A STUDY ON INVENTORY MANAGEMENT

(A Study with Reference to Coromandel International Limited, Visakhapatnam )

A project report submitted to JNT University in partial fulfillment for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION

By Mr SEKHAR DAVULURI Regd.No: 10JP1E0008 Under the guidance of Mrs V.A.LAKSHMI Asst. Professor, Dept. of MBA KAKINADA INSISTUTE OF TECHNOLOGICAL SCIENCES

Department of Management Studies

KAKINADA INSISTUTE OF TECHNOLOGICAL SCIENCES (Affiliated JNTU,KAKINADA) RAMACHANDRAPURAM 2010-12

DECLARATION

I hereby declare that this project work entitled A Study on INVENTORY MANAGEMENT in Coromandel International Limited Submitted by me to the JNT University, Kakinada in partial fulfillment for the award of Degree of MBA is entirely based on my own study is being submitted for the first time and it has not been submitted to any other university or institution for any degree or diploma

(Mr.SEKHAR DAVULURI)

KAKINADA INSISTUTE OF TECHNOLOGICAL SCIENCES

Department of Management Studies (JNTU, Kakinada),

57 Division, Narava, VISAKHAPATNAM _______________________________________________________________________ _

CERTIFICATE

This is to certify that the project report titled A Study on INVENTORY Management in Coromandel International Limited, Visakhapatnam is being submitted by Mr. SEKHAR DAVULURI in partial fulfillment for the award of the Degree of MBA has been carried out by her under my guidance and supervision.

(Mrs.Vijaya lakshmi) Project Guide Dept. of MBA. JNTU, Kakinada.

ACKNOWLEDGEMENT
I express my sincere thanks to my project guide Mrs Vijaya Lakshmi for his valuable guidance and cooperation throughout the project work. I am also thankful to our Head of the Department Mr. S.Ramana Kumar and all other faculty members who helped me directly and indirectly for the successful completion of my project work. I also express my gratitude and heartfelt thanks to my company guide Mr.Ch.V.S.R.Sanjeeva Rao Sr Manager-Accounts Limited, Pefertilizer Unit coromandel international

and other executives/employees of Coromandel

International Limited who extended their cooperation and timely support and providing necessary data for early completion of my project work. Finally I would like to express my gratitude and thanks my parents and friends whose unremarkable encouragement had helped me throughout my educational endeavor and to do this project work.

(Mr. SEKHAR DAVULURI)

DISADVANTAGES OF OLD SYSTEM

As we know the manual processing is quite tedious, time Consuming, less accurate in comparison to computerized processing. Obviously the Present system is not is exception consultant encountering all the above problems. 1. Time consuming. 2. It is very tedious. 3. All information is not placed separately. 4. Lot of paper work. 5. Slow data processing. 6.Not user-friendly environment. 7. It is difficult to found records due file Management system.

ADVANTAGES OF NEW SYSTEM

In new computerized system I tried to give these facilities. 1.Manually system changes into computerized System. 2. Friendly user interface. 3. Time saving. 4. Save paper work. 5. Connecting to database so we use different type of queries, data report. 6. Give facility of different type of inquiry. 7. Formatted data. 8. Datas are easily approachable.

REQUIREMENTS OF PROJECT REPORT

Hardware Requirement:
Processor: - Intel Pentium III 833MHz RAM: - 128 SD-RAM. Hard Disk: -20 GB or above. Monitor: - 14 VGA. Mouse. Printer: - For print report or Bill.

Software Requirement:
Operating system: - Windows 98/2002/NT. Front End: - Visual Basic 6.0. (Professional Edition.) Back end: - MS. Access. (Some additional feature of VB like, Dtagrind, DataReport) Web site: google

Contents

CHAPTER-1
1.1 INTRODUCTION TO INVENTORY MANAGEMENT 1.2 OBJECTIVES OF THE STUDY 1.3 PURPOSE OF THE STUDY 1.4 SCOPE OF THE STUDY 1.5 METHEDOLOGY 1.6 LIMITATIONS

CHAPTER 2:
2.1 INTRODUCTION TO FERTILIZERS 2.2 ORIGIN AND DEVELOPMENT OF FERTILIZER INDUSTRY IN INDIA 2.3 MAJOR SEGMENTS IN FERTILIZERS 2.4 DEMAND AND SUPPLY 2.5 PRICING POILCY 2.6 FERTILIZER SUBSIDY 2.7 Development & Growth of Fertilizer Industry 2.8The Future of the Industry

CHAPTER 3:
3.1 INTRODUCTION TO FERTILIZERS 3.2 HISTORY 3.3 MANAGEMENT 3.4 VALUES AND BELIFS 3.5 MILE STONES 3.6 AWARDS AND CERTIFICATES 3.7 GROUP COMPANIES 3.8 INTERNATIONAL ALLIANCES

CHAPTER 4:
4.1 INTRODUCTION 4.2OBJECTIVES 4.3VISION 4.4POLICIES 4.5VALUES AND BENEFITS 4.6GUIDING PRINCIPLES 4.7SAFETY HEALTY AND ENVIRONMENT (SHF): 4.8 NON-FERTILIZERS ACTIVITIES 4.9 ORGANISATION CHART: 4.10 ENVIRONMENT: 4.11 ACHEIVEMENTS 4.12PRODUCTS AND SERVICES 4.13 CIL AWARDS & RECOGNITIONS

CHAPTER-5
5.1 THEORITICAL FRAME WORK: 5.2 INTRODUCTION 5.3 ABC ANYALASIS 5.4 XYZ ANYALASIS 5.5VED ANYALASIS 5.6 NON-MOVING ITEMS 5.7EOQ 5.8REORDER POINTS 5.9 LEAD TIME 5.10 CLF PURCHASING DEPARTMENT

And the technique

CHAPTER-6
6.1 ANAYALYSIS AND INTERPRETATION 6.2 ABC ANALYSIS 6.3 XYZ ANALYSIS 6.4 FIFO (FIRST IN FIRST OUT) 6.5 STANDARIZATION AND VARIETY REDUCTION 6.6 ANALYSIS OF INVENTORIES 6.7WORK IN PROGRESS 6.8 FINISHED GOODS

CHAPTER 7
7.1 SUMMARY 7.2 FINDINGS 7.3 SUGGESTIONS

BIBLIOGRPHY

1.1 Introduction:
Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory. Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly. Calculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the

minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in case an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be interrupted due to a lack of essential parts in the operation supply inventory. Inventory management is not limited to documenting the delivery of raw materials and the movement of those materials into operational process. The movement of those materials as they go through the various stages of the operation is also important. Typically known as a goods or work in progress inventory, tracking materials as they are used to create finished goods also helps to identify the need to adjust ordering amounts before the raw materials inventory gets dangerously low or is inflated to an unfavorable level. Finally, inventory management has to do with keeping accurate records of finished goods that are ready for shipment. This often means posting the production of newly completed goods to the inventory totals as well as subtracting the most recent shipments of finished goods to buyers. When the company has a return policy in place, there is usually a sub-category contained in the finished goods inventory to account for any returned goods that are reclassified as refurbished or second grade quality. Accurately maintaining figures on the finished goods inventory makes it possible to quickly convey information to sales personnel as to what is available and ready for shipment at any given time. In addition to maintaining control of the volume and movement of various inventories, inventory management also makes it possible to prepare accurate records that are used for accessing any taxes due on each inventory type.

Without precise data regarding unit volumes within each phase of the overall operation, the company cannot accurately calculate the tax amounts. This could lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an independent audit. Inventory is often defined as an idle source of any kind having an economic value in the sense, that raw material can be converted into semi finished goods and with additional value becomes the finished goods. In all these cases in a company the working capital is tied up and hence the financial manager wary of servicing the idle working capital at 30% per annum. On the contrary if the item is not kept in the store there will be a stock out if the demand arises. Thus a large quantum of inventories does not necessarily lad to higher volume of output, while lack of inventories will hamper production. As material is money there is a need for financial discipline in the field of material management. There should be a financial discipline on all components of working capital. Inventory based industries need the norms to be set either by the top management or the material management department. The top management usually sets monitory limits for investment in inventories. The materials department then has to allocate this investment to be various items and ensure the smooth operations or the company. It would be worthwhile if the inventory norms were set by management by objectives concept. This concept expects the top management to set the inventory norms (limits) in consultation with the materials management department. The norms thus evolved should be specific and the responsibility of the materials department. In any organization materials department accounts for major portion of the cash outflow as every purchase order placed by a purchasing department results in a commitment company funds. Inventory is also the

single largest asset in the balance sheet of most of the firms. It is thus clear that efficient libation between purchasing and finance is imperative to ensure that the working capital resources of organization are not unduly strained. competing demands. required purpose. 1.2 OBJECTIVES OF STUDY: A fundamental objective of a good system of inventory control is to be able to place an order at the right time from the right source to acquire the right quantity at right price and of right quality. Coramandel fertilizers ltd.., has been carried out with following objectives. 1. To Ensure Adequate Stock 2. To Minimize Inventorytories on Hand 3. To Maintain Continuity in Production 4. To study the inventory management policies, techniques and their effectiveness 5. .To ensure that the supply of raw material & finished goods will remain continuous so that production process is not halted and demands ofcustomers are duly met. 6. .To minimize carrying cost of inventory. 7. . To keep investment in inventory at optimum level. 8. . To reduce the losses of theft, obsolescence & wastage etc. 9. . To make arrangement for sale of slow moving items. 10..To minimize inventory ordering costs. A companys working capital is to be wisely utilized, as it attracts many Even where the production and purchasing can put

1.3NEED FOR THE STUDY

It is useful to the management at the time of purchasing, issuing And Storage of stock (raw material).

The study is also beneficial to employees and offers motivation by showing various activities for company growth. It is useful to me for applying my knowledge and abilities in that area.

To study about the inventory management at COROMANDEL INTERNATIONAL LIMITED and to have an idea about the utilization of the inventory and little more about the storage procedure that are practically implemented in organization.

Inventory plays a vital role in every manufacturing organization to have an uninterrupted production process by maintaining an optimum level of raw materials available at all time.

Coromandel International Limited has multi-location production facilities and markets its products all over India and exports pesticides to various countries across the globe. It is managed by competent and committed professionals using advanced management practices. The Company is known for fostering a climate of high performance and continuous improvement. The products are Gromor 14-35-14 Gromor 28-28-0, Gromor 20-20-0-13, Paramfos 16-20-0-13, Parry Gold, Parry Super (Single Super Phosphate), DAP, 10:26:26, 12:32:16, 14:35:14

1.4 METHEDOLOGY:
Primary data
The primary data is collected by personal interviews with officials.

Secondary data
Files, annual reports, periodicals, manuals order books journals relating to fertilizers and financial department of COROMANDEL. Which have already been passed through the statistical process are the secondary data used. It is also obtained from the annual reports and the documents maintained in the company

1.5 LIMITATIONS:
Every study will be bound with some limitations. The below mentioned are the constraints under which the study was carried out. Some of the information was not available due to the confidential matters. Since officials, executive and others were busy so the study was Primarily focused on secondary data. Time is also a major constraint of the study. The study is confined to only 5 years Most of the information has been kept confidential and as such is not passed on as a part of the policy of the company. Since the number and size of inventory is very large, all the raw materials could not be included in the analysis.

1.6PURPOSE OF STUDY:
To study about the management at coramandel international limited and to have an idea about the utilization of the inventory and little more about the storage procedure that are practically implemented in organizations. Inventory plays a vital role in every manufacturing organization to have an uninterrupted production process by manufacturing organization level of raw materials available at all time.

1.7 SCOPE OF THE STUDY:

The scope of my study is confined to one of the key areas of The scope of my study is confined to one of the key areas of Finance i.e. inventory management. The study concentrates on finance i.e. inventory management. The study concentrates on the methods and techniques followed by CORAMANDEL INTERNATIONAL LIMITED for its inventory management and its relative merits and demerits. Relative merits and demerits. The study appraises the companys success in meeting the requirements of the company and the country by helping the farmers to raise agriculture output to meet the requirement of the countrys growing population for food grains The scope covers the study of company profile of Coromandel Fertilizers Limited and industry profile i.e. regarding Coromandel Fertilizers Limited industry and profitability of Coromandel Fertilizers Limited. The study of company profile includes introduction to Coromandel Fertilizers Limited company growth profile of the company, organization chart and the board of directors plant location.

The study of industry profile includes history of Coromandel Fertilizers Limited industry, government policies and regulations in investment regarding the industry recent prices of Coromandel international Limited, fertilizers and turnover etc. The study of financial performance and profitability includes particularly on past five years financial highlights of the company and also the comparison of the privatization and study also includes the comparison of one year to the other year.

FERTILIZER INDUSTRY
2.1 FERTILIZER:
Fertilizer (or fertilizer) is any organic or inorganic material of natural or synthetic origin (other than liming materials) that is added to a soil to supply one or more plant nutrients essential to the growth of plants. A recent assessment found that about 40 to 60% of crop yields are attributable to commercial fertilizer use. Mined inorganic fertilizers have been used for many centuries, whereas chemically synthesized inorganic fertilizers were only widely developed during the industrial revolution. Increased understanding and use of fertilizers were important parts of the pre-industrial British Agricultural Revolution and the industrial Green Revolution of the 20th century.

Inorganic fertilizer use has also significantly supported global population growth it has been estimated that almost half the people on the Earth are currently fed as a result of synthetic nitrogen fertilizer use. Fertilizers typically provide, in varying proportions:

Six macronutrients: nitrogen (N), phosphorus (P), potassium (K), calcium (Ca), magnesium (Mg), and sulfur (S); Seven micronutrients: boron (B), chlorine (Cl), copper (Cu), iron (Fe), manganese (Mn), molybdenum (Mo), and zinc (Zn).

The macronutrients are consumed in larger quantities and are present in plant tissue in quantities from 0.15% to 6.0% on a dry matter (0% moisture) basis (DM). Micronutrients are consumed in smaller quantities and are present in plant tissue on the order of parts per million (ppm), ranging from 0.15 to 400 ppm DM, or less than 0.04% DM. Only three other macronutrients are required by all plants: carbon, hydrogen, and oxygen. These nutrients are supplied by water and carbon dioxide. The nitrogen-rich fertilizer ammonium nitrate is also used as an oxidizing agent in improvised explosive devices, sometimes called fertilizer bombs, leading to sale
regulations

2.2 FERILIZER IN INDIAN ECONOMY:

Though much euphoric services sector growth in Indian economy has drawn the attention over the globe, still its importance brings confusion when we come across the parameters like increasing inequality and a stalemate in condition. Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples. The Government Of India from time to time has taken considerable steps for the upliftment of Agriculture Sector. Here we have analyzed the performance of Fertilizer Industry being one of the vital parts in agricultural production and Government's policy initiatives for the same. Fertilizer in the agricultural process is an important area of concern. Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizers in the recent years. The Fertilizer Industry in India started its first manufacturing unit of Single Super Phosphate (SSP) in Ranipet near Chennai with a capacity of 6000 MT a year.India's green revolution in late sixties gave a positive boost to the sector. The sector experienced a faster growth rate and presently India is the third largest fertilizer producer in the world. According to Given Statistics, total capacity of the industry as on 30.01.2003 has reached a level of 121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphoric nutrient. Presently there are 57 large fertilizers plants in the country producing urea, DAP, Complex fertilizer, Ammonium Sulphate (AS) and Calcium Ammonium Nitrate (CAN).

Industry Scenario
World fertilizer demand was strong and widespread in 2010 and the global fertilizer consumption is expected to have gone up by 3.8%, over the Previous year level. This was partly triggered by the higher commodity prices. World nutrient based fertilizer production also increased Significantly by 11% over 2009 and global sales increased by 13% mainly on Account of potash sales. India continues to remain one of the key drivers of growth of nutrient based fertilizer demand in the World. At the national level, the total Consumption of all nutrient based fertilizers in 2010-11 is estimated at 590 lakh tones compared to 533 lakh tones in the previous year.

2.3 Origin and Development of Fertilizers Industry in India:

The Indian fertilizer industry has succeeded in meeting almost fully the demand of all chemical fertilizers except for MOP. The industry had a very humble beginning in 1906, when the first manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were the first large sized -fertilizer plants set up in the forties and fifties with a view to establish an industrial base to achieve self-sufficiency in food grains. Subsequently, green revolution in the late sixties gave an impetus to the growth of fertilizer industry in India. The seventies and eighties then witnessed a significant addition to the fertilizer production capacity. The Indian fertilizer industry has witnessed a phenomenal growth in the eighties. However, the growth has tapered off in the nineties and in the recent past only public and cooperative sectors have made major investments in this industry. Presently public, private and coop. sector share 45, 33 and 22 percent of capacity, respectively, whereas their share in P2O5 capacity is 26, 64 and 10 per cent respectively. New proposals to government for setting-up fresh capacities in country are mainly from Public and Cooperative sectors. The installed capacity as on 30.01.2003 has reached a level of 121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making India

the 3rd largest fertilizer producer in the world. The rapid build-up of fertilizer production capacity in the country has been achieved as a result of a favorable policy environment facilitating large investments in the public, co-operative and private sectors. Presently, there are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP and complex fertilizers 13 plants manufacture Ammonium Sulphate (AS), Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous fertilizers. Besides, there are about 64 medium and small-scale units in operation producing SSP. The sector experienced a faster growth rate and presently India is the third largest fertilizer producer.

2.4 MAJOR SEGMENTS IN FERTILIZERS

Any natural or manufactured material that contains at least 5% of one or more of the three primary nutrients - nitrogen (N), phosphorous (P), or potassium (K) - can be considered a fertilizer. Industrially manufactured fertilizers are sometimes referred to as "mineral" fertilizers. There are several sources of plant nutrients . The two most important are organic manure and mineral fertilizers. When manure and crop residues are used, mineral fertilizers supply the outstanding nutrient balance needed for good crop yields. In most parts of the world, the balance to be supplied by mineral fertilizers is substantial. Fertilizer production entails gathering raw materials from nature; treating them in order to purify them or increase their concentration; converting them into plant-available forms; and often combining them into products that contain more than one nutrient.

How are fertilizers manufactured?

Nitrogen
78% of the earth's atmosphere is nitrogen. However, the nitrogen we breathe is in a chemically inert form that plants (except legumes) cannot use. Large amounts of energy are required to convert this nitrogen to a form that can be used by plants. The production of ammonia from atmospheric nitrogen was made possible in the first part of the 20 th century by the development of the Huber-Bosch process. It remains the only chemical breakthrough recognized by two Nobel prizes for chemistry , awarded to Fritz Huber in 1918 and Carl Bosch in 1931. The most important nitrogen-based fertilizers are urea and ammonium nitrate.

Phosphate
Phosphorus, in the form of phosphate (a salt of phosphoric acid) is mined from naturally occurring mineral deposits (phosphate rock) that were once sediments at the bottom of ancient seas. Rock phosphate is the raw material used in the manufacture of most commercial phosphate fertilizers. Ground rock phosphate was ounce applied directly to acid soils. However, due to low availability of phosphorous, high transport costs, and low crop responses, very little rock phosphate is currently used in agriculture. Phosphate rock processing consists in the separation of phosphate from the mix of sand, clay and phosphate that makes up the matrix layer.

Potash
The potassium used in fertilizers is found in a salt form called potash. Potash deposits are derived from evaporated seawater. They occur in beds of sediment at only a few places in the world. The largest deposit, in Saskatchewan, Canada

is 2.7 to 23.5 meters (9 to 77.6 feet) thick and found at depths of 1000 to 10, 000 meters (3,200 to 10,000 feet). Solution mining methods are used to extract potash at greater depths. Conventional underground dry-shaft mining methods are used in mines as great as 1100 meters (3500 feet.). The ore is extracted from potash deposits by electrically operated mining machines and conveyed to the surface, where it is crushed. Using a flotation process, salt and clay particles are removed, the brine solution is dried, and the potash is sized by screening. The resultant coarse grade product is then ready for distribution. Fine particles remaining from the screening process are compacted into sheets that are crushed and screened to particle sizes suitable for blending.

Sulphur
Most of the sulphur used by the fertilizer industry is a by-product of other industrial processes.

2.5 DEMANDS AND SUPPLY

The Demand-Supply scenario in fertilizers has been worked out by the Working Group on Fertilizers for the Ninth Plan (1997-98 to 2001-02) on the basis of the estimated demand and production projections in terms of N and P2O5 nutrients (Table-2). The increase in production (supply) will be 4.86 million tons, most of it is confined to nitrogen resulting from the commissioning of the expansions, new plants or joint ventures abroad. Production of N is expected to increase from 9.7 million tons in 1997-98 to 25.0 million tons in 2007-08. The Group estimated that the available phosphate supply will increase from 2.8 million tons of P2O5 in 1997-98 and reach 7

million tons in 2007-08. The demand for N, P2O5, and K2O has also been estimated up to 2006-2007 (terminal year of tenth plan) at 16.35, 6.65 and 2.60 million tones, respectively.

2.6 Pricing policy:

The fertilizer policy is aimed at increasing consumption to meet the food and fiber requirement of growing population through setting up required production capacities, ensuring that quality fertilizers are made available to the farmers throughout the country at uniform and affordable price. It was also recognized that fertilizer use should be profitable to the farmers for which he must get a certain minimum return for the produce. This led to the announcement of procurement prices and minimum support prices for several crops from 1970 onwards. The Marathe Committee was assigned the task of resolving the issue of keeping Farm Gate Prices (FGP) of fertilizers at an affordable level in the face of rising production/import costs. Its recommendations in 1977 led to the birth of the Retention Price Scheme (RPS). This scheme was intended to ensure that both the fertilizer producers as well as the farmers should find it worthwhile to produce and use fertilizers. The policy aimed that each manufacturer is able to get 12% post-tax return on investment on efficient operation regardless of the location, age, technology and cost of production. In addition, the government agreed to reimburse the cost of transportation from factory gate to railhead and also take care of the distribution margin. The RETENTION PRICE SCHEME is now restricted to urea onl

2.7 Fertilizer subsidy:

The RPS system helped in achieving the objective of increased indigenous availability and supplying it to farmers on affordable and uniform price. The difference between FARM GATE PRICES and RPS is paid to the industry as subsidy. With the growth in fertilizer

(a) Chart showing subsidy on Fertilizers Production along with escalation in price of raw material and plant cost, the subsidy amount swelled to huge proportions over the years. In an attempt to reduce the burden of subsidy, the government has increased urea price by 10 % w.e.f February 2005. As a result, domestic urea prices have risen from Rs3320/t (US$ 83/t) to Rs3660/t (US$ 91/t) for bagged deliveries to farmers. The average subsidy pattern of urea is around US$ 84/t. Prior to decontrol of phosphatic and potassic fertilizers (in the year 1992) subsidy was available to

all domestic and imported fertilizers. The fertilizer subsidy increased from US$ 418 million in 1999-00 to US$ 2446 million in 2004-2005. However, the subsidy bill after the decontrol of phosphatic and potassic fertilizer declined and remained below 1990-91 levels. The union budget for 2000-01 raised urea prices by 15 percent; DAP by 7 percent and that of MOP by 15 percent. This move enabled the Government of India (GOI) to prune the subsidy bill to some extent. However, there was no increase in urea price in the union budget for 2001-02. In the long-term policy, the subsidy withdrawal in a phased manner has been proposed. However, modality to phase out the subsidy has not been clearly mentioned.

2.8 Import of DAP:

DAP is mainly imported from Jordan, Germany, Canada, Rumania, U.K, Japan, U.S.A, Norway, Saudi Arabia, Philippines, Mexico, U.S.S.R and others.
DAP Production 28.65 Imports 20.77 Consumption 45.18

YEAR 1997-98

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 .

25.95 19.51 28.23 26.47 27.59 36.91 38.68 38.63 48.89 50.94 57.76

14.51 15.69 8.65 15.14 5.34 14.60 21.05 32.68 8.60 9.33 3.44

40.52 34.80 35.86 34.51 36.24 53.76 58.28 69.38 58.85 61.81 72.80**

(c) Chart showing import of DAP from 1997-2008

GROUP PROFILE
3.1 INTRODUCTION:
Coromandel International Limited, Indias leading manufacturer of a wide range of fertilizers, Crop protection products and Specialty Nutrient products,

has recorded creditable Operational and financial results for the financial year ended March 31, 2011. The Company has posted robust growth in Net Sales and Net Profits, EBIDTA and EPS during the year. Overall, it has been one more year of good performance for the Company. During the year the Company achieved a sales turnover of Rs. 7,527.95 crore (previous year: Rs. 6,394.73 crore), registering a growth of 18% over the previous year. The operating Profit before depreciation, interest and taxes for the year is Rs. 1,134.42 crore (previous year Rs. 843.04 crore) higher by 35% Coromandel International Limited, Indias second largest phosphatic fertilizer player, is in the business segments of Fertilizers, Specialty Nutrients, Crop Protection and Retail. The Company manufactures a wide range of fertilizers and markets around 2.9 million tons making it a leader in its addressable markets

Headquartered in Chennai, the Rs. 17,051crores (USD 3.8 billion as on March 31, 2011) Murugappa Group is one of India's leading business conglomerates. Market leaders in diverse areas of business including Engineering, Abrasives, Finance, General Insurance, Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Bio-products and Nutraceuticals, its 29 businesses have manufacturing facilities spread across 13 states in India. The organization fosters an environment of professionalism and has a workforce of over 32,000 employees. The Group has forged strong joint venture alliances with leading international companies like Mitsui Sumitomo, Foskor, Cargill and Group Chimique Tunisien has consolidated its status as one of the fastest growing diversified business houses in India.

3.2 OBJETIVES OF COROMANDEL

 Towards Nation - To conduct profitable and progressive fertilizer products distribution and other related agricultural input business for the wealth of the nation. Towards Investors: To provides good return on capital to generate internal resources for growth expectation and diversification of industry and progress agricultural production. Towards Distributors- To promote all round commercial policies and competitive marketing efforts to serve the customers . Towards Farmers :Importing required knowledge to farmers for optional use of fertilizer inculcate proper attitude the adoption of improved practice in achieving better agricultural productivity apart from companies, self interested and national social economic interests. Towards Society: Upholding the rich heritage, culture and prestige of
the Society and serve towards the economic growth and prosperity of the people.
Towards Co-Promoters: To drive esteemed co-operation of co-

promoters in Capital and Resources utilization and Adoption of innovative and proper methods production & maintenance.
Towards the Employees: To evolve the participative style of

management which ensures good work ethics, job satisfaction better wage promotion which leads to prosperity of employees.

Vision:
To be the leader in the phosphatic fertilizer industry, producing high quality fertilizers at low cost and giving satisfaction to all stake holders To enhance the prosperity of farmer through the supply of quality farm inputs and related services to ensure value for money

3.3 POLICIES:

 Quality Control: CIL are committed to supply phosphate fertilizers and related products with safety requirements of customers and comply with application specifications.

Further they are committed to continual improvement of the quality management system and process with the objective of improving the product quality. CIL will strive to achieve the quality objectives and customers satisfaction by: Developing Implementing maintaining quality management system to International standards.

Imparting requisites knowledge, skills and competency to employees and ensuring employees participation in continuous improvement measures.

SAFETY POLICY:

It is the policy of Coromandel fertilizers Ltd to conduct its activities in a manner, which ensure the healthy work environment and safety of its employees. At all Coromandel location local management has the responsibility to ensure that all processes that equipment and facilities and designed constructed operated and maintained in a safe national state and local government regulations cost consideration or

demands of product and operations must not allow shadow safety consideration. It is the obligation of every employee to KNOW and FOLLOW our safety rules and regulations. TEACH what we know to others WARN other of unsafe conditions REACT positively to emergency situations REPORT promptly hazardous or unsafe practices and conditions to Concerned department head PROJECT Company properly from loss or accidents. PROTECT company properly from loss or accidents Fellow employees and neighboring community.

3.4 MANAGEMENT:
Name A. Vellayan M M Murugappan N Srinivasan Sridhar Ganesh V Ravichandran Venkatraman Thyagarajan Current designation Executive Chairman Vice Chairman Director-Finance Director-Human Resources Lead Director - Fertilizers Non-executive External Director

Deepak Satwalekar Sridar Iyengar

Non executive External Director Non executive External Director

3.5 VALUES AND BENEFITS:

The following are the values and belief of the company

Adhere: To ethical norms in all dealings with shareholders, employees,

customers, suppliers, financial and government. Provide: Value for money to customers-through quality products and services. Treat: Our people with respect and concern provide opportunities to learn, contribute and advance, recognize and reward initiative, innovativeness and creativity.

Maintain: An organizational climate conducive to trust, open communication and team spirit a style of operation, benefiting our size, but reflecting moderation and humility.

Manage: Environment effectively for harnessing opportunities Discharge: Responsibilities to various sections of society and preserve environment

Grow: In an accelerated manner, consistent with values and beliefs, by continuous organization renewal

3.6 COROMANDELSMAJOR COMPETITIORS:

The Fertilizers and Chemicals Travancore Ltd. (FACT) Gujarat Narmada Val ties Fertilizers and Chemicals Ltd. 9GNFCL) Gujarat state Fertilizers Company Ltd. (GSFCL) Hindustan Liver Ltd. (HLL) Indian Farmers Fertilizers Co-operation Ltd. (IFFCO) Madras Fertilizers Ltd. (MFL)

 Pyrites and Phosphates Ltd. (PPL) Rastriya Chemicals and Fertilizers Ltd. (RCF) Southern Petrochemical and Industries Corporation Ltd. (SPLC) Oswal Chemical and Fertilizers Ltd. (OCFL)

3.7ACHIVEMENTS OF COROMANDEL
1 million safe man-hours 27 times; a record in fertilizers Industry. 2 consecutive million safe man-hours 8 times. 3 consecutive million safe man-hours 4 times. 4 consecutive million safe man-hours once. Won first prize for safety among 162 fertilizers companies in the international fertilizers Industry section contest in 1992.

3.8

AWARDS AND CERTIFICATES:

For the ninth time the FAI Best Production Performance Award for 2006, to the phosphoric acid plant in Vizag Award for Best Energy Conservation in the Fertilizer sector for 2005-06, received by Vizag Plant on 14 December 2006, National Energy Conservation Day The FAI Best Video Film Award for 2006, to the film on 'Gromor Sulphur' for the fifth time National award (1st prize) for the house journal, 2006, from the Public Relations Society of India, New Delhi, received for The Voice (house journal) for the second consecutive year National Award (2nd prize) for video film, 2006 , from the Public Relations Society of India, New Delhi, to the Marketing Department (Fertilizers) for the film Cheyutha (helping hand) British Council 'Five Star' rating for safety management systems in 1998 Several other awards from the central and state governments, as well as other institutions like the Jawaharlal Nehru Award for Pollution Control and Energy Conservation Received a commendation certificate for a 'Strong Commitment to HR Excellence' from the Confederation of Indian Industries (CII) CFO Deal of the Year Award, 2005 , for the Business Assistance Agreement with Foskor Limited, South Africa

 The Visakapatnam Plant was awarded ISO 14001:1996 first in 2002 and again in 2004. The company is also the recipient of OHSAS 18001:1999 certificate

3.9GROUP COMPANIES
Cholamandalam Investment and Finance Company Limited (CIFCL )
was incorporated in 1978 as the financial services arm of the Murugappa Group. The Company that commenced business as an equipment financing company has now emerged as a comprehensive financial services solution provider that offers vehicle finance, business finance, home equity loans, stock broking and distribution of financial products to its customers. The Company operates from over 171 branches across India with assets under management of about Rs.8601 Crores as of 31st March 2010.

Cholamandalam Distribution Services Limited (CDSL) is in the business of

providing wealth management services with enhanced focus on larger product basket and unbiased investment advice. Products offered include mutual funds, life and general insurance, equities, real estate, private equity and fixed income products. The Company has a rich base of loyal clients with an asset size of Rs.919 crores as of October 2010.

Cholamandalam Securities Limited (CSEC) is a securities broking company

offering stock broking, depository and equity advisory services to high net worth individuals and retail investors across major cities. CSEC is a corporate broking member of Bombay Stock Exchange Limited and National Stock Exchange of India Limited. It is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

Cholamandalam MS General Insurance

Cholamandalam MS General Insurance Company Limited is a joint venture between Murugappa Group and Mitsui Sumitomo Insurance Group of Japan, one of the top ten general insurance companies globally and Japans second largest Insurance Group. Chola MS offers a range of products that include accident, engineering, health, liability, marine, motor, property, travel and rural insurance for individuals, SMEs and the corporate sector. The company has a network of 113 branches across the country. Chola MS vision is to bring peace of mind to its clients through protection from financial risks. Chola MS has well-integrated operational capabilities to ensure the smooth performance of delivery like strong underwriting capabilities, tie-ups with global reinsurers, fast track claim settlement and cash-free settlement of health insurance. Chola MS offers a unique combination of efficient insurance services and innovative risk management consultancy to corporate customers, thereby offering Total Risk Management Solutions. Cholamandalam MS Risk Services, a group company, offers consultancy in the area of risk identification, assessment and suggesting control measures alongside the Insurance support services. Chola MS Risk has successfully executed over 1,350 consulting assignments across 35 sectors in India and abroad and is accredited as the only Risk Management Company in Asia to be recognized by oil giants. Adding another feather to their cap, Chola MS Risk Services won the prestigious Risk Manager of the Year 2007 at the 11th Asian Insurance Industry Awards. Cholamandalam MS is moving firmly on its path to profitable and aggressive growth.

EID Parry
E.I.D. Parry has been synonymous with dynamism since 1788. It became a part of the Murugappa Group in 1981 and its businesses now cover a wide range of products including sugar, micro algal health supplements from Parry Nutraceuticals and bio products from Bio Products Division.

E.I.D. Parry set up India's first sugar plant at Nellikuppam in 1842. The pioneering spirit has seen E.I.D. Parry setting up the first fully automated sugar plant at Pudukottai in 2000, a distillery, and more recently, zero waste integrated sugar complexes. Silk road Sugar Private Limited is a joint venture with Cargill International where E.I.D. Parry holds 50% stake. A sugar refinery with a capacity of 600, 000 MT located in a Food Processing Special Economic Zone of Parry Infrastructure Company Private Limited at Kakinada is being set up. The company is one of the few to introduce branded sugar in the retail market in India under the Parrys Pure and Parrys White Label. The company produces a variety of sugars at its four fully automated plants in Tamil Nadu and a fifth one in Pondicherry. These cater to the food, bakery, confectioneries and beverage manufacturing industries, and are also used in pharma applications. E.I.D. Parry pioneered integrated sugar complexes that maximize the utility of sugarcane through the production of sugar and using its other components in more purposeful ways. The company also converts biogases into electricity in its cogeneration units and processes molasses into various types of alcohol, thus completing the value chain. In addition, EID Parry has a stand-alone distillery in Sivaganga in Tamil Nadu.

Parry Agro

Parry Agro has tea plantation factories both in South and North-East India and between the two regions; the Company produces around 17 million kilograms of tea. A pioneer in organic plantations, Parry Agros Iyerpadi Estate has been certified organic by IMO, JAS (Organic Laws of Japan), NOP (Organic Laws of USA) and NPOP (Organic Laws of India). The Iyerpadi factory is also ISO 22000 and is FLO (Fairtrade Labelling Organisation) Certified. Three of Parry Agros tea factories namely Mayura, Attikunna and Carolyn are certified for ISO 9001:2000. Mayura, one of the first CTC Tea factories thus certified, is also one of the first to have micro-processor based control and monitoring systems, reflecting the forward looking approach of the Management.

Tube Investments of India Limited

Tube Investments of India Limited is the flagship Company of Murugappa Group. The Company has 15 manufacturing/assembly units spread across the country. These units are ably supported by marketing offices that act as interface between customer requirements and production team. The Companys shares are listed on the National, Mumbai and Chennai stock exchanges within India and GDRs on the Luxembourg Stock Exchange. The Companys product segments are - Engineering, Metal Formed Products, E-Scooters, Fitness Equipments and Cycles. TI is the market leader in precision tubes with 62 percent market share by virtue of its quality and application engineering capabilities. It is the market leader in roll formed car doorframes with 76 percent market share by virtue of its cost efficiency, association with key auto majors and roll forming capabilities. TI is a leading player in automotive chain with 35 percent market share by virtue of its quality, cost and delivery and association with two wheeler majors. The company is also a leading player in bicycle segment with 34 percent market share by virtue of its brand equity, product development capability and proximity to the markets. Recently, TI acquired a controlling stake in Sedis Group, France.

COMPANY PROFILE
4.1 INTRODUCTION TO COROMANDEL:
Coromandel Fertilizers Limited (COROMANDEL) incorporated in 1964, now belonging to the Rs 9582 crores (USD $ 2.4 Billion) Murugappa Group, is a leading company in India manufacturing a wide range of fertilizers and

pesticides (technical and formulations). COROMANDEL markets around 2.5 million tones of phosphatic fertilizers making it a leader in its addressable markets and the second largest phosphatic fertilizer player in India. The Company also markets phosphogypsum and sulphur pastilles. Coromandel Fertilizers Ltd has multi-locational production facilities and markets its products all over India and exports pesticides to various countries across the globe. It is managed by competent and committed professionals using advanced management practices. The Company is known for fostering a climate globe. of high performance and continuous improvement. The Company also has strategic partnerships with leading companies across the

Company profile
Coromandel Fertilizers limited is located spreading over 464 acres of land (which is leased from Visakhapatnam port trust on renewal basis) at Visakhapatnam, at 5 kms far from Visakhapatnam port on the east coast of India. The COROMANDEL was set as a private ltd company on 16 th October 1961, with a capital investment of Rs.50 crores. Then it was converted into public ltd Company. COROMANDEL was jointly promoted by international minerals and chemicals corporation and (IMC) and chevron chemical company, two well-known U.S Corporation and E.I.D. Parry (India) Limited. In 1981 EID parry was taken over by MURUGAPPA group holds 79% of share market: Indian financial 13 % and Indian public hold 8% of share market.

COROMANDEL producing high analysis of fertilizers like urea ammonium phosphate 28:28:0, 14:35:14 NPK, as well as low analysis fertilizers like 20:20:0:15 under the brand name of GROMOR COROMANDEL is originally an integrated fertilizer complex plant where some of the required raw material such as urea, ammonia, sulfuric acid & phosphoric acid were manufactured at high capacity . At present ammonia & urea plants ere closed down as its production cost is incompatible with the lower international market rates; so it is importing ammonia from gulf countries and urea from local fertilizer industries.

4.2 Company History

1959:

Prime Minister Jawaharlal Nehru invited the Ford Foundation to carry out a comprehensive study of Indian agriculture and give its recommendations. The study revealed a crucial need to produce indigenous chemical fertilizers to increase agricultural output to meet the countrys ever-increasing food demand.
1961:

An industrial license was granted to three companies IMC (the worlds largest producer of fertilizers), Chevron Chemical Company (a major American player in fertilizers / industrial chemicals) and E.I.D.Parry India Limited (Indias largest private fertilizer producer with 60 years standing) to set up a giant chemical fertilizer complex.
1962:

Market developments commence in the form of a seeding programme.

E.I.D. Parry was appointed COROMANDELs principal sales agent in India for the product aptly name GROMOR epitomizing the idea of Growing More food for the nation. A 483.5 acres site was identified at Visakhapatnam along the Coromandel coast (Indias east coast), from where the Company derived its name. The land, taken under a 50-year lease from Visakhapatnam Port Trust, has a private jetty just 5 km from the plant site. With a capital investment of Rs.50 crores, Lumus Company undertook construction of the plant.
1967:

On December 10, Mr. Morarji Desai, the then Deputy Prime Minister of India, dedicated the fertilizer plant to the nation, in the presence of Mr. Kasu Brahmananda Reddy, the Chief Minister of Andhra Pradesh. Grandhi Ramamurthy, a local farmer, was given the honor of cutting the ribbon .
1970:

The GROMOR farmer was developed as a marketing symbol and introduced on the bags to spread the message of higher yields, bigger profits. Today, farmer households across our addressable markets identify COROMANDELs brand by this symbol.
1971:

The Coromandel Lecture was instituted to provide a forum for thinkers, economists, and social and agricultural research scientists around the world to share their thoughts on issues of global concern such as food security, environment and extension activity. This reflects COROMANDELs concern to develop a symbiotic interaction between agriculture, industry and academia .
1976:

The fertilizer retail outlet at Secunderabad got a boost with garden lovers fervently seeking small quantities of fertilizers for bigger and richer blooms and fruit.

1977:

COROMANDEL completed a decade of participation in augmenting agricultural production for the nation. Its vital role covered soil nourishment, sharing agronomic expertise, supporting agricultural education and rewarding research all of which had progressively grown in width and depth during the decade.

1980 90:

A groundbreaking ceremony was performed in November 1980 at Chilamkur (Andhra Pradesh), which is rich in limestone deposits; to set up a one million tones cement plant. The fully computerized plant (designed by world-renowned cement manufacturer Krupp Polysius of West Germany) was commissioned in 1984.
1995 99:

Chevron Chemical Company divested its stake in favor of E.I.D.Parry (I) Limited in 1995, followed by IMC in 1999. E.I.D. Parry (I) Limited acquired majority shareholding in COROMANDEL, making it a part of the Murugappa Group, a highly reputed industrial conglomerate.
2000:

COROMANDELs growth over the years has been punctuated with several path-breaking modernizations / up gradation programmes. Begun in 1975, the programme gathered momentum in 1992-95, when the Sulphuric Acid, Phosphoric Acid and Complex Granulation plants were debottlenecked. On September 29, Mr. N Chandrababu Naidu, the Chief Minister of Andhra Pradesh, inaugurated a new complex granulation train. This further augmented capacity to 600,000 MT, a boon to the entire farming community.

2003:

On July 12, COROMANDEL consolidated its business by acquiring controlling stake in Godavari Fertilizers & Chemicals Limited (GFCL). To optimize synergy of operations in the Group, the Farm Inputs Division of E.I.D Parry (I) Limited was merged with COROMANDEL on December 1.
2004:

Mr. V. Ravichandran took over as President on January 22. Mr. A.Vellayan took over as Chairman on September 1. Other Directors on the Board are Mr. J.Jayaraman, Mr.M.M.Murugappan, Mr.T.M.M Nambiar, Mr. M.K.Tandon, Mr.D.E.Udwadia, Mr.S.Viswanathan and Mr.K.A.Nair. The first post-merger AGM of the Company was held on July 15.
2005: .

COROMANDEL signed a Business Assistance Agreement with

Foskor Limited, South Africa to provide managerial and technical assistance to Foskor
2006:

Plant protection business expanded and Coromandel acquired FICOM organics limited.
2007:

Coromandel launched its retail business to serve the rural markets. Today Coromandel has a chain of over 400 outlets in rural Andhra Pradesh .
2008:

Coromandel specialty Nutrient range including Micronutrients and watersoluble products were launched a new line of organic fertilizers.
2009:

A joint venture was signed on May 26 with Soquimich European holdings. B.V., Netherlands (a subsidiary of SQM, Chile) a world leader in specialty plant nutrient business was to set up a manufacturing facility at Kakinada to provide WSF NPK grades.

On 25th August the name of the company changed to Coromandel international limited.

Locations: COROMANDEL's has fertilizer plants in Visakhapatnam, Ennore and

Ranipet and Plant Protection Chemicals plant at Navi Mumbai, Ranipet,, ankeleshwar and Jammu. It also has marketing branches in the following states:

Madhya Pradesh Chhattisgarh Orissa Andhra Pradesh Karnataka Tamilnadu Punjab Haryana Rajasthan Gujarat Maharashtra Kerala

4.3 STRENGTHS:

COROMANDEL is promoted by two internally renowned US multinationals dealing in fertilizers and petrochemicals. Good manpower, productivity and industrial relations.

Low capital cost hence cost of productivity is low.

Excellent maintenance practices and timely planned replacement decreasing Down time in plant.

Reliable supply of raw materials, long time contract with suppliers for supply of raw materials. Well located in respect of raw materials and market. Own berthing facilities for handling imported rock phosphate and sulphur in shiploads: these facilities can be offered to outsiders by giving scope for income generation to the company.

Adequate storage at the factory. Company enjoys a good brand image and value.

Good revenue from by- products such as gypsum, fluorine etc

4.5 POLICIES
Quality Policy
We consider it our corporate commitment to provide full value for money to our customers through quality products and services. We commit ourselves as a corporation and as individuals to carry out every activity, however minor, by doing it right first time and every time. We commit ourselves to create and maintain organizational climate conducive to trust, openness and team spirit necessary for improving quality to higher and higher levels.

4.6 GUIDING PRINCIPLES

To propagate and adhere the group values and beliefs. To achieve cost effective operations through profitable funds management and efficient financial control. To create cost and quality consciousness at all levels. To increase levels of employee motivation, commitment and sense of belonging. To strictly adhere to all statutory norms on environmental protection, pollution control and ensure total safety to employee and neighborhood.

4.7 SAFETY HEALTY AND ENVIRONMENT (SHF):

Coromandel International Limited has given safety as the prime importance. Senior m a n a g e r t a k e s c a r e o f t h e i m p l e m e n t a t i o n o f s a f e t y m e a s u r e s i n t h e p l a n t . H e imparts safety education through posters, slogans, and safety training on continual basis. The company has so far achieved one million safe working man hours record 28t i m e s , t w o c o n s e c u t i v e s a f e m i l l i o n m a n h o u r s

8 t i m e s , t h r e e c o n s e c u t i v e s a f e million man hours 4 times. The company maintains an excellent safety records and achieved many national and international awards. All the employees at Coromandel International Limited

BOARD OF DIRECTORS

4.8 NON-FERTILIZERS ACTIVITIES:

PRESIDENT & MANAGING Sale of intermediates, such as Sulphuric acid, phosphoric acid and DIRECTOR

Hydrofluosillic acid.

Sale of fertilizer raw material such as sulphur, rock phosphate, potash etc., Sale of by-product, viz., gypsum and carbon dioxide. cargo at our berth. President President
(Marketin g) (Fertilizer s) Sr. Vice Sr. Vice Sr. Vice Preside nt (Pesticid es) General Mgr. (Project) General Manage r (Plant)

4.9 ORGANISATIONAL CHART:

Sr. Sr. Vice Handling Vice of other Presid Presid ent ent (HR) (Finan ce)

Board of Directors manages the organization of Coromandel FertilizersSr. Limited. President and MD Chief Executive of the entire Sr. Vice Vice acts as Vice Sr. Vice
Preside Preside setup and stationed at(Material its registered (Finance) office located at Tamilnadu. View Presid nt Chennai, nt (Retail) president overseas the CFL plant at Visakhapatnam. ng) ent Project) (Marketi (Tech. services ). Vice President President

Chief Engr.

AGM (TSD)

AGM (Materials )

AGM (Commer cial)

AGM (Operati ons)

Sr. Mgr. (Instrum entation)

AGM (Project s)

AGM (Elec./ Power)

AGM (Qlty. assuran ce & devlp.)

AGM (Fin)

FUNCTION
The vice president manufacturing and projects is over all in charge of manufacturing fertilizers at plant and implementation of all projects in time. The vice president finance is in charge of overall fund management, internal audit and secretarial functions. The general manager marketing is in charge of overall marketing of COROMANDELs finished products as well as the byproducts like gypsum, fluorine etc., The employees of the organization are divided in to three grades, they are:

TECHNICAL

The technical employees are sub divided in to highly skilled, semi skilled and unskilled people. The labors come under unskilled works men. Technical staff is graded in to s1 to s7.

CLERICAL
The clerical staff is graded in to c1 to c3 ranks where c1 grade is for assistant, c2 for junior assistant and c3 for senior assistant. The clerical staff mainly looks after the office work.

MANAGERIAL
The management staff is graded in to MG10 to MG10 ranks. Thus according to the ranks the employees of Coromandel Fertilizers Limited are graded and the company runs round the clock. The employees work in shifting times. The timings of three shifts are: 0700hrs to 1500hrs 1500hrs to 2300hrs 2300hrs to 0700hrs The general shift is from 0800hrs to 1630hrs. Thus the employees working under all the shift timings receive all the welfare facilities like canteen, transport, drinking water etc.

4.10 ENVIRONMENT:
COROMANDEL demonstrates keen concern towards environment and other pollution control methods and has implements several measures from time to time by adopting the latest technologies via switching over to DCDA process in sulphuric acid plant; total recycling of effluents installation of fluorine recovery unit and installation of bag fitters in phosphoric acid plant etc. the fluorint recovery unit convert the pollutant gases into a useful by-product called HYDROFLUOSILICIC ACID which is sold to a neighboring ancillary unit. COROMANDEL believes that

environmental protection and pollution control is a continuous process and always looks forward to adapt new system.

4.11 ACHEIVEMENTS:
First in India achieved to commercially manufacture high a n a l y s i s complex fertilizer, which is urea ammonium phosphate 28:28:0 with high nitrogen and phosphate content in 1:1 ratio First in India achieved to install a large sulphuric acid p l a n t b a s e d o n DCDA technology to control sulphur dioxide emission. First in India achieved successfully to implement total r e c y c l i n g o f seawater for its effluent recirculation system attached to phosphoric acid plant.

4.12 Key Financial Ratios of Coromandel International

Key Financial Ratios of Coromandel International Mar '07 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios 2.00 2.00 16.33 165.36 35.99 54.53

------------------- in Rs. Cr. ------------------Mar '08 2.00 3.50 31.19 271.61 44.82 49.52 Mar '09 2.00 10.00 58.91 681.85 68.52 49.52 Mar '10 2.00 10.00 51.94 460.86 90.27 49.38 Mar '11 1.00 7.00 36.14 270.16 61.57 49.16

Operating Profit Margin (%) Profit Before Interest And Tax Margin (%) Gross Profit Margin (%) Cash Profit Margin (%) Adjusted Cash Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%) Return On Capital Employed (%) Return On Net Worth (%) Adjusted Return on Net Worth (%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds (%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit

9.87 7.93 8.87 6.65 6.57 4.76 4.68 17.45 19.66 19.33 40.33 40.33 24.11 1.15 1.08 1.01 0.45 5.62 1.01 6.87 5.40 5.22 15.72 5.60 5.63 2.04 2.90 46.72 38.52 80.82 73.58 90.12 7.26 3.11 29.69

11.48 10.01 10.11 7.21 7.21 5.47 5.47 24.51 26.40 28.25 56.79 56.79 39.33 0.77 0.75 1.15 0.34 5.99 1.15 6.57 4.66 4.61 28.88 4.61 3.37 2.23 3.37 88.22 20.64 58.78 74.16 91.56 5.38 1.60 27.30

8.63 7.95 8.05 5.65 5.65 5.13 5.13 32.18 44.03 43.46 80.57 80.57 70.97 0.79 0.77 1.44 0.11 10.46 1.44 11.13 7.52 7.27 92.20 7.27 7.92 3.46 7.92 40.57 20.37 34.67 87.29 91.60 2.50 2.46 32.97

11.27 10.21 10.35 7.68 7.68 7.14 7.14 23.35 32.62 30.97 102.30 102.30 50.42 0.76 1.37 1.27 0.05 10.08 1.27 10.87 8.00 7.27 52.34 7.27 4.97 1.99 4.97 48.98 21.70 76.09 74.40 94.12 5.69 1.01 35.00

13.37 12.41 12.56 9.51 9.51 9.01 9.01 32.06 36.47 35.27 67.56 67.56 51.20 1.09 1.13 0.72 0.08 12.47 0.72 13.20 9.98 5.23 43.77 5.23 5.66 2.33 5.66 65.50 31.17 84.08 78.17 88.77 5.52 0.95 33.08

Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value

21.28 69.80 78.46 3.71 Mar '07 7.93 40.33

21.87 74.48 79.29 3.30 Mar '08 14.99 56.79

29.62 66.60 70.03 2.98 Mar '09 35.48 80.57

31.07 63.13 67.47 3.61 Mar '10 33.38 102.30

30.38 65.80 68.68 1.87 Mar '11 24.64 67.56

4.12PRODUCTS AND SERVICES

Coromandel is a leading manufacturer of phosphatic fertilisers with plants located at Visakhapatnam & Kakinada in Andhra Pradesh and Ennore & Ranipet at Tamil Nadu. The range of products manufactured at these plants include:

Gromor 14-35-14 Contains nitrogen phosphate and potash.

Highest total nutrients content (63%) N&P ratio same as DAP. But 14-35-14 has extra 14% potash. Highest in phosphate (35%) Best for cotton, groundnut, chilly, soyabeans, potato, etc. Not suitable for tobacco and grapes.

Gromor 28-28-0

Complex with highest N&P in 1:1 ratio. Unique granulation by coating prilled urea with ammonium phosphate layer. Such granule configuration ensures efficient utilization of nutrients. Highly suitable for paddy, wheat.

Gromor 20-20-0-13 A high analysis complex Fertilizer containing all the three major nutrients - Nitrogen, Phosphate and Potash, was launched by Coromandel in March 2003. This complex contains Phosphate and Potash in the ratio of 1:1, the highest among the NPK Fertilizers. Its unique features being:

Paramfos 16-20-0-13 Ammonium Phosphate Sulphate containing Nitrogen, Phosphate

and Sulphur.

It is the most preferred Fertilizer in drill-sown areas .

Parry Gold

Ammonium Phosphate Sulphate Containing Nitrogen and Phosphate in 1:1 ratio. It is an ideal Fertilizer for all crops grown in Sulphur deficient soils.

Parry Super (Single Super Phosphate)

First chemical Fertilizer to be manufactured in India. Favored Fertilizer for dry land areas. Controls acidity in soil and increase productivity .

DAP

GODAVARI DAP (NP 18:46) is a complex fertilizer containing two major plant nutrients - Nitrogen and Phosphorus.

10:26:26

Godavari 10:26:26 is a high analysis complex fertilizer containing all the three major plant nutrients viz. Nitrogen, Phosphate and Potash. Godavari 10:26:26 contains phosphate and potash in the ratio of 1:1

12:32:16 Godavari 12:32:16 is a complex fertilizer containing all three

major plant nutrients viz. Nitrogen, Phosphate and Potash .

14:35:14

GODAVARI 14:35:14 is a complex fertilizer containing all three major plant nutrients viz. Nitrogen, Phosphate and Potash. This is the only complex having highest total nutrient content among all the NPK complex fertilizers (63 %).

4.13CIL AWARDS & RECOGNITIONS

Over the years, Coromandel has received a number of awards and recognitions including the British Council 'Five Star' rating for Safety Management Systems and being adjudged one of the 'Ten Greenest Companies in India' by a joint survey of TERI and Business Today magazine. Some of the recent awards and recognitions received by Coromandel include:

Coromandel was awarded "Significant Achievement in HR Excellence" by the Confederation of Indian Industries (CII). This recognition was conferred at the CII HR Conclave 2010 by Mr. Hari S Bhartia, President of CII on 23rd July 2010 at New Delhi. The process involved a rigorous assessment of Coromandel HR processes and practices including site visits by a team of CII assessors. Coromandel in the past has archived "Strong Commitment to HR Excellence"

CII EXIM-BANK Business Excellence Award CNBC Award for for 'Strong Most Engaged Commitment to Workforce. Excel' for Vizag & Kakinada Plants.

DMA - Erehwon National Award for Innovation in HR.

Public Relations Society of India National Award (1st International Prize) for The VOICE, Award for The Coromandel in-house magazine, VOICE magazine. received for the 4th time.

FAI Best Production Performance Award for the Phosphoric Acid Plant at Vizag received for the 9th time.

FAI Best Production Performance Award for Complex (P2O2)Fertilisers for Kakinada Plant.

FAI Environment Protection Award for Complex (P2O2)

FAI Best Video Film Award

National Energy Conservation Award

Plant, Vizag.

(Commendation Certificate) for efforts in Energy received for the 6th Conservation from time. Ministry of Power, New Delhi, for Kakinada P

CHAPTER 5
5.1 THEORITICAL FRAME WORK
In todays competitive market scenario, all organization are focusing their efforts on inventory reduction and lean management practices.It is always essential to control stocks at various locations in organization at optimum level, proper inventory control is possible only with the support of efficient stores management i.e., at various places such as receipt of raw materials, finished components, work-in-progress, finished goods and spare parts. The objectives of inventory control can be met by analyzing the process, Inventory carrying cost, procuring cost, set up cost, stock out costs, EOQ etc. for this various tools like ABC analysis, XYZ analysis, VED analysis, FSN analysis etc. are being used. Lead time management and vendor managed inventory (VMI) also facilitates to reduce the inventory to optimum level.

5.2 INTRODUCTION:
In any industry there are four M s that play a very important role in the smooth functioning of the organization and relation and objectives, they are Man, Machinery, Money and Material. The management of materials plays a pivotal role as 60% of the capital cost is attributed to materials alone. Inventories represent aggregate of those items, which are either held for the sale in the ordinary course of the business, or are in the process of production for sale or yet to be utilized consumed in the production of goods and services. Inventory can be classifies into seven categories. They are given below Raw materials Finished parts Work in progress Finished goods Tools Machinery Suppliers The principal items of inventory are as follows:

RAW MATERIALS - Raw materials un fabricated materials, which

have undergone no Conversion what so ever since their receipts from the suppliers.

FINISHED PARTS - Finished parts are those which may either be

brought out parts or piece parts brought out parts are those finished parts sub-assemblies or assemblies, which are purchased from outside

supplies Piece parts, are those parts, which are manufactured at the companys own plant from the basic raw materials.

WORK IN PROGRESS - It comprises of the items in partially

completed condition of manufacture.

FINISHED GOODS - These are the final products ready to be shipped. TOOLS - These are comprise of standard tools and hand tools, standard
tools used machines such as saws, drills, reamers, etc. and hand tools are drill guns, hammers, mallets, etc.

SUPPLIERS - Include materials used in running the plant or in making

companys products but do not they go into the product.

MACHINERY SPARES - Are, which are used to maintain the machine

without any problems so that there wont be unnecessary breakdowns, these spares include consumable spares, replacement spares, rotatable spares, insurance spares.

5.3 ABC ANYALASIS

In this technique, the items of inventory are classified according to value of usage. The higher value items have lower safety stocks, because the cost of production is very high in respect of higher value items. The lower value items carry higher safety stocks. ABC analysis divides the total inventory list into three classes A, B, and C using the rupee volume, as follows:

Items in class 'A' constitute the most important class of inventories so far as the proportion in the total value of inventory. The 'A' items consists of approximately 15% of the total items, accounts for 80% of the total material usage. Items in class B' constitute an intermediate position, which constitute approximately 35%of the total items, accounts for approximately 15% of the total material consumption. Items in class 'C are quite negligible. It consists remaining 50% items, Accounting only 5% of the monetary value of total material usage The numbers are just indicative and actual break-up will vary from situation to situation.

The Above categorization is represented in the table given

Class of items A B C

%of items

15 35 50 ______________________ 100 100 __________________________________

%of value 80 15 5

5.4 XYZ ANALYSIS:

Inventory holding of each project will also be analyzed with reference to value of the holding against each item. It is found that about 70% of the total holding would be covered by very small percentage of items by number, which will be around 10%. This category will be classified as X class items. Similarly items accounting for the remaining 20% contributing will be categorized as Y class items and the remaining items will be listed in Z class. This analysis is usually done for the annual stock review. In ABC analysis consumption value of items for a particular time span is considered. In XYZ analysis inventory value of item on a particular day will be considered. All steps in ABC analysis are followed in XYZ analysis. 5.5 VED ANALYSIS: Vital Essential Desirable.

VITAL
It is not ready to available in market.

ESSENTIAL
Can be replaced immediately Lead time for procurement is 1-2 month DERSIRABLE The item is available at market Lead time at procurement by low level Cost will not much

 VED analysis is generally useful for spares parts inventory for companys plant & Machinery Items in stores are classified based on critical its of an item Items are classified as Vital Essential Desirable

5.6 NON MOVING ING ITEM ANALYSIS All items held in stock will be subjected to non movement analysis segregating the items for different non movement periods like over 2 years, over 5 years and 10 years so as to critically analyze the possibility of utilization of these items or otherwise for declaring surplus especially those items which have not moved for more than 5 years. Materials management department with the concerned technical departments will jointly do this analysis and separate list will be prepared, i.e. code group wise, for the nonmoving items beyond 5 years on an annual basis project wise under different code groups and steps would be taken so that the non moving items are not indented again, until the existing stocks are utilized. Every effort will be made to keep as low as practicable because this is non productive inventory. Which is blocking the capital, storage space needing preservation and up keeping efforts and results, in extra inventory carrying cost. The company reduces the non moving inventory by regular review for utilization or by declaring as surplus.

 CODIFICTION:

Any organization engaged in production repair or

construction is obliged to stock a large number of items of stores. It is essential to maintain accurate stock records of these items and also to know their location in store warehouses. The normal way of identifying an article is by simple description but this method is far from satisfactory. The best way is to list out the various items classifying or grouping them in some convenient manner and allotting each item a code number which if quoted is sufficient to identify the items. Each code number is unique and represents one single item. By this maintenance of stocks will be carrier records with the help of data processing machines are able to give any output using these codes. These are three types of coding system are i.e. Alphabetical, alphanumeric and numerical.

STANDARDIZATION AND VARIETY REDUCTION: It is the

process of establishing agreements up on acceptable levels of various characteristics of a product Eg. Quality, design, dimensions, physical characteristics, chemical composition, performance etc on the basis of study and experience gained by established agreement or uniform identification is termed a standard / specification. Standardization is applied usually in two distinct areas in industry. Standardization of products, Standardization of business practices,

 AUTOMATIC REPLENISHMENT SYSTEMS: For few items in the

stock that frequently moving and are usually of low value and required by more than one department are subjected to ARS, ARA is completely controlled by materials control department, they actually fix a minimum, maximum and recorder level. So as soon as these items reaches reorder level material control department will monitor it and indent is prepared immediately for procurement of these items.

STORES MANAGEMENT: Stores are used for receiving, storage and

supply of the goods. It plays a major role in inventory management. Stores are the center of activities of materials in motion, an efficient system must aim at good systems and procedures, efficient O & M and smooth and speedy receipts and issues. The main objective of stores will be to provide efficient service to all operating functions such as production, construction, repair and maintenance. These are usually two sections in stores Receipt / issue section Custody section Custody section usually takes care of storage and preservation of the incoming goods where as issues / receipt section confirms of right input according to the order and issues the same according to the requirements.

STORES PRESERVATION: proper material storage the concerned

department carries out it very important and it very effectively. For carrying out an effective preservation programs, factors such as economic aspects, period of idleness of a part, condition of the part,

nature of the exposed surface as well as applicability of specific protective to be applied is considered and make sure that they do no exceed the cost of the part to be preserved. Some of the procedures followed are as follows: All ferrous spares are given a protective cost of paint / varnish and stored. Precision spares like instruments, electronic and electrical spares, ball & roller bearing are covered in polythene bags, enclosing moisture absorbent chemicals like silica gel etc. Precision spares are maintained in dust free air conditioned rooms without sunlight and moisture. French chalk powder is sparkled whenever possible an rubber items like tires, tubes hoses, v belts etc. Items like electrodes are kept intact in original packing and kept in dry storage room with same heaters to avoid excess of moisture affecting the coating. Sintered bush bearings are soaked in warm oil for 24 hours once in a year. Pipes over 2 are flushed / cleaned with dry our in these cases protective paints to the exterior painting. Vertical stocking of grin dining wheels with partitioning in between is necessary so that the faces do not came in to contact with each other. Strip heaters in all high voltage motors, LT motors should be provided to avoid moisture entering in to the motors. Copper parts are protected against ingress of ammonium salts. Silver and lead parts are cleansed with fresh water.

 Compressors and turbines o9f multistage pumps are rotated on their bearings every quarter to prevent staging / clogging. Anti rodents and insecticides measures are taken on regular basis. Shafts gears and impellers are stored horizontally after painting with dewatering protection films such as rust guards, rust line etc. Fasteners and screws that are kept in the racks are treated with hard preservation film. Perishables spares like V belts with a low shelf life are identified and the FIFO method of issues are practiced.

5.7 BRIEF ABOUT WARE HOUSE

TOTAL NO. OF ITEMS IN STORES - 11887 TOTAL INVENTORY VALUE 9.84 CRORES TOTAL INVENTORY TURNOVER DURING THE YEAR 201011-----20.15 CRORES OBSELETE ITEMS: 2260 TOTAL ITEMS ARE DISTRIBUTED AMONG 94 GROUPS (LIKE ELECTRICAL, INSTRUMENT, MECHANICAL, CIVIL, CHEMICALS ETC.,) EACH ITEM IS HAVING UNIQUE STOCK NO. EACH ITEM IS HAVING MIN MAX LEVELS WHEN EVER STOCK LEVEL CROSSES THE MIN LEVEL AFTER ISSUEING, THEN A PLANNED ORDER WILL RAISE FOR THE DEFICIT QTY TO THE MAXIMUM STOCK LEVEL

 AFTER OBSERVING THE CONSUMPTION PATTERN, THE STORES INCHARGE WILL CONVERT PLANNED ORDER TO PURCHASE REQUISTION. (PR) THAT PR WILL APPEAR AT PURCHASE DEPT., BASED ON THAT PR, PURCHASE DEPT WILL GIVE ENQUIRIES TO THE VENDORS AS PER THE SOURCE LIST. VENDORS WILL GIVE THEIR BEST PRICE TO THE PURCHASE DEPT PURCHASE COMMITTEE ALONG WITH INDENTOR / USER AND ACCOUNTS PERSONNEL WILL DESIDE THE VENDOR, THOSE WHO WILL GIVE THE LOWEST PRICE. THEN PURCHASE ORDER WILL BE PLACED. BASED ON THAT PUCHASE ORDER VENDOR WILL SUPPLY MATERIALS ALONG WITH INVOCE TO STORES ACCORDING TO THAT INVOICE STORES DEPT WILL RAISE GOODS RECEIPT (GR) AFTER PROPER INSPECTION-BY-INSPECTION DEPARTMENT THE MATERIALS WILL BE HANDED OVER TO ISSUE SECTION BY PUTTING INTO BINS. IF MATERIALS ARE NOT AS PER OUR STANDARDS THAT MATERIALS WILL BE REJECTED AND IT WILL BE SEND BACK TO THE PARTY. ISSUE SECTION WILL ISSUE MATERIALS BASED ON THE RESERVATIONS GIVEN BY USERS (MAINT/OPERATIONS/PROJECTS/OTHERS) AFTER ISSUE THE MATERIALS THAT RESERVATIONS WILL BE POSTED IN SAP

 AFTER

POSTING,

THE

STOCK

LEVELS

WILL

REDUCE

ACCORDINGLY. AGAIN THE CYCLE REPEATS FOR NON STOCK ITEMS, PR WILL BE RAISED DIRECTLY BY THE USER AFTER RELEASE OF THAT PR IN SAP BY DEPT., HEAD, THE ACTION WILL BE TAKEN BY THE PURCHASE DEPT., THE SAME PROCESS WILL BE DONE LIKE STOCK ITEMS PO AFTER RECEIPT OF MATERIALS, STORES DEPT., INTIMATE THE INDENTOR FOR INSPECTION AFTER ACCEPTANCE , THAT MATERIALS WILL BE HANDED OVER TO THE INDENTOR BY TAKING PROPER SIGNATURE

5.8 EOQ (ECONOMIC ORDER QUANTITY)

One of the basic decisions that must be made in any stock control system is that of determining the quantity to order since investment in inventories largely depends upon the quantities in which the items are ordered for replenishment. Ordering large lots infrequently, reduces administrative work but increases investment in stocks ordering small lots frequently keeps the investment in low but increases administrative work. This is because small lots require high order frequency, more purchase requisition require to be raised, more frequently the comparative statement must be raised, more the material must be received, more posting must be done more bills must be handled. All these activities will call for more staff and hence more administrative costs and

overheads. Therefore a rational approach is needed for fixing the order quantity of an item, which will either increase neither the procurement cost nor the storage cost. So such quantity that results in equal procurement cost & storage cost is known as EOQ (Economic Order Quantity) The mathematical explanation of the is as follows EOQ is given by Q = (2 * C * 0) / I Where: C = annual consumption of the inventory in units O = cost of placing one order including the cost of receiving the goods i.e Cost of getting an item into the firms inventory Q = quantity per order in units I = annual carrying cost per unit The annual carrying costs are equal to the average value of stock held multiplied by carrying cost per unit and represent as QI / 2. Where I = annual carrying cost per unit.

5.9 REORDER POINT

An important question in any inventory management system is when should an order for the purchases of an item should be placed, so the RE ORDER point system provides the answer to this question. RE ORDER point is the level of inventory at which the storekeeper should initiate the purchases requisition for the purchases of inventory in the amount of the economic order quantity. In designing a RE ORDER point sub system three items of information are needed as inputs to the sub system.

1. Lead time, i.e. time lag between indenting and receiving of the inventory. It is usually expressed in number of days. 2. Usage rate, i.e., the quantity per day at which the items consumed in production process or sold to customers. 3. Minimum stock level, i.e., the quantity below which stock should not be allowed to fall. This can be calculated by multiplying the usage rate by the number of day the firm wants to hold as a protection against shortages. The following formula can be used for the calculation of the reorder paint REORDER POINT = UR*LT= UR*DAYS OF SAFETY Where: UR = Usage rate per day. LT = Lead-time in days. DAYS OF SAFETY = Days of safety stock desired by the firm.

5.10 LEAD TIME

There is a definite time lag between identification of the need for an item till it is received in store ready for issue after placing of order, manufacturing, transport, receiving and inspection. The total time that elapses between the recognition of the need for an item and the fulfillment of the need is called lead time of the item and it plays an important role in establishing the right time for procurement. The right time for the procurement of an item is the time the stock on hand is just enough to satisfy the demand for the period required for the procurement since there may be increase in the demand between the time the order is placed and received in store, safety stock may be added to the average requirements of the lead time. This implies that the right time for procurement of an item is the time when stock drops down to a level which is enough to take

care of demand during the period necessary to replenish stock and extension of lead time.

IMPORTANCE OF LEAD TIME - Lead-time has a direct relationship

with investment in inventories. The longer the lead-time, higher is the requirement of the working capital. Since during the lead-time, there is no delivery of material, the requirement of the production is met from the inventories in stock. Also since both lead-time and consumption rate increase without notice, over and above the stock to take care of normal consumption during average lead-time, safety stock is required to be maintained. This implies that a major factor which influences investment in inventories is that lead-time and it is therefore responsibility of the purchase department to take steps to reduce the lead-time.

ELEMENTS OF LEAD TIME:

Time required by the indenting department to convey requirements to purchase. Time required by the buyer to call quotation, make enquires / visit potential vendors negotiate terms, enter in to contract. Time required by the supplier to route buyers order through his administrative channel and fill the same. Transit time for goods to reach buyer works. Time required by the buyers receiving department to uncrate goods, prepare necessary documents and offer material for inspection. Time require by buyers inward to verity quality of goods. Time required by the stores deportment to take goods in to stock, deposit into appropriate bins and update stock records.

 MAJOR PARTS OF LEAD TIME:

Lead-time of an item can be divided into two parts Internal lead time External lead time

INTERNAL LEAD TIME

It is also called as buyer lead-time, is the sum of servicing time and receiving time. The servicing time includes time required by the buyers to call quotations, compare quotations, visit vendors negotiate terms, obtain sanctions, enter in to contract etc and receiving time is made up of time required to uncreated and inspects goods, move them between stores, deposit them in appropriate bins and make entries into stock cards.

EXTERNAL LEAD TIME

It is also called as suppliers lead-time, is made of administrative, manufacturing and delivery times required by the supplier. External lead-time therefore is the time required to get the items from selected suppliers.

PRODUCTION PROFILE OF THE COMPANY

The company is mainly engaged in manufacturing the complex fertilizers DAP, which is having the highest nutrient value of its grade with 15% Nitrogen and 46% of phosphorous. The major raw materials required for manufacturings DAP are Ammonia and Phosphoric Acid. The storage tanks for these raw materials are situated in Kakinada.

AT KAKINADA

For Phosphoric Acid: 1 tank of 5000MT capacity : 2 tank of 10000MT capacity : 2 tank of 12000MT capacity : 2 tank of 7500MT capacity For Ammonia: 2 tank of 1500MT capacity : 2 tank of 5000MT capacity For Sulphuric Acid: 4 tank of 2400MT capacity

PRODUCT PROFILE
DAP (18: 46: 0)

Complexes (10: 26: 26) Complexes (12: 32: 16) Complexes (14: 35: 14) Complexes (20: 20: 0)

PESTICIDE FORMULATION
Endosulphate, Monocrototphos, quinolphos, Dimethoate, Butanone, Acephate, Carbandazium, Fenvelerae, Cypermethrin and Cloropyriphos,

5.11 INVENTORY OF RAW MATERIAL

Raw materials are those items, which are yet to be consumed by the company. The main raw materials of the company are Phosphoric Acid, Sulphuric Acid and Ammonia. The main function of Raw Material Department is to procure right material at right time and at right cost so that there are no interruptions in

the production CFL procured almost 99% of its raw materials from outside countries such as South Africa, Tunisia, and Bangladesh etc Raw materials storage tanks, which are situated in Kakinada, are given below.

AT KAKINADA
For Phosphoric Acid: 1 tank of 5,000MT capacity : 2 tank of 10,000MT capacity : 2 tank of 12,000MT capacity : 2 tank of 7,500MT capacity For Ammonia: 2 tank of 1,500MT capacity : 2 tank of 5,000MT capacity For Sulphuric Acid: 4 tank of 2,400MT capacity Similarly the details of the lead time (both internal & external) are given below. Time required by the indenting department to convey requirements to purchase 3 days Time required by the buyer to call quotation make enquiries/visit potential vendors, negotiate terms enter into a contract 45 days Time required by the supplier to route buyers order through his administrative channel and fill the same 7 days Transit time for goods to reach buyer works 10 days (indigenous) 30 days (imported) Time required by the buyer receiving department to uncrate goods prepare necessary documents and offer materials for inspection 7 days

 Time required by buyer inward to verify quality of goods 3 days Time required by the stored department to take goods into stock, deposit into appropriate bins and update stock records 2 days Details of the norms provided by the operations department for the requirement of the raw materials for the production of one metric ton of fertilizers. PHOSPHORIC ACID DAP (DI AMMONIUM PHOSPHATE) 14: 35: 14 12: 32: 16 : .872 : .622 : .613

AMMONIA DAP (DI AMMONIUM PHOSPHATE) 12: 32: 16 14: 35 : 14 : .213 : .154 : .177

Raw material department receives a production plan from the Operations Department it provides all the details of the production for that particular financial year & it also provides the required norms. Now raw material department, depending upon the production plan & the norms provided, prepares a monthly schedule report which not only consists of the production plan, norms but also the information of the closing stock at the end of that particular year / day / month So depending upon the available stock, consumption rate, lead time and storage capacity raw material department prepares the monthly schedule report which provides all the necessary information of when to procure and where to store the raw materials. It also consist of the details bout the name and other details of the supplier.

5.12 PURCHASING SYSTEM

To keep pace with changed market conditions. To satisfy demand during period of replenishment. To carry reserve stocks to avoid stock outs. To prevent loss of sales. To level out or stabilize production. To satisfy other business constraints. Suppliers conditions of lien quantity. Government regulation. Seasonal availability. Demand forecast error. Suppliers delivery interval. Lead time offered to customers are shorter than supplier lead times. Minimization of delivery costs.

INTRODUCTION: The purchasing department occupies a vital and unique position in the organization of an industrial concern because purchasing is one of the main functions of the success of a modern manufacturing concern. Mass production industries, since they rely upon a continuous how of right materials, for demand for an efficient purchasing division. The purchasing function is liaison agency, which operates between the factory organization and outside vendors on all matters of procurement. Purchasing implies

procurement materials, suppliers, machinery and services needed for production and maintenance of the concern. OBJECTIVES OF PURCHASING DEPARTMENT: To procure right material. To procure material in right quantities. To procure material of right quality. To procure from right and reliable source or vendor. To procure material economically, i.e at right or reasonable price. To receive an delivery of materials at right place and at right time.

FUNCTIONS OF PURCHASING DEPARTMENT Keep records indicating possible materials and their substitutes. Maintain records of reliable sources of supply and price of materials. Review of materials specification with an idea of simplifying and standardizing them. Making contacts with right sources of supply at competitive price. Procure and analyze quotations. Place and follow up purchase orders.

Maintain records of all purchases. To make sure through inspection that right king ( i.e quantity quality etc,) To act as liaison between the vendors and different departments of the concern such as production, quality control, finance, maintenance etc :

To check if the material has been purchases at right time and at economical rates. To prepare purchasing budget. To prepare and update list of materials required by different departments of the organization with in a specified span of time.

COROMANDEL PURCHASE DEPARTMENT The internal organization of purchases department in on a lime, basis with purchasing agent, director of purchase or purchasing manager being in charge of purchase department. He is responsible for the overall efficient operation of the department. The purchasing manager is however assisted in purchasing by a number of assistants and few clerical staff. The purchasing manger has the powers to execute purchasing contracts for the concern. He divides the duties among the assistants according to the nature of purchases to be made. For, example goods, one assistant may purchase only electrical another (major) raw materials, third plant equipment and so on. Purchasing section places orders with the vendors, purchase service

section fallows the progress to the orders at its shipment by vendors and its vendors end its final receipt in the company. At CFL Kakinada as a part of modernization and up gradation of technology in line with government thinking, the company has entered in to a contract with m/s Satyam enterprise solutions a cost of Rs 3.00 Cr for implementation of ERT/SAP. The total company operations all over India i.e. Production Unit, Corporate Office, Liaison Office and various marketing offices are being hooked up through, a network (wan). At CFL they are using SAP to overall departments in the plants up to date each and every transaction. In purchasing, the vendor department, material procurement, stores and accounts. At CFL Kakinada as part of Logistics Development company has implemented ERP (SAP) system. In this SAP system not only materials procured but material consumed in daily production every transaction, can be updated in the system. The companys materials department is maintaining the following files. Purchasing Requisition (PR) Purchasing Order (PO) Daily Receipt Report (DRR) Discrepancy Report (DR) Materials Receipt Report (MRR) Materials Issue Voucher ( MIV) Materials Return Voucher (MRV) Materials Transfer Voucher (MTV)

Stores Correction Voucher (SCV)

STEPS IN COMPLETE PURCHASING CYCLE : Recognition of need, receipt and analysis of purchase Selection of possible potential sources of supply. Making the request for quotation. Receipt and analysis of quotation. Selection of right source of supply. Issuing the purchase order. Follow up and expediting the orders. Analyzing received reports and processing discrepancies

requisition.

and rejection. Checking and approving vendors invoices for payment. Closing completed order. Maintenance of records.

6.1 RAW MATERIAL CONSUMPTION TREND

PHOSPHORIC ACID:

YEAR

QUANTITY (MEN TONN) 71682.00 45859.00 53327.00 134901.00 87466.00

VALUE (IN LAKHS) 1602740107 1105902839 4010910167 3998451045 3790288965

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

AMMONIA:

YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

QUANTITY (MET TONN) 177259.00 110828.00 1441170 203659.00 184798

VALUE (LAKHS) 270904410 14875018 3626629918 2993491350 3494997254

MAP
YEAR QUANTITY (MET TONN) VALUE (LAKHS)

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

2143 1952 883 707 159 25113

277214065 25619619 1179364 11045316 2998920 32867084

MAP

 phos.acid
QUANTITY YEAR (MET TONN) VALUE (LAKHS)

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

71682 45859 53327 134901 87446

1602740107 1105902839 4010910617 3998451045 3290288965

Rock
YEAR QUANTITY (MET TONN) VALUE (LAKHS)

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

581814 461296 421198 480869 471759

2412196293 2118679731 510095856 4200325119 3244172145

6.2 INVENTORY MANAGEMENT OF FINISHED GOODS

Sales & distribution department ensure that finished goods reach the right place at right time and at right cost. Operation department prepares the production plan and sends it to vice president marketing who along with RMO of different region prepares a sales plan & sends it to the sales & distribution department. These plans are of different formats: Product wise, Season wise sales plan Product wise, month wise sales plan Marketing office wise, month wise DAP sales plan Marketing office wise, product wise sales plan Month wise. Destination wise rake movement plan Sales & distribution department considers both sales and production while preparing a dispatch plan, S & D department also make sure to crosscheck the monthly stock reconciliation report, sent by RMO from every region, so that details about the closing stock of each centre are known. So any variation in the closing stock will lead to a little variation in the dispatch plan when compared to sales plan.

RAW MATERIAL CONSUMPTION TREND

Raw Materials for March 2004

Product Name Rock Phosphate Ammonia Urea Sulphur Phosphoric Acid MAP Quantity 656,602.00 143655 114,200.00 221122 22,084.00 13,339.00 Value (Rs.cr) 179.22 158.14 93.59 86.09 37.74 12.19 Cost (Rs.) / Unit 2,729.51 11,008.32 8,195.27 3,893.33 17,089.30 9,138.62

Raw Materials for March 2005

Product Name Rock Phosphate Ammonia Urea Sulphur Phosphoric Acid

Quantity 688,274.00 164515 140,907.00 227,478.00 49399

Value (Rs.cr) 226.42 219.17 152.76 98.39 92.77

Cost (Rs.) / Unit 3,289.68 13,322.19 10,841.19 4,325.25 18,779.73

Raw Materials for March 2006

Product Name Ammonia Rock Phosphate Urea

Quantity 213,010.00 767627 183,315.00

Value (Rs.cr) 322.85 294.47 229.22

Cost (Rs.) / Unit 15,156.57 3,836.11 12,504.16

Phosphoric Acid Sulphur MAP

77,397.00 268494 7137

161.41 119.24 9.53

20,854.81 4,441.07 13,352.95

Raw Materials for march 2007

Product Name Rock Phosphate Ammonia Urea Phosphoric Acid Sulphur MAP

Quantity 842,130.00 238296 167,906.00 73704 292,178.00 21454

Value (Rs.cr) 343.23 331.65 210.20 161.99 110.86 27.82

Cost(Rs.) / Unit 4,075.74 13,917.56 12,518.91 21,978.45 3,794.26 12,967.28

Raw Materials for March 2008

Product Name Phosphoric Acid Ammonia Rock Phosphate Urea Sulphur MAP

Unit MT MT MT MT MT MT

Quantity 443,581.00 339504 637,438.00 164,112.00 232,376.00 2,236.00

Value (Rs.cr) 1,049.91 444.80 286.49 240.02 132.94 2.56

Cost(Rs.) / Unit 23,668.96 13,101.47 4,494.40 14,625.38 5,720.90 11,449.02

Raw Materials for march2009

Product Name Phosphoric Acid Ammonia Rock Phosphate Sulphur Urea MAP

Quantity 449,927.00 370057 592,017.00 238917 104,696.00 4,021.00

Value (Rs.cr) 3,480.66 983.43 798.24 699.01 275.34 13.94

Cost(Rs.) / Unit 77,360.55 26,575.10 13,483.40 29,257.44 26,299.00 34,667.99

Raw Materials for 2010

Product Name Phosphoric Acid Ammonia Rock Phosphate Urea Sulphur MAP

Quantity 617,046.00 475691 653,242.00 134345 252,755.00 8,453.00

Value (Rs.cr) 1,742.91 689.67 455.64 196.89 78.67 14.78

Cost(Rs.) / Unit 28,246.03 14,498.28 6,975.06 14,655.55 3,112.50 17,484.92

Raw Materials for 2011

Product Name Phosphoric Acid Ammonia

Quantity 584,219.00 467251

Value (Rs.cr) 2,229.91 903.03

Cost (Rs.) / Unit 38,169.08 19,326.44

Rock Phosphate Sulphur Urea MAP

665149 260112 87,234.00 4919

476.01 210.32 137.24 9.51

7,156.44 8,085.75 15,732.40 19,333.20

Inventory control is very essential for any organization. An organization represents aggregate of those items which are either held for the sale in ordinary course of business or are in the process of production (i.e., work-inprogress) or yet to be utilized in the production of goods and services. In case of CFL, Raw Material Department procures the required raw material. Here central stores department take care of spares consumed in the production, Sale & Distribution. The tools used by the company for the inventory control in stores are ABC ANALYSIS XYZ ANALYSIS FIFO (First In First Out) NON MOVING Item analysis

6.3 ABC ANALYSIS

A category items otherwise called as high priority items which requires tight control including complete accurate records, regular and frequent review by management.

 B category item which is called medium priority items requires only normal control. C category items which require lowest priority which needs simplest possible control perhaps use a two bin system or periodic review system.

TABLE-1

ABC ANYALASIS FOR THE YEAR 200607

ABC ind. A A A B B Material Group P03 P02 Fuels Chemical Tot. usage val. 92,575,775.95 52,564,596.05 8,728,628.47 7,401,910.48 6,630,722.78

M43 Iron & S M41 Lubricant ME02 Bearings

B B B B B B C C C C C C C C C C C C C

P01 M30 G05 C200 ME01 M22 M40 CIH M45 M08 M28 M11 M34 M13 MC01 EI04 M44 M06 MEI04

Catalyst Pumps & Safety I Building Welding Mech Mis Valves & Transmit Automobiles Conveyors, Pipes ( Gases Screens Fastener Refractors Cables & Packings Chains Baggng&P

5,865,600.00 5,739,743.78 4,164,326.47 3,278,347.15 3,149,585.27 2,714,306.71 2,568,213.46 2,027,156.30 1,952,086.86 1,919,883.91 1,873,206.93 1,395,812.34 1,384,817.79 1,328,516.98 1,221,619.18 1,138,841.47 1,119,440.03 1,093,278.22 1,055,509.80

M04

Blowers

1,039,956.10

FINALLY
Segmen ts A segment B segment C segment Total 25 Material Group 3 8 14 12 32 56 100.00% % % % Tot. usage val. in segment 153,869,000.47 38,944,542.64 21,118,339.37 INR 71.92 INR 18.2 INR 9.87 100.00% % % %

213,931,882.48 INR

ABC ANYALASIS
100 80 60 40 20 0
A B C 0 10 0

% of value

SEGMENTS

ANALYSIS: During the year 2006-07 71.92 % of the items have been classified as A class items which requires tight control and strict monitoring. Almost half of the inventory is maintained under B category but which requires only medium control and has a less value of 18.2% and the remaining items are under C, which requires least control and has a very minimum value 9.87%.

TURN OVER FOR 2006-07

Material Group Total P03 P02 M43 M41 ME02 Tot. Usage val. 230,705,451.76 92,575,775.95 52,564,596.05 8,728,628.47 7,401,910.48 6,630,722.78 No.iss.VS 46,145 362 471 1,254 730 568

Fuels Chemical Iron & S Lubrican Bearings

P01 M30 G05 C200 ME01 M22 M40 CIH M45 M08 M28 M11 M34 M13 MC01 EI04 M44 M06 MEI04 M04 Rest

Catalyst 5,865,600.00 Pumps & 5,739,743.78 Safety I 4,164,326.47 Building 3,278,347.15 Welding 3,149,585.27 Mech Mis 2,714,306.71 Valves & 2,568,213.46 Transmit 2,027,156.30 Automobiles1,952,086.86 Conveyors, 1,919,883.91 Pipes ( 1,873,206.93 Gases 1,395,812.34 Screens 1,384,817.79 Fastener 1,328,516.98 Refractors 1,221,619.18 Cables & 1,138,841.47 Packings 1,119,440.03 Chains 1,093,278.22 Baggng&P 1,055,509.80 Blowers 1,039,956.10 16,773,569.28

4 1,136 6,189 1,395 1,909 2,725 631 54 753 202 516 2,713 157 8,834 84 185 1,798 112 117 14 13,232

TABLE-2

ABC ANYALASIS FOR THE YEAR 2007-08

Material Group
A A A A A A B B B B B B B P03 P02 M30 M43 ME02 P01 M41 C200 M06 ME01 G05 M22 M08 Fuels Chemical Pumps & Iron & S Bearings Catalyst Lubrican Building Chains Welding Safety I Mech Mis Conveyors,

Tot. usage val.

52,073,199.89 44,740,129.43 10,584,785.39 7,997,661.22 7,139,914.92 6,561,100.00 5,717,098.45 5,004,607.36 3,749,980.78 3,744,411.70 3,423,598.26 2,926,524.43 2,346,692.97

B B C C C C C C C C C C

M40 M15 M28 M13 M11 M45 M44 EI04 CIH M34 M27 MEI02

Valves & Gantry i Pipes ( Fastener Gases Automobiles Packings Cables & Transmit Screens Pipe fit DG Set S

2,337,586.63 2,125,947.71 2,092,465.23 2,066,560.43 1,858,291.02 1,657,372.30 1,641,943.05 1,601,236.10 1,523,854.63 1,363,918.47 1,127,446.10 1,050,265.11

FINALLY:

Segme nts Group

Material Tot. usage val. in segment 6 9 10 24 36 40 100.00% % % % 129,096,790.85 31,376,448.29 15,983,352.44 INR 73.16 INR 17.78 INR 9.06 % % %

A segment B segment C segment Total 25

176,456,591.58 INR 100.00%

ABC ANYALASIS
100 80 60 40 20 0
A B C 0 10 0

% of value

SEGMENTS

ANALYSIS: During the year 2006-07 73.16 % of the items have been classified as a class items, which requires tight control and strict monitoring. Almost half of the inventory is maintained under B category but which requires only medium control and has a less value of 18.2% and the remaining items are under C, which requires least control and has a very minimum value 9.87

TURN OVER FOR 2007-08

Material Group Total P03 P02 M30 M43 ME02 P01 M41 C200 M06 ME01 G05 M22 M08 M40 M15 M28 M13 M11 M45 M44 EI04 CIH M34 M27 MEI02 Rest Tot. usage val. 193,630,030.82 52,073,199.89 44,740,129.43 10,584,785.39 7,997,661.22 7,139,914.92 6,561,100.00 5,717,098.45 5,004,607.36 3,749,980.78 3,744,411.70 3,423,598.26 2,926,524.43 2,346,692.97 2,337,586.63 2,125,947.71 2,092,465.23 2,066,560.43 1,858,291.02 1,657,372.30 1,641,943.05 1,601,236.10 1,523,854.63 1,363,918.47 1,127,446.10 1,050,265.11 17,173,439.24 No.iss.VS 48,222 326 446 1,403 1,217 557 4 680 1,531 80 2,078 6,477 2,968 146 496 45 505 9,968 3,007 587 1,685 203 44 144 2,478 71 11,076 Fuels Chemical Pumps & Iron & S Bearings Catalyst Lubrican Building Chains Welding Safety I Mech Mis Conveyors, Valves & Gantry i Pipes ( Fastener Gases Automobiles Packings Cables & Transmit Screens Pipe fit DG Set S

TABLE-3

ABC ANYALASIS FOR THE YEAR 2008-09

Material Group A A A A A A B B B B B B B B B B C C C C C C C C C P02 P03 M30 M43 P01 M41 M15 M08 ME02 C200 G05 ME01 M06 M22 M13 M11 M28 M40 M34 EI04 M45 M27 M44 M33 M17 Chemical Fuels Pumps & Iron & S Catalyst Lubrican Gantry i Conveyors, Bearings Building Safety I Welding Chains Mech Mis Fastener Gases Pipes ( Valves & Screens Cables & Automobile Pipe fit Packings Rubber l Grinding

Tot. usage val. 46,028,763.88 34,632,176.06 10,089,684.20 9,581,212.31 8,536,792.84 5,309,360.13 4,718,710.03 3,161,086.43 3,032,565.05 2,979,143.64 2,959,104.08 2,495,578.70 2,462,279.64 2,364,055.18 2,290,439.99 2,261,293.62 2,117,095.74 2,024,137.83 1,733,802.16 1,689,689.43 1,608,383.42 1,409,914.82 1,386,665.97 1,201,023.15 979,581.93

FINALLY:

Segments A segment B segment C segment Total

Material Group 6 10 9 25 24% 40% 36% 100.00%

Tot. Usage val. in segment 114,177,989.42INR 28,724,256.36INR 14,150,294.45INR 157,052,540.23 INR 72.7% 18.29% 9.01% 100.00%

ABC ANYALASIS
100 80 60 40 20 0
A B C 0 10 0
No.iss.VS 46,781 385 286 882 1,351 6 611 27 124 515 1,318 6,764 2,079

% of value

SEGMENTS

ANALYSIS: -

During the year 2006-07 72.17% of the items have been classified as a class items which requires tight control and strict monitoring. Almost half of the inventory is maintained under B category but which requires only medium control and has a less value of 18.29% and the remaining items are under C, which requires least control and has a very minimum value 9.01

TURNOVER FOR YEAR 2008-09

Material Group Total P02 P03 M30 M43 P01 M41 M15 M08 ME02 C200 G05 ME01 Tot. Usage val. 169,453,563.59INR 46,028,763.88INR 34,632,176.06INR 10,089,684.20INR 9,581,212.31INR 8,536,792.84INR 5,309,360.13INR 4,718,710.03INR 3,161,086.43INR 3,032,565.05INR 2,979,143.64INR 2,959,104.08INR 2,495,578.70INR

Chemical Fuels Pumps & Iron & S Catalyst Lubrican Gantry i Convyrs, Bearings Building Safety I Welding

M06 M22 M13 M11 M28 M40 M34 EI04 M45 M27 M44 M33 M17 Rest

Chains Mech Mis Fastener Gases Pipes ( Valves & Screens Cables & Automobi Pipe fit Packings Rubber l Grinding

2,462,279.64INR 2,364,055.18INR 2,290,439.99INR 2,261,293.62INR 2,117,095.74INR 2,024,137.83INR 1,733,802.16INR 1,689,689.43INR 1,608,383.42INR 1,409,914.82INR 1,386,665.97INR 1,201,023.15INR 979,581.93INR 12,401,023.36INR

48 2,942 9,364 2,842 457 458 168 272 897 2,291 1,434 255 68 10,937

TABLE-4

ABC ANYALASIS FOR THE YEAR 2009-10

Material Group A A A A A A B B B B B B B B B C P02 P03 M43 C200 M41 M30 G05 ME02 M15 ME01 M08 M28 M22 M13 M40 M11 Chemical Fuels Iron & S Building Lubrican Pumps & Safety I Bearings Gantry i Welding Conveyors, Pipes ( Mech Mis Fastener Valves & Gases Tot. usage val. 42,819,089.47 39,183,239.90 10,058,162.05 8,338,709.40 7,177,875.27 6,369,395.49 5,211,828.18 4,301,349.32 3,906,851.26 3,154,926.54 3,057,780.91 2,882,387.07 2,866,757.38 2,764,678.46 2,729,919.10 2,559,825.68

C C C C C C C C C

M34 M44 M27 M33 M17 M45 CIH M32 MI01

Screens Packings Pipe fit Rubber l Grinding Automobile Transmit Rubber l Filters&

2,536,908.99 1,919,582.69 1,566,179.00 1,397,512.22 1,359,805.70 1,187,259.32 1,048,212.12 1,019,736.92 1,016,147.94

FINALLY:
Segments A segment B segment C segment Total 25 Material Group 6 9 10 24% 36% 40% 100.00% Tot. usage val. in segment 113,946,471.58INR 30,876,478.22INR 15,611,170.58INR 160,434,120.38 INR 71.02% 19.25% 9.73% 100.00%

ABC ANYALASIS
100 80 60 40 20 0
A B C 0 10 0

% of value

SEGMENTS
ANALYSIS: -

During the year 2006-07 71.02 % of the items have been classified as A class items which requires tight control and strict monitoring. Almost half of the inventory is

maintained under B category but which requires only medium control and has a less value of 19.25% and the remaining items are under C, which requires least control and has a very minimum value 9.73%

TURN OVER FOR 2009-10

Material Group Total P02 P03 M43 C200 M41 M30 G05 ME02 M15 ME01 M08 M28 M22 M13 M40 M11 M34 M44 M27 M33 M17 M45 CIH M32 MI01 Rest Tot. usage val. 175,277,279.29 42,819,089.47 39,183,239.90 10,058,162.05 8,338,709.40 7,177,875.27 6,369,395.49 5,211,828.18 4,301,349.32 3,906,851.26 3,154,926.54 3,057,780.91 2,882,387.07 2,866,757.38 2,764,678.46 2,729,919.10 2,559,825.68 2,536,908.99 1,919,582.69 1,566,179.00 1,397,512.22 1,359,805.70 1,187,259.32 1,048,212.12 1,019,736.92 1,016,147.94 14,843,158.91 No.iss.VS 49,139 386 275 1,316 1,621 715 678 7,406 599 13 2,438 163 534 2,981 10,254 444 3,398 172 1,509 2,401 235 59 495 26 212 65 10,744

Chemical Fuels Iron & S Building Lubrican Pumps & Safety I Bearings Gantry i Welding Convyrs, Pipes ( Mech Mis Fastener Valves & Gases Screens Packings Pipe fit Rubber l Grinding Automobiles Transmit Rubber l Filters&

TABLE-5
ABC ANYALASIS FOR THE YEAR 2010-11

Material Group A A A A A A A B B B B B B B B C C C C C C C C C C P03 P02 P01 C200 M43 M41 M08 ME02 M30 G05 M22 ME01 MI01 M13 M44 M11 M28 M40 M27 M06 M34 M45 M33 M16 ME03 Fuels Chemical Catalyst Building Iron & S Lubrican Conveyors, Bearings Pumps & Safety I Mech Mis Welding Filters& Fastener Packings Gases Pipes ( Valves & Pipe fit Chains Screens Automobiles Rubber l Gears, Drier/Gr

Tot. usage val. 39,768,720.19 35,443,890.43 24,451,692.69 10,771,847.89 8,435,757.70 7,495,057.14 7,130,081.57 7,075,462.94 5,703,282.50 5,331,618.02 3,923,468.65 3,784,513.02 3,207,853.61 3,145,124.06 2,588,588.57 2,366,248.11 2,065,628.16 2,037,829.67 1,914,075.98 1,538,959.55 1,460,943.15 1,225,199.04 1,223,088.61 1,197,341.74 1,030,013.64

FINALLY:

Segments A segment B segment C segment Total

Material Group 7 8 10 25 28% 32% 40% 100.00%

Tot. Usage val. in segment 133,497,047.61INR 34,759,911.37INR 16,059,327.65INR 184,316,286.63 72.43% 18.86% 8.71% 100.00%

ABC ANYALASIS
100 80 60 40 20 0
A B C 0 10 0
No.iss.VS 51,327 239 437 21 1,775 1,086 823 204 764 654

% of value

SEGMENTS
ANALYSIS: -

During the year 2006-07 72.43 % of the items have been classified as A class items which requires tight control and strict monitoring. Almost half of the inventory is maintained under B category but which requires only medium control and has a less value of 18.86 % and the remaining items are under C, which requires least control and has a very minimum value 8.01%

TUROVER FOR THE YEAR 2010-2011

Material Group Total P03 P02 P01 C200 M43 M41 M08 ME02 M30 Tot. Usage val. 201,556,950.54 39,768,720.19 35,443,890.43 24,451,692.69 10,771,847.89 8,435,757.70 7,495,057.14 7,130,081.57 7,075,462.94 5,703,282.50

Fuels Chemical Catalyst Building Iron & S Lubrican Conveyors, Bearings Pumps &

G05 M22 ME01 MI01 M13 M44 M11 M28 M40 M27 M06 M34 M45 M33 M16 ME03 Rest

Safety I Mech Mis Welding Filters& Fastener Packings Gases Pipes ( Valves & Pipe fit Chains Screens Automobile Rubber l Gears,Ge Drier/Gr

5,331,618.02 3,923,468.65 3,784,513.02 3,207,853.61 3,145,124.06 2,588,588.57 2,366,248.11 2,065,628.16 2,037,829.67 1,914,075.98 1,538,959.55 1,460,943.15 1,225,199.04 1,223,088.61 1,197,341.74 1,030,013.64 17,240,663.91

7,922 3,176 2,691 56 10,936 1,668 2,924 522 461 2,420 37 109 684 241 23 21 11,433

CALCULATION OF EOQ FOR THE YEAR 2010-011

FORAMMONIA: ANNUAL DEMAND =184798 mt UNIT PRICE =18912 rs ORDERING COST =16554rs CARRYING COST =20% on unit price

= 18912*20/100 = 3782 rs EOQ= 2*D*O.C C.C = 2*(184798)(16554) 3782

=1272MT FOR MAP: ANNUAL DEMAND (D) UNIT PRICE ORDERING COST =159MT =18861 =6465 rs

CARRYING COST =20% on unit price = 18861*20/100 3772 rs

EOQ= 2*D*O.C C.C EOQ=2*(159)(6465) 3772

=23.mt

FOR PHOS.ACID
ANNUAL DEMAND (D) UNIT PRICE ORDERING COST =87446 =37626 =28446 rs

CARRYING COST =20% on unit price 37626*20/100 =7525 EOQ= 2*D*O.C C.C EOQ=2*(87446)(28446) 7525 =813M

FOR ROCK
ANNUAL DEMAND(D) UNIT PRICE ORDERING COST =471757 = 6876 =6465 rs

CARRYING COST =20% on unit price 6876*20/100 =1375

EOQ= 2*D*O.C C.C EOQ=2*471757*6465 1375 =666MT

FOR SULPHURIC ACID

ANNUAL DEMAND (D) UNIT PRICE ORDERING COST =112843 = 3932 =1113 rs

CARRYING COST =20% on unit price =3932*20/100 =786.4

EOQ= 2*D*O.C C.C

EOQ=2*112843*1113 786

=565 MT

FOR SULPHUR

ANNUAL DEMAND (D) UNIT PRICE ORDERING COST

=17376 = 7798 =4538 rs

CARRYING COST =20% on unit price =7798*20/100 =1559 EOQ= 2*D*O.C C.C EOQ=2*(17376)(4538) 1559

= 318MT

FOR UREA
ANNUAL DEMAND (D) UNIT PRICE ORDERING COST =69348 = 14418 =15803 rs

CARRYING COST =20% on unit price =14418*20/100

=2883 EOQ= 2*D*O.C C.C EOQ=2*(69348)(15803) 2883

=871MT

ANALYSIS The important technique in inventory management i.e.; EOQ is been calculated for items PHOSPHORIC, AMMONIA, MAP, , ROCK, SULP.ACID, SULPHUR, UREA as the information is available only for these two items. EOQ for phosphoric is813 units per order i.e; in one order 813 units will be in order to reduce the carrying cost as well as buying cost With respect to ammonia 1272 units are being placed an order which could be an optimum level for maintaining and as well as for the production activities With respect to map 23units are being placed an order, which could be an optimum, level for maintaining and as well as for the production activities With respect to rock 666 units are being placed an order, which could be an optimum level for maintaining and as well as for the production activities With respect to sulph.acid 565 units are being placed an order, which could be an optimum level for maintaining and as well as for the production activities With respect to sulphur 318 units are being placed an order, which could be an optimum, level for maintaining and as well as for the production activities With respect to urea 817 units are being placed an order, which could be an optimum level for maintaining and as well as for the production activities

INVENTORY ANALYSIS ANALYSIS OF RAW MATERIAL

As per the consumption of raw materials of Phosphoric Acid is increased from 2003to 2008 is 47.56% and decreased in the year 2006 2007 is 07.07%. The Ammonia consumption from 2003 2008 is increased to 33.64% and the consumption decreased during the year 2008 2009 is 10.86%. The Muriate of potash is introduced in the year 2006 2007 and from that year the consumption is increased gradually. 6.3 Work-in-progress:
INVENTORY Work in progress Work in progress Work in progress Work in progress Work in progress Work in progress Work in progress Work in progress YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 VALUE 0.27 10.86 132.13 262.28 67.89 220.80 170.25 217.8

Work in progress from 2004to 2011 is increased 97.50%. It increased in the year 2010-11to Rs. 217.8.

6.4 FINISHED GOODS

INVENTORY Finished goods Finished goods Finished goods Finished goods Finished goods Finished goods Finished goods Finished goods 164% YEARS 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 VALUES 16353.71 20451.32 11586.70 19497.28 21762.40 35953.66

2009-10 2010-11

33217.16 54742.79

Finished goods increased from 2003 to 2011is 141.90% and increased in the year 2010-11 is

CHAPTER-7
7.1SUMMARY
Inventory management as a project has been carried over in COROMANDEL FERTILIZERS for a duration of 8 weeks. This topic is chosen because almost 60% of the working capital is blocked in inventories for all the Indian companies.
The study period is from 2005-06 to 2010-2011.The techniques used by the company in managing inventory such as ABC analysis, E.O.Q, etc. have been analyzed thoroughly & inferences were also presented respectively. There are some drawbacks with the company in inventory management, the suggestions were given accordingly. Hopefully the company would consider the suggestions in managing the inventories effectively in coming years.

Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and Industries, etc., In accounting inventory is considered an asset. Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and Industries, etc., In accounting inventory is considered an asset. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facoromandelity or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of

materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. The inventory management process begins as soon as one has started production and ordered raw materials, semi-finished products or any other thing from a supplier. If you are a retailer, then this process begins as soon you have placed your first order with the wholesaler. Once orders have been placed, there is generally a short period of time available to a firm to put an inventory management plan in place before the supplies are delivered. Inventory management helps a firm to decide in advance where these supplies should be stored. Inventory constitutes the most significant part of current assets to a large majority of companies in India. On an average inventories are approximately 60% of current assets in public Limited companies in India. Because of the large size of inventories maintained by the firms, a considerable amount of funds is required to be committed to them. It is possible for a company to reduce its levels of inventories to a considerable degree e.g., 10 to20 percent, with out any adverse effect on production and sales, by using simple inventory planning control and techniques. And at the same time company should not invest excess money in inventory by managing large size of inventories. The company may loose the opportunity cost on the excess inventory and also the carrying cost will increase due to large size of inventories. Therefore it is advisable for the company to maintain inventory at an optimum level always. There are different techniques available for the company to maintain optimum level of inventory. As the inventories forms a major part in CFL, a study is being carried over on how the inventories are controlled and managed.

To

study

about

the

inventory

management

at

COROMANDEL

INTERNATIONAL LIMITED and to have an idea about the utilization of the inventory and little more about the storage procedure that are practically implemented in organization. Inventory plays a vital role in every manufacturing organization to have an uninterrupted production process by maintaining an optimum level of raw materials available at all time. The scope of my study is confined to one of the key areas of finance i.e. inventory management. The study concentrates on the methods and techniques followed by CORAMANDAL INTERNATIONAL LIMITED for its inventory management and its relative merits and demerits The study appraises the companys success in meeting the requirements of the company and the country by helping the farmers to raise agriculture output to meet the requirement of the countrys growing population for food grains. Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth". Since the essential physiological attribute of seeds is their ability to convert a great duel of nutrients into grain. The spread of this variety lead for greater consumption of fertilizers simultaneously with increasing demographic pressure on the agricultural productivity has assumed more importance. This also contributed to the rising demand for fertilizers. Agriculture the backbone of Indian Economy still holds its relative importance for more than a billion peoples. The Government Of India from time to time has taken considerable steps for the upliftment of Agriculture Sector. Here we have analyzed the performance of Fertilizer Industry being one of the vital parts in agricultural production and Government's policy initiatives for the same.

Fertilizer in the agricultural process is an important area of concern. Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizers in the recent years. The Fertilizer Industry in India started its first manufacturing unit of Single Super Phosphate (SSP) in Ranipet near Chennai with a capacity of 6000 MT a year. Then established the first two large-sized fertilizer plants, one was the Fertilizer & Chemicals Tranvancore of India Ltd. (FACT) in Cochin, Kerala, and the another one was Fertilizers Corporation of India (FCI) in Sindri, Bihar. These two were established as pedestal fertilizer units to have self sufficiency in the production of food grains. Afterwards, the industry gained impetus in its growth due to green revolution in late sixties, followed by seventies and eighties when fertilizer industry witnessed an incredible boom in the fertilizer production. Fertilizer consumption of plant nutrients per unit of grossed cropped area in India is still very low average being 91.5 kg/ha. Productivity of food grain crops in the country is also quite low, around 1.6 t/ha, which can certainly be doubled by enhancing per unit average fertilizer use. Fertilizer consumption has to increase substantially in order to achieve the food grain requirement of 220 million tons by the year 2002. The Indian fertilizer industry has succeeded in meeting almost fully the demand of all chemical fertilizers except for MOP. The industry had a very humble beginning in 1906, when the first manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were the first large sized -fertilizer plants set up in the forties and fifties with a view to establish an industrial base to achieve self-sufficiency in food grains. Subsequently, green revolution in the late sixties gave an impetus to the growth of fertilizer industry in India. The seventies and eighties then witnessed a significant addition to the fertilizer production capacity. The Indian fertilizer industry has witnessed a phenomenal growth in the eighties. However, the growth has tapered off in the nineties and in the recent past only public and cooperative sectors have made major investments in this industry. Presently public,

private and coop. sector share 45, 33 and 22 percent of capacity, respectively, whereas their share in P2O5 capacity is 26, 64 and 10 per cent respectively . New proposals to government for setting-up fresh capacities in country are mainly from Public and Cooperative sectors. The installed capacity as on 30.01.2003 has reached a level of 121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making India The 3rd largest fertilizer producer in the world. The rapid build-up of fertilizer production capacity in the country has been achieved as a result of a favorable policy environment facoromandelitating large investments in the public, co-operative and private sectors. Presently, there are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP and complex fertilizers 13 plants manufacture Ammonium Sulphate (AS), Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous fertilizers. Besides, there are about 64 medium and small-scale units in operation producing SSP. The Indian fertilizer industry is broadly divided into Nitrogenous, Phosphatic and Potassic segments. In addition to these, nutrients are combined to produce several complex fertilizers. To express the nutrient constitution of fertilizers, the grade of a fertilizer is expressed as a set of three numbers in the order of percent of Nitrogen (N), Phosphate (P) and Potash (K). The straight nitrogenous fertilizers produced in the country are urea, ammonium Sulphate, calcium ammonium nitrate (CAN) and ammonium chloride. The only straight Phosphatic fertilizer being produced in Sector Report: Fertilizer Industry India /Economics the country is SSP. The complex fertilizers include DAP, several grades of Nitro phosphates and NPK complexes. Urea and DAP are the main fertilizers produced indigenously. The Demand-Supply scenario in fertilizers has been worked out by the Working Group on Fertilizers for the Ninth Plan (1997-98 to 2001-02) on the basis of the

estimated demand and production projections in terms of N and P2O5 nutrients (Table2). The increase in production (supply) will be 4.86 million tons, most of it is confined to nitrogen resulting from the commissioning of the expansions, new plants or joint ventures abroad. Production of N is expected to increase from 9.7 million tons in 1997-98 to 25.0 million tons in 2007-08. The Group estimated that the available phosphate supply will increase from 2.8 million tons of P2O5 in 1997-98 and reach 7 million tons in 2007-08. The demand for N, P2O5, K2O has also been estimated up to 2006-2007 (terminal year of tenth plan) at 16.35, 6.65 and 2.60 million tones, respectively. The fertilizer policy is aimed at increasing consumption to meet the food and fiber requirement of growing population through setting up required production capacities, ensuring that quality fertilizers are made available to the farmers throughout the country at uniform and affordable price. It was also recognized that fertilizer use should be profitable to the farmers for which he must get a certain minimum return for the produce. This led to the announcement of procurement prices and minimum support prices for several crops from 1970 onwards. The Marathe Committee was assigned the task of resolving the issue of keeping Farm Gate Prices (FGP) of fertilizers at an affordable level in the face of rising production/import costs. Its recommendations in 1977 led to the birth of the Retention Price Scheme (RPS). This scheme was intended to ensure that both the fertilizer producers as well as the farmers should find it worthwhile to produce and use fertilizers. The policy aimed that each manufacturer is able to get 12% post-tax return on investment on efficient operation regardless of the location, age, technology and cost of production. In addition, the government agreed to reimburse the cost of transportation from factory gate to railhead and also take care of the distribution margin. The RETENTION PRICE SCHEME is now restricted to urea only. Coromandel International Limited incorporated in 1964, now belonging to the Rs. 15,646 crores Murugappa Group, is a leading company in India manufacturing a wide range of fertilisers and plant protection products (technical & formulations). Coromandel markets around 2.9 million tonnes of phosphatic fertilizers making it a

leader in its addressible markets and the second largest phosphatic fertiliser player in India. The Company also markets phosphogypsum and sulphur pastilles. Coromandel International Limited has multi-location production

facoromandelities and markets its products all over India and exports pesticides to various countries across the globe. It is managed by competent and committed professionals using advanced management practices. The Company is known for fostering a climate of high performance and continuous improvement. The Company also has strategic partnerships with leading companies across the globe. Voted as one of the ten greenest companies in India, reflects the Company`s commitment to the environment and society. Coromandel exhibited a keen concern towards control of environment pollution since inception. Several pollution control measure have been implemented from time to time by taking advantage of use of latest technology as in case of switch over to DCDA rose in sulphuric levels drastically. Similarly CFL adopted when over possible measure for recycling similarly in side the plant premises and installation of filter for recovery of rock dust thus saving foreign exchange and at the same time eliminating dust pollution. The total amount spent on pollution control till 2008-2009 was Rs. 97.82 crores (Only 2008-2009 19.364 crores) and an additional cost of Rs.25.63 crores in 2008 are earmarked for implementation of project for dry gypsum disposal system.
In todays competitive market scenario, all organization are focusing their efforts on inventory reduction and lean management practices. It is always essential to control stocks at various locations in organization at optimum level, proper inventory control is possible only with the support of efficient stores management i.e., at various places such as receipt of raw materials, finished components, work-in-progress, finished goods and spare parts.

The objectives of inventory control can be met by analyzing the process, Inventory carrying cost, procuring cost, set up cost, stock out costs, EOQ etc. for this various tools like ABC analysis, XYZ analysis, VED analysis, FSN analysis etc. are being used. Lead time management and vendor managed inventory (VMI) also facoromandelitates to reduce the inventory to optimum level. In any industry there are four M s that play a very important role in the smooth functioning of the organization and relation and objectives, they are Man, Machinery, Money and Material. The management of materials plays a pivotal role as 60% of the capital cost is attributed to materials alone. Inventories represent aggregate of those items, which are either held for the sale in the ordinary course of the business, or are in the process of production for sale or yet to be utilized consumed in the production of goods and services.

All items held in stock will be subjected to non movement analysis segregating the items for different non movement periods like over 2 years, over 5 years and 10 years so as to critically analyze the possibility of utilization of these items or otherwise for declaring surplus especially those items which have not moved for more than 5 years. Materials management department with the concerned technical departments will jointly do this analysis and separate list will be prepared, i.e. code group wise, for the nonmoving items beyond 5 years on an annual basis project wise under different code groups and steps would be taken so that the non moving items are not indented again, until the existing stocks are utilized. Every effort will be made to keep as low as practicable because this is non productive inventory. Which is blocking the capital, storage space needing preservation and up keeping efforts and results, in extra inventory carrying cost. The company reduces the non moving inventory by regular review for utilization or by declaring as surplus.

One of the basic decisions that must be made in any stock control system is that of determining the quantity to order since investment in inventories largely depends upon the quantities in which the items are ordered for replenishment.

Ordering large lots infrequently, reduces administrative work but increases investment in stocks ordering small lots frequently keeps the investment in low but increases administrative work. This is because small lots require high order frequency, more purchase requisition require to be raised, more frequently the comparative statement must be raised, more the material must be received, more posting must be done more bills must be handled. All these activities will call for more staff and hence more administrative costs and overheads. Therefore a rational approach is needed for fixing the order quantity of an item, which will either increase neither the procurement cost nor the storage cost. So such quantity which results in equal procurement cost & storage cost is known as EOQ (Economic Order Quantity)

7.2 SUGGESTIONS
Company should maintain an optimum level of inventory to ensure efficient and smooth production. The company is investing huge amount on A class and X category items on which the company would loose opportunity cost. Therefore company shall reduce size of inventories on these categories. The categories under XYZ & ABC have to be continuously monitored and reviewed. The company can maintain only minimum investment in order to maintain efficiently . E.O.Q method of inventory management can be extended to other items of inventory.

Company should make an effort to reduce carrying cost by maintaining expensive inventories less in number. LIFO method can also be used effectively in case if the item is quickly perceivable & also incase of heavy investment inventories. The other techniques like V.E.D analysis, P.V.A analysis etc. can also be used applied by the company to manage the inventories. The firm should estimate the cost, return and risk factor also in establishing its inventory policies. Instead of maintaining huge size of inventory, the company can maintain safety stock in all the items. The Re-order point has to be calculated by the company in order to avoid excess inventory and to reduce lead time.

7.3 FINDINGS
Company is right now using only four inventory management techniques such as ABC analysis, FIFO, Non moving items. The company is using XYZ analysis only for the past four years.

E.O.Q method is followed by the company only on few inventories.

All the inventories are not included in ABC & XYZ analysis.

Large size of inventories are maintained by the company under XYZ & ABC analysis in order to reduce the ordering cost.

The carrying cost incurred by the company for maintaining the given level of inventory is increasing every year.

The equipments & spares in general stores are also maintained as an inventory which requires huge investment.

Only FIFO method is used and LIFO is not used by the company.

BIBLIOGRAPHY

Financial Management Financial Management: Operations Management

: I.M.PANDAY, JAIN&NARANG : B.S.GOEL

Management Accounting:

SHARMA & GUPTA

www.coromandal.biz

website

www.indiainfoline.com

: website