Inventory Management Project Main2

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Inventory Management Project Main

A PROJECT REPORT ON INVENTORY

MANAGEMENT IN SINGARENICOLLIERIES COMPANY LIMITED

Submitted By I.Sushma H.NO:141109672044

Project report submitted in partial fulfillment for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

ICBM-School of Business Excellence

(affiliated to Osmania University) Upperpalli X Roads,Right of pillar No: 179, Rajendra

Nagar,Hyderabad-500048 (2010-2011)

DECLARATION

I here by declare that this project work entitled INVENTORYMANAGEMENT in

SINGARENI COLLIRIES COMPANY LIMITED is an original and genuine work done by me. Ialso state that it is not submitted else where in part of full a part from myself submitting it from

the context of an academic endeavour and partial fulfillment for the award MBA degree by

Osmania University as a part of the academic curriculum.

I.SUSHMA

ACKNOWLEDGEMENT

I take this opportunity to express my gratitude to SINGARENI COLLIERIES COMPANY

LIMITED (SCCL), Kothagudem who gave me this opportunity to carry out the work in the

organization. I am very much thankful to Mr.R.PEDDI RAJU Project Manager SCCL, for

giving me full information and for helping me in the completion of the project. I thank ,Head ofthe Department,ICBM-SBE,Hyderabad for his encouragement to complete my project work. I

Sincerely praise the efforts of Mr.Ramesh Babu, ICBM-SBE,Hyderabad for guiding andsupporting me in completion of this project.

I.SUSHMA

INDEX

CHAPTER

Chapter-1 Chapter-2 Chapter-3 Chapter-4


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CONTENTS

Introduction InventoryManagement Need ofInventoryManagement Objectives of the Study

Methodology of the study Limitations of the study Time period Review of literature Review ofrelated literature Organisation profile Introduction Origin History Operational Areas Milestones

Technology and Output Manpower in SCCL Vision Mission Gloom to Glory Strengths

Weakness

PAGE NO.

Inventorymanagement in SCCL Introduction Material Management Cycle Stores

Organisation Stores Categorisation Organizational setup & Resposibilities

Store Keeping Standardisation,classification & codification Analysis ofinventorymanagement

in SCCL Inventory control procedures Inventory Carrying cost Inventory Levels Chapter-5 Chapter-6 Analysis Conclusions Suggestions BIBILOGRAPHY

CHAPTER-1 Introduction

INTRODUCTION

INVENTORYMANAGEMENT: Conversion of raw materials into finished goods is the mainunction of every production firm.Required raw materials if purchased and stocked in advance,

ensures smooth production process. But, how much should be purchased? How to stock it? How

to release the stock? What costs are involved? How to control the costs of acquiring and storing

materials? All these issues call for Materials Management. Materials management involvesMaterials acquiring-purchasing, receiving and storing, inventory control, disposal of surplus and

control on scrap. Effective materials management is key to a firms profitability. An ideal

materials management ensures efficiency in accountability coordination and performance in the

department. Further, it is computerized to save time and efforts.

MEANING AND NATURE OF INVENTORY:In accounting language, inventory may mean

the stock and stores etc. Definitions:Material management is the flow of materials into an

organization to the point where those materials are converted into the firms end product(s).Bailey & Farmer. of finished goods only. In a manufacturing concern, it may include raw

materials, work-in-progress

INVENTORY INCLUDES THE FOLLOWING THINGS:A. Raw material:- Raw material form

a major input into the organization. They are required to carry out production activitiesuninterruptedly the quantity of raw material required will be determined by the rate of

consumption and the time required for replenishing etc., to affect the stock of raw materials. B.Work in Progress :-The work in progress is that stage of stocks, which are in between rawmaterial and finished goods. The quantum of work in progress depends upon the time taken in

the manufacturing process. The greater the time taken in manufacturing the more will be the

amount of work in progress. C. Consumables:- These are the materials, which are needed tosmoother the process ofproduction. These materials do not directly enterproduction but they

act as catalysts. Consumables may be classified according to their consumption and criticality.

Generally consumables stores do not create any supply problem and the form a small part of


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production cost. There can be instances where these materials may account for which they value

raw materials. The fuel oil may form a substantial part of cost. D. Finished goods:- These are the

goods, which are ready for the consumers the stock market. of finished goods provides a bufferbetween production and

E. Spares:- The stocking policies of spare differ from industry to industry some industries liketransport will required more spares than the other concerns. The costly spare parts like engine,

maintenance spares etc. are not discarded after use, rather they kept in ready position for furtheruse. All decision about spares are based on the financial cost ofinventory on such spares and the

cost may arises due to their non-availability. BENEFITS OF HOLDING INVENTORIES:-

Although holding involves blocking of firms funds and the cost of storage and interrupted

production and smooth running of business. In the absence of inventories a firm will have or

mark purchases as soon as it receives order. It will mean loss of time and delays in execution of

orders which sometimes may causes loss of customers and business. inventories

handling, every

business enterprise has to be maintain certain level of inventories of facilitate un-

A firm also needs to maintain inventories to reduce ordering cost and avail quantity

discounts etc.

There are their main purposes of holding inventories. THE TRANSACTION MOTIVE:-which

necessitates the holding of inventories for material? THE PRECAUTIONARY MOTIVE:-which necessitates the holding of inventories for meeting the unpredictable changes in demand

and supplies of materials? the unpredictable changes in demand and supplies of

THE SPECULATIVE MOTIVE:- This includes keeping inventories for taking advantage ofprise fiuctuvations,saving re ordaring costs and quality discounts.

RISK AND COSTS OF HOLDING INVENTORIES:-

The holding of inventories involves blocking of firms fund and incurrence of capital and

other costs.

The various costs and risks involve in holding inventories are. Capital Costs:-Maintianing ofinventories results in blocking of firms financial resourses.The firm has therefore to arrange for

additional funds to meet the costs of inventories. The funds may be arranged from own

resources of from outsiders. But in both the case, the firm insures the cost .in the former case,there is an opportunity cost of investment while in the later case. The firm has to pay interest to

the outsiders. Storage and Handing Costs:-Holding of inventories also involves coast on storage

as well as handing of materials. The storage of cost include the rental of the go down, insurance


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charges etc., Risk of Price Decline:- There is always a risk of reduction in the prices of

inventories by the supplies in holding inventories. This may be due to increased market supply,

competition or general depreciation in the market. Risk of Obsolescence:- The inventories maybecome obsolete due to improved technology, changes in requirements, changes in customer

tastes etc.,

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Risk Determination in Quality:- The quality of materials also deteriorates while the

inventories are kept.

OBJECTIVES OF INVENTORY MANAGEMENT

Definition ofinventorymanagement: Inventorymanagement is concern with the

determination of optimum level of investment for each components ofinventory and the

efficient use of components and the operation of components and the operation of an effectivecontrol and review of mechanism. The main objectives management is operational and

financial. The operational objective mean the materials and the spares should be available insufficient quantity so that work is not disrupted for want ofinventory. The financial objectives

mean that the material and spares should be available in sufficient quantity so that work is not

disrupted for want ofinventory. The following are the objectives means that investment in

inventory should not remain idle and minimum working capital be locked in it. The following

are the objectives ofinventorymanagement: To ensure continuous supply of materials, spares

and finished goods so that production should not suffer at any tie and the customers demandalso be met. To avoid both over-stocking and under-stocking. To maintain investment in

inventories at the optimum level as required by the operational and sales activities. To keep

material cost under control so that they contribute in reducing the coast ofproduction andoverall costs.

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To eliminate duplication in ordering or replenishing stocks. This is possible with help of

centralizing purchases. To minimize losses through deterioration pilferage wastages and

damages. To ensure perpetual inventory control so that materials show in stock ledgers shouldbe actually lying in the stores. To ensure right quality goods at the reasonable prices. Suitable

quality standards will ensure proper quality of stocks. The price analysis; the cost-analysis willensure payment of proper prices.

To facilitate furnishing of date for short-term and long-term planning and control of

Inventory.


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TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT

A properinventory control not only helps in solving the acute problem of liquidity but also

increases profits and causes substantial reduction in the working capital of the concern. 1.Determination of stock levels: Carrying of too little ofinventory is detrimental to the film. If the

inventory level is too little, the firm will face frequent stock outs involving heavy ordering cost

and if the inventory level is too high it will be unnecessary tie up of capital. An efficientinventorymanagement requires that a firm should maintain an optimum level ofinventorywhere inventory costs are the minimum and at the same time there is no stock out if which may

result I loss or sale of shortage ofproduction.

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2. Minimum stock level: It represents the quality below its stock of any item should not be

allowed to fall. Lead-Time: a purchase in firm requires sometimes to process the order and the

Time is also required by the supplying firm to execute the order. The time taken in processing

the order and then executing it is known as lead-time. Rate of consumption:-It is the average

consumption of materials in the factory. The rate of consumption will be decided on the basis ofpast experience and production plans. Nature of material:- The nature of material also affects

the minimum level if a material is required only against the special order of the customer teenminimum stock level cal be required for such material. Minimum stock level can be calculated

withy the help of the following formula. ( Minimum stock level = reordering level (normal

consumption X normal re-order period) b) Re-ordering level:When the quantity of materialreaches at a certain figures then fresh order is sent to get material again. The order is sent before

the materials reach minimum stock level, Re-ordering maximum level. ( Re-ordering level =

maximum consumption X maximum re-order period) c) Maximum level:- It is the quantity of

materials beyond which a firm should not exceed its stocks. If the quantity exceeds maximumlevel limit it will be over-stocking. level is fixed between minimum level and

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Over stocking will mean blocking of more working capital, more space for storing the materials,

more wastage of materials and more changes of losses from obsolescence. (Maximum stock level= record level + recorder quantity (minimum consumption minimum re order period) D) Danger

stock level:It is fixed below minimum stock level. The danger stock level indicates emergency of

stock position and urgency of obtaining fresh supply at any cost. E) Average stock level:Thisstock level indicates the averages stock held by the concern. (Average stock level = minimum

stock level +1/2 x reorder period) 2) Determination of safety stocks:Safety stocks are a buffer to

meet some unanticipated increase in usage. The demand for material may fluctuate and delivery

ofinventory may also be delayed and in such a situation the firm can face a problem of stockout. In order to protect against the stock out arising out of usage flucturations, firms usually

maintain some margin of safety stocks. Two costs are involved in the determination of the stock

that is opportunity cost of stock outs and the carrying cost. 3) Economic OrderQuantity( EOQ):The quantity of material to be ordered at one time is known as economic order

quantity. The quantity is fixed in such a manner as to minimize the coct of ordering and carrying

cost. (Total Cost Of Material = Acquisition + Carrying Cost+ Ordering Cost) Carrying Cost:


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It is the cost holding the materials in the store Ordering cost; It is the cost of placing order for the

purchases of materials. EOQ can be calculated with the help of following formula EOQ=Squareroot of 2CO/1 Where C= consumption of the material in units during the year O=Ordering cost

I= Carrying cost or interest payment on the capital ABC analysis (Always better controlanalysis):Under ABC analysis the materials are divided into 3 categories viz A,B,C. Almost 10%

of items contribute to 70% of value of consumption and this category is called A category. About20% items controlbute about 20% of value of consumption and his is known as category B

materials. Category C covers about 70% of items which contribute only 10% pf value of

consumption. VED analysis (Vitally Essntial Desire) The VED analysis is used generally forspare parts. Spare parts classified as vital (V) essential (E) and desirable (D). The vital spares are

must for running the concern smoothly and these must be stored adequately the E type of spares

are also necessary but their stocks may be kept at low figures. CLASSIFICATION ANDCODIFICATION OF INVENTORIES:The inventories should first be classified and then code

numbers should be assigned for their identification. The identification of short names is useful

forinventory

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management not only for large concerns but also for small concerns. Lack of properclassification may also lead to reduction in production. Generally materials are classification

accordingly to their nature such as consumption materials consumer stock, spares,lubricants etc,

After classification the materials are given code numbers. The coding may be donealphabetically or numerically. The later method is generally used for coding. The class of

materials is assigned two digits and then two or three digits are assigning to the categories of

items divided into 15 groups. Two numbers will be categories of materials in that class. The third

distinction is needed for the quality of goods and decimals are used to not this factor. Valuationof inventories-method of valuation: FIFO method LIFO method Base stock method Weighted

average method

CRITERIA FOR JUDGING THE INVENTORY SYSTEM:While the overall object of the

inventory system is to minimize the cost to the at the risk level acceqtable ofmanagement, the

more proximate criteria for judging the inventory system are: Comprehensibility Adaptability

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Timeliness Areas of improvement: Inventorymanagement in India can be improved in

various ways. Improvements could be effected through: Effective computerization: Computersshould not be used merely for accounting purpose but also for improving decision-making.

Review of classification. ABC and FSN classification must be periodically reviewed. Improved

Co-ordination: Better co-ordination among purchase, production marketing, and financedepartments will help in achieving greater efficiency in inventorymanagement.

DEVELOPMENT OF LONG TERM RELATIONSHIP:Companies should develop long term

relationship with vendors. This would help in improving quality and delivery. Disposal ofobsolete/surplus inventories: Procedure for disposing obsolete/surplus inventories must be


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simplified. Adoption of challenging norms: Companies should set benchmarks with global

competitors and use ideas like JIT to improve inventorymanagement.

The reasons for keeping stock:There are three basic reasons for keeping an inventory: Time -The time lags present in the supply chain, from supplier to user at every stage, requires that you

maintain certain amount ofinventory to use in this "lead time". Uncertainty - Inventories aremaintained as buffers to meet uncertainties in demand, supply and movements of goods.

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Economies of scale - Ideal condition of "one unit at a time at a place where user needs it, when

he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement

and storing brings in economies of scale. INVENTORY COST:Inventory cost represents the

following:-

a) The total value of stores and spares and capital spares b) Stores in transit an under inspection

and c) Stock of finished products. Normally, there are certain problems in maintaining optimum

level ofinventory problems ofinventory can be resolved by the cost implication. Costs whichare relevant for consideration, are discussed in the following lines: Basically, there are four costs

for consideration in developing an inventory model. 1).The cost of placing a replenishment

order. 2).The cost of carrying inventory 3).The cost of over stocking 4).The cost of under

stocking The cost of ordering and inventory carrying cost are reviewed as the supply side costand help in determination of the quantity to be ordered for each replenishment.

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The under stocking and over stocking costs are viewed as the demand side costs and help in the

determination of the amount of variations in demand and the delay in supplies which the

inventory should withstand. Understocking:This cost is incurred when an item is out of stock.It

includes cost of lost production during the period of stock out and the extra cost per unit which

might have to be paid for an emergency purchase.

Overstocking:This cost is the inventory carrying cost (which is calculated per year)for aspecified period of time.The time varies in different context it could be the lead-time of

procurement of entire lifetime of machine.

Cost of ordering includes:1) 2) etc Paper work cost, typing and dispatching an order Follow upcosts-the follow up required to ensure timely supplies

includes the travel cost for purchase follow up ,the telephones, telex and postal bills

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3) 4) 5)


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Costs involved in receiving of the order, inspection, checking and Any set up cost of machines

charged by the supplier, either directly The salaries and wages of the purchase department.

handling in the stores. indicated in quotations are assessed through quotations for various

quantities

Cost ofinventory carrying: This cost is measured as the percent of the unit cost of the item. This

measure gives basis for estimating what actually cost a company to carry a stock. This cost

includes:1) Interest on capital. 2) Insurance and tax charges. 3) Storage costs-labour cost,provision of storages areas and facilities like bins, racks etc. 4) Transport bills and hamali

charges. 5) Allowances for deterioration or spoilages. 6) salaries of stores staff Objectives of the

study: To examine the organization structure ofinventorymanagement in the stores ofSCCL. To discuss pattern,levels and trends of inventories in SCCL. To understand the various

inventory control techniques followed by stores in SCCL.

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To access the performance ofinventorymanagement of the SCCL by selected accountingratios. To know the inventory control techniques of SCCL.

Methodology of the study:The study is based on secondary data. The secondary data has been

collected from annual reports, manuals, purchase, registers, storage records of the organization.

But, it was supplemented by with interaction with the concerned personal with regard to someprimary data. Limitations:The study has the following limitations: 2009-10. Time

Period:The study was carried in Singareni collaries company limited kothagudem for a period of

6 weeks. There may be approximations. The study is purely based on secondary data. The studyis limited only for a period of 5 years i.e., from 2005-06 to

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CHAPTER-2 Organisational Profile

INTRODUCTION OF COAL MINING IN INDIA

Man had blessed with abundance of natural resources, including mineral wealth that play a vital

role in the development of a country and promote the economic growth when explored and made

best use of them.

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Man knows coal, which is one of the important materials, since ages and this natural wealth have

put to diverse use In the modern world. Coal regarded as the fuel of growth. The coal is animportant input for power generation and many other industries like iron and steel, railway,

shipping and construction industries etc, a vital infrastructure fro the economic development.


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Despite the development of alternative fuel material in many industries. Thus coal industry plays

an important role In the industrial development of any country, like India. The world coal

consumption is projected to go up from 4.7 billion tonnes in 1999 to 6.4 billion tonnes by 2020.primarily in India and china , which are expected to account for 75% of the increased

consumption. In India , coal mining was started in 1774 and still significantly under the

government control and ownership with coal India limited ( CIL) , along with its followingsubsidiaries are become number one coal producer in India. Eastern Coal fields India limited

(ECFIL) sanctrica, west Bengal. Bharath Cooking coal limited (BCCL) - Dhanbad, Bihar

Central Coal fields limited (CCL) Ranchi, Bihar Northern Coal fields limited (NCFL) Singrauli, Madhya pradesh Western Coal fields limited (WCFL) Nagpur, Maharastra.

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Mahanadi Coal fields limited (MCL) Sambalpur. Orissa. Central mining planning & design

institute limited (CMPDIL) Ranchi, Bihar.

SINGARENI COLLERIES COMPANY LIMITEDORIGIN:A remarkable little adventure gave a birth to this giant corporate entity that us today the

Singareni Collieries Company Limited. Way back on a dark night in 1870, a group of pilgrims

who on their way to have a darshan of lord Rama at Badrachalam temple (near singareni village)

has lit a fire to prepare for the meal. One of the supporting stones on their makeshift stove,caught fire. The incident was immediately reported to the local government. This led to an

extensive survey by Dr. William king, an eminent geologist, which confirmed the revolutionary

discovery of mammoth of coal in the Godavari valley. The rest, as they say, is history: The year1886 witnessed the formation of they Hyderabad Deccan Company private limited and it

acquires the mining rights for exploiting the coal

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reserves.

The first commercial operation commenced at Yellandu ( khammam

District) in Andhra pradesh in 1889. In 1921 the company was re-christened the Singareni

colleries company limited: and its scrip listed on the London stock exchange. The mining rights

for exploiting the coal reserves were acquired by the Hyderabad Deccan company. Which was

incorporated at London Stock exchange. Hence the first extracting of coal was started at yellanduin 1886 by Hyderabad deccan company. The company became government company after nizam

purchased its shared from London stock exchange in 1945. With this, SCCL became the fiorstever government managed coal company in India. Later in the year 1949, SCCL came under thecontrol of indai and Andhra pradesh as a joint venture with equity ratio of 49% and 51%

respectively. The SCCL is engaged in coal mining in four districts of Andhra Pradesh namely,

Khammam, karimnagar, adilabad and wrangal. In overall India it spreads to 6% of geographicalarea producing 10% of total coal.


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The operation areas of SCCL are as follows:

Khammam District Kothagudem, yellandu,Sattupalli and managuru Adilabad District

Bellampalli, Mandamari Srirampur,Goleti,Kairiguraand

Dorli

Karimnagar District Ramagundam I, II, III. Warangal district Bhoopalpally.

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The coal reserves stretch over 350 square kms. Of pranahis Godavari valley of above districts of

Andhra Pradesh with proven deposits of 8,575 million tones of coal. SCCL now operates 36under ground mines and 14 open cast mines in these four districts.

MILE STONES OF TECHNOLOGY INTRODUCTION:

1948: 1951: 1953: 1954: 1975: 1979: 1981: 1983: 1986: 1989: 1994: 2002: Introduction of

machine mining (shuttle car) Electric coal drills Electric cap lamps Frame Proof mining

machinery Open cast mining Side Dumps Loaders(SDLs) Load haul dumpers Merchandisedlong wall. walking dragline in open cast mines and computes introduction French Blasting

gallery technology Input crushing & conveying technology in opencast mining. Surface minertechnology.

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Vision, Mission and Principles Guiding Sustainable Development

Vision: Vision shall bring into view untapped potentials and unutilized opportunities that awaitexploitation as well as problems and challenges that may impede progress. The vision must

identify catalytic forces that can be harnessed. It must express aspitations, determination and

commitment for self realization. Though planning and prediction over long time horizon isdifficult, desired end results must be dreamt and strategies to accomplish them shall be drawn.Vision needs a subtle blend of humility and courage to dare. Vision is realizable only when it

neither has lofty optimism nor extreme pessimism.

The vision of Singareni is,

To produce coal qualitatively and cost effectively in a socially and environmentally sustainable

manner, valued by customers, employees, and the community.

TO achieve this vision,

It aims to achieve a best safety performance.

Adopt best environmental practices strive to bring BACKthe nature to

the best possible original extent,

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Attain sustainable competitive advantage in the marketplace Align production to meet market

demand And, continuously improve operational performance.

SCCL MISSION:

o o To retain strategic role of a premier coal producing company in the To strive for the self-

reliance by optimum utilization of resources and To exploit the available mining blocks withmaximum conservation

country and excel in a competitive business environments. earn adequate returns on capital

employed.

o

and utmost safety by adopting suitable technologies and practices and constantly upgrading them

against international bench marks. o product. o To emerge as a model employer and maintainharmonious industrial To emerge as a responsible company through good corporate relations

with the legal and social frame work of the state.

o

To supply reliable and qualitative coal in adequate quantitites and

strive to satisfy customers needs by sharing their experience customizing our

governance, by laying emphasis on protection of environment & ecology and with due to regard

for corporate social obligations.

GLOOM TO GLORY:

The SCCL was receiving budgetary support from both government of India and government of

Andhra Pradesh till some time age, but they later

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abandoned. Also the pricing of coals was decided by government of India keeping its impact on

the major sectors like power, railways, cement, and etc. the prices were not revised regularly alsohike in input cost due to periodical revisions of national coal wage agreements (NCWA), stores

and interest were also not fully compensated by government. The frequent strikes by the

workers, law and order problems, low productivity, apart from un-remunerative coal price vise- a

versa cost ofproduction during the period 1989-90 to 1991-1992 affected the financial healthof the company and refer to BIFR in may 1992. But due to liberal financial package extended by

the Govt of India in consultation with Govt of A.P and sustained efforts made by themanagement of SCCL and trade unions, a modest financial turn around was achieved. Thecompany earned profit of rs 17.76 crores and 26.64 crores in 1993-94 respectively. By March

1994, SCCL became out of the BIFR purview. The company for success took following remedial

Unifying trade unions through path breaking elections.measures/reforms. High pitchcommunication drive harnessing media, launching literacy Focused multi-faceted workers

welfare programme. Establishing outsourcing of non-core and ancillary activities. Innovative


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programmes launched( dial your GM, Fields visits, Fuel supply agreements-technology infusion

for quality testing, work Focus on safety, environment protection and labour welfare.

programmes.

The process of force visits to client sites. interactions, follow ups). turning around a sickcompany which commenced in 1997-98 reached its logical conclusion when sccl, totally wiped

out its accumulated losses and entered the financial year 2003-04 with a net profit of 80.45

crores after issuing dividend of 86.70 crores

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Mining Success and Honors:

SCCL Multi faceted achievements are landmarks that stand testimony to its efficiency. The

company has deservedly won many awards prominent them are: 2001 -02: Best

management award in the state National safety award Best payroll saving award in the state.

2003 -2004:

Best workers welfare activity award from FAPCCI Golden peacock environment management

award from world Coal India award for fly ash utilization from ministry of env & Goldenpeacock innovation management award from world

environment management foundation. forests, power, science, & technology.

environment management foundation.

Important Events In The Life Of SCCL

Year 1889 1948 Milestones Commencement of mining operations. Introduction of Machine

Mining(Shuttle cars,Ls).

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1951 1951 1952 1953 1975 1981 1983 1984 1985 1986 1989 1991 1994 1995 2009

Introduction of Incentive Schemes. Introduction of Electrical Coal Drills. Introduction of ElectricCap Lamps. Introduction of Flame Proof Mining Machinery. Commencement of Open cast

Mining Projects. Introduction of latest underground machine. Introduction of Long Wall FaceMachinery. Introduction of First 132/33 KYA substation. Singareni coal work graded from c

to g grade. Introduction of Walking Dragline in CC mines. Introduction of French BlastingGallery Techniques. Computerised Information System. Introduction of In-pit crushing in OCP

mines. Open casting of developed pillars and go ap aran SAP introduction


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AWARDS: Singareni Collieries Company Limited(SCCL) has been awarded Infraline Energy

Excellence Award 2007 under company category-Black Diamond Award for coal sector

development on 12th October 2007 at New Delhi.

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SCCL received Indira Gandhi Vriksha Mitra Award-2004 for outstate made in the field of

afforestation and waste land development on 5th june 007 at New Delhi.

Environmental Excellence Award for 2005-06 from Society for Research and Initiatives forSustainable Technology Institute(SRISTI),New Delhi. Environmental Excellence Award from

Green Tech Foundation in 2005-06. Golden Peacock Innovation Mnagement Award 2005 from

the Institute of Directors,New Delhi. Golden Peacock Environment Management Award fromWorld Environment Foundation,New Delhi. National Fly Ash Utilization Award 2005 jointly

instituted by the Ministry of Environment and Forests,Power Technology,Government of India.

The second Best Corporate Film Award 2005 by Public Relations Society of India,Hyderabad forShramika Bandham. Three of the fourteen National Safey Awards(Mines) instituted by the

Directorate General of Mines Safety,Government(pertaining to 2001). Best Worker Welfare

Activity Award for 2002-03 by the Federation of Andhra Pradesh Chambr of Commerce and

Indusries. Best Management Award for 2001-02 by the Government of Andhra Pradesh.

PRODUCTION PROJECTIONS:

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Operating Region

PRODUCTION (MT) IN THE TERMINAL YEAR OF 1X Plan 2001 505 16.1 12.4 34.0 52%

X Plan 2006-07 605 17.6 12.5 36.6 48% 52% X1 Plan 2011-12 8.0 13.3 13.8 35.1 44% 56% X11Plan 2016-17 8.7 11.4 15.1 35.3 29% 71%

Bellampalli Ramagundam Kothagudem Total

Open Cast 48% Under ground

SCCL strengths and Barriers:-

Strengths:

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Quick and smooth adoption of new technologies SCCL is a pioneer in adopting blasting gallery

(BG) technology (FRENCH) input crushing & conveying technology (Germany) and (UK &

China ) performance is very encouraging.

Barriers:Limited financially viable reserves, amenable for open cast mining, high stripping ratios

in projects. Difficult geo-minig conditions like steepness, existence of clay bands incompatibleroof and low grade of coal.

Production Of SCCL:(figures are in crores tonns)

Year

Target

Actual

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360.00 2005-06 375 2006-07 380 2007-08 415 2008-09 503.90 2009-10

361.00 377 406 445.46 504.24

Targeted Production for the Year 2010-11 is 513.00 lakh tonnes

Coal Prices :Grade Coal of Useful heat value Basic Price per Tonne(RS) per kilo calorie/perkilogram A Exceeding 6200 ROM Coal 2607.5 Steam/Round Slack Coal 2841.54 coal 2623.1

Crushed ROM Coal 2677.74

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B C D E F G Washery Grade-D Washery Grade-E Washery Grade-F

2 Exceeding 5600 but 2213.6 not exceeding 6200 4 Exceeding 4940 but 1838.8 not exceeding5600 8 Exceeding 4200 but 1491.6 not exceeding 4940 0 Exceeding 3360 but 1128 not

exceeding 4200 Exceeding 2400 but 681 not exceeding 3360 Exceeding 1300 but 503 not

exceeding 2400

2447.64 2054.88 1689.60 1334.46 831 653

4 2229.2 4 1853.2 8 1504.8 0 1141.2 6 691 513 2390.00 1676.63 1472.47

2283.84 1903.68 1551 1189.56 726 548

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CHAPTER-4 INVENTORY MANAGEMENT IN SCCL


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Introduction : The thrust areas of this Millennium for improving efficiency of any business

activity are considered to be Service functions. Globalisation has resulted in high competition.

Improving quality and reducing cost have become real needs for the success of any Organisation.High degree of competition has forced Organisations to look beyond the operational levels to

reduce cost ofproduction to withstand global competition. Need

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for higher productivity has percolated not only to the operational level but also to the productdesign and other managerial effectiveness resulting in introduction of higher level technologies

and automation. In High-tech scenario, as Machine controlled elements are more dominant than

the human elements, Management Service functions have become need of the hour, to reduceoverall cost ofproduction. Further, developments in information Technology and Internet

facilities have helped to maximise resources utilisation and achieve higher service levels.

Logistics /Materials Management is considered one of the vital service functions that helps in

bringing down the working capital requirement and hence, the cost ofproduction through

reduction of interest burden. Also, it would help to make available capital for alternateproductive purposes.

Materials Management Cycle : Broadly, the InventoryManagement System comprises of

Material Planning Purchasing Formulating delivery schedules Receipts and inspection Storage& issues

38

Re-allocation of available stocks among various stores/users Identification of Obsolete andunusable inventory Disposal of used items / scrap

It is needless to say that judicious Planning, Organising, scheduling and monitoring of various

activities is essential at every stage to ensure that inventories are maintained at optimal level and

avoid stock out situations. In real time, the subject becomes complex, as it has got inter-relationship with the production system, which is dynamic due to both internal and external

factors. Thus, integration of Materials Management System with the production system and

supply chain management is essential to achieve the desired results. STORES

ORGANISATION Organisation ofInventoryManagement function in SCCL: In a traditionalway, the Materials Management function in SCCL is organised as PURCHASE and STORES

functions. While the Purchase function is looked after by the Purchase Department, the Storesfunctions viz Material Planning Formulating delivery schedules Receipts andinspection Storage & issues Re-allocation of available stocks among various stores/users

Identification of Obsolete and unusable inventory Disposal of used items / scrap

39


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are entrusted to the Stores Department. The Stores department is headed by CGM(Stores). Who

functions under the control of Director (Operations). Separate stores are established for Machine

Mining equipment / spares and Opencast equipment/spares to develop expertise in Spare Parts

Management and to meet the local requirements of the projects. In all, there are 12 Stores

located in various areas and each stores is under the administrative control of respective

CGM/GM. Out of 12 Stores, there are 5 Opencast Stores and 6 Area stores and there is a CentralStores located at Kothagudem to maintain and monitor high value items pertaining to Opencast

Projects and Capital items of under ground Mining to avoid duplication of stocks of high value

items

Codification and Standardisation :As the stores activities are widely spread geographically across350 Kms from one end to the other end of the Company, proper classification and codification

are the key factors not only for successful implementation of computerisation and also to have

clear communication/interaction among the users, stores, suppliers and Purchase Department. Ifthe codification is not unique, computerisation becomes waste and it creates chaos. It would only

result in garbage-in and garbage-out in computer jargon. In order to derive full benefit of

computerisation, codification has been standardised to ensure that unique Code is maintained atall stores for any given item. Also, Items with alternate Part Nos. have been brought under

unique Nos. at each store. item codes. Items maintained with wrong Part Nos. have been

corrected for their Part Suitable programs were developed in this direction and

40

continuous efforts are put in to ensure that duplicate Items are avoided exercise has givenfavorable results to reduce the inventories considerably.

This

In order to make sure that the items and Material Master are maintained with correct Part Nos. an

exercise was undertaken to counter-check the Part Nos. maintained in Item/ Material Master withOEM Parts Catalogues. For the items for which, Part Nos. have not tallied with the Parts

Catalogue, correct part nos. were identified from the purchase orders and the same are

incorporated in the Item as well as Material Master. Wherever the equipment suppliers have

supplied Parts Catalogue in a CD, this exercise could be done faster and more systematically.Suppliers were also requested to furnish the list of alternate part nos. using which; items with

alternate part nos. have been codified with unique item code. This exercise has helped to obtain

correct stock status for better decision-making before placing further orders. In case of importedequipment, this exercise could not be taken up as there is no response from the suppliers.

However, all the Purchase Orders for the capital equipment are released with the condition that

they must supply soft copy of the Parts Catalogue. By this exercise many of the items, whichwere lying as non-moving are put to use, by correcting the Part Nos. and nomenclature. Also,

another exercise was undertaken to identify to bought out items by OEM (such as bearings,

electrical, Hydraulic components etc.), which are referred in the Parts Catalogue with their ownpart nos. In order to avoid multiple bin cards, some with OEM part nos. and some with original

manufacturers part nos. Such items have been brought under unique item code. This has helped


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to reduce the inventory in case of bearings, auto electrical, Hydraulic components. STORES

CATEGORISATION:-

41

Central Stores (CS):The concept of CS was started to optimize inventories. High Value itemscommon to more than one project required to be stocked as float is ordered on CS. The item is

diverted to the needy project as and when needed. Similarly capital items and items where

buffer stocks are required to be maintained are ordered on CS, which are diverted as and whenrequired. As far as possible stocking of items physically at CS is avoided only diversion of

Purchase Order is resorted to. CS is under direct control of CGM (Stores). Area Stores:To cater

the materials requirement of various Mines & Departments, Area Stores exist in each Area. EachArea Stores will be under the charge of DGM/SE/DySE who will be assisted by sufficient

Executives, Stores Keepers, Clerical staff and Issue Mazdoors. While he will be functionally

responsible to the CGM (Stores), he will be administratively under GM/CGM of the Area

wherever the Stores is attached to the GM/CGM of that Area. The broad functions of Area Stores

will be: 1. Receipts 2. RC suborder placing and supply the required material based on usersrequirement 3. Custody and stores keeping 4. Issues to Mines & departments on STOs and

Reservation 5. Delivery schedules giving as per requirements(JIT) 6. Claims, Insurance andother miscellaneous works 7. Inventory control 8. Material Requirement Planning(MRP) 9.

Stock verification

42

The custodial responsibility for the material held in a stores will be transferred to the storespersonal employed therein. PIT/Departmental Stores:The Department Officer of Pit Stores will

normally be the Pit Manager/Engineer or any other Officer nominated by the GM The stores set

up in Workshops, Power Houses, Building Department etc., will be under the direct control ofthe head of the department concerned. The Mines and Departments will draw their requirementsfrom the Area Stores for direct consumption on weekly or fortnightly basis. Each

Mine/Department will have a small stores for charge-off materials of daily consumption, drawn

from the Area Stores. The Mine/Departmental Stores will keep the Receipt & Issue Records on anumerical ledger maintained at Pit/Departmental level.

The general Organisational pattern of stores is as under

Director(operations) CGM(Stores) Central stores IMC Inspections Disposal Area stores

OCStores

43

DGM(Stores)

Inspection

Store keeper


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Fitter/Electrician

Sec.Clerks Issue.Mazdoor

STORE KEEPING :PRINCIPLES OF STORE KEEPING, STORAGE, CARE AND

PRESERVATION OF MATERIAL

44

STORAGE :Every store dept., will be well laid-out and organised to allow smooth flow ofreceipts and issues, to ensure that no hidden stocks exists or stocks accumulate, to deviate stock

verification discrepancies and above all to reduce the cost ofinventory by better stores

management. The principles of store keeping should be observed while organising a storehouse.PRINCIPLES OF STORE KEEPING :The following principles of Store keeping will be

observed by all personnel employed on Store Keeping functions: o Separate Areas for different

functions : o (Receipt, Storage & issue) :o undirectional flow of material o Optimum utilisationof spare Floor area and Vertical Space. o Proper lay-out, providing gang-ways for working

space, Fire line, use of material handling devices and ventilation. o Proper system of location

(Sequential order of codification as far as possible). o Correct accounting. o Security cage forattractive and costly items and restriction of entry to store houses. o Use of dumpage. o Use of

mechanical handling devices. o Cleanliness. o Room for expansion.

45

o Bulk stores godowns near receipt section, issue sections near issuebay. o First in First

out. o Sacred trust store keeper, a trustee of stores.

STANDARDISATION, INVENTORIES:GENERAL :-

CLASSIFICATION

&

CODIFICATION

OF

Inventories used in S.C.C.Limited consist mainly of General Consumable stores and Spare partsfor mining, excavation, drilling and miscellaneous equipment. Among the general consumable

stores, engineering materials, mining supplies and general supplies are included.

STANDARDISATION:Standardisation is a process of systemization of stores, based on

reduction of varieties to control minimum work, leading to economy and efficiency. In otherwords, standardization is rationalised store keeping and it has great importance in Inventorycontrol, as it leads directly to lower holdings and thereby secure a reduction in material cost,

without a corresponding reduction in stock over.


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PROCEDURE FOR STANDARDISATION:-

46

The implementation of a program as standardization involves a thorough scrutiny of the

complete list of commodities stocked, keeping in view the following essential requirements viz.,:The ultimate use of each item. Items having similar characteristics and which can be used as

substitutes. Range of sizes actually required, to determine sizes which can be eliminated.

Detailed specifications of items required to be retained. Identification is the process ofsystematically defining and describing all items of stock and fixing their identity by allotment of

Code numbers for uniform adoption by all concerned sections. SPECIFICATION :The

description of materials apart from laying down the Code number and description of every itemalso indicates the specifications wherever applicable and prescribed. A specification for an item

is a correct description of the item, its dimensions, analysis, performance or other relevant

characteristics in sufficient detail to ensure that it will be suitable for the purpose intended.

Dimensions are the sizes of the various parts of an article, including the extent of tolerance

permitted in these sizes. The dimensions of a typical item can be shown as under: 2-6 long = 0.25 1-6 wide = 0.25 6 deep = 0.10 This means that the length can vary between

26.25 to 25.75 width can vary between 16.25 to 15.75 and the depth can be between6.10 to 5.90. If any of the dimensions exceed the limits shown above, it should be rejected at

inspection.

47

Performance describes the physical ability of an article to withstand certain duties. For example aTyre should be capable of running 20,000 Miles under load of 2 tonnes and be able to sustain an

internal pressure of 85 lbs. Per square inch at a temperature of 150 F without bursting.

Adherence to standard specifications will ensure consistency in quality of materials from thepoint of view of end use of the finished product, facilitate inspections and enable the purchaser tocompare the offers of competitors against a standard yard-stick. MECHANICAL

RECORDING :For Computerized Stores accounting the allotment of Code Numbers for every

stock item is an essential pre-requisite, as it is only Code numbers that all stock items can beintroduced into the computer accounting system, together with abbreviated designations. Even

manufacturers part Numbers exist, as in the case of Spare parts for equipment and since no

uniformity exists in the part numbering system adopted by different manufacturers, CodeNumbers will have to be allotted to every item in addition, so as to bring about uniformity in the

recording system. However, the part numbers allotted to spare parts by different manufacturers

should be shown additionally in the accounting records, so that procurement is arranged on the

basis of manufacturers part numbers.

S.C.CO.LTD., CODIFICATION:-

48

Classification of materials into group of similar items adoption of standard nomenclature and

codification are essential for proper identification and orderly storage of materials. Scientific


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classification and codification of Eliminates stocking of same items materials has thefollowing advantages. Enables proper under different types, nomenclature or by function orend use. Eliminates unnecessary varieties storage and prompt issue of materials. &Facilitates proper procurement sizes. & Facilitates accounting. introduction of moderninventory control Facilitates introduction of computerization for account and techniques.

reporting. Classification of materials is done taking into consideration the characteristics, end useetc., In the S.C.Co.Ltd., the equipments and materials are classified into 37 Main Classes. A 10

Digit Code has been evolved with the configuration shown below to cover all varieties of items.CODE STRUCTURE:1 2 3 4 5 6 7 8 9 10 xx xx xx xxx x --a) --b) --c) ------ d) e)

Main Class Sub-Class Detailed classification or Special features

49

or Sub-assembly. Sequential Number Check Digit The list of Classification of Inventories used

in S.C.Co.Ltd., are as shown below: LIST OF MAIN CLASSES ADOPTED FOR STORES

CODIFICATION:CLASS WISE INVENTORY STATUS AS ON 31-3-2010. (Values in crorerupees) SL.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 MAIN CLASS 10 11 12 14 15 16 17 20 24 30 31

32 33 DESCRIPTION Building material Cap lamps&spares Chemicals-lab materials

Consumableselectrical Consumables-general Computer media Electrical appliances ExplosuresHardware &fastners Iron & steel Non-ferrous materials Petrol,oils &lubricants Paints &

varnishes Mar10 0.67 0.42 2.19 1.13 3.94 0.16 0.07 1.83 2.23 15.44 0.10 8.97 0.12

50

14 15 16 17 18 19 20 21 22 23 24 25

34 35 36 38 40 44 45 61 64 70 72 74

Pipes & pipe fittings Power cables Production stores Sundries Timber Tools,instruments,labequipments Tubs & tub materials Spares for HEMM Exploration stock Spares for

1.10 0.31 23.35 1.50 2.40 0.82 1.50 106.69 0.70 2.62

automobiles Spares for C.S.Ps 1.03 Spares for 0.02 construction equipment Spares for electrical

1.63 equipment-NFLP Spares for electrical 2.89 equipment-FLP Spares for general 0.39 Sparesfor 0.23 FEL,FL,Tractors Spares for mining- 3.55 conventional Spares for machine 22.96 mining

Spares for power 1.18

26 27 28 29 30 31 32 33 34

75 76 77 78 79 80 82 83 84

house Spares for printing 0.01 press Spares prospecting for 0.64


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51

35 36 37

85 86 98 TOTAL

Spares for pumpsets 0.64 Spares for W/S and 0.28 Auto W/S Bearings 4.24 217.92

INVENTORY ANALYSIS IN SCCl:

INVENTORY CONTROL PROCEDURE INTRODUCTION:Although the broader

concept of Materials Management includes

Inventory Control as a whole, it is usual for the Stores Department to be primarily concerned

with stock control or stores inventory control of regular stock items. Inventory Control is theprocess of deciding what and how much of various items are to be kept in stock. The basic

objective ofInventory Control is to reduce investment in the inventories while at the same time,

ensuring that stock-outs do not occur and production will not suffer due to non-availability ofany material.

52

i .e e x

This involves classification of all items through ABC Analysis, based on consumption pattern,

XYZ analysis based on stock value, FSN analysis based on movement of items and otherrelevant factors to determine the safety stock minimum / maximum levels and economic supply

quantities. The main reasons for keeping Inventory are a) Un-interrupted transactions of stores

items. b) To procure at an appropriate time at minimum price. c) As a precaution against anyeventuality of procurement.

INVENTORY CARRYING COST:This is the hidden cost which normally does not appear in

the documents but is accrued on acquisition and maintaining the inventory. The Principal

elements of the Inventory carrying cost are detailed below: a) Interest on the investment. b)Storage cost. c) Physical deterioration or its prevention d) Obsolescence cost e) Insurance cost. f)

Handling & distribution INVENTORY LEVELS:-

53

a) SAFETY STOCK LEVEL:A certain amount of stock is maintained to take any Stock Level.eventualities. There are many sophisticated ways to calculate Safety Stock Level. In CoalIndustry the Safety Stock may be taken as part of the total 1) Imported items and Spares 2)

Indigenous items and Spares 3) Explosives & POL b) MINIMUM LEVEL :When the stock

reaches this level action for procurement should be taken. The consumption during the lead-timeof purchase for most of the items it is taken as the same as Safety Stock level but for some

Insurance / Imported stores, the level may be higher than the Safety Stock Level. c) MAXIMUM

LEVEL :The maximum amount of allowable stock, which can be kept. This level can be


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determined as stock level and twice the lead time consumption. It should normally vary from 3 to

6 month's consumption depending upon the lead time and Safety Stock level. d) RE-ORDER

LEVEL or RE-ORDER POINT :This is represented by Safety Stock and Lead time consumption.It is known as minimum level in stock holding. - 6 Months - 3 Months of storage capacity

consumption depending upon the criticality / availability of items: sudden

fluctuation of demand of the item or supply of the item. This is known as Safety The Safety

stock acts as a cushion or buffer for absorbing such

54

e) LEAD TIME (L.T.) :It is the time that elapses between submission of requirements for

anything and the time taken to satisfy the need by supplying the material. f) LEAD TIME

CONSUMPTION (L.T.C.) :The average consumption of any item during the Lead Time isknown as Lead Time consumption. 1) Lead Time Stock for Imported items 2) Lead Time Stock

for Indigenous items INVENTORY CONTROL :Inventory Control is the most important

function of the Materials Management and it forms the nerve center in any MaterialsManagement Organisation. Inventory Control is the process of deciding what and how much of

various items are to be kept in stock. It also determines the time and quality of various items to

be procured. The basic objective ofInventory Control is to reduce investment in inventories and

ensuring that production does not suffer at the same time. Various tools available forInventory

ABCcontrol are: FSN Analysis Analysis Analysis Analysis Analysis - 6 to 16HML SDEVED Months - 3 to 6 Months

Staggered Delivery Schedules

55

A B C ANALYSIS: The most important of all analysis is the ABC Analysis "Always BetterControl:. This involves analysing of the Annual Consumption value the money spent and not the

quantity (Consumption in Numbers x Unit rate) goes after the principle "Vital Few - RivalMany" and the criterion used here is consumed. The general pattern of ABC Analysis will be as

following: % of Total "A" ITEMS :a) Since these items account for over Items A Items BItems C Items 70% of the total value, they should be ordered more frequently to reduce the

capital locked up at a time in form of inventories. Usually 3-4 Orders should be placed in a yearfor such items or annual Rate contracts should be entered into. b) There would be some items for

which the consumption varies 10 20 70 % of Annual Consumption cost 70 20 10

considerably from time to time during a year. For such items the expected future consumptionshould be estimated in advance and they should then procured on a planned basis, so that onlythe required quantities arrive a little before they required.

56

c) Annual or 6-months contracts with scheduled deliveries with a specific period of order are

essential. As far as possible, two or more suppliers should be selected for each items so that the


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dependency on one supplier is avoided. Due to strike, fire, lockout or any other eventualities if

one supplier fails to supply, the other supplier can be approached. Delivery schedules for such

items should be planned in such a way that the items are consumed within a month on "B"

ITEMS: a) The policies for "B" Items in general are its receipt. intermediate between "A" and"C" Items. b) Order quantities, re-order points and safety stocks should be fixed for "B Items

and revisions once in a year is adequate. c) Annual or 6-months contracts with scheduleddeliveries can be used "C" ITEMS: a) Since these items are too many to an advantage for "B"Items. and the value is less the policies are to be aimed to reducing the ordering and stock

keeping to an extent possible and ensuring the availability at all times by stocking liberalquantities.

57

b) Stocks to last for 6 months to over one year can be kept since these "C" Items do not involve

much capital tie-up. c) Annual orders should be placed to reduce paper work and also to take

advantage of quantity discount for bulk purchases.

V E D ANALYSIS :This Analysis is done to consider the vitality of an item and its effect onproduction and other services. It is specially used for V classification of maintenance sparesdenoting the essentiality of stocking. D - Stands for Vital items - when not readily available, - is

for E Essential items - when not readily available, temporary - denotes Desirable items -which are necessary but do not

production would come to a halt. loss of production or dislocation of S D Eproduction workoccurs. cause any immediate loss in production. ANALYSIS: -

58

This Analysis is based upon the availability position of an item. Especially in developing

countries where certain items are scare, this analysis is very S - refers to Scarce items - specially

imported and those are in short useful. D - refers to Difficult items - which are available inindigenous supply market but cannot be procured easily. Items which are to come from far offplaces or where there is not much of competition in the market or reliable E - refers to items,

which are easily suppliers are difficult to find. H M L ANALYSIS :The cost per items (perunit) is considered foravailable. L - High cost items - M H this Analysis and all itemsare classified as: Medium cost items - Low cost items

This type of Analysis is useful for keeping control over consumption at department level and for

deciding the Safety Stock in relation to the F S N ANALYSIS :-availability of the material(SDE Analysis).

59

Here the quantity and rate of consumption are Analysed to classify the items X YN - Fastmoving items - Slow moving items - Non-moving items S F as Z ANALYSIS :XYZ


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Analysis is to stock what ABC Analysis is to consumption. It is the counterpart of ABC in stock.

It focuses the attention of the Management on the materials which have been procured at a faster

rate than their consumption and hence its procurement policy needs a review or have become

obsolete and "X" Items - Items whose inventory value is 70% hence have to be disposed off."Y" Items Items whose inventory value is 20% of total value. of total value "Z" Items

Items whose inventory value is 10% of total inventory value. STOCK-OUT COST :The lossincurred by way of production or other-wise due to nonavailability of items is known as stock-

out cost. This may be NIL to anytime, depending upon the essentiality of the material. level as

stated earlier. To counteract the stock outs, suitable value of Normal consumption is given whilecalculating the Safety Stock

60

Staggered Delivery Schedule: This forms one of the most important inventory control technique

in the context of our organization. Generally in our system Purchase orders are released onlyonce a year with annual requirement as the ordered quantity. Hence the only way to control

inventory build up is to stagger the delivery of the supply of the items. Deliveries should beplanned in such a way that the item when supplied can immediately put to use especially for Aclass items. For doing so the lead-time of supply (for first supply only) and actual requirement by

the user is to be considered. For B-class items the supplies should be scheduled in such a way

that a minimum of 4 schedules are planned for supply in a year or even more if it is other than

BVitem. Items that have uniform consumption pattern throughout the year (Other than spares)monthly schedules should be planned. SYSTEM OF INVENTORY CONTROL :The objectives

of Inventory Control is a) Economy or provisioning at minimum investment and cost without

jeopardizing essential production. b) Insurance against losses due to stock-out of materials.PERIODIC REVIEW SYSTEM :Under this system, the items are periodically reviewed

depending upon the essentiality of the items for stocks and the consumption pattern. Necessary

action for procurement and delivery are taken after the review is done. INVENTORYCONTROL MEASURES & PROVISIONING: -

61

It is desirable to periodically review the items where stocks have gone beyond the optimum

levels to share the inventory of such items. statement of such items at regular intervals in the

stores can do this. Over-stocked items list can be generated on the computer every quarter, andwherever SAP has been introduced once in a month. List of such over-stocked items are to be

submitted to CGM(S) by all Area Stores. CGM(S) will circulate the list to all other stores for

indicating the requirement of these items for their Area with particulars of Average Consumption

per month, stock and pending orders. CGM(S) will arrange Inter-area transfers. Action wouldalso be taken by the Purchase Department to stagger the deliveries appropriately and even cancel

the purchase orders in the case of such items where over-stocking has been detected. In the caseof under stocked-below order level items, action would be taken to replenish the stocks to

prevent stock-outs. List of unmoved items should be compiled every six months / one year, in

descending order of value. This statement should indicate the quantity on hand and its value,quantity on order and the date of last issue for items which have not moved for 1,2 or 3 years and

above. After identifying such unmoved items, further procurement of such items should be


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stopped, after carrying out the reutilization check by circulating the items within the company.

Compiling

INVENTORY CONTROL & PROVISIONING OF SPARE PARTS: -

62

This is a very important subject, in as much as, most part of the surpluses that accrue constitute

the Spare parts. Only indenting of first set of Spares for the equipment should be done on the

basis of the manufacturers recommended lists of Spare Parts, duly trimmed and adjusted so as

not to exceed 10% of the total value of the equipment. Here also it would be desirable to ordersmaller quantities in the initial stage and only after gaining experience by maintaining proper

records of consumption for each type of equipment, larger quantities of Spares should be

procured. The items covering the last set of Spares will be processed simultaneously along withthe equipment in order to ensure availability of full backing of initial Spares for preventive

maintenance when the new equipment is put into commission. The Second set of Spares will be

provided to cover the maintenance requirements for the third and fourth year of operation of theequipment. The range of Spares required will be based on the manufacturer's recommendations

suitably adjusted in the light of experience gained in the first two years of equipment operation

and the maintenance scales developed by Engineers. It is very important to build up proper

consumption data right from the stage of commissioning the equipment, which should form thebasis for all further requirements. The provisioning of subsequent requirements of Spare parts

will be done by the users based on the consumption pattern duly projected to cover the

anticipated requirements and taking into consideration the actual working conditions and themaintenance scales. ERP SYSTEM (MATERIAL MANAGEMENT MODULE)

63

In SCCL, four modules of ERP(SAP) was implemented VIZ., 1.Material Management

2.FICO(Finance and Controlling) 3.Sales and Distribution 4.HR(Human Resource) MaterialManagement module consists of Inventory Management(IM) and purchasing. The total stores

transactions are being covered in IM of SAP-MM module.As this ERP SAP is an integrated

application,the online time to time latest status will be available,which is useful for correct

administrative decisions and also reduces time delays and repetitive data handling were avoided.The online material stock,requisition,balance on order status are available throughout the

company to review for procurement action. In SCCL,12 store plants and 60 pit stores plants are

configured. The following material types are mainly available, 1. Capital item(ZCAP) 2.Revenue items(ZSTK) 3. Stationery items(ZSTA) 4. Repaired item(ZCOR) 5. Coal item(ZFIN)

6. Medical item(ZMED) 7. MPN mterial items(ZMPN) 8.Scrap item(ZSCR) ZSTK materials are

stock transferred from one store plant to another plant on STO(Stock Transport Order) andZCAP,ZSTA,ZCOR materials are drawn on requisition which is on direct consumption account.

