A PROJECT REPORT ON INVENTORY MANAGEMENT IN SINGARENI COLLIERIES 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) 1 DECLARATION I here by declare that this project work entitled “INVENTORY MANAGEMENT” in SINGARENI COLLIRIES COMPANY LIMITED is an original and genuine work done by me. I also 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 2 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 of the 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 and supporting me in completion of this project. I.SUSHMA 3 INDEX CHAPTER Chapter-1 • • • • • • Chapter-2 • Chapter-3 • • • • • • • • • • • • Chapter-4 CONTENTS Introduction Inventory Management Need of Inventory Management Objectives of the Study Methodology of the study Limitations of the study Time period Review of literature Review of related literature Organisation profile Introduction Origin History Operational Areas Milestones Technology and Output Manpower in SCCL Vision Mission Gloom to Glory Strengths Weakness PAGE NO. Inventory management in SCCL Introduction Material Management Cycle Stores Organisation Stores Categorisation Organizational setup & Resposibilities 4 . Store Keeping Standardisation.classification & codification Analysis of inventory management in SCCL • Inventory control procedures • Inventory Carrying cost • Inventory Levels Chapter-5 Chapter-6 Analysis Conclusions Suggestions BIBILOGRAPHY 5 . CHAPTER-1 Introduction 6 . Further. ensures smooth production process. of finished goods only. Effective materials management is key to a firm’s profitability. work-in-progress 7 . In a manufacturing concern. inventory may mean the stock and stores etc. Bailey & Farmer. MEANING AND NATURE OF INVENTORY:In accounting language.INTRODUCTION INVENTORY MANAGEMENT: Conversion of raw materials into finished goods is the main unction of every production firm. it is computerized to save time and efforts. it may include raw materials. But. disposal of surplus and control on scrap.Required raw materials if purchased and stocked in advance. receiving and storing. Definitions:Material management is the flow of materials into an organization to the point where those materials are converted into the firm’s end product(s). 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. inventory control. An ideal materials management ensures efficiency in accountability coordination and performance in the department. Materials management involves Materials acquiring-purchasing. Work in Progress :-The work in progress is that stage of stocks. C. which are ready for the consumer’s the stock market. which are in between raw material and finished goods. There can be instances where these materials may account for which they value raw materials.. Consumables:. B. Generally consumables stores do not create any supply problem and the form a small part of production cost. Finished goods:. of finished goods provides a buffer between production and 8 . to affect the stock of raw materials. D.Raw material form a major input into the organization. which are needed to smoother the process of production. Consumables may be classified according to their consumption and criticality.These are the goods. They are required to carry out production activities uninterruptedly the quantity of raw material required will be determined by the rate of consumption and the time required for replenishing etc.These are the materials. The fuel oil may form a substantial part of cost. Raw material:. 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.INVENTORY INCLUDES THE FOLLOWING THINGS:A. These materials do not directly enter production but they act as catalysts. rather they kept in ready position for further use.The stocking policies of spare differ from industry to industry some industries like transport will required more spares than the other concerns. The costly spare parts like engine. It will mean loss of time and delays in execution of orders which sometimes may causes • loss of customers and business. 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. Spares:.E. There are their main purposes 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. All decision about spares are based on the financial cost of inventory on such spares and the cost may arises due to their non-availability. • 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 9 . inventories handling. are not discarded after use. maintenance spares etc. BENEFITS OF HOLDING INVENTORIES:. in the former case.The inventories may become obsolete due to improved technology. 10 . The storage of cost include the rental of the go down. changes in customer tastes etc. changes in requirements.There is always a risk of reduction in the prices of inventories by the supplies in holding inventories. the firm insures the cost . • RISK AND COSTS OF HOLDING INVENTORIES:- The holding of inventories involves blocking of firms fund and incurrence of capital and other costs.saving re ordaring costs and quality discounts. The various costs and risks involve in holding inventories are. But in both the case. insurance charges etc. • Risk of Obsolescence:..This includes keeping inventories for taking advantage of prise fiuctuvations. This may be due to increased market supply. • Risk of Price Decline:. there is an opportunity cost of investment while in the later case.• THE SPECULATIVE MOTIVE:. • The funds may be arranged from own resources of from outsiders. competition or general depreciation in the market.The firm has therefore to arrange for additional funds to meet the costs of inventories.. The firm has to pay interest to the outsiders. • Capital Costs:-Maintianing of inventories results in blocking of firms financial resourses. • Storage and Handing Costs:-Holding of inventories also involves coast on storage as well as handing of materials. To keep material cost under control so that they contribute in reducing the coast of production and overall costs. The following are the objectives of inventory management: • To ensure continuous supply of materials. To maintain investment in inventories at the optimum level as required by the operational and sales activities.• Risk Determination in Quality:. spares and finished goods so that production should not suffer at any tie and the customers demand also be met. 11 . The financial objectives mean that the material and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The following are the objectives means that investment in inventory should not remain idle and minimum working capital be locked in it. The main objectives management is operational and financial. • • • To avoid both over-stocking and under-stocking. The operational objective mean the materials and the spares should be available in sufficient quantity so that work is not disrupted for want of inventory.The quality of materials also deteriorates while the inventories are kept. OBJECTIVES OF INVENTORY MANAGEMENT Definition of inventory management: Inventory management is concern with the determination of optimum level of investment for each components of inventory and the efficient use of components and the operation of components and the operation of an effective control and review of mechanism. Suitable quality standards will ensure proper quality of stocks. This is possible with help of centralizing purchases. 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. Determination of stock levels: Carrying of too little of inventory is detrimental to the film. To ensure right quality goods at the reasonable prices. 1. the cost-analysis will ensure payment of proper prices. To ensure perpetual inventory control so that materials show in stock ledgers should be actually lying in the stores. An efficient inventory management requires that a firm should maintain an optimum level of inventory where 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 of production. • To facilitate furnishing of date for short-term and long-term planning and control of Inventory.• • • • To eliminate duplication in ordering or replenishing stocks. TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT A proper inventory 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. 12 . If the inventory level is too little. The price analysis. To minimize losses through deterioration pilferage wastages and damages. Minimum stock level can be calculated withy the help of the following formula. The rate of consumption will be decided on the basis of past experience and production plans. Rate of consumption:-It is the average consumption of materials in the factory. Re-ordering maximum level. level is fixed between minimum level and 13 . ( Re-ordering level = maximum consumption X maximum re-order period) c) Maximum level:. The time taken in processing the order and then executing it is known as lead-time. 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. Minimum stock level: It represents the quality below its stock of any item should not be allowed to fall. 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 teen minimum stock level cal be required for such material.It is the quantity of materials beyond which a firm should not exceed its stocks.2. The order is sent before the materials reach minimum stock level. ( Minimum stock level = reordering level –(normal consumption X normal re-order period) b) Re-ordering level:When the quantity of material reaches at a certain figures then fresh order is sent to get material again. If the quantity exceeds maximum level limit it will be over-stocking. Over stocking will mean blocking of more working capital. The danger stock level indicates emergency of stock position and urgency of obtaining fresh supply at any cost. 3) Economic Order Quantity( EOQ):The quantity of material to be ordered at one time is known as economic order quantity. (Total Cost Of Material = Acquisition + Carrying Cost+ Ordering Cost) Carrying Cost: 14 . firms usually maintain some margin of safety stocks. 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. E) Average stock level:This stock 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 quantity is fixed in such a manner as to minimize the coct of ordering and carrying cost. Two costs are involved in the determination of the stock that is opportunity cost of stock outs and the carrying cost. more space for storing the materials. In order to protect against the stock out arising out of usage flucturations. The demand for material may fluctuate and delivery of inventory may also be delayed and in such a situation the firm can face a problem of stock out. VED analysis (Vitally Essntial Desire) The VED analysis is used generally for spare parts.It is the cost holding the materials in the store Ordering cost. 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.C. Category C covers about 70% of items which contribute only 10% pf value of consumption.B. CLASSIFICATION AND CODIFICATION OF INVENTORIES:The inventories should first be classified and then code numbers should be assigned for their identification. About 20% items controlbute about 20% of value of consumption and his is known as category B materials. Almost 10% of items contribute to 70% of value of consumption and this category is called A category. EOQ can be calculated with the help of following formula EOQ=Square root 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 control analysis):Under ABC analysis the materials are divided into 3 categories viz A. The identification of short names is useful for inventory 15 . Spare parts classified as vital (V) essential (E) and desirable (D). It is the cost of placing order for the purchases of materials. 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.management not only for large concerns but also for small concerns. The later method is generally used for coding.lubricants etc. spares. Lack of proper classification may also lead to reduction in production. the more proximate criteria for judging the inventory system are: Comprehensibility • Adaptability 16 . Generally materials are classification accordingly to their nature such as consumption materials consumer stock. The third distinction is needed for the quality of goods and decimals are used to not this factor. Valuation of 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 of management. The coding may be done alphabetically or numerically. After classification the materials are given code numbers. Two numbers will be categories of materials in that class. Adoption of challenging norms: Companies should set benchmarks with global competitors and use ideas like JIT to improve inventory management. This would help in improving quality and delivery. The reasons for keeping stock:There are three basic reasons for keeping an inventory:• Time . DEVELOPMENT OF LONG TERM RELATIONSHIP:Companies should develop long term relationship with vendors. requires that you maintain certain amount of inventory to use in this "lead time". production marketing.The time lags present in the supply chain. supply and movements of goods. Disposal of obsolete/surplus inventories: Procedure for disposing obsolete/surplus inventories must be simplified. • Uncertainty . Review of classification. from supplier to user at every stage. Improvements could be effected through: Effective computerization: Computers should not be used merely for accounting purpose but also for improving decision-making. Improved Co-ordination: Better co-ordination among purchase. 17 .Inventories are maintained as buffers to meet uncertainties in demand. and finance departments will help in achieving greater efficiency in inventory management. ABC and FSN classification must be periodically reviewed.• Timeliness Areas of improvement: Inventory management in India can be improved in various ways. Ideal condition of "one unit at a time at a place where user needs it. 2). 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. So bulk buying. there are certain problems in maintaining optimum level of inventory problems of inventory can be resolved by the cost implication.The cost of placing a replenishment order.The cost of over stocking 4).• Economies of scale . movement and storing brings in economies of scale. are discussed in the following lines: Basically.The cost of under stocking The cost of ordering and inventory carrying cost are reviewed as the supply side cost and help in determination of the quantity to be ordered for each replenishment.The cost of carrying inventory 3). when he needs it" principle tends to incur lots of costs in terms of logistics. 18 . there are four costs for consideration in developing an inventory model. Normally. 1). Costs which are relevant for consideration. typing and dispatching an order Follow up costs-the follow up required to ensure timely supplies includes the travel cost for purchase follow up .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.the telephones. Cost of ordering includes:1) 2) etc Paper work cost.The time varies in different context it could be the lead-time of procurement of entire lifetime of machine.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 a specified period of time. telex and postal bills 19 . Understocking:This cost is incurred when an item is out of stock. handling in the stores. This measure gives basis for estimating what actually cost a company to carry a stock. checking and Any set up cost of machines charged by the supplier. 6) salaries of stores staff Objectives of the study:• • • To examine the organization structure of inventory management in the stores of SCCL. To understand the various inventory control techniques followed by stores in SCCL.3) 4) 5) Costs involved in receiving of the order. 2) Insurance and tax charges. 20 . 3) Storage costs-labour cost. 5) Allowances for deterioration or spoilages. either directly The salaries and wages of the purchase department.levels and trends of inventories in SCCL. indicated in quotations are assessed through quotations for various quantities Cost of inventory carrying: This cost is measured as the percent of the unit cost of the item. 4) Transport bills and hamali charges. racks etc. provision of storages areas and facilities like bins. This cost includes:1) Interest on capital. inspection. To discuss pattern. • • Time Period:The study was carried in Singareni collaries company limited kothagudem for a period of 6 weeks. manuals. But. registers..e. purchase. The study is purely based on secondary data. it was supplemented by with interaction with the concerned personal with regard to some primary data. The study is limited only for a period of 5 years i. Limitations:The study has the following limitations: • 2009-10. There may be approximations. from 2005-06 to 21 . Methodology of the study:The study is based on secondary data.• • • • To access the performance of inventory management of the SCCL by selected accounting ratios. To know the inventory control techniques of SCCL. The secondary data has been collected from annual reports. storage records of the organization. 22 .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. Bihar Central Coal fields limited (CCL) – Ranchi. which is one of the important materials. Madhya pradesh Western Coal fields limited (WCFL) – Nagpur. along with its following subsidiaries are become number one coal producer in India. primarily in India and china . Bihar Northern Coal fields limited (NCFL) – Singrauli. 23 . Thus coal industry plays an important role In the industrial development of any country. In India . coal mining was started in 1774 and still significantly under the government control and ownership with coal India limited ( CIL) . The world coal consumption is projected to go up from 4. Bharath Cooking coal limited (BCCL) . Eastern Coal fields India limited (ECFIL) – sanctrica. Maharastra. west Bengal.4 billion tonnes by 2020. a vital infrastructure fro the economic development. shipping and construction industries etc.Dhanbad. since ages and this natural wealth have put to diverse use In the modern world. Coal regarded as the fuel of growth.7 billion tonnes in 1999 to 6. The coal is an important input for power generation and many other industries like iron and steel. railway. Despite the development of alternative fuel material in many industries. like India.Man knows coal. which are expected to account for 75% of the increased consumption. William king. 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. The rest. an eminent geologist. as they say. caught fire. This led to an extensive survey by Dr. The incident was immediately reported to the local government. Central mining planning & design institute limited (CMPDIL) – Ranchi. Orissa. Bihar. SINGARENI COLLERIES COMPANY LIMITED ORIGIN:A remarkable little adventure gave a birth to this giant corporate entity that us today the Singareni Collieries Company Limited. is history: The year 1886 witnessed the formation of they Hyderabad Deccan Company private limited and it acquires the mining rights for exploiting the coal 24 .Mahanadi Coal fields limited (MCL) – Sambalpur. One of the supporting stones on their makeshift stove. which confirmed the revolutionary discovery of mammoth of coal in the Godavari valley. Khammam.Goleti. Which was incorporated at London Stock exchange. SCCL came under the control of indai and Andhra pradesh as a joint venture with equity ratio of 49% and 51% respectively. The company became government company after nizam purchased its shared from London stock exchange in 1945. yellandu. karimnagar. The mining rights for exploiting the coal reserves were acquired by the Hyderabad Deccan company. Hence the first extracting of coal was started at yellandu in 1886 by Hyderabad deccan company. 25 . adilabad and wrangal. Later in the year 1949.Sattupalli and managuru – Bellampalli. SCCL became the fiorst ever government managed coal company in India. In overall India it spreads to 6% of geographical area producing 10% of total coal. In 1921 the company was re-christened the “ Singareni colleries company limited: and its scrip listed on the London stock exchange. The operation areas of SCCL are as follows: Khammam District Adilabad District – Kothagudem. Dorli Karimnagar District Warangal district – Bhoopalpally.reserves. With this. III. The first commercial operation commenced at Yellandu ( khammam District) in Andhra pradesh in 1889. The SCCL is engaged in coal mining in four districts of Andhra Pradesh namely. II. Mandamari Srirampur.Kairiguraand – Ramagundam – I. 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 36 under 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 Merchandised long wall. walking dragline in open cast mines and computes introduction French Blasting gallery technology Input crushing & conveying technology in opencast mining. Surface miner technology. 26 Vision, Mission and Principles Guiding Sustainable Development Vision: Vision shall bring into view untapped potentials and unutilized opportunities that await exploitation 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 is difficult, 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, 27 • • • 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 with maximum 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 maintain harmonious 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 28 The company earned profit of rs 17. railways.P and sustained efforts made by the management of SCCL and trade unions. Establishing outsourcing of non-core and ancillary activities. low productivity.45 crores after issuing dividend of 86. environment protection and labour welfare. Also the pricing of coals was decided by government of India keeping its impact on the major sectors like power. The company for success took following remedial measures/reforms. follow ups). work Focus on safety. and etc.64 crores in 1993-94 respectively. launching literacy Focused multi-faceted workers welfare programme. apart from un-remunerative coal price vise. cement. interactions. a modest financial turn around was achieved. SCCL became out of the BIFR purview. By March 1994.70 crores 29 . force visits to client sites. But due to liberal financial package extended by the Govt of India in consultation with Govt of A.abandoned. Fuel supply agreements-technology infusion for quality testing. law and order problems. totally wiped out its accumulated losses and entered the financial year 2003-04 with a net profit of 80. Unifying trade unions through path breaking elections. stores and interest were also not fully compensated by government. Innovative programmes launched( dial your GM. programmes. High pitch communication drive harnessing media. the prices were not revised regularly also hike in input cost due to periodical revisions of national coal wage agreements (NCWA). The frequent strikes by the workers.a—versa cost of production during the period 1989-90 to 1991-1992 affected the financial health of the company and refer to BIFR in may 1992.76 crores and 26. Fields visits. The process of turning around a sick company which commenced in 1997-98 reached its logical conclusion when sccl. Introduction of Machine Mining(Shuttle cars. & technology. 30 . power. environment management foundation. Important Events In The Life Of SCCL Year 1889 1948 Milestones Commencement of mining operations. science. 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 & Golden peacock innovation management award from world environment management foundation.Ls). 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.Mining Success and Honors: SCCL Multi faceted achievements are landmarks that stand testimony to its efficiency. • • forests. Introduction of Walking Dragline in CC mines. Singareni coal work graded from “c” to “g” grade. Commencement of Open cast Mining Projects. Introduction of In-pit crushing in OCP mines. Introduction of Flame Proof Mining Machinery. Computerised Information System.1951 1951 1952 1953 1975 1981 1983 1984 1985 1986 1989 1991 1994 1995 2009 Introduction of Incentive Schemes. Introduction of Electric Cap Lamps. 31 . Open casting of developed pillars and go ap aran SAP introduction 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. Introduction of Electrical Coal Drills. Introduction of First 132/33 KYA substation. Introduction of latest underground machine. Introduction of French Blasting Gallery Techniques. Introduction of Long Wall Face Machinery. Government(pertaining to 2001). Environmental Excellence Award from Green Tech Foundation in 2005-06. Best Management Award for 2001-02 by the Government of Andhra Pradesh.New Delhi.Government of India. National Fly Ash Utilization Award 2005 jointly instituted by the Ministry of Environment and Forests. PRODUCTION PROJECTIONS: 32 .New Delhi. Best Worker Welfare Activity Award for 2002-03 by the Federation of Andhra Pradesh Chambr of Commerce and Indusries.Hyderabad for “Shramika Bandham”. Three of the fourteen “National Safey Awards(Mines)” instituted by the Directorate General of Mines Safety.New Delhi.• 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 for Sustainable Technology Institute(SRISTI).Power Technology. Golden Peacock Innovation Mnagement Award 2005 from the Institute of Directors. The second Best Corporate Film Award 2005 by Public Relations Society of India. Golden Peacock Environment Management Award from World Environment Foundation. 1 12.Operating Region PRODUCTION (MT) IN THE TERMINAL YEAR OF 1X Plan 2001 505 16.6 48% 52% X1 Plan 2011-12 8.7 11.4 15.1 44% 56% X11 Plan 2016-17 8.6 12.3 29% 71% Bellampalli Ramagundam Kothagudem Total Open Cast 48% Under ground SCCL strengths and Barriers:- Strengths: 33 .8 35.5 36.4 34.0 52% X Plan 2006-07 605 17.0 13.1 35.3 13. existence of clay bands incompatible roof and low grade of coal. Barriers:Limited financially viable reserves. high stripping ratios in projects. Difficult geo-minig conditions like steepness. amenable for open cast mining. Production Of SCCL:(figures are in crores tonns) Year Target Actual 34 .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. 24 Targeted Production for the Year 2010-11 is 513.1 Crushed ROM Coal 2677.00 377 406 445.46 504.5 Steam/Round Slack Coal 2841.74 35 .360.90 2009-10 361.00 lakh tonnes Coal Prices :Grade Coal of Useful heat value Basic Price per Tonne(RS) per kilo calorie/per kilogram A Exceeding 6200 ROM Coal 2607.54 coal 2623.00 2005-06 375 2006-07 380 2007-08 415 2008-09 503. 8 0 1141.B C D E F G Washery Grade-D Washery Grade-E Washery Grade-F 2 Exceeding 5600 but 2213.64 2054.47 2283.2 8 1504.56 726 548 36 .2 6 691 513 2390.60 1334.63 1472.68 1551 1189.8 not exceeding 5600 8 Exceeding 4200 but 1491.84 1903.00 1676.6 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 2447.6 not exceeding 6200 4 Exceeding 4940 but 1838.46 831 653 4 2229.88 1689.2 4 1853. Globalisation has resulted in high competition. Improving quality and reducing cost have become real needs for the success of any Organisation. Need 37 .CHAPTER-4 INVENTORY MANAGEMENT IN SCCL Introduction : The thrust areas of this Millennium for improving efficiency of any business activity are considered to be Service functions. High degree of competition has forced Organisations to look beyond the operational levels to reduce cost of production to withstand global competition. developments in information Technology and Internet facilities have helped to maximise resources utilisation and achieve higher service levels. the Inventory Management System comprises of • • • • • Material Planning Purchasing Formulating delivery schedules Receipts and inspection Storage & issues 38 . In High-tech scenario.for higher productivity has percolated not only to the operational level but also to the product design and other managerial effectiveness resulting in introduction of higher level technologies and automation. as Machine controlled elements are more dominant than the human elements. it would help to make available capital for alternate productive purposes. Materials Management Cycle : Broadly. Logistics /Materials Management is considered one of the vital service functions that helps in bringing down the working capital requirement and hence. Further. to reduce overall cost of production. Management Service functions have become need of the hour. the cost of production through reduction of interest burden. Also. Thus. In real time. integration of Materials Management System with the production system and supply chain management is essential to achieve the desired results. 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.• • • Re-allocation of available stocks among various stores/users Identification of Obsolete and unusable inventory Disposal of used items / scrap It is needless to say that judicious Planning. While the Purchase function is looked after by the Purchase Department. Organising. the subject becomes complex. as it has got inter-relationship with the production system. the Stores functions viz • • • • • • • Material Planning Formulating delivery schedules Receipts and inspection Storage & issues Re-allocation of available stocks among various stores/users Identification of Obsolete and unusable inventory Disposal of used items / scrap 39 . which is dynamic due to both internal and external factors. STORES ORGANISATION Organisation of Inventory Management function in SCCL: In a traditional way. the Materials Management function in SCCL is organised as PURCHASE and STORES functions. In all. have been brought under unique Nos. suppliers and Purchase Department. 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. item codes. at each store. In order to derive full benefit of computerisation. Out of 12 Stores. computerisation becomes waste and it creates chaos.are entrusted to the Stores Department. The Stores department is headed by CGM(Stores). It would only result in garbage-in and garbage-out in computer jargon. there are 12 Stores located in various areas and each stores is under the administrative control of respective CGM/GM. Who functions under the control of Director (Operations). have been corrected for their Part Suitable programs were developed in this direction and 40 . there are 5 Opencast Stores and 6 Area stores and there is a Central Stores 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 across 350 Kms from one end to the other end of the Company. codification has been standardised to ensure that unique Code is maintained at all stores for any given item. stores. Items maintained with wrong Part Nos. If the codification is not unique. Items with alternate Part Nos. 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. Also. By this exercise many of the items. Such items have been brought under unique item code. Hydraulic components etc. In case of imported equipment. this exercise could be done faster and more systematically. electrical. Suppliers were also requested to furnish the list of alternate part nos. and some with original manufacturers’ part nos. This has helped to reduce the inventory in case of bearings. have been codified with unique item code. 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. Hydraulic components. auto electrical. using which.). correct part nos. Part Nos. and nomenclature. For the items for which. this exercise could not be taken up as there is no response from the suppliers. which were lying as non-moving are put to use.continuous efforts are put in to ensure that duplicate Items are avoided exercise has given favorable results to reduce the inventories considerably. by correcting the Part Nos. maintained in Item/ Material Master with OEM Parts’ Catalogues. all the Purchase Orders for the capital equipment are released with the condition that they must supply soft copy of the Parts Catalogue. have not tallied with the Parts’ Catalogue. STORES CATEGORISATION:- 41 . another exercise was undertaken to identify to bought out items by OEM (such as bearings. an exercise was undertaken to counter-check the Part Nos. However. This In order to make sure that the items and Material Master are maintained with correct Part Nos. which are referred in the Parts Catalogue with their own part nos. items with alternate part nos. In order to avoid multiple bin cards. Also. This exercise has helped to obtain correct stock status for better decision-making before placing further orders. some with OEM part nos. Inventory control 8. Custody and stores keeping 4. While he will be functionally responsible to the CGM (Stores).Central Stores (CS):The concept of CS was started to optimize inventories. Stock verification 42 . Similarly capital items and items where buffer stocks are required to be maintained are ordered on CS. The broad functions of Area Stores will be: 1. High Value items common to more than one project required to be stocked as float is ordered on CS. he will be administratively under GM/CGM of the Area wherever the Stores is attached to the GM/CGM of that Area. Area Stores:To cater the materials requirement of various Mines & Departments. Insurance and other miscellaneous works 7. The item is diverted to the needy project as and when needed. Clerical staff and Issue Mazdoors. Issues to Mines & departments on STO’s and Reservation 5. As far as possible stocking of items physically at CS is avoided only diversion of Purchase Order is resorted to. Delivery schedules giving as per requirements(JIT) 6. Area Stores exist in each Area. which are diverted as and when required. Claims. Each Area Stores will be under the charge of DGM/SE/DySE who will be assisted by sufficient Executives. Material Requirement Planning(MRP) 9. Receipts 2. CS is under direct control of CGM (Stores). RC suborder placing and supply the required material based on users requirement 3. Stores Keepers. The Mines and Departments will draw their requirements from the Area Stores for direct consumption on weekly or fortnightly basis. Power Houses. will be under the direct control of the head of the department concerned. The general Organisational pattern of stores is as under Director(operations) CGM(Stores) Central stores IMC Inspections Disposal Area stores OCStores 43 . drawn from the Area Stores.The custodial responsibility for the material held in a stores will be transferred to the stores personal employed therein. The Mine/Departmental Stores will keep the Receipt & Issue Records on a numerical ledger maintained at Pit/Departmental level. 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. Each Mine/Department will have a small stores for charge-off materials of daily consumption.. Building Department etc. DGM(Stores) Inspection Store keeper Fitter/Electrician Sec. CARE AND PRESERVATION OF MATERIAL 44 . STORAGE.Clerks Issue.Mazdoor STORE KEEPING :PRINCIPLES OF STORE KEEPING. to ensure that no hidden stocks exists or stocks accumulate. Fire line. will be well laid-out and organised to allow smooth flow of receipts and issues. o Use of mechanical handling devices. to deviate stock verification discrepancies and above all to reduce the cost of inventory by better stores management. The principles of store keeping should be observed while organising a storehouse.. o Room for expansion.STORAGE :Every store dept. o Proper system of location (Sequential order of codification as far as possible). o Correct accounting. 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. o Cleanliness. providing gang-ways for working space. o Proper lay-out. Storage & issue) :o undirectional flow of material o Optimum utilisation of spare Floor area and Vertical Space. use of material handling devices and ventilation. o Security cage for attractive and costly items and restriction of entry to store houses. 45 . o Use of dumpage. as it leads directly to lower holdings and thereby secure a reduction in material cost. a trustee of stores. based on reduction of varieties to control minimum work. PROCEDURE FOR STANDARDISATION:- 46 . STANDARDISATION:Standardisation is a process of systemization of stores. Among the general consumable stores. issue sections near issuebay. drilling and miscellaneous equipment. leading to economy and efficiency. without a corresponding reduction in stock over.C. mining supplies and general supplies are included. o First – in – First – out. INVENTORIES:GENERAL :- CLASSIFICATION & CODIFICATION OF Inventories used in S.C.Limited consist mainly of General Consumable stores and Spare parts for mining. engineering materials.o Bulk stores godowns near receipt section. standardization is rationalised store keeping and it has great importance in Inventory control. o Sacred trust – store keeper. STANDARDISATION. excavation. In other words. Items having similar characteristics and which can be used as substitutes. keeping in view the following essential requirements viz. including the extent of tolerance permitted in these sizes. Range of sizes actually required.The implementation of a program as standardization involves a thorough scrutiny of the complete list of commodities stocked. A specification for an item is a correct description of the item.: The ultimate use of each item. it should be rejected at inspection.10” to 5. If any of the dimensions exceed the limits shown above.75” and the depth can be between 6.10” This means that the length can vary between 2’6.25” to 2’5. The dimensions of a typical item can be shown as under: 2’-6” long = ± 0.25” 1’-6” wide = ± 0..25” 6” deep = ± 0. 47 .75” width can vary between 1’6. Dimensions are the sizes of the various parts of an article.90”. analysis. Detailed specifications of items required to be retained. performance or other relevant characteristics in sufficient detail to ensure that it will be suitable for the purpose intended. Identification is the process of systematically defining and describing all items of stock and fixing their identity by allotment of Code numbers for uniform adoption by all concerned sections. to determine sizes which can be eliminated. SPECIFICATION :The description of materials apart from laying down the Code number and description of every item also indicates the specifications wherever applicable and prescribed. its dimensions.25” to 1’5. . facilitate inspections and enable the purchaser to compare the offers of competitors against a standard yard-stick. Per square inch at a temperature of 150° F without bursting. so that procurement is arranged on the basis of manufacturer’s part numbers. Even manufacturers’ part Numbers exist. Adherence to standard specifications will ensure consistency in quality of materials from the point of view of end use of the finished product. MECHANICAL RECORDING :For Computerized Stores accounting the allotment of Code Numbers for every stock item is an essential pre-requisite. so as to bring about uniformity in the recording system. Code Numbers will have to be allotted to every item in addition. as in the case of Spare parts for equipment and since no uniformity exists in the part numbering system adopted by different manufacturers.C. S. the part numbers allotted to spare parts by different manufacturers should be shown additionally in the accounting records.CO. as it is only Code numbers that all stock items can be introduced into the computer accounting system. However.LTD.000 Miles under load of 2 tonnes and be able to sustain an internal pressure of 85 lbs. together with abbreviated designations. For example a Tyre should be capable of running 20.Performance describes the physical ability of an article to withstand certain duties. CODIFICATION:- 48 . Ltd. Enables proper storage and prompt issue of materials.Classification of materials into group of similar items adoption of standard nomenclature and codification are essential for proper identification and orderly storage of materials. the equipment’s and materials are classified into 37 Main Classes. In the S.C. Facilitates introduction of computerization for account and reporting.Co. Facilitates proper procurement & accounting. A 10 Digit Code has been evolved with the configuration shown below to cover all varieties of items. end use etc.d) e) Main Class Sub-Class Detailed classification or Special features 49 . Eliminates stocking of same items under different types.. Eliminates unnecessary varieties & sizes. Scientific classification and codification of materials has the following advantages. Facilitates introduction of modern inventory control techniques. CODE STRUCTURE:1 2 3 4 5 6 7 8 9 10 xx xx xx xxx x --a) --b) --c) -----. Classification of materials is done taking into consideration the characteristics.. nomenclature or by function or end use. .12 50 .10 8. (Values in crore rupees) SL.19 1.C.42 2.67 0.83 2.Ltd.07 1. are as shown below: LIST OF MAIN CLASSES ADOPTED FOR STORES CODIFICATION:CLASS WISE INVENTORY STATUS AS ON 31-3-2010.44 0.oils &lubricants Paints & varnishes Mar10 0. Sequential Number Check Digit The list of Classification of Inventories used in S.16 0.94 0.or Sub-assembly.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 Explosures Hardware &fastners Iron & steel Non-ferrous materials Petrol.Co.13 3.97 0.23 15. 35 1.31 23.03 Spares for 0.50 106.69 0.instruments.3.lab equipments Tubs & tub materials Spares for HEMM Exploration stock Spares for 1.S.40 0.64 51 .18 26 27 28 29 30 31 32 33 34 75 76 77 78 79 80 82 83 84 house Spares for printing 0.89 equipment-FLP Spares for general 0.02 construction equipment Spares for electrical 1.39 Spares for 0.96 mining Spares for power 1.50 2.55 conventional Spares for machine 22.23 FEL.P’s 1.63 equipment-NFLP Spares for electrical 2.82 1.10 0.70 2.01 press Spares prospecting for 0.62 automobiles Spares for C.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.Tractors Spares for mining.FL. it is usual for the Stores Department to be primarily concerned with stock control or stores inventory control of regular stock items. 52 i . Inventory Control is the process of deciding what and how much of various items are to be kept in stock.92 INVENTORY ANALYSIS IN SCCl: INVENTORY CONTROL PROCEDURE INTRODUCTION:Although the broader concept of Materials Management includes Inventory Control as a whole.35 36 37 85 86 98 TOTAL Spares for pumpsets 0.24 217. ensuring that stock-outs do not occur and production will not suffer due to non-availability of any material. The basic objective of Inventory Control is to reduce investment in the inventories while at the same time.64 Spares for W/S and 0.28 Auto W/S Bearings 4.e e x . b) Storage cost. 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.This involves classification of all items through ABC Analysis. based on consumption pattern. b) To procure at an appropriate time at minimum price. The Principal elements of the Inventory carrying cost are detailed below: a) Interest on the investment. XYZ analysis based on stock value. The main reasons for keeping Inventory are a) Un-interrupted transactions of stores items. c) Physical deterioration or its prevention d) Obsolescence cost e) Insurance cost. f) Handling & distribution INVENTORY LEVELS:- 53 . c) As a precaution against any eventuality of procurement. FSN analysis based on movement of items and other relevant factors to determine the safety stock minimum / maximum levels and economic supply quantities. This is known as Safety The Safety stock acts as a cushion or buffer for absorbing such 54 . .6 Months . the level may be higher than the Safety Stock Level. This level can be determined as stock level and twice the lead time consumption. c) MAXIMUM LEVEL :The maximum amount of allowable stock. It is known as minimum level in stock holding. eventualities. It should normally vary from 3 to 6 month's consumption depending upon the lead time and Safety Stock level. The consumption during the lead-time of purchase for most of the items it is taken as the same as Safety Stock level but for some Insurance / Imported stores.a) SAFETY STOCK LEVEL:A certain amount of stock is maintained to take any Stock Level. d) RE-ORDER LEVEL or RE-ORDER POINT :This is represented by Safety Stock and Lead time consumption. In Coal Industry 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. which can be kept. There are many sophisticated ways to calculate Safety Stock Level.3 Months ¼ of storage capacity consumption depending upon the criticality / availability of items: sudden fluctuation of demand of the item or supply of the item. Various tools available for Inventory control are: ABC VED SDE HML FSN Analysis Analysis Analysis Analysis Analysis .) :The average consumption of any item during the Lead Time is known as Lead Time consumption.e) LEAD TIME (L.3 to 6 Months Staggered Delivery Schedules 55 .6 to 16 Months .T. The basic objective of Inventory Control is to reduce investment in inventories and ensuring that production does not suffer at the same time. Inventory Control is the process of deciding what and how much of various items are to be kept in stock.) :It is the time that elapses between submission of requirements for anything and the time taken to satisfy the need by supplying the material.C. It also determines the time and quality of various items to be procured.T. 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 Materials Management Organisation. f) LEAD TIME CONSUMPTION (L. 56 . 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. they should be ordered more frequently to reduce the capital locked up at a time in form of inventories. The general pattern of ABC Analysis will be as following: % of Total Items A Items B Items C Items "A" ITEMS :a) Since these items account for over 70% of the total value. so that only the required quantities arrive a little before they required.Rival Many" and the criterion used here is consumed. A B C ANALYSIS: The most important of all analysis is the ABC Analysis "Always Better Control:. 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 . For such items the expected future consumption should be estimated in advance and they should then procured on a planned basis. Usually 3-4 Orders should be placed in a year for such items or annual Rate contracts should be entered into. "C" ITEMS: a) Since these items are too many 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 liberal quantities. 57 . As far as possible. Due to strike.c) Annual or 6-months contracts with scheduled deliveries with a specific period of order are essential. fire. "B" ITEMS: a) The policies for "B" Items in general are intermediate between "A" and "C" Items. two or more suppliers should be selected for each items so that the dependency on one supplier is avoided. the other supplier can be approached. c) Annual or 6-months contracts with scheduled deliveries can be used to an advantage for "B" Items. Delivery schedules for such items should be planned in such a way that the items are consumed within a month on its receipt. lockout or any other eventualities if one supplier fails to supply. re-order points and safety stocks should be fixed for "B” Items and revisions once in a year is adequate. b) Order quantities. denotes Desirable items . V E D ANALYSIS :This Analysis is done to consider the vitality of an item and its effect on production and other services. It is specially used for classification of maintenance spares denoting the essentiality of stocking.when not readily available.when not readily available.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.Stands for Vital items . V E D . c) Annual orders should be placed to reduce paper work and also to take advantage of quantity discount for bulk purchases.which are necessary but do not production would come to a halt. loss of production or dislocation of production work occurs. cause any immediate loss in production. S D E ANALYSIS: - 58 . temporary .is for Essential items . . F S N ANALYSIS :- 59 .refers to Difficult items . S .which are available in indigenous market but cannot be procured easily. this analysis is very useful.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 availability of the material (SDE Analysis). Especially in developing countries where certain items are scare. which are easily available.refers to items. E .refers to Scarce items .High cost items . Items which are to come from far off places or where there is not much of competition in the market or reliable suppliers are difficult to find.This Analysis is based upon the availability position of an item.specially imported and those are in short supply D . H M L ANALYSIS :The cost per items (per unit) is considered for this Analysis and all items are classified as: H M L . "Z" Items – Items whose inventory value is 10% of total inventory value.Fast moving items . depending upon the essentiality of the material.Slow moving items .Non-moving items X Y Z ANALYSIS :XYZ Analysis is to stock what ABC Analysis is to consumption.Here the quantity and rate of consumption are Analysed to classify the items as F S N . level as stated earlier.Items whose inventory value is 70% of total value "Y" Items – Items whose inventory value is 20% of total value. suitable value of Normal consumption is given while calculating the Safety Stock 60 . To counteract the stock outs. 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 hence have to be disposed off. "X" Items . STOCK-OUT COST :The loss incurred by way of production or other-wise due to nonavailability of items is known as stock-out cost. This may be NIL to anytime. Necessary action for procurement and delivery are taken after the review is done. PERIODIC REVIEW SYSTEM :Under this system.Staggered Delivery Schedule: This forms one of the most important inventory control technique in the context of our organization. For doing so the lead-time of supply (for first supply only) and actual requirement by the user is to be considered. Generally in our system Purchase orders are released only once a year with annual requirement as the ordered quantity. b) Insurance against losses due to stock-out of materials. INVENTORY CONTROL MEASURES & PROVISIONING: - 61 . Hence the only way to control inventory build up is to stagger the delivery of the supply of the items. 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 BV–item. SYSTEM OF INVENTORY CONTROL :The objectives of Inventory Control is a) Economy or provisioning at minimum investment and cost without jeopardizing essential production. Items that have uniform consumption pattern throughout the year (Other than spares) monthly schedules should be planned. the items are periodically reviewed depending upon the essentiality of the items for stocks and the consumption pattern. Deliveries should be planned in such a way that the item when supplied can immediately put to use especially for A class items. action would be taken to replenish the stocks to prevent stock-outs. quantity on order and the date of last issue for items which have not moved for 1. Action would also 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. 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. in descending order of value. After identifying such unmoved items. CGM(S) will arrange Inter-area transfers. after carrying out the reutilization check by circulating the items within the company. and wherever SAP has been introduced once in a month. statement of such items at regular intervals in the stores can do this. This statement should indicate the quantity on hand and its value. stock and pending orders.2 or 3 years and above. Compiling INVENTORY CONTROL & PROVISIONING OF SPARE PARTS: - 62 . List of unmoved items should be compiled every six months / one year. further procurement of such items should be stopped. In the case of under stocked-below order level items.It is desirable to periodically review the items where stocks have gone beyond the optimum levels to share the inventory of such items. Over-stocked items list can be generated on the computer every quarter. List of such over-stocked items are to be submitted to CGM(S) by all Area Stores. Here also it would be desirable to order smaller quantities in the initial stage and only after gaining experience by maintaining proper records of consumption for each type of equipment. duly trimmed and adjusted so as not to exceed 10% of the total value of the equipment. which should form the basis for all further requirements.This is a very important subject. Only indenting of first set of Spares for the equipment should be done on the basis of the manufacturers recommended lists of Spare Parts. larger quantities of Spares should be procured. The items covering the last set of Spares will be processed simultaneously along with the equipment in order to ensure availability of full backing of initial Spares for preventive maintenance when the new equipment is put into commission. ERP SYSTEM (MATERIAL MANAGEMENT MODULE) 63 . The Second set of Spares will be provided to cover the maintenance requirements for the third and fourth year of operation of the equipment. 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. most part of the surpluses that accrue constitute the Spare parts. 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 the maintenance scales. It is very important to build up proper consumption data right from the stage of commissioning the equipment. in as much as. 1.FICO(Finance and Controlling) 3.Material Management 2.the online time to time latest status will be available. Revenue items(ZSTK) 3.Sales and Distribution 4.ZSTA.HR(Human Resource) Material Management module consists of Inventory Management(IM) and purchasing. 64 . Stationery items(ZSTA) 4. The online material stock. 1. Coal item(ZFIN) 6.Scrap item(ZSCR) ZSTK materials are stock transferred from one store plant to another plant on STO(Stock Transport Order) and ZCAP. The following material types are mainly available. four modules of ERP(SAP) was implemented VIZ.which is useful for correct administrative decisions and also reduces time delays and repetitive data handling were avoided. Medical item(ZMED) 7. The total stores transactions are being covered in IM of SAP-MM module.. MPN mterial items(ZMPN) 8.ZCOR materials are drawn on requisition which is on direct consumption account.12 store plants and 60 pit stores plants are configured. Repaired item(ZCOR) 5.balance on order status are available throughout the company to review for procurement action.In SCCL. In SCCL.requisition.As this ERP SAP is an integrated application. Capital item(ZCAP) 2. The stores process like GR(Goods Receipt)/GI(Goods Issued) are made in MIGO transaction code in SAP.All material moment like issues. Moreover. timely preparation of control statements to assist proper Inventory control and other material management functions is not possible manually.In GR process the stock is updated and value is updated for revenue items and material document. Therefore.accounting document created. if the store accounting is done manually. In addition to the above there are COLG(Customer Operated Located Godown)and depot agreement are also opted by SCCL.Based on accounting document payment to the vendor is made.there are Rate Contract(RC) available for which the sub order are placed by store plants. The materials requirements are reviewed from time to time in MRP(Material Requirement Planning)and purchase requisition are given. For some of the regular equipment spares. COMPUTERISED STORE ACCOUNTING :In a large undertaking having several units detached far away from each other and the headquarters. in order to introduce the latest techniques of Material Management in our organization. 65 .Then PO(Purchase Order) are placed accotdingly with staggered delivery schedules for optimizing inventory levels. it becomes very difficult to get the Inventory position at any given time.receipts are based on movement types in SAP.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. 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. (All figures are in lakh rupees) STORE 1050 NAME CENTRAL STORES 2009-10 1256.59 2007-08 4372.75 2006-07 2286.69 2005-06 4920.98 2008-09 7677.09 66 .company) TREND OF CONSUMPTION VALUES AS ON 31/03/2010.THE SINGARENI COLLIRIES COMPANY LIMITED (A Govt. 12 4776.47 7647.00 18283.16 24261.01 17056.1150 1250 1350 2250 2251 2350 2351 2450 3150 3250 3450 KGM STORES YLW STORES MNG AREA STORES RG2 AREA STORES RG-OC3 STORES RG-OC1 STORES RG-OC2 STORES BHP AREA STORES BPAAREA STORES MM AREA STORES SRP AREA STORES 17678.01 13327.64 10223.18 16242.61 5870.company) TREND VALUES OF INVENTORY AS ON 31-3-2010 (All figures are in lakh rupees) 67 .02 3752.76 10738.29 19815.78 10958.14 16138.07 154295.10 3721.43 4996.81 14292.41 113756.59 3422.49 7860.14 11848.66 9047.46 3393.05 9310.44 19712.61 3333.54 9574.20 37411.85 102600.05 24389.60 5245.33 144864.03 15753.69 12082.11 9427.99 8094.01 22883.39 11654.99 7693.79 5430.10 21138.11 5237.04 10982.33 5925.62 13762.06 25190.54 160641.27 THE SINGARENI COLLIRIES COMPANY LIMITED (A Govt.83 13353.05 24058.60 7896.67 6400.21 5929.72 8022.38 9990.65 12445.62 1017.10 7074.95 19872. 1 936.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 AREA STORES 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 595.5 1182 1238 2031 1296 1218 1856 3119 2151 1095 1738 429.3 68 .5 20252 18149.8 988.6 517.3 298.7 1217 1997 2009 1107 1756 4165 2576 955.8 990.8 105.5 16966.8 1898 2629 2331 1168 2303 729.5 1852 745.8 19881. Chapter-5 Analysis 69 . 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: 70 .CHAPTER-6 Conclusions Conclusions:In this chapter. Overall.Such items are to be identified.minimization of stocks and avoided costly interruption in operations.It has kept down the investments in inventories.inventory carrying cost and obsolescence losses to the minimum through purchasing economies by the measurement of requirements on the basis of recorded experience. Utility of the items asking more than 1 lakh has to be reviewed to take 71 .the inventory management in SCCL is upto the mark where by adequate supplies of materials and store. 2. 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. e) further action f) Linking up alternate part numbers and elimination o duplicate code numbers so that effective utilization of the available items would be done and unnecessary purchases could be avoided.It also enables the management to make cost and consumption comparisons between operations and periods.Rate contracts requirement.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. d) Orders are released mostly for all the items covered in the op en order to be done immediately on their receipt of agreements. 3.Only the items required are to be procured other wise the items procured will not get consumed and become non-moving. NO AUTHOUR TITLE OF THE EDITION BOOK PUBLISHER PUBLISHING YEAR 72 .BIBILOGRAPHY:- S. 1 Khan .M. M.COM 73 . 3 Prasanna . Pandey .K 2 I.Y.SCCLMINES.Jain P. Chandra Financial management Financial Management Financial Management 3rd Tata MCGraw Hills Vikas Tata McGraw Hills 2007 8th 6th 2004 2006 VISITED WEB SITES:WWW.