A SUMMER TRAINING PROJECT REPORT ON INVENTORY MANAGEMENT

AT

INDIAN OIL CORPORATION LIMITED

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF

MASTERS OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF BY

MS. CHANDRA FACULTY SRM UNIVERSITY

SUBMITTED
VIKAS KUMAR MBA 2008-2010 REG NO. 35084151

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SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR

DECLARATION
I VIKAS KUMAR ,a bonafide student of SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY , REG No. 35084151 MBA (3rd Semester) hereby declare that the Final Project entitled INVENTORY MANAGEMENT is an original work and the same has not been submitted to any other institute for the award of any other degree.

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VIKAS KUMAR

PREFACE
Knowledge has two aspects - theoretical and practical and no theoretical concept is complete without having knowledge of its practical application. A few weeks professional training programme was introduced as a part of curriculum of M.B.A. This summer training programme proves beneficial to the future managers as they are confronted with the problems of actual work environment during their training period.

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As per the curriculum requirement , I did 6 weeks training in INDIAN OIL CORPORATION LTD. In INDIA, PANIPAT. Working in such a big concern, no matter for a very small period was really a matter of pride. My area of work in that concern was confined to Finance department and moreover it was not possible for me to cover all the areas of Finance department in such a short period of time so I concentrated my working on the project assigned to me i.e. INVENTORY MANAGEMENT. So the learning during the training in INDIAN OIL CORPORATION LTD., a report of that is being presented in the following pages.

VIKAS KUMAR

ACKNOWLEDGEMENT
Intention, dedication, concentration and work are very much essential to complete any task.But still it needs lot of support, guidance, co-operation of people to make it successful. Heart full thanks to all the respective persons who support and guide me. I have no words to express a deep sense of gratitude to the management of SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 4

INDIAN OIL CORPORATION LIMITED for giving me an opportunity to pursue my internship. I sincerely thank Mr. L.D. Batra (T&D Manager) for giving me more than just a training place and an opportunity for understanding of what is a good professional culture I express my deep sense of indebtness towards Mr. Rakesh Kumar Dubey (Finance Manager, Panipat region) for providing me valuable information . I would like to thank Mr.Siddhartha for guiding and helping me immensely throughout my training. I also offer my sincere thanks to DR. N K SINHA, H.O.D. of Master of Business Administration, SRM Institute of Management & Technