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PROJECT REPORTON

INVENTORY MANAGEMENT AND COSTING SYSTEMIN

TATA STEEL LTD. WEST BOKARO DIVISION, (Jharkhand )

SUBMITTED TO- SUBMITTED BY- SK .SIRVASTAV RITU PATHAK DIRECTOR OF IBM MBA(BE)(2009-2011)FACULTY OF IBM ROLLS NO: 0124044

CSJM. UNIVERSITY KANPUR

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ACKNOWLEDGEMENT

Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me in completing this winter project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part.

I would also like to thank, Mr. SK.SRIVASTAVA (DIRECTOR OF IBM,CSJM UNIVERSITY, KANPUR) for giving me the permission to go ahead with a project of such a great learning experience and acquainting me with real life project on estimation of working capital.

I am also obliged to other faculty member for there able guidance at every step of my project report.Last but not least I am thankful to my senior and friend for there corporation

RITU PATHAK

(MBA (BE)

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PREFACE

The project assigned to me was to perform the study of INVENTORY MANAGEMENT AND COSTING SYSTEM in West Bokaro Division and the study of environment in which it operates. which an integral part of MBA curriculum is. This project has been prepared to summarize the activities in West Bokaro Division and to highlight the crucial system of inventory and costing at West Bokaro Division. It represents a framework for evaluating cost and inventory that have been developed by professional accountants.I have tried to throw light on the entire organization of Inventory management and costing system of Tata Steel, West Bokaro Division. However it will be judged by the learner and readers how far my attempt has been successful. Suggestions to improve the project are always welcomed.

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Table of Contents

S.No. Particulars Page no.

1 Introduction of Tata Steel 5-62 Introduction of West Bokaro Division 7-135 Objectives and Scope of Study 146 Research Methodology 154 Introduction to inventory management 16-197 Inventory management in West Bokaro Division 20-698 Costing system in West Bokaro Division 70-879 Conclusion 8810 Limitations 8911 Recommendations 9012 Bibliography 91

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TATA GROUP

the world and one of the few select steel companies in Tata Steel ( formerly TISCO - Tata Iron and Steel Company Limited ) is Asia's first and India's largest integrated private sector steel company. Tata Steel is among the lowest cost producers of steel in the world that is EVA+ (Economic Value Added). The Tata has been respected in India for 140 years for its adherence to strong values and business ethics. Revenues in 2009-10 are estimated at $65 billion of which 61% is from business outside India. The group employs around 350,000 people worldwide. The business operation of Tata Group currently encompasses seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals.The major companies in the Group include Tata Steel, Tata Motors, Tata Consultancy services, Tata Power, Tata Chemicals, Tata Tea, Tata Communications and Indian Hotels.Founded by Jamshedji Tata in 1868, the Tata Group’s early years were inspired by the spirit of nationalism. The Group pioneered several industries of national importance in India: steel, power, hospitality and airlines.In most recent times, the Tata Group’s pioneering spirit has been showcased by companies like Tata Consultancy Services, India’s first software company, which pioneered the international delivery model, and Tata Motors, which made India’s first indigenously developed car, the Indica, in 1998 and recently launched the world’s lowest-cost car, the Tata Nano, in 2009. The Tata Group has always believed in returning wealth to the society it serves. Two-thirds of the equity of Tata Sons, the Tata Group’s promoter company, is held by philanthropic trusts which have created national institutions in science and technology, medical research, social studies and the performing arts. The trusts also provide aid and assistance to NGO’s in the areas of education, healthcare, and livelihoods.

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TATA STEELTata Steel is the world’s 6th largest steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum(MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world’s second most geographically diversified steel producer and a Fortune 500 Company. Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries.Tata steel completed 100 glorious years of existence on August 26, 2007 following the ideals and philosophy laid down by its Founder, Jamshedji Nusserwanji Tata. It was the vision of the founder, that on 27th February 1908, the first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds.Tata Steel’s Jamshedpur(India) Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2011. The Company has proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.Through investment in Corus, Millennium Steel(renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the Pacific countries.Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the steel building and construction applications market.The iron ore mines and collieries in India give the company a distinct advantage in raw material sourcing. Tata Steel is also striving towards raw material security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement with Steel Authority of India Limited (SAIL) to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has brought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining.Exploration of opportunities in titanium dioxide business in Tamil Nadu, Ferro-chrome plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalization objectives of Tata Steel. Tata Steel India is the first integrated Steel Company in the world outside Japan to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

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BACKGROUND

Earlier West Bokaro was a thick Forest clotted with eight villages and inhabited by wild animals. The land belongs to Kamakhya Narayan Singh Bahadur. The King of Ramgarh. In 1946 he leased these 13000 bighas of land to West Bokaro and Ramnagar ltd. a mining firm. The firm later subleased the property to its managing agents Anderson and Wright a U.K. based company of Calcutta, who operated the Dhori, Jharandih and Chandrapura Collieries in the neighborhood of West Bokaro. When the first geological study of the area in 1946 confirms the existence of vast deposits of the metallurgical coal, the agents approached Tata steel for its sale. The steel co. agreed paraphernalic associated with mining a small power house. The first washery in the country, a railway siding at chainpur and a monocable ropeway between the washery and siding. The managing agents were, however, responsible for administration and received one rupee per tonne as commission on coal dispatch to Jamshedpur steel plant. With a compliment of fifteen people among whom were the manager, surveyors, chairman and mazdoors, the colliery raise its first 100 tonnes of coal in 1948 from the under ground mine through what is still known as south Main Adit or incline. Blasted coal was loaded into 2.5 tonnes capacity mines cars by piece rated workers. Coal from mine was crushed to 4 th

lumps and treated at the Washery and dispatched by aerial ropeways to the siding at chainpur 4.5 km away from there it was transported by rail to Jamshedpur. Meanwhile follows independence. The land reforms Act has been enforced abolishing Jamindari in Bihar. M/S. Anderson Wright & co. which has so far paid royalty to the maharaja became lessees of the state government. In 1956 the managing agency system was abolished by amendment to the companies Act .The colliery thus passed the direct supervision of Tata steel as west Bokaro ltd. though still a wholly owned subsidiary. it merged formally with the company in 1976 from past of its collieries division, then administered from Jamadoba. In 1982 West Bokaro was made a division of company in it’s own right.

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THE TATA TITANS

There is a difference between making money for oneself and creating wealth for others. This is the story of a business house that has created wealth for a nation. It is a story of struggle, anxiety, adventure and achievement. This is the story of our pioneers.

Jamshedji Tata: The founder of the Tata Group began with a textile mill in central India in the 1870s. His powerful vision inspired the steel and power industries in the country, set the foundation for technical education, and helped India leapfrog from backwardness to the ranks of industrialized nations.

Sir Dorab Tata: Through his endeavors in setting up Tata Steel and Tata Power, this elder son of Jamshedji Tata was instrumental in transforming his father's grandvision into reality. It was also under his leadership that the Sir Dorabji Tata Trust, the premier charitable endowment of the Tatas, was created, propelling the Tata tradition of Philanthropy.

Sir Ratan Tata: Jamshedji Tata's younger son had a personality that reflected his sensitivity to the struggles of ordinary people and his desire to utilize his considerable wealth to enhance the quality of public life. A philanthropist all his life, he created a trust fund for "the advancement of learning and for the relief of human suffering and other works of public utility". The Sir Ratan Tata Trust is today the second largest of the Tata trusts.

JRD Tata: The late chairman of the Tata Group pioneered civil aviation on the subcontinent in 1932 by launching the airline now known as Air India. That was the first of many path-breaking achievements that JRD, who guided the destiny of the Group for more than half a century, came to be remembered for.

Naval Tata: Naval Tata's myriad contributions in the fields of business, sports administration and labour relations symbolized all that is best in the Tata spirit of giving back to society and the communities in which its enterprises grow.

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MISSION AND VISION:

 GROUP VISION:

We aspire to be the global steel industry benchmark for

Value Creation and Corporate Citizenship

We make the difference through:Our PEOPLE, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.

Our OFFER, by becoming the supplier of choice delivering premium products and services and creating value to our customersOur INNOVATIVE APPROACH by developing leading edge Solutions in Technology, processes and products.

Our CONDUCTS, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.

MISSION:

Consistent with the vision and values of the founder Jamshedji Tata, Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices.Tata Steel recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise, profitability provides the main spark for economic activity.Overall, the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.

OBJECTIVE OF TATA STEEL:

The Company sets down it’s objectives in 1964.The statement spelled out that fundamental objective of the Steel Company is:

To strengthen India’s Industrial base through increased productivity. Effective utilization

of material and manpower resources.

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Continued application of modern scientific and managerial methods, as well as through

systematic growth, in keeping with national aspirations.

The company recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise, profitability provides the main sparks for economic activity. It affirms its faith in democratic values and in the importance in the success of the individual, collective and corporate enterprise for the economic emancipation and prosperity of company guided in its policies and objectives by philosophy and its founder Jamshedji Tata. The company believes in effective discharge of its duties and obligations toward.

SHARE HOLDERS:-

By protecting and safeguarding their investments.

By ensuring to them a fair return.

EMPLOYEES:-

By realistic and generous understanding and acceptance of their needs and rights and an

enlightened awareness of the social responsibilities of industry.

By providing adequate wages, good working conditions, job security, effective

machinery for speedy redressal of grievances and suitable opportunity for promotion and

self development.

By promoting feelings of trust and loyalty through a human and purposeful awareness

of their needs and aspirations and.

By creating a sense of belonging and team spirit through their closer association with

the management at various levels.

CUSTOMERS:-

By providing products of proven quality at a fair price.

By fulfilling its commitment impartially and Courteous in accordance with sound and

straight forward business principles.

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By earning their continuing confidence in its productive ability and its technical

competence to keep improving the quality of its products.

COMMUNITY:-

By respecting the dignity of the individual and his activity according to the ideals of the

community.

By encouraging talent and promoting a civic sense among members of a community.

