A SUMMER TRAINING REPORT ON “INVENTORY MANAGEMENT" FOR GUJARAT NARMADA VALLEY FERTILIZER COMPANY LIMITED, BHARUCH SUBMITTED TO. ANAND INSTITUTE OF MANAGEMENT IN PARTIAL FULLFILLMENT OF THE REQUIREMENT OF THE AWARDS FOR THE DEGREE OF MASTER OF BUSINESS ADMNISTRATION UNDER THE GUIDANCE OF NISHI SANGWAN (Faculty, A.1.M) PRESENTED BY: (JAYNAND PATALIA) EXAM SEAT NO.: M-20063 MBA- SEMESTER ANAND INSTITUTE OF MANANGEMENT M.B.4, PROGRAMME OPP. TOWNHALL, NR. GRID, ANAND JUNE 2011Preface TABLE OF CONTENTS Acknowledgement Declaration Executive Summary ‘SR. NO. PARTICULAR PAGE NO. PART — 1 GENERAL INFORMATION INTRODUCTION FUNCTIONAL DEPARTMENTS » PRODUCTION DEPARTMENT » HUMANRESOURCE DEPARTMENT » FINANCE DEPARTMENT + MARKETING DEPARTMENT » INFORMATION TECHNOLOGY PART — INDUSTRY INFORMATION RESEARCH METHODOLOGY SWOT ANALYSIS INDUSTRY PROFILE. COMPANY PROFILE THEORIES OF INVENTORY MANAGEMENT DATA INTERPRETATION AND ANALYSIS LIMITATIONS OF STUDY. FINDINGS CONCLUSIONS: LIST OF GRAPHS: Sr.No. PARTICULARS [TABLE NO. PAGE NO-][60] ee js 6 aa FINISHED GOODS CONVERSION INVENTORY CONVERSION TOTAL INVENTORY INVESTMENT INV ENTORY TURNOVER RATIO RAW MATERIAL TURNOVER RATIO WORK-IN-PROCESS TURNOVER RATIO FINISHED GOODS TRUNOVER RATIO LIST OF DIAGRAMS PARTICULAR DIAGRAM NO. [PAGE NO. ‘SHARE HOLDING PATTERNS 7 14 OFGNFCLTO. | DIFFERENT BANKS OF GNFC 2RAW MATERIAL CONVERSION WORK-IN-PROCESS CONVERSION FINISHED GOODS CONVERSION INVENTORY CONVERSION TOTAL INVENTORY INVESTMENT INV ENTORY TURNOVER RATIO RAW MATERIAL TURNOVER RATIO. WORK-IN-PROCESS TURNOVER RATIO FINISHED GOODS TRUNOVER RATIO LIST OF DIAGRAMS PARTICULAR DIAGRAM NO. PAGE NO. ‘SHARE HOLDING PATTERNS OF GNFC LTD, __ _ DIFFERENT BANKS OF GNFG 28DIFFERENT INSURANCE COMPANY OF GNFC a BIFURCATION OF INVENTORY a 5 ‘ABC ANALYSIS OF INVENTORY 5 50 € EO MODEL € 50 7 NET OPERATING CYCLE 7 et PREFACE “Experience is the best teacher.” This saying plays a guiding line in our lives and alse in project reports that are an integral part of the MBA programmed in Gujarat University.Today's age is an age of management. Management is the backbone of any organization or any activity done. The real success of management lies in applying the professional management techniques an all managerial activities. Hence, to attain this objective and to have the outlook of all intricacies of corporate world | have undertaken the Summer Training at “GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD." It's all about “INVENTORY MANAGEMENT AND ITS ANALYSIS.” ACKNOWLEDGEMENT Industrial tr ing is the phase of the activity during my study in which | am expected to expand my creative thinking ability and to get the training ofhow to work in the industry and how all works are undertaken in the industry. Itwas a great pleasure working on analysis of inventory management. The presentation of this report gives me a feeling of fulfilment. As the final frantior towards achieving a master of business administration degree, the activity of going through industrial orientation has bridged the gap between the academics and practical real life work for me. It has prepared me to apply myself better to become good manager. Normally, it require a lot of, People suppart to complete this oppartunity to acknowledge their support for me. First of all | am thankful to Mr. N.K, Patadia (A.G.M. HRD) GNFC for allowing me te take training under his shelter in the company. | am thankful to Mr. A.K. Trivedi (G.M. Finance Department), Mr. N.A. Modi (Senior Manager, Store Account) and Mr. B.S. Patel for guiding me through aut the projact development. | would also like to thank Mr. D.C. Jadeja and Mr. D.R. Panchal and co-worker who have given their precious time to us and help us a lot in this project. | even show my gratitude towards Dr, N.N. Patel, Director, AIM, ANAND and my faculty guide Miss jshi Sangwan without whose support my project would not be possible to complete. Ihave been able to prepare my report successfully and | acknowledge a Special thanks to all hose people without whose support it was impossible for me to make the project report. DECLARATION1.EXECUTIVE SUMMARY During the Summer Training at “Gujarat Narmada Valley Fertilizers Company Ltd". | have tried to cover the glimpse of overall working of theorganization, G.NF.C. is a large fertilizer and petrochemical company established on 10" May. 1976. G.N.F.C. has two aims like to do social work for the society and to make India a strong economical country. This report talks about the company first. and than further it talks. about the financial aspects of the company. > Afterward it proceeds towards the theoreti report and about various research methods used for the data aspects of the project collection » Further is discusses about the various aspects and techniques used in inventory management, Further it talks about various data analysis and interpretation of various inventories ratio. > Lastly at the end of the report it talks about variaus strengths and weakness and the limitations of the project report. » GNFC wants to give full services as well as education about crop, soil, seeds, and fertilizer ete, to the farmers.A PROJECT REPORT ‘ON GENERAL INFORMATION ABOUT THE COMPANY IN THE AREA OF FINANCE FOR GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD. BHARUCH SUBMITTED TO ANAND INSTITUTE OF MANAGEMENT M.B.A. PROGRAMME PRESENTED BY JAYNAND PATALIA B.A. — SEMESTER-I|INTRODUCTION Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples.India is primarily an agriculture based economy. The agricultural sector and its other associated spheres provide employment to a large section of the country's population. Fertilizer in the agricultural process is an important aree of concern Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizers. in the recent years. The Fertilizer Industry in India started Its first manufacturing unit of Single Super Phosphate (SSP} in Ranipet near Chennai with a capacity of 6000 MT a year. The company has variad praducts and diversification as well as growth strategy. It has been basic to India's progress not only because of its inception immediately after independence. But on one hand it has helped in Production of strong needed fertilizer as well as the chemical products ands on other hand has provided employment to many people. Such employment is not only limited to company’s own premises but all other industries whose growth has been fostered with development of this fertilizers and chemical company are benefited through Hf.> Production Department GNFC has drawn on the worlds leading technologies and systems for its various production culmination of enterprise and initiative, resourcefulness: and resolve, technology at GNFC common vision for continuous growth, GNFC has always shown a dedication to standards af production and environment safeguards, qualified research acumen, and 100% capacity utilisation for more than two decades » Human Resource Department> Finance Department G.NF.C has a very active finance department, which looks for finance management of company. Division of work plays an important role in every organization for smeath working, Financial management is that managerial activity which is cancem with the planning and controlling of the company's financial resources so finance is life blood for every organization, without efficient financial management, company can't survive for long time: » Marketing Department GNFC Regional Offices Madodara— ‘Surat Agra Ratlam Toanpur Indore Udaipur Reipur Mehsana Nasik Chennai Rajkot Kochi > Information Technology(n)Code Solutions - An IT Division of GNF (n)Code Solutions offers Digital Certificates that can integrate with applications such as emails, workflow, enterprise wide applications, or secure VPNs. The Digital Certificates can be used by individuals, corporate and governments to secure online 82B/B2C applications and other anline transactions. thas promoted a porial called www nprocure.com offering endsto- end electronic procurement services provider. (n)Code also designs and builds warld class data center infrastructures. (n)Code also offers a wide range of Security Services which include Managed IT Services & Secure Infrastructure design & building Servicesv Study or Research Objectives: The main objectives of study: Ta learn how the company keeps all the data of inventory perfectly. Ta study how finance department of the company wark. Ta find out the composition of inventory. Ta study the various inventory ratio. To analyze the inventory management techniques used in the company. Ta study the Inventory Control Techniques of the company. Methods of Data Collection: ‘The data is collected from the respected persons of the company. The communication was informal in nature: i, Secondary Data: The data was analyzed from the balance sheet, various tables. graphs. charts, referred some of the reports and ather companies report. Data Analysis Techniques: Far the purpose of analysis of the data and the report | have kept in mind the abjective and analyzed each and every data I got at each stage of the report. | have used many tools for analyzing the data and the different ratios used for it are as follows i. Total investment in inventory ratio. i, Total inventory to current ratio. Raw materials turnover ratio, Iv. Work in process turnover ratio ¥. Finished goods tumover ratio.It focuses an the company’s financial as well as overall performance and futur STRENGTHS: © Woll organized structure of inventory management with high productivity and economic cost. ‘+ Well defined policies and innovative plans with cost reduction by its excellent human resources © Good link of raw materials requirement planning and monitoring annual and monthly requirement plan. = Environment consciousness. WEAKNESS = Non moving inventory items are in huge quantity. © Due to regulated environment in the fertilizer sector, there is a lack of pricing in fertilizers business of GNFC. © Disposal activity results are not satisfactory, OPPORTUNITIES © Nice chance of converting all fertilizers plant into gas producing unit. As government is allowing subsidy on these plants. © Scope of reduction in energy consumption by way of implementing revamp scheme. THREATS © Fow plants are in operation for more than twenty year and may also require replacement of high value equipment and higher maintenance expenditures ‘© Entry of new competitors in the same field of business. + Higher competitive market for IT products and service, 6 INDUSTRY PROFILE® Introduction: Fertilizers sector is a very crucial for the Indian economy because provides @ very important input to agriculture, The fertilizer industry in India has played @ pivotal role in achieving self-sufficiency in food grains as well as in rapid and sustained agriculture growth. india is the third largest procedures and consumer of festilizer in the world after China and the United States Agriculture. which acccunts for one fit of GOP. provides sustenance to two-thirds of the population. Besides, it provides crucial backward and forward linkages to the rest of the economy. Successive five-year plans have laid stress on self-sulficiency and self-reliance in food grains production and cencentated efforts in this direction have resulted in substantial increase in agriculture production and productivity, This is clear from the fact that irom a very modest level of 52 milion MT In 1951-52, food grains production rase to above 208.6 million MT in 2005-06 Keeping in view the vital role played by chemical fertilizers in the success of India’s green revolution and consequent self-reliance in food grain production, the Government of India has been consistently pursuing policies conductive to increased availability and consumption of fertilizers in the country. As a result, the annual consumption of fertilizers, in nutrient terms( N, P & Ki), has increased fram 0.7 LMT in 1954-52 to 2034 LMT in 2005-06, while per hectare consumption, which was less than 1 kg in 1951-82 has risen to the level of 104.Skq in 2005-06.> Growth in Fertilizer Industry: The Indian fertilizer industry has succeeded in mesting almost fully the demand of all chemical fertlizors except for MOP. The industry had a very humbie beginning in 1905, when the first manufacturing unit of Single Super Phosphate (SSP) was sot up in Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar wore the first large sized -tertiizer plants set up in the forties and fities with a view to establish an industrial base to achieve self-sufficiency in foodgrains. Subsequently, green revolution in the late sixties gave an impetus to the grawth of fertilizer industry in India. The seventies and eighties then witnessed a significant addition ta the fertilizer production capacity. Tho installed capacity as on 30.01.2003 has reached a lavel of 121.10 lakh MT of nitragen (inclusive of an installed capacity of 208.42 lakh MT of urea afer reassessment of capacity) and 62.80 lakh MT of phosphatic nutrient, making India the 3rd largest fertilizer producer in the world. The rapid build-up of fertilizer production capacity in the country has been achieved as a result of a favourable policy environment facilitating large investments in the public, co-operative and private sectors. Presently, there are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex ferllizers, Out of these, 29 unit preduce urea, 20 Units produce DAP and complex fertilizers 1% plants manufacture Ammonium Sulphate (AS), Calcium Ammonium Nitrate (CAN} and other low analysis nitrogenous ferilizers. Be Units in operation producing SSP. jes, there are about 64 medium and small-scale» Importance of Fertilizer Industry: These coal based plants have, however. been clesed by Government W.e.f, 14.2002 due to technical and financial non-viability, However, with natural gas becoming available from offshore Bombay High and South Basin, a number of gases based ammonia-urea plants have been set up since 1985. As the usage of gas increased and its available supply dwindled, a number of expansion projects came up in the last few years with duel feed facility using both naphtha and gas. Feasibility of making available Liquefied Natural Gas {LING) to moet the demand of existing fertilizer plants andlor for their expansion projects, along with the passibilily for ublizing newly discovered gas reserves, is also being expiared by various fertilizer companies in India In case of phosphates, the paucity of demestic raw material has boon a constraint in the attainment of self-sufficiency in the country. Indigenous rock phosphate supplies meet enly 5-10% of the total requirement of PZO5. A policy has therefore been aslepted which involves a mix of three options, viz, domestic production based on indigenous/imported rock phosphate and imported sulphur: imported intermediates, viz. ammonia and phospheric acid; and third, import of finished fertilizers, In the absence of commercially exploitable potash sources in the country, the entire demand of potassic fertilizers for direct application as well as for production of complex fertilizers is met through imports. Given the Volatility in international market for fertilizers in general and urea in particular, marginal pravision through imports could be used to the country's strategic advantage. This is also desirable as the international market, especially in case of urea. is very sensitive to demand supply scenario.