Monographs on Refinery Environmental Control- Managment of Water Discharges, February 1990
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Transcript of inventory managment in barauni refinery
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
APROJECT REPORT
ON
INVENTORY MANAGEMENT INBARAUNI REFINAEY
SUBMITTED TO: FACULTY GUIDEMr. MUKESH KUMAR SWAGATA SENGUPTASr. Accounts Officer
SUBMITTED BY: POULAMI GHATAK ROLL NO: L088135
A Report submitted in partial fulfillment of the requirement of M.B.A Programme of
HERITAGE INSTITUTE OF TECHNOLOGY(Affiliated to All India Council for Technical Education)
(An College under west Bengal university of technology Kolkata)
2
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
CONTENT PAGE NUMBER
ACKNOWLEGEMENT………………………………………………….. 0 5
PREFACE……………………………………………………………………. 06
INTRODUCTION…………………………………………………………………. 8 - 14
INDIAN OIL CORPORATION 08
VISSION OF THE ORGANIZATION 14
MISSION OF THE ORGANIZATION 15
ENVIRONMENT MANAGEMENT SYSTEM…………………….. 16
ORGANOGRAM OF DIVISION OF IOCL………………………… 17
FINANCE DEPARTMENT IN BARAUNI REFINERY……….. 18
FINANCIAL DEPARTMENT ORGANOGRAM…………………. 19
Functions of finance department……………………. 20
Objective of finance department…...................... 20
FINANCIAL ANALYSIS OF BARAUNI REFINERY…………. 21
BALANCE SHEET OF BARAUNI REFINERY………………….. 22- 24
INTRODUCTION OF INVENTORY MANAGEMENT………… 25
IMPORTANT CONCEPT IN INVENTORY MANAGEMENT 26
EOQ
26
SAWTOOTH MODEL
27
INVENTORY MODEL
27
JIT
28
INVENTORY MANAGEMENT………………………………………… 29-
PURCHASE PROCUREMENT
PROCUREMENT OF MATERIAL
OBJECTIVE OF PURCHASE 30
3
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY BASIC PRINCIPAL OF PURCHASE 30
PURCHASE POLICY 30
PURCHASE ORDER 31-38
TENDER AND CONCURRENCE
INTRODUCTION 39
TYPES OF TENDER 39-41
MODE OF TENDER 41-44
INVENTORY IN STORE OR IN TRANSIT
ABC ANALYSIS
INTRODUCTION 45-46
ALLOCATION OF ABC ITEMS 47
SEGMENTATION OG ABC ITEMS 47
GRAPH OF SHOWING ABC ITEMS 47
GOODS RECEIVED NOTE
INTRODUCTION OF GOODS RECEIVED NOTE 48-50
A SAMPLE OF GOODS RECEIVED NOTE 51
T CODES IN SAP 52
PAYMENT
SERVICE TAX 53-55
FRIENGE BENEFIT TAX 55
EXCISE DUTY 56
ENTRY TAX 56
TDS 57
CENVAT 57-60
OTHER PAYMENT…………………………………………………………… 61-63
RESEARCH AND MITHODOLOGY…………………………………… 64
OBSERVATION……………………………………………………………… 65
SUGGESTION………………………………………………………………… 66
BIBILIOGRAPHY……………………………………………………………… 67
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
ACKNOWLEGEMENT The satisfaction and euphoria that accompanies the successful completion of any task will be
incomplete without mentioning the names of the people who made it possible, whose
constant guidance and encouragement crown all the efforts with success.
I’m deeply indebted to all people who have guided, inspired and helped us in the successful
completion of this project. I owe a debt of gratitude to all of them, who were so generous
with their time and expertise.
It is my pleasure to place on record my sincere gratitude towards Mr. Avijit Basu(CFM)
IOC Limited, Barauni, Mr. Mukesh Kumar (SCAO) my Project Guides who spent their
precious time providing continuous ideas and expert guidance to my Report work. It was
their direction and encouragement at every moment and step that motivated me to steer the
research work confidently and successfully.
I am also thankful to Prof. Aloke Ray, Director Of Heritage Institute Of Technology &
Swagata Sengupta and Dr. Gagan parekh whose encouragement, moral support provide the
valuable guidance, which has been a source of inspiration to me.
Last but not the Least, thanks to ALMIGHTY for the profuse blessings, which always
back us!!
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY POULAMI GHATAK
Student Id. No. L088135 MBA (FINANCE)
PREFACE
It give me great pleasure to present this project report on “Inventory Management” of Indian Oil Corporation Limited, Barauni Refinery Unit, Begusarai. This project report is intended to fulfill the partial requirement for the completion of Post-Graduation Program.
The real objective behind the partial training and presentation of the report is to gain experience to the actual work environment and the required knock to guide knowledge towards facilitating its application for any professional practical training and close contact with the prevailing system in an organization is of great importance.
Efforts have been made to prepare this Project Report in most simple language. While preparing this Project Report, a care has been taken to make it comprehensive, reliable and analytical to make it easy to understand. Charts and Diagram have been used to avoid difficulties.
UNDER GUIDANCE OF
MR.AVIJIT BASUCHIEF ACCOUNTS MANAGERINDIAN OIL CORPORATIONBARAUNI REFINERY
&
MR. MUKESH KUMARSENIOR ACCOUNTS OFFICERINDIAN OIL CORPORATIONBARAUNI REFINERY
POULAMI GHATAK
6
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY DATE:
PLACE:
INTRODUCTION OF INDIAN OIL CORPORATION
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
INDIAN OIL CORPORATION LIMITED
Indian Oil Corporation Limited (Indian Oil)
is the country's largest commercial
enterprise, with a sales turnover of Rs.1,50,
677 crore and profits of Rs. 4,891 crore for
fiscal 2004. And a sales turnover of Rs.
247,479 crore(US $ 61.70 billion) and profit
of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007- 2008.
Indian Oil is India’s No.1 Company in Fortune's prestigious listing of the world's
500 largest corporations, ranked 116 for the year 2007 based on fiscal 2006
performance. It is also the 18th largest petroleum company in the world. The
company has also been adjudged No.1 in petroleum trading among the national oil
companies in the Asia-Pacific region, and is ranked 325th in the current Forbes' "Global 500"
listing of the largest public companies.
The Indian Oil Group of companies owns and operates 10 of
Indian’s 20 refineries with a combined refining capacity of 60.2 million metric
tonnes per annum(MMTPA, i.e. 1.2 million barrels per day ). These includes two r
refineries of subsidiary Chennai Petroleum Corporation Ltd.(CPCL). The
Corporation’s cross country network of crude oil and product pipelines, spanning
more than 10,000 kms and the largest in the Country, meets the vital energy needs
of the consumers in an efficient , economical and environment-friendly manner.
Indian Oil is investing Rs. 43,393 crore(US $10.8 billion) during the period 2007-
12 in augmentation of refining and pipelines capacities, expansion of marketing
infrastructure and product quality upgradetion as well as in integration and
diversification projects.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
Beginning in 1959 as Indian Oil Company Ltd., Indian Oil Corporation Ltd. was
formed in 1964 with the merger of Indian Refineries Ltd. (Estd. 1958).
In financial parlance, Inventory is defined as the sum of the
value of raw material, fuels & lubricants, spare parts maintaince consumables, semi
processed materials and finished goods at any given point of time. Operational
definition of Inventory would be: “ the amount required raw material , fuels,
lubricants , spare parts and semi-finished goods , stocked for smooth running of the
plant”. Since these resources are idle when kept in store inventories is defined as an
idle resources of any kind having an economic value.
10
Indian refinery ltd.
Refining companyIncorporated
Indian Oil CompanyMarketing
companyIncorporated
Indian Oil Corporation
Merger
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
Process Overview and all the product of barauni
refinery
IOCL is one of the navratan PSU of India. Its an petrochemical manufacturing company
The Refinery processes Imported Low sulphur & High sulphur crude oil to produce:
LPG
Naphtha (SRN)
Motor Spirit (Petrol)
Superior Kerosene Oil (Kerosene)
High Speed Diesel (Diesel)
Light Diesel Oil
Low Sulphur Heavy Stock
Raw Petroleum Coke
Carbon Black Feed Stock
Sulphur
Barauni Refinery, the lifeline of Bihar, meets the demand of vital petroleum products not
only of the State but also for sustenance and growth of industries all around. It has been
acting as a great synthesizer of a traditionally agrarian economy with industrial development
ushering in prosperity, so much so, that the Refinery is referred to as a luminous jewel,
reflecting the development of Bihar.
The Petroleum Products from the Refinery are dispatched through Tank Trucks, Tank
Wagons (Rail) and Barauni-Kanpur-Lucknow pipeline. The pipeline passes through Patna,
Mughalsarai and Allahabad where Marketing Division taps off the products for local
distribution at the respective locations.
The other major industrial establishments near the refinery are :
@ Barauni Thermal Power Station
11
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY @ Hindustan Fertilizer Corporation Ltd. (Closed)
@ National Thermal Power Station, Barh (Upcoming)
MAJOR PROCESS UNITS OF BARAUNI REFINERY :
PROCESS UNITS CAPACITY(‘000 MTPA)
ATM & VACUUM UNIT-I, II & III 6000
DELAYED COKER UNIT-A 600
DELAYED COKER UNIT-B 500
LPG RECOVERY UNIT 192
CATALYTIC REFORMER UNIT 300
RESID FLUIDISED CATALYTIC CRACKING UNIT 1400
DIESEL HYDROTREATMENT UNIT 2200
HYDROGEN GENERATION UNIT 34 “H2” GEN.
SULPHUR RECOVERY UNIT 2*40 MT/DAY “S” PRODN.
As India's flagship national oil company, Indian Oil accounts for 56% petroleum
products market share among PSU companies, 42% national refining capacity and
69% downstream pipeline throughput capacity.
In Barauni Refinery, in the year i.e. 2008-2009 two projects have been undertaken namely:
1. Yield optimization of AVU.12
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY 2. Yield optimization of LTU.
Apart from above measures to improve the profitability of the refinery a no. of
management schemes for improvement & product enhancement are also undertaken like Six
Sigma, TPM, ISRS.
CAPACITY
Indian Oil controls 10 of India's 18 refineries - at Digboi, Guwahati, Barauni, Koyali, Haldia,
Mathura, Panipat, Chennai, Narimanam and Bongaigaon - with a current combined rated
capacity of 54.20 million metric tons per annum (MMTPA) Indian Oil accounts for 42% of
India's total refining capacity.
REFINING
Born from the vision of achieving self-reliance in oil refining and marketing for the nation,
Indian Oil has gathered a luminous legacy of more than 100 years of accumulated
experiences in all areas of petroleum refining by taking into its fold, the Digboi Refinery
commissioned in 1901 .Indian Oil controls 10 of India’s 19 refineries. The group refining
capacity is 60.2 million metric tons per annum (MMTPA) or 1.2 million barrels per day -the
13
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY largest share among refining companies in India. It accounts for 40.4% share of national
refining capacity.
MARKETING
Indian Oil’s countrywide network of over 21,000 retail sales points is backed for supplies by its extensive, well spread out marketing infrastructure comprising 169 bulk storage terminals, installations and depots, 93 aviation fuel stations and 79 LPG bottling plants. Its subsidiary, IBP Co. Ltd, is a stand-alone marketing company with a nationwide retail network of over 2500 sales points. Indian Oil caters to over 53% of India's petroleum consumption.
SERVO Technical Services MarketingTotal Fuel Management/ Consumer PumpsCommercial/Reticulated LPGLPG Business (Non-Fuel Alliances)Retail Business (Non- Fuel Alliances)IndianOil Aviation ServiceLoyalty Programs
RESEARCH & DEVELOPMENT
Indian Oil’s world-class R&D Centre has won recognition for its pioneering work in
lubricants formulation, refinery processes, pipeline transportation and bio-fuels. It has
developed over 2,100 formulations of SERVO brand lubricants and greases for virtually all
conceivable applications – automotive, railroad, industrial and marine – meeting stringent
international standards and bearing the stamp of approval of all major original equipment
manufacturers. The Centre has to its credit over 90 national and international patents. The 14
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Centre has recently incorporated a subsidiary company for commercializing its innovations
and technologies.
The wide range of SERVO brand lubricants, greases, coolants and brake fluids meet
stringent international standards and bear the stamp of approval of all major original
equipment manufacturers. The Centre has to its credit over 60 national and international
patents, including 5 from US.
Vision of the corporation
15
ETHICS
TECHNOLOGYPEOPLE
ENVIRONMENT
CUSTOMARINNOVATION
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
A major diversified, transnational, integrated
energy Company, with national leadership and a strong environment
conscience, playing a national role in oil security& public distribution.
Mission of the corporation
To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through value of products and services, and cost reduction.
To maximize creation of wealth, value and satisfaction for the stakeholders. To attain leadership in developing, adopting and assimilating state-of- the-art
technology for competitive advantage. To provide technology and services through sustained Research and
Development. To foster a culture of participation and innovation for employee growth and
contribution. To cultivate high standards of business ethics and Total Quality Management for
a strong corporate identity and brand equity. To help enrich the quality of life of the community and preserve ecological
balance and heritage through a strong environment conscience.
16
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
ENVIRONMENT MANAGEMENT SYSTEM
Barauni Refinery has a full-fledge Environment protection cell. The worth nothing is that
this cell was established 36 years back in 1975. In India oil , Environment protection has
always remained a thrust area. The Environment protection cell having qualified engineer’s
coordinates all the activities required to achieve continuous improvement in environment
performance related to Environment Management in the Refinery.
The Refinery has a beautiful ecological park spread over an area of 75
acres. The park developed with in house expertise and resources has lush green lawns large
17
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY variety of trees and shrubs and wonderful ECO pond where flora & fauna and aquatic life are
thriving on treated effluent.
ORGANOGRAM OF DIVISION OF IOCL
18
IOCL
MARKETING DIVISION
PIPELINE DIVISION
REFINERY DIVISION
R&D DIVISION
ASSAM OIL DIVISION
PANIPATH
GUWAHATI
HALDIA
BARAUNI
GUJARAT
MATHURA
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
FINANCE DEPARTMENT
All the divisions have their respective finance functions within their structure. For coordination of the finance functions of all the divisions and to provide guidelines for financial matters , a corporate finance department is also functioning under director (finance) in the corporate office.
For the purpose of meeting the requirement of companies act,
consolidation of balance sheet and the profit and loss accounts of the divisions and the R&D Centre is done by marketing divisions , Mumbai. Finally a consolidated balance sheet and profit and loss accounts is prepared for the corporation as a whole. This project looks at the finance functions within the finance department in the refinery divisions.
The general manager ( Finance) is the head of the finance department in the refinery
divisions. The E.D ( Finance) is appointed by the board and is delegated with specific financial powers. He also acts the principal staff advisor to the director on all financial matters. All the proposals involving financial implications are required to bear the concurrence of the E.D ( Finance) before they are submitted for the approval of director. Similarly at refinery units the Deputy General Manager( Finance) / Chief Finance Manager / Senior finance manager acts as a principal staff advisor on all principal matters to the Executive Director / general Manager.
19
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
Finance department organogram
20
2011-2012
S . C. BHANSALI CFM
S . C. BHANSALI CFM
A.BASU ( SFM)
A.BASU ( SFM)
A.K. LAL SFM
A.K. LAL SFM
B. SETHIFM
S. KUMAR(DFM)
V.D JHA(SACO)
R.N.PRASAD(SACO)
A.K.RAKSHIT(ACO)
H.SEKHAR(ACO)
R.AGARWAL(SACO)
L.P.SHARMA(SACO
V.C.JAISWAL(ACO)
S.LACHHIRAMKA (ACO)
A.SONI( FM)
M.KUMAR(SACO)
R.K.SINGH(SACO)
A.KUMAR(SACO)
SANTOSH KUMAR(SACO)
SUMIT AGARWAL(ACO)
R.P.SINGH(DFM)
G.SHARMA(SACO)
A.K.SINHA(SACO)
U.K.PRASAD(ACO)
U.S.SARAWAT(ACO)
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
FUNCTIONS OF THE FINANCE DEPARTMENT
Management of financial resources for meeting the cooperation’s programmes of operations and capital expenditure including investment of surplus fund , if any.
Ensuring uniform financial and accounting policies and procedures to the extent possible in the divisions.
Establish and maintain a system of financial scrutiny and internal checks and render advice on financial matter including examination of feasibility studies and detailed Projects report.
Establishment and maintain an appropriate system of budgetary control and management information system for different levels of the management.
Carry out periodical/ special studies with a view to control costs , reduce expenditure, economy in administrative expenditure, improve efficiency to maximize profitability of the corporation.
Maintain the financial accounts , cost accounts and other relevant books and records in accordance profitability of the corporation.
Maintain the financial accounts , cost accounts and other relevant books and records in accordance with the various statutory and other requirement.
Advice on corporate cash planning, credit policy and pricing policies of the corporation.
Ensuring that the corporation acts in all financial and accounting matters as per approved policies of the corporation within the framework of government policy for public enterprises.
OBJECTIVE OF FINANCE DEPARTMENT
To ensure adequate return on capital employed and maintain a reasonable annual dividend on its equity capital.
To ensure maximum economy in expenditure. To generate sufficient internal resources for financing partly / wholly expenditure
on new capital Project. To develop long term corporate plans to provide adequate growth of the activities
of the corporation. To endeavor to complete all plans project within stipulated time and within
stipulated cost estimate.
21
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
FINANCIAL ANALYSIS OF BARAUNI REFINERY
In a dynamic business environment, financial performance is the lifeline, which sets the
basic foundation of the organization. Indian Oil is largest business organization and we have
drawn strength from our systems, procedures and transparent financial management.
The Finance function with the focus on profitability, cost cutting, effective forecasting,
innovative new financial products and optimum risk management is a key to management
information & decision support system.
Finance with the greater focus on simplifying and consolidating financial procedures,
following best practices of corporate governance, customer satisfaction, skill development
assists in achieving the goal of excellence with continuous improvement.
I am happy to note that in line with the expectations of the emerging global business
requirements; our Finance has re-scripted the Accounts and Finance manual. The new
manual has taken care of SAP implementation requirements, new accounting standards
issued by the Institute of Chartered Accountants of India and the changed policies and
guidelines .
I earnestly appreciate the initiative taken by the Finance Department to update the manual,
which I am sure this will greatly enhance the efficiency in our working and meet the
stakeholder’s expectation.
Why SAP Was Selected Support for open XML Java standard Integration with the existing SAP® ERP application Harmonized with all other components of the SAP Net Weaver® technology
platform Integration tool for all SAP solutions Support for industry-standard as Rosetta Net and chemical industry data exchange
22
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
INDIAN OIL CORPORATION LIMITED
Barauni RefineryBalance Sheet as at 31 March
2010
Amou
nt in Rs.
Schedule March-11 March-10
SOURCES OF FUNDS
Shareholders' Funds:
a) Share Capital "A" 0 0
b) Share Capital Suspense Account "A1" 0 0
c) Reserves and Surplus "B" -2723863582 6558192042
-2723863582 6558192042
Regd. Office A/C (Division balances)
Loan Funds
a) Secured Loans "C" -100004550 -173014641
b) Unsecured Loans "D" 0 0
-100004550 -173014641
Deferred Tax Liability(Net)
Foreign Currency Monetary Item Translation Difference Account
"D1"0 0
TOTAL 2823868132 6385177401
23
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
PARTICULARS SCHEDULE MARCH 11 MARCH 10
APPLICATION OF FUNDS
FIXED ASSETS AND INTANGIBLE ASSETS:
1.1 Fixed Assets "E"
a) Gross Block2856030525
5 27614632652
b) Less : Depreciation-
13032158549 -11942246629
c) Less : Impairment Loss
d) Net Block1552814670
615672386023
1.2 Intangible Assets "E1"
a) Gross Block 69240362 72671073
b) Less : Amortisation -55560292 -57649718
c) Less : Impairment Loss
d) Net Block 13680071 15021355
1.3 Dismantled Capital Assets 42994900 42207966
1.4 Capital work in Progress "F" 8434382289 2996169812
24019203966
18725785156
Investments "G" 2500 2500
Advances for Investments "G-1" 0 0
Finance Lease Receivables
Current Assets, Loans and Advances
a) Inventories "H"1215990182
89554181512
b) Sundry Debtors "I" -62252395 -41562195
b) Cash and Bank Balances "J" 1200 203852
c) Other Current Assets "J1" 5101115 0
e) Loans and Advances "K" 1273103123 1086257491
13375854871
10599080660
Less: Current Liabilities and Provisions
"L"
a) Current Liabilities-
2699959331-9494821128
b) Provisions - 0
24
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY 8488589290
-11188548621
-9494821128
2187306250 1104259531
c)Inter-Division Balances 487734816 369943248
d) Intra-Division Balances-
23870674911 -26585167836
NET CURRENT ASSETS(5-6)-
21195633845 -25110965057
Miscelleneous Expenditure ( to the extent not written off or adjusted)
"L-1" 0 0
TOTAL 2823572621 -6385177401
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES "Q"
NOTES ON ACCOUNTS "R"OTHER SCHEDULES FORMING
PART OF ACCOUNTS "S" to "X"
25
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
INVENTORY MANAGEMENT
Inventory - A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.
Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be maintained
A TYPICAL MM CYCLE IN INVENTORY
26
INVOICE VERIFICATION
REQUIRMENT
GOODS RECEIPT RFQ
PO/CALL UP CREATED CONTRACT
PAYMENT
INVOICE
DELIVERY
PO
MRP
PM/PS
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
IMPORTENT CONCEPTS IN INVENTORY MANAGEMENT
Models for Inventory Management:
EOQ
EOQ minimizes the sum of holding and setup costs Q = 2DC o/Ch
D = annual demandCo = ordering/setup costsCh = cost of holding one unit of inventory
27
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
SAWTOOTH MODEL
INVENTORY MODEL UNDER UNCERTAINTY
28
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
JUST IN TIME (JIT) PRODUCTION
Just-in-time(JIT) is defined in the APICS dictionary as “ a philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity”. It also has been described as an approach with the objective of producing the right part in the right place at the right time ( in others words, ‘ just - in –time). Waste results from any activity that adds cost without adding value , such as the unnecessary moving of material , the accumulation of excess inventory or the use of faulty production methods that creates products requiring subsequent rework. JIT ( also known as lean production or stockless production) should improve profits and return on investment by reducing inventory levels (increasing the inventory turnover rate), reducing variability, improving products quality, reducing production and delivery lead times and reducing other costs( such as those associated with machine setup and equipment breakdown). In a JIT system underutilized( excess) capacity is used instead of buffer inventories to hedge against problems that may arise. JIT applies primarily to repetitive manufacturing processes in which the same products and components are produced over and again. The general idea is to establish flow processes (even when the facility uses a jobbing or batch process layout) by linking work centers so that there is an even , balanced flow of materials throughout the entire production process , similar to that found in an assembly line. To accomplish this, an attempt is made to reach the goals of driving all inventory buffers towards zero achieving the ideal lot size of one unit. The basic elements of JIT were developed by Toyota in the year 1950’s and became known as the Toyota production system (TPS) . JIT was well established in many Japanese factories’ by the early 1970’s. JIT began to be adopted in the U.S in the 1980’s ( General Electric was an early adopter) and the JIT / lean concepts are now widely accepted and used.
29
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
30
INVENTORY MANAGEMENT
PURCHASE PROCEDURE
INVENTORY IN STORE OR IN TRANSIT
PAYMENT
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
PURCHASE PROCRDURE
PROCUREMENT OF METERIAL
0BJECTIVE OF PURCHASE1. To maintain continuity of supply so as to support production schedules.
2. It must ensure minimum investment in stores and materials inventory.
3. It must avoid duplication of purchases, wastes , obsolescence, and costly delays.
4. It must maintain quality standards based on suitability criterion.
5. It must procure materials at the lowest possible cost consistent with quality and service requirements.
6. It must maintain material costs such that the company is in a competitive position.
BASIC PRINCIPLE OF PURCHASING 1) Buying the right quality, 2) Buying the right quantity, 3) Buying the right price, 4) Buying form the right source, 5) Buying at the right time, & 6) Buying for the right place. PURCHASE POLICY AND PROCEDURE1) A written well documented policy is helps in guiding the purchasing process. 2) It eliminates the necessity to make fresh decisions every time when a comparable
situation arises. 3) It contains details of approval authority of purchasing people. 4) It should mention how many vendors to be maintained and their preferences rules.5) Policy sets down the minimum no of quotes to be collected for selection & finalization.6) In case of deviation it should give the rules for getting sanction from higher authority.7) Penalty, Performance Guarantee/Warranty claims clauses to be mentioned.8) Credit terms of purchases should be specified in the policy. 9) It should address issue of reciprocal buying.
31
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Purchase Order
FOA/LOA shall be regularize through a purchase order(PO). All POs shall be prepared through SAP as per PO release strategy and shall be issued under the signature of authorized officer of material Department as per DOA
A completed purchase requisition will be reviewed and approved in the Purchasing Department according to the University’s policy for requisition approval. Once the requisition has been approved, it will be used to create a Purchase Order (PO).
When the supplier receives their copy of the PO and confirms acceptance of the information and terms, the PO becomes a formal contract between the University and the supplier for that specific transaction.
Both parties are required to comply with the terms on the PO as they would with a regular contract.
Two copies of PO shall be sent to the vendor one of which should be signed and sent back to the vendor as a token of acceptance.
Annual rate contract with approved vendor wherever possible may be entered into for supply of regular consumables on staggered delivery basis is reduce the inventory level.
For purchase order release through SAP on line PO release system, signed copy of PO will not be required for internal use and follow on process of GR , payment.
The Purchasing Department will send a copy of the PO to the employee to confirm that the PO was sent to the supplier and to act as documentation during the receiving process
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
A COPY OF PURCHASE ORDER ON BARAUNI REFINERYIndian Oil Corporation Limited
(Refineries Division)P.O. Barauni Oil Refinery
Barauni PIN-851114
_________________________________________________________________
Vendor Code-10215577KANORIA CHEMICALS& INDUSTRIES LTD71 PARK STREET,PARK PLAZAKOLKATA-700016West BengalTel.:Fax :Email:
We are pleased to forward here with a document for your reference and action. For any further clarifications please use following contact information:
Purchasing Document Number: RBRM10V057/23353974Document Date : 05.04.2011Name & Designation : ,EMAIL :PH :FAX :
Corporate Website: http://www.iocl.com/Corporate Tenders Site: http://www.IndianOilTenders.com/_________________________________________________________________Regd. Office: G-9, Ali Yavar Jung Marg, Bandra(E), Mumbai-51,India
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Vendor Code:10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDERKANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Payment Terms: PO No.:RBRM10V057/2335397471 PARK STREET,PARK PLAZA See Details Below PO Date:05.04.2011
West Bengal Incoterms: FOR Total items on PO = 1 DESTINATION Tot PO Amt(INR): 2,827,185.00Tel No:Fax No:
FOR ALL CORRESPONDENCE PLS. QUOTE PO No. AS ABOVE.
Dear, sir/ Madam
Subject to the terms and conditions and instruction given herein, over leaf(ifany) along with enclosures please dispatch / deliver the following material.Unless otherwise specified at item level.Supply to Plant: 9020, Barauni RefineryStore: REVN, Revenue Store.Sr.No. Material Code UOM Quantity Unit Price AmountGROUP: 1PROCESS CHEMICALSHYDROCHLORIC ACIDFORMULA: HClSTRENGTH: 30%GENERAL APPERANCE: CLEAR YELLOWSPECIFIC GRAVITY 27 DEG.C: 1.145HYDROCHLORIC ACID CONTENT: 30.0%SULPHATES CONTENT: 0.1%IRON CONTENT: 0.02%RESIDUE ON IGNITION: 0.1%FREE CHLORINE&BROMINE: 0.02%STANDARD CONFORM TO: IS-265/1973SULPHATES (AS SO2): 0.05%00010 8822320574 TO 1,500.000 1,884.79 2,827,185.00 Tone (metric tons) INR /1 TO INRHYDORCHLORIC ACID, IS 265/1993, BW GRADE
Cenvat(Invt.) = 10.000 % E Cess(Invt.) = 2.000 % SE Cess(Invt.) = 1.000 % CST = 2.000 % Delivery Schedule: 04.04.2012 ; Qty = 1,264.769
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Vendor Code:10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDERKANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Payment Terms: PO No.:RBRM10V057/2335397471 PARK STREET,PARK PLAZA See Details Below PO Date:05.04.2011West Bengal Coll.Ref.:RBRM10V057
Sr.No. Material Code UOM Quantity Unit Price AmountItem Text:SPECIFICATIONS OF HYDROCHLORIC ACIDTOTAL ACTIVITY(AS HCL),PERCENT BY WT :30(MIN)RESIDUE ON IGNITION,PERCENT BY WT :0.01(MAX)SULPHATES(AS H2SO4),PERCENT BY WT :0.1 (MAX)IRON(AS FE),PERCENT BY WT :20PPM MAXFREE CHLORINE AND BROMINE(AS HCL),PERCENT BY WT:5PPM(MAX)SULPHITES(AS SO2),PERCENT BY WT :0.05(MAX)HEAVY METALS(AS PB),PERCENT BY WT :0.002(MAX)ARSENIC(AS AS),PPM MAX :5PPM(MAX)MERCURY(AS HG),PPM MAX :3PPM(MAX)STANDARD CONFORMS TO :IS 265: 1993 BW GRADE
NOTE : PLEASE IGNORE TECHNICAL SPECIFICATIONS MENTIONED ELSE WHERE INTHE PURCHASE ORDER OTHER THAN THE SPECIFICATIONS MENTIONED IN THE ITEMTEXT DULY ACCEPTED BY YOU.
______________________________________________________________________________________________________
Total PO Amount(INR):Exclusive of Header and Item conditions2,827,185.00Rs.TWENTY-EIGHT LAC TWENTY-SEVEN THOUSAND ONE HUNDRED EIGHTY-FIVE ONLY
______________________________________________________________________________________________________
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY 10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE
ORDER(cont.)KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INR PO number:RBRM10V057/23353974 PO Date:05.04.2011
______________________________________________________________________________________________________
Header Text:TERMS AND CONDITION :-THIS HAS REFERENCE TO YOUR OFFER NUMBER SALES-21/65 DATED 20.01.2011 AGAINST
OUR NIT NO.RBRM10V057, OUR FOI DTD.04.04.2011 AND ALL SUBSEQUENT CORRESPONDENCES UP TO AND INCLUDING YOUR E-MAIL FOR PRICE BREAK-UP DATED 04.04.2011, WE ARE PLEASED TO ISSUE THIS ORDER FOR SUPPLY OF HCL AS PER OUR SPECIFICATION.
1. 100% PAYMENT WILL BE RELEASED WITHIN 30 DAYS AFTER RECEIPT AND ACCEPTANCE OF MATERIALS AT OUR STORES.
2. EXCISE DUTY AT ACTUALS WILL BE PAID EXTRA WITHIN CDD. THE PRESENT RATE OFEXCISE DUTY BEING @ 10% AND CESS @ 3%. ANY INCREASE IN EXCISE DUTY BEYOND
CDD SHALL BE TO VENDORS ACCOUNT.
3. UNDER RULE 11 OF THE CENTRAL EXCISE RULES 2001 EFFECTING FROM 01.07.2001,EXCISABLE GOODS SHALL BE DELIVERED FROM THE FACTORY OR A WAREHOUSE
ONLY UNDER ANINVOICE WHICH IS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE SAID
RULE.
4. OUR NEW ECC NUMBER IS AAACI1681GXM079 W.E.F 01.12.2001 (AGAINST OLD ONE OF12-01070017) AND CODE OF CENTRAL EXCISE RANGE IS-120107 DIVISION CENTRAL
EXCISEDIVISION, CENTRAL REVENUE BUILDING. ANNEX, BIR CHAND PATEL MARG, PATNA,COLLECTORATE CENTRAL REVENUE BUILDING, B.C.PATEL MARG, PATNA. OUR PAN NO.
IS AAA C1 1681 G.
5. KINDLY ENSURE TO SEND A DUPLICATE COPY OF THE INVOICE FOR TRANSPORTERFULFILLING ALL REQUIREMENTS AS PER EXCISE RULE ALONGWITH CONSIGNMENT
FOR TAKINGCREDIT UNDER RULE 57G. OTHERWISE THE CENVAT AMOUNT WILL BE DEDUCTED
FROM YOURBILL.
6.SALES TAX @ 2% WILL BE PAID EXTRA. .C. FORM WILL BE ISSUED BY US. TAX PAYERIDENTIFICATION NO. (TIN) NO. FOR BIHAR VAT = 10360215078. TAX PAYERIDENTIFICATION NO. (TIN) NO. FOR CST = 10360215175. ANY CHANGES IN TAXES ANDDUTIES WITHIN CDD WILL BE AT OUR ACCOUNT AND BEYOND CDD WILL BE AT
VENDORSACCOUNT.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDER(cont.)KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INR PO number:RBRM10V057/23353974 PO Date:05.04.2011
______________________________________________________________________________________________________
7. FREIGHT CHARGES WILL BE PAID EXTRA RS.1600/- PER MT. FREIGHT CHARGES WILL BEDIRRECTLY PAID TO THE VENDOR.
8. TRANSIT INSURANCE WILL BE ARRANGED BY YOU AT YOUR COST.
9. WE ARE ENCLOSING HEREWITH BIHAR ROAD PERMIT NO. __________________ .
10. FIRM PRICE : THE PRICE WILL REMAIN FIRM TILL THE EXECUTION OF THE ORDERQUANTITY OR CONTRCTUAL DELIVERY DATE FOR TOTAL QUANTITY WHICH EVER IS
EARLIER
11. PLEASE WRITE COMPLETE DESCRIPTION, ITEM CODE ( 10 DIGIT), PURCHASE ORDER NO.
ETC. ON THE CHALLAN/ INVOICE AND VENDOR HAS TO PRINT/ PASTE A SLIP/ WRITE THE
ITEM CODE (* * * * * * * * * *) ON THE PACKING OR BOX OR DRUM ETC. FOR EASYIDENTIFICATION OF THE MATERIALS AT OUR END
12. CONCENTRATION VARIATION : UPTO +/- 0.5% SHALL BE CONSIDERED WITHIN TOLERANCE
LIMIT.
13. WEIGHT VARIATION : UPTO +/- 0.5% (100% BASIS) ON LYE WEIGHT WILL BE TREATEDWITHIN THE TOLERANCE LIMIT.
14. DELAYED DELIVERY : THE TIME AND DATE OF DELIVERY OF STORES/ MATERIALS/EQUIPMENTS AS STIPULATED IN ORDER SHALL BE DEEMED TO BE THE ESSENCE OF THECONTRACT. IN CASE OF DELAY IN EXECUTION OF THE ORDER BEYOND THE DATE OF
DELIVERY
AS STIPULATED IN THE ORDER OR ANY EXTENSIONS SANCTIONED. THE OWNER MAY AT HIS
OPTION EITHER.
