/Mt

Table 7.8 Total Urea dispatched, Unloading & Transport cost (Rs in lakhs)

for 10 years


INTERPRETATION:

Table 7.8 illustrates Total Urea dispatched, Unloading & Transport cost (Rs

in lakhs) for 10 years. It presents that the Average Unloading & Transport cost

(Rs./Mt) in the years 2001 - 02, 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 -

07, 2007 - 08, 2008 - 09, and 2009 - 10 are 15, 15.7, 8.61, 4.67, 4.71, 4.91, 4.8, 55,

and 1.7 respectively. And the Average Freight in Rs lakhs is 313.3277, 371.3377,

386.0758, 373.4496, 389.3505, 533.7448, 651.7534, 637.7469, and 593.9993,

respectively. In the year 2001 – 03 the Average Unloading & Transport cost is

more than Rs. 15 per Mt. is due to lack of heavy load trucks for transportation.

Financial Year

Total dispatched

(MTs)

Unloading &

Transport cost(Rs in

lakhs)

Average Unloading

& Transport cost(Rs./M

t)

% Chan

ge

Total Freight

in RsCrores

Average Freight in Rs lakhs

% Change

2001 - 02 1194596 179.07 15 37.43 313.3277

2002 - 03 1194600 187.08 15.7 4.67 44.36 371.3377 18.5

2003 - 04 1194066 102.84 8.61 -45.2 46.1 386.0758 3.92

2004 - 05 1392959 65.00 4.67 -45.8 52.02 373.4496 12.8

2005 - 06 1379220 65.00 4.71 0.86 53.7 389.3505 3.23

2006 - 07 1324041 65.00 4.91 4.25 70.67 533.7448 31.6

2007 - 08 1354500 65.00 4.8 -2.24 88.28 651.7534 24.9

2008 - 09 1378133 75.39 5.5 1046 87.89 637.7469 -0.44

2009 - 10 1481820 25.15 1.7 -96.9 88.02 593.9993 0.15

2010 - 11 1655162 Na Na Na 99.6 601.7538 13.2

The average freight in Rs lakhs in 2001 – 02 is 313.3277 increased to more than

double amount in the years 2006 onwards is because of increased logistics cost

and the demand from the TPL.

From this study it’s clear that the total dispatched Unloading & Transport

cost (Rs in lakhs) for 10 years have been reduced greatly and the Average Freight

in Rs lakhs per Mt has doubled in the year 2010 – 01from 2001 - 02. Hence it is

suggested that if the company can follow the recommendations made in this study

it will gain more advantages in reducing the freight cost.

Chart 7.8.1 Urea Average Unloading & Transport cost (Rs in lakhs) for 10

years

15 15.7

8.614.67 4.71 4.91 4.8

55

1.7 0

2001 ‐ 022002 ‐ 032003 ‐ 042004 ‐ 052005 ‐ 062006 ‐ 072007 ‐ 082008 ‐ 092009 ‐ 102010 ‐ 11

Financial Year

Avrage Unloading & Transport cost(Rs./Mt)

Avrage Unloading & Transport cost(Rs./Mt)

Chart 7.8.2 Average Freight (Rs in lakhs) for 10 years

313.3277

371.3377

386.0758

373.4496

389.3505533.7448

651.7534

637.7469

593.9993

601.7538

2001 ‐ 02 2002 ‐ 03 2003 ‐ 04 2004 ‐ 05 2005 ‐ 06 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009 ‐ 10 2010 ‐ 11

Financial Year



Table 7.9 – No of destinations district wise

Sl. District No of 1 East Godavari 864 2 West Godavari 653 3 Khammam 382 4 Krishna 381 5 Guntur 378 6 Warangal 316 7 Visakhapatna 295 8 Vizianagaram 252 9 Srikakulam 234

10 Karimnagar 209 11 Nalgonda 206 12 Nizamabad 187 13 Prakasam 151 14 Adilabad 129 15 Mahbubnagar 124 16 Nellore 117 17 Kurnool 113 18 Medak 106 19 Chittoor 103 20 Rangareddy 77 21 Anantapur 60 22 Kadapa 54 23 Hyderabad 52


INTERPRETATION:

Table 7.9 Presents the district wise no of destinations for NFCL. It shows

that the districts East Godavari, West Godavari, Khammam, Krishna, Guntur,

Warangal, Visakhapatnam, Vizianagaram, Srikakulam, Karimnagar, and Nalgonda

are covering destinations 864, 653, 382, 381, 378, 316, 295, 252, 234, 209 and 206

respectively. NFCL is having maximum no of destinations in coastal districts of

East Godavari and West Godavari because the company is located in Kakinada

East Godavari district and these two districts are near to the company. The

remaining districts are having less number even less than 100 destinations the

reason is they are away from the company and are also having low acreage

cultivation land.

From this study it can be said that the markets (destinations) are considered

on the basis of location and cultivation lands. So it is suggested that the company

should target on the basis of demand for fertilizers.

Chart 7.9: No of destinations district wise

864

653

382 381 378316 295 252 234 209 206 187 151 129 124 117 113 106 103 77 60 54 52

No of destinations District wise

No of destinations

Table 7.10: No of destinations Region wise and total distance covered


INTERPRETATION:

Table 7.10 presents the no of destinations Region wise for NFCL. It shows

that the region coastal Andhra is covering 61% of destinations with 3325 no of

destinations is the major market for NFCL but is covering 40% of distance with

597295 kms is due to nearness. The second region is Rayalaseema covers 4

districts, 6% of destinations and 13% of total distance covering by the company.

The third region is Telangana region covers 10 districts, 33% of destinations and

covering 696036 kms which is 47% of total distance covered by the company.

This is long distance from the company as this region is located far from the

company.

From this study it is clear that the regions which are close to the firm are

having more destinations than the regions which are away from the firm. Hence it

is suggested that the company should equally consider all the three regions on the

basis of demand for fertilizers.

Sl no Region No of

Districts No of

destinations % Total Distance

covering %

1 Coastal Andhra 9 3325 61 597295 40

2 Rayalaseema 4 330 6 189090 13

3 Telangana 10 1788 33 696036 47

Total 23 5443 100 1482421 100

Chart 7.10.1 – No of destinations Fig.: 7.10.1– No of destinations

Chart 7.10.2 – Total Distance Covered Fig.: 7.10.2 – Total Distance Covered

3325

3301788

Coastal Andhra

Rayalaseema Telangana

No of destinations No of destinations

Coastal Andhra

3325 (61%)

Rayalaseema 330 (6%)

Telangana 1788

(33%)

No of destinations

597295

189090

696036

Coastal Andhra Rayalaseema Telangana

Total Distance covered

Total Distance covering

Coastal Andhra

40%

Rayalaseema 13%

Telangana

(47%)

Total Distance covered

Table 7.11 Production and Consumption of Fertilizers in Nutrient Terms (in lakh tons)

Yea

r

Urea

Produ

ction

Nitroge

nous

(N)

Consu

mption

%

Sur

plus

/

defi

cit

Di-

ammo

nium

phosp

hate

Produ

ction

Phosph

ate (P)

Consu

mption

%

Sur

plus

/

defi

cit

Compl

ex

Fertili

zers

Produ

ction

Total

(N+P+

K)

Consu

mption

%

Sur

plus

/

defi

cit

Per

hectare

consum

ption

(kg)

%

Incr

ease

2006

– 07 203.10 137.73 0.65 48.52 55.43

-

0.06

9

74.64 216.51 -

1.42 111.8

2007

– 08 198.60 144.19 0.54 42.12 55.15

-

0.13 58.50 225.70

-

1.67 116.50 4.2

2008

– 09 199.20 150.90 0.48 29.93 65.06

-

0.35

1

68.48 249.09 -

1.81 127.2 9.18

2009

– 10 211.12 155.80 0.55 42.46 72.74

-

0.30

3

80.38 264.86 -

1.84 135.76 6.73

2010

– 11 218.80 165.58 0.53 35.37 80.50

-

0.45

1

87.27 281.22 -

1.94 144.14 6.17

Aver

age 206.16

4 150.84 0.55 39.68 65.776

-1.62

9 73.854 247.476

-173.622

127.08 6.57

Source: Department of Fertilizers

INTERPRETATION:

Table 7.11 presents the Production and Consumption of Fertilizers in

Nutrient Terms (in lakh tons). It shows that in the years 2006 - 07, 2007 - 08, 2008

- 09, 2009 - 10 and 2010 – 11 the production of urea (in lakh tons) is 203.10,

198.60, 199.20, 211.12 and 218.80 respectively whereas the consumption of urea

(in lakh tons) is 137.73, 144.19, 150.90, 155.80 and 165.58 respectively. And the

production of Di-ammonium phosphate(in lakh tons) is 48.52, 42.12, 29.93, 42.46

and 35.37 respectively whereas the consumption of Di-ammonium phosphate(in

lakh tons) is 55.43, 55.15, 65.06, 72.74 and 80.50 respectively. The production of

Complex Fertilizers(in lakh tons) is 74.64, 58.50, 68.48, 80.38 and 87.27

respectively whereas the consumption of Complex Fertilizers (in lakh tons) is

216.51, 225.70, 249.09, 264.86 and 281.22 respectively.

