PRESENTATION ON INVENTORY MANAGEMENT ANALYSIS UNDERTAKEN AT RIL-HMD

Supervised by Mr.Ajay Gaur Head of accounts dept. RIL-HMD

Submitted by : Pooja Malik 104682276262 MBA(Finance)

INTRODUCTION

ABOUT RIL-HMD
RIL-Hoshiarpur Manufacturing Division is one of polyester manufacturing sites of RIL which is largest private sector company of India on all major financial parameters such as profits, sales and net worth. RIL-HMD was established in 1987 by JCT with capacity of 70 TPD to produce PSF and PET chips with Zimmer, A. G. German technology. A major expansion was done in 1995 by installing another 70 TPD to produce PSF, POY, and PET chips.

PRODUCT PROFILE
P ro d u c t /P la n t PSF -I PSF -II POY PFF C H IP S C a p a c ity C o m m is io n e d y e a r 2 4 0 T P D (s p e c ia lly 1 9 8 9 c o n ju c a te fib e r re c ro n ) 240 TPD 30 TPD 30 TPD 300 TPD 1995 1995 2004

All the products are being produced on large scale. The brand used for the product is RECRON. The total production capacity of whole of the plant is 351 TPD (Tons Per Day).

INTRODUCTION TO INVENTORY MANAGEMENT Inventory management is considereding:

What ? How ? How much? Where? when?

TYPES OF INVENTORY

Inventory may take the form of:

Work in process

Vendors

Raw Materials

Work in process Work in process

Finished goods

Custome r

BASIC INVENTORY DECISIONS

These decisions have to do with the timing of orders for the item and the size orders for the item. of

Basic Inventory Decisions

How much? Lot sizing decision Determination of the

When? Lot timing decision Determination of the timing for the orders.

quantity to be ordered.

SCOPE,OBJECTIVES AND LIMITATIONS

SCOPE OF THE STUDY

The various following areas are covered in the study: Receipt section Storage and preservation section Issue section Waste and scrap Inventory control techniques

OBJECTIVES OF THE STUDY

The main objective of this project is to study the inventory management and control Practices in RIL-HMD. The objectives of my study are: To understand the meaning and importance of inventory management and control system in an organization. To study the various tools and techniques of inventory control used by RIL-HMD.

LIMITATIONS OF THE STUDY

Less Time Lack of information More use of secondary data: The study was limited only to one firm in the industry. It consumes more time. The analysis is based on figures present in the internal records only.

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
The main objectives of my study are to understand the meaning and importance of inventory management and control system in RIL,Hoshiarpur.During analyzing of inventory,following types of inventories are determined: raw materials inventory Work in progress inventory Finished goods inventory Supplies inventory.

The methodology adopted by me is as follows:TYPE OF RESEARCH : Descriptive. SAMPLING PLAN SAMPLE PLACE : RIL-HMD which is a group company of RELIANCE INDUSTRIES LIMITED. SAMPLE SIZE: Three years financial reports(20082011) SOURCES OF DATA COLLECTION: There are mainly two methods of collecting data: Primary data Collection Secondary data Collection

DATA PRESENTATION ANALYSIS AND INTERPRETATION

Data is presented through : Charts Tables Diagrams

Inventory Management And Control System In Ril Classification Of Stores Central stores Chemical stores Bulk chemicals Scrap Yard

Classification of materials:
CODE SPAR CACH PAMA MATERIALS SPARES CHEMICALA& CATALYSTS PACKAGING MATERIAL FINISHED FTRM LABC TRADABLE RAW MATERIALS LAB CHEMICALS

Ril Maintains Its Inventories By Classifying Them Into-

P A R T I C U L AN Ro S. o f I t e m Cs o n t r o l C a te g o ry A 4 8 0 C a te g o ry B 9 7 0 C a te g o ry C 3 0 0 0 S tr ic t/T ig h t M o d e ra te M in im u m

Tp oi vn r y e f ne t y o Rw a ra a me l t i

Cm i e o o p ss f r : MG E Gc l l o y PA T Ai c d Tai mi x ead i n d i , n t u od Atm y x e n o oi i n d -Pr u e Tr pa lc e ht i e a -M o o n Ey n t l e he

Wkn r g s o i P r s r oe

m ea t a a i t e a r l ht r n h t i s e p c s o m u cun r es f a f t r g o na i adles pr t l i t e n i ea e n h a y f c r p me at y r i s o e s

F i hd od i se G s n o

fn hdi e s t a le i i i e t m ht i n s t ewr hue r ay t h a os , ed o e b d pt hd R s ls e i a e. I e s c L l i sgosudrt e r n t od ne h b d a nmRCO. a e ERN

S r s n sa s t e ad pr o e

sa e tr r t s bans er g i eg ern s a s ni e g pr n i e fl e ,s ao it r el i s l o-rn ig c ti g i g u n rns t Pt n i o s i ple m lr e s

METHODS OF ISSUE OF MATERIALS There are many methods of material issues, the following are those methods which are used in RIL. FIRST IN FIRST OUT (FIFO) LAST IN FIRST OUT(LIFO) RIL have big stores and here normally FIFO (First in First Out) method is adopted for Issue of various materials

Codification:
In RIL, various codes are allotted to different types of materials for its proper identification. If the material is of same nature but it is different from the other in respect to its length, sizes etc then different bins are allotted with different code numbers for keeping such material so that the required material can be issued when it is demanded by the consuming department

C D GO P R H S R Q IS IO O IN F U C A E E U IT N PAT LN A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 A 1 I0 D C L E IS IP IN A L -A T F C A L -A M F D A L -C A F L A L -C L F V A L -E E F L A L -F N F L A L -IN F S A L -IT F D A L -M C F E A L -M T F K A L -P Q F E A L -P L F O A L -P Y F O A L -P L F P A L -P R F U A L -S F F A A L -S G F P A L -S R F T A L -T A F L A L -U L F T DS R T N E C IP IO Ac o n c u ts P rs n l A m is a n e o a d in tr tio C e ic l la . hma b C il D p rtm n iv e a e t E c ic l D p rtm n le tr a e a e t F reL eD p rtm n ib in e a e t In tru e ta nD p rtm n s m n tio e a e t In rm tio & e h o g fo a n T c n lo y De a e t p rtm n M c a ic l D p rtm n eh n a ea e t M rk tin D p r e t a e g e atm n P c s in ro e s g Qa u lity c n l D p rtm n o tro e a e t P L D p rtm n OY e a e t P YD p rtm n O ea et P t D p rtm n ilo e a e t P rc a eD p rtm n u hs ea et S fe D p rtm n a ty e a e t S in in D p rtm n p n g ea et S re D p r e t to s e atm n T x D p rtm n e tile e a e t U tilitie s .

STORES PROCEDURE IN RIL INDENTING

RECEIPT, VERIFICATION AND INSPECTION

STORAGE WAREHOUSE AND DISPTCH

The major objective of warehouse and dispatch is the proper handling and storage of PSF, POY and CHIPS to protect them from damage and deterioration during handling, maintenance and storage and to dispatch and deliver the goods in compliance of dispatch orders to the entire satisfaction of the customers

DATA ANALYSIS AND INTERPRETATION

STATEMENT OF STOCK OF MATERIALS AS ON 31.03.2011 Table : INVENTORY STRUCTURE IN RIL-HMD

D E S C R IP T IO N 2 0 0 80 9 (A m o u n t 2 0 0 91 0 (A m o u n t 2 0 1 01 1 (A m o u n t in L a k h s ) R a w m a te ria l S to re s & S p a re s In s u ra n c e s p a re s W o rk in ro g re s s p F in ish e d g o o d s TOTAL 2 5 2 6 .2 5 2 6 5 .5 8 5 8 .6 8 3 5 8 .5 8 1 6 2 3 .2 0 4 8 3 2 .2 9 in L a k h s ) 1 2 2 8 .6 5 2 4 0 .8 5 5 0 .2 9 2 9 6 .2 5 1 0 2 2 .0 4 2 8 3 8 .0 8 in L a k h s ) 2 3 2 4 .8 5 2 7 0 .5 4 6 0 .5 8 3 5 4 .8 5 1 4 7 1 .4 5 4 4 8 2 .2 7

Fig:INVENTORY STRUCTURE IN RIL-HMD

Figure : Amount of raw material in total inventory

Figure :Value of stores and spares in total inventory

Figure : Value of WIP in total inventory

Figure: Value of Finished goods in total inventory

Figure : Comparison of Three years total inventory

Table : Statement Of Inventory To Current Assets

D e s c rip tio n 2 0 0 80 9(A m o u n t in2 0 0 91 0(A m o u n t 2 0 1 01 1(A m o u n t la k h s ) Asset % Age c u rre n t A s s e ts . of 7 9 .7 2 6 8 .5 5 6 3 .6 9 in la k h s ) A sset la k h s ) Asset In v e n to ry C u rre n t In v e n to ry C u rre n t In v e n to ry C u rre n t 4 8 3 2 .2 9 6 0 6 0 .9 9 2 8 3 8 .0 8 4 1 4 0 .4 1 4 4 8 2 .2 7 7 0 3 7 .2 2 in

Fig: Inventory To Current Assets

Table : STATEMENT OF PRODUCTION As On 31/03/2011

P R O D U C T I O 2N0 0-089( i n M T ) 2 0 0 90( i n M T ) 2 0 1-101( i n M T ) -1 P r o d u c tDoi s p a tP h o d u c tD oi s p a tPc rho d u c Di oi sn p a t c h i n cr i n t P S F /P F F 8 1 3 9 3 8 1 5 0 9 5 5 6 1 9 5 6 6 6 77 0 9 9 7 6 9 7 7 7 POY C H IP S 1 1 0 1 8 1 1 0 3 19 8 8 3 9901 11090 10799 7861 1 1 9 6 6 1 2 0 4 0 1 0 7 9 9 1 0 3 2 68 3 4 7

T O T A L 1 0 4 3 7 7 1 0 4 5 8 7 6 3 0 1 7 6 98 4 9 0 4 3 4 8 8 4 3 7 0

Fig: Production Of Psf /Pff

Fig: Production Of Poy

Fig: Production Of Chips

Fig:TOTAL PRODUCTION AND DISPATCH

Table : Statement Of Inventory Holding/Inventory Turnover In Months

D E S C R IP T IO N 2 0 0 -8 9 0 C o s t o f g o o d s s o ld 0 4 5 0 .7 2 6 ( in la c s ) A v e r a g e in v e n to r y5 1 9 6 .2 1 ( in la c s ) In v e n t o r y T u r n o v e r R a tio 1 1 .6 3 1 1 .9 2 1 4 .4 6 3 8 3 5 .1 8 3 6 6 0 .8 1 2 0 0 -9 0 1 4 5 7 1 9 .4 1 2 0Z1 0-1 1 5 2 9 3 2 .5 8

Fig :. Inventory Holding/Inventory Turnover In Months

Table :Showing Working Capital Turnover Ratio For The Period Of Three Years
YEAR COGS N E T W O R K IN G W C C A P IT A L 2 0 0-0 9 8 2 0 0-1 0 9 2 0 1-1 1 0 6 0 4 5 0 .7 2 4 5 7 1 9 .4 1 5 2 3 2 .5 8 9 3 2 4 2 .8 9 2 7 3 0 .4 5 4 9 3 2 .1 7 TURNOVER R A T IO 1 8 .6 4 1 6 .7 4 1 0 .7 3

Fig. Showing Working Capital Turnover Ratio For The Period Of Three Years

ABC ANALYSIS
Q U A N T IT Y P A T IC U L A R S V A L U E P E R C E N T A G E R PERCENTAGE IT E M A IT E M B IT E M C TOAL 70 20 10 100 10 20 70 100

ITEM CLASSIFICATION BY ABC

FSN ANALYSIS:

FINDINGS
RIL strictly keeps a control on all its items in the stores by setting certain authorization levels . Inventory level is maintained on reorder level RIL has been carrying out various Inventory Control techniques like ABC, XYZ but they do not use VED Analysis which is equally important. RIL has been maintaining different levels to control inventory.

All the work is coordinated through SAP System. All the functions in the stores like other departments work on SAP-System Application Program with mappings designed especially for all types of items. This system has been recently installed in all the departments of RIL. Another Technique i.e. Economic Order Quantity (EOQ), which determines How much to Order, is not being used in RIL.

After the installation of the SAP system, working in the organization has improved tremendously. In RIL the stores department is located in the central place.The location of stores department in RIL has been selected by taking into account the various factors. The drums of MEG and FO are kept openly there in the stores department and at the times of rain, they have to face a problem of damage to these drums of raw materials.

In RIL, in order to achieve the object of a good store layout the store is divided into different sections. For keeping the materials, bins with proper numbers or codes are allotted to them for their identification. Separate space is provided for keeping different types of materials. Separate section is there for chemicals, tools and spare parts, paints, stationery etc.

Small items such as nails, screws, nuts bolts etc. are stored in small but closed bins. Heavy weight or material not affected by rainwater, sunlight, air etc. is kept in the open yard. Inventories constitute the most significant part of the current assets in the RIL, Hoshiarpur complex. Because of the large size of inventories maintained by the plant, a considerable amount of funds is required to be committed to them , which in addition involves certain crucial planning and decision-making.

SUGGESTIONS
In RIL, VED Analysis is not used as an inventory control tool .They must use it. They should explore the Practical applicabilities / possibilities to introduce EOQ model. This will facilitate a lot in exercising the better control over the inventory. The drums of MEG should not be kept openly to safeguard them from damage and wastage. More sheds should be provided to keep such material safely.

In RIL there are two different departments i.e. Purchase department and Stores department. It is strongly felt that with the integration of these two areas i.e. Procurement and Storage; they can save a lot in lead-time communication, manpower and can avoid duplicacy of work too. So with this the work load on the employees will also be reduced to some extent.

CONCLUSION
After the overall study on the Inventory Control System in RIL, I have concluded that there is proper management of inventory in the stores. The surplus stock available in the stores is properly utilized. The main focus of issue department is to control the wastage to a minimum extent.

Efficient inventory management can take the company to new heights and inefficient inventory management can ruin the company.