(I) ACCEPT DELAYED DELIVERY AT PRICES REDUCED BY A SUM EQUIVALENT TO ONE HALF OF
ONE PERCENT (1/2%) OF THE VALUE OF ANY GOODS NOT DELIVERED OR EVERY WEEK OF DELAY
OR PART THEREOF LIMITED TO A MAXIMUM OF 5% OF THE TOTAL ORDER VALUE.REPORTING OF MATERIAL AT OUR STORES WILL BE TREATED AS DATE OF RECEIPT.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDER(cont.)
KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INR PO number:RBRM10V057/23353974 PO Date:05.04.2011
______________________________________________________________________________________________________
CANCEL THE ORDER IN PART OR FULL AND PURCHASE SUCH CANCELLED QUANTITIES FROM
ELSEWHERE ON ACCOUNT AND AT THE RISK OF VENDOR, WITHOUT PREJUDICE TO ITS RIGHT
UNDER (I) ABOVE IN RESPECT OF GOODS DELIVERED
15. MSDS/TREM CARDMSDS/TREM CARD are required to be carried along with each tanker and theinstructions of safety must be followed strictly by the transporters.
16. P.P.Es(Personnel protective equipment’s)The drivers/khalasis must carry proper Personnel Protective Equipment’s(PPE)via :ACID/Alkali proof Hand Gloves, Helmet, Gumboot/ Safety shoes, Google, Apron up toknee high etc., related to industrial safety, with each tanker and wear the sameduring unloading of the materials from tanker.In case it is found that thedrivers/khalasis do not have the proper P.P.Es with them or not wearing the same,they will be fined with Rs.1000.00 in each occation,apart from taking othermeasure as may deemed fit.
17. Quantity Variation :- +/- 1.0 % is applicable.
18. Please arrange to submit PBG for 10% order value. The PBG should come fromyour Banker directly to us. PBG should valid for Contractual Delivery + 6 months.
19. SEALING OF TANKERTanker carrying the material shall be sealed properly to avoid any contamination in transit. Vendor has
to check all measure to avoid contamination and propersealing of material in transit.
20. GPCAll other terms and conditions shall be as per our GPC (General Purchase Conditions) which is duly
accepted by you along with your offer.
21. Testing and Sampling : You will send a sealed sample along with each supply. Material is to be sent preferably in single chamber tankers and sample will be drawn by our lab. in presence of driver of tanker. Our lab. report will be final and binding to vendor. Payment will be made in accordance with our lab. Test report.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY 10215577 Qtn.Ref.:QR-7/1/P23 PURCHASE ORDER(cont.)KANORIA CHEMICALS Qtn.Dt.:20.01.2011& INDUSTRIES LTD Currency:INR PO number:RBRM10V057/23353974 PO Date:05.04.2011
______________________________________________________________________________________________________
In case variation in quality more than that of permissible limit sealed sample will be referred for testing. IOCL will be at liberty to reject any or all supply
which will not be found in line with our specification based on our lab. report.IOCL BARAUNI REFINERY lab report is final and binding to the vendor.
22. Schedule of supply : 250 MT ( +/- 25%) per month starting from first week ofApril'2011. IOCL will be at liberty to ask the vendor for any change in quantitybased on our requirement of plant and plant capacity.
23. Transporter to be advised by vendor for observance of all safety rule ofRefinery.24. Tanker should have all the valid documents as per traffic rule without whichtankers will not be permitted to enter Refinery premises. TANKER MUST FOLLOWGENERAL REGULATORY REQUIREMENTS UNDER MOTOR VEHICLES,RULES, 1989
ENCLOSE ASANNEXURE-A.
25. Our basis of ordering is FOT Destination and IOCL have no responsibility tillthe material is received at our Stores. Vendor should take sufficient care tosupply the right quality of material as per our specification.26.SUBMIT E-PAYMENT FORM ATTACHED ALONG WITH THIS SUPPLY. ALL PAYMENT
WILL BEE-PAYMENT. SO YOUR SUPPLY DOCUMENT MUST INCLUDE FORMAT FILLED UP ALL
COLUMN WITHSIGNATURE AND COMPANY SEAL FAILING WHICH PAYMENT WILL NOT BE RELEASED.
PLEASEIGONORE THIS IF YOU HAD ALREADY SUBMITTED THE SAME.ALSO MENTION THE PO
NUMBERAGAINST WHICH YOU HAD SUPPLIED THE DOCUMENT.
For and on behalf of INDIAN OIL CORPORATION LIMITED P N Kumar Chief Materials Manager
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
TENDER AND CONCURRENCE
The objective of Financial Concurrence is protection of financial interests of the Company in the decision making while ensuring financial propriety as a part of internal control system. The internal control is exercised through the vetting and concurrence by Finance department so that decision making is as per policy guidelines, rules, regulations, provision of budgets, etc. and it is not detrimental to the financial interest of the Company.
The financial concurrence facilitates achievement of transparency in the decision making which is subject to the scrutiny of various Government agencies like audit, Vigilance etc.
TYPES OF TENDER
They should follow tender system to procure materials at the most competitive rates meeting quality parameters. There should be three kinds of tender which are in vogue, namely, open tender, limited tender and single/proprietary item tender.
OPEN TENDER LIMITED TENDER SINGLE TENDER
OPEN TENDER In this procedure, practically any contractor can submit a bid for the job. This
method was probably the traditional method until more sophisticated techniques were accepted. The process begins by the placing of an advertisement in trade, magazines and newspapers highlighting the significant features of the project. This method of tendering has the benefit of attracting number of tenders and hence the price the obtained are usually very competitive.
For items of regular consumption nature where source of supply have already been established and where the list of approved vendors is maintained duly updated from time to time , press tender need not to be invited even if the estimated value is more than Rs. 50 lakhs but approval of competent authority for waiver of press tendering s to be taken
Advantage of open tendering:
1. Unknown contractor can tender for the work 2. Open tendering secures maximum competition.3. There is no restrictive list of tenders, which does not allow favoritism – a valid point for
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY local authorities who are publicly accountable.4. There is no obligation to tender therefore all tenders received will be genuine.
Disadvantage of open tendering:
1. Cost of tendering is expensive to the client who must bear the cost of reproducing multiple copies of drawing, bills of quantities, etc.
2. The wrong contractor can be chosen. Little may known about the contractors – their record, experience, standard of workmanship, etc.
3. The lowest tender may not necessarily be a “bargain”. Choosing a low tender may result in.. poor work – a large number of, or even permanent, defects may occur unless there is close supervision by the client’s agent.. poor organization – late completion, specialist subcontractors delayed, etc.
4. It is lengthy operation requiring skilled estimating, the cost of which must be recovered on the job by the contractors. The higher the proportion of unsuccessful tenders the higher the cost to be recovered on the job.
5. A contractor may be awarded work for which he has little or no experience and which he be ill-equipped to deal with.
The use of open tendering on public sector contracts is required by law in several developing countries. But In many countries, private sector clients generally avoid open tendering.
LIMITED TENDER Limited Tender shall be considered in case enquiries are sent to at least three registered
vendors. There will be flexibility to send enquiries to less than three vendors in case registered vendors are less than three. As far as possible single tender should be avoided. However, single tender can be called for the following reasons :-
Proprietary in nature. Specific items from statutory authorities/Authorized Dealer/
Stockiest/manufacturers/ Govt. Dept.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Spares from original equipment manufacturer. Urgency of the requirement certified by concerned Manager/HOD of the
department giving justification on indent. Any single response received from an open tender or limited tender shall be treated as single tender and can be opened with the approval of HOD of Purchase/Commercial dept. duly concurred by Finance Dept.
SINGLE TENDER single tender should normally be avoided . however in case of emergencies ,
specialized jobs or in special circumstances , to which reason to be recorded, dingle tender may be issued. Approval of the competent authority within whose power the approval of award of job lies but not above the rank of GM should be obtained for issuing of single tender equity.
In order to follow uniform procedure by all department concerned , procedure to line up an agency and award of job under single tender/ emergency situation shall be prepared by the unit and got approved by the unit head.
Where an item has been identified or specified by process licensor and approved by the general manager that the nature of the item is proprietary of single manufacture and no other substitute material is acceptable for technical reason.
Slandered brand items are also permissible on single tender basis provided there are strong justification which shall be recorded in writing.
Invitation of Tender / Mode of Tendering / Tender opening
While concurring the proposals, it shall be ensured that the guidelines provided for invitation of tenders, mode of Tendering and Tender opening as per Materials Management Manual / Works Procedure Manual have been followed. Such guidelines generally relate to pre-qualification criteria, special conditions of contract, tendering system, publication of tender notice, tender fee/EMD, amendment/extension, tender opening, numbering of tenders, authentication of cuttings/ over writings, witnessing of tender opening, etc.
Single bid system:
In single bid system, offers are invited in single part in sealed envelope. Single bid system of tendering shall generally be followed where estimated
value of the procurement is less then Rs. 50.00 lakhs and technical specification are a comprehensive and deviation may not be envisaged.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Stages in single bid system
In single bid system they first prepare technical specification with that they making the price bid and after checking all the product with their quantity and price the prepare the CS. the procedure are as follows,
Two bid system:
In case where detailed Engineering specification are not worked out by the Engineering Department or the specification are not comprehensive / well, and the scope involves design work also to be done by the bidder , a system of two part tendering shall be adopted.
Two bid system of tendering shall be followed where estimated value of the procurement is more than Rs.50.00 lakhs.
However indenter / mererial department consider it necessary to issue the enquiry under two bid system, two bid system can be followed irrespective of any value limit.
Tender should be asked to submit Earnest Money Deposit along with technical bid only. In case of bank guarantees, if these are sent directly by the bank, a certified copy of the said BG shall be enclosed along with the techno commercial offer.
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Technical specification
Price bid
Cs prepared
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
Stages in two bid system
:
Tender committee
The Tender Committee will consist of head of Purchase, Works and Finance Dept. Representative of the concerned department may be co-opted wherever necessary. Tender Committee is empowered for final recommendation to the Competent Authority mainly for the raw materials and other materials wherever value of the procurement is Rs. 10 lacs and above.
Consideration , evaluation and recommendation to the competent authorities for approval of the offers/tenders for purchase, works, disposal of surplus/obsolete/scrap items of assets and service contracts shall be done by a tender committee whose constitution shall be as follows :
One representative from Finance Depts. One representative from Materials/Contract Cell/Tendering Deptt. One representative from the user deptt.
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Technical specification
Check by expert
Technically accepted CBA prepared
Price bid open CS prepared
Tender committee
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY The representatives from the other depts. shall be nominated one
grade higher than the Finance member. The nomination of the Finance member shall be as per guidelines in this behalf. If no officer in appropriate grade is there in the department, the officer in the next grade shall attend the Tender Committee meeting. In case of proposals received from EIL and others, our consultants for Plan projects, it is not necessary to constitute tender committee and proposals may be examined by the respective department for approval of competent authority
Consideration by tender committee shall not be required in case of
proposals on single tender/proprietary basis. However, proposals involving lone offer/lone technically offer shall be considered by Tender Committee. Further, the recommendations of the tender committee shall also be concurred by Finance (by an authority not lower than the finance representative in T.C.) irrespective of the fact that the T.C. member happens to be the concurring authority for approval of the proposal.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
INVENTORY MANAGEMENT AND STORES
ABC ANALYSIS
1. Classifies items based on the annual usage value (AUV)
2. Identifies a small percentage of items which account for most of the total inventory value
Pareto’s law applied to inventories
The relationship between the percentage of items and the percentage of AUV followsa pattern
A – about 20 % of items account for about 80 % of the AUV
B - about 30 % of items account for about 15 % of the AUV
C - about 50 % of items account for about 5 % of the AUV
Different Controls used with different classes
A Items: High priority – Tight control including complete accurate records, regular and frequent review by management, frequent review of demand forecast and close follow-up and expediting to reduce lead time
B Items: Medium priority – Normal Control C Items: Lowest priority – Simplest possible control. Periodic review system. Order
larger quantities and carry sufficient safety stock.
“ A” ITEMS
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
For "A" category items relating to
(I) Forecasting,
(II) Material planning,
(III) Value analysis,
(IV) Lead time analysis,
(V) Market research, source selection, source development and follow-up
(VI) Safety stock determination,
(VII) Materials consumption control,
(VIII) Physical stock verification,
(IX) Stores, and
(X) Accounting and inspection.
The degree of control should be rigorous for "A" items and should be moderate for “B” items and minimum for "C" items.
“B” ITEMS
The stocking policy for 'B' items need not be highly sophisticated. For the items which are available ex-stock or of the shelf or in the near proximity, the re-order level shall be fixed at 3 1/2 - 4 months stock.
“C” ITEMS
Procurement for these items shall be made in one or two lots per annum i.e. procurement for 6 months or 12 months at a time as far as practicable . Items which are perishable or bulky shall be omitted from this arrangement.
'C' items shall be reviewed once a year according to a phased time table or when reorder
level is reached if that is earlier.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
ABC Inventory Categories
SEGMENT NO OF ITEMS % VALUE OF STOCK IN SEGMENTA 2748 9.69% 1,144,503,294.22 80.00%B 5093 17.75% 214,554,731.32 15.00%C 20529 72.36% 71,524,668.24 5.00%TOTAL 28370 100%% 1,430,582,693.78 100%
= VALUE STOCK
= NO OF ITEMS
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
GOODS RECEIVED NOTE
Once a Purchase Order has been completed the information sits in the system until the goods / service is received. Once this has happened and you have an invoice it is time to complete a goods Received Note. The Goods Received Note has information relating to what has been received, how much and when. On completion of the GRN a copy is sent to payments, with the invoice, for payment.
In a larger business, a goods received note (GRN) is generated whenever a delivery is made to the business. The GRN details what goods and quantities have been received and when. A copy of the GRN is sent to the accounts department to enable them to match it to the purchase order (that would have been raised when the goods were originally ordered from the supplier).
In that case Stock(Revenue/Capital) Account is getting debited and corresponding clearing Account (e.g. GR/IR clearing, Freight clearing, Inspection clearing, Misc. Clearing Etc.) gets credited.
If material is excisable but not cenvatable for IOCL, then excise amount shall become a part of stock valuation. If material is cenvatable, Finance shall capture cenvat amount thru’ T code J1IEX. While preparation of PO, one thing must be remembered that basic price of materials should exclusive of excise duty. If excise duty is included in basic price in PO, then excise duty cannot be captured thru’ J1IEX and material valuation will be wrong.
After cenvat entry, GRNs is to be linked with bills / files (where bank payments already released) and shall be verified with reference to the purchase orders. After checking, MIRO has to be performed in SAP with
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
respect to the GRN/s. In many cases, various related charges like Freight , TPI charges is to be paid to agencies other than suppliers. In such cases, T code YMIROPRD has to be performed for suppliers’ payment and T Code YMIROOTH has to be done for other agencies payment.
In case of import PO, Finance has to perform T Code YMIROOTH for Bill of Entry amount before receipt of materials in SAP. After this entry, Finance has to capture cenvat amount thru’ T code J1IEX and inform Stores department for preparation of GRN using B/E No. After receipt of GRN, Finance shall post cenvat amount thru’ J1IEX
Normally, for import purchases, payments like FOB, freight, insurance, port charges, clearing agent charges is getting paid by IOCL port offices and Debit note were raised by them. Finance while performing MIRO (GRN Verification) for GRN, should ensure that all costs is getting accounted/adjusted and exchange variation is getting properly booked.
Before the bills are passed for payment, the following checks shall be exercised: That all particulars in the supplier's bill such as name of the supplier, specifications of the material quantity, price, taxes, freight etc. are in conformity with the provisions of the corresponding purchase order.
After MIRO transaction, Bank voucher will be prepared thru’ T code F-53 and shall be sent to the Cash Section after having been signed by the competent authority. For e-payment, Finance shall prepare 83 series documents capturing documents generated thru’ MIRO.
All payments to suppliers including advance payments shall be made by way of crossed account payee cheques or Bank drafts.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
Cash Section while sending cheques/ drafts to the suppliers shall attach a forwarding letter generated thru’ T Code YF88 showing details of payment and deductions, if any, and a 'C' form duly filled in, if applicable (under the Central Sales Tax Act). The Section shall maintain a register of ‘C’ forms issued.
No correspondence shall be undertaken directly with the suppliers except relating to payment details and issue of 'C' form etc. Letters received from suppliers concerning the matters of contractual performance and obligations shall be passed on to the Materials Department.
Care shall be taken to see that all linked bills are passed promptly as soon as they are received in the Section. Normally a bill shall be cleared within 7 days of receipt of GRN in the Section.
Debit notes received from Head Office in respect of purchases made by Head Office on behalf of units shall be responded by performing MIRO and subsequent adjustment thru’ F-04 or F-51. Proper care is to be taken so that no payment can be released from Units in case of HQ payments.
In respect of bills for supply where no GR Notes are prepared, such bills shall be passed on the basis of certification by the Department concerned confirming that such supplies have been received. However, this should be avoided as far as possible.
After passing, the bills along with supporting papers shall be filed properly and kept in safe custody till the annual audit is over. After the audit, the bills shall be transferred to the record room duly indexed.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
A GOODS RECEIVED NOTE
Goods Received Note
Supplier ..................................................Date................................................. Advice note number …..................................................
Order Number.........................................Delivery Location…………………………….....Cost-Centre……………...................................
GoodsPack
Size
Price Order
Quantity
Delivered
Quantity Comments
1
2
3
4
5
6
7
8
9
10
Received by...................................................................................... Checked by..................................................................................
1. Accounts/Finance dept. copy2. Supplier Copy3. Stores/Goods Inwards copy
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
T CODES IN SAP
Action to be taken in SAP T CodeRaising PR ME51NApproval/Release of PR ME54PR for material on Capital Account CN22Creation of RFQ ME41For entering quotation details in SAP ME47Comparative Statement YMR166Chapter ID table J1IDPO Proposal printout YM43Creating of PO ME21NApproval/release of PO ME28Display PO ME23NEntry of material received against PO MIGOViewing GRV MB51Payment against PO MIROCancellation of MIRO MR8MEMD Cheque Receipt Voucher F-43BG Entry F-40Initial Advance F-48For E-payment F-57 (Document No. will
be in 83 series)Capturing of Cenvatable amount J1IEXLSC Adjustment F-51Preparation of Bank Voucher F-53Printing of Payment voucher YFR121Cheque forwarding letters YF88
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
PAYMENT
SERVICE TAX FRINGE BENEFIT TAX EXCISE DUTY VAT TDS CENVAT/ MODVAT
SERVICE TAX
Service tax is a central tax collected by Govt. of India. Service tax was levied for the first time in the year 1994, under the Finance Act, 1994. There is yet no separate Service Tax Act as such. Also the Finance Act, 1994, does not define “service”. The Act only states what are taxable services.
Service tax is payable on about 108 taxable services as defined in section 65(105) of finance act 1994. Service provided or to be provided ‘ is taxable event’ . thus service tax is payable when advance is received.
Service required 2 parties. One cannot give service to himself. It can’t be levied on value of goods.
Rate of service tax is 10.03%.
DUTY PAYMENT
Payment of service tax is required to be deposited by 5th of the following month, and in case it is deposited electronically through internet banking, the date is 6th of the following month.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY Service tax is not payable on basis of amount charged in the bills/ invoice,
but only on amount actually received during the relevant period. A person liable to pay service tax can pay amount in the advance towards
future service tax liability. After such payment he should inform superintendent of central excise within 15 days. When he adjusts the advance , he should indicate details in the subsequent return filed.
Tax is payable by GAR- 7 challan using appropriate accounting code. E – payment is compulsory to those who are paying service tax of more than Rs. 50 lakhs per annum. For others e- payment is optional.
Mandatory interest for late payment of service tax is 13 %.
SERVICE TAX ACCOUNTING IN SAP
In case of any service P.O there is no liability on account service tax, use the tax code as V0 which debit the entire service cost into our consumption account.
Wherever service is eligible for input service for availment of CENVAT benefit put the appropriate tax code. Tax codes are created for all the plants under one company code.
WHEN SERVICE TAX IS APPEARING IN THE BILL OF THE VENDOR AND THE SAME IS ELIGIBLE FOR IOCL AND ALSO PAYABLE TO THE VENDOR WITH THE BILL AMOUNT
EXPENDITURE DEBIT …………. DR. (BILL AMOUNT EXCLUDING ST) TO VENDOR (BILL AMOUNT+ST/CESS-TDS/CESS)
CLAIM SERVICE TAX…………. DR. (SERVICE TAX AMOUNT) CLAIM CESS ON SERVICE TAX………… DR. (CESS ON SERVICE TAX) TO TDS (TDS AMOUNT)
TO CESS ON TDS (CESS ON TDS AMOUNT)
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY WHEN SERVICE TAX IS NOT APPEARING IN THE BILL OF THE
VENDOR AND THE SAME IS ELIGIBLE FOR IOCL AND IS TO BE DEPOSITED BY IOCL.
EXPENDITURE DEBIT………………….. DR. (BILL AMOUNT EXCLUDING ST)
CLAIM SERVICE TAX ……………………. DR. (SERVICE TAX AMOUNT) CLAIM CESS ON SERVICE TAX……….. DR. (CESS ON SERVICE TAX) TO SERVICE TAX LIABILITY (SERVICE TAX AMOUNT) TO CESS ON SERVICE TAX LIABILITY ( CESS ON SERVICE TAX) TO TDS ( TDS AMOUNT)
TO CESS ON TDS (CESS ON TDS AMOUNT) TO VENDOR (BILL AMOUNT-TDS/CESS)
PAYMENT OF SERVICE TAX THROUGH INVOICE VERIFICATION
METHOD
GR/IR CLEARING DEBIT……… DR. (BILL AMOUNT EXCLUDING ST TO VENDOR (BILL AMOUNT+ST/CESS- TDS/CESS)
CLAIM SERVICE TAX…………. DR. (SERVICE TAX AMOUNT) CLAIM CESS ON SERVICE TAX….. DR. (CESS ON SERVICE TAX) TO TDS (TDS AMOUNT)
TO CESS ON TDS ( CESS ON TDS AMOUNT)
FRINGE BENEFIT TAX
Fringe Benefit Tax (FBT) has been introduced in the Finance Bill 2005 w.e.f. 1.4.2005. Fringe Benefit Tax is to be borne by Companies on the value of Fringe Benefit and deemed fringe benefits provided during the financial year. The rate of tax applicable is the same as Corporate Tax i.e. 33.99% (inclusive of applicable surcharge and education cess) for the relevant Assessment Year
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY FBT is introduced basically to tax such fringe benefits that are difficult to be identified with any one particular employee but enjoyed by the employees collectively or otherwise. FBT is not payable by the Company on deemed fringe benefits provided to the employees on which tax has been paid by the employees. In other words, company has to pay FBT on the expenses covered under FBT and employees are exempt from payment of tax on such expenditure reimbursed to them.
Just like advance taxes, FBT is payable in four installments falling due on 15th June, 15th September, 15th December and finally on 15th March each year on projected expenditure to be incurred during the year.
Determination of FBT payable would be based on the amount accounted and reflected in the financial books under those expenses on which FBT is payable. Broadly the financial codes applicable to FBT are expenses reported in Schedule O and O – 1 of P & L Account.
Expenses debited to Schedule F-1 (CWIP) is not to be considered for FBT. The payment of FBT shall be made by Marketing Division at Mumbai. Refinery Division is required to submit details for calculating FBT in the prescribed format by 10th of the month. Units should, therefore, submit data relating to FBT to Head Office by 4th of the month
EXCISE DUTY
Excise duty/ Sales tax will be paid extra at actual within the contractual delivery date. Any increase in the rates of Excise Duty & Sales Tax beyond the contractual completion date or approved extended contractual completion time will be borne by IOCL to the extent Cenvatable documents passed on to IOCL and IOCL is in a position to get the CENVAT claim from the Excise authorities. However, the benefit of any reduction must be passed on to IOCL.
ENTRY TAX
Entry tax is levied on that product which transfer or enter a product from-one state to another state or one District to another district,if you sale as such the product not
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY restructuring. Barauni Refinery is paying 2% Entry tax on Crude Oil and 8 % on Electrical items and 4 % on pipelines.
TDS
In simple terms, TDS is the tax getting deducted from the person the amount by the person paying such amount (Employer/Deductor). This is applicable for certain types of payments, as applicable under the Act
The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt, within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment.
TDS Certificates
A tax deductor is also required to issue TDS certificate to the deductee within specified timed under section 203 of the I T Act. The certification from the deductor, for the deduction and payment of the respective TDS amount to the bank, issued to the deductee is a TDS certificate.
The deductee should produce the details of this certificate, during the regular assessment of income tax, to adjust the amount of TDS against the Tax payable by the Deductee [assesse].
Types of TDS certificates
Salaries - Form 16 Non-salaries - Form 16A TCS Certificates - Form 27D
CENVAT OR MODVAT
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
The Modified Value Added Tax (MODVAT) was extended to Petroleum Ministry in the Union Budget of 1994, under which IOCL entitled to claim MODVAT credit. In the same year, credit was also introduced for capital goods first time in the MODVAT scheme.
Service provider can avail cenvat credit of service tax paid on input services and excise duty paid on capital goods. The credit can be utilized for payment of service tax on output services.
Definition: of input service is wide. Any service in relation to business is input services.. credit can be availed on the basis of proper and complete specified original duty paying
documents.
Taxation of inputs, like raw materials, components and other intermediaries had a number of limitations. In production process, raw material passes through various processes stages till a final product emerges. Thus, output of the first manufacturer becomes input for second manufacturer and so on. When the inputs are used in the manufacture of product `A', the cost of the final product increases not only on account of the cost of the inputs, but also on account of the duty paid on such inputs. As the duty on the final product is on ad valorem basis and the final cost of product `A' includes the cost of inputs, inclusive of the duty paid, duty charged on product `A' meant doubly taxing raw materials. In other words, the tax burden goes on increasing as raw material and final product passes from one stage to other because, each subsequent purchaser has to pay tax again and again on the material which has already suffered tax. This is called cascading effect or double taxation.
This very often distorted the production structure and did not allow the correct assessment of the tax incidence. Therefore, the Government tried to remove these defects of the Central Excise System by progressively relieving inputs from excise and countervailing duties. An ideal system to realize this objective would have been to adopt value added taxation (VAT). However, on account of some practical difficulties it was not possible to fully adopt the value added taxation.
Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax). MODVAT Scheme which essentially follows VAT Scheme of taxation. i.e. if a manufacturer A purchases certain components(raw materials) from another manufacturer B for use in its product. B would have paid excise duty on components manufactured by it and would have recovered that excise duty in its sales price from A. Now, A has to pay excise duty on product manufactured by it as well as bear the excise duty paid by the supplier of raw material B. Under the MODVAT scheme, a manufacturer can take credit of excise duty paid
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY on raw materials and components used by him in his manufacture. It amounts to excise duty only on additions in value by each manufacturer at each stage.
The modvat scheme is regulated by Rules 57A to 57U of the Central Excise Rules and the notifications issued there under (The Central Excise Rules, 2002 (Section 143 of the Finance Act, 2002).
Modvat Scheme ensures the revenue of the same order and at same time the price of the final product could be lower. Apart from reducing the costs through elimination of cascade effect, and bringing in greater rationalization in tax structure and also bringing in certainty in the amount of tax leviable on the final product, this scheme will help the consumer to understand precisely the impact of taxation on the cost of any product and will, therefore, enable consumer resistance to unethical attempts on the part of manufacturers to raise prices of final products, attributing the same to higher taxes.
Subsequently, MODVAT scheme was restructured into CENVAT( Central Value Added Tax) scheme. A new set of rules 57AA to 57AK , under The Cenvat Credit Rules, 2004, were framed and whatever restrictions restrictions were there in MODVAT Scheme were put to an end and comparatively, a free hand was given to the assesses. Under the Cenvat Scheme, a manufacturer of final product or provider of taxable service shall be allowed to take credit of duty of excise as well as of service tax paid on any input received in the factory or any input service received by manufacturer of final product.
The term "Input" means : -
1. All goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production
2. All goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
Explanation 1 : The light diesel oil, high-speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2 : Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;"
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
The term "Input service" means any service : -
1. Used by a provider of taxable service for providing an output service; or
2. Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,
And includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;"
Manufacturer and service providers can avail Cenvat credit of capital goods used by them. The plant and machinery and allied items are purchased by a manufacturer. Such goods known as capital goods may be duty paid. The capital goods shall be used in manufacture of final products or for providing output service. The CENVAT credit in respect of duty paid on capital goods shall be taken only for an amount not exceeding fifty percent of the duty paid in the same financial year and the credit of balance amount can be take in any financial year subsequent to the financial year in which the capital goods were received.
WHEN AND HOW MUCH CREDIT CAN BE TAKEN1. The Cenvat Credit in respect of inputs may be taken immediately on receipt of the
inputs.2. The Cenvat credit in respect of Capital Goods received in a factory at any point of
time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year and the balance of Cenvat Credit may be taken in any subsequent financial year.
3. The Cenvat credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair etc. and it is established from the records that the goods are received back in the factory within180 days of their being sent to a job worker.
4. Where any inputs are used in the final products which are cleared for export, the Cenvat Credit in respect of the inputs so used shall be allowed to be utilised towards payment of duty on any final product cleared for home consumption and where for any
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY reason such adjustment is not possible, the manufacture shall be allowed refund of such amount.
OTHER MODE OF PAYMENT
When goods are sold on cash, the payment is received either before the goods are
shipped (cash in advance) or when goods are delivered (cash on delivery). Cash in advance is
generally insisted upon when goods are made to order. In such a case, the seller would like to
finance production and eliminate marketing risk. Cash on delivery is often demanded by the
seller if it is in a strong bargaining position and the customer is perceived to be risky open
account system. In this case the seller first delivers the goods and then sends the invoice
(bill). The creditor (cash period, cash discount for prompt payment, the period of discount as
on) are stated in the invoice which is acknowledged by the buyer.
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OTHER PAYMENT
CREDIT PERIOD
CASH DISCOUNT DRAFT
LETTER OF CREDIT
CREDIT ALLOWED
INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
CREDIT PERIOD:
The credit period refers to the length of time the customer is allowed to pay for its purchases. It is usually mentioned in days from the date of invoice. For example 15 days, 30 days, 60 days etc.
CASH DISCOUNT:
Firms generally offer cash discount to include customer to make prompt payment. For example 2/10 which means if the payment is made within 10 days one will get 2% discount.
DRAFT:
Whether goods are sent on an open account or consignment, the seller doesn’t have strong evidence of the buyer’s obligation. So a more secure arrangements usually in the form of draft, is sought. A draft represents an unconditional order issued by the seller asking the buyer to pay on demand or a certain future date. It serves as a written evidence of definite obligation
LETTER OF CREDIT :
A letter of credit is issued by a bank on behalf of its customers (buyers), to the seller. As per this document, the bank agrees to honors he drafts as drawn on it for the suppliers to the customer (buyer), if the seller fulfills the condition laid down in the letter of credit.
IN CONTEXT OF BARAUNI REFINERY UNIT (IOCL)
Through bank payment mode is followed in Barauni Refinery unit (IOCL). The vendor sends two intimation copies to the bank and one copy to the Finance Department. The
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY two intimation copies include Lorry Receipt (LR) and the invoice. The units begin operation only when it gets the intimation letter from the bank. Cheques is drawn by the Finance Department first in the name of “Yourself” account and then transferred to the bank. The bank then receive the cheques, first credits to the party account with the amount of payment and then releases the original endorsement consignee copy to the Finance Department. It is then sent to the stores department, which takes it to the transporters and gets the possession of the materials.
There are as such no creditors of this unit but the time it takes the payment to the parties (For Chemicals and stores and spares) creates such creditors for that period.
PERIOD OF CREDIT ALLOWED :
The period of credit depicts the period for which any firm is allowed to have possession of the materials without prior payment. The Barauni unit basically dos not deal with any sort of credit as per the main goods for the unit is concerned. Thus there isn’t any such credit payment except the accessories, which are used for the comfort of the staff members here.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
RESEARCH METHODOLOGY
Intensive research has been done during this project to find out the necessary information regarding the procurement of raw material and payment to the vendor in the Barauni Refinery and the various projects that are being implemented to optimize profit and product yield. While working in the organization, I get much information during the practical work. The methodology applied to gather the necessary information is discussed below:
PRIMARY DATA:-
This is mainly concerned with first-hand information. It consists of preparing questionnaire or taking interviews. In my project I had queries which were answered by different responsible personals of various departments like purchase department , store department and payment department.
SECONDARY DATA:-
This is mainly concerned with second hand information. It consists of collecting relevant information from different documents, books, journals, previous reports, manuals, etc. For my project I used secondary data as Accounts Manual, Brochures, Financial Appraisal, Annual Operation Report, and Web site.
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
OBSERVATION
# IOCL , Barauni is a major contributor in oil production in India. At present its production capacity is 6 MMPTA , producing a wide range of petroleum products.
# The Indian oil group of companies owns and operates 10 of Indian’s 20 refineries with a combined refining capacity of 60.2 million metric tons per year.
# Both crude oil & material are purchased through tender procedure. Barauni refinery gets crude oil from paradip – haldia barauni pipelines.
# Indian Oil and its subsidiaries account for a 47% share in the petroleum products market , 40 % share in refining capacity and 67% downstream sector pipelines capacity in India.
# Inventory management is mainly based on ABC analysis because of large no of inventories. And the inventory are used on FIFO basis. Some other techniques are also as JIT , EOQ.
# In ABC analysis items of ‘A’ group constitute small percentage of quantity (18.92%) which accounts for higher percentage of value (97.46%). The items of ‘B’ groups constitute more percentage of quantity (27.03%) then item of A which account for less percentage of value (2.10%). While the items of ‘C’ groups constitute highest percentage of quantity (54.05%) then items of ‘A’ ‘B’ which account for lesser percentage of value(.44%)
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
#Stock turnover ratio (STR) of 5 years shows that the STR is high at 21.5 during 2009-2010, and minimum in year 2004-2005 i. e 3.7 . Graph shows a increase trend. Higher the turnover grater is the efficiency.
#The average time taken for clearing stock is highest in the year 2004-2005 its 97.2 days and in the year 2009-2010 it is lowest 16.7 days. Lesser the time in which stock is sold better is the efficiency of the firm.
#Barauni refinery is increasing its capacity utilization year by year, but the % of utilization decreased in the year 2008-2009.
SUGGESTION
#Continuous supply of material and finished goods should be maintained so that production process does not suffer and customer’s demand are met.
#EOQ & ROP should be maintained and monitored continuously.
#Both overstocking and under stocking of inventory are dis-advantageous. Both should be avoided.
#Material costs should be under control so as to reduce overall costs of production.
#Losses should be minimized through deterioration, pilferage, wastes and damages.
#Proper quality standards ensure proper quality of stock. The price analysis will lead to payment of proper prices.
#Appropriate planning and control of inventory is required for fulfilling short and long term objective
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
BIBILIOGRAPHY
In the accomplishment of this project these books, journals and sites have referred to:-
Financial management I. M Pandey
Financial management Khan & Jain
Inventory management S. N Chary
Financial management Prasanna
Chandra
Research Methodology C. R. KOTHARI
Administrative Manual of IOCL
Indian Oil News
Vatayan
www.indianoilxpress.com
www.google.com
www.wikipidia.com
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INVENTORY MANAGEMENT IN INDIAN OIL IN BARAUNI REFINERY
THANK YOU
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