By availing of opportunities to develop democratic quality involved in collective work

undertaken in the interest of the community.

By assuming it proper share of social responsibilities in the communities in which the

company operates.

TATA STEEL: GOAL 2012

VALUE CREATION:

Increase your ROIC to 30% from the current 16%

SAFETY:

Reduce ltif 0.4 compared to the current 1.7

ENVIRONMENT:

Reduce Co2 emissions to 1.5 tons/ton of liquid steel compared to the current 1.8T/tls

EMPLOYER OF CHOICE

Across all industries – top quartile

ASPIRATION OF WEST BOKARO DIVISION

“To be the most admired unit in coal industry”.

WEST BOKARO IS TODAY………….

1. West Bokaro is a division of Tata Steel providing 43% cooking coal & thermal

coal requirement of the company.

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2. It also provides 34% thermal coal of the requirement of Jojobera plant, Tata

Power.

3. Location-180 Kms. North of Jamshedpur -38Kms, South of Hazaribagh 26 Kms.

North of Ramgarh Cantt.

4. Leasehold-4300 acres.

5. Reserves-200 MT.

6. West Bokaro Division is the first coal mine in India, which has been certified

under Environment Management System ISO 14001.

WORK ACTIVITIES

West Bokaro is one of the coalmines divisions of Tata Steel, which provides the various types of coal on demand of the Tata Steel Jamshedpur & other customers. The products are:-

ROM (Raw coal)

Clean coal

Middling coal

Rejection coal

Slurry

OBJECTIVES OF THE STUDY:

This Research Project covers the most important aspects or features of the functioning of the FINANCE & ACCOUNTS DEPARTMENT of TATA STEEL LTD. West Bokaro Division.

To analyze the Inventory Management and Costing system at Tata Steel Ltd.

To understand Inventory Management of the organization.

To understand the policies of Inventory management followed by TATA STEEL.

To analyze E.O.Q position of the organization.

To find out the Lead Time Analysis of the organization.

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To study the factors that affects the E.O.Q position of the organization

Ensure a continuous supply of raw materials to facilitate uninterrupted production.

Maintain sufficient stock of raw materials in period of short supply and anticipate price changes.

Maintain sufficient finished goods inventory for smooth sales operations and efficient customer service.

Minimize the inventory carrying costs. To maintain a minimum investment in inventory to maximize profitability.

METHODOLOGY OF THE STUDY:

The basic type of research used to prepare this report is Descriptive.

The study is mainly based on the secondary data which refers to that form of information that has

already been collected and is available. These include some internal sources within the company

and externally these sources include books and periodicals, published reports and data of TATA

STEEL LTD. and the annual reports of the company. Interaction with the various employees of

the Finance & accounts department has also been a major source of information. No primary data

has been used as a part of this study.

The analysis of Inventory management is based on Consumption pattern to monitor overall

trends in store and to identify areas requiring closer management.

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AN INTRODUCTION TO

Inventory management

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INVENTORY

The word inventory means ‘Stocks of goods.’ The Stock of goods could be for manufacture or for sale. Fred Hanssman has defined inventory as “An inventory is an idle resources of any provided that such resources has economic value.”Inventory = Goods in stock + Goods received – Goods issued In financial language inventory is defined as sum of the value of Raw material, Fuels and Lubricants, Spares parts maintenance consumables semi processed material and finished goods stock at any given point of time.

Role of Inventory Management.

The success of a venture depends on its ability to provide services to user and remain financially viable. For an organization which is supplying goods to its customer, the major activity is to have suitable product available at an actable price in reasonable timescale. Many parts of business are involved in setting up this situation. Initially it is the marketing and design departments. Then purchasing, and in some cases, manufacturing are involved. For an item which is already in the marketplace, the main activity is providing a continuity of supply for the customer.

Inventory control is the activity which organizes the availability of times to the customer. It coordinates the purchasing, manufacturing and distribution function to meet marketing needs.

The role of inventory management includes the supply of current sales items, and product consumables, spare parts, obsolescent items and all other supplies. Inventory enable a company to support its customer services , logistic or manufacturing activity in situations where purchase or manufacture of the items is not able to satisfy demand .Lack of satisfaction could arise either because the speed of purchasing or manufacturing is too protracted , or because the appropriate quantity can not be provided without stock.

Stock control exists at a crossroads in the activity of the company. Many of the activity depend on the correct level of stock being held , but the definition of the term “correct level” varies depending upon which activity is the defining the stock .

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Stock control is definitely a balancing act between the conflicting requirement

of the company , and the prime reason for the development of inventory management is to resolve this conflict in best interest of the business. A conventional supply organization will have many department including sales , purchasing , finance , quality assurance , contract and general administration . in some case there will also be manufacturing, distribution or support services or a variety of industry specific activities .Each of these has a particular view of the role of stock control .

Sales consideration that goods stock control enable the company to have available any item which will meet immediate sales for large a quantity as demand ; this requires large stock. For service companies where parts service is involved, the control of stock at the customer interface is traditionally left with the person carrying out the service, and this has led to overstocking and poor control. Similarly in distribution , the effect of bulking up shipment will lead to high stock level and a compromise has to be reached.

Purchasing consideration that stock control provides the opportunity for goods to be purchased so that optimum price can be obtained . Buying item in bulk often reduce the purchased price and also improves the efficiency within the purchasing department . The store is a means of keeping the bulk purchase items after buying advantageously.

Finance department have a problem with stock because it consumed vast amount of working capital and upsets the case flow. One benefit of the stock from a financial standpoint is that provision can be made in case the stock turn out to be unsalable , and this value can be adjusted to modify the profit figure in time of goods or bad financial result .However the existing of these provision in the first place is detrimental to the finance of the company

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TYPES OF INVENTORY

1. Production Inventory

2. MRO Inventory (Maintenance, repairs and operating supplies)

3. Work in progress (WIP)

4. Finished goods inventory

Production Inventory—

These are of two types:--

a. Materials which are purchased from the market like Raw materials and ready made parts and components required for manufacture of equipment.

b. Special parts or a component manufactured is ones own company and kept in stock for use in manufacturing.

MRO Inventory; -- These are materials purchased from Vendors and required for maintenance of the production process. These also include Petrol, Oil, Lubricants parts, Jigs tools etc.

WIP (Work in progress);--These are semi-finished products in various stages of production on the factory floor.

Finished goods; -- These consist of manufactured goods kept in warehouses or retail outlets and are meant for sales

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INVENTORY SYSTEM IN TATA STEEL LTD. ATWEST BOKARO DIVISION

NEED FOR INVENTORIES

Transaction motive- for facilitating smooth production and sales operation.

Precautionary motive- to guard against the risk of unpredictable changes in usage rate and delivery time.

Speculative motive- to take advantage of price fluctuations

FINISHED GOODS

CLEAN COAL

BY PRODUCT

MIDDLING

TAILINGS

REGECTS

EXTRACTED COAL

STOCK

EXPLOSIVE FOR BLAST

DIESEL TYRES

ROPEWAY CONVEYOR BELT

MAGNETIDE

WORK IN PROGRESS

CRUSHED COAL

COAL AT WASHERY

RAW MATERIAL

INVENTORY

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INVENTORY MANAGEMENT

Basically there are two Departments in Tata Steel West Bokaro for maintaining inventory.

These are—

a. Purchase department

b. Store department

Purchase department

Purchase department play an important role in central store as they provide finished goods to each and every department as per there requirement this can be cited through an example –The department that requirement goods then send MR to central store where the list of goods demanded with serial number are checked through SAP for their availability if the goods are available then the demand is must otherwise purchase department is informed for non availability of the goods and request is committed for the making the goods to be available then the purchase department issue quotation in the market . After issuing the quotation competitive price are checked according to the quotation issued and contract are given. After that the contractor provides the goods required to purchase department.

PURCHASING SYSTEM

Material Requirement from Department

Initiation of purchase requisition of material from different department

Verification by M.R.O. department

Selecting the reputed Vendors

Calling of Quotation

Placing the order

Receiving of goods along with Challan

Verification of goods along with Challan

Inspection of materials

Preparation of GRN

Keeping the material in store

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The main steps involved in the function of purchase Department are----

1. Enquiry

2. Quotation

3. Negotiation

4. Order placing.

Format of the Quotation form is shown below.

Quotation form

Reference no. 01.45.73435

Date ________________________

WBD ________________________

________________________

Dear sir, ________________________

Sub ________________________

Ref.Your RFQ

_________________________________

_________________________________

1.Item.no._______________,Material.no_____________, Price______________

Condition

Delivery date _____________

Payment date _____________

Mode of payment_____________

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The quotations are carefully studied

A comparative statement is prepared in the form of table to compare the relative price

and data. Normally, lowest rate is accepted if it conforms strictly to the specifications.

Finally, purchase order is placed to the selected Vendor and follows up action taken for

timely supply of materials.

If the organization feels for still lower prices or any other terms and condition negotiation

may be done with the supplier for the most advantages terms of purchase. Party gives the

final quotation will all the requisites. At last, a final purchase order is prepared and

issued.

Selection in Purchase department

1. General item group— The items which are of general nature are purchased by general item

group.

2.Civil group— The item which are used in Construction process like Cement, Rod, Sand,

Bricks etc. are purchased by civil group.

3. Excavation group or EME space— The items which are used in machine and heavy vehicles

like tyres of dumper etc. are purchased by Excavation group.

Local Vendors— Local vendors supplies stationary item and few spare parts for maintenance.

OEM— Company has maintained a directly relation with the manufacture so these companies

supplies material with a certificate of authenticity and genuine.

With these materials the companies do not have to inspect much about its originality and quality.

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Unified Rate contract

To maintain consistent relation with Vendors, the company make a URC agreement according to

which a unified rate contracts is made for a particular period of time (generally for one year). At

this period materials are supplied at a rate as per agreement.

This rate contracts can be revised if price of material rises and vendor feel difficult to supply that

material at the same price. But for that the vendor has to negotiate with the company.

. As for example :

Caterpillar : For Rear DumpersHitachi : For ExcavatorsGoodyear : For HEMM Tyres Indian Oil Corporation : For Fuel & LubricantsCummins India Limted : For engines

Depot Agreement—

Depot Agreement is a mutual agreement with the company and its vendor on which the company

provide depot near its work place. The vendor companies manage inventory and supply materials

at the time of requirement.

There are six vendor companies in depot agreement at West Bokaro Division----

a) Bharat Earth Movers Ltd.

b) MRM marketing pvt ltd.

c) TIL ltd.

d) Hydrokrimp AC pvt. Ltd.

e) Telco construction equipment.

f) Voltas ltd.

g) Depot of Bulk explosive

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Issue of PR to manager for approve

The PR prepared goes to the Sr. Manager (purchase and stores) for approved. The senior

manager is authorized to approve the purchase requisition after checking it and finding it

appropriate

If Sr.Manager find some thing wrong, approval is not given and further procedure

of purchasing stops.

*After the approval the department goes for party enquiry (calling the reputed vendors for their

quotation).

A format of purchase requisition form is shown below:

Purchase requisition

PR no. _______________

Deptt. _______________

Doc type _______________

Purchase group _______________

Requisition no. _______________

No. of material Description clean center UMO zate rate Value Deptt. Doc.

____________ ___________________ ____________ ___________ ____

Description of material _______________________

Material group _______________________

Class _______________________

Quantity _______________________

Delivery date _______________________

General instruction to Vendors_______________________

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Generation of RFQ

A tender inviting the quotation called Requisition for Quotation (RFQ) is prepared. Through

company Website this RFQ is communicated to the various parties (Vendors).

Purchase Department (RFQ)

Code 34666 RFQ

This is not a order

RFQ no. _________

RFQ Date. _________

RFQ Due __________

Cont __________

Item no. 1234

Brief Description of item_____________________________________

Delivery Date.________

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Ordering system

Ordering system of Tata Steel operates in a systematic way----

Review by Ledger section

Material requisition to department

Preparation of PR

Issue of PR to manager for approved

PR approved by the manager

Generation of RFQ to selected parties

Quotation by parties

Comparison of quotation

Selecting the best supplier

Preparation of purchase order

Placing the order

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EOQ MODEL

EOQ: - It is that size of order which is most economical, it is a tradeoff between carrying cost and ordering cost which neither increase the carrying cost nor the ordering cost

ORDERING COST: - It is the cost incurred while placing an order it increases when numerous orders are placed.

CARRING COST:-It is the cost that incurred when inventory is kept in store like Rent Electricity chargesMaintenance cost, Insurance cost,Watchman salary etc.Carrying Cost increases when inventory are kept in stores for a longer period of time

It can be represented in the form of formula as……………EOQ=√2 AO /CWhere,A=Annual Consumption.O=Ordering Cost.C=Carrying Cost.U=unit Price.Q=Quantity per order.

List of some item are given below

UMC NO. Items Consumption Cost/unit Total Cost

2268AA001 TRAM CAR WHEEL

60pcs. 3600 216000

2268AA005 LINE SHEAVE 75pcs. 4200 3150002268AA006 TRACK PLATE

ASSYMBLE100pcs. 1550 155000

2268AA009 BUCKET WITH HANGER

45pcs. 34500 1552500

2268AA010 GRIP CHANNEL ASSEMBEL

40pcs. 4200 168000

2268AA015 QUARD MOUNT 10pcs. 7800 78000

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We have taken item Tram Car wheel umc No. 2268AA001 for EOQ Calculation.Annual Consumption of tram car wheel. Is (Assumed) 60 pcsOrdering Cost=250Carrying Cost=12.5% of inventory 12.5% of 3600 =450EOQ=√2 AO /CEOQ=√2× 60 ×250 /450 =√66.67 =8.1651699 units.Hence it is economical to order in batches of 8 unit.No of order per year=A/Q =60/8

=7.5 or 8 order.

Stores DepartmentINTRODUCTION

Store-keeping is the function of receiving, storing and issuing of materials. It involves supervision of clearance of incoming supplies, to ensure that they are maintained in good condition, safety and readiness for use when required while they are in storage and issuing them against authorized requisitions.

HIERARCHY OF STORES

Head (Purchases & stores)

Material manager

Senior store keeper

Assistant store keeper

Clerk

Worker

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The main functions of store department are as follows: ---

a. To study the requirement of each and every item of inventory by considering annual consumption, opening stock, lead time consumption.(required stock or consumed stock during lead time, i.e. consumption during period between issue of purchase order and receive delivery of that item), average stock, maximum stock and minimum stock.

b. After studying the requirements if department feel that there is need of any particular item, then it prepares material requisition form and send to stores to purchase that item.

c. After purchasing by purchase department, the concerned party delivers that item to stores and receives and makes a enquiry from point of view of quantity and quality. After being satisfied, it prepares the goods receipt note for the quantity received.

d. After issuing Goods receipt number, it transfers the received item to concerned godown for carrying purpose.

e. When departments (quarries, washeries, PCP, dispatch section etc.) demand for any item, it issues the item through material issue requisition.

f. Store department maintains average stock, minimum stock and maximum stock to avoid excessive carrying cost and to facilitate production process by supplying material and other inventory item continuously.

Basic function of store keeping are---

*Receiving of materials supplied by the Vendor.

*Storing of material properly, safely and ensuring that they are maintained in good condition.

*Issuing of material against the authorized requisition.

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CENTRAL STORE LAYOUT

Store Organization in West Bokaro

For proper storage of the inventory or the raw materials, there is one warehouse

in the organization known as the CENTRAL STORES.

Some features of central stores—

1. Spread in a large area

2. Adequate space.

3. Proper utilization of space.

4. Adequate lighting.

5. Use of safety appliances, like helmet, shoes, gloves etc.

6. Proper ventilation.

GATE

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ORGANISATIONAL STRUCTURE OF STORE

Different sections of central store

1. Receipt section 5. Old stores

2. General section 6. Magazine

3. Ledger/ Indenting section 7. Diesel and petrol pump

4. EME section 8. Medical store

.

CENTRAL STORE

RECEIPT DEPTT.

D.D.I

SECTION

CAPITAL SACTION

GENERAL DEPTT

LEDGER DEPTT.

E.M.E Old store

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FUNCTION OF RECEIPT SECTION

The functioning of the receipt section can be depicted from the flow diagram as follows:

Receipt of material

Receipt of challan

Verification

Inspection (if required)

Preparation of GRN

Entry to be made in register

Transfer the material along with challan to respective godowns

FUNCTION OF GENERAL SECTION

Issue of stores

The store keeper issues the material on Material from which is an authority issued to the store

keeper by the operating department to issue the material. The main customers of central store are

different departments.

Before issue of materials, the store keeper checks that it has been signed by proper authority.

A requisition must furnish the following details:

1. Description of the item required.

2. Quantity of item required.

3. Work order number and chargeable head.

4. Dated initials of the person receiving material.

5. Section requiring the material.

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Use of BIN CARD in the stores

On the receipt of goods in the stores, a Bin card is prepared for every received item. On the issue of goods, Bin Card is prepared for every issued item. It shows all the records of materials entry or leaving the stores.

A Bin card must furnish the following information:

Description of material—

UMC no. and rack no.

Location

Receipt information—

Date, Quantity and rack no.

Issue information---

Date, Quantity and rack no.

Balance

.Signature of the store officer.

BIN CARD

STOCK No. 243/1920 LOCATION………………ISCO MAX. VEVEL………….. WEST BOKARO DIVISION ORD. VEVEL…………… STOCK NO………………….. ANNUAL.CONSUMPTION…..MATERIAL………………….

Date GRN/Regn.No Ch.A/c Receipt Issue Balance L.P Rate Initial

FUNCTIONS OF LEDGER SECTION

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The major functions of ledger section are as follows:

1. Procurement action of stores stock items

2. Making of purchase requisition in the S.A.P. System

3. Determination of quantity to be procured

This is done by taking into account after review of the material by considering the

following parameters:

a) GB (Ground balance),

b) LYC (Last year consumption),

c) YBL (Year before last),

d) Balance on order (valid) &

e) Coverage.

4. It does the future planning, determination of Reorder level and maintaining safety stock.

5. Keeping the record of stock in the different section of stores.

6. It also follows up with the party and preparation of the pending list.

7. Preparation of delivery schedule.

In this Periodic review, the Parameters that are taken into account are:-

GB (ground balance)

LYC (last year consumption)

YBC (year before consumption)

On the basis of GB, LYC & YBC order quantity can be estimated.

For example –

LYC YBC Av. Consumption In order GB DQ

200 300 250 75 25 150

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An average quantity to be ordered. For example:

ITEM NAME BALANCE OF INVENTORY

AVERAGE OF FOUR YEARS GDN. BALANCES

QUANTITY TO BE ORDERED

CONDUCTOR AL3.35MM*RABBIT*

2009-111232008-10,0002007-93342006-9230

(11123+10000+9334+9230)/4=9921.75 uts.

4172UTS 9921.75-4172=5749.75 uts

CABLE CU.2CORE,3/.036” 250VOLT/440VOLT

2009-125002008-102162007-101152006-9200

(12500+10216+10115+9200)/4=10507.75uts.

3793UTS 10507.75-3793=6714.75 uts

HAND GLOVE LEATHER

2009-300372008-276042007-225022006-24031

(30037+27604+22502+24031)/4=26043.5 uts.

3949UTS 26043.5-3949=22094.5 uts

Units to be ordered- CONDUCTOR AL 3.35MM*RABBIT*- -------------------------5749.75UNITS CABLE CU.2CORE,3/.036”250VOLT/440VOLTS-------------6714.75UNITS HANDGLOVES LEATHER- -------------------------------------22094.5UNITS

EME department-EME is the sub department of central store and its main function is generally based on inventory management .It provide the equipment for underground wiring and spare parts to heavy vehicle in fields . The department which required the inventory send material requisition to EME section and if the goods are available with EME then goods are released .EME had depot section this depot section had been developed in order to less the inventory. EME section use FIFO method for relies the goods.