From this study it is clear that the average Production of Urea is 206.164

(in lakh tons), and its average Consumption is 150.84 (in lakh tons) shows an

average surplus of 0.55% (in lakh tons). The average Production of Di-ammonium

phosphate is 39.68 (in lakh tons) and its average Consumption is 65.776 (in lakh

tons) shows an average deficit of 1.629% (in lakh tons). The average Production

of Complex Fertilizers is 73.854 (in lakh tons) and its average Consumption is

247.476 (in lakh tons) shows an average deficit of 173.622% (in lakh tons).

Hence it is suggested that the company and the govt. should equally think about all

the ways that help to meet the demand.

Table 7.12: Value of Distribution Expenses for 10 Years

Financial Year Value (Rs. Lakhs) %Change

2001 - 02 477.68

2002 - 03 592.61 24.1

2003 - 04 754.65 27.3

2004 - 05 364.96 -51.6

2005 - 06 461.77 26.5

2006 - 07 441.19 -4.46

2007 - 08 719.03 63

2008 - 09 884.05 23

2009 - 10 834.46 -5.61

2010 - 11 584.92 -29.9

Total 6115.32


INTERPRETATION:

Table7.12 Presents the Value of Distribution Expenses for 10 Years. It

shows that in the years 2002 - 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07, 2007

- 08, 2008 - 09, 2009 - 10 and 2010 – 11 the % change in the Value of Distribution

Expenses is 24.1, 27.3, -51.6, 26.5, -4.46, 63, 23, -5.61 and -29.9 respectively. It

illustrate us that in the year 2004 – 05 the % change is -51.6 than the previous year

is due to assignment of work to new union members who quoted less on the

tender. Again in the year 2007 – 08 it is 63% more than previous year is because

of increased logistics cost and the demand from the TPL.

So it is suggested that if the company can maintain its own logistics and its

operations it will gain more advantages in reducing the value of distribution

expenses to considerable extent.

Chart 7.12: Value of Distribution Expenses for 10 Years

0

24.1 27.3

‐51.6

26.5

‐4.46

63

23

‐5.61

‐29.9

2001 ‐ 02 2002 ‐ 03 2003 ‐ 04 2004 ‐ 05 2005 ‐ 06 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009 ‐ 10 2010 ‐ 11

Value of Distribution Expenses for 10 Years %Change

Value of Distribution Expenses over 10 Years %Change

TABLE 7.13: CONSOLIDAT

Table 7.13 CONSOLIDATED OUTBOUND LOGISTICS FOR 10 YEARS

S.NO Name of the

product Produced(Sold)

2001- 2002 2002-2003 2003- 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 Destination

reaching Distance Mode

of transportation

Quantity Value (Rs.

Lakhs) Quantity Value (Rs.

Lakhs) Quantity Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs) Quantity

Value (Rs.

Lakhs)

1 Ammonia (MT) 706528 - 689263 - 701927 - 803482 - 788471 - 756814 - 772584 - 782861 - 846533 - 942487 -

captive consumption

2 Urea (MT) 1221944 52811.73 1187259 49035.17 1193960 66547.83 1392538 62699.18 1379220 64167.97 1324054 60484.16 1354490 61808.72 1378162 64813.2 1505485 69920.21 1647766 84550.5

A.P, Bihar , Chattisgarh, Gujarat , Harayana, Karnataka, M.P, Maharashtra , New Delhi , Orissa, Punjab , Rajasthan, T.N, U.P, W.B

list attached Rail, Road

3 Extruded

Irrigation(Lakh Meters )

no production

no production

no production

no production

no production

no production 359 529.93 174.29 1077.19 229.08 1485.22 378.63 2648.58 511.25 4221.53 796.4 7057.26 1032.83 9508.58



5 Pool Urea (MT) 119191 5512.132 155264 7486.193 169626 8578.449 201440 10187.37 38418.45 1852.38 695185.8 32276.78 1256269 58098.17 911094.81 42135.06 613903.9 28540.14 554924 28461.05



7 Specialty Fertilizers(MT) - 1764.22 - 4120.71 - 3627.73 - 1001.25 - 2423.66 - 2892.65 - 4111.49 - 4632.83 - 4689.49 - 5156.55



8 Other Fertilizers(MT) - 6542.43 - 1157.48 - 449.18 - 1421.21 - 2110.06 - 3359.67 - 4641.15 - 5081.49 - 9077.92 - 10135



9 Distribution Expenses 477.68 592.61 754.65 364.96 461.77 441.19 719.03 884.05 834.46 584.92


INTERPRETATION:

The consolidated table 7.13 presents the outbound logistics of NFCL for

10 years. It shows the quantity and value of outputs of NFCL and the

destinations reaching, distance travelling and the mode of transportation. The

table tells that the product Ammonia (MT) is produced for captive consumption

for manufacturing urea. The other products produced by NFCL like Urea (MT),

Extruded Irrigation(Lakh Meters ), and the imported Pool Urea (MT), Specialty

Fertilizers(MT) and Other Fertilizers(MT) are mainly distributed to A.P, Bihar ,

Chattisgarh, Gujarat , Harayana, Karnataka, M.P, Maharashtra , New Delhi ,

Orissa, Punjab , Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal and the

mode of transportation is the rail and road.

7.1 OVERVIEW OF CHAPTERS VI AND VII AND THE

PROPOSED SCM MODEL:

On the basis of inferential analysis made in the chapters VI and VII it is

concluded that the present SCM system in NFCL and the fertilizer industry should

be modernized with a new model which is more cost effective and efficient in the

modern agriculture.

7.2 SCM as the circulatory system and distribution as the pumping organ (the

heart)

SCM in NFCL or in the fertilizer industry should work as a circulatory

system of the human beings. It collects deoxygenated blood from various organs

and parts of the human body and circulates it to the lungs for purification and

receives oxygenated blood and sends it to all parts of the human body. It’s a

continuous process that’s why the human beings stay alive. Hence there should be

a similar process here in SCM of NFCL and in the fertilizer industry itself.

The inbound logistics of NFCL is a continuous process as it supplies

natural gas and other inputs for manufacturing of Urea, the process is nonstop

process through out the clock, and round the week.(except maintenance days about

25days in the year). The output is continuous process i.e. 4300 tons per

day. Department of Fertilizers says ‘Since one decade there has been no new urea

capacity addition in India. The demand supply-gap has widened over the past

decade. Currently indigenous urea production is of about 22 million tons and the

consumption is of some 29 million tones, the 7 million tons shortfall is bridged

through imports’.63 The demand for urea by the farmers in India is also continuous

demand. So the firm should meet the demand in continuous process.

63 Ministry of Fertilizers of India

Markets

Outbound Logistics Process

Inbound logistics

SCM as the Circulatory

Distribution(HEART)

Markets

Markets

Markets

Re distribution (reverse logistics)

Distribution

Figure 7.2: SCM as the Circulatory System and Distribution as the Pumping Organ (The Heart)

Markets

But the bottle necks in the process are due to deficit in supply. The

government of India is importing urea to meet the additional demand. But this is

not continuous process so the farmers are facing shortage of urea in right time for

cultivation.

In this study the major bottle necks in this SCM of fertilizer industry can be

the supply of natural gas, over control of government on the distribution and their

policies related to expansion of industry, NBS and allocation of natural resources.

The bottle necks in SCM of NFCL are lack of company’s won vehicles, and TPL

(third party logistics).

7.2.1 The supply of natural gas

According to The Hindu business line January 31, 2012, at present there is

a plan with the Indian authorities to go ahead with a new investment strategy for

the fertilizer sector, especially urea. This policy seeks to create a 1.5 million-tons

capacity for the production of urea over a five year-period. The new policy may

provide gas linkage for up to 75 per cent of new capacity created from domestic

gas resources, while the rest will have to be met through imports.

The Government may provide a subsidy for the price differential between

domestic and imported gas. The proposed policy is for both Greenfield (new

plants) and brown field plants, i.e. capacity addition to existing plants or revival of

old or closed plants. The proposed policy is based on the current availability of gas

within the country and rising trend in global gas prices. The new policy is

expected to be announced in the Budget for 2012-13 and then the issue will be

placed before the Cabinet for a final decision. As it is the limiting factor to the

study it can be suggested that if these policies are implemented properly the bottle

necks related to inbound logistics can be rectified.

Over control of government on the distribution

According to Department of Fertilizers

1. The distribution and movement of fertilizers along with imports of finished

fertilizers, fertilizer inputs and production by indigenous units will continue

to be monitored through the online web based “Fertilizer Monitoring

System (FMS)”.

2. 20% of the prices decontrolled fertilizers produced / imported in India will

continue to be in the movement control under the Essential Commodities

Act 1955 (ECA). Department of fertilizers will regulate the movement of

these fertilizers to bridge the supplies in underserved areas.

3. Freight reimbursement on account of primary movement of P&K fertilizers

(except SSP) by railway shall be paid as per actual on the basis of railway

receipts. No freight reimbursement shall be made on account of secondary

movement of P&K fertilizers. Freight reimbursement on account of direct

road movement of P&K fertilizers (except SSP) shall be paid as per the

actual subject to maximum of equivalent rail freight. Maximum allowable

distance under direct road movement shall be 500 km. For the purpose of

equivalent rail freight the following rates shall be applicable.

Table 7.14 Provisional freight reimbursement

Movement (KM) Rate (Rs / MT)

Up to 100 130

101 to 200 224

201 to 300 316

301 to 400 407

401 to 500 500

Source: FAI New Delhi

Urea continues to be under the regulatory regime and this continues to

affect the Company adversely. The risk of adverse effect of government policy

remains difficult to mitigate.

This factor is also a limitation for this study so it is only suggested that

some liberal polices pertaining to distribution and movement of fertilizer will help

the industry overcome these bottlenecks of distribution.

Policies related to expansion of industry: NBS and allocation of natural

resources.

At first The Ministry of Environment and Forest (MOEF) has deferred

grant of environmental clearance to Nagarjuna Fertilizers and Chemicals

Limited’s (NFCL’s) phase III expansion pending receipt of replies to certain

queries. With this action NFCL’s plan of expansion process faced slow down.

Later on March 22, 201264 The Ministry of Environment and Forest (MOEF)-

constituted expert committee for appraisal of chemical projects has decided to

recommend grant of environmental clearance to phase III expansion project of

64News Letter Ministry of Fertilizers

Nagarjuna Fertilizers and Chemicals Limited. At its last meeting, the committee

expressed satisfaction over NFCL’s assessment of different risks including the

ones posed by probable tsunami and ammonia leakage from the storage tanks

under different scenarios.

The Committee also took note of information furnished by the company in

response to specific queries raised by in its November 2011 meeting. At its

meeting held on February 16-17, the Committee thus specified incorporation of

terms and conditions in the environmental clearance to be issued to the company.

The Rs. 4,314-crore project provides for setting up a new ammonia unit with a

capacity of 2200 tons per day (tpd) and a 3860-tpd urea unit at NFCL’s fertilizers

complex at Kakinada in Andhra Pradesh65

Zuari Industries Limited (ZIL)66 has shut down its ammonia-urea stream

and is faced with imminent closure of its complex fertilizer plants in Goa due to

feedstock woes. The company had earlier hinted at the risk of setback to its

ammonia-urea stream following a major fire that broke out in the pipeline carrying

feedstock on August 19. The pipeline, which is owned by ZIL’s Joint Venture

Zuari Indian Oil tanking Limited (ZIOL), carries naphtha from Mormugao port to

the Terminal of ZIOL.

NFCL had identified Africa as a next destination for exploring growth

opportunities. In view of the opportunities available there, the Company has set-up

a branch office in Nairobi, Kenya, to start its International sales and marketing

operations in Africa. In the initial stage, it is proposed to market plant nutrients

and thereafter foray into Micro Irrigation systems at a later stage. During the next

year, the Company will venture into Ghana, South Africa and other places67

65 FAI New Delhi 66News Letter Ministry of Fertilizers 67 NFCL Annual Reports 2011

This indicates some barriers are posed by the government for the industry

so it is suggested that if the industry is doing effective exploitation of resources to

maximize its production then it’s better to formulate new policies to improve the

indigenous production than going for imports, if the industry is doing over

exploitation of resources to meet its targets then it’s better to go for imports. (Or)

If the gains from the imports are more than the gains from expansion of industry

then it’s wise to go for imports

7.3 The bottle necks in SCM of NFCL are lack of company’s won vehicles,

and TPL.

Plan of distribution in NFCL is pending daily due to the following reasons

1. Insufficient no of RAKEs,

2. Lack of company’s won warehouses (multipurpose)

3. TPL: The cherry pickers are selecting only the commercial routs but not the

non commercial routs.

4. The road problems to the Truck Drivers are external bottlenecks (with clear

information we can reduce the problems associated with the roads)

The govt. says there are an average surplus of 0.55 lakh tones per year for

nitrogenous nutrient (Table 7.11) and an average of 0.2608 lakh tones deficit per

year for phosphate (P) nutrient and 1.736 lakh tones deficit per year for Complex

Fertilizers (NPK). This indicates the supply and demand gap for nitrogenous (N)

nutrient is nil.

Nevertheless there is a surplus in the records of government in the actual

picture the farmer is facing shortage of urea and other complex fertilizers. The

causes for this problem can be lack of proper distribution (out bound logistics)

management and urea is being supplied to the mixture units (complex fertilizers).

Another reason for the shortfall in supply can be the dealers who are creating

artificial shortage in peak demands so that they can enjoy more profits by rising

prices. So the government and the company should maintain a transparent

distribution control system which is accountable for both the public at large and

the industry and the government itself.

These problems can be solved when the SCM in NFCL and in the

fertilizer industry works as the circulatory system and distribution as the

pumping organ (the heart).

7.4 What this system is?

The SCM in NFCL and (or) in fertilizer industry is consist of the primary

activities like inbound logistics, operations, outbound logistics and marketing sales

and services with the supportive activities of firms infrastructure, HRM and the

procurement.

The SCM system should work as a circulatory system and distribution as

the pumping organ (the heart). The heart collects deoxygenated blood from

various organs and parts of the human body, and circulates it to the lungs for

purification and receives oxygenated blood, and sends it to all parts of the human

body. As long as it’s the continuous process and the heart receives both the inflow

and outflows of blood without any hurdles in its channels the heart function

healthily. But any hurdle in its channels of both inflows and outflows can result

heart stroke. Hence there should be a similar process in SCM of NFCL and (or) in

the fertilizer industry itself.

Inbound

Logistics

Im

Im

Figure 7

mports

mports

.4: Distrib

Outbound(Distri

bution as t

d Logistics ibution)

Central WarB/SK

Exports

the Pumpi

rehouse U

ing Organ

Indigenous

n (The Hea

nieos

art)

The inbound logistics:

The NFCL and (or) the fertilizer industry is wholly driven by the major

input the natural gas, and other inputs like naphtha, fuel Natural Gas, Catalysts

Chemicals and Consumables, Packing Material and spares. The industry is running

with a shortage of about 25% of natural gas as it became the major fuel gas for

domestic cocking, electricity feedstock, CNG fuel gas to automobiles and other

manufacturing industries are being run by the natural gas but the availability of

natural gas is limited in some areas. It should be allocated to all the nearby states

as it was the nation’s property.

In this study there is less emphasis given to the inbound logistics as the

allocation of natural gas is strictly under the government control so only advisable

suggestions are given. The government should supply sufficient natural gas

without any shortage to this fertilizer industry to gain its self sufficiency to meet

the domestic demand as the fertilizers are the major inputs to the agriculture the

primary sector of India.

Table 7.15: Implementation of the Nutrient Based Subsidy (NBS) Policy for

Phosphate and Potassic (P&K) for the year 2012 – 13 to be implemented

w.e.f. 01.04.2012.

Sl. No Nutrients NBS (Rs. Per Kg of Nutrient)

1 N 24.000

2 P 21.804

3 K 24.000

4 S 1.677

Source: FAI New Delhi

If the cost of all inputs in manufacturing of Kg of nutrient is reduced or less than

Rs. 24.000 the NBS proposed by the government the firm will earn profits.

Imports:

India is importing 7 million tons of urea to bridge the gap between the

demand and supply. Nevertheless the farmer is facing shortage of urea in right

time. The reason for this problem can be the irregular periods of imports. So it can

be suggested the government should make available of imports in right time as the

production of this product in this industry worldwide is a continuous process.

The operations:

In this study less emphasis is given to operations as the topic is very narrow

to the operations activities. So only few suggestions are advised to make it

functional.

In the performance of fertilizer industry it is identified that (see industry

performance analysis) the firm is doing well and it can do more effectively and

efficiently because MOEF panel clears NFCL phase III urea expansion and

NFCL shortlists technologies for its Phase III expansion. Nagarjuna Fertilizers and

Chemicals Limited (NFCL) has shortlisted three ammonia and three urea

technologies for its proposed Rs. 4,314-Crore expansion project. In its

environment impact assessment (EIA) report on the project, the company says:

“The single stream Ammonia / Urea plants of 2200 MTPD / 3860 MTPD

capacities have been selected and will use one of the following process

technologies.” The technological options for ammonia Plant are: Kellog Brown

and Root Process, HaldorTopsoe Process and Uhde Process. The short-listed urea

technologies are: Stamicarbon Process, Snamprogetti Process and Toyo’s ACES-

21 Process. The project named phase III is targeted for completion with 30 months

from the zero date. NFCL has an agreement with RIL and GAIL for supply of

3.255 MMSCMD of natural gas for the existing two ammonia-urea streams. It has

already given a request to the Union Government to allocate additional gas of 2.4

MMSCMD for Phase III project.

Subsequently it is suggested that if the industry is doing effective

exploitation of resources to maximize its production then it’s better to formulate

new policies to improve the indigenous production than going for imports, if the

industry is doing over exploitation of resources to meet its targets then it’s better

to go for imports. (Or) If the gains from the imports are more than the gains from

expansion of industry then it’s wise to go for imports.

7.5 Outbound logistics: distribution as the pumping organ (the heart)

This system can work well with the help a sound IT in the distributions

system. After gaining the knowledge pertaining to demand and the supply of both

indigenous and imports a sound planning of distribution will work as the pumping

organ the heart. First of all collect the product needed to meet the demand from

both the sources of indigenous and imports in right time continuously. Secondly

Stock it in B/SKUs in the factory premises for indigenous and near the ports for

imports. And thirdly the product can be distributed to the destinations by

following ways of distribution continuously

Figure 7.5: channels of distribution

1.

2.

3.

4.

Rail ways are recommended when there is availability of RAKEs, priority

of demand and for long distances. It should send or distribute more to the working

organs (where demand is more). Information system should provide information

about demand / crop / season/ type of fertilizer required/ the quantity required. It

should maintain BSKUs to stock for long time without any loss. ZSO (Zonal Sales

Officers) and ASO (Area Sales Officers) are responsible for product information.

Bulk Stock Keeping Units:

Why this BSKUs?

Along with the regular mode of transportation the pool or bulk urea can be

transported and stocked safely with cost effectively and efficiently. The firm is

used to store the bulk urea near its bagging plant when there are no rail or road

transportation wagons. The same is re retrieved from the bulk storage house to

bagging plant and bag it and transports when there are the wagons for

transportation. This can be implemented to far reaching destinations also when

there is low demand for fertilizer (after harvesting to new plantation) the bulk or

pool urea can be transported and stocked until the demand for fertilizers rise. It

can save the time for bagging, space of transportation, and cost of labor involved.

And also the product is distributed evenly to all the destinations based on the

demand and the stipulated movement of fertilizers by the government. The firm is

acting as the Clear and Forward agents for imports in the same manner it can bag

and distribute the bulk stocked urea as and when required.

Location of warehouse:

Is should be near to rail, market (cultivated land), and road facilities

Design:

It should be just like a tomb or a water tank with large input and output openings

Advantages:

Cost effective in building, less maintenance cost, optimum utilization of

capacity, use of conveyer belts, less loading and unloading time, cost, moisture

free and safe from rain water, stored for long time when stored with good

ventilation and in dry place and used for other food grains after cleaning with a

proper agent, Act as multipurpose

Maintenance:

It can be maintained by the company or it can be leased from the TPL

vendors or from the government.

BSKU

Market segmentation:

On the basis of geographic (travel distance), availability of ports for

imports and market demand (usage rate)

Table 7.16.1: market segmentation for Nagarjuna Urea (District wise)

Sl.no

Name of the district

covering above 500

km

No of destinations for

Urea

No of ports

No of major

rail station

s

Name of the district covering

below 500 km

No of destinatio

ns for

Urea

No of ports

No of major

rail station

s

1 Adilabad 129 Nil 6 East Godavari 864 2 15 2 Anantapur 60 Nil 7 Guntur 378 1 11 3 Chittoor 103 Nil 8 Khammam 382 Nil 11 4 Hyderabad 52 Nil 4 Krishna 381 1 11 5 Kadapa 54 Nil 3 Srikakulam 234 3 15 6 Karimnagar 209 Nil 8 Visakhapatnam 295 3 11 7 Kurnool 113 Nil 2 West Godavari 653 1 10 8 Mahbubnaga 124 Nil 7 9 Medak 106 Nil 2 10 Nalgonda 206 Nil 8 11 Nellore 117 1 4 12 Nizamabad 187 Nil 4 13 Prakasam 151 1 3 14 Rangareddy 77 Nil 11 15 Vizianagara 252 Nil 15 16 Warangal 316 Nil 6 Total 2256 2 98 3187 11 84

Source: Company internal records

INTERPRETATION:

Table 7.16.1 presents the market segmentation for Nagarjuna Urea. It

shows the districts Adilabad, Anantapur, Chittoor, Hyderabad, Kadapa,

Karimnagar, Kurnool, Mahbubnagar, Medak, Nalgonda, Nellore, Nizamabad,

Prakasam, Rangareddy, Vizianagaram and Warangal has covered more than 500

kms and are covered 2256 destinations and having an average of 6 major rail

stations. The district East Godavari, Guntur, Khammam, Krishna, Srikakulam,

Visakhapatnam and West Godavari has covered less than 500 kms with 3187

destinations and are having an average of 12 major rail stations.

From this study it is clear that the destinations which are far from the

company is having less no of rail and ports for transportation where as the

destinations which are near to the company is having more no of rail and ports for

transportation. Hence it is suggested that the govt. and the company should follow

the suggestions made under this study for ensured smooth flow of product.

Priority to Railways should be given as follows.

1. First priority should be given to the destinations which covered maximum

distance.

2. Second priority should be given to the destinations which are having high

and irregular demand.

3. Last but not least priority should be given to the destinations where there

are no ports and less no of rail stations available.

Priority to road transportation should be given to the immediate (nearest)

destinations which cover mass markets as there are regulations in govt.

reimbursement.

Map 7.6: Rail map

B/SKU

‐‐‐‐‐‐‐ RAIL WAYS

ROAD WAYS

Table 7.16.2: market segmentation for Nagarjuna Urea (Region wise)

Sl. No

Name of the region

No of destinations for

Urea

Total Distance covering

(km)

Average distance

per destinatio

n from NFCL (km)

No of

ports

No of major

rail way

stations

No of B/SKUs suggeste

d

Initial Mode of

transportation

suggested

(Rail : Road)

1 Coastal Andhra

3325 597295 179.63 13 95 35 50 : 50

2 Telengana 178 696036 389.28 Nil 67 26 50 : 50

3 Rayalaseema

330 189090 573 Nil 20 16 50 : 50

Total 5443 1482421 1141.91 13 182 77

Why roads?