>» Salient Features of Fertilizer Industry: * Fertilizer sector is very crucial to Indian economy. provides important input to agriculture sector. It is regulated by government policies administering the price of fertilizer and the production. Urea production is energy intensive process ‘+ Natural gas, Naphtha, LSLifuel oil are used as feedstock for producing urea. = Cost of energy varies from 65% to 87% of production costs + Specific energy consumption of sample plants covered under this study varies between 5.53 goalMT of urea and 10.2 Goal/MT. + Majority of industry energy conscious and focuses an energy management. Over the years, the industry has improved its energy performance by bringing dawn the specific energy consumption and improving capacity ulilization.» Fertilizer Industry Scenario in India: BSR EKR ALS Public Sector Indu: The fertilizer and Chemicals Travancore Ltd. (FACT) NATIONAL FERTILIZERS LIMITED (NFL) PARADEEP PHOSPHATES LIMITED (PPL} PYRITES, PHOSPHATES & CHEMICALS LTD. (PPCL} RASHTRIYA CHEMICALS & FERTILIZERS LIMITED (RCF) STEEL AUTHORITY OF INDIA LIMITED (SAIL) HINDUSTAN COPPER LIMITED (HCL) eee RRS Co-Operative Sector Industries: v_ INDIAN FARMERS FERTILISER COOPERATIVE LIMITED {IFFCQ) ¥_ KRISHAK BHARATI COOPERATIVE LIMITED (KRIBHGO) Private Sector Industries: There are 14 companies in private sector: Gujarat Narmada Valley Fertiizer Co, Lid(GNFC) Hindustan Lever Ltd. (HLL) ICI Indian Lad, Indo Gulf Fertilizers and Che ‘als Gorporation Ltd, Manglore Chemicals ane Fertilizers Lid.(MCFL} Southern Petro Chemicals Industries Corporation Lite. Nagarjuna Fertilizers Chemicals Ltd.(NFCL) Deepak Fertilizers and Chemicals indusry. ‘Tutcorain Alkali Chemicals and Fertilizers Ltd Gujarat State Fertilizers Company(GSFC) Chambal Fertilizers and Petro Chemicals Lid.{CFPCL} "COMPANY PROFILE > GNFC at Glance: Gujarat Narmada Valley Fertilizers Company Ltd. (GNFC) is 8 joint sector enterprise promoted by the Government of Gujarat and the Gujarat State Fertilizer Company Lid. (GSFC). It was set in 1976, at Bharuch located in Gujarat in an extromaly prosperous industrial belt, GNFC draws an the resources of the natural weallh af the land ag well ag the industry rich heavens of the areas GNFC started ite manufacturing and marketing operation by setting Up in 1982, one of the world’s largest single-stoam ammonia-urea tertizer complexes. (Over the newt faw years, GNFC successfully cammissioned different projects fields as diverse as chemicals, fertilizers and electronics, in Since inception, GNFG has worked towards an extensive growth as a corporation. A growth which respects the environment and springs from the progressive vision of GNFC. > General Information: » Name: - Gujarat Narmada Valley Fertilizers Company Limited. » Type: - Joint Sector » Scale: - Large Scale > Date of Established: - 10" May, 1976Website: - vwrw.anfe: in » Promoters: - Govt. of Gujarat GSFC 2 » Board of Directors: - Board of Directors Shri AK. Jeti iS [Chairman Shri. V. Patel TAS | Managing Director Shri M. ML. Srivastava IAS [Director Shri DJ. Pandian IAS | Director Shei R, K, Tripathy 1AS | Director Shri GC. Murme 18S | Director Dr. TT Ram Mohan Director Shri D.C. Anjaria Director Ashok Shaly Director Exoouive Directors Executive Directar IT Sint §, Kocher Executive Director and Chief Finanee Officer ‘Shai K. ©, Jatunia Bankers: - Bank of Baroda (Leader) Stale Bank of India Canara Bank State Bank of Saurashtra HDF, ICICI> Head Office: - Bharuch > Regional Offices: - Ahmedabad, Bhopal, Hyderabad, Jaipur, Lucknow, New Delhi, Pune, Mohali 13 Historical Development GNFC started from 10" May, 1976, « It promoted by government of Gujarat & GDFC Lid 4 In 1981 largest shareholder promated for the first projact of GNFC Ltd. ¥ In 1985, major diversification by GNEC. into Industrial chemical methanal, formic acid, acetic acid, nitric acid, electronic, telecammunications, information technology, et. GNFGis a joint sector company. ¥ NOPL has recently b2en merged with GNFC. G - Good, safety, ActionlAppraach,NN - Never be absent-minded, aver safely minded. F - Full proof safety wills fail-device. © - Cleaner place is sate place, » Share Capital Pattern DIAGRAM NO: 1 Share Holding Pattern Of GNFC BGowt of Gul 21.38%. se 2.108% Bris 8 DRA a0 > Awards and Achievements * National Safety Council, USA: Good Safety Performance.National Productivity Council: Best Productivity - First, Second & Third Prizes. Best Productivity far Nitragenous Fertilizers. Ministry af Labor, GOL: Good Safety Performance (Thrice) Federation of Indian Chamber of Commerce & Industry (FICC!) : Best Environment Preservation & Pollution Control, Indian Chemicals Manufacturers Association (ICMA): Environmental Control & Safety. Alll India Organization of Employers: Outstanding Contribution in the field of Industrial Relations. National Energy Conservation Award, Deptt. of Energy, Government of India : Energy Conservation Award, Second Prize. Government of India: Award for Enorgy Conservation. Jawaharlal Nehru Memerial National Award: Effective Energy Conservation Award. National Suggestion Scheme: Two awards for the company, one for the employee Set up the world’s largest single stream, fuel oll based Ammonia - Urea plant, All fertilizers under the brand name af Narmada, along with extensive support activities, have been well accepted by the country’s farmer community India's largest producer of Formic Acid, Acetic acid and Methanol. 15 India’s only manufacturer of Glacial Acetic Acid through the cutting- edge Methanol route. India’s largest single stream plant of Aniline. The only manufacturer of Toluene Dl-isocyanine in Sauth East Asia, Record capacity utilizations in all plants, defying the vintage through ingeniously innovative maintenance measures, Development of the first indigenous, ece-triendly technolagy for H2S removal, CATSGL, a much awarded product of the Company's R&D labs.» Vision and Mission of GNFC: ¥ Vision statement: © Te be a technology driven, environmentally responsible Joint Sector Company manufacturing Fertilizers, Commodity and Specialty Chemicals maintaining highest standards of operational excellence and innovation for creating sustainable value for all stakeholders. Y Mission Statement: We shall — 0 Be the leading provider of Chemicals and Agricultural inputs through adoption of State of the Art Technologies and Business Processes; 0 Have a firm commitment to quality, environment, health and safe! © Enrich human resourees and promete teamwork, innovativeness and integrity 16 © Achieve sustainable economic growth based on corporate excellence driven by ethical business practices, professionalism, dynamism and social responsibility. > Fertilizers Division: GNC started fertilizer manufacturing and marketing eperations by setting up in 1982, one of the world’s largest single-stream ammonia-urea fertilizer complexes.GNFG today is one of the leaders in fertilizer industry. The company is engaged in manufacturing and selling fertilizers such as Urea, Ammonium Nitro phosphate and Calcium Ammonium Nitrate under the umbrella NARMADA. GNF has to its credit one of the largest Ammonia plant, a reference plant in the world of fuel oil based tecinology along with the world's largest single stream Urea plant. + Chemical Division: GNFG has kept pace with changing times and its visian is always focused ‘on growth. Even as the Company was implementing its fertilizer complex, plans were underway for expansion and diversification in related areas. This resulted in the setting up of care chemical and petrochemical plants such as Methanol, Formic Acid, Nitric Acid and Acetic Acid GNFC has kept pace with changing times.and its vision is always focused on growth. Even as the Company was implementing its fertilizer complex, plans wore underway for expansion and diversification in related areas. This resulted in the setting up of care chemical and petrachemical plants such as Methanol Formic Acid, Nitric Acid and Acetic Acid Ww > Grganizational StructureGNC is the largest company. So organization structure is very large. GNFG is the company having organization structure of line and staff type. There is a clear line of authority snd responsibilty, i.e. authority flows {rom top to battam level. = Basic Raw Materials Used = Fuel Oi © Natural Gas. © Rock Phasphate = Utilities are = Water. = Coal, «= Electicity, = Catalysts are = HOL. = Aluminum, 18 = Fertilizers are + Urea, + Ammonium Nitro Phosphate "Calcium ammonium nitrate, = Chemicals are= Ammonia, = Methanol, Acetic Acid. = Formic Acid | Methyl formate. = Weak Nitric Acid. = Concentrated Nitrate Melt » Fortilizer Product UREA[NARMADA Urea] Tachnolagy: Snamprogeti-ttaly Capacity: 6, 36,000 MTA. Narmada Urea contains 46% nitrogen which is readily available to plants. ‘The granules of Narmada Urea are white, uniform in size and free flowing which ensures even distribution in the soil Narmada Urea contains less than 1% biuret, making it convenient for foliar application on the canopy ef the plant, Itis equally effective for all kind of soils and crops: 50 kg HDPE bags. Supply thraugh rail arrpad.2. Calcium Ammonium Nitrate Technology: UNDE ~ Germany Capacity: 1, 42,500 MTA + Uses ¥ Narmada CAN granules are white in colour and are free flowing, which ensures easy uniform distribution, ¥ Narmada GAN contains 26 % double power N (half in ammoniac and half in nitrate form), ¥ Narmada GAN also contains 8.1% calcium-an essential secondary nutrient for normal growth of plants. ¥ Narmada CAN is excellant fertilizer for entire upland craps. Being neutral in reaction, continuous use of Narmada CAN does not create any acidity and alkalinity in the soil and soil productivity is maintained on sustained basis. ‘+ Packaging and supply 50 kg HDPE bags with double packing Supply thraugh rail or road 3. Ammonium Nitro phosphate: Technology: BASF ~ Germany Capacity: 1.42.500 MTA.20 Uses Narmada phos granules are uniform, grey in colour and free flowing. Therefore are easy to apply uniformly in the soil, Narmada Phos contains 20% N and 20% P205 available to plants. This ensures balanced fertilization for basal applicatien at sowing time. In addition to N and 205, Narmada Phos contains calcium and Micronutrients which are essential for the normal growth ef the plant Packaging and supply 50 kg HDPE bags with double packing. GNFG is the first fertilizer company to provide double packing, Supply through rail or road Diammonium Phosphate Uses Ht contains 18% N and 46% P205, It is a very good fertilizer for basal application and more suitable for crops where recommendation of P25 is more than N. Being granular it ensures uniform distribution in the soil Single Super Phosphate+ Uses Y itis widely used in most of the erops. ¥ Usod at the time of sowing as basal application + Packaging and supply: 50 kg HDPE bags Supply through rail or road. 21 » Industrial Product 1, Methanol Capacity: 150000 MATS. Tachnolagy: Low Pressure, Law Tempe: fe Technalegy from IG, UK. Uses: supplied in tanker loads. Ex-GNFC, Bharuch 2, Aniline Capacity: 40000 MTPA Technology: The technology for Aniline has been supplied by DuPont, USA. Packing: In Stainless Steel Tankers. In 30kgs. Uses: acetic anhydride, Vinyl Acetate Monomer (VAM) Purified ‘Terephthalic Acid (PTA)3. Formic acid Capacity: 10000 MTA. Tachnolegy: The Technology for Formic Acid Plant has been supplied by Kemira OY, Finland. GNFC produces high quality Formic sAcid through Methyl Formate Route Packing: Farmic Acid is available in 35 kg (net) HOPE carboys and in Stainless Stoel tankers. Available in 35 kg HOPE carboys and 250 kg HOPE drums. Uses: A coagulant for obtaining rubber from latex, fixing of dyes in leather Industry Preservation of silage and grams. 22 4, Acetic acid Capacity: 100000 MTPA (approx) Technology: British Petraleum's Technolagy Packing: In Stainless Steel tankers. In 30kg. HDPE Carboys. Uses: acetic anhydride, Vinyl Acetate Monomer (VAM) Purified Tarephthalic Acid (PTA)5. Methyl Formate: Capacity: 3000 MTPA Technology: By Kemira OY. Fintand Packing: In 200 Lites drums with epoxy lining or in suitable road tanker. Uses: Used as a Fumigant and larvicide’s for tebacco. used in organic Synthesis and in Formulation of Synthetic Flavours, 8. Weak Nitric Acid Capacity: 247500 NTPA ‘Technolgy: UHDE Germany. Uses: Ammonium Nitrate and other explosive, Sodium Nitrate, Potassium Nitrate, Calcium Nitrate and ather Nitro Derivatives. 7. Weak Capacity: 70000 MTFA. Technology: UHDE Germany Packing: Stainless Steel Tankers.Uses: Widely used Ammonium — Nitrate, Pharmaceuticals, as Absorbent, » Work for Society: in the manufacturer of fe ers like calcium, Ammonium Nitrate Phosphate, explosives, 23 ¥ Being constantly aware af social obligations. ¥ GNFC has provided for ts employees a modern township, set up English and Gujarati Medium Schools, & 32 Bed hospital wi consultants in various disciplines. Y GNFG gives full fledged operation for family schemes and appropriate incentives. ¥ GNFC has adopted a few villages under the ‘GOKUL GRAM YOJANA’ Set up the government af Gujarat. ¥ A sports complex has been construction with modern facilities for various indaor and outdoer games. > Production Performance of GNFC Plants TABLE NO: 4 Production Performance of GNFC Plants For the Year 2010-17 PLANTS PRODUCTION CAPACITY UTILIZATION (ia) ‘Ammonia 474866, 106.582 Urea 643226, 101.136 Methanol 3o172 78.34 Methanolll 163372 36.854 MSU, 3266 17.208 Methyl Formate | 24937 109.373 Fermic Acid 19382 193.82 ‘Acetic Acid 153295 153.295WNA 284307, 114.87 CANT 35870 108.698 CAN 37870 114.759 ANP 166235 116.656 2a DospatchiSale Performance of GNFC plants DESPACTCHISALE PERFORMANCE OF GNFC PLANTS FOR THE YEAR 2010-2011 TABLE NO: 2 DESPATCH SALE “ACTUAL (MT) Urea 636800 Methanol 126059 Methyl Formate 1237 Formic Acid 78969 ‘Acelic Acid 751420 WA, 62278 CAN 23873 ‘ANP, 764076 CAN 38675 ‘AN Melt 42404 Cal. Carbonate 63705 ‘Aniline 30687 TOI t7a7? NB 1440 HCL 50808 Dry Fly Ah 31179628 1ance Department => Introduction Financial management is that managerial activity, which Is concerned with the planning and eantrelling ef the company’s financial resources. So, finance is the blood or every organization. Without effective finance management company cannot survive for the leng time Finance management has to sell financial assets or securities such as share and bonds debentures; to investers in capital markal to raise necessary funds. Finance management also raises funds by borrowing from bank, financial institutions and other resources, The exist and inseparable relation between finance function on one hand of business activity, directly or indirectly it involve the acquisition and use of maney. “Financial management is the process of organising the flow of funds, se that the business can carry out its objectives in the most efficient manner to meets its obligation as they fall due.” This definition of financial management reflects the importance of finance department in a company. Financial management is management of fund raising and fund using or itis a precurement and utilization of fund. Finance is rightly called as “THE LIFE BLOOD OF BUSINESS.” Finanes is needed at each and every stage of the company. At GNFC. the finance department is divided into 11 sections. Mainly the sections areBanking and Fund Raising sections, insurance section, central accounting sections, concurrence section, store accounting section, etc. The whole system is computerized and this has helped the department to perform the work fast and more efficiently. 28 = Majer Functions of Finance Department ¥ Financial Budgeting ¥ Maintenance of recorded required by other Department. ¥ Liaison with Financial institution and other bodies. Y Payments of wages & salaries. ¥ Praparation of balance sheet of the company. ¥ Financial Projection for Expansion and Diversifications. = Sections in Finance Department: As it has been mentioned earlier, GNFC’s Finance department is divided into the different sections. Finance department includes total eleven sections, which are as follows: 4. Bank section. 2. Bill payment section.3. Central accounting section. 4. Marketing accounting section 5. Stores accounting section, 6. Concurrence section. 7. Establishment section. 8. Budget and cost section. 9. Indirect taxation section, 10. Insurance section 11, Foreign payment section. aT 1. BANKING SECTION Bank section is related to the day-to-day operation of cash & bank of the company. Bank section mainly arranges the fund in the company and reduces the cost of the company's product, ‘There are mainly three types of funds at GNFC: 4. Short term fund 2, Medium term fund 3. Long term fund Following are the main banks of the companyTABLE NO: 3 Name of the Bank Wh share Bank of Baroda (lead bank} % State bank of India 25% Canada Bank 10% Bank of india 10% Slate bank of Saurashira oe HDFG Bank Bh TOIGI Bank Si DIAGRAM No. 2B ‘The Bank Section has been divided in to two categories: |. Fund Management I. Operation Management = FUND MANAGEMENT: Management of the fund Is very crucial activity for GNFC because of its very vast business operations. This section every year prepares Credit Monetary Authority Data which is substantiated to respective banker of the company, Based on this, data recording agencies like CRISIL, ICRA & Fitchetc. provide credit rating. There are several ratings such as AAA, AA. and B+ ete, GNFC got A/V rating: it becomes very easy for the company to get cash credit on loans. Fund management section also looks after the management of working capital. Short term and long term working capital are very important for the company. OPERATION MANAGEMENT: Operation Management covers all daily payment. Payments are made through cheques, if the amount is mare than Rs.20, 000. Operation management covers two basic functions: > Cash Operation Bank Operation Cash Operation: All routing payment like traveling, conveyance allowances, medical allowances, halting allowances ete. Bank Operation Bank operatien covers all the major payment ike payment to parties. Like Interest payments, Dividend payments, Ineorhe tax et 29 2, BILLS PAYMENT SECTION In G.NF.C, payment section deals with preparation of Bills for making payment and sending them fo bank section. Thus, payment section is the link between the payee and payer. The payinent rules in GNFG is that, any section can take the decision for the transaction up to Rs.50, 900. Then after if the transaction is above 5.50, 000 than the concem department has to contact the finance department and after the legal procedure, payment is made.© RAW MATERIAL PAYMENT. © WORKS/PROJEGT PAYMENT. © SERVICE PAYMENT. + FOREIGN PAYMENT SECTION. 3, CENTRAL ACCOUNT SECTION Tho whole finance department is divided into different section like Bill payment section, Insurance section ete. Each section has te account for respective areas by way of payment to the parties, receiving payment fram the parties etc. All the accounting is done by the various sections are consolidated here in Central Accounting Section. Provision of depreciation on variaus Fixed Assets is charged against the utilization of and passage of time of fixed assets. GNFC has SAP system, which has gat FICO MODULE. All the accounting entries are passed in the FICO module at the end af the month and run the system and close the books, Alter preparing the account it has to be audited by the practicing fin of Chartered Accountants. GNFC have MS SR Batliboi & CO. CA Mumbai as Statutory audit. 30 4, MARKETING ACCOUNTING SECTION Receivables management is concem with the decision a company takes regarding its averall credit and collection and the evaluation of individual credit application. Marketing Accounts Section of Finance depariment of GNFC is concemed the management of receivables. It takes decision regarding collection of incomes.Generally credit period of 30-45 days is allowed, Over due interest is charged if the payment is not made within the speculated time period and a debit note is issued to the concern party Marketing Account Section covers the following activities: Gash Collection ‘As the company’s product is divided into two parts, Fertilizers and Industrial Products, thus the cash cellection methods are also different, 1. Fertilizer Product 2. Industrial Praducts + Cash Collection from Exported Praducts + Collection of Miscellaneous Income a1 5, STORES ACCOUNTING SECTION Inventory section is responsible for making all accounting entry related to stores and valuation of inventories. Stores department when receives any material they send Material Receiving Report (MRR) to stores section. When stores department issues material to users department they Inform stores accounts section. Sometimes the users department returns the issued material, than the store accaunt section makes the reverse entry for that,Stores accounts section prepares inventory ledger by the weighted average method which shows how much stores material is Issued, hew much is retumed by the users department etc. stores accounts section also prepares final account store. 6. CONCURRENCE SECTION © Concurrence means pre audit. + No purchase order is placed without financial concurrence is done by the Concurrence Section +The main objective of financial concurrence is to got competitive rates. + Ifthe purchases are more than 1.5 lacs the financial representative should be taken into consideration, The fenders which are opened, are signed by the represenistives so that ne cheating is done. «Comparison of order received and order described is. done by this section. ‘+ While undergoing the contract, general terms and conditions of the Contracts are followed + Ifthe payment is more than Rs.20, 000 then the payment is made through Cheques 22 © Labor contracts are entered on the yearly basis, but the billing is done on the monthly basis. ‘Financial department see to it that no liability is left out for the payment. «If the payment is to be made for more than Rs.50,000 then the cheques has tobe signed by “Additional General Manager’ No order and certificate is prepared for the cost less than Rs.5000. Thus, these section covers activity like: © To prepare comparative statement and negotiation with party. Comparative statement includes rate, days of oredit, sales tax, excise duty, insurance, freight charges, ete. + After preparing comparative statement concurrence section invites the party for negotiation and try to obtain benefits fram ther7, ESTABLISHMENT SECTION In GNFG, Establishment section Is aiso known as Employes Oriented Section, it deals with the transaction of employee's remuneration. = Afler an emplayee is appointed, he is coded © Master datais prepared which includes all the details of entire history ‘Of the employes. + Every 25" of the month salary is paid through bank. + lf, an employee is faraway fram the banks, then DD to be sent. © Employees are tied-up with the banks for salaries, like :Bank of Baroda, ICICI, UTI, SBI, HDF Personal loans are given to an employee through above banks. a2 8. BUDGET & COSTING SECTION = Budget section “Budget is pracess of estimating the future expenses incurred to achieve decided goals and comparing actual cost with the predetermined one with a view to take corrective action so that decided gaal can be achieved in time with least cost and least time." A budget is a comprehensive & coordinated plan, expressed in financial terms for the operations & resources of enterprise for same specific period in future. Budget is plan of future.Budget section prepares budget in starting af accaunting year for whole year & get approval of board af directors => Budget manual In GNFC, while budget is prepared, all the estimated sales, production, availability of raw materials etc. are taken in to account. So all departments concern with different estimations are budget manual like marketing, personnel, finance, purchase. = Budget control Budget contral is controlling of the expenses by controlling consumption norms. Every month the expenditure data of each department is provided to the budget contraller. Gontrolling of the expenses is basically by controlling the consumption norms, Budgetary control is a process through which a budget is implemented for altaining the budgetary targets by constantly monitoring the performance of budget centers on the basic of harms and all allocation. 3 = Cost ser Product cost helps management to decide the production level market price or selling price and other parameter. It also helps the management to renew the product mix of various products of GNFC. Management can decide the production level as well its rolling price. This section prepares cost sheets, which provides the data on consumption norte per unit Of product, It also heals to moniter the preduation level and cast ratio. 9, INDIRECT TAXATION SECTIONThere are two types of indirect taxes: * VAT (value added tax ) © CST (central service tax) + Service Tax |. VAT (Value Added Tax) + Its considered to be tha revenue of the state government. ‘©The laws are framed and controlled by the state government. + Every company or organization registered is known as dealer, they got TIN 1.6. Tax Identification No. © This is printed on the invoiog, © 2 is given for Gujarat out of the 11 digits + Permanent Nos. are given by the department for the sales and purchase activity, au = Payment to Government + Government gives 22 days as a grace period. ‘+ 18% interest has to be paid if the party is not able to pay the amount or there is any delay in the payment. > Returns Statement! Information should be given according ta the specimen declared by the government. In the Gujarat form nestatement no, 204 is to be filled to give the information about the sales value by the dealer. = Penalty* 30 days are given to file the rewurns and if the dealer fails to make the payment then they have to pay Rs.100 per month for each delay in fing the return, = Assessment + ILean be in the following ways: * Demand to pay * Demand not to pay Refund = Appeal to Departments © Appeal to Tribunal © Appeal to High Court ‘Appeal to Supreme Court 35 Ul, CENTRAL SALES TAX (CST) The central sales tax is controlled by the Central government and the revenue is given to the State government. As the dealers are from different states, there are chances of disputes on tax payment, Thus. to avoid this competitin among the states, contral government eames inte picture, Form ‘C's issued by the local authorities to the dealer for the purchase af goods at chipper VAT rate. INPUT TAX CREDIT is not applicable, Form 'H’ is for the International Marketing. SERVICE TAXService Taxis established in 1984 in India = Init ily the tax rate was 8% in 1994. ‘There after itingreased by 3% in 2004 Le. It became B% In May 2005 i again increased by 2% Le. il was 10% In June 2006 it ineraaged by 2% Le. iLis 129%. Since then itis applicable as 10%. 410. INSURANCE SECTION In GNFC all the plants are insured by the policy named “Industrial All Risk Policy’. There are two types of Insurance: 1, Life Insurance. (Insurance given against human life) 2. General Insurance {Insurance given against property) The company deals with the general insurance policy, The various types of general insurance policy are as follows . Fire Policy, Marine Policy. Liability Policy. Cash Policy. Erection Pi Ree 36 4. Fire insurance Policy The Fire Insurance Policy includes, Flood Earthquake Inundations Impact Explosion vyryvyy 2. Marine Insurance Policy+ It provides protection against the goods in transit. Thus goods in ansit Lo. by air, by road, it alse provides protection against theft of truck, accidents of the trucks ete. 3. Liability Policy © For any claim arising out of the deals of the employee. + Public Liability: In case of the blast, Insurance caver is give to the public, 4. Cash Insurance Policy © Safety (in transit) for the cash may get damaged 5. Erection Policy = Civil work, © Actual erection of plant & machinary and its foundation © Third party Liability (i.e. vorker dies while working) + Surrounding property. a TABLE NO: 4 Insurance Company %% share Tica Tokyo {lead company) 30% New India Insurance Company 20% ICICI Lombard 15% Reliance General Insurance Company Lid [15 9 United India Insurance 10% Govt. of Gujarat Insurance fund { sleeping member) | 10% DIAGRAM NO: 3fa Wea Toma ta covery) (a New bia insurance Cosy ly Heuer General reurane® Suey Ud (a Usted beta sarance (a Geve of Gara (ateaping mrt = Employee welfare policy GNEC is having a group! personal accident policy. This policy covers 2500 employees of the company. Every year company pays Rs.60 lacs as a premium for the employee's insurance policy. Presently company provides a5, compensation 100 times salaries in case of death, This campensation is paid to his naminee. In Octaber 2003, at the time of explosion in nite phosphate plant, company has to recaver Rs.70 crore from the insurance company as Insurance claim due to explosion towards material damage and loss of profit to company. This explosion affected the people who live in the near by townivillage and they get Rs.15lacs from GNFE towards loss of property to them due to the event that occured. 38 THEORIES OF INVENTORY MANAGEMENT = Inventory Management What do you mean by inventory? ventory” is a list for goods and materials, or these goods and material themselves, held available in stock by a business.“Management of Inventories” is with the primary objective of determining, controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock halding and handling costs. A subsidiary ledger which is usually used to record the details of individual items of stack. Inventories can alse be used to hold the details of otfier assets of a business, There are three types of inventory: Raw materials, work in pracess and finished goods. Raw materials are materials and components that are inputs in making final products, Work in process alsa called stock in process refers to goods in the intermediate stages of Production finished goods consist of final products that are ready for sale inventory represents the second largest asset category for manufacturing companies next only, t@ plant and equipment he proportion of inventory to total assets generally consists of 16 to 30 percentage. Inventories is a list of goods available in stock at warehouses .it is alse se for a list of contains of a household and for a of testamentary purpose of the possession of someone who has died in accounting inventory consists as assets. 39 Nature of Inventories Inventories ate classified according to uses and point of entry in the alteration is as follows: © Raw material + Work in process goods, © Finished goods & + Spares and consumables.* Raw Materials Raw materials are those units that are converted in to finished production through manufacturing process. Raw material inventories are those units which have been purchased and stored for future. Under head of raw materials GNFC are maintained rock phosphates, liquid ammania ete. + Work in Process goods It is also called stock in process. It refers to goads in the intermediate stage of production. These inventories are semi finished products. It presents the products that need mare work before they become finished praduct for sale. + Finished goods Finished goeds consist of final products that are ready for sale. Finished goods ara those completely manufacturing products which are ready for sale. Stock of material and wark in process facilitate production, while Stock af finished goods is required for smooth marketing operation. Thus inventories serves as a link between production and consumption of goods. 40 + Spares.and consumables Spares play an important part of inventories by themselves. Their consumption pattern defers from that of raw material, consumables and finished goods, They also even keep these items in @ spare which is not easily available, There is the material which act as catalysis in the production precess and are not directly found in to oulpul. This enables the preduction process to function smoothly like - fuel, call, oil, LSHS etc, are the example of the consumables,= Objective of the Inventory Management The basic responsibility of the financial is te make sure the firm's cash flows are managed efficiently. Efficient management of inventory should ultimately result in the maximization of the owner's wealth. It was indicated that in order to minimizes cash requirements, inventory should be tured over as quickly as pos: the production line or lead to a logs of sales. le, avoiding stock-cuts thal might result in clasing down ‘The main objective of inventory management consists of two parts. 1, To minimize investment in inventory. 2, Ta meet demand for the product by efficiently organizing the production and sales operations. The firm should minimize investment in inventory implies that maintaining Inventory involves costs, such that the smaller the inventory, the lower is the cost to the firm. But inventory alse provide benefits to the extent that facilitate the smooth functioning of the fiams. a > Why Inventory Management? An increased emphasis on liquidity has lead businessman to hold cash and securities In performance to inventories. Inventories are new often referred to as the grave yard of the business. The surplus of the stock has been a principal guide of failure thus lead to change their view regarding holding of inventories and adont scientific wayof inventory holding. Following are factor that are following the view of scientific inventory control, 1. Size of Business The increased size of business establishment has played an important rola in madam large seale enterprise. Often it operates with small profit margin which can be eliminated by scientific inventories control method 2. Wide variety and complexity ‘The wide variety and complexity in moder technology requires conscious inventory management. The larger the range of requirement, the greater the number af problem of investment, procurement, storage, holding, accounting, shortage and stock oul deterioration etc. 3. Urgency in material requirements The need and importance of inventories varies in different production With the ideal tine, cost of men, machinery and uraéney of requirement. But it is highly uneconomical to keep @ secure and a rapid capital turnover and the most effective means of achieving these objectives is to contral stares. 42 q Inventory Management DecThere two types of factors, They are external and internal factor which Influence decision making for inventory in an crganization. The external factor arises from market conditions, credit availability and government regulation. The extemal factors are not controllable easily while internal factor are contrallabie with affactive inventory management. Following are the factors influence the inventory decision of an organization 2. Lead Time Lead time can be defined as the period that elapses between the reorganization of a need and its fulfilment. Inventories have to lake care of normal consumption during lead time because it increases the inventories and it will have to be increased correspondingly. The time spent on each of these four stages will vary from item to item. Out of these administrative and inspection lead time are under eentrol of purchase. Procurement lead time is the largest time. This should be taken care of while negotiating the order and supply detail 3. Relevant Cost The inventory problem is one of the balancing costs, so that total cast is minimized. Their costs are: A. Cost of Ordering The activities that are carried out for fulfilling the need for material, Which consume executive time, stationary ané communication charges, these are the cost of ordering 43 B. Cost of Carrying out Inventories:The moving factor ta control inventory is the cost incurred by helding. It is the cast that is expressed as percentage af the average investment ie. capital investment, spoilage insurance cost = Material Control Techniques The concept of material control techniques signifies the efficiency of any organization. The contingent upon having the right material of right quality al right quantity at the right time in follawing three areas: 1. Purchase Contrel 2, Storage Control 3. Warehouse Accounting 1, Purchase Central This is one of the basic functions of inventory management and forms @ major part of it, It needs considerable expertise not only negotiating but also in the techniques of competitors and studying of economic trends in respect of materials to be purchaged in large quantity ka inereage the profit © Objectives of Purchasing: 1. To maintain continuity of production 2, To contribute to the competitiveness of the product 3. Te contribute towards higher productivity 4. Ta inerease profit 5. To contibute towards standardization, variety reduction, value analysis. aa 2. Storage ControlThe control of materials when it is in storage is affected through what is known ag the perpetual inventory. Thus two main functions of the perpetual inventory system have been studied which are 1, Receipt and Issue System, 2. Maintenance of Store Recards The use of inventory control technique also has been evaluated considering existing position af GEC. 3. Warehousing System and Procedure The procedure comas into operatian immediately on receipt of dispatched documents or dispatched intimation in the stores and covers on the actives ie. clearance, delivery, inspection, stock charging and preservation, issue and retum of materials by the ends after striking cut balance from the stock card and delivery of the accaunt department, 45GNC is maintaining inventories successfully. Thero are total 1, 40,000 ems in inventory whose total value Rs.1 crore (approx.) Bifurcation of Inventories percentage wise as shown below: TABLE Ni Mechanical Spares Catalyst & chemical spares Thsirumentation tems 10% Other miscellaneous items 10% In 57% Mechanical Spare, there are some insured items which are essential and cannot produce immediately, These items are not came into use daily. These items are very costly and carrying cost is also high Bifurcation of Inventories: DIAGRAM NO: 4 [nWechental Sees Catalyst & chemical spares Electrical spaces tu fstrumentation tems 48 GNFC maintain some inventories different ways like use of SAP system.>» COMPOSITION OF THE NET OPERATING CYCLE DIAGRAM NO: 5 Nea eae Vasa : |ON DEBTOR CONVERSION PERIOD WORK IN PROCESS CONVERSION PERIOD a7 > Material Control Techniques in GNFCTo know the practical use of various inventory control techniques in GNFG following inventory control techniques were studied and evaluated which are: 1. Codification System 2. Classification of Inventory: (a) ABC Classification (b) Determination of £.0.0 (c) FSN Classification (2) HML Classification (e) Zero inventories 3. Determination of Inventories Level: (a) Minimum Stock Level (b) Maximum Stock Levol (c) Re-Order Level 4, Importance Substitution. 5. Supply Chain Management & Inventary Control 48 1. Codification System:Codification system means assigning a unique code or name to each tom based on its use. characteristics. importance and other features. It is the process of allocating a code after logical grouping and sub grouping considering material type and application + Principles of Material Gode: ¥ There should be adequate provision for future expansion and there should be no duplication. Gne particular size and type should be at one place only. Description should be brief, very accurate, specification, part number; drawing number should be quoted whenever required. Unit of issue and receipts should be given and followed strictly Code should be understandable by those who have to use it It should be properly classified for section, classed and group he unique cade for each item represented by single code, aS SAR Advantages: It enable systematic grouping of similar items together. It helps in avoiding duplication of items. ¥ Rationalized codification result in variety of reductions. Many firms have successfully reduced the number of items stock by them. ¥ It avoids confusion caused by the long and unwieldy description and accurately logically and logically identifies all items. ¥ Iis the starting point for standardization Y It lays the foundation for an efficient purchase organization by helping to fram specialized commodity base purchase section. Since items are identified by source of supply. it is possible to bulk them together to take advantages of bulk discount. 49 > Classification of InventoryThe Inventories having huge amount of use in the organization has to be controlled very strictly and low amount of use should be kept low control The main classification of Inventory is as under: (a) ABE classification (b) Economics Ordering Quantity (6) FSN classification (2) HML classification (@) Zero Inventories {A) ABC Classification In most of the inventaries a stnall proportion af items account for a vary substantial usag@ and large proportion of items accounts for a very small usage. ABC analysis. based on this empitical reality, advocales in essence a selective approach to inventory centro! which ealls for a greater concentration of efforts on inventory items accounting for the bulk of usage value ABC classification is a basic analytical management tools which enable top management to direct their efforts where the resull will be maximum. This technique properly knows as "ALWAYS BETTER CONTROL" has universal application in many areas of human endeavor, The techniques ties to analyze the distribution of any characteristic by money value of impartance in order te determine its priarity. 49 TABLE NO: 6 Class ‘AGiass B Class © ClassTrams value 70% 20% 10% Number of tems 10% 20% 70% DIAGRAM NO: 6 {8) Economic Order Quantity: Order quantity is defined as the quantity or its rupee equivalent for which fresh order of as inventary item is placed. The decision regarding order quantity of various inventory items is of vital importance in the management of the inventory item of which total of two types of cost opposing each ether will be the minimum at this level, the sum af all cost af on type is exactly equal ta the sum af all the cost of the other type. Thus quantity is eflen referred to as economic order quantity, for the purchase, Purchase item and economic lot size for production item. DIAGRAM NO: 7The economic order quantity can be determined with the help of the following formula EOQ=\2ABiCl Where, ‘A= annwal usage in units B= buying costordering cost, C= camying cost inventory carrying cost ¥ Disposal ef Non Moving tems ¥ Inventory Gonirol Review Meeting ¥ Altemative Material Use Y Circulation of Non Maving / Slow Maying Items list. {C) FSN Analysis In GNEC FSN analysis carried for consumable items, which are used by multi users, FSN means fast moving (F), slow moving (S}, non moving (N) items analysis. The norms established by GNFC for each items are as follows: Y Fast Moving tems GNFG has norms that fast moving items have the following: 1, It'should have more than § issue transactions in a year. 2, There should be multi user, ¥ Slow Moving tems: GNFC has norms that slow moving items have the following; 1. lloms should have transaction between 1 to § time in a year 2, There should be multi user, 54 Non Moving Items: