A

PROJECT REPORT
ON
“STORE MANAGEMENT”

FOR

HINDUSTAN ORGANIC CHEMICAL LIMITED

RASAYANI

SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY
IN FULFILLMENT OF TWO YEARS FULL TIME
MASTERS DEGREE IN BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY

MS. SARIKA GAVATE

(BATCH-2019-2021)

UNDER THE GUIDANCE OF

Prof. Mr. Viresh Parkhe

SIR VISVESVARAYA INSTITUTE OF TECHNOLOGY, CHINCHOLI,

NASIK-422102
i
SIR VISVESVARAYA INSTITUTE OF TECHNOLOGY, CHINCHOLI, NASIK-422102
 ACKNOWLEDGEMENT

On completion of my project I would like to express my thanks to all who guided and
supported me during my project.

I am grateful to the “Hindustan Organic Chemical Ltd.Rasayani” for giving me this

opportunity for being part of this internship program. I would like to thank Mr. Pratik
Jha (Plant Head) and Mr. Irfan Sayed (Operation Manager) for helping with my
project.

My special thanks to my HOD Prof. Mr. Amol Kare and Prof. Mr. Viresh Parkhe as a
project guide under whose supervision and guidance it has become possible for me to
bring out this work successfully. Also I would like to give my heartfelt thanks to Prof.
Mr.Viresh Parkhe, the principal of the SVIT College. I would also like to thank all
teaching & non teaching staff for their constant co-operation and their valuable
contribution in my project.

I have paucity of words to express my obeisance before them for their keen interest,
valuable guidance; unflinching judgment and constant encouragement during the
entire course of my study.
Words in my lexicon fall short to express my feelings towards Mrs. Kanti Naidu (Hub
Head) for his timely and important help in completing the project report.

Last but not the least, I own my regards to the ‘Almighty’ for making me able to
believe in myself and letting me utilize my potential to the fullest of my during the
entire course of the study.

Date:
Place: Sinner Ms. Sarika Gavate
 DECLARATION

I, Ms.Sarika Gavate, student of Second Year MBA (Operation & Supply Chain
Management) hereby declares that, project report entitled “Store Management” is an
original research work carried out by me, under the supervision and able guidance of
Prof. Mr. Viresh Parkhe

I further declare that, to the best of my knowledge, the project report has not been
submitted in part or full to this University or any other University for the award of any
diploma or degree. I will be solely responsible in case if any issue occurs in relation
with genuineness of the same.

Date:
Place: Sinner Ms. Sarika Gavate
 INDEX

Chapter Title of Content Page No.

No.
1 Acknowledgement ii
2 Student Declaration iii

Chapter Title of Content Page No.

No.
1 Executive Summary 1

2 Objectives of the Study 2

3 Organization Profile 3-6

4 Product Profile 7-8

5 Theoretical Background 9-10

6 Research Methodology 11-37

7 Data Analysis & Interpretation 38-48

8 Findings & Conclusion 49

9 Suggestions & Recommendations 50

Annexure 51-56

Bibliography 57
 LIST OF GRAPHS

Sr.. Graph. Title of Graph Page No.

No. No.
1 1.1 Different parts of analysis of the inventory 39
management
2 2.1 Raw Material Conversion Period 41

3 3.1 Work In Process Conversion Period 42

4 4.1 Finished Goods Conversion Period 43

5 5.1 Inventory Conversion Period 44

6 6.1 Total Investment in Inventory 45

7 7.1 Inventory Turnover Ratio 46

8 8.1 Work in Process Turnover Ratio 47

9 9.1 Finished Goods Turnover Ratio 48

LIST OF TABLES

Sr.No. Table Title of Table Page No.

No.
1 1.1 Bifurcation of inventories percentage 19
2 2.1 ABC Analysis Percentage 28
3 3.1 30
Features of ABC Analysis

4 4.1 Analysis of Inventory Management 39

5 5.1 Raw Material Conversion Period 41
6 6.1 Work in Process Conversion Period 42
7 7.1 Finished Goods Conversion Period 43
8 8.1 Inventory Conversion Period 43
9 9.1 Total Investment in Inventory 45
10 10.1 Inventory Turnover Ratio 46
11 11.1 Work in Process Turnover Ratio 47
12 12.1 Finished Goods Turnover Ratio 48
 LIST OF FIGURES

Sr.No. Figure Title of Figures Page No.

No.
1 1.1 Bifurcation of Inventories 20

2 2.1 Composition of the net operating cycle 21

3 3.1 ABC Analysis Percentage 29

4 4.1 Determination of EOQ 31

5 5.1 Net Operating Cycle 40

LIST OF ABBREVIATIONS

Sr.No. Abbreviation Full Form of Abbreviation

1 HOCL Hindustan Organic Chemical Li

2 EOQ Economic Order Quantity.
3 SAP Systems, Applications & Products in Data
Processing
4 FACT Fertilizer and Chemicals Travancore Ltd
5 NFL National Fertilizers Limited.
6 PPL Paradeep phosphates limited
7 PPCL Pyrites, Phosphates & Chemical Limited
8 RCF Rashtriya Chemical and Fertilizers Limited.
9 SAIL Steel Authority of India Limited.
10 HCL Hindustan Copper Limited.
11 FG Finished Goods
12 ISO International Organization for Standardization.
13 IFFCO Indian Farmers Fertiliser cooperative limited.
 1. EXECUTIVE SUMMARY
During the Int. Training at “Hindustan Organic Chemical Ltd”, I have tried to
cover the glimpse of overall working of the organization. H.O.C.L. is a large
chemical company established in 1960. H.O.C.L. has two aims like to be a dynamic
chemical market leader committed to quality & customer satisfaction, and also to be
prime representative of India in global chemical business.

⮚ This report talks about the company first, and then further it talks about the
Stores management of the company.
⮚ Afterward it proceeds towards the theoretical aspects of the project report and
about various research methods used for the data collection.
⮚ Further is discussed about the various aspects and techniques used in
Codification of Materials and inventory management.
⮚ Further it talks about various data analysis and interpretation of various
inventories ratio.
⮚ Lastly at the end of the report it talks about various strengths and weaknesses
and the limitations of the project report.

1
 2. OBJECTIVES
Primary 1. To visit the Hindustan Organic Chemical Ltd
Objectives: Company , Rasayani
2. To study the details of Operation going inside the
company.

Secondary Objectives:
1. Detailed analysis & process changes on
raw material conversion period to
increase the conversion days count.

2. Detailed analysis & process changes on

finished good conversion period to
increase the conversion period days
count as compared to last year's rate of
182 days.
3. To minimise the production loss
percentage due to machine
breakdown/Damage.
4. To create awareness on SAP system among all the
employees

Future Scope:

1. The study will help the company to

solve all the internal errors in catalog
issue solve process.
2. The study brings changes from current
level of performance and brings some
advancement in the future.
3. The study highlights the various
characteristics of the department and
employee’s scoring for them which are
2
SIR VISVESVARAYA INSTITUTE OF TECHNOLOGY, CHINCHOLI, NASIK-422102
 hi employees to take steps to deal with
gh them effectively.
ly
he
lpf
ul
for
th
e
m
an
ag
e
m
en
t.
4. Th
e
res
ea
rc
h
kn
o
ws
th
e
tra
ini
ng
ne
ed
s
of
3
SIR VISVESVARAYA INSTITUTE OF TECHNOLOGY, CHINCHOLI, NASIK-422102
 3. ORGANIZATION PROFILE
Hindustan Organic Chemicals Limited (HOC) was set up by the Government in
1960 with the objective of attaining self- reliance on basic chemical needs. In fact this
was the first endeavor to indigenous manufacture of basic chemicals and to reduce the
country’s dependence on import of vital organic chemicals. HOC, started as a small
chemical unit. But today it has acquired the status of multi unit company with two fast
growing units and one subsidiary unit company achieving a turnover of more than ₹ 6
Billion in 2018-2019.
It was expected that indigenous manufacture of these chemical intermediaries
would give an impetus to downstream industries resulting in setting up of chemical
units and achieving self-sufficiency for the country. At present more than 500 units
based on HOC’s products have been set up all over the country which have not only
succeeded in meeting the goal of self-sufficiency but also entered the international
markets earning precious profit.

⮚ General Information:
⮚ Name: - Hindustan Organic Chemical Limited.
⮚ Type: - State-owned enterprise Public Sector
⮚ Industry:- Chemicals, Organic chemicals
⮚ Scale: - Large Scale
⮚ Date of Established: - 1960
⮚ Website: - www.hoclindia.com
⮚ Traded as:- BSE: 500449
NSE: HOCL
⮚ Promoters: - Govt. Of India
HOCL
⮚ Key people:- R. N. Madangeri, (Chairman &MD)

⮚ Head Office: - Mumbai, Maharashtra, India

Main manufacturing Units of HOC Complex of

● The Nitro Aromatic Complex at Rasayani in Raigad District (Maharashtra).

● The Phenol Complex at Kochi (Kerala).

● Factory Layout:
Achievements & Awards:

Mission

To be a dynamic market leader committed to quality and customer satisfaction. Our

mission is also to be a prime representative of India in global chemical business.

Growth Strategy

The fast changing business environment and the need for not only sustaining but also
accelerating the growth process, dictated the long term perspective in planning
coupled with flexibility to make strategic decisions. Organizations are expected to be
resilient enough to respond to the emerging challenges. Hence, the company
concentrates on the core business of Nitro aromatics and Phenol / Acetone and certain
Phenol based downstream products.
● Major business and investment thrust to be in the areas of core competency.
● Value addition in areas of manufacture.

Continuous restructuring and reengineering in order to achieve.

1) Reduction in cost of production

2) Increase market share & margins
3) Higher levels of efficiency & productivity
4) Economy of scale
5) Rationalization of manpower
Competitors in India:

● Public Sector Industries:

The fertilizer and Chemicals Travancore Ltd. (FACT)

NATIONAL FERTILIZERS LIMITED (NFL)
PARADEEP PHOSPHATES LIMITED (PPL)
PYRITES, PHOSPHATES & CHEMICALS LTD. (PPCL)
RASHTRIYA CHEMICALS & FERTILIZERS LIMITED (RCF)
STEEL AUTHORITY OF INDIA LIMITED (SAIL)
HINDUSTAN COPPER LIMITED (HCL)

● Co-Operative Sector Industries:

INDIAN FARMERS FERTILISER COOPERATIVE LIMITED (IFFCO)

KRISHAK BHARATI COOPERATIVE LIMITED (KRIBHCO)

● Private Sector Industries:

There are 14 companies in private sector:

✔ Gujarat Narmada Valley Fertilizer Co. Ltd(GNFC)

✔ Hindustan Lever Ltd.(HLL)
✔ ICI Indian Ltd.
✔ Indo Gulf Fertilizers and Chemicals Corporation Ltd.
✔ Mangalore Chemicals and Fertilizers Ltd.(MCFL)
✔ Southern PetroChemicals Industries Corporation Ltd.
✔ Nagarjuna Fertilizers Chemicals Ltd.(NFCL)
✔ Deepak Fertilizers and Chemicals Industry.
✔ Tutcorain Alkali Chemicals and Fertilizers Ltd.
✔ Gujarat State Fertilizers Company(GSFC)
✔ Chambal Fertilizers and PetroChemicals Ltd.(CFPCL)
 4. PRODUCT PROFILE

PRODUCTS END USE

ANILINE Rubber chemicals, drugs, dyes, polymers, photographic

chemicals, perfumes, pest control chemicals.

CONCENTRATED NITRIC ACID Nitration of organic compounds, explosives.

FORMALDEHYDE Synthetic resins, laminates, adhesives, drugs, disinfectants,

pesticide intermediates.

HYDROGEN Catalytic hydrogenation of nitro compounds.

NITROBENZENE Drugs, dye/intermediaries, aniline, crop protection and pest
control, solvents, aromatics, flavors’ and cosmetics, anti-
corrosion applications, fluorescent whitening agents and
dyestuffs, floor wax, furniture polish, shoe polish,
explosives.

NITROTOLUENES Dye-intermediates, drugs, polyurethane, photographic

chemicals, explosives.

SULPHURIC ACID / OLEUMS Industrial detergents, dye-intermediates, pigments.

PHENOL Phenol-formaldehyde laminated, moulding powder, resins

surface active agents, abrasives, textiles auxiliaries,
bisphenol-A, chlorophenol, pesticides, pharmaceuticals,
dyes, epoxy, resins, alkyl phenols, styrenated phenol,
phenolic foam

ACETONE Methyl methacrylate, di-acetone alcohol, methyl isobutyl

ketone, bisphenol-A cellulose, acetone solvents, surface
coating paints, pharmaceuticals, rubber chemicals

HYDROGEN PEROXIDE Bleaching agent for textile, pulp and paper and food
industries, manufacturing of plasticisers and stabilizers for
plastic industry, for picking and chemical polishing of
metal and metal alloys
HOC provides the basic organic chemicals essential for vital industries.

The main products manufactured by HOC are Phenol, Acetone, Nitrobenzene,

Acetanilide, Formaldehyde, Aniline and Nitrotoluenes. The raw materials used by
HOC are Benzene, Toluene, LPG, Methanol, Naptha and Sulphur, majority of which
come from petroleum refineries and petrochemicals complexes.
HOC provides the basic organic chemicals essential for vital industries like resins and
laminates dye intermediaries, drugs and pharmaceuticals, rubber chemicals, paints,
pesticides and others, touching virtually every facet of everyday life.

Neutroclean Hypochlorous Acid

Pro-HOCL

Hypochlorite Disinfectant
 5. THEORETICAL BACKGROUND
Introduction
Store management is a service function which deals with the physical storage of
goods under the custodianship of a person called storekeeper or stock controller.
Goods stored may be either, “stocks”. Un-working materials or raw materials are
usually referred to as “stores” and places where or raw materials are usually referred
to as “stores” and the place where they are kept is known as “stores-room”. Finished
products ready for shipment are usually called “stock” and are housed in a place
called “stock-room”. Storekeeping, therefore, is that aspect of materials which is
concerned with physical storage of goods.
Store functions concerns receiving, movement storage and issue of items – raw
materials, bought out parts, tools, spares, consumables etc.-required for production,
maintenance and operation of the plant. Store therefore, is the custodian of all goods
that are received in the company until they are consumed or sold and naturally it
assumes the responsibility of receiving, storage, preservation, issue and accounting
functions.

Functions of Store Management:

The working of store need to be organized to perform the following functions:

i) Exercising control on quantity of materials received.
ii) Storing and protecting materials against hazardous conditions, weather,
deterioration and pilferage.
iii) Issuing materials against properly authorized material requisitions.
iv) Maintaining exact records of all receipts, issues and balances to facilitate ordering
of required materials.
v) Maintaining adequate records of receipts and expenditures.
vi) Maintaining adequate stocks of materials to serve production needs.
vii) Keeping inventory investment within desired limits.

Types of stores:

Functionally, stores are of five types:

1. Receiving store
2. Main store
3. Finished product store (Warehouse)
4. Special store
5. Scrap yard

1. Receiving store: Receiving store to perform activities to exercise control on

quality and quantity of purchased materials before they are accepted and taken into
stock. Receiving store may be subdivided as under:
 i) Inward store to keep incoming materials until they are accepted and taken
into stock.
ii) Quarantine store to temporary stock materials which are under dispute and
require suppliers (or transporters) certification (e.g. quantity discrepancy in
the consignment, transit damage to the goods etc.)
iii) Rejection store to stock defective (non-conforming) items until they are sent
back to their suppliers.

2. Main store: Main store to perform activities concerning storage and issue of
accepted materials and maintenance of records. Main stores may be either centralized
and housed in a large godown or decentralized and located near their point of use
materials.
Main store may be divided as under:
i) Crib store to stock cutting tools, hand tools, measuring instruments and gauges
etc to be issued to the workmen in the beginning of the shift and to be received
at the end of the shift (or job).
ii) Finished part store to stock components and parts produced at works in
economic lot sizes.
iii) Plant (or maintenance) store to stock parts of plant and machinery.
iv) Sub-store (raw material store) to stock bar stocks, castings and forgings etc.
which require a lot of space and can be stocked in areas open to the sky.

3. Warehouse (Finished product store): Finished product store to perform activities

concerning receipt, packaging, and packing, dispatch goods to different destinations
and handling of connected paper and documents.

4. Special store: Special store to perform activities of receipt, storage and issue of
special materials. Like Bonded store, statutory store, Temperature controlled store.

5. Scrap yards: Scrap yards to perform activities of receipt, segregation and storage
of different types of scrap.
 6. RESEARCH METHODOLOGY
Study or Research Objectives:

The main objectives of study:

a. To analyze the store management techniques used in the company.

b. To learn how the company does codification of each and every item.
c. To learn how the company keeps all the data of inventory perfectly.
d. To find out the composition of inventory.
e. To study the various inventory ratios.
f. To study the Inventory Control Techniques of the company.

Methods of Data Collection:

Primary Data:

The data is collected from the respected persons of the company.

The communication was informal in nature.

Secondary Data:

The data was analyzed from the various tables, graphs, charts, referred to some of
the reports and companies reports.

Data Analysis Techniques:

For the purpose of analysis of the data and the report I have kept in mind the
objective and analyzed each and every data I got at each stage of the report. I have
used many tools for analyzing the data and the different ratios used for it are as
follows:
1) Total investment in inventory ratio.
2) Total inventory to current ratio.
3) Raw materials turnover ratio.
4) Work in process turnover ratio.
5) Finished goods turnover ratio.
Theories Of Inventory Management:

What do you mean by inventory?

“Inventory” is a list for goods and materials, or those goods and material
themselves, held available in stock by a business.
“Management of Inventories” is the primary objective of determining,
controlling stock levels within the physical distribution function to balance the need
for product availability against the need for minimizing stock holding and handling
costs.
A subsidiary ledger which is usually used to record the details of individual
items of stock. Inventories can also be used to hold the details of other assets of a
business. There are three types of inventory: Raw materials, work in process and
finished goods. Raw materials are materials and components that are inputs in making
final products. Work in process also called stock in process refers to goods in the
intermediate stages of production finished goods consist of final products that are
ready for sale .inventory represents the second largest asset category for
manufacturing companies next only, to plant and equipment the proportion of
inventory to total assets generally consists of 15 to 30 percentage.
Inventories is a list of goods available in stock at warehouses .It is also used
for a list of contains of a household and for a list of testamentary purpose of the
possession of someone who has died in accounting inventory as assets.

