OVERALL AND SPARES INVENTORY OVER LAST FIVE YEARS (WHOLE NTPC)

S.N. FIN.YEAR

INST ALLED CAPACIT Y (M W)

COAL

GAS

T OT AL

CLOSING ST OCK OF
OVERALL
INVENT ORY
(RS.CR.)
1505.32

CONST RUCT ION

O&M INVENT ORY
INVENT ORY (RS.CR.)S PARES
INV. OT HERS
(RS.CR.)
(RS.CR.)
189.09
1220.56
87.33

96-97

14610

3175

17785

97-98

14610

3175

17785

1504.82

158.39

1243.43

95.67

98-99

14610

3275

17885

1503.95

113.65

1288.4

101.9

99-2000

16015

3955

19970

1515.66

137.85

1276.57

101.24

2000-01

16015

3955

19970

1402.55

117.59

1115.68

106.38

CONSTITUENTS OF OVERALL INVENTORY

13%

6%

81%

SPARES CONSUMPTION VIS-A-VIS PROCUREMENTS

FOR LAST 8 YEARS (TOTAL NTPC)
YEAR
99-00
00-01
01-02
02-03
03-04
04-05
05-06
06-07

PROCUREMENT
321.3
369.71
366
391
466
438
395
577

(RS.CR.)
CONS. IN % OF
101.3%
140.56%
77.30%
120.70%
96.80%
91.10%
95.70%
85.60%

CONSUMPTION
325.4
519.66
283
472
451
399
378
494

SPARES CONSUMPTION VIS-A-VIS PROCUREMENT (TOTAL NTPC FOR

LAST 8 YEARS)

700

PROCUREMENT

600
500
400
300

472

519.66
325.4

369.71

466

366

451
391

321.3

577
438

395
399

494

378

283

200

SPARES

100
0
99-00

00-01

01-02

02-03

03-04
FIN.YEAR

04-05

05-06

06-07

INVENTORY HOLDING NORMS

CONSTRUCTIONSTORES

A.

INVENTORYNORMSINDAY/
MONTHSCONSUMPTION

1.

CEMENT

2.

STEEL

i.TORSTEEL/REINFORCEMENTSTEEL

3MONTHS

ii.STRUCTURALSTEEL

6MONTHS

3.

OTHERS(VIZ.PIPE,PIPEFITTINGS,CABLESETC.)

9MONTHS

B.

O&MSTORES

1.

COAL

i.FORPITHEADSTATIONS

15DAYS

ii.FORNONPITHEADSTATIONS

30DAYS

2.

FUEL(EXCLUDINGCOAL)FURNACEOIL

3.

SPARES(EXCLUDINGINS.SPARES

i.INDIGENOUS

18MONTHS

ii.IMPORTED

18MONTHS

4.

LOOSETOOLS

6MONTHS

5.

CHEMICALS,GASESANDEXPLOSIVES

3MONTHS

6.

OIL&LUBRICANTS

1MONTH

7.

STORESOTHERTHANSPARES(CONSUMABLEGENERALSTORES)

3MONTHS

8.

SCRAP

1-2MONTHS

2MONTHS

4MONTHSARISING
(3DISPOSALSINAYEAR)

SOURCESOFSPARESINVENTORYBUILD-UP

-MANDATORYSPARES
SPECIFIED&PROCUREDWITH
INITIALPLANT&EQUIPMENTS

-RECOMMENDEDSPARESASPERRECOMMENDATIONSOF
VENDORRECEIVEDALONGWITH
THEPLANT&EQUIPMENT
OFFER,SCRUTINISED&
PROCUREDINTHEINITIAL
PERIODOFCONTRACT

-SITEORDEREDSPARES ORDERSPLACEDBYSITESTO
MEETOPERATIONAL
REQUIREMENTS.

INVENTORYCARRYINGCOST

ITALSOVARIESWITHQUANTITYORDERED,BASEONAVERAGE
INVENTORYANDCONSISTSOFTHEFOLLOWINGCOSTS.

COSTOFCAPITALINVESTMENT

COSTOFSTORAGE

COSTOFINSURANCE

COSTOFPRESERVATION

COSTOFOBSOLESCENCE

ADMINISTRATIVECOST

-INVENTORYCARRYINGCOSTISAPPROXIMATELY20TO25%OFCOSTOF
INVENTORY.

ECONOMICORDERQUANTITY(E.O.Q.)

-Itisthatorderquantitywhichpermitslowestcostperunitandmost

advantageous.

-Itdependsupontwotypesofcosts

i)InventoryProcurementCost

ii)InventoryCarryingCost

INVENTORYPROCUREMENTCOST

Itconsistsofexpenditureconnectedwiththefollowingandvarieswiththeorder
quantity.

ReceivingQuotations
ProcessingforPurchaseOrders
Follow-upandexpeditingpurchaseorder
ReceivingMaterialsandtheninspectingit
ProcessingSellersInvoice

Economic Order Quantity :

TO DETERMINE THE BEST OR PROFITABLE ORDER QUANTITY , IT IS

NECESSARY TO WEIGH THE ORDER COSTS AGAINST THE INVENTORY
CARRYING COSTS , BECAUSE THESE TWO COSTS ARE CONFLICTING IN
NATURE .

INVENTORY CARRYING COSTS :

IN AN IDEAL CONDITION THERE SHOULD BE NO STOCK .

EVERY ITEM SHOULD ARIVE JUST BEFORE USE IN JUST ENOUGH

QUANTITY FOR A DAY OR SO .
BUT IT IS NOT PRACTICAL FOR THE TWO REASONS :
SUPPLIERS AND PRODUCTION PROGRAMMES ARE NOT SO CERTAIN

TOTALCOST

T
O
T
A
L
C
O
S
T

INVENTORYCARRYINGCOST

ORDERINGCOST

TOTALQUANTITY

ECONOMICORDERQUANTITYCANBEEXPRESSEDINTHEFOLLOWING
FORMULA:

2AS
OQ

==CI

HERE:
S =COSTPERORDERPERRs.
A =ANNUALCONSUMPTIONINUNITS.
C =COSTOFONEITEMINRs.
I =INVENTORYCARRYINGCOST/YEAR/ITEMINONEUNIT.
ASICPRINCIPLESTOBEREMEMBERED:
ORDERQUANTITYSHOULDBEEXPRESSEDINTHESAMEUNITINWHICH
CONSUMPTIONISTAKEN.
CONSUMPTIONRATEANDINVENTORYCARRYINGCOSTSSHOULDBEOF
SAME

STRATEGYANDACTIONSTAKENFORCONTROLOFINVENTORY

STRATEGY :
REGULATINGTHEPROCUREMENTSOFINITIALANDO&MSPARES

OPTIMUMSTOCKINGI.E.STOCKSCOMPARABLETOCONSUMPTION

INTERUNITTRANSFEROFMATERIALS.

DISPOSALOFSCRAP.

ACTIONSTAKEN:
STRINGENTCONTROLOFPROCUREMENTOFINITIALSPARES.

STRINGENTCONTROLONPROCUREMENTCONTROLOFINDENTS.
REVIEWOFINDENTSOFSPARES.

ABOVE RS. 5.0 LAKHS BY HOD(MATERIALS), HOD(F) AND HOD (INDENTING

DEPARTMENT)

ABOVERS.2.0LAKHSBYCOMMITTEEOFMANAGER/SR.MANAGERS

INVENTORYMONITORINGTHROUGHORTS&MANAGEMENTCOMMITTEES.

COMMONCODIFICATIONOFINTERCHANGEABLESPARES.

DIVERSIONOFSURPLUSITEMSTONEEDYPROJECTS.

REGULARDISPOSALOFSCRAP

LEADTIMEANALYSIS

LEADTIME

IT IS THE ESTIMATED TIME LAG BETWEEN THE DATE, THE

INDENT IS ACCEPTED AND REGISTERED IN PURCHASE SECTION
TOTHEDATEOFPHYSICALRECEIPTOFMATERIALSATSTORES.

IT IS PRE-KNOWN OR ESTIMATED BY THE MATERIALS

MANAGERS DEPENDING UPON TYPE OF MATERIALS AND BASED
ONPASTEXPERIENCE.

ITCANBESUBDIVIDEDINTOFOLLOWINGCOMPONENTS:

I)ADMINISTRATIVELEADTIME.

II)SUPPLIERSLEADTIME

III)TRANSPORTERSLEADTIME

ROCUREMENTSYSTEMS
RECOUPWHENDUESYSTEM(WDS)

MEANTFORAUTOMATICRECOUPMENT(AR)ITEMS.

PERIODICALREVIEWSYSTEM(PRS)
MEANTFORNONARITEMS

OTHTHEABOVESYSTEMSCALLFORDETERMINATIONOFLIMITSTOGUIDE
DECISIONSONWHENANDHOWMUCHTORECOUP.
UNDERWDS,ORDERSAREPLACEDWHENTHESTOCKREACHESA

INVENTORY MANAGEMENT
INVENTORY HOLDING NORMS FOR SPARES
It is estimated that about 60% of the maintenance cost of plant and
equipment is on account of spares alone. For making 100% availability of spares,
a huge inventory of spares has to be maintained requiring large working capital.
Optimum inventory holding is aimed to strike a balance between the working
capital requirement and providing high plant availability.
Inventory holding norm for spares have been fixed on the basis of experience
obtained during the past years in respect of consumption of spares, procurement
lead time, nature of spares (viz. Vital essential, desirable etc.), The Inventory
Norm fixed for spares is 18 months consumption (excluding insurance spares).
spares inventory
The inventory holding is computedClosing
at thebalance
end ofoffinancial
years in atterms of
Inventory
Ratio:
inventory
turnoverTurnover
ratio which
is defined as under:
Consumption
the
end of F.Yearduring F.Year.

OPTIMAL STOCKING AND

PROCUREMENT OF SPARES
NTPC being a multi unit organisation, to avoid stocking
of huge quantities of spares at each unit resulting in
locking of
large working capital, a policy on
indentification of interchangeable spares with allotment
of codes for the purpose of pooling of spares is
envisaged. Common code wherever feasible has already
been adopted for the purpose of pooling amongst the
stations as far as possible.
The policy is formulated with the objective of ensuring
ready availability of such spares at the time of
requirement as also optimisation of capital investment.

SELECTIVEINVENTORY
CONTROLOFSPARESTHROUGHDIFFERENTANALYSIS

To achieve the goal of optimum inventory, various

TYPE OF
OBJECTIVE
types
of analysis and BASIS
classifications are carried
out as
ANALYSIS
below:
ABC

Annual value of usage.

Selective
control
through
analysis of Annual Usage
Value.
To regulate co-efficient on
confidence
levels
in
providing safety stock.

VED

Criticality of the spares i.e. Vital,

Essential & Desirable

XYZ

Itemwise stock holding value

To effect selective control.

ICU

Nature of use i.e. Insurance,

Consumable and Unit Replacement.

To regulate procurement policy

and stock holding.

FSN

Pattern of movement i.e. Fast, Slow

and Non-Moving

To identify pattern of movement

and earmark non-moving spares.

SDE

MarketAvailability

To formulate methodologies of
procurement depending upon
market availability.

THANKYOU