64

The stores process like GR(Goods Receipt)/GI(Goods Issued) are made in MIGO transaction

code in SAP.All material moment like issues,receipts are based on movement types in SAP.In


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GR process the stock is updated and value is updated for revenue items and material

document,accounting document created.Based on accounting document payment to the vendor is

made. The materials requirements are reviewed from time to time in MRP(Material RequirementPlanning)and purchase requisition are given.Then PO(Purchase Order) are placed accotdingly

with staggered delivery schedules for optimizing inventory levels. For some of the regular

equipment spares,there are Rate Contract(RC) available for which the sub order are placed bystore plants.The lead time for these type of items will be generally low and stocking of such

items is also less which is a better tool for optimum inventory. In addition to the above there are

COLG(Customer Operated Located Godown)and depot agreement are also opted by SCCL.COMPUTERISED STORE ACCOUNTING :In a large undertaking having several units

detached far away from each other and the headquarters, it becomes very difficult to get the

Inventory position at any given time, if the store accounting is done manually. Moreover, timely

preparation of control statements to assist proper Inventory control and other materialmanagement functions is not possible manually. Therefore, in order to introduce the latest

techniques of Material Management in our organization, it is necessary to introduce

computerised store accounting in a phased manner. The first step in computerized store

accounting is proper codification and classification of stores.

65

THE SINGARENI COLLIRIES COMPANY LIMITED (A Govt.company) TREND OF

CONSUMPTION VALUES AS ON 31/03/2010.(All figures are in lakh rupees) STORE 1050 NAME CENTRAL STORES 2009-10 1256.98

2008-09 7677.59 2007-08 4372.75 2006-07 2286.69 2005-06 4920.09

66

1150 1250 1350 2250 2251 2350 2351 2450 3150 3250 3450

KGM STORES YLW STORES MNG AREA STORES RG2 AREA STORES RG-OC3STORES RG-OC1 STORES RG-OC2 STORES BHP AREA STORES BPAAREA STORES

MM AREA STORES SRP AREA STORES

17678.72 8022.05 24058.65 12445.06 25190.03 15753.83 13353.64 10223.04 10982.46 3393.00

18283.54 160641.01

13327.12 4776.20 37411.49 7860.29 19815.39 11654.16 24261.11 5237.79 5430.43 4996.14

11848.07 154295.78

10958.10 3721.01 22883.44 19712.69 12082.11 9427.60 7896.02 3752.95 19872.10 21138.66

9047.33 144864.76

10738.61 5870.18 16242.05 24389.62 13762.54 9574.05 9310.61 3333.60 5245.21 5929.10

7074.41 113756.67


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6400.33 5925.01 17056.14 16138.81 14292.38 9990.99 8094.59 3422.62 1017.47 7647.99

7693.85 102600.27

THE SINGARENI COLLIRIES COMPANY LIMITED (A Govt.company) TREND VALUESOF INVENTORY AS ON 31-3-2010 (All figures are in lakh rupees)

67

SLNO 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

STORE 1050 1150 1250 1350 2250 2251 2350 2351 2450 3150 3250 3450

NAME CENTRAL STORES KGM STORES YLW STORES MNG AREA STORES RG2

AREA STORES RG-OC3 STORES RG-OC1 STORES RG-OC2 STORES BHP AREASTORES BPA-AREA STORES MM AREA STORES SRP AREA STORES

2009-10

2008-09

2007-08

2006-07

2005-06

1588 1491 531 2413 2931 3635 2388 3309 638 581 741 1545 21792

2269 1443 484 1810 3437 3627 1302 2475 503 609 765 1528

1716 2056 595.8 1898 2629 2331 1168 2303 729.6 517.8 988.7 1217

1997 2009 1107 1756 4165 2576 955.5 1852 745.3 298.5 1182 1238

2031 1296 1218 1856 3119 2151 1095 1738 429.8 105.8 990.1 936.5 16966.5

20252 18149.8 19881.3

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Chapter-5 Analysis

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CHAPTER-6 Conclusions


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Conclusions:In this chapter, an attempt is made to give the conclusions at a glance on inventory

management of Singareni Colliries Company Limited. The following conclusions have been

drawn:

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Overall,the inventory management in SCCL is upto the mark where by adequate supplies of

materials and store,minimization of stocks and avoided costly interruption in operations. 2.It has

kept down the investments in inventories,inventory carrying cost and obsolescence losses to theminimum through purchasing economies by the measurement of requirements on the basis of

recorded experience. 3.It also enables the management to make cost and consumption

comparisons between operations and periods.

Suggestions:a) b) c) Stocks transfers from one store to other stores to be done effectively.Disposal actions for obsolete and non moving items to be take up on Implementation of buy back

clause incorporated the earlier equipment

priority.Identification of buyers to be searched. purchase orders has to be taken up with the

suppliers and returning of the unconsumed spare parts to be done.Such items are to be identified.d) Orders are released mostly for all the items covered in the op en order to be done immediately

on their receipt of agreements.Rate contracts

requirement.Only the items required are to be procured other wise the items procured will not get

consumed and become non-moving. e) further action f) Linking up alternate part numbers andelimination o duplicate code numbers so that effective utilization of the available items would be

done and unnecessary purchases could be avoided. Utility of the items asking more than 1 lakh

has to be reviewed to take

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BIBILOGRAPHY:-

S.NO

AUTHOUR

TITLE OF THE EDITION BOOK

PUBLISHER

PUBLISHING YEAR

72

1 Khan . M.Y,Jain P.K 2 I.M. Pandey . 3 Prasanna . Chandra


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Financial management Financial Management Financial Management

3rd

Tata MCGraw Hills Vikas Tata McGraw Hills

2007

8th 6th

2004 2006

VISITED WEB SITES:WWW.SCCLMINES.COM

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Objective of study

To find out the efficiency of Inventory management in Dankuni CoalComplex, a unit of South Eastern Coalfields Ltd. (SECL). To have a first hand experience of the functioning of a coalcarbonizationplant. To have a practical experience of the functioning of the FinanceDepartment of a coal gas producing company. To study how inventory management practices plays an importantrole insupporting other activities of an organization. To gain familiarity with the various methods and techniques followedbyDankuni Coal Complex (DCC) in maintaining their inventory. To judge the success of the management in balancing theproduction withthe demand. To gain an in-depth knowledge of the tricks of faster conversion ofinventories into cash in Dankuni Coal Complex. To find out the difference between the theoretical and practicalaspect ofinventory management. To study and come out with any solution for improvement ofinventorymanagement in Dankuni Coal Complex.


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Inventory Management Project Main2

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