Nature of Inventories
Inventories are classified according to uses and point of entry in the alteration
is as follows:
● Raw material
● Work in process goods,
● Finished goods &
● Spares and consumables.
● Raw Materials
Raw materials are those units that are converted into finished
production through the manufacturing process. Raw material inventories are those
units which have been purchased and stored for future use. Under the head of raw
materials GNFC are maintained rock phosphates, liquid ammonia etc.

● Work in Process goods

It is also called stock in process. It refers to goods in the intermediate stage of

production. These inventories are semi finished products. It presents the products that
need more work before they become finished products for sale.

● Finished goods

Finished goods consist of final products that are ready for sale. Finished
goods are those completely manufacturing products which are ready for sale. Stock of
material and work in process facilitate production, while stock of finished goods is
required for smooth marketing operation. Thus inventories serve as a link between
production and consumption of goods.

● Spares and consumables

Spares play an important part of inventories by themselves. Their
consumption pattern differs from that of raw material, consumables and finished
goods. They also even keep these items in a spare which is not easily available. There
is the material which acts as catalysis in the production process and is not directly
found in output. This enables the production process to function smoothly like - fuel,
coil, oil, LSHS etc, are the example of the consumables.
Objectives of the Inventory Management

The basic responsibility of the financial is to make sure the firm’s cash flows
are managed efficiently. Efficient management of inventory should ultimately result
in the maximization of the owner’s wealth. It was indicated that in order to minimize
cash requirements, inventory should be turned over as quickly as possible, avoiding
stock- outs that might result in closing down the production line or lead to a loss of
sales.

The main objective of inventory management consists of two parts.

1. To minimize investment in inventory.

2. To meet demand for the product by efficiently organizing the production
and sales operations.

The firm should minimize investment in inventory implies that maintaining inventory
involves costs, such that the smaller the inventory, the lower is the cost to the firm.
But inventory also provides benefits to the extent that facilitate the smooth
functioning of the firms.

Why Inventory Management?

An increased emphasis on liquidity has led businessmen to hold cash and

securities in performance to inventories. Inventories are now often referred to as the
graveyard of the business.

The surplus of the stock has been a principal guide of failure thus leading to
change their view regarding holding of inventories and adopting a scientific way of
inventory holding. Following are factors that are following the view of scientific
inventory control.
 1. Size of Business

The increased size of business establishment has played an important role in

modern large scale enterprise. Often it operates with a small profit margin which can
be eliminated by scientific inventories control methods.

2. Wide variety and complexity

The wide variety and complexity in modern technology requires conscious

inventory management. The larger the range of requirements, the greater the number
of problems of investment, procurement, storage, holding, accounting, shortage and
stock out deterioration etc.

3. Urgency in material requirements

The need and importance of inventories varies in different production with the deal
time, cost of men, machinery and urgency of requirement. But it is highly
uneconomical to keep a secure and a rapid capital turnover and the most effective
means of achieving these objectives is to control stores.

Factors Influencing Inventory Management Decision

There are two types of factors. They are external and internal factors which
influence decision making for inventory in an organization. The external factor arises
from market conditions, credit availability and government regulation. The external
factors are not controllable easily while internal factors are controllable with effective
inventory management.
 Following are the factors influence the inventory decision of an organization
1.Lead Time

Lead time can be defined as the period that elapses between the reorganization
of a need and its fulfillment. Inventories have to take care of normal consumption
during lead time because it increases the inventories and it will have to be increased
correspondingly.
The time spent on each of these four stages will vary from item to item. Out of
these administrative and inspection lead time are under control of purchase.
Procurement lead time is the largest time. This should be taken care of while
negotiating the order and supply detail.

1. Relevant Cost

The inventory problem is one of the balancing costs, so that total cost is
minimized. Their costs are:

- Cost of Ordering
The activities that are carried out for fulfilling the need for material, which consume
executive time, stationary and communication charges are the cost of ordering.

- Cost of Carrying out Inventories:

The moving factor to control inventory is the cost incurred by holding. It is the cost
that is expressed as percentage of the average investment i.e. capital investment,
spoilage insurance cost..
Material Control Techniques
The concept of material control techniques signifies the efficiency of any
organization. The contingent upon having the right material of right quality at right
quantity at the right time in following three areas:

1. Purchase Control
2. Storage Control
3. Warehouse Accounting
1. Purchase Control

This is one of the basic functions of inventory management and forms a major
part of it. It needs considerable expertise not only in negotiating but also in the
techniques of competitors and studying economic trends in respect of materials to be
purchased in large quantities to increase the profit.

o Objectives of Purchasing:
1. To maintain continuity of production
2. To contribute to the competitiveness of the product
3. To contribute towards higher productivity
4. To increase profit
5. To contribute towards standardization, variety reduction, value
analysis.

2. Storage Control
The control of materials when it is in storage is affected through what is known as the
perpetual inventory. Thus two main functions of the perpetual inventory system have
been studied which are

1. Receipt and Issue System,

2. Maintenance of Store Records

The use of inventory control techniques also has been evaluated considering the
existing position of HOCL.

3. Warehousing System and Procedure

The procedure comes into operation immediately on receipt of dispatched documents
or dispatched intimation in the stores and covers on the activities i.e. clearance,
delivery, inspection, stock charging and preservation, issue and return of materials by
the ends after striking out balance from the stock card and delivery of the account
department.
Process of Stores in HOCL:
1. Purchase requisition cum Indent comes by indenting department.
2. Code no, description, qty.
3. Justification note – why to purchase, signed by HOD sent to Stores Dept.
4. Stock verification from respective stockholder, checks Bin balance, if seen
then issues against Demand note, else Stock holder writes STOCK NILL and
signs and sends it back to dept.
5. Scrutiny committee – Two officers, scrutinize the reasons, justifications,
etc. to curtail and sign and stamps.
6. Indenting officer, Reviewing Officer(same Dept), Approving Officer, HOD
7. Approved PR by Scrutiny committee.

Indent Procedure:

1. To prepare Indent on AIMS as per Purchase Requisition.

AIMS (Accounts Inventory Management System) are software in
which all stores work.
2. Accounting and Inventory System (AIMS) s/w generates the Indent
number.
3. Registers the Indent No. in a Register and forwards to Purchase Dept.
4. The Purchase Dept will process the Indent.

Procedure of Purchase Department

1. Indent is generated from the required department to the Procurement

department.

2. The Procurement dept. issues a tender notice.

3. Then the selected registered vendors give the quotations.

● The Procurement dept. wait for one week
● There should be minimum 3 Vendor’s quotations
● If there are less than 3 quotations, they again wait for 3 weeks.
● If then also no quotation is received, the minimum quotation
received is opened.

4. They first check the specifications, then the price.

5. The quotation which satisfies the specification and the price is selected.
Material Inward :

⮚ Solid Materials

1. Vendor reports to Material Gate of Company.

2. Gate security checks the container & informs the stores dept.
3. Stores Official endorse their challan for allowing unloading at stores.
4. Material Gate makes a record of what material has come in, Vehicle details,
required documents, Driving License, Drivers name, Valid Insurance
policy.
5. Vendor comes to Stores after weighment on Weigh-Bridge, if required.

⮚ Liquid Materials

1. In case of liquid RM, the Admin officer on Gate informs LAB for taking
samples of material for QC check after checking all the Seals on Valves.
2. As the company is using Flammable liquid materials, the security
officials affix Flame arrestor on the vendor's vehicle.
3. After getting QC dept confirmation, the transporter moves to Weigh-Bridge
for weighment.
4. Transporter will go to Tank-Farm(Production Dept.) for unloading.
5. After unloading, the empty tanker is again weighed on WB.
6. The FPS officer will send Delay. Challan along with weighment-slip and
Demand Note of the actual weight quantity of raw material to the Stores
department.
7. Stores Dept depending on challan, weighment slip and demand note,
prepares MRV(Material Receipt Voucher) and makes proper Bin-card
entries.
8. Bin balance of all the Liquid Raw Materials is NIL on a Stock Bin card,
because it is actually stored in the Tank-farm of the Production department.

Inventory Management In HOCL:

HOCL is maintaining inventories successfully. There are total 1, 1891 items in

inventory whose total value is Rs. 645, 96,256.62 (approx.) Bifurcation of inventories
percentage wise as shown below:
TABLE NO: 1
Mechanical Items 63 %
Raw materials 01 %
Electrical and Instrumentation Items 34 %
 Stationary Items 02 %
In 63% Mechanical Items, there are some insured items which are essential
and cannot produce immediately. These items do not come into use daily. These items
are very costly and carrying cost is also high.

Bifurcation of Inventories:
Figure No: 1

HOCL maintains some inventories in different ways like use of SAP systems.
 COMPOSITION OF THE NET OPERATING CYCLE
Figure No: 2
 Material Control Techniques in HOCL

To know the practical use of various inventory control techniques in HOCL following
inventory control techniques were studied and evaluated which are:
1. Codification System

2. Classification of Inventory:
(a) ABC Classification
(b) Determination of E.O.Q
(c) FSN Classification
(d) HML Classification

3. Determination of Inventories Level:

(a) Minimum Stock Level

(b) Maximum Stock Level
(c) Reorder Level

4. Importance Substitution.
5. Supply Chain Management & Inventory Control.

1. Codification System:

Codification system means assigning a unique code or name to each item

based on its use, characteristics, importance and other features. It is the process of
allocating a code after logical grouping and sub grouping considering material type
and application.