Freight reimbursement on account of primary movement of P&K fertilizers

(except SSP) by railway shall be paid as per actual on the basis of railway receipts.

No freight reimbursement shall be made on account of secondary movement of

P&K fertilizers. Freight reimbursement on account of direct road movement of

P&K fertilizers (except SSP) shall be paid as per the actual subject to maximum of

equivalent rail freight. Maximum allowable distance under direct road movement

shall be 500 km. Thus there is no such restriction for Nitrogenous (N) Fertilizer

but the freight reimbursed by the government to the road movement is confidential

to the company. This is the reason why the company wants to improve its cost

effectiveness to gain its competitive advantage.

The study related to rail ways mode of transportation is limited in this study

as it is 100% reimbursement railway shall be paid as per actual on the basis of

railway receipts so the study is limited to the road transportation as it is the only

mode of transportation we can make it cost effective and there is great scope of

operations as and when it is deregulated by the government. The road map or the

road web can help in identifying critical paths. The table gives an idea about the

movement and freight for each mode of dispatches of urea. There is no doubt that

the road freight only can reduce the transportation cost when compared to rail

freight. Nevertheless the government policies on the movement of fertilizers are

biased to the railways. It’s suggested that if it can deregulates these policies it can

help the industry in cost competitive advantage.

The current method of freight master used by NFCL is doing well in

addition to the current method it should consider the following to the more cost

effective. In Andhra Pradesh there are 4,89,379 goods vehicles are there So prefer

high capacity trucks for transportation as there are 6tns, 8tns, 10tns, 12tns, 14tns,

16tns, 18tns, 20tns and 25tns capacity trucks are available68. So that bulk amount

can be distributed for the same cost of transportation. And Prefer new trucks than

old trucks so that km/liter increases and the TPL will quote for less as vendors are

invited through tenders and sealed bid quotations. If the firm can maintain its own

vehicles it works more cost effective than TPL.

68 AP RTO Records 2011

Table 7.17Nagarjuna Urea Production V/S Dispatches & Railway V/S Road

Freight for 10 Years

Financial year

Production

(MTS)

Rail coeff

.

(%)

Rail freight in Crs.

Rail freight per MT

(Rs)

Road coeff.

(%)

Road freight in Crs.

Road freight per MT (Rs)

Difference between rail and

road freight per MT in Rs.

2001 - 02 1221944 80 29.47 301.47 20 6.92 283.16 18.31

2002 - 03 1187259 82 36.15 371.32 18 7.21 337.38 33.94

2003 - 04 1193960 81 38.24 395.41 19 7.53 331.93 63.47

2004 - 05 1392538 81 44.03 390.35 19 7.99 301.99 88.37

2005 - 06 1379220 80 45.46 412.01 20 8.24 298.72 113.3

2006 - 07 1324054 82 61.55 566.9 18 9.12 382.66 184.2

2007 - 08 1354490 89 78.8 653.67 11 9.48 636.27 17.41

2008 - 09 1378162 89 80.44 655.82 11 7.45 491.43 164.4

2009 - 10 1482103 78 81.37 703.87 22 6.65 203.95 499.9

2010 - 11 1655042 77 92.71 727.49 23 6.89 181 546.5

Average 1356877 81.9 58.822 517.831 18.1 7.748 344.849 172.98

Source: Company internal records

INTERPRETATION:

Table 7.17 Presents the Nagarjuna Urea Production V/S Dispatches &

Railway V/S Road Freight for 10 Years. It shows that in the years 2001 – 02, 2002

- 03, 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08, 2008 - 09, 2009 - 10

and 2010 – 11 the urea production (MTs) is 1221944, 1187259, 1193960,

1392538, 1379220, 1324054, 1354490, 1378162, 1482103 and 1655042

respectively. The rail coefficient (%) dispatched is 80, 82, 81, 81, 80, 82, 89, 89,

78 and 77 respectively. Whereas the road coefficient (%) dispatched is 20, 18, 19,

19, 20, 18, 11, 11, 22 and 23 respectively. And Rail freight per MT (Rs) is 301.47,

371.32, 395.41, 390.35, 412.01, 566.9, 653.67, 655.82, 703.87 and 727.49

respectively. Whereas the Road freight per MT (Rs) is 283.16, 337.38, 331.93,

301.99, 298.72, 382.66, 636.27, 491.43, 203.95 and 181 respectively.

From this study it is clear that the average Rail coeff (%) is 81.9 and

Road coeff (%) is 18.1for dispatches and the average Rail freight per MT (Rs) is

517.831 whereas the average Road freight per MT (Rs) is 344.849 shows an

average Difference between rail and road freight per MT in Rs. 172.98 for

10years. Hence it is suggested that the govt. and the company should dispatch

more through the road transportation.

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