OLD STORES

In the old stores the material of the respective department are Stored.

DDI

It is almost impossible for the store to carry all the material that may be required by different

departments. Therefore in every department there is an authorized person who can raise purchase

requisition if any material is not available in the store. Such materials are received under DDI

section and are supplied to the needful department.

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Inspection section

Before preparing GRN, the materials received and send to Inspection section for the quality

check. Here Physical measurement, laboratory check, matching of specific features especially in

engineering items with the provided catalog. The materials which cannot be inspected,

inspection section ask for Test certificate from the original equipment manufacturer

(OEM). E.g.—Computer

Inventory verification and audit

The stores controller has the physical custody of the materials and is responsible for their safe

upkeep. There can be any major discrepancy in the stock figures. To guard against such

possibility, there must be constant review and stocks update the accounts and reconcile the

physical and book balance. The verification process enables the management to identify areas

needing tighter controls. In the Organization there is provision for internal audit which does the

annual reviews of the stock.

Inventory Management at West Bokaro

Here at West Bokaro Inventory is managed by both Pull & Push process. Through Pull process

Inventory is managed by responding the demand of materials from different customers

(departments). This is done through DDI. And through Push process Inventory is managed by

forecasting the materials that may be demanded by various Departments. It is done by careful

analysis of requirements of various departments its cost 2 years.

STORING AND STORAGE FACILITIES

●Storing means placing materials in their proper places according to

established methods.

●Commonly used equipments for materials in the store are

Open type racks,

Box pallet,

Bins,

Godrej etc.

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Different methods of storing

Bin number OR material no.

Various materials handling equipments available are:

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Shelf trolley

Two wheel hand truck

Mobile crane etc.

Specialized technique of identification is there:

Tagging or labeling:- Identification tags must be there at the time of receiving of goods.

Coding:- Coding is done for the items by using the UMC no.

Proper location identity is there with Bin no. or rack no. which is also there in the Bin card.

Details of inventory statistics of Stores. Net Inventory as on 1.4.2009 as on 1.4.2010

A.General stores 172 lac 152 lac

B.Earth moving stores 82 lac 80 lac

C.Washery spares. 120 lac 132 lac

D.Others stores-- Explosives 33 lac 45 lac

--Miscelaneous 56 lac 20 lac

----------------------- ------------------Total Net Inventory 463 429Average Monthly Consumption 21.33 20.83

Details of Inventory

2006-07 2007-08 2008-09 2009-10669 lac 512 lac 473 lac 449 lac

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Nature of goods stored

According to the company's activity, a warehouse will store:

Production activities:

●Raw materials or semi-finished goods are stored in order to

regulate the manufacturing process.

●Packaging

●But also finished goods destinated to the commercial process...

Commercial and trade activities:

●Products the company purchased and which will not be transformed in order to be sold,

●Spare parts in case of after-sales activities

Types of warehouse storage systems

19th century warehouses in Gloucester docks originally used to store imported corn. Some of the

most common types of warehouse storage systems are:

•Pallet rack including selective, drive-in, drive-thru, double-deep, pushback, and gravity flow.

•Mezzanine including structural rolls formed, rack supported, and shelf supported.

•Cantilever Rack including structural and roll formed.

•Industrial Shelving including metal, steel, wire, and catwalk.

•Automated Storage and Retrieval System (ASRS) including vertical carousels, vertical lift

modules, horizontal carousels, robotics, mini loads, and compact 3D

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For a warehouse to function efficiently, the facility must be properly slotted. Effective slotting

addresses which storage medium a product will be picked from (pallet rack or carton flow), and

how they will be picked (pick-to-light, pick-to-voice, or pick-to-paper). With a proper slotting

plan, a warehouse can improve its inventory rotation requirements-- such as FIFO (First In First

Out) and LIFO (Last In First Out) -- control labor costs and increase product.

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Modern trends

Aisle with pallets on storage racks

Traditional warehousing has been declining since the last decades of the 20th century with the

gradual introduction of Just in Time (JIT) techniques designed to improve the return on

investment of a business by reducing in-process inventory. The JIT system promotes the delivery

of product directly from the factory to the retail merchant or from parts manufacturers directly to

a large scale factory such as an automobile assembly plant, without the use of warehouses.

However, with the gradual implementation of offshore outsourcing and off shoring in about the

same time period, the distance between the manufacturer and the retailer

(or the parts manufacturer and the industrial plant) grew considerably in many domains,

necessitating at least one warehouse per country or per region in any typical supply chain for a

given range of products.

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Recent developments in marketing have also led to the development of warehouse-

style retail stores with extremely high ceilings where decorative shelving is

replaced by tall heavy duty industrial racks, with the items ready for sale being placed in the

bottom parts of the racks and the crated or palletized and wrapped inventory items being usually

placed in the top parts. In this way the same building is used both as a retail store and a

warehouse.

Modern warehouses are also used at large by exporters/manufacturers as a point of developing

retail outlets in a particular region or country. This concept reduces the end cost of the product to

the consumer and thus enhance the production sale ratio. Warehousing is an age old concept

which can be used as sharp tool by original manufacturers to reach out directly to consumers

leaving aside or bypassing importers or any other middle agencies or person.

Inventory of TATA STEEL at West Bokaro Division

Inventory of Tata Steel at its West Bokaro Division constitutes approx 40,000 items of worth Rs.

125 crore.

Some of the Vendor partners are--

IOC

Rs. 30 Cr TELCON

HSD Rs. 3 Cr

HEMM

spares

ICI / IBP

Rs.10 Cr

Explosive

WEST BOKARO

MRF TIL

Rs.5 cr. Rs.20 cr.

Tyres HEMM spares

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Apart from above Vendor partner there are other hundreds of Vendors Supplying materials for Tata Steel.

Basically there are three types of vendors from which materials are being procured here, they are—

1. Local vendors

2. Transporters

3. OEM (Original Equipment manufacturer)

ANALYSIS ON INVENTARY

The ABC AnalysisEfficient storekeeping calls for sufficient control over all items of stores.It is logical that greater care and control is necessary in case of costlier items, or in case of items most needed for production. The inventories of a concern generally consist of a small number of items representing a major portion of inventory value. In such a case, a graded preferences is needed in the treatment of stocks and as such all items are classified into categories: A, B and C. Category A consist of more costly items, while category B consists of less costly items, and category C of least costly items.Inventory surveys have shown the following trends regarding the components of inventories of

manufacturing organizations.Category % of Total Value % of Total InventoryABC

70% or above15% or above14% or below

103555

Items in Category A should be given maximum attention while exercising control over stores. Their stock levels should be strictly controlled. Items in category B should receive second preference in keeping stock-levels, and in stock-taking. Items in category C are least important. These mostly include nails, nuts, bolts, etc. Stock-levels are not always necessary to be fixed. In case of category C items, orders may be placed in bulk to economise in costs. The ABC technique is also known as ‘Always Better Control’ and is based on the principle of Management by Exception’i.e. critical areas are to be cared for more than non-critical ones.

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Facts & Figures gathered: A statement of Conveyor belts as on 31.3.2010

S.No UMC No. ITEM ANNUAL CONSUMPTION

CURRENT RATE (Rs.)

TOTAL VALUE (Rs.)

1 1055AA039

CONVEYOR BELT 800mm

1900m 1182 2245800

2 1055AA040

CONVEYOR BELT 1200mm

1400m 2100 2940000

3 1055AA044

CONVEYOR BELT 900mm

700m 2600 1820000

4 1055AA004

CONVEYOR BELT 1400mm

500m 3000 1500000

5 2268AA001

TRAM CAR WHEEL

60pcs. 3600 216000

6 2268AA005

LINE SHEAVE 75pcs. 4200 315000

7 2268AA006

TRACK PLATE ASSYMBLE

100pcs. 1550 155000

8 2268AA009

BUCKET WITH HANGER

45pcs. 34500 1552500

9 2268AA010

GRIP CHANNEL ASSEMBEL

40pcs. 4200 168000

10 2268AA015

QUARD MOUNT

10pcs. 7800 78000

CALCULATION: For class: - A

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(value Above 15,00,000 considered as class A)

Total value of (A) *100/Total Value. = % : - 1820000+2940000+2245800+1552500 = 8558300*100/10990300 = 77.87%, = 78% Approx.

For class: - B(value between 2,00,000 to 15,00,000 considered as class B)

Total value of (B) *100/Total Value. = % : - 1500000+216000+315000 = 2031000*100/10990300 = 18.47%, = 18% Approx. For class: - C(value below 2,00,000 considered as C) Total value of (C) *100/Total Value. = % : - 78000+168000+155000 = 401000*100/10990300 = 3.7%, = 4% Approx.

ABC Classification: It can be represented as:

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S. No. UMC No. CURRENT RATE(Rs.)

TOTAL VALUE(Rs.)

Classification

1.2.3.8.

1055AA0391055AA0401055AA0442268AA009

11822100260034500

1820000294000022458001552500

A4.5.6.

1055AA0042268AA0012268AA005

420036003000

1500000216000315000 B

7.9.10.

2268AA0062268AA0102268AA015

155042007800

78000168000155000 C10990300 TOTAL

VALUE

Category A- In this category most expensive items are kept, they are high in value and less in quantityIn WBD items whose unit value is greater than 5000 are kept in this category. Some examples of this category are:-

Umc no. 2268AA015ITEM –QUARD MOUNTPRICE -7800/u

Category B- It constitute of items which are comparatively less expensive than items placed in category A. In WBD items whose unit price is less than 5000 and value is greater than 2000 are kept in this category. Some examples of this category are:-

Umc no. 2268AA010ITEM –GRIP CHANNEL ASSEMBLEPRICE- 4200/u

Category C-It constitute of the items which are less in price in comparison to items of category A & B. In WBD items whose value is less than 2000 are kept in it. some examples of this category are:-

Umc no. 2268AA006ITEM –TRACK PLATE ASSEMBLEPRICE- 1550/u

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It is assumed that value of items of category A, B & C constitute 70 % or above, 15% or above & 14% or below of the total cost of inventory and 10%,35% &55% of total quantity of inventory respectively NOTE: - In Tata steel sometimes total value wise classification into consideration while classifying inventory in category A, B& C. It means an item whose unit price is less than 2000 and total value is comparatively higher than other stock of inventory then it will be placed in category ‘A’ instead of category ‘C’. Same has been done in above classification that’s why % of quantity of inventory do not match as decided.

VED Classification

VED stands for

V-Vital,E- Essential and D-Desirable.

This type of classification is applicable most in the case of spare parts.

The following table is necessary for this type of control.TABLE – 1

Classes V-items E-items D-itemsA items Constant control Moderate Less stocks.

And regular follow stocks Up

B items Moderate stocks Moderate Very low stocksStocks

C items High stocks Moderate stocks Low stock

Case study : UMC No1055 & 2268

TABLE - 2Classes V-items E-items D-items

‘A’ items 1055AA040 & 44 1055AA039 2268AA009

‘B’ items 2268AA001 2268AA005 1055AA004

‘C’ items 2268AA006 2268AA010 2268AA015

___ __

X-Y-Z Classification

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This classification is based on the value of inventory in hand.If the values are high, special efforts should be made to reduce then This exercise can be done once in a year.

‘x’ items are those whose Inventory values are high ‘Y’items are those whose Inventory values are moderate ‘z’ items are those whose inventory values are low.

This type of classification helps us to identify items which are Extensively stocked. XYZ and ABC can used in conjunction

The method of control is as follows :

TABLE –3Classes X-items Y-items Z-itemsA items A Critical analysis Must be Attempts to must be Items are with in

done in an effort to reduce made to convert ‘Z’ control.Stocks. category.

B items Consumption and stocks Further action for Control Can be review twiceShould be reviewed may not be necessary a year.

Frequently .C items Steps Should be taken to Contol Should be Can be reviewed

Dispose off surprise stocks very strict. Annually.

Case study : UMC No.1055 & 2268

TABLE - 4Classes X-items Y-items Z-items

‘A’ items 2268AA009 1055AA040 & 44 1055AA039

‘B’ items 1055AA004 2268AA005 2268AA001

‘C’ items 2268AA006 2268AA015 2268AA010

LEAD TIME ANALYSIS

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LEAD TIME -

Lead time is said that period taken between the arising of the need i.e. placing of an indent an receipt of material at works particularly it is not possible to procure material immediately on receipt of requisition . It may a take a few days ,week or month between the time of requisition and receipt of material . Lead time can be divided into Administrative lead time(Internal lead time ) Supplier lead time(External lead time)

Administrative lead time is the time required to complete departmental formalities .It involves the following activity .Raising and preparing of purchase requisition .Time required for processing of tender and their approval Time required for inspection of material and making receipt note.Supply of goods from store to department .

Supplier lead time is the time required by the outside parties for supply of material . It involves the following activity. Time required for delivery of supply order .Time required by the vender for the supply of material.

OBSERVATION

This observed that too long lead time creates problem of having high stock of materials.Here few case studies are made by me for lead time analysis of Tata Steel.Flow chart made on the basis of different operations .

(A)FLOW CHART

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Item Description

UMC NO. 0135A0304 Tyres (12 pcs)

Order no.2100209419

S1. Date Symbol Description No

1. 24.02.09 Stores prepares P.R.

2. 26.02.09 Requisition sent to purchase

3. 08.03.09 Enquiry floated to parties

4. 30.03.09 Due date of Enquiry/Last date ofReceiving quotation.

5. 14.04.09 Quotation opened for comparative statement.

6. 18.05.09 purchase decodes to place order.

7. 21.05.09 purchase order prepared.

8. 26.05.10 purchase order issued.

9. 16.06.10 material received in stores.

10. 17.06.10 Quantity verification.

11. 18.06.10 Inspection done 12. 19.06.10 Good receipt note prepared.

.

Calculation

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Administrative Lead time = 24.02.09 to 26.04.10. = 2 month 4 days.

= 16.06.10 to 19.06.10 = 4 days. ---------------------------- 2 month 8 days

Supplier’s Lead time = 26.05.10 to 16.06.10

= 21 days-------------------------------

Total Lead Time = 2 month 29days.

Comments

From the data mentioned above, it is evident that the Administrative lead time of item UMC NO. 0135A0304 is 2 month 8 days which is required to improve and the Supplier’s Lead time is 21 days which is Satisfactory.

(B) FLOW CHART

Item Description

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UMC NO. 0986A0015 DEE Shackele

Order No.2100207987

S1. Date Symbol Description No

1. 01.03.10 stores prepares P.R.

2. 03.03.10 Requisition sent to purchase

3. 07.03.10 Enquiry floated to parties

4. 12.04.10 Due date of Enquiry/Last date ofReceiving quotation.

5. 19.04.10 Quotation opened for comparative statement .

6. 21.04.10 purchase decodes to place order.

7. 29.04.10 purchase order prepared.

8. 12.05.10 purchase order issued.

9. 31.05.10 material received in stores.

10. 03.06.10 Quantity verification

11. 07.06.10 Inspection done 12. 09.06.10 Good receipt note prepared

.

Calculation

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Administrative Lead time = 01.03.10 to 12.05.10 = 2month 12 days.

= 31.05.10 to 09.06.10 = 10 days. ---------------------------- 2 month 22 days

Supplier’s Lead time = 12.05.10 to 31.05.10 = 19 days

----------------------------

Total Lead Time = 3 month 11 days.

Comments

From the data mentioned above,it is evident that the Administrative lead time of item UMC NO. 0986A0015 is 2 month 22 days which required to be check and the Supplier’s Lead time is 19 days which is Alright.

(C) FLOW CHART

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Item Description

UMC NO. 0794A2347 Control cable 140” LGOrder No.2100205856

S1. Date Symbol Description No

1. 01.03.10 stores prepares P.R.

2. 03.03.10 Requisition sent to purchase

3. 07.03.10 Enquiry floated to parties

4. 02.04.10 Due date of Enquiry/Last date ofReceiving quotation.

5. 09.04.10 Quotation opened for comparative statement .

6. 11.04.10 purchase decodes to place order.

7. 16.04.10 purchase order prepared.

8. 22.04.10 purchase order issued.

9. 17.06.10 material received in stores.

10. 18.06.10 Quantity verification

11. 22.06.10 Inspection done 12. 23.06.10 Good receipt note prepared

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Calculation

Administrative Lead time = 01.03.10 to 22.04.10 = 1 month 23 days.

= 17.06.10 to 23.06.10 = 7 days. ---------------------------- 2 month.

Supplier’s Lead time = 22.04.10 to 17.06.10 = 1 month 27 days

---------------------------Total Lead Time = 3 month 27 days.

Comments

From the data mentioned above,it is evident that the Administrative lead time of item UMC NO. 0794A2347 is 2 month which is required to improve and the Supplier’s Lead time is 1 month 27 days which is not idle.

(D)FLOW CHART

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Item Description

UMC NO. 0579A0537 Super Electrosafe

Order No.2100204653S1. Date Symbol Description No

1. 01.03.10 Stores Prepares P.R.

2. 03.03.10 Requisition sent to purchase

3. 05.03.10 Enquiry floated to parties

4. 28.03.10 Due date of Enquiry/Last date ofReceiving quotation.

5. 01.04.10 Quotation opened for comparative statement.

6. 05.04.10 purchase decodes to place order.

7. 10.04.10 purchase order prepared.

8. 12.04.10 purchase order issued.

9. 21.04.10 material received in stores.

10. 24.04.10 Quantity verification

11. 24.04.10 Inspection done 12. 24.04.10 Good receipt note prepared

Calculation

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Administrative Lead time =01.03.10 to 12.04.10 = 1 month 13 days.

= 21.04.10 to 24.04.10 = 4 days. ---------------------------- 1 month.17 days.

Supplier’s Lead time = 12.04.10 to 21.04.10 = 10 days

----------------------------Total Lead Time = 1 month 27days.

Comments

From the data mentioned above,it is evident that the Administrative lead time of item UMC NO. 0579A0537 is 1 month 17 days which is up to mark and the Supplier’s Lead time is10 days which is Alright .

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This project work is related with the inventory analysis and control of two important groups of item

1) Conveyor belt2) Spare parts of steel wire product

AREA- the central stores is having an inventory of 350 cr as on 31.3.2010 and total 4000 0consumable items. These items are kept for the maintenance and service purpose for different types of (1) earth moving equipments (2) For machineries of coal washing plants (3) For machineries and appliance of general services (4) For machineries of monocable ropeways.

Facts &figures gathered: - a statement of conveyor belting as on 31.3.2010 is as under

S.No. UMC No. ITEM GODOWN BALANCE(Mtrs)

CURRENT RATE(Rs.)

TOTAL VALUE(Rs.)

1 1055AA039 CONVEYOR BELT 800mm

350 1182 413700

2 1055AA040 CONVEYOR BELT 1200mm

NIL 2100 000

3 1055AA044 CONVEYOR BELT 900mm

NIL 2600 000

4 1055AA004 CONVEYOR BELT 1400mm

NIL 3000 000

Observation:-

(A)The above table show that out of 4 items,3 items are out of stock

Annual consumption of 1055 groups for the last 3 years & Variance analysis –

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Stock UMC No. 2007-08 2008-09 2009-10

1055AA039 3200.00 mtrs. 900.00 mtrs. 1900.00 mtrs

1055AA040 5200.00 mtrs 4100.00 mtrs. 1400.00 mtrs

1055AA044 2100.00 mtrs 900.00 mtrs. 700.00 mtrs

1055AA004 3100.00 mtrs. 500.00 mtrs 000.00 mtrs

.Analysis of Situation:-

(A)Consumption figures of item 1055AA039 are very irregular. Hence consumption to be checked. We can see that in 2007-08 Consumption was 3200 mtrs, but in 2008-09 it decreased to 900 mtrs which is 3 times of previous year. Again In 2009-10 its increased to 1900 mtrs, which is Just double of previous year

(B) Consumption figures of item 1055AA040 are Acceptable while comparing between 2007-08 and 2008-09.But in 2009-10 it decreased from 4100 mtrs to 1400 mtrs which is about 3 times of previous year. Current balance of this item is NIL hence Safety Stock was not maintained in spite of their consumption and this is not acceptable.

(C) Consumption figures of item 1055AA044 are not acceptable while comparing 2007-08 and 2008-09.because it reduces from 2100mtrs to 900mtrs.which was double of previous year .But it is Alright when we compare between 2008-09 and 2009-10. Current balance of this item is NIL hence Safety Stock was not maintained in spite of their consumption and this is not acceptable.

(D)While analyzing item 1055AA004.we found that its Consumption was decreased consistently and finally NIL in 2009-10.Thus this item become obsolete and no need purchase or maintain Safety Stock.

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Facts & Figures gathered: A statement of few spares part of steel wire &products as on 31.3.2010

GROUND UMC NO. ITEMS BALANCE COST/UNIT TOTAL COST

2268AA001 TRAM CAR WHEEL

NIL 3600 0000

2268AA005 LINE SHEAVE 15pcs 4200 630002268AA006 TRACK PLATE

ASSYMBLENIL. 1550 00000

2268AA009 BUCKET WITH HANGER

NIL. 34500 00000

2268AA010 GRIP CHANNEL ASSEMBLE

60pcs. 4200 252000

2268AA015 QUARD MOUNT NIL. 7800 0000

Observation:-

(A)The above table show that out of 6 items,4 items are out of stock.

Annual consumption of 2268 groups for the last 3 years & Variance analysis

Stock UMC No. 2007-08 2008-09 2009-10

2268AA001 190.00 mtrs 50.00 mtrs. 60.00 mtrs

2268AA005 100.00 mtrs. 130.00 mtrs 75.00 mtrs

2268AA006 125.00 mtrs 120.00 mtrs. 100.00 mtrs

2268AA009 60.00 mtrs. 40.00 mtrs 45.00 mtrs

2268AA010 75.00 mtrs 250.00 mtrs. 40.00 mtrs 2268AA015 45.00 mtrs. 20.00 mtrs 10.00 mtrs

Analysis:

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(A) Consumption figures of item 2268AA001 are not acceptable while comparing 2007-08 and 2008-09.because it reduces from 190mtrs to 50mtrs.which was about 4 times of previous Year .But it is Alright when we compare between 2008-09 and 2009-10. Current balance of this item is NIL. Hence Safety Stock was not maintained In spite of their consumption and this is not acceptable.

(B) While analyzing item 2268AA005.we found that it’s Consumption was about consistent and maintained Safety Stock. Thus this item consumption and Safety stock was Perfect.

(C) While analyzing items 2268AA006 and 2268AA009.we found that Consumption was about Consistent. Thus these items consumption was perfect. But Current balances of these items are NIL. Hence Safety Stock was not maintained in spite of their consumption and this is not acceptable.

(D) While analyzing item 2268AA010.we found that Consumption was about consistent in 2007-08and2009-10.But It was found that Consumption of 2008-09 was comparatively high. But maintained Safety Stock. Thus this item consumption and Safety Stock was perfect.

(E) While analyzing item 2268AA015.we found that Consumption was decreased constantly @ 50%.If this situation would continue for 3 years this item become obsolete.

Material requirement planning The structure There is a well developed technique for planning dependent demand called material requirement planning. This is generally applicable technique for all type dependent demand. The basic concept is to have stock when it is needed and to have none the rest of time. With dependent demand, the size and timing of the requirement are know from the next level .MRP can therefore give the good control. It is issued extensively in manufacturing because there can be several level of dependent demand in the product. Here MRP is well developed and complex. In many inventory situations MRP is a much simpler process.

Fig 4 Inventory level for dependent demand

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FORMAT OF MATERIAL REQUISITION FORM

U.M. CODE JOB NAME OF BEARER P.NO DATE

CylindersPads SheetsNumbers

IndentingDep.

Dept.Serial

Debit Dept.Cost Code

ChargeAccount

Work Order No.

EquipmentCode

RollsCoilsReels 01

LengthsBrasTins

Material Number G .B UM L.P QuantityIssued

Rate Total Value

PadsSheetPair 02Set 06Meter 26BeamsPackers 27BoxesLiter 39C.U 40MeterKgs 41M Ten 42SoMeter 45

Raised By Approver

Special Approver

Issued/Date Received

TATA STEEL LTD STORE CODE-81 WEST BOKARO DIVISION MAT.NO- 0798AA124

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INVENTORY TREND FOR LAST 5 YEARS IN WEST BOKARO

The effectiveness of the inventory control in West Bokaro can be visualized in the following bar chart which gives the data of the inventory trend for the last 4 years, i.e. 2005-2010. The figures are given in terms of value. (In Rs. Crores. ).

Considering the trend shown in the bar chart above, we see that the inventory is being continuously decreased for the last 4 years. Observing the trend, we found that in the year 2010 inventory increased by 0.26 % from the year 2009. The high inventory during the year 2005 and 2006 shows the improper management and loose inventory control of the management. This high inventory was the main reason for the blocking of working capital and the funds. This hampered the production schedule in the organization. Management realized the disadvantages of high inventory and started working on it. Converting the inventory items into direct department inventory was one of the effective inventory control measures. It reduced the inventory both in terms of value and volume.

Disadvantages of high inventory

2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12Decreasing % of invevtory

In Crores (Rs.)

10.

94

6. 99

5. 12 4. 73 4. 99

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1. Much of working capital is tied up. It increases cost of production.

2. Bigger the inventory, more the insurance charges.3. Many items are likely to be damaged and deteriorate with passage of time.

4. When the design changes, all the inventories become obsolete and surplus.

5. Large inventories require more storing capacity. It also requires more handling and bigger records.

6. Chances of pilferage and misplacement are more. Sometimes cost of material decreases. It causes loss to the organization

MOVING AND NON-MOVING ITEMS

Non moving items--- The items which is in the stock but haven’t been stocked out for several years due to obsolescence or any other reason are called the non moving items.Following is the diagram showing the no. of non moving items for different no. years in the stores of West Bokaro Division.

No. of Non moving items in West Bokaro:

More than 3 years 2-3 years 1-2 years0

100

200

300

400

500

600

485

55

164

Non moving items

U n its

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No. of years Number Value (Rs)

More than 3 years 485 50, 13,000

2-3 years 55 4, 06,907

1-2 years 164 23, 76,237

To control the Non moving items, these are regularly been identified through periodic review

and audit and they are being converted into Direct department inventory (DDI) and these type of

inventories are continuously being minimized.

Moving items--- The items which are constantly been stocked out from the stores are called the

moving items.Any system designed to handle the information requirements for inventory will

have to keep a constant track of the physical flow of materials.

In the central store most of the item are none moving from last few year as per given the pie chart. Non moving products are not good sign for the organization.

93,26,236

5,13,000

4,06,907

NON MOVING INVENTORY IN RS

more then 1 yearmore then 3 yearmore then 2 year

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DEAD STOCK

According to the company policy, those items are declared as dead stocks which are there in the stock for more than the 5 Years as decided by the management. Dead stock keeps them in original place. A product before putting in the dead stock list , store organization send the list of non moving item to the head of every department , do you want this material ,if that material required by department then material is being send to respective department , otherwise it is put in dead stock list .Dead stock list send to secondary product department by the approval from G.M. Finally list dispatch to the KOLKATA sales office. KOLKATA sales office start bedding through on line.

TREND - Decreasing dead stock item every year as per the line graph decrease in the dead stock in the year 2005-06 to 2006-07 is 11% & in the financial year 2006-07 to 2007-08 the decrease in the dead stock is 42%.

DEAD STOCK IN CENTRAL STORE

Reason of dead stock:

2005 2006 2007 20090

10

20

30

40

50

60

70

62 L

AC

51

LA

C

17.4

L

AC

22

LA

C

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1. Communication gap between store organization & production department.2. Subsidiary product is use.

Reason of fall in the dead stock1. Most of the product converts into DDI (direct department inventory).Store unable to

decide which material should be kept with them and in how much quantity. Department know it better how much quantity of material are required so they prepared MR (material requisition) and send it to the store. After that, the stores purchase that material from the vendor and after the various process send to the department. By Converting the product into DDI Section the store doesn’t required to store the product with them previously.

2. Proper planning3. Out Sourcing

COAL PRODUCTION CHART

2005-06

2006-07

2007-08

2008-09

2009-10

0

10

20

30

40

50

RAW COAL IN LAC TONCLEAN COAL IN LAC TON

As per the graph In the year .2005-06 the raw coal was 41.5 lakhs tonnes produced and clean coal 13.5 lakhs tonnes and consumption was 250 cores.2006-07 the raw coal was 46 lakhs tonnes and clean coal 13.6 lakhs tonnes and total consumption was 200 crores. From the given above data the consumption of store was 300 crores in the year 2003-04 and the production of raw coal was 40 lakhs and clean coal was 13 lakhs tonnes but in the next financial year 2004-05 the consumption decrease and the consumption was 270 crores but the production increases and the raw coal was produced in that year was 41 lakhs tonnes and clean coal 14 lakhs tonnes reason was that there was well planning and most of the product was converted into DDI section. In 2006-07 the consumption was 200 crores and the production was 46 lakhs tonnes and clean coal was 13.6 lakhs tonnes from this we came to know that with the use of well planning and DDI method we can produced more with low consumption. Earlier we don’t have proper planning, and there is communication gap between store and production department so store have to keep the stock of inventory in large amount which block our working capital and most of the product come under dead stock this is not a good sign for any organization.

CONSUMPTION OF STORE

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2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

50100150200250300350

Series 2

Series 2

TRENDThe above diagram showing the store consumption trend depicts the decreasing status in the consumption of stores. It has been decreased by 10% in 2004-05, by 7.4% in 2005-06 and 20% in 2006-07 as same way in next year’s.

COMMENTSAnalyzing the above pattern of consumption in west bokaro, we can come to the findings that as the consumption of stores have been decreased as we compare the trends year by year parallel.This shows the effectiveness of the inventory control and proper management of stores that even if the store consumption has decreased, it hasn’t hampered the production process and it has still been increased. Minimization of inventory is there.

Costing System at TATA Steel ltd.

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(West Bokaro Division)

INTRODUCTION OF PRODUCTION SYSTEM

West Bokaro is a opencast mine of coal. In order to extract the raw coal Mining operation has to go through several processes gradually.

ACTIVITIES IN QUARRY

Ground Preparation & Removal of Overburden. Preparation of surface(clearing ground surface) Firstly the rocks are drilled filled by the gun powder and blasting is done

SHOVELL MACHINE and DUMPHER dumped Over burdens on dumping yard..

Extraction of raw coal (grade wise) from various quarries. Seams of coal are drilled filled by the gun powder Blasting is done to fragment the coal. Heavy Earth Moving Machineries (HEMM) coal is take out from the mine and send to

crushing plant to further reduce the coal size.

ACTIVITIES IN CRUSHING PLANT

Sizing of Coal

Crushing Plant: Raw coal is dumped into hoppers by 50 T capacity Bottom Dump Coal Haulers. Crusher is driven by a 180 KW slipring motor. The raw coal is crushed to a size of –125 mm. Crushed coal is fed to 2 conveyor circuits (600 TPH) known as C1A and C1B.

ACTIVITIES IN WASHERY

Inbound Logistics (Transfer to Washery).

With the help of Ropeway and Conveyor belts Crushed Coal transfer from Crushing plant to Washery for Coal beneficiation.

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Coal Beneficiation

Raw coal is beneficiated, at the Washeries, to produce clean coal, middlings, tailings and rejects. The principle of separation by specific gravity is employed in the DM Cyclone process, where the medium of washing constitutes of water and finely ground magnetite powder.

ACTIVITIES IN DESPATCH

OutBound Logistics

Ropeway is used to transfer the Clean Coal from washery to Chainpur Railway siding inorder to dispatch the clean Coal to Jamshedpur.

COSTING

The techniques and processes of ascertaining costs. Costing works are performed in the different cost centres at west bokaro division and works are done very effectively and efficiently

Costing System consider the expenses of every activities in production process

Cost

WASHERY

QUARRY

CRUSHING

DESPATCH

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It is the amount of expenditure incurred on or attributable to a given thing.It is the result of effectiveness combination of factors of production. Cost or production cost refers to all sorts of monetary expenditures incurred in the production of the commodity.

Fig.:- Showing Types Of Production Cost

1. TOTAL FIXED COST

It is the payment for fixed factors of production in the short run is known as total fixed cost. Fixed costs are cost which do not change with the change in quantity of output.Fixed costs are also known as supplementary costs or overhead costs.Some examples of TOTAL FIXED COSTS are:-

Insurance premium Salaries of the permanent employees Standard depreciation of the plant and machinery Maintenance of building and license fee etc.

2.TOTAL VARIABLE COST

It is the payment of variable factors of production is called as total variable cost. Variable cost is one which varies as the level of the output varies.Total variable costs are also known as prime costs, special costs or direct costs.Some examples of TOTAL VARIABLE COSTS are:-

Wages of temporary labourers Cost of raw materials Cost of fuel Cost of electricity etc.

TOTAL PRODUCTION COST Total cost includes both total fixed cost and total variable cost. It may be also called as total cost of production.

TOTAL PRODUCTION COSTTOTAL FIXED

COSTTOTAL VARIABLE COST

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where,

TPC = TOTAL PRODUCTION COST TFC = TOTAL FIXED COST TVC = TOTAL VARIABLE COST

Cost flow-

Fig. cost flow

Cost Run, process & control

Annual business plan data (ABP) for the month is entered into the system.Survey report (details of opening balance, production, consumption, dispatch & sales and closing stock of different material are given in the report) is received from Chief (Planning)Reconciliation of data as per SAP with that of Survey Report. Control – Data as per SAP should be matching with Survey report figures. In case of difference, contact the authorized production personnel and sr. Manager (Q-AB) from departments for correction. Cost run should not start before data as per SAP is exactly matching with survey report. There are specific activities for each production and maintenance departments in SAP which enables system to compute standard cost. Do checking for all activities. In activity hours or days are abnormally high or low, matter is to be taken up with the concerned department for correction.Prepare Cost Finance Reconciliation report and take action on over / under absorption.

.NEED FOR COSTING

Main objective is to record and analyze the expenses.

Work

in p

rogress

Purchase of

Material

Purchase of service,labourPurchase of plant & equipment

Fin

ished

goods

Cost of good

s sold

Depreciation

Processing & maintenance

Overheads

TPC = TFC + TVC

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Exercise the control over cost. Cost is to help formulating policies. Cost help in management in fixation of the selling price of the product produced. It help the management in its effort to maximize the output and profit It helps in forecasting.

Cost centreCost centers are the place where direct and indirect expenditures are allocated. Cost centre allocate the cost of different and their different machinery used, maintenance and other expenses. Cost centers play a very important role in the smooth running of the organization.

TATA STEEL Ltd. (Jamshedpur)(Cost Centre)

Jharia West Bokaro Colliery Noamundi

List of cost centers in use at WB

SINO.

COSTCENTRE NO. COST CENTRES

1. 51100 DRILLING

2. 51101 DRILL – MAINT

3. 51105 SHOVELLING

4. 51106 SHOVELL – MAINT

5. 51107 MINING GNRL – COAL

6. 51108 LOADING

7. 51109 HAULING

8. 51110 QE – PUMPING

9. 51111 DOZZING

10. 51112 PUMP & ELECT – MAINT11. 51113 PCP 1

12. 51114 PCP 1- MAINT

13. 51115 DESHLLING PLANT

14. 51116 CHAINPUR15. 51117 MEDICAL

16. 51118 TOWN MAINTENANCE

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17. 51119 RURAL DEVELOPMENT

18. 51120 LAND CELL

19. 51121 ACCOUNTS

20. 51122 GM’S OFFICE

21. 51123 ASPIRE

At West Bokaro division two types of products are produced :-

1. Primary producta. Clean coal

2. Secondary productsa. Joint product (Middling)b. By product (Tailing and Rejects)

1. Primary product

Primary product is the main product .it means that all the mining operations are done for getting the main product i.e. clean coal.

a. Clean coal

Clean coal is obtained from the raw coal after washing the coal at the washeries of the w.b.d. and raw coal is obtained from the mining operations. We calculate the net cost of cc.Clean coal is a low ash% coal which is used in blast furnace for melting iron.West bokaro division is a captive mine of Tata steel ltd. The primary objective is to supply of clean coal to Jamshedpur plant as per the annual budget plan decided by the company at low cost.

2. Secondary product

Secondary products are those product which are obtained during or after the production process of the main product (clean coal).Example- middling, tailing and rejects.

A. JOINT PRODUCT

At WBD joint product is the middling. It contains the 35%ash it is obtained during the process of main product. it is sold by the del credre agent .We calculate the net cost of middling.

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Middling are sold to the thermal power stations or some middlings are sent to the Jamshedpur for further process.Joint products are defined as the two or more products separated in course of some processing operations, usually requiring further processing, each product being in such proportion that no single product can be designed as a major product.By analyzing it is clear that two or more products are inevitably produced in a process from one basic raw material and each has more or less the same value economic importance or earns approximately the same profit in relation to the other.

MAIN FEATURES ARE:-

Joint product by their very nature of production process cannot be produced separately and have equal economic importance.The joint products can be sold either at the stage of production (split off point) or it self or they can be processed further. Costs incurred before the split off point are called joint costs and the costs incurred Beyond that point are known as separable cost. The crucial factor in accounting for joint product is allocation of joint cost among the joint product from the joint process.

Commonly used methods for allocating joint process costs are:-

1. Physical quantities method.2. Relative sales value method.3. Net realizable value less normal profit method.4. Weighted average cost method.5. Any reasonable method. (Equivalent ratio method)

At WBD EQUIVALENT RATIO METHOD is used.

B. BY PRODUCTS

Tailing and rejects are the byproducts at WBD . Tailing contains 50% of ash % and it is used in brick kilns. We calculate the net cost of Tailing.Rejects contains 65% of ash% and it is used in FBC power houses, there is no calculation work is done.By product is defined as the any saleable or usable value incidentally produced in addition to main product.By analyzing the definition it is clear that by products are associated products which arise or emerge from one basic raw material in the corse of producing the main product and such product having the market value.

MAIN FEATURES ARE:-

By products are of lesser value as compared to that of main product.

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If subsequently process enhances their value but the resulting profit will be less than that of the main product otherwise the by product would become the main product.The accounting treatment depends upon whether the by product is sold at the split off point or is further processed.

The two most commonly used methods of accounting for by products are:-1. Miscellaneous income method.2. Net realizable value method.

At WBD NET REALISABLE VALUE METHOD is used.

APPORTIONMENT OF COST

Clean Coal (CC) and Middling are considered as joint product. Expenditure is allocated to both products based on carbon produced (equivalent production*) on production of Tailings, credit is given to CC and Middling cost @ administered price of tailings. Amount of credit is distributed to CC and Middling based on carbon production. Stock of Middling is valued at moving weighted average price. Stock of Tailings is maintained at administered price. On actual sale of Middling, difference between sale price and moving weighted average price is credited to CC cost. On sale of tailings, difference between sale price and administered price is credited to CC cost and Middling cost in the ratio of carbon production. Credit for sale of Rejects is given at the time of actual sale to CC and Middling at ratio of carbon production.

CALCULATION OF CLEAN COAL FOR THE YEAR ENDED 31-03-10 :-

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STEP 1 Total Expenditure of the Division is determined. Process

All the departments are defined with some cost centers through which cost get infused in the SAP system.

The cost centre criteria are fixed for all expenditure booking. The summation of all the cost centers gives the actual expenditure of the Division.

Total expenditure of the division = Rs 300 cr (Hypothetical)

STEP 2Calculating the carbon% in Cc and Midd. :-

Cc - 20 % ash (Hypothetical)

Midd. - 40% ash (Hypothetical)

Process Subtract the ash% of Cc and Midd. from their total%. Calculation :-

Hence, I get the 80% carbon content for the Cc and 60% carbon content for the Midd.On the basis of carbon content in two prime products namely Cc and Midd., the Equivalent ratio is calculated = 80 : 60

STEP 3Production of Cc and Midd. (in tonnes) :-

Tonnage of Cc = 600000 tonne (Hypothetical)Tonnage of Midd. = 900000 tonne (Hypothetical)

Process From the production report which is duly certified by the surveyor

STEP 4Calculation of Actual production on the basis of carbon content :-

Process

Cc = (100-20)% = 80% carbon content

Midd. = (100-40)% = 60% carbon content

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Multiply the carbon content of Cc and Midd. with their tonnages. Calculation :-

Actual production = (carbon content * tonnages)

Actual production of Cc = 80% * 600000

= 480000 tonne

Actual production of Midd. = 60% * 900000 = 540000 tonne

Hence,I get the Actual production of Cc and Actual production of Midd. i.e, 480000 tonne & 540000 tonne respectively.

STEP 5Calculation of Total Actual production on the basis of carbon content :-

Process Add the Actual production of Cc and Actual production of Midd. Calculation :-

Total actual production = (Actual production of Cc + Actual production of Midd.)

= 480000 + 540000

= 1020000 tonneSTEP 6

Calculation of Gross cost of Cc and Midd. :-

Process Bifurcation of Total cost between Cc and Midd. On the basis of Equivalent

ratio . Calculation :-

Cc = 300 cr * 480000/1020000 = 141 cr

Midd. = 300 cr * 540000 / 1020000 = 159 cr

Gross cost for the Cc = Rs 141 cr

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Gross cost for the Midd. = Rs 159 cr

Total gross cost of Cc and Midd. = (Gross cost of Cc + Gross cost of Midd.)

480000 and 540000 are Actual production of Cc and Midd. Respectively (in tonne).1020000 is the total Actual production of Cc and Midd.300 cr is the total Expenditure of the WBD.

STEP 7Margin in sale of Tailing :-

Process CENTRAL COAL FIELD LIMITED Fix the price for the sale of tailing i.e,

Rs 800 /tonneand this price is also known as 'ADMINISTERED PRICE'.

Average rate during the year of Tailings is Rs 1000/tonne Calculation of the average rate :- Average rate =Sum of the rates of all the months / No. of months Rate of each month is available from the sales report.

Margin in sale of the Tailings = Average rate - Administered rate (Hypothetical)

= 1000 - 800

= Rs 200/tonne

Sales quantity of the Tailings =1100000 tonne Process for getting the sales quantity :-

Sales quantity will be available from the SALES REPORT.

Calculation of credit on the SALES QUANTITY :-

Credit = Sales quantity *Margin in sale of the Tailings

= 1100000 *200

= 22 cr tonne

= 141 + 159 = Rs 300 cr

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Credit to be taken in Cc and Midd. = 22cr tonne

STEP 8

Credit of cost of Tailings :-Process

Administered price = Rs 800 (Hypothetical) Actual production of the Tailing = 1200000 tonne (Hypothetical) Actual production of the Tailings is available from the PRODUCTION

REPORT. Calculation of credit on the Actual production of the Tailings :-

Credit = Administered price * Actual production = 800 * 1200000 = 96 cr

Credit to be taken in Cc and Midd. = 96 cr Hence, Total credit = credit on sales quantity + credit on the actual production = ( 22 + 96 ) cr = 118 crNow, on the basis of Equivalent ratio I will divide the Total credit between Cc and Midd :-

Hence, credit to be taken in the Cc = 56 cr credit to be taken in the Midd = 70 cr

STEP 9

Calculation of the NET COST in 1st stage of the Cc :-Process

Subtract the credit to be taken in the Cc from the gross cost of the Cc. Calculation :-

Cc = Gross cost of Cc - Credit to be taken in the Cc

= (141 - 56) cr

= 85 cr

Cc = 480000/1020000 * 118 = 56 cr

Midd. = 5400000/1020000 * 118 = 70 cr

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Hence, at the first stege net cost of the Cc = 85 cr

STEP 10

Calculation of the final NET COST of the Midd. :-

Process Subtract the credit to be taken in the Midd. from the gross cost of the Midd. Calculation :-

Midd. = Gross cost of Midd. - Credit to be taken in the Midd.

= (159 - 70 cr)

= 89 cr

Hence, the final net cost of the Midd. is Rs 89 cr.

STEP 11

Calcualation of final NET COST of the Cc :-

Process

Calculation of sale of Midd. :-

Sale of Midd. = Actual production of Midd. * Average rate Average rate is available from the price during the year Sale of Midd. = 540000 tonne * 2500 = 135 cr

Calculation on profit on sale of Midd. :-

Profit on sale = Sale of Midd. - Net cost of the Midd.

= (135 - 89) cr

= 46 cr

Calculation of the final net cost of the Cc :- Final net cost of Cc = First net cost of Cc -Profit on sale of Midd.

= ( 85 - 46 ) cr

= 39 cr

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Calculation of final net cost per tonne of Cc :-Net cost per tonne of Cc = Net cost of Cc / Actual production of

the Cc

= 39 cr / 480000

= 813 / tonne Hence, the net cost per tonne of the Cc = Rs 813 / tonne

ABPABP stands for “ANNUAL BUSINESS PLAN” it is like a annual pre-planned budget for one financial year.The ABP drafted is a very useful tool for monitoring expenses and production target.The ABP figures are also fed in the system so, that planned and actual figures are displayed simultaneously and easy to monitor.The ABP is drafted after deep analysis impact of external factors, need of Jamshedpur plant , government policies , inflation rate , etc.

PRODUCTION REPORT

Production report is a key document. It contain following information :-

Extraction of Overburden. Extraction of raw coal (grade wise) from various quarries Opening stock and Closing stock is also given. Raw coal fed to washeries. Quantitative detail raw material is also given. Clean coal dispatch to Jamshedpur plant. Middlings and Tailings are sold to the Institutional buyers.

The report is made on daily basis. However at the month end a final summary of the entire month is captured and verified by surveyor. The data like raw coal production etc. helps in calculation of royalty and stowing excise.The format of PRODUCTION REPORT is attached.

SALES REPORT

SALES REPORT is a key document. It contains following information:- Name & Address of the party whom the company has sold its product.

NOTE :- Cc =clean coal ,

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Name of the item sold. Quantity of the item sold. Rate of the item sold.

The report is made on daily basis. However at the month end a final summary of the entire month is captured and verified by surveyor.

On the sales VAT and CST are calculated.

The format of SALES REPORT is attached.

COMPUTERISED WORKING

West Bokaro Division has ERP package (Enterprise Resource Planning) SAP.

SAP is integrated software more emphasis is on system controlled as there is minimum manual

intervention.

SAP has different module to simplify an automatised financial accounting operation with proper

control.

CONCLUSION

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Inventory management and costing system at West Bokaro Division is an outcome of practical

thinking and designed as per specific need of West Bokaro Division by a team of experienced

professionals. The process may be applicable to all parallel industries to a great extent with

simple modifications.

Analyzing the pattern of the production and consumption in West Bokaro Division, we find that

the production has increased continuously year by year and on the other hand consumption by

the stores department has decreased continuously. This shows the effectiveness of inventory

control and proper management by the stores department. The production has increased and

inventory has decreased but this has not hampered the production process of the company. This

shows that the inventory has been managed properly. JIT method and DDI method has been

adopted to control the inventory in the organization.

Costing system adopted here is not applicable in other parallel industries. Equivalent ratio

method and net realizable value method has been adopted here for the determination of net cost

of joint product and by product respectively.

Pursuing the summer internship project in Tata Steel, West Bokaro Division was indeed a

learning experience.

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LIMITATIONS OF THE STUDY:

The following are the limitations of this summer project training:

The study is limited to five financial years i.e. from 2006-2010.

The data used in this study has been taken from the Central Store, Purchase Store

& Accounts Department of Tata Steel, West Bokaro Division, Ghatotand, Ramgarh

Jharkhand as per the requirement.

Some of the information that was essential for this study cannot however be given in

this report due to their confidential nature.

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Recommendations

(A)Since Godown balance is NIL of item 1055AA040 1055AA044 1055AA004. Which shows that Safety Stock was not maintained which may cause hindrance in the production process. So Safety Stock Should be maintained.

(B)After Analyzing consumption pattern of 2009-10. And as the information given regarding godown balance. Purchase deptt. Should issue purchase order for above mentioned item.

(C)The ABC, XYZ, and FSN analysis should be done once in a year as a practice.

(D)The ROL and EOQ should be monitored regularly to determine the exact order quantity and Re-order level point.

(E) Effort should be made to dispose off obsolete and non-moving items as they are blocking large amount.

(F) The system should be update regularly.

(G)An effort should be made to apply JIT technique.

(H)There should be a correction in preparation of GRN in 101 for DDI items, so that the items/materials received for the Department will be informed automatically to the respective department.

(I) Presently there is a provision of pulling heavy materials with Rope which is very risky; to avoid any mishap Crain should be used.

(J) In General section there should be proper spacing between the Racks.

(K)There should be Stopper for vehicles at the place of loading/unloading to avoid damage of railings by vehicles.

(L) There should be more space in Cable Yard.

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BIBLIOGRAPHY

»» Self Observation at Tata Steel Warehouse (central store) and Purchase office. .»» JRD Training Centre, Library (Magazines published by TATA STEEL ,West Bokaro Division-Khaas Baat, Darpan)

»»Financial management- I.M. Pandey

»»Costing system- M. Y. Khan

»» www.google.com

»» www.tatasteel.com

»» Tata steel Intranet.