● Principles of Material Code:

✔ There should be adequate provision for future expansion and there should be no
duplication.
✔ One particular size and type should be at one place only.
✔ Description should be brief, very accurate, specification, part number; drawing
number should be quoted whenever required.
✔ Unit of issue and receipts should be given and followed strictly.
✔ Code should be understandable by those who have to use it.
✔ It should be properly classified for section, classed and group.
✔ One unique code for each item represented by single code.

Advantages:

✔ It enables systematic grouping of similar items together.

✔ It helps in avoiding duplication of items.
✔ Rationalized codification results in a variety of reductions. Many firms have
successfully reduced the number of items stock by them.
✔ It avoids confusion caused by the long and unwieldy description and accurately
logically and logically identifies all items.
✔ It is the starting point for standardization
✔ It lays the foundation for an efficient purchase organization by helping to form
specialized commodity base purchase sections. Since items are identified by
source of supply, it is possible to bulk them together to take advantages of
bulk discount.
Codification in HOCL:
The Standardization and codification of all Stores Items have been completed but it is
a regular process for updating the codification catalogue. Efforts are to be continued.
Presently all store items have been grouped into 62 Main Groups whereas the
provision is for 98 Main Groups to accommodate future need.

These 62 Main Groups have been divided into 8 Parts according to the different
categories of the items.The groups have been functionally classified and more efforts
have been made to take the item as a common item and standardized on it so that
multiple items having the same end user can be avoided.

Thus this unified standard nomenclature Catalogue has been prepared and in each
main group further sub-group have been divided according to the different types or
items of different makes and models as in Electrical Groups or Instrument Groups.
This has been done in a best possible scientific and systematic manner comprehensive
and coordinated system leading to the introduction of integrated data utilization
processing techniques for stores.
 The chief recruitment of the system is that uniform description of materials be used at
all levels and description should be adequate to serve the purpose of Purchase, Stores,
Accounts and various user departments and at the same time that should be a unique
code No. for each item v/s each item represented by single code.
Therefore, in order to achieve above a logical basis of listing the items in
alphabetic order and then the order follows in the ascending order of sizes.

In some Groups (E.g. Instruments and Pumps) the logic used is different and it
follows the listing of items in ascending order of Part Nos. because of its simplicity in
locating an item with respect to the catalogues supplied by the manufacturers.
To make the code compact, concise, consistent care has been taken to make it more
flexible for future additions and in some of the groups the digits are not redundant but
each digit has a significance in valve groups or pipes and pipe fitting groups.

As far as possible items have been taken in the general Groups to give an example all
types of Gasket in the Gasket Groups. Similarly irrespective whether it has been used
in the pump or in Automobile vehicle or plant spares. In the Bearings the
identification is by the Bearing No. Thus all are requested to follow this carefully and
while raising future requisition Bearing No. should be given by the manufacturer
should be invariably quoted for standardization and easiness we have adopted the
Standard No. of SKF Bearings though equivalent chart for all makes of Bearings have
been supplied along with the Bearing Main Group.Similarly, for oils and lubricants
also we have standardized all IOC products and an equivalent chart is also been
supplied along with the Main Group.
Common mechanical spares and equivalent spares have been grouped in the 53
Main Group which accommodate all common items such as tower packing’s,
mechanical seals etc. whereas in the Plant Groups only the items exclusively suitable
for that particular plant equipment having specific drawing No. etc have been taken in
a relevant plant Group. In Plant Group the items sub-grouped according to the process
involved and in each sub-groups item have been listed equipment No. wise and then
each item falls in alphabetic order.
As far as possible drawings No. and Equipments No. have been incorporated.
Efforts also have been made to refer to standards specifications IS, ISO, BSS and others
but wherever Indians standards specification are not available other specifications have
been mentioned. Though standards specifications have been incorporated to the
minimum extent but still if there are standard specifications and have been incorporated
we request users to assist us and intimate the corresponding I.S, No. if they are aware.
We have also standardized the units and all are requested to follow the same
unit mentioned in the catalogue otherwise it may cause inconvenience as the
documents with wrong units will not be accepted by the stores henceforth.
We have also introduced the classification codes depending upon different
classes such as standards stores, critical items, sources etc. and the details are
explained in the classification code chapter. It is requested the codes should be used
appropriately
while raising any requisition for the new items. At the same time if users feel the item
should fall in different classification they can list and suggestions are most welcome.

 Rational of codification:

The 8 digit code has been spotted as follows:-

XX First 2 digits Main group.
_ _ XX Next 2 digits i.e. 3rd & 4th digits represent sub-group within
each group whereas.
_ _ _ _XXXX last four digits usually indicate the listing of items in the
chronological order/Alphabetical order/ Part No. / etc

Except in few main groups 5th digit significance has been used for representing the
material of construction or type of service or design of particular valve or particular
standard adopted in case of pipes which users will have well-versed when they go
through the sub-group plan of each main group.
The codification is the basic requirement for Inventory Control and also meets the
demand effectively. In order to fulfill its role properly we need to understand, co-
operation and support from all the persons.

 How to locate the item in the unified standard Nomenclature list

For a quick reference list of the content in each part has been provided, From that one
item falling in a particular part is to be located and from the Main group plan the
particular major main group is to be selected in which items likely to fall ( in case of
some common items specific instructions are given ). Having selected the main group
the relevant sub-group should be selected after going through the sub-group plan
thoroughly. From the sub-group plan the items either fall in alphabetic or in the order
of ascending sizes or items fall part No. wise whichever is applicable. As far as
possible Brand Names have been avoided and the same as having different Brand
Names will have unique code no.

Sub – Inventory Code No. – Inventory Control

With a view to ensure optimum utilization of existing stocks and also to

streamline the system of standardization and codification of stores items, it has been
decided that before submission of any indent for a new item which is not appearing in
the Inventory Code book, indentor should obtain GM(C)’s approval for allotment of
code number to the item.
Following procedure shall be followed for this purpose:-
1. Before initiating any proposal for indenting a new item, the indenter should
verify that no item in the inventory code book is suitable for the purpose. To
facilitate
 reference, inventory code books are given to Heads of Divisions and
arrangement is being made to supply copies to every division.
2. If an existing item will not serve the purpose, the indenter may put up an
application in triplicate through the Head of Division in the Performa attached
herewith for getting approval for allotment of new code number for item to be
purchased.
3. Indentor should give description, specification and anticipated annual
consumption of the item and minimum quantity to be stocked and also a
pattern of consumption as regards time, Quantity – required per month/ per
Quarter/ per Year and in case of occasionally required items duration after
which demand may be repeated.
4. Proposal shall then be sent to the Materials Manager for his examination and
recommendations. Control No. starting from 1ast April every year, will also be
given to proposals at this stage. For the year 1981-82, however, control
numbers will begin from 1st July 1981. He will indicate the stock positions as
‘Nil’ if it is a new item and indicate the stock in the remarks column whether
there is any similar item in stock; if so indicates details thereof.
5. Proposal will be then sent to GM(C).
6. Orders proposed by GM(C) will be recorded on all copies and the same will be
distributed as follows:
a. Indentor: One copy with new code No. entered on it, if approved.
b. MAT : One copy with new code No. entered on it, if approved
c. Stores : One copy with new code No. entered on it, if approved

If GM(C) has not approved the proposal, one copy will be filed in the
Materials Division and other two copies returned to Indenter with
suitable remarks.
7. Sanction of GM(C) for this purpose is only for this purpose is only for the
allotment of Code Number and should not be constructed as a sanction for the
purchase. Indenter may therefore take separate action for obtaining sanction of
the competent authority for the purchase.
8. A copy of GM(C)’s approval for the allotment of new code number in
inventory shall be attached to the purchase indent. Code number is to be
quoted in all indents in the proper column.
9. IBM will be informed by MAT immediately about the allotment of new code
numbers by sending intimidation through tear off slip, after giving serial
number, running in annual series starting from 1st April every year. MAT’s
copy will be filed after noting on it the code number allotted and serial
number, under which intimation has been sent to IBM. One copy with final
order and new code number, recorded on it, will be sent to Stores for opening
new Bin cards. Stores Officer will authenticate the issue of a new Bin Card by
quoting serial number of intimation and putting his signature on the top of the
Bin card.
10. MAT will arrange to record all allotments of new code numbers in centralized
master copy of the inventory code book. MAT will also issue amendments to
 inventory code books supply copies of the amendments total Divisions once in
a Quarter.
11. If it is found that an existing codified item has become deletion of an item can
be proposed by giving proper information in the form giving reasons for
deletion and suggestions for the disposal of existing stock, if any.
All such proposals will be consolidated and examined by the Materials
Division.

Example:
Code number is from 1 to 86 in HOCL.

Raw Materials (01, 02, 03)

Mechanical ( 05, 06 ,10, 11, 13, 14, 15, 16 ,18,19, 20, 21, 25, 26 ,28, 31 ,35 ,37 ,54,
55 ,56 ,57 ,58, 59, 62 ,67, 68, 69 ,71, 72, 73 74, 75 ,76 ,77)

Electrical & Instrumentation (51, 52, 53, 61, 63, 64, 65, 66)

Stationery (80, 82, 83, 84, 85, 86)

Inventory Classification:

The Inventories having huge amounts of use in the organization has to be

controlled very strictly and low amounts of use should be kept low control.

The main classification of Inventory is as under:

(a) ABC classification
(b) Economics Ordering Quantity
(c) FSN classification
(d) HML classification

(A) ABC Classification

In most of the inventories a small proportion of items account for a very

substantial usage and large proportion of items accounts for a very small usage. ABC
analysis, based on this empirical reality, advocates in essence a selective approach to
inventory control which calls for a greater concentration of efforts on inventory items
accounting for the bulk of usage value.

ABC classification is a basic analytical management tool which enables top

management to direct their efforts where the result will be maximum. This technique
properly known as “ALWAYS BETTER CONTROL” has universal application in
many areas of human endeavor. The technique tries to analyze the distribution of any
characteristic by money value of importance in order to determine its priority.

TABLE NO: 2
Class A Class B Class C Class
Items value 70% 20% 10%
Number of items 10% 20% 70%
DIAGRAM NO: 3

ABC ANALYSIS

Meaning

The inventory of an organization generally consists of thousands of items with

varying prices, usage rate and lead time. It is neither desirable nor possible to pay
equal attention to all items.

ABC analysis is a basic analytical tool which enables management to

concentrate its efforts where results will be greater. The concept applied to inventory
is called ABC analysis.

Statistics reveal that just a few items account for the bulk of the annual
consumption of the materials. These few items are called ‘A’ class items which hold
the key to business. The other items known as ‘B’ & ‘C’ which are numerous in
number but their contribution is less significant. ABC analysis thus tends to segregate
the items into three categories ‘A’, ‘B’& ‘C’ on the basis of their values. The
categorization is made to pay right attention and control demanded by items.
 FEATURES OF ABC ANALYSIS

TABLE NO: 3
A Class (High Value) B Class (Moderate Value) C Class (Low Value)
1. Tight control on Moderate control Less control
stock levels
2. Low safety stock Medium Large
3. Ordered frequently Less frequently Bulk ordering
4. Individual posting Individual Collective posting
in stores
5. Weekly control Monthly control Quarterly control
reports
6. Continuous effort to Moderate efforts Minimum efforts
reduce lead time

ADVANTAGES

● This approach helps the manager to exercise selective control & focus his
attention only to a few items.
● By exercising strict control on ‘A’ class items, the materials manager is able to
show the results within a short period of time.
● It results in reduced clerical costs, saves time and effort and results in better
planning and control and increased inventory turnover.
● ABC analysis, thus, tries to focus and direct the efforts based on the merit of
the items and, thus, becomes an effective management control tool.
(B) Economic Order Quantity:

Order quantity is defined as the quantity or its rupee equivalent for which
fresh order of as inventory item is placed. The decision regarding order quantity of
various inventory items is of vital importance in the management of the inventory
item of which a total of two types of cost opposing each other will be the minimum at
this level, the sum of all costs of one type is exactly equal to the sum of all the costs
of the other type. This quantity is often referred to as economic order quantity, for the
purchase. Purchase item and economic lot size for production item.
 DIAGRAM NO: 4

Determination of EOQ:

The economic order quantity can be determined with the help of the following
formula:

EOQ=√2AB/CI
Where,
A= Annual usage in units.
B= Ordering cost. Error! No bookmark name given.
C= Carrying cost/ Holding Cost
I= Inventory Carrying Cost.

✔ Disposal of Non Moving Items

✔ Inventory Control Review Meeting
✔ Alternative Material Use
✔ Circulation of Non Moving / Slow Moving Items list.

(C) FSN Analysis

In GNFC FSN analysis carried for consumable items, which are used by
multi users, FSN means fast moving (F), slow moving (S), non moving (N) items
analysis. The norms established by GNFC for each items are as follows:

✔Fast Moving Items:

GNFC has norms that fast moving items have the following:
1.It should have more than 5 issue transactions in a year.
 2. There should be multi-users.
✔ Slow Moving Items:
GNFC has norms that slow moving items have the following;
1. Items should have transaction between 1 to 5 time in a year
2. There should be multi-users.

✔ Non Moving Items:

GNFC has norms that are non moving items have the following:
Items have no issue transaction for last 3 years
Items should have some quantity available in all the past three years.

● Actions taken for FSN Analysis:

✔ Fast Moving Items:

a. Close watch is required of users, availability of short notice, at time maximum
withdrawals etc data are collected and enough care is taken while fixing level.
b. Annual rate contract are made to avoid stock outs
c. Frequency of review is more
d. Frequent changes of level are made depending upon the importance of plant /
equipment.

✔ Slow Moving Items:

a. For slow moving items, consumption patterns are studied. In some cases either
the items are being used only in shutdown or by limited users only. While
fixing level user weightage is given and it withdrawals. Normally these items
are for specific users and levels can be kept low but users should give their
requirement of abnormal requirements of shutdown etc.
b. Frequency of review is less.
✔ Non Moving Items:
a. Normally on closing of the financial year reports are prepared for non moving
items. This report is then circulated to all concerned users departments and a
list will be sent to the store’s disposal procedure.
 b. Meanwhile the users department study the use of equivalent material against
other similar nature material requirements and give their comment.
c. Accordingly excess material declared for disposal will be disposed off.

(D) HML Analysis

This method is similar to ABC classification but in this case instead of

consumption value of items, medium value Items is considered.
As the name implies the materials are classified according to their unit
price as high value Items and negotiate the price.

As per the company rules:

⮚ The items having value greater than or equal to Rs. 1,00,000 are classified as
high value Items.
⮚ The items having individual value greater than or equal to Rs. 25,000 and
below Rs. 1,00,000 is considered to be medium value items.

If the value is less than Rs. 25,000 then it is low value items.
HML analysis value is done for electrical items, instrumentations and other
items.

 Determination of Inventory Level:

The inventory level concept considers store keeping as profit intensive

service to production store keeping should contribute directly to profitability and
be concerned with matters such as flow, packing and dispatch.

In the same way that specification is related to technical needs. so, the
general level of stock should be related to the sales and production policies of the
company.
 There are various levels of stock which are established by the GNFC are as
follows:

(1) Minimum Level

(2) Maximum Stock Level

(3) Re-order Stock Level

(1) Minimum Level:

This is the level at which any future demands upon the bill will
necessarily withdraw from the reserve stock.

The Minimum stock level is converted to meet exceptional conditions

of Demand. Two months usage of material taken into considerations by the
HOCL Ltd. As a minimum stock level.

(2) Maximum Stock Level:

This is the Level above which the stock should not be permitted to rise.
Eighteen months consumption of stocks taken into considerations by HOCL
Ltd. As a Maximum stock level.
(3) Re-order Stock Level:

The Point of which the order has to be placed. The Re-order level may
not always be numerically equal to the Economic Order Quantity. It should be
regularly reviewed for paid moving items. For fast factors as change in
demand, delivery times or variation in trend.

(D) Importance Substitution:

HOCL has successfully adopted & exercised these techniques. It has many
items / materials which are imported from abroad. But now, HOCL has started to
substitute the imported item by substituting these items / materials by finding
domestic suppliers for this product. HOCL is importing rock phosphate which is used
as raw materials. Now HOCL has developed a supplier on the domestic market and
made a contract with him for supply of that raw material.

Procedure Followed:
a. Items are selected
b. It is checked for dimension as well as for material of construction. It is
also required to check it with the help of a metal analyzer to know the
exact material of construction. Drawings are developed
c. Local indigenous parties are developed to get it manufactured locally.
d. Trials are taken after success it is stopped procuring from abroad

(E) Supply Chain Management & Inventory Control:

Supply chain management solves the purchasing problem by foregoing the short term
benefit of competitive bidding in order to develop special long term relationships. In
exchange the vendor coincides his production schedule and quantity standards to plant
needs thus reducing uncertainty and hence the need for excess inventories. The
release and scheduling process with the supplier consist of four steps:

a. Make a long term purchase commitment to the supplier.

b. Give the supplier a monthly forecast for a rolling period of six month of
production.
c. Establishment with a supplier a monthly form release for the next month of
production.
d. Make an arrangement with the supplier on the policy for changing delivery
dates.
 Inventory Management and Inventory Control Practice:

In all the company they have all types of inventories. But the main important
thing is when and how many times control of the inventories of all the companies is
required. So in HOCL control of all the inventories is mentioned as under:

✔ The company regularly held the meeting with an agenda of inventory controls.
Meetings are held quarterly, semi quarterly or annually as per the need. The
purpose is to see the loopholes and try to remove it.

✔ Brainstorming is to control the problem of excess inventory. By arranging such a

meeting, all the concerned departments are informed. The inventory level is
maintained with the storing department. These meetings are held as a part of
constant performance review.

✔ The company maintained the space and planning for the particular department for
example, suppose company has a Pipes and in production department it is required
500 pipes, but here already company has 200 pipes. So the company now requires
only 300 pipes and they purchase it. So in this way the company arranges space
and plans to maintain it.

Strength & Weakness of Inventory Management

Strength:

1. Well organized structure of Inventory Management

2. Well Defined Policies and Plans.
3. Good links with raw material requirements planning and monitoring
with annual and monthly requirements plans.
4. Well Established vendor registration procedure.
Weakness:

1. Non moving items inventory is high. Approximately 15% need more clarity
and policy plan.
2. Disposal activity results are not satisfactory.

STORES ACCOUNTING SECTION

Inventory section is responsible for making all accounting entries related to

stores and valuation of inventories. Stores department when receives any material
they send Material Receiving Report (MRR) to the stores section.

When the stores department issues material to the users department they
inform the stores accounts section. Sometimes the users department returns the issued
material, then the store account section makes the reverse entry for that.

Stores accounts section prepares inventory ledger by the weighted average

method which shows how much store material is issued, how much is returned by the
users department etc. stores accounts section also prepares the final account store.
 7. DATA ANALYSIS & INTERPRETATIONS

⮚ Valuation of Inventories:

A. At Plant:

✔ Stores & Spares (including coal) = At weighted average cost.

✔ Raw Materials, Finished Goods & Work in Process = At Lower of Cost or Net
Realizable Value. Annual cost is computed on full absorption costing method
including material cost and conversion costs.

✔ Fertilizers of Sub-standard Quality = At Lower of Cost or Net Realizable Value

as estimated by the Company. Annual cost is computed on full absorption
costing method including material cost and conversion costs.

B. At Field:

✔ Finished Goods = At Lower of Cost or Net Realizable Value. Annual cost is

computed on full absorption costing method including material cost and
conversion costs. Costs of field stocks include freight to the destination.

✔ Fertilizers of Sub-standard Quality = At Lower Costs or Net Realizable Value

as estimated by the Company.

● Note:

Net realizable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and estimated costs necessary to
make the sale.
Analysis of Inventory Management

The total inventory management of the company includes the raw materials
inventory, work in process inventory, finished goods inventory. The total inventory of
the company in 2019-2020 is Rs. 40503.38 lacks. GNFC has a total of approx. 214683
different types of inventories.
TABLE NO: 4
(in lakhs)
Particulars 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Total 26957.87 38846.52 38599.79 43075.71 40503.38

The above graph shows the total inventory management of the company various parts

GRAPH NO: 1

The report includes different parts of analysis of the inventory management which is
as follows:

1. Analysis of the composition of inventory.

2. Effects of the various inventory ratios.
3. Study of the different inventory management techniques
4. Find out the inventory management and control practice at GNFC
5. The analysis of the report is divided into main four parts, which are

A. Under composition of inventory

B. Various inventory ratios
C. Techniques of inventory
D. Control of inventory
Analysis of inventory management

Inventory conversion period is very closely related to the inventory

management.
Inventory conversion is the part of the net operating cycle.

1. Raw material conversion period

2. Work in process conversion period
3. Finished goods conversion period.

DIAGRAM NO: 5

Raw Material Conversion Period: Average Raw material Inventory

Raw material consumption period

 TABLE NO: 5
(in lakhs)
Particulars 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Average R.M. Inventory 4041.72 5274.76 5522.4 6090.595 8270.05
R.M. Consumption per day 214.72 294.78 341.99 343.39 346.56
R.M. Conversion Period 19 days 18 days 16 days 18 days 24 days

GRAPH NO: 2

Interpretation:

Raw material conversion period is the time period between receiving the raw material
and sending them for production. It is the period of stocking the raw materials for
usage. So higher the ratio lower will be the profit. In the above chart raw material
conversion period lies between 15 to 19 days for the last five years. In 2014-2015 it
was 15 days which is the lowest and so it is good for the company. But in 2015-2016
it is 19 times which is not good for the company because higher the ratio the lower
will be the profit. In 2018-2019 the ratio is 18 times which is also very high and so not
good for the company. So companies should try to reduce it.

Work in Process Conversion Period:

Average WIP Inventory

Cost of Production
 TABLE NO: 6
(in lakhs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Average W.I.P Inventory 2422.75 1793.74 2031.60 2707.93 1110.41
Cost of Production per day 319.38 398.08 461.47 507.88 498.04
W.I.P Conversion Period 8 days 5 days 4 days 5 days 2 days

GRAPH NO: 3

Interpretation:

Work-in-progress conversion period is the time period when the raw materials
are received for production and the time for their dispatch. The higher the ratio the
lower will be the profitability. In 2017-2018 the ratio is 4 days which is too low and
so it is good for the company. But in 2015-2016 the ratio is 8 days which is too high.
But in 2018-2019 the ratio is 5 days which is low and so good for the company. But
as we have not compared it with other companies any decision can’t be taken.

Finished Goods Conversion Period:

Average finished goods Inventory

Costs of goods sold

 TABLE NO: 7

(In lakhs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20
Average Finished Inventory 4351.265 8795.65 11532.51 10332.275 7251.50
Cost of Goods Sold 70.81 84.71 188.63 81.05 39.632
Finished Goods Conversion 61 days 103 days 61 days 127 days 182 days
Period

GRAPH NO: 4

Interpretation:

Finished goods conversion period is the time of storage of finished goods in

the warehouse until they are sold. The higher the ratio the low will be the profit. If we
store the huge stock in a warehouse then we are losing the opportunity cost. In 2014-
2015 the ratio was 35 days which increased by 6 days i.e. 41 days in 2015-2016 which
is not good. But in 2016-2017 the ratio is 114 days which indicates that huge stock is
laying at the godown and so the company is losing its profit and so the profit in that
year is very low. But in 2018-2019 it is 86 days which is too high and not good for the
company. But as we are not aware about other companies in this industry any
comment about it is not appropriate.

Inventory Conversion Period:

TABLE NO: 8

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20

R.M. Conversion Period 19 days 18 days 16 days 18 days 24 days
W.I.P. Conversion Period 8 days 5 days 4 days 5 days 2 days

F.G. Conversion Period 61 days 103 days 61 days 127 days 182 days
Inventory Conversion 88 days 126 days 81 days 150 days 208 days
Period
 GRAPH NO: 5

⇒ Interpretation:

Inventory conversion period indicates in how much days our inventory gets
converted. In this ratio we will consider the entire inventory ratio. We will consider
all type of inventories i.e. raw materials, work in process and finished goods. The
higher the ratio the higher will be the profitability. In 2016-2017 the ratio is 137 days
which shows that in this year a huge amount of profit the company has earned. So this
year the profit is very high as compared to other years. But in 2018-2019 the ratio is
109 days which is very huge because the finished goods conversion period is huge.
And so the profit also increased by approx Rs. 15000 (in lakhs).

⮚ Various Inventory Ratios:

A. Total Investment in Inventory

B. Total Inventory Turnover Ratio
C. Work in Process Turnover Ratio
D. Finished Goods Turnover Ratio
A. Total Investment in Inventory:
TABLE NO: 9 (in lakhs)
Particulars 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Inventory 26957.87 38846.52 38599.79 43075.71 40503.38

GRAPH NO: 6

Interpretation:

The above chart indicates the amount of inventory with the company. The
lower the amount the higher will be the profit but higher the amount the lower will be
profit. There is an inverse relation between profit and inventory. From the above chart
it can be seen that in 2018-2019the amount of inventory is Rs. 43089 (in lakhs) due to
which the profit also reduced and so the profit is low in 2018-2019.

B. Total Inventory Turnover Ratio:

Total inventory turnover ratio is concerned with the cost of goods sold and
average inventory. Total inventory turnover ratio is shows how many times inventory
is replaced during the year symbolically,

Costs of goods sold (sales)

Average Inventory
 TABLE NO: 11

Particulars 2016-2017 2017-2018 2018-2019 2019-2020

Inventory Turnover Ratio 6.92 times 7.5 times 7.95 times 6.63 times

GRAPH NO: 7 (in lakhs)

Interpretation:

Inventories represent stocks of readymade goods or raw materials that are

needed to be kept in order to be able to meet the orders of clients. The higher the ratio
the higher will be the profit and lower the ratio lower will be the profit. In GNFC the
inventory turnover ratio for the year 2018-2019 is 6.63 times which is lowest and
resulted in low profitability. The highest ratio is found in 2017-2018 which is 7.95
times and it is very good for the company. But any decision can’t be taken for it
because we have just compared the data of past five years of GNFC only and not of
four to five other companies' ratios which are coming under this industry.

C. Work in Process Turnover Ratio:

Work in process turnover ratio is concerned with the cost of goods sold and
average work in process inventory. Work in process turnover ratio shows how many
times work in process inventory is replaced during the year. Symbolically,
Cost of production

Average WIP Inventory

 TABLE NO: 11

Particulars 2016-2017 2017-2018 2018-2019 2019-2020

Work in Process Turnover Ratio 75 times 137 times 152 times 99 times
(in lakhs)

GRAPH NO: 8

Interpretation:

Work in process indicates the stock withdrawn from the warehouse and are yet
to get converted into finished stock. The higher the ratio the higher will be the
management efficiency. In 2017-2018 the ratio is approx 152 times which shows
good profitability for the company. But it reduced to 99 times in 2018-2019 which
shows decrease in profitability, the company is taking more time to produce finished
goods which is not good for the company.

D. Finished Goods Turnover Ratio:

Finished goods turnover ratio is concerned with the cost of goods sold and average
finished goods inventory. Finished goods turnover ratio indicates how many times
finished goods are replaced during the year. Symbolically,

Costs of goods sold

Average finished goods inventory

 TABLE NO: 12

(in lakhs)
Particulars 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Finished Goods Turnover Ratio 42 times 28 times 26 times 26 times 34 times

GRAPH NO: 9

Interpretation:

Finished goods turnover ratio indicates how much time finished goods get
turnover. The higher the ratio the more will be the sales and vice versa. But after it
subsequently reduces and lasts to 26 times in 2018-2019 which is not a good sign for
the company. It shows that the company is holding huge stock at its warehouse.
 8. FINDINGS & CONCLUSIONS

FINDINGS
⮚ Research Findings:

The study of stores management at HOCL is conducted to know the various

techniques followed by the company to control the stores management of the
company.

-In the company the total inventory conversion period for the year 2019-2010 which is
208 days

-Inventory turnover ratio in the year 2017-2018 (7.95 times) is high.

✔ Raw material turnover ratio is lowest in 2019-2020 since last five
years i.e. 30 times,
✔ Work in process turnover ratio is very high in 2019-2020 which is 224
times.
✔ Finished goods turnover ratio is very high in 2015-2016 which is 42 times
Limitation:

● Time period of 8 weeks in such a big company like

HOCL is very small to carry out a bigger project
like Stores management.
● All the data collected was secondary in nature
so loopholes if any would be carried forward in
the study.
9. SUGGESTIONS & RECOMMENDATIONS
✔ Raw Material Conversion Period for the company is increased by 6 days in
2019-2020 as compared to previous year is not a good sign.
✔ Finished Goods Conversion Period in 2019-2020 is highest which 182 days
which has increased by 55 days as compared to previous year should be
reduced.
✔ Since its beginning the company has had to incur loss due to damage of
machine E-501 and due to which they had loss of production. So they have to
keep this machine in stock.
✔ Most of the employees in the organization are not aware about how to use SAP
software.
 ANNEXURE
STORES INVENTORY BALANCES AS ON AUGUST - 2020.FINAL

Raw Materials (01, 02, 03)

Mat. Description UOM Last Consumption Last Closing Balance
Code Moved Recpt.
Rate

LYR-QTY YTD- Quantity Value

QTY
01 HYDRATED KG 09-2019 2,120.00 1,280.00 6.05 13,720.00 83,006.00
015011 LIME
01 CALCIUM- KG 03-2018 4,000.00 11,500.00 28.10 5,000.00 1,40,500.00
010402 NITRATE
HYDRATED
03 HDPE PAPER NO 11-2017 95.00 20.00 26.13 4,159.00 1,08,674.67
150902 BAGS
LAMINATED
WITH LDPE 1
PLY
POLYCOATED
KRAFT LINER
03 POLYBAG UV KG 09-2016 .00 .00 104.00 .00 .00
152110 STABILISED
IN BLACK
COLOUR SIZE
90 MM X 120
MM X 250
GAUGE
04 NITROGEN QM 03-2015 7,063.00 11,011.00 16.53 469.00 7,752.57
050836 GAS IN
CYLINDER
IS-1747-1960
04 RESIN LT 05-2014 900.00 7,000.00 57.90 775.00 44,872.50
089455 STRONG
ACID H-FORM
TULSION T-

Mechanical ( 05, 06 ,10, 11, 13, 14, 15, 16 ,18,19, 20, 21, 25, 26 ,28, 31
,35 ,37 ,54, 55 ,56 ,57 ,58, 59, 62 ,67, 68, 69 ,71, 72, 73 74, 75 ,76 ,77)
Mat. Code Description UOM Last Consumption Last Recpt. Closing Balance
Moved Rate

LYR-QTY YTD-QTY Quantity Value

05 000555 ELECTRODE NO 07-2013 .00 .00 481.00 12.00 5,772.00
IGNITION
GVALOX MAKE
AR 4

SPARES FOR NO 12-2012 .00 .00 23.33 .00 .00

05 601022 COOLING
TOWER NO.4
BUSH IN
NEOPRENE
RUBBER.
DRAWING
NO.CT/M/T-55.
O RING FOR NO 08-2012 .00 16.00 20.18 .00 .00
06 408230 UNLOADER
PISTON FOR LP
 S UNLOADER
ASSEMBLY
P.NO.9991227800

06 500717 GASKET NO 01-2007 .00 .00 293.06 8.00 2,344.48

VALVE SEAT
RIN-6416 T-9
10 170054 BLADE HYLAN NO 10-1997 .00 .00 2,011.22 18.00 36,202.00
500 MM LONG
150 MM WIDE
SEAT IN GFT NO 04-2005 .00 .00 256.00 4.00 1,024.00
10 250281 FOR BOTTOM
VALVE OF REA
NO 04-2005 R-1
11 023004 DISTANCE NO 03-1998 .00 .00 254.80 .00 .00
BUSH P NO 30
11 023016 OIL SEAL NO 07-1997 .00 .00 34.32 .00 .00

SHAFT FOR NO 03-1999 .00 .00 566.80 .00 .00

13 010050 AGITATOR
ARL-35 DNB-
MT-T-100
GEARED NO 03-1999 .00 .00 90,603.96 .00 .00
13 011005 MOTOR
EQP.DNB-11
HWL 385
PISTON RING NO 10-2012 .00 16.00 856.75 .00 .00
14 021729 PT.NO.
116851000

RING NO 10-2012 .00 3.00 22,419.33 .00 .00

14 021810 RETAINER PT.
NO 133514001
BURNER TIP OF NO 02-2012 5.00 .00 581.08 3.00 1,743.24
15 022020 2 GPH CAP FOR
AIR OIL
IMPELLER, NO 07-1992 .00 .00 35,604.65 1.00 35,604.65
15 981332 RESTICAL
BLADED M S
WITH AND
KEY WAYED
16 370600 1 INCH. SIZE NO 03-1998 .00 .00 10.11 .00 .00
MATERIAL IN
CI / ALUMI CF 1
16 981522 LIQUID SEAL NO 03-1998 .00 .00 370.00 .00 .00
GRUF LSI
HEAT NO 05-1995 .00 .00 12,978.00 .00 .00
18 191320 EXCHANGER
5M2 EQP NO 150
DRG N
NOZZLE NO 12-1996 .00 .00 100.88 .00 .00
18 230258 1/2INCH IN
SS316
BEARING NO 03-1998 .00 .00 6,365.54 .00 .00
19 010606 HOUSING FOR
ARL-70
FULLY NO 03-1998 .00 .00 4,053.79 .00 .00
19 981200 INSULATED
RCD P 11302 Z ,
VF
20 271505 STATIONERY NO 03-1998 .00 .00 281.43 .00 .00
SEAL RING
EJECTOR 70 NO 12-1996 .00 .00 2,000.00 .00 .00
20 982410 WV-1 FOR NT
19820
21 010560 GEAR FOR NO 03-1999 .00 .00 128.75 .00 .00
MOTOR M2
SA/M/T161
BURSTING NO 02-1997 .00 .00 7,834.50 2.00 15,669.00
21 381513 DISC 565 DIA
0.5MM THICK S
 DISTANCE NO 03-1997 .00 .00 116.81 .00 .00
25 020006 RING FOR
BEARING

GASKET NO 03-1997 .00 .00 26.96 .00 .00

25 070046 COVER 5858C I
1

LOCKING NO 11-1998 .00 .00 43.06 1.00 43.06

26 073158 WASHER POS
NO 274/02
26 073500 `O' RING TO NO 11-1998 .00 .00 124.53 4.00 498.15
DRAIN VALVE
HYDRATED KG 03-2002 .00 .00 2.05 .00 .00
28 000808 LIME
GASKET NO 03-1999 .00 .00 218.40 .00 .00
28 173144 MANHOLE
COVER
OUTER NO 06-2011 1.00 .00 71,521.19 2.00 1,43,042.38
31 331555 BEARING POS.
5 PT.NO.183-570
BALANCED NO 03-2004 .00 .00 993,778.12 .00 .00
31 332500 ROTTER DWG-
177
NORGREN 5 NO 03-2001 .00 .00 13,214.21 .00 .00
35 101003 PART
SOLENOID
VALVE PART
NO 10049 110
VOLTS
REBUILD KIT NO 03-2001 .00 .00 1,422.15 .00 .00
35 101106 FOR NORGREN
5 PART
SOLENOID
VALVE PART
NO X 4200050
COPPER PIG NO 11-2009 .00 .00 2,626.50 7.00 18,385.50
37 330056 TAIL FOR
CHLORINE
FILLIN DRG NO
CSD/M/T-452
WITH FITTINGS
ION LT 06-2010 .00 .00 474.84 1,350.00 6,41,034.00
37 500107 EXCHANGE
RESIN DUOLITE
C467
INDUSSTRIAL
GRADE
CHELATING
RESIN
AKAY MAKE NO 09-1997 .00 .00 12,514.47 .00 .00
54 002254 COMPLETE
PUMP MODEL 3
X 1.5 - 6 CHP-ST
IN CI
IMPELLER IN NO 09-2007 .00 .00 4,119.00 .00 .00
54 082031 C.I. FOR KSB
MAKE MEGA
OIL RELIEF NO 08-2011 1.00 .00 42,249.00 .00 .00
55 002020 VALVE ITEM
NO V07A
VALVE SEAT NO 08-2011 4.00 .00 23,250.50 .00 .00
55 002055 ITEM NO.S05A
HOSE MT 08-2002 .00 .00 102.74 .00 .00
56 795403 ASBESTOS
PACKED FOR
PRESSURE 6
50 MM SIZE
PVC TUBE MT 02-1997 .00 .00 92.00 .00 .00
56 859326 FLEXIBLE SIZE
 32 MM (1 1/4
INCH)

BEND NO 02-2011 .00 .00 652.50 .00 .00

57 050405 ANTENITE 90
DEGREE SCH 10
SIZE
57 075219 BEND CPVC 90 NO 11-2009 .00 .00 81.64 .00 .00
DG SCH-80
SIZE: 1"

3INCH QUICK NO 08-2002 .00 .00 25.00 .00 .00

58 654501 OPERATING
VALVE M S SCR
VALVE NON NO 01-1997 .00 .00 200.00 .00 .00
58 980374 RETURN 80MM
LONG PCD
GLAND NUT NO 02-1998 .00 .00 34.03 .00 .00
59 341804 FOR CD103 FIRE
HYDRANT VAL
CI WHEEL FOR NO 02-1998 .00 .00 25.40 .00 .00
59 381802 KD 10 FIRE
HYDRANT VAL
LOVEJOY NO 03-2009 .00 .00 810.00 .00 .00
62 000007 COUPLING
RRL-095
CI FOR LOVE NO 01-2011 .00 .00 4,242.20 .00 .00
62 000779 JOY COUPLING
RRL 225
67 215567 RADIATOR NO 05-1995 .00 .00 45.60 .00 .00
HOSE KIT
OIL FILTER CAP NO 07-1995 .00 .00 8.90 .00 .00
67 215609
68 030794 BALL JOINT NO 03-1998 .00 .00 122.27 .00 .00
ASSEMBLY
FOR
AMBASSADOR
68 094875 PINION, NO 03-1998 .00 .00 83.32 .00 .00
STEERING
69 111236 BATTERY 12 NO 06-2011 2.00 .00 5,500.00 .00 .00
VOLT 15
PLATES
CONDENSER NO 03-1998 .00 .00 30.00 .00 .00
69 142002 1745533
71 014159 BEARING SKF NO 03-2007 .00 .00 12,885.30 .00 .00
7015 CD PA4
BEARING NO 09-1998 .00 .00 464.76 .00 .00
71 086110 RADIAL BALL
SELF ALIGNING
S
GAS QM 12-2012 17.77 1,268.47 240.02 .00 .00
72 000156 ACETELENE
72 001057 GAS L.P. 39 KG NO 03-2010 .00 .00 905.60 .00 .00
CYLINDER
*B.P.*
NUT SS 316 NO 10-2012 .00 .00 5.39 69.00 372.00
73 025070 METRIC HEX
HEAD FOR 6
MM
74 071063 CUTTER HOLE NO 03-2000 .00 .00 50.60 28.00 1,416.80
SAW HSS12MM
74 082700 DIE BITS NO 03-1993 .00 .00 .0084.60 1.00 84.60
CONDUCT 1 1/4
INCH DIA
CORD, MT 01-2003 .00 .00 3.50 .00 .00
75 391340 SYNTHETIC
RUBBER SIZE 5
MM DI
SHIM, BRASS NO 08-2012 .00 2.00 699.72 .00 .00
75 397304 THICKNESS
0.4572 MM SIZE
1200 X 350
 M S ROUND 5.50 KG 11-2001 .00 .00 13.06 .00 .00
76 082088 MM TATA-MB
BAR ROUND SS KG 07-2012 1.00 4.00 37.80 215.00 8,127.00
76 086422 316 QUALITY 4
MM DIA
AC CLIP NO 03-1998 .00 .00 2.18 .00 .00
77 010814 EVEREST - H4-
31

PLYWOOD SIZE NO 05-1997 .00 .00 335.82 .00 .00

77 200470 6 INCH X 4
INCH X 6 MM

Electrical & Instrumentation (51, 52, 53, 61, 63, 64, 65, 66)

Mat. Description UOM Last Consumption Last Closing Balance

Code Moved Recpt.
Rate

LYR- YTD- Quantity Value

QTY QTY
51 PRESSURE GAUGES 0-400 NO 08-2010 .00 .00 1,000.00 .00 .00
121189 KG/cm2 BOURDE

51 RANGE 0-16 KG/CM2G NO 06-2012 .00 10.00 3,950.00 .00 .00

125080

MOTOR, ELECTRIC CHART NO 08-1989 .00 .00 416.00 7.00 2,912.00

52 DRIVE 117 V 5 68S295
068298
52 CO2 KATHORIMETER AS NO 10-2012 .00 2.00 38,361.32 .00 .00
710579 PIRATORAND SCOT ASSLY
RANGE ON 20% CO2
GLAND RING IN SS INTERNAL NO 01-1997 .00 .00 7,624.50 .00 .00
53 MOUNTED F SEAL SIZE 2.375
078111 INCH SEALOL MAKE
53 SIGHT GLASS ROUND NO 11-2004 .00 .00 76.61 34.00 2,604.74
257054 TOUGHENED 225MM

ARMATURE PART NO 5682 NO 02-1977 .00 .00 298.70 1.00 298.70

61
010303
61 CARBON BRUSH NO 1435 PR 02-1984 .00 .00 11.64 1.00 11.64
071353

62 LOVEJOY COUPLING RRL-095 NO 03-2009 .00 .00 810.00 .00 .00

000007

62 V BELT A 45 NO 04-2012 .00 3.00 118.00 .00 .00

300260

63 GLAND CABLE BRASS FOR NO 04-2009 .00 .00 9.37 98.00 918.26
053100 2X10MM2-2X16M

63 STRIPS MT 01-1996 .00 .00 9.01 .00 .00

057840 BINDING,CABLE,PUNCHED,8MM
WI

TRANSFORMER,POTENTIAL NO 03-1996 .00 .00 3,212.82 .00 .00

64 SINGLE PHASE VOLTAGE
300602 RATIO,22 KV/1.73TO110 V/1.7
22KV/1.73,VA RATING 50 OR 25
VA IND INSULATED.
64 KEY FOR MOTOR SHAFT M. S. 30 NO 03-1997 .00 .00 60.00 .00 .00
255104 X 17

COMPRESSOR SRIRAM MAKE NO 05-2005 .00 .00 90.00 .00 .00

65 MODEL 1012 F
011508
 65 OVER-LOAD-2 PIN SUITABLE NO 03-1996 .00 .00 51.63 .00 .00
016506 FOR DADAJI KLIXON MAKE

66 BELL LOUD RINGING NO 12-1997 .00 .00 1,170.00 .00 .00

010706 TELEPHONE WITH RE

66 WIRE JUMPER 2CORE RED + MT 11-2010 .00 .00 3.00 .00 .00
068101 WHITE 23SWG

Stationery (80, 82, 83, 84, 85, 86)

Mat. Description UOM Last Consumption Last Closing Balance
Code Moved Recpt.
Rate

LYR- YTD- Quantity Value

QTY QTY
DRIVE BELT NYLON 600 TO 1000 NO 06-1996 .00 .00 309.33 .00 .00
80 RPM FO
012826
SODIUM CHLORIDE (SALT KG 06-2011 600.00 .00 8.33 .00 .00
80 POWDER)
058012
FILM FOR DENTAL X-RAY BX 12-2012 .00 3.00 2,137.66 .00 .00
82
301736
82 X RAY FILM (CASSET AND NO 12-2012 .00 2.00 3,568.50 .00 .00
301888 SCREEN) SIZ

83 FIREMAN AXE AS PER IS-926/70 NO 01-2003 .00 .00 514.00 .00 .00
010051

SAFETY CLIP FOR 5 KG/10KG NO 01-2005 .00 .00 10.05 .00 .00
83 FIRE EXTI
012734
SAVIN KG 07-1996 .00 .00 551.00 .00 .00
84
198412
84 SICKLE BIG SIZE NO 06-1997 .00 .00 75.48 .00 .00
251712

TORCH, 3 CELL 4.5 V NO 03-1999 .00 .00 165.97 .00 .00

85
511651
85 THREAD NYLON REVO TWINE BD 07-2012 11.00 2.00 27.95 158.00 4,416.10
610768 R.T.NO.612

PRINTER COMPUTER TVS MSP NO 01-2006 .00 .00 13,000.00 .00 .00
86 355, 24 WI
011030
PLASTIC FOLDERR FOR NO 03-2000 .00 .00 146.44 .00 .00
86 COMPUTER PAPER
513060
 BIBLIOGRAPHY
⮚ Books

I. M. Pandey, Financial Management, Vikas Publishing Pvt, Ltd, (9th Edition) Pg

no: 524, 525, 624 to 639.

⮚ Websites

⮚ http://www.gnfc.in/aboutus/finance.html
⮚ http://www.gnvfc.com
⮚ www.hoclindia.com/
⮚ http://en.wikipedia.org/wiki/Hindustan_Organic_Chemicals_Ltd
⮚ http://www.moneycontrol.com/gnfc/financials.html

⮚ Other Materials

✔ Annual report of the company

✔ Balance Sheet