CHAPTER I

INTRODUCTION

1
The dictionary meaning of inventory is 'stock of goods'. The investment in inventory is very
high in most of the undertakings engaged in manufacturing. The amount of investment is
sometimes more in inventory than in other assets. About 90 percent part of working capital is
invested in inventories. It is necessary for every management to give proper attention to
inventory management. A proper planning of purchasing, handling, storing and accounting
should form a part of inventory management. By proper planning it is possible for a company
to reduce its levels of inventories to a considerable degree, without any adverse effect on
productionandsales,byusingsimplyinventoryplanningandcontroltechnique.Thereduction in
excessive inventories carries a favourable impact on company's profitability. An efficient
system of inventory management willdetermine.

1) What topurchase

2) How much to purchase

3) From where to purchase

4) Where to store,etc.

―Effective inventory management enables an organization to meet or exceed customers‖

expectationsofproductavailabilitywhilemaximizingnetprofitsorminimizingco.Inventories
constitute about 60% of current assets of companies of India. The manufacturing companies
hold inventories in the form of raw materials, work in process, finished goods, stores and
spares, chemicals, lubricants etc.

Three motives for holding inventories:-

1. To facilitate smooth production and sales operation (transactionmotive),

2. To guard against the risk of unpredictable changes in usage rate and delivery time
(precautionarymotive)

3. To take advantage of price fluctuation (speculativemotive)

2
Two types of cost are involved in the inventory maintenance:-

“Ordering cost” requisition, placing of order, transportation, receiving, inspecting, storing,

clerical staff, are fixed per order. Therefore, they decline as the order size increases.

“Carrying cost” warehousing, handling, clerical staff, insurances and taxes. Carrying costs
vary with inventory holding. As order size increases, average inventory holding increases and
therefore the carrying costs increase.

The firm should minimize the total cost (ordering + carrying). The economic order quantityof
inventory level occurs at point where total cost isminimum.

3
 COMPANY PROFILE
Indian Farmers Fertilizer Cooperative Limited, also known as IFFCO, is the world's
largest fertilizer cooperative federation based in India which is registered as a Multistate
CooperativeSociety.IFFCOhas36,000membercooperativesreachingover50millionIndian

farmers. IFFCO has been ranked #1 among top 300 cooperatives of world in2021.

Key people are:

Chairman&Director : Mr. Balvinder Singh Nakai

CEO : Dr. Udai ShankerAwasthi

IFFCO has made strategic investments in several joint ventures. Indian Potash Ltd (IPL) in
India, Industries Chimiques du Senegal (ICS) in Senegal, Oman India Fertilizer Company
(OMIFCO)inOmanandJordanIndiaFertilizerCompany(JIFCO)areimportantfertilizerjointventu
res. As part of strategic diversification, IFFCO has entered into several key sectors.
IFFCO-TokioGeneral Insurance Ltd (ITGI) is a foray into general insurance sector. Through
ITGI, IFFCO has formulated new services of benefit to farmers. 'Sankat Haran
BimaYojana'providesfreeinsurancecovertofarmersalongwitheachbagofIFFCOfertilizer
purchased. To take the benefits of emerging concepts like agricultural commodity trading,
IFFCO has taken equity in National Commodity and Derivative Exchange (NCDEX) and
National Collateral Management Services Ltd (NCMSL). IFFCO Chhattisgarh Power Ltd
(ICPL) which is under implementation is yet another foray to move into core area of power.
IFFCO is also behind several other companies with the sole intention of benefittingfarmers.

4
IFFCO, the thirst for ever improving the services to farmers and member co-operatives is
insatiable, commitment to quality is insurmountable and harnessing of mother earths' bounty
to drive hunger away from India in an ecologically sustainable manner is the prime mission.
AllthatIFFCOcherishesinexchangeisaneverlastingsmileonthefaceofIndianFarmerwho forms
the moving spirit behind thismission.
IFFCO, to day, is a leading player in India's fertilizer industry and is making substantial
contribution to the efforts of Indian Government to increase food grain production in the
country.

India today is the third largest producer of nitrogenous fertilizers in the world only behind
China & USA. At present, there are 56 large size fertilizer units in the country manufacturing
a wide range of nitrogenous, phosphoric and complex fertilizers. Of these, 29 units produce
urea, 20 units produce DAP and complex fertilizers, 7 units produce low analysis straight
nitrogenousfertilizers.Thereare9unitsthatmanufactureAmmoniumSulphateasby-product.
Besides, there are about 72 small and medium scale units in operation producing single super
phosphate(SSP).

Inthepast,ithasbeenobservedthatwhiletherewasadequateavailabilityoffertilizersineach
stateatthemacroleveltherewerealsopocketsofshortagesinsomeofthedistricts.Toaddress this
concern, a new web based Fertilizers Monitoring System (FMS) was launched on
22ndJanuary 2007 to monitor the movement of fertilizers up to the District level. To ensure
the adequate availability of fertilizers up to the block level, the dealership network has also
been expanded during the last oneyear.

With the objective of promoting balanced application of all the three nutrients, i.e., nitrogen,
phosphorus and potash and making available fertilizers to farmers at affordable prices, the
Government provides subsidy on urea, which is the only fertilizer at present under statutory
price control and concession on decontrolled Phosphate and Potassium (P&K)

5
India has been predominantly considered as an agricultural dependent economy. Agriculture plays a very
dominant role as more than one-fourth of our GDP come from this sector. Nearly 70% of population depends
on the agriculture for their lively-hood. The basic need for an
agriculturaldependenteconomyisfertilizersandureaisoneofthemainfertilizers.Indiaisthe second largest
manufacturing country in theworld.

VISION AND MISSION

VISION
―To augment the incremental incomes of farmers by helping them to increase their crop
productivity through balanced use of energy efficient fertilizers; maintain the environmental
health; and to make cooperative societies economically and democratically strong for
professionalized services to the farming community to ensure an empowered rural India‖.

MISSION
 To provide to farmers high quality fertilizers in right time and in adequate quantities
with an objective to increase cropproductivity.

 To make plants energy efficient and continually review various schemes to conserve
energy.

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 Commitment to health, safety, environment and forestry development to enrich the
quality of communitylife.

 Commitment to social responsibilities for a strong socialfabric.

 Toinstitutionalizecorevaluesandcreateacultureofteambuilding,empowermentand
innovation which would help in incremental growth of employees and enable
achievement of strategicobjectives.

 Foster a culture of trust, openness and mutual concern to make working a stimulating
and challenging experience for stakeholders.

 Buildingavaluedrivenorganizationwithanimprovedandresponsivecustomerfocus. A
true commitment to transparency, accountability and integrity in principle and
practice.

 To acquire, assimilate and adopt reliable, efficient and cost effectivetechnologies.

 Sourcing raw materials for production of phosphaticfertilizers at economical cost by

entering into Joint Ventures outsideIndia.

 To ensure growth in core and non-coresectors.

13
During mid- sixties the Co-operative sector in India was responsible for distribution of 70 per cent of
fertilisersconsumed in the country. This Sector had adequate infrastructure to distribute fertilisersbut
had no production facilities of its own and hence dependent on public/private Sectors for supplies. To
overcome this lacuna and to bridge the
demandsupplygapinthecountry,anewcooperativesocietywasconceivedtospecificallycatertothe
requirements of farmers. It was an unique venture in which the farmers of the country through
their own Co-operative Societies created this new institution to safeguard their interests. The
number of Co-operative Societies associated with IFFCO have risen from 57 in 1967 to 36,000 at
present. Indian Farmers Fertiliser Co-operative Limited (IFFCO) was
registeredonNovember3,1967asaMulti-unitCo-operativeSociety.Ontheenactmentofthe MultistateCo-
operativeSocieties act1984&2002,theSocietyisdeemedtoberegisteredasa Multistate Co-operative
Society. The Society is primarily engaged in production and distribution of fertilisers. The byelaws of
the Society provide a broad frame work for the activities of IFFCO as a Co-operative Society. IFFCO
commissioned an ammonia - urea complex at Kaloland the NPK/DAP plant at Kandla both in the
state of Gujarat in 1975. Another ammonia - urea complex was set up at Phulpurin the state of Uttar
Pradesh in 1981. The ammonia - urea unit at Aonlawas commissioned in 1988. In 1993, IFFCO had
drawn up a major expansion programme of all the four plants under overall aegis of IFFCO
VISION2000. The expansion projects at Aonla, Kalol, Phulpur and Kandla were completed on
schedule.AlltheprojectsconceivedaspartofVISION2000hadbeenrealisedwithouttimeor cost overruns.
All the production units of IFFCO have established a reputation for excellence andquality.

14
Another growth path was chalked out to realise newer dreams and greater heights
through Vision 2010. As part of this vision, IFFCO has acquired fertiliserunit at Paradeepin
Orissa in September 2005. As a result of these expansion projects and acuisition, IFFCO's
annualcapacityhasbeenincreasedto3.69milliontonnesofUreaandNPK/DAPequivalentto
1.71milliontonnes.Inpursuitofits growthanddevelopment,IFFCOhadembarkeduponand
successfully implemented its Corporate Plans, ‗Mission 2005‘ and ‗Vision 2010‘. These plans
have resulted in IFFCO becoming one of the largest producer and marketeer of
Chemical fertilisersby expansion of its existing Units, setting upJoint Venture Companies
Overseas and Diversification into new Sectors. IFFCO has now visualized a comprehensive
plan titled ‗Vision-2015‘ which is presently under implementation. IFFCO has made strategic
investments in several joint ventures. Indian Potash Ltd (IPL) in India, Industries Chimiques
du Senegal (ICS) in Senegal, Oman India Fertiliser Company (OMIFCO) in Oman andJordan
India Fertiliser Company (JIFCO) are important fertiliserjoint ventures. As part of strategic
diversification, IFFCO has entered into several key sectors. IFFCO-TokioGeneral Insurance
Ltd (ITGI) is a foray into general insurance sector. Through ITGI, IFFCO has formulated new
services of benefit to farmers. 'Sankat Haran Bima Yojana' provides free insurance cover to
farmers along with each bag of IFFCO fertiliser purchased. To take the benefits of emerging
conceptslikeagriculturalcommoditytrading,IFFCOhastakenequityinNationalCommodity and
Derivative Exchange (NCDEX) and National Collateral Management Services Ltd
(NCMSL).IFFCOChattisgarhPowerLtd(ICPL)whichisunderimplementationisyetanother foray
to move into core area of power. IFFCO is also behind several other companies with the sole
intention of benefitting farmers.

15
The distribution of IFFCO's fertiliseris undertaken through over 39824 Co-operativeSocieties.
The entire activities of Distribution, Sales and Promotion are co-ordinated by
MarketingCentralOffice(MKCO)atNewDelhiassistedbytheMarketingoffices inthefield.
Inaddition,essentialagro-inputsforcropproductionaremadeavailabletothefarmersthrough a
chain of 158 Farmers Service Centre (FSC). IFFCO has promoted several institutions and
organisations to work for the welfare of farmers, strengthening cooperative movement,
improve Indian agriculture. Indian Farm Forestry Development Cooperative Ltd (IFFDC),
Cooperative Rural Development Trust (CORDET), IFFCO Foundation, Kisan SewaTrust
belong to thiscategory.

An ambitious project 'ICT Initiatives for Farmers and Cooperatives' is launched to promote e-
culture in rural India. IFFCO obsessively nurtures its relations with farmers and undertakes a
large number of agricultural extension activities for their benefit every year.

At IFFCO, the thirst for ever improving the services to farmers and member co-operatives is
insatiable, commitment to quality is insurmountable and harnessing of mother earths' bounty
to drive hunger away from India in an ecologically sustainable manner is the prime mission.
AllthatIFFCOcherishesinexchangeisaneverlastingsmileonthefaceofIndianFarmerwho form the
moving spirit behind this mission. IFFCO, to day, is a leading player in India's
fertiliser industry and is making substantial contribution to the efforts of Indian Government
to increase foodgrain production in thecountry.

16
 ORGANISATIONAL CHART OF IFFCO

Board of Directors

Chairman& Vice Chairman

Managing Director

Jt. MD Director Director Director Director.

Cum- Mkt.
(Technical) (HRD) (Coop.
Finance Director Development
Director

17
 BOARD OF DIRECTORS
The Directors of IFFCO
Chairperson : Mr. Dileep Sanghani

Vice-Chairperson : Mr. Balvir Singh

DIRECTORS

ManagingDirector&CEO : Dr. U. S. Awasthi

Joint Managing Director &CEO : Mr. Prem Chandra Munshi

IFFCO IS:

Largest producer of fertilizers in the country

Number of Plant Locations: Five

Installed Annual Capacity ('000

MT)1. UREA - 4242.2

2. NPK/DAP - 4335.4

3. TOTAL 'N' - 2628.2

4. TOTAL 'P2O5 - 1712.8

1. Iffco has achieved highest ever yearly record dispatch of 133.24 lakh MT of
Urea/NP/NPK/DAP/WSF and other speciality fertilizers in year 2019-2020 from Iffco
plant at Karol, Phulpur, Aonla, Kandla, Pradeep and Ports.

3. Fertilizers marketed through 39,564 Cooperative Societies and 15 Farmers ServiceCenters.

4. Service to the Farmers through a variety ofprogrammers.

18
PRODUCTION OF IFFCO

SALES OF IFFCO

19
 ABOUT AONLA UNIT
LOCATION

State : UttarPradesh

StateCapital :Lucknow

DistancefromLucknow : 280Km.

Distance fromNew Delhi : 260Km.

NearestAirport : NewDelhi

RailwayStation : Aonla (10 Km. from thePlant)

Road : Plant is In Bareilly–Aonla Bareillyhighway.

AreaunderPlant : 260Hectares

AreaunderTownship : 220Hectares

YEAR OFCOMMISSIONING 1988

INVESTMENT : Rs.651.6 Crore AONLA-I

YEAR OFEXPANSION 1996

INVESTMENT : Rs.954.7 Crore AONLA-II

YEAROFDEBOTTLENECKING 2008

INVESTMENT : Rs.149.2Crore

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 The IFFCO AONLA Unit is located in the Gangetic Plains of Uttar Pradesh in Bareilly
districtabout28Km.SouthwestonBareilly-AonlaRoad.Itwassetupon08January1985and
startedcommercialureaproductionat16July1988.TheinfrastructureofAONLAunitisvery big and
constructed on 713 acres of land.

IFFCO Aonla unit is the most efficient and quality-wise as well as environmental
orientedunitsothatM/sKPMGPeatMarwick,aqualityregistrarhascertifieditasISO:9002 unit and
M/s BVQI London has accredited it as ISO:14001 unit. The Aonla unit,an

Ammonia- urea complex is comprised of the two phases:

AONLA-1

AONLA-2

AONLA -1 was established in 1988 and it was digested to nation by honorable Prime Minister
of India late Shri Rajeev Gandhi on 17 May 1989.

AONLA-2 was established in1996 December. This unit was designed to nation by honorable
Prime Minister of India Shri I.K. Gujral on 28 Jan 1997.

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 FINANCE AND ACCOUNT DEPARTMENT AT A GLANCE
The Finance & Accounts Department of IFFCO, Aonla is divided into 5 sections, to facilitate
smooth and easy functioning and control.

Organization Structure

FINANCE &
ACCOUNT
DEPARTMENT

BOOKS/FI FINANCIAL BILL PAYRO TAXATI PSL

CC CONCURRENC SECTIO LL ON SECTIO
CELL E N SECTIO SECTION N
N

Supply Note Sheet Work Order

Section Payment

Indigenous Imported Work Service

supply supply contract contract

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 Each company is carried with a purpose of earning money. Money or capital being a
scare as well as crucial resource in the working of any organization needs to be given prime
importance. The financial resources have been planned and controlled in a proper and
continuous manner. As among the most crucial decisions of a firm are those which relate to
finance. Finance & accounts from an integral part of any organization. Proper and smooth
functioning of this section is very vital for the organization to survive and grow.

Finance functions are of two types:

 Managerial financefunction
 Routine financefunction

Managerial finance functions are so called because they require skilful planning,
control and execution of financial activities.

Routinefinancefunctionsontheotherhand,donotrequireagreatmanagerialability to
carry them out. They are chiefly and are incidental to the effective handling of the material
financefunctions.

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CONCEPT OF INVENTORY MANAGEMENT
The literary meaning of inventory is stock of goods. According to Accounting Standards-2,
Inventory is a tangible property which is held:

 For sale in the ordinary course ofbusiness;

 In the process of manufacture for such asale;
 For consumption in the process of production of goods and services for sale including
maintenance supplies and consumables other than machineryspares.
InventoryManagementinvolvesthecontrolofassetsbeingproducedforthepurposeofsalein
thenormalcourseofthecompany'soperations.Thegoalofeffectiveinventorymanagementis to
minimize the total costs - direct and indirect - that are associated with holding inventories.
However, the importance of inventory management to the company depends upon the extent
of investment ininventory.

The term „inventory‟ includes:

 Inventory of Raw Materials:

Inthecaseofmanufacturingconcerns,varioustypesofrawmaterialsarebeingusedinthe
production system. To ensure smooth production function and also to avoid any kind of
production delays the concern has to keep inventory of rawmaterials.

 Inventory of Stores and Spare Parts :

This inventory consists of those products which serve as accessories to the main products
manufactured for the purpose of sale. Bolts, nuts screws, clamps, etc., are the examples of
storesandsparesparts.Suchsparepartsareeitherboughtfromoutsideormanufacturedin the
concernitself.

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 Inventory of Work-In-Process (W.I.P.) :
Sometimes the manufacturing system involves various processes for converting raw
materials into finished goods. As such, some materials might have been issued to the
productionprocessbutmightnothavebeencompletedasfinishedgoods.Thisisknownas work-
in-process.

 Inventory of Finished Goods:

Allgoodsmanufacturedduringaparticularperiodmaynotbesoldimmediately. Theseare to be
kept in warehouse. The idea is to uncouple the production and sales function so that it is
no longer necessary to produce the goods before a sale canoccur.

The application of managerial function on the basis of management principles in the field of
inventory is termed as inventory management. Managerial functions are performed with
respect to inventory; it may be called inventory management.

The objective of inventory management is to plan the optimum size of inventory which is
neither excessive nor deficient and is timely available. For timely availability along with
optimum size, there is need for controlling as well. Only on the basis of various control
techniquesonecanensureswhetherinventorywouldbetimelyavailable.Buteffectivecontrol in
itself depends upon organizing and coordination. Thus, inventory management comprises the
functions of planning, controlling and organizing the types of all goods, quantity, status, flow
and time- sequenceetc.

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Need for inventory management
Inventory management is an integral part of general management. Three important functional
aspects of a business are closely related to inventory management. These are:

1) Productionmanagement
2) Marketingmanagement
3) Financialmanagement

Heretheproductionmanagementandmarketingmanagementarerelatedtothephysicalaspect of
inventory management and; financial management is concerned with the financial aspectof
the inventorymanagement.

In production management, production manager will always strive to have a large inventory
of raw materials and of such a good quality as to ensure stable production operations.

In marketing management, marketing manager aims at satisfying ever increasing demands

for improved customers‘ service by having large inventory of inside goods.

Infinancialmanagement,financemanagerwillefforttowardstokeepinvestmentsindifferent
typesofinventoryataminimumpossiblelevelsothatthebusinessconcernmayearnmaximum return

STORE SECTION

Store of any organization is of vital importance. It is the responsibility of stores to

receive the material required by the organization‘s operations to keep it properly & to issue it
as when required. The stores are divided in two subsections for greater flexibility like receipt
and custody section. In IFFCO there are two stores.

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 A. Store A for Aonla-1unit.

(This store contains that spares which are used by Aonla-1)

B. Store B for Aonla-2unit.

(It contains mainly catalysts used by Aonla-2 )

Store has the following warehouses:

 MainStore
 Cementgodown
 PetrolPump
 Cableyard
 Chemicalgodown
 Paintgodown
 PDILstore

Verification of Inventories
The officer of stores will coordinate the job of physical verification and the accounts
officerinchargeshallrenderallassistancetoensurethatthephysicalverificationofinventories
iscarriedoutasperthepolicyandthepolicyandthe approvedprogram.Thestoredepartment will
ensure that the posting in the Kardexare updated before the verification of inventories.
Kardex contains all the information that is in thestore.

The inventories are classified in three categories for verification purpose.

 Raw material & Packingmaterials

 Stores, Chemicals & Spareparts
 Finishedproducts

27
The stocks of raw materials, packing materials and finished products are to be verified on
quarterly basis by an independent surveyor by the society. No adjustments need be carried out
inthebooksofaccountsunlessthediscrepanciesinliquidrawmaterialsandsolidrawmaterial are in
excess of 1% to 5% respectively. This is as per guidelines issued by the headoffice.

Incaseoffinishedgoodsalsothesameprincipleappliedexceptthatnoadjustmentsinthe books
of accounts shall be made. However the stock registers shall be adjusted on the basis of actual
stock in order to replace the notional figures of stocks by more accurate estimate based on
physical verification. The inventories for other items such as stores, spares, construction
materials etc. are also verified every year keeping in view ABC analysis of stock items value
and exercise of verification may be completed by March everyyear.

For the purpose of verification of stores, chemicals & spare parts shall be classified in to A, B
and C categories.

Categories Value (Rs. per unit) Quantum of Verification

A Above Rs. 100000/- 100%

B 25000 to 100000/- 70%

C Below Rs. 25,000/- 25%

Ateamofstockverifiersshallprepareastockverificationsheetgivingthekardexbalanceand the
physical balance of each item covered in the stock verification. After filling up the particulars
of the value and quality discrepancies with reference to the priced stores ledger balance, the
stock verification sheets shall be forwarded to the materials department for scrutiny and
reconciliation and adjustment in consultation with finance department accepted shortage shall
be processed for the approval of the competentauthority.

28
 RECONCILIATION AND ADJUSTMENT

Aftereachphysicalverificationbythecustodiansofinventoriesandsuitableadjustmentaction has to
be taken. It is desirable to complete the physical verification work by March every year so
that reconciliation/adjustment action can be completed within the yearitself.

Internal Check

1) One set of document for receipts, issues and return of materials shall be sent to the
accounting section of finance department. Based on these documents, priced store ledger
shall be prepared for each item for stores. The material code number between stores and
accountsshallbeidentical.Thepricedstoreledgershallprovidevalueofeachreceipt,Issue and
return transaction along with quantity ledger. The quantity balance appearing in priced
store ledger shall serve as counter check for accuracy of bin card balance in store which is
essential for proper functioning of inventory controlsystem

2) The priced store ledger shall not be maintained for large number of low value items
suchasstationery,medicines,canteenstoresetc.inthiscasetheexpenditureshallbecharged
totheappropriateexpenseaccountattimepurchase.Quantitativerecordshallbekeptbythe
concerned department and shall be produced as and when required for auditpurpose.

29
Inventory Control

Inventory control is concerned with minimizing the total cost of inventory. The three
main factors in inventory control decision making process are:

I. The cost of holding the stock (e.g., based on the interestrate).

II. The cost of placing an order (e.g., for row material stocks) or the set-up cost of
production.
III. The cost of shortage, i.e., what is lost if the stock is insufficient to meet alldemand.

The third element is the most difficult to measure and is often handled by establishing a
"service level" policy, eg. certain percentage of demand will be met from stock without delay.

The Inventory Management system and the Inventory Control Process provides
information to efficiently manage the flow of materials, effectively utilize people and
equipment, coordinate internal activities, and communicate with customers. Inventory
Management and the activities of Inventory Control do not make decisions or manage
operations; they provide the information to Managers who make more accurate and timely
decisions to manage their operations.

Inventory control is a systematic control and regulation of purchase and usage of materials in
such a way so as to maintain an even flow of production at the same time avoiding excessive
investment in inventories. Efficient material control reduces losses and wastage of materials
that otherwise pass unnoticed.

Inventorycontrolisthecoreofmaterialmanagement.Theneedandimportanceofinventories varies
in direct proportion to the idle time cost of men and machinery, and urgency of requirements.
If men and machinery in the factory could wait and so could the customers, materials good
not lie in wait for them and no inventory need to be carried. But it is highly uneconomical to
keep the men and machine waiting and the requirements for modern life are so urgent that
they cannot wait for materials to arrive after the need for them hasarisen.

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TECHNIQUES OF INVENTORY CONTROL
Reduction of surplus stock is an essential requirement inventory control. Various
techniques are available to solve the various types of problems associated with inventory
control:-

1) Min-Maxplan

2) Order cyclingsystem

3) Fixation of variouslevels

4) Use of controlratios

5) Review of slow and non-moving items

6) The ABCAnalysis

1) Min-Maxplan:

In this plan analyst lays down a maximum and minimum for each stock item. Minimum level
establishes the reorder point and order is placed for quantity of material, which will bring it to
the maximum level.

2) Order CyclingSystem:

In this system, quantities in hand of each item or class of stock are reviewed periodically. In
that,ifitisobservedthatstocklevelofagiven itemwillnotbesufficienttillthenextschedule review
keeping in view of its probable rate of depletion, an order is placed to replenish its supply.

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 1) Fixation of Various Levels:

Certain stock levels or fixed levels are given below:-

A. Maximum Level

It is the quantity of materials beyond which a firm should not exceed its stocks. If the
quantity exceeds maximum level limit then it will be overstocking.

Maximum Level= Re-ordering level + Re-ordering Quantity-(Minimum

Consumption*Minimum Re-orderingperiod)

B. MinimumLevel

It represents the quantity of stock that should be held at all the time, stock level is
normally not allowed facing below this level.

Minimum Level = Re-order level – (Normal consumption*Normal Re-order Period)

C. SafetyLevel

Normal issues of stock usually stopped at this level and made only under specific
instructions. Safety stock is a buffer to meet some unanticipated increase in usage.

Safety stock level = Ordering Level – (Average rate of consumption * Re-order level)

OR

= (Maximum rate of consumption – Average rate of consumption) * Lead Time.

D. Re-orderingLevel

When the quantity of materials reaches at a certain figure then fresh order is sent to get
materials again.

Re-ordering level = Maximum Consumption*Maximum Re-order period.

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 1) Use of ControlRatios:
Inventory turnover ratio helps management to avoid capital being locked up unnecessarily. This ratio
reveals the efficiency of stock keeping .

Inventory turnover ratio =Cost of materials consumed / Cost of average stock held during
the period

Where,

Cost of average stock = [Cost of opening stock + Cost of closing stock] / 2

Inventory turnover ratio [in days] =Days during the period /Inventory turnoverratio.

2) Review of slow moving and non- movingitems:

Stock turnover ratio should be as high as possible. Loss due to obsolescence be eliminated or these
itemsusedinsomeprofitablework..Slowmovingstockshouldbeidentifiedandspeedilydisposedoff. The
speed of movement should be increased. The turnover of different items of stock can be analyzed to
find out the movingstocks.

The percentage of slow moving stores = Slow moving stores / Total Inventory

33
 TECHNIQUE USED in IFFCO
forINVENTORY CONTROL
The ABC Analysis:
With the numerous parts and materials that enter into each and every industrial production, inventory
control leads itself, inventory and foremost, to the problem of analysis. Such analytical approach is
popularly known as ABC (ALWAYS BETTER CONTROL) Analysis.

This Plan is based upon segregation of material for selection control. It measures money value i.e. cost
significance for each materials item in relation to total cost and inventory value. The logic behind is
thatthemanagementshouldstudyeachitemofstockintermsofitsusage,lead-time,technicalorother problems
and its relative money value in the total investment ininventories.

Critical, i.e. high value items deserve very close attention, and low value items need to be devoted
minimum expense and effort in the task of controlling inventories.

The ABC Reports aremade:

“A” inventory reports lists parts having little or no turnover. Turnover frequency is measured by an
exposure index. We calculate the index by dividing a part‘s inventory quantity by its usage during the
most recent 24 monthperiod.

“B” report shows the parts with more than a one year supply but less than a 2-year supply.

“C” report lists the parts with more than six months supply but not more than one year.

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 INVENTORY SOFTWARE
Enterprise resource planning (ERP) systems integrate internal and external management of
information across an entire organization—embracing finance/accounting, manufacturing,
sales and service, customer relationship management, etc. ERP systems automate this activity
with an integrated software application. ERP facilitates information flow between all business
functionsinsidetheorganization,andmanagesconnectionstooutsidestakeholders.Enterprise
system software is a multi-billion dollar industry that produces components that support a
variety of business functions. IT investments have become the largest category of capital
expenditure in United States-based businesses over the past decade. Enterprise systems are
complex software packages that offer the potential of integrating data and processes across
functionsinanenterprise.AlthoughtheinitialERPsystemsfocusedonlargeenterprises,there has
been a shift towards smaller enterprises also using ERPsystems.

ThemainexampleisERPsystems.OrganizationsconsidertheERPsystemtheirbackboneand a vital
organizational tool because it integrates varied organizational systems, and enables flawless
transactions and production. However, an ERP system is radically different from traditional
systems development. ERP systems can run on a variety of computerhardware and
network configurations, typically employing a database as a repository for information.

The Main Components of ERP Software is:

 Transactional database
 Management portal/dashboard
Business intelligence system
 Customizable reporting
 Simple resource planning - Who Is Doing What and When?
Analysing the product
 External access via technology such as web services
Search

35
Accounting requirement for stores and spares:
A summary account is maintained monthly to analyze the difference in quantity
as well as value of each item.

In IFFCO inventory in stores is divided in some groups. These groups are

again classified as:

1) GENERAL STORES

2) SPARES

3) LOOSETOOLS

4) CATALYSTS

5) CHEMICALS –OTHERS

6) CONSTRUCTION MATERIAL

These groups contains items which are either similar in terms of their use or are
used in the same plant. For example, in general stores inventory there are groups
like pipes, valves, fittings, industrial gases, lubricants etc. in each group there
can be different types of same item. For example, pipes can be of different sizes,
lubricants used can differ from machine to machine.

36
  GeneralStock.

General stock contains groups of items which are used frequently.

There are 34 items in total under this head, namely:

o Pipes
o Flanges
o Fittings
o Strainer
o Filters
o Bellows
o Specificfittings
o Valves
o Bolts, nut ,stud,fasteners
o O-Rings , gaskets, sheets,packing
o Weldingmaterial
o Abrasives
o Industrialgases
o Adhesives, cleaning,chemicals
o Instrumentitems
o Electricitems
o Generalite
ms

IFFCO has to maintain the large stock of these items as it is a continuous plant
and the requirement of these materials is regular. Some of the groups that have
high value are pipes, flanges, fittings, valves, refractory insulating materials,
instruments items, electrical items and general items.
37
  Spares.

Spares are the groups which have items that are used in a particular plant. Thus, these item
groups are formed according to the plants in which they are used. These groups are

1. Ammonia

2. Urea

3. Offsites

4. Producthandling

5. Steam and powergeneration

6. Others

 LooseTools.

This group contains items like hand tools, M/C tools, rigs and fixtures.

 Catalysts.

These are the materials used in the production process. theese are either manufactured in
IFFCO or purchased.

38
  Chemical-others.

Thesechemicalsarealsousedintheproductionprocess.Thedifferentchemicalsconstitutethe
following_

Hydrochloric acid (HCL): procured from either United Alkalies or from Bhatia Acid.

Caustic Soda (NaOH): is procured from United Alkalies

SulphuricAcid (H2SO4): is purchased from K.L.Singhania& Sons.

Liquid Chlorine: is purchased from Kanoria Chemicals

Alum

Ferrous Sulphate

Hydrated Lime

Liquid Nitrogen

Furnace Oil

High Speed Diesel (HSD)

 PackingMaterial.

HDPE/Jute Bags are procured from Kanpur Plastipack Ltd. and Modern Laminators Ltd. they
are in 2 different forms:- 25 kg. and 50kg. For both units of Aonla.

 Construction Material.

IFFCO keeps the inventory of necessary construction material like cement, steel and timber.

39
 CHAPTER II
LITERATURE REVIEW

40
 LITERATURE REVIEW

THE ORGANISATION
Indian Farmers Fertiliser Cooperative Limited operates two Ammonia plants, each with a
production capacity of 1740 MTPD and four Urea plants, each with a production capacity of
1515 MTPD at Aonla Unit, Bareilly, Uttar Pradesh in India. Ammonia plants have been
designed based on technology from M/s HaldorTopsoe, Denmark with steam reforming of
Natural Gas and /or naphtha and Urea plants have been designed based on technology from
M/s Snamprogetti, Italy with IFFCO Aonla is one of the most energy efficient & prestigious
fertilizercomplexesandisbasedonNaturalGasfromHBJpipeline.TheUnithasbeencertified for
ISO-9001, ISO-14000, EN-16001, OHSAS-18001 andISO-26000.
IFFCOAonlahasalwaysbeenafrontrunnerin'GreenRevolution'andhas,alwaystakenpride in
implementing quality initiatives and practices in its activities. Quality concepts inculcate
continual Improvement through fresh initiatives and review of the existingpractices.

QUALITY & ENVIRONMENTAL MANAGEMENT SYSTEM AT IFFCO AONLA

IFFCO Aonla is having well defined and implemented quality policy and environment policy
in line with corporate quality, safety, health and environment policies. An approach of total
quality management (TQM) is in practice at all levels in the unit.

41
 1
QUALITY POLICY OF IFFCO AONLA UNIT
IFFCO Aonla is committed to achieve satisfaction of its cooperative societies, farming
community and customers by manufacturing and supplying specified quality product by
pursuing:
· Improvement of Technology for enhancing/maintaining productivity andgrowth.
· Creating safe & healthy working conditions and eco-friendly environment.
· Co-operation and teamspirit.
· Development of humanresources.

ENVIRONMENTAL POLICY OF IFFCO AONLA

IFFCO Aonla Unit is committed for continual improvement and protection of environmentby
setting and reviewing the objectives and targets through environmental management system
focusingat:
Compliance of applicable legislation at work place and other requirements, which the
organization subscribe. Monitoring and conserving natural resources.
Effluent and waste minimization by way of recycling and reuse.
Developing awareness and competence amongst Employees, Contractor‘s Staff and Related
Agencies on Environment issues. Emergency preparedness for safety of concerned personnel
andplant.

QUALITY CONTROL & RESOURCE CONSERVATION

Aonla has created following facilities to monitor and control Product Quality & Resource
Conservation:
A well-equipped quality control laboratory. Technical core group for monitoring product
qualityandenergyconsumption.ConservationofnaturalresourcesbyimplementationofEMS.
HRDcellforcreatingallroundawarenessandcompetenceonquality&environmentalissues.

42
ENERGY CONSERVATION & COST REDUCTION
IFFCO Aonla is certified for international standard EN16001:2009 by certifying body M/sQS
Zurich AG, Zurich, for its Energy Management System. The certificate was issued on 26th
November, 2011 and is valid upto 22nd November, 2014. Energy audit forms an integral part
of energy conservation at IFFCO Aonla. Based on the energy audit of various sections of the
plants carried out on regular basis, various steps are taken to conserve energy either by wayof
optimising the plant operations or by implementing the energy conservation schemes.
Salientfeatures of the strategy adopted tor energy conservation are as given below:
a. Incorporation of proven energy conservation schemes involving largeinvestments.
b. In-house minor modifications for energy conservation schemes involving small
investments.

c.
d. Utilisation of excess steam from one plant toanother.
e. Trimmed operation of cooling towers to achieve most optimum cooling watertemperature.
f. Minimise the unscheduled shutdowns by adopting exhaustive preventivemaintenance
schedule for all the standbyequipments.
g. Minimise the loss of unproductive inputs during startup by minimising venting andby
using the process gas from one plant to another plant during startup.
h. Optimising the processparameters.
i. Operating only one gas turbine in place of two gas turbines during wintermonths.
j. Adopting change in original philosophy by operating motor drives during normal operation
in place of condensing turbines, thereby reducing heat loss to cooling water which is a major
heatsink.
k. Operating only 3 units of urea plant at high load in place of 4 units at low load as andwhen
required.
l. Checking of vents and relief valves for passing at regular intervals and maintain a record
for thesame.
m. Monitoring of Energy Consumption & Cost of Production on DailyBasis
n. Monitoring of overall specific energy consumption and cost of inputs per MT ofUrea.
o. Monitoring of energy consumption of individual plants/sections by monitoring the overall
steam balance of thecomplex.

42
p. Task force to work on bringing down energy requirement in thecomplex.
q. Efficiency upgradation and waste reduction through implementation of ISO 9001 / ISO
14001.
r. Goodhousekeeping.

With the above efforts, the average capacity utilisation of plants at Aonla Unit has been more
than 100% resulting in realisation of capital costs as well as saving of foreign exchange by
avoiding import of fertilisers. So far, Aonla Unit has produced and supplied over 36 Million
MT of Urea in 25 years of operation.

SAFETY PRACTICES
ThequalitylevelsofAonlaUnitreflectinitssafetyperformancealso.AonlaUnithas observed
accident free period for almost three years. Several safety features are in built in the design of
the plant. Longest continuous accident free running figure of 1521 days has been achieved
which is equivalent to 24.165 million man-hours. A detailed disaster management action plan
hasbeenpreparedtoovercomeanyunforeseenoccurrence.Firealarmsystemnetworkhasbeen
installed and commissioned throughout the factory consisting of automatic fire detection
system and manual call alarmstem.

ADOPTION OF DEVELOPMENT IN THE FIELD OF INFORMATION

TECHNOLOGY
1. Spreading Computer usage and IT awareness in the plant by providing Computers in each
andeverysectionofthePlant;connectedtoeachotherthroughHighspeedGigabitFibreOptic based
Network. About 450 numbers of PIV Computers are installed in the Plant Premises at
present.

2. Provision of Internet Access on all installed computers , for accessing common web sites
likeBanks,ExaminationResults,RailwayReservation,Fertiliserministryetc.Apartfromthis, full
Internet Access provided to about 150 Computers across theplant.

43
3. Provision of E-mail Id to all officers and few common area in the Plant, totaling 520 in
number,coveringallemployeesintheratioof1:2EnhancementofOfficeAutomationtoolsin
English as well as Hindi; provision of paper- less Work Flow System for Leave Application,
Salary Advance, LTC/LTE, EL Encashment etc. for Employees.

4. IntroductionofStateoftheArtBiometricfinger-printbasedAttendanceRecordingSystem,
todoawaywithProxyPunchingormalpracticeofanykind,indailyattendanceofEmployees.

5. Deployment of Web based Applications in the area of Material Management, Finance &
Accounts,HumanResources(HR),Production&TechnicalReporting,ProductDespatch,Plant
Maintenance, Lab Analysis & Quality Control, Visitors/ Material Gate Pass, etc. for
management Information and DecisionSupport.

6. Facility of On-line Video Conferencing with other Units and Corporate Office of IFFCO,
through MPLS-VPN based Wide AreaNetwork Provision of IP Phones at important
locations in the Plant to freely communicate with Plant persons of different Units , HO and
Marketing Offices of IFFCO.

ENVIRONMENT FRIENDLY APPROACH

· Implementation of Environmental Management System - ISO14001.
· Developing the environment & natural surroundings in plant & township to upgrade the
quality of worklife.
· Green Beltdevelopment
· Use of effluent water for development of greenbelt.
· Ban on use of polythene bags in thetownship.
· Tree plantationdrive
· Conducting awareness programmes to cover all employees on environmentalissues.

44
COMMUNITY DEVELOPMENT
IFFCO Aonla Unit has been certified for International Standard ISO 26000:2010 for its
excellent effort towards Social Responsibility by certifying body M/s QS Zurich AG,
Zurich.The certificate was issued on 15th July, 2013 and is valid upto 11th July, 2016. IFFCO
Aonla Unit is driven by a unique sense of social responsibility and always strives to improve
the socio-economic conditions inside and outside of the factory complex. IFFCO Aonla Unit
has provided direct as well as indirect benefits to people in villages surrounding the fertilizer
complex.196villagershavederiveddirectbenefitsintheformofdirectemploymentwhilethe other
villagers, from whom land was acquired got indirect benefits through various employment
opportunities like providing goods and services to the inmates of IFFCO Township, working
as petty contractors etc. Balanced fertilizer dose education scheme
(BFDES):ToincreaseFarmersawarenessregardingBalancedFertilizerDose(BFD),balanced
fertilizer dose education scheme has been taken up at IFFCO Aonla which involves educating
thefarmersontheissueanddistributionofkitsfreeofcost. PriortoinceptionofIFFCOAonla
FertilizerComplextheliteracyrateoftheareawasverypoor.Intactthelocalinhabitantswere not
aware of the importance of education., particularly education of females. According to
censusof1991theliteracyrateofmaleandfemalewas38%and12%respectivelyinthearea. In 1998
as per the study conducted by IRMED, New Delhi the literacy rate has gone up to 450% and
17% respectively. Moreover, the no. of school going children has also increased by around
150%. Schools: Facilities for education, for children of IFFCO Township and nearby villages
have been provided in form of a Kendriya Vidyalaya for students of classes I to XII; Subah
Shiksha Kendra for Nursary to class V; Tiny Tots School for Nursary and KG classes.
Alongwith other subjects, knowledge on use of computers is also imparted to the students of
Kendriya Vidyalaya. Elaborate facilities are provided in all the schools for sports in form of a
large playground and sportsequipment.

45
IRDP PROGRAMME & OTHER WELFARE ACTIVITIES
IFFCOAonlaUnitinitiatesandimplementsvariousprogramsoutofitswelfarefundandIRDP fund.
Following programmes are being implemented under theseschemes:
a. HealthCamps
b. EyeCamps
c. Animal HealthCampaign
d. Education Programmes on Improved Methods of cultivation
e. Construction of Village PathWays
f. Distribution of Plants through SocialForestry
g. Drinking Water Facilities like providing hand-pumps invillages
h. Construction of Bus Stops
i. Financial Aid to schools / institutions of nearbyarea
k. The commendable work which is executed successfully by IFFCO has broughttremendous
improvement in the overall quality of life of local habitants. It has motivated villagers to live
healthy andhappy.
l. Overall community and rural development.
m. Initiating co-operative culture amongpeople
n. Earning goodwill among people for IFFCO Aonla Unit as a socially responsible
organization
COOPERATIVE CULTURE
lFFCOAonla takes great pride in its strong fundamental i.e. co-operative culture, sustainable
advantages are achieved through constantly reinventing the organization and practicing the
following :
· An inbuilt approach in practice at all levels in organization to demonstrate that IffcoAonla
is not an entity but it is a ret1ection of farmer'sidentity.
· Technical task force and core groups have been created to monitor and take initiatives to
bring down energy consumption and costs as well as address environmentalissues.
· Identification of performance centres, observation by effective management systems and
accountability at alllevels.

46
· Developing the competence and potential of human capital so that continuousorganisational
development takes place in order to meet thechange-challenges.
· Energy, Safety, Quality and Environmental audits are carried out at periodical intervalsfor
continualimprovement.
· Employees suggestion scheme.
· Celebration of Technology Week, Productivity Week, RajbhashaSaptaha& SafetyWeek.
· Participation of members from all levels in the quest of improvement by creatingvarious
committees and forums.

IFFCO TOWNSHIP: A MODEL OF HEALTH

It has been rightly said "Where there is a will, there is a way". This proverb has been found
absolutelycorrectinaremotebutverywelldevelopedminiTownshipinBareillydistrictwhich is an
example for providing complete physical, mental and spiritual health to its residents and
neighboring areas. Patients consisting of township residents & their dependents and 20 non-
dependents are being provided medical facilities by specialist doctors in different fields.
Around 20 patients are being provided rehabilitation services by Physiotherapist everyday.
Regularpreventivemedicalcheckupofaround30employeespermonthisbeingcarriedoutas per
OHSAS-18001 plan. High standard medical facilities through tertiary centers, counseling and
welfare camps are being provided that have resulted in good health of residents of Township
and surrounding areas. It is a matter of great satisfaction that health of IFFCO Township
residents is comparable and even at times better than health of the people of the
developedcountries.

47
 CHAPTER III

RESEARCH OBJECTIVES

&

RESEARCH METHODOLOGY

48
 RESEARCH OBJECTIVES

 To analysis the level of investment in inventory by iffco.

 To understand the working of different sections of finance and accounts department.

 To study and analyze the policies and practices regarding inventories adopted by the
aonla unit.

49
 RESEARCH METHODOLOGY

Research covers the search for retrieval of information for a specific purpose. Basically
research is a systematic method of finding solution to a problem.

The steps followed to conduct this study are as follows :-

 Researchproblem:
The problem under study is how effectively IFFCO is managing its inventory from last few
years. As inventory is the most important part of any company so has to manage it very well
but from past three years i.e form year 2018-2019, 2019-2020 and 2020-2021 company is
facing problem in managing its inventory very well that‘s why a analysis is being done tofind
out the problem which is affecting inventory. Thus the whole study is conducted under the
guidance of the officers of finance department ofIFFCO.

 Researchdesign:

Descriptive research -
This research provides data about the Inventory which is being studied. But it can
only describe the "who, what, when, where and how" of a situation, not what caused it. It
describes the characteristics of a relevant group which estimate the percent (%) of units in a
specifiedDatatodeterminetheperceptionofthecategoriesofproductcharacteristics.Itisused to
make more specificpredictions.

Secondary Source -
Data observed or collected from Second-hand experience. The data which is collected Second
handespeciallyforthepurposeofstudy.Itiscollectedforaddressingtheproblemofmanaging the
inventory of IFFCO at Aonlaunit.

50
 Place
The Project was conducted in IFFCO at Aonla unit near Bareilly city.

 ResearchTool

Statistical trend analysis

Approach
The approach used by a surveyor for the project varies with the purpose of the survey. Under
this report, "Quantitative & Qualitative" approach both is used as per the requirements of the
survey.

 StatisticalTools

Representationofstatisticaldatabyusingdiagram,graphs,chartsorpicturesismoreeffective than
tabular representation being easily intelligible to a layman, indeed diagrams is most essential
whenever it is required to convey any statistical information to the generalpublic.

Line Graph
Bar Diagram
Percentage Method

51
 CHAPTER IV

DATA ANALYSIS

52
  GENRAL STOCK

1600 1510.34
1415.62
1400 1342.37 1334.61

1200

1000 916.59

800

600 519.8 506.8 478.9

400

200

0
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK ISSUES

TURNOVER RATIO
0.41
0.4
0.4
0.39
0.38
0.38
0.37
0.37
0.36
0.35
0.35
0.34
0.33
0.32
2017-18 2018-19 2019-20 2020-21

53
 HOLDING RATIO
35
34.1
34

33 32.55
31.98
32

31
30.22
30

29

28
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK of Inventory of general stock was 1431.37 lakhs in 2018. During 2018-
2019 the issues went down by 43.8% from last year to 519.80 lakhs This shows that IFFCO
received material in spite of the lower requirement and the closing stock in 2019 was 1334.61
lakhs. This means IFFCO already has enough General stock to meet out the requirement of
2016-2017 so there is no need to receive more material. During 2017-2018 the ISSUES went
down only by 2.56% i.e.506.95 lakhs and the closing stock in 2020 is 1415.62 lakhs. This
shows that again the material in IFFCO was received material in spite of the lower
requirement& more stock.

INVENTORY TURNOVER RATIO decreased from 0.40 times in 2016 to 0.38 times in 2019
and to 0.37 times in 2020. HOLDING PERIOD increased from 30.22 months in 2018 to 31.93
months in 2019 and to 32.55 months in 2018. As the inventory turnover ratio is decreasing year
by year which implies poor sales & excess inventory. As we see above turnover ratio is
decreasing on the other side holding ratio is increasing thus both the ratios are not favorable for
IFFCO Aonla I. The groups which caused such a difference in the inventory are high value
items such as pipes, flanges etc. which are either have high value or are purchased in large
quantities.

54
  PIPES

160 149.1
139.25 141.02
140 132.46

120
99.59
100

80

60

40 29.51 26.95 25.01

20

0
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK ISSUES

TURNOVER RATIO
0.4 0.37
0.35

0.3

0.25 0.22
0.19
0.2
0.15
0.15

0.1

0.05

0
2017-18 2018-19 2019-20 2020-21

55
 HOLDING ATIO
80
68.56
70
62.41
60 55.25

50

40 32.57
30

20

10

0
2017-18 2018-19 2019-20 2020-21

In 2018the STOCK of pipes was 9.25% of the general stores inventory in 2018-2019 it
increased to 10.43% and 2019-2020 it decreased to 9.96 % so the pipes is an important part of
general inventory. The inventory of pipes is increasing year by year from 2018-2020 therefore
it will affect turnover ratio as turnover ratio is decreased year by year. Turnover ratio decreased
from 0.37 times in 2013 to 0.22 times in 2019 and further decreases to 0.19 times in 2020.The
issues decreased drastically by 70.43% in the year 2016-2017, from 99.59 lakhs in 2018 to
29.50 lakhs in 2017 and increased but by a small amount to 51.37 lakhs.

Thus its shows IFFCO should manage the inventory of pipes by increasing it's issues and not
receiving any material. Hence, pipes played an important role in the decreasing inventory
turnover of general stock and increasing holding ratio.

56
  FITTINGS

Chart Title
160 142.71 138.08
140
115.94
120
100.91
100
80
60
38.08
40
20 5.3 1.76 1.23
0
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK ISSUES

TURNOVER RATIO
0.16 0.15

0.14

0.12

0.1

0.08

0.06
0.04
0.04

0.02 0.01 0.01

0
2017-18 2018-19 2019-20 2020-21

57
 HOLDING RATIO
1400 1314.3

1200

1000
868.5
800

600

400 318.31

200 78.48
0
2017-18 2018-19 2019-20 2020-21

In 2018 the closing stock of fittings was 9.97% of the general stock. In 2018-2019 it increased
to10.37% and 2019-2020 it decreased to 8.19% it shows fittings is an important part of
general inventory. The inventory of fittings is decreasing year by year from 2018 to.2020 The
ISSUES decreased drastically, by 86% in the year 2018-2019, from 38.08 lakhs in 2016 to
5.23 lakhs in 2017 and further decrease to 1.36 lakhs. Therefore it will affect turnover ratio as
turnover ratio is decreased year by year. Turnover ratio decreased from 0.15 times in 2018 to
0.04 times in 2019 and further decreases to 0.01 times in 2020 on the other hand holding ratio
increasing year by year.

Thus its shows IFFCO should manage the inventory of fittings by checking on issues hence,
fittings played an important role in the decreasing inventory turnover of general stock and
increasing holding ratio.

58
  SPARES IN STOCK

4000
3509.44
3500
3056.61
2874.35
3000
2623.08
2500

2000

1500

1000
559.75 595.88
419.23 360.13
500

0
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK ISSUES

TURNOVER RATIO
0.2 0.19
0.18 0.17
0.16
0.14 0.13
0.12 0.11
0.1
0.08
0.06
0.04
0.02
0
2017-18 2018-19 2019-20 2020-21

59
 HOLDING RATIO
120
107.62

100 91.59
80.06
80
63.57
60

40

20

0
2017-18 2018-19 2019-20 2020-21

Spares are the largest part of inventory:

In 2018 they were 40% of the total inventory. In 2019 it decreased to 37%. In 2020 this
percentage drastically increased to 72%.

Inventory of spare item is increasing year by year from 2016 is 2623.08 lakhs to 2874.35
lakhs in 2019& it further increase in 2020 to 3056.31 lakhs on the other side turnover ratio is
also increasing but in 2018 the issue is highly increase due to which the figure of turnover ratio
& holding ratio seems good. The only concern is about inventory level for which IFFCO should
control on their material receives

60
  AMMONIA PLANT

1600 1510.34
1355.64 1397.25
1400
1225.87
1200

1000

800

600

400
181.54 172.41 190.35
200
46.75
0
2017-18 2018-19 2019-20 2020-21

CLOSING STOCK ISSUES

TURNOVER RATIO
0.14

0.12
0.12

0.1
0.1

0.08
0.08

0.06

0.04
0.04

0.02

0
2017-18 2018-19 2019-20 2020-21

61
 HOLDING RATIO
400
338.52
350

300

250

200
147.32
150 119.89
99.02
100

50

0
2017-18 2018-19 2019-20 2020-21

Ammonia have the highest value of spares in 2016 the STOCK of ammonia was 53% of the
total spares inventory in 2016-2017 it remained constant to 53% and 2019-2020 it increased
to 54% so the ammonia is an important part of spares items inventory. The inventory of
ammonia is increasing year by year from 2018-2020 therefore it will affect turnover ratio as
turnover ratio is decreased in 2018-2019 but it increased in 2019-2020. Turnover ratio
decreased from 0.10 times in 2018 to 0.04 times in 2019 it is because The ISSUES
decreased drastically, by 75% in the year 2018-2019, from 1801.5 lakhs in 2018 to 45.7 lakhs
in 2017 and still material is received but turnover ratio increases to 0.08 times in 2013. Because
of issues in the same year also increases by 73.5%. Holding period first increase then
decreased it is also due to changing in issues.Thus its shows IFFCO should manage the
inventory of ammonia in 2018 by increasing issues by 73.5%.

62
 UREA

1000
900 859.35

800 728.27
700
602.29
600
500 447.96
400
300 215.2
174.49
200 143.65
100 57.65

0
2017-18 2018-19 2019-20 2020-21

COLSING STOCK ISSUES

TURNOVER RATIO
0.25
0.22

0.2

0.15
0.11
0.1
0.06
0.05
0.01
0
2017-18 2018-19 2019-20 2020-21

63
 HOLDING RATIO
400
349
350

300

250
201
200

150
109.31
100
54
50

0
2017-18 2018-19 2019-20 2020-21

In 2016 the STOCK of urea was 17% of the total spares inventory in 2018-2019 it increased to
21%and 2019-2020 it increased to 24% so the urea is an important part of spares items
inventory. The inventory of urea is increasing year by year from 2016-2018 therefore it will
affect turnover ratio as turnover ratio is decreased year by year. Turnover ratio decreased
from 0.22 times in 2013 to 0.11 times in 2019 to 0.06 in 2020 on the other hand holding ratio
increased year by year from 2017-2018 The ISSUES decreased drastically, by 60% in the year
2018-2019, from 143.65 lakhs in 2018 to 57.65 lakhs in 2019 and still material is received in
2018-2019 which give adverse effect on turnover and holding ratio spite of increasing in
issues 2019-2020 by 67% from 57.65 in 2020 to 174.5 lakhs in 2020 there is no favorable
effect on turnover and holding ratio. Thus its shows IFFCO should manage the inventory of
urea by receiving less amount of material

64
 OVERALL

6000
4955.16 5000.33
5000 4574.95
4337.97

4000

3000
2154.04 1996.56
2000

1000 559.75 478.9

0
2017-18 2018-19 2019-20 2020-21

COLSING STOCK ISSUES

TURNOVER RATIO
0.5
0.45 0.44
0.45 0.43

0.4
0.35 0.33

0.3
0.25
0.2
0.15
0.1
0.05
0
2017-18 2018-19 2019-20 2020-21

65
 HOLDING RATIO
40 36.55
35

30 27.07 28.08
26.78
25

20

15

10

0
2017-18 2018-19 2019-20 2020-21

Overall inventory turnover is increasing year by year from 2018-2020i.e. 4337.97 lakhs in
2018 to 4574.95 lakhs in 2017 and further increase to 4955.16 lakhs in 2020 on the other
hand the issues decrease in 2019 by 2% to1996.57 lakhs and it further increase by 5.4% to
2112.67 lakhs in year 2020. Inventory turnover ratio is increase in year 2017 from 0.33
times in 2016 to 0.45 times in 2017 and it decrease to 0.44 in 2020 and same trend follows in
holding ratio.Thus it shows IFFCO manage the overall inventory very well in the year 2019-
2020 as compared to 2018-2020.

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 CHAPTER V

RESEARCH FINDINGS

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 FINDINGS

 Most of the items have low inventory turnover like general items, electric items etc.
Some of them have constant inventory level and some have fluctuating inventory level.
But the most important thing is that in spite of huge fall in material is received. This has
increased the inventory level and decreased the inventory turnover.

 nventory have been mismanaged rather than controlled efficiently.

 Inventories should increase or decrease in amount or time as related to sales requirements

and production schedules

 Responsibility for control of inventories is of the top management.

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 CONCLUSION

Therefore it can be said that IFFCO is on sound footing to protect it stability and enhance
it profitability by cutting on cost and increasing production in years to come. Further
IFFCO has also taken various other venture like SEZ at NELLORE, Power plant at
CHASSIGARDH, IFFCO Tokyo General insurance, IFFCO Kisan Sanchar L.T.D.
IFFCO has taken Joint Venture out of India i.e. OMIFCO at OMAN, JORDAN India
fertilizer company , Industrial Critiques DU Senegal (ICS)and Kisan International
Trading FZE at Dubai. Therefore IFFCO main business is Product & sell fertilizers but it
has extends its wings for backward integration & meet the needs of its services
Requirement & to serve better to the farmer community.

It might seem axiomatic that inventory control is efficient as long as inventory level is
going down. But the fact is that if inventories are minimized without adequate
operations, inventories have been mismanaged rather than controlled efficiently. Thus,
the basic objectives of inventory management appear to be conflicting in nature.
Inventories should increase or decrease in amount or time as related to sales requirements
and production schedules.

In most inventories a small proportion of items accounts for a very substantial usage (in
terms of monetary value and annual consumption) and a large proportion of items
accounts for a 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

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 LIMITATIONS

1. Data is not comprehensive enough to draw a fruitful conclusion.

2. The research is conducted only in IFFCO at Aonla unit in Bareilly region

therefore the findings are not generalized for all Units' of IFFCO around
different parts in India.

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 RECOMMENDATION

For a number of organizations, inventory represents a substantial investment and IFFCO is one
of them. The goal of wealth maximization is affected by the efficiency with which inventory is
managed. Thus organizations specially manufacturing firms are using more efficient and
sophisticated methods of inventory management
.
The example of such an inventory control system is JIT (JUST-IN-TIME). In this the delivery
of materials is synchronized with the manufacturing cycle and speed.

It eliminates the necessity of carrying large inventories.

There are some points that may be given as recommendation or a program may be constructed
for inventory monitoring and controlling

 The purchases should be controlled as per the changing requirement level of material.
 Level of safety stock must be reviewed more frequently.
 The carrying cost i.e. warehousing, handling, clerical and staff services, insurance and
taxes, increases as the inventory holding increases. Therefore the maximum and
minimum inventory level must be decided after considering the carrying cost for the
items.

71
 BIBLIOGRAPHY
 Books
o Management Accounting : Dr. S.P GUPTA
o Financial Management : S.N. MAHESHWARI

➢ iffco.in

➢Annual Report of IFFCO : 2020-2021

➢Accounts Manual of IFFCO Aonla

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