BIRLA INSTITUTE OF TECHNOLOGY

Kolkata Extension Centre

Name : Amit Murmu

Roll No:BBA/3519/07
Semester: Vth
Course: BBA
Subject: Project-I (BBA 620)

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 A

Project Report

On

“Inventory Analysis”

External Project Guide

Mr. Suhas Mahadeokar

Manager– Purchasing Process & IT Projects

Internal Project Guide

By:

Mrs. Sraboni Dutta

Amit Murmu

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BBA/3519/07

Table of Contents Page no

1. Acknowledgment 4

2. Executive Summary 5

3. Introduction 6

4. Certificate 6

5. Scope & Objective 8

6. Brief Review of Plants 11

7. Vision 15

8. Lafarge Products 16

9. Important Definitions 17

10. Item Master & Supplier Master 19

11. Approach 20

12. Working at Eastern Operation Office, Kolkata 21

13. Evaluation on Jojobera Cement Plant 22

14. Recommendations 28

15. Suggestions 29

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 16. Key Learning 30

17. Conclusion 31

Acknowledgement

I am thankful to Mr. R T Goswami , Faculty In charge BIT

Mesra Kolkata Extension Centre and Mr. Mohit

Kapoor,V.P. Logistics Lafrge Cement EOO kolkata for
giving me an opportunity to work for Lafarge India Pvt.
Ltd.

My sincere thanks to Mr Suhas Mahadeokar Manager–

Purchasing Process & IT Projects for extending his full
support and valuable guidance throughout my project
duration.

I am also thankful to respective HODs and Users of

Lafarge for extending their cooperation towards the
successful completion of my project.

My sincere thanks to my Internal Guide Mrs. Sraboni

Dutta, Lecturer BIT Mesra Kolkata extension Centre for
extending all the support and for her ideas and
knowledge which acted as preliminary information for all
the project work.

Finally, I would thank my faculty and friends for their valuable suggestions
and inputs that proved to be of invaluable assistance, and constantly
motivated me to learn as much as possible.
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 Amit Murmu

BBA/3519/07

Executive Summary

The main aim of this project is to identify

movable and immovable items , slow moving
items and the inventory currently in use and
identifying obsolete items. The Summary Report
includes positive comments about the Lafarge
cement industry and the evaluation of jojobera
cement plant inventories .The observation also
includes the areas where the company would like
to see improvement. There are areas where the
industry has to look upon its inventories and its
different plants have to, share similar
perspectives. There are also a number of areas
where Industry differ by quality, quantity i.e.
stock, and or rank i.e. proper use of stocks., given
that Lafarge cement Industry has experience
both on market performance, position an gaining
customer loyalty.

The project summarizes the work and experience

gained at Lafarge Eastern Operation Office and a
brief overview of different items (moving, non-
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 moving, disposable ) ,and a evaluation on
jojobera plant has also been done.

INTRODUCTION

In line with its strategy to develop its Aggregates

& Concrete business in emerging markets,
Lafarge acquires 66 highly efficient concrete
plants located across India. It has key markets
in Delhi, Kolkata, Mumbai and Bangalore, with
total estimated volumes of 4.1Mm3 in 2008
and a market share of approximately 25%.
Lafarge has established itself as the leader in
the Indian ready-mix concrete market.

The ready-mix concrete market is still in an early

stage of its development in India, but offers
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strong growth and value creation potential. The
Indian construction market is developing to meet
significant demand for new housing, urbanization
and infrastructure.

India offers strong potential for introducing

innovative products. Lafarge boasts the world's
leading research facility in building materials and
has developed innovative, value-added concrete
products over the last ten years which contribute
to improving construction methods and working
conditions on building sites. One of Lafarge's key
strategic focuses today is innovation in concrete,
which translates into an accelerated roll-out of
value-added concrete products in both developed
and emerging markets. Lafarge will be aiming to
offer the Indian market its most advanced and
value creative solutions for construction.
"Lafarge was the first in its industry to move into
Aggregates and Concrete in a significant way,
over 10 years ago, and to develop a unique
expertise in creating value in the Concrete
business."
The recent start-up of operations at Lafarge's first
Greenfield ready-mix concrete plant in Raipur, in
the state of Chhattisgarh and marks a decisive
step in Lafarge's strategy to grow its presence in
the Indian ready-mix market.
Lafarge is already present in India in its other
businesses and is investing to develop its Indian
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operations, in order to accompany market
growth. In cement, Lafarge has emerged as a
major player in the eastern region of India, with a
cement production capacity of 5.5 million tons
and a strategic plan to more than double its
presence in the next five years through
Greenfield projects in several regions. In Gypsum,
Lafarge is already supplying the Indian market
and is currently building a plasterboard plant
near New Delhi, Rajasthan, with an annual
capacity of around 10 million m².
Lafarge Cement currently holds the leadership
position in Eastern Indian markets, producing
high performance blended cements in Portland
Slag Cement (PSC) and Portland Pozzolona
Cement (PPC) variants. Lafarge enjoys high brand
equity through its different brands; Lafarge
Concreto, Lafarge Duragard and Lafarge Cement.

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 Scope & Objective

The objective of this study is to identify items

which can be declared as disposable items. This
will help in improving working capital, reducing
the storage, handling costs and various indirect
costs being incurred by Lafarge in maintaining
such non-usable Items. The project here by helps
to understand the inventory’s maintained by
Lafarge cement and categorising them as
movable and non movable items. It also helps to
understand the valuation of items, how much the
stock of inventories Lafarge cement maintains
and how it uses them.

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 Company Overview

Lafarge India is a subsidiary of the French

Building Materials major Lafarge. Lafarge is the
world leader in building materials, with top-
ranking positions in all of its businesses: Cement,
Aggregates & Concrete and Gypsum. Lafarge
entered the Indian market in 1999, with the
acquisition of the cement business of Tata Steel.
This acquisition was followed by the purchase of
the Raymond Cement facility in 2001.

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Lafarge currently has four cement plants in India:
two integrated plants in the state of
Chhattisgarh , one grinding station each in
Jharkhand & West Bengal. Total cement
production capacity of Lafarge in the Indian
market currently stands at around 6.5 million
tons. Lafarge India produces different types
cements like Portland Slag Cement, Portland
Pozzolana Cement. Lafarge Cement is famous all
over the world for its premium quality and has
been used to build many landmark
buildings,structures globally. The company is a
leading cement player in Eastern India. It’s
brands Lafarge Cement and Lafarge Concreto
Cement enjoy high brand equity here and are
amongst the highest priced brands. Lafarge is
committed to the Indian market and has firm
plans to expand its capacity in India.

Lafarge cement is available through a large

dealer network, throughout eastern India- in the
states of West Bengal, Jharkhand, Bihar,
Chattisgarh, Orissa and North-East States.
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Lafarge Cement is also available in parts of
Madhya Pradesh and Maharashtra (Vidarbha
region), Part of Uttar pradesh , Andhra Pradesh &
National Capital Region.

Brief Review of Plants

Lafarge India's current cement operation

comprises a modern split location cement facility

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 located at Sonadih (District Raipur,
Chhattisgarh) , at Jojobera (District Singhbhum,
Jharkhand), at Mejia(District Bankura,West
Bengal) and an integrated cement facility located
at Arasmeta (District Janjgir-Champa,
Chhattisgarh).

All plants are ISO 9001 and 14001 certified.

The plants at Sonadih, Jojobera,Mejia and

Arasmeta are based on the dry process
technology and use energy efficient processes.
The thermal energy of the kiln is optimized by the
use of a multistage pre-heater with in-line pre-
calciner.

Lafarge worldwide places a very high emphasis

on protection of the environment. In all its Indian
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plants, bag filters and electrostatic precipitators
are used to reduce pollution and ensure
environment friendly plant operations.

Lafarge India has adopted stringent quality

control measures to ensure the highest quality
cement .The plants have the benefit of the strong
technical and R&D set-up of Lafarge group called
DPC which is supported by CTI & CTEO - at Lyon
in France, CTS - at Montreal in Canada, ATC - at
Kuala Lumpur in Malaysia and CTEC - in Austria.

Lafarge Group employs more than 500 scientists

and spends more than 100 million euros annually
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in developing leading technologies in the area of
building materials and construction technology.
The regular exchange of knowledge and
technological improvements between the
technical centre and the Indian operations has
enabled Lafarge India to improve operational
efficiencies on a continuous basis.

Rated Capacities
Location Facilities
(as of 2009)
Clinkerisation unit 1.4 MTPA of clinker
0.5 5MTPA of Ordinary
Sonadih
Cement Grinding unit Portland Cement (OPC) 43
grade

Cement Grinding unit with 3.4 MTPA of Portland Slag

Jojobera
separate circuits for Cement (PSC) & Portland
clinker and slag grinding Pozzolana Cement (PPC)

Arasmeta 1.6 MTPA of clinker

Clinkerisation unit

1.6 MTPA of Portland

Cement Grinding unit
Pozzolana Cement (PPC)

1.0 MTPA of Cement

Mejia Cement Grinding Unit 15

Portland Pozzolana
Cement (PPC)
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 Vision

To be a leading cement company in India.

• Sustained growth that creates value for our shareholders and

doubles our turnover every 4 years.

• Building strong brands that meet consumer needs and

aspirations.

• Embracing safety as a way of life.

• Being a responsible citizen and ensuring sustainable

development.

• Being committed to the highest standards of corporate

governance by conducting the business with integrity,
honesty and transparency.

• Fostering a performance culture in an environment of learning

that encourages mutual trust and respect, teamwork,
customer orientation and sharing of best practices .

LAFARGE PRODUCTS
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World leader in building materials, Lafarge holds top-ranking positions in all of
its businesses: Cement, Aggregates & Concrete and Gypsum , plaster primer
named “ASTARTEK”.

Important Definitions
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• Inventory - Inventory is the total amount of goods / materials
contained in a store or a factory at a given time.

• Non Moving Items – The items lying in the inventory of

Lafarge’s Plants which have not moved since Oct. 2004

• Slow Moving Items – The items lying in the inventory of

Lafarge’s Plants which have not moved since July,2006.

• Insurance Spares – The spares which have a book value

greater than Rs. 1.6 crores are insurance spares.

• Critical Spares – The spares which are essential for

continuous operation of the plant i.e. the plant cannot
continue production if the major equipment running through
these spares are not available at the time of breakdown.

• Non Productive Items – Items lying in Lafarge’s inventory

which are fast moving and consumable but are of no
economic importance to Lafarge. Such Items included
Stationary, Printed Stationary , Printer Cartridges etc.

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• S- Tagged Items – The items which are live in nature i.e. they
are suitable to use in there present condition

• U- Tagged Items – The items classified as U tagged were

those items which are declared as Obsolete and are not more
suitable to use in plant or the major equipment is not running
due to technological advances.

• O– Tagged Items – This category of items represents the dead

items.

• M – Tagged Items – This category includes those items, which

are required to be maintained in the inventory within a
minimum permissible limit. The quantity level of such items
should never reach below the allowed minimum permissible
limits. Responsibility to maintain inventory/ availability of
such items is of Plant Inventory Team.

Item Master & Supplier Master

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 • Item Master – Item Master gives all the details about the item
that has been procured such as item description, item code
etc.

• Supplier Master – Supplier Master deals with all the details of

the suppliers.

• Generation of Codes

Any item in the inventory is given a particular code which is

comprised of 9 digits.

Consider the following example:

Suppose a Item Code is 220104A01

The logic behind generation of this code is shown below:

22 represent the class, standard item.

2201 represent the family, bearing.

220104 represent the sub family, ball bearing.

A01 represent the serial number of the particular item.

Similarly, codes are generated for suppliers which comprises of 8

digits.

Approach

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• Focused on Items, which have not moved since last one year,
which also included Slow Moving and Non Moving Items.

• Segregation of Items Department wise

• Meeting with Respective Department Heads & Users.

Working at Eastern Operation Office

Kolkata
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• Segregated Items Department wise, Class wise and Family
wise.

• Analysis of Non Moving Items.

• Analysis of Top Items.

• Analysis of Non Productive Items.

• Classified Items on the basis of Equipment type.

• Learned Use of stocks.

Valuation of Jojobera Cement Plant

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 Total Inventory* Non Moving Items Slow Moving Items Moving Items
(MINR) (MINR) (Not (MINR) (Not Moved (MINR)
Moved since Oct since July 2006)
Jul 2009 2004) July 2009

No. of 9102 1989 3414 5688

Items

Total 250.95 8.51 25.76 225.19

Value

Top Items

Departments Value (MINR) July 2009

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Mechanical 58.52

Electrical 10.64

Electrical & Instrumentation 9.71

Mines 14.26

Production 35.73

Instrumentation 8.18

Total 137.04

Non Moving Spares, appearing in inventory, for the

following main equipments:

Equipment Value (MINR) July 2009

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Coles Crane 0.16

Dozer D155 0.16

Dumper BH40 0.22

Dumper LW 35 0.17

IR HP 450 SCU Compressor 0.10

Others 1.59

Total 2.40

Non Productive Items

Category No. of Items Value

A 3 0.04

B 142 0.88

C 4 0.03

Total 149 0.95

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CATEGORY INCLUDES:

A INVENTORY OF CONSUMABLE ITEMS

INVENTORY ITEMS RELATED TO :

B IT,ELECTRONICS,CONSUMABLES,GENERAL
ITEMS,STATIONARY & PRINTED STATIONARY

INVENTORY OF ELECTRONIC ITEMS WHERE THE

C
MAIN EQUIPMENT/METHOD IS OUT DATED.

Observations

• There were some rubber items laying in inventory which were

not moved since 2004, which required physical verification.

• Similarly, there were couplings and bearings which also

required physical inspection after not having moved for so
many years.

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• Many non-productive items are part of Inventory. Maintaining
inventory of such items may have impact on carrying /
handling cost. Ex. stationary, printing stationery, IT related
products such as Printer Cartridges, RAM & Hard Disk etc.

Evaluation on Jojobera Cement Plant

• Worked on Inventory as on 11th July, 2009.

• Modified our strategy by working on last year non moves items

• Held a detailed discussion regarding non moving items.

Summary of Disposable Items

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Department No. of Items Value(INR)

MINES 307 15,61,407.70

PRODUCTION 4 4,09,406.21

CIVIL, DG, ELECTRICAL AND INSTRUMENTATION 52 2,93,818.37

INFORMATION TECHNOLOGY 21 1,51,197.80

DISPATCH 2 8,014.66

TOTAL 386 24,23,844.74

Recommendations

• Maintaining healthy relations with suppliers.

• Working on Zero Inventory Basis.

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• Reduce the Purchase Procedure Timing.

• Formation of a Centralized Core Committee which will visualize

procurement of materials for all the plants.

Suggestions

• If predictions made by Inspectors can provide

specific details about failure of equipments, it
can help in reducing inventory by working
according to the time limit given by them.

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• Some Items are doubly coded which results in
non- moving items.

Key Learning’s

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• The logic behind generation of codes for
various Items.

• How are inventories classified and maintained

in stores

• Purchasing Process

• Organizational Structure

• Organizational Approach

• Art of Management

Conclusion

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Lafarge is maintaining a huge stock pile of
inventories which causes a great impact on
storage costs, handling costs and other indirect
costs. In order to restore the order of inventory,
Lafarge must redefine the criticality of the
components and must revise the ordering and
purchasing process so that the items are
procured in right manner and in right quantity
and at right time. A total reduction of Rs. 27 Lacs
of inventory was made in Jojobera Cement Plant.
Such analysis should be carried out on a regular
basis to ensure a constant check on the levels of
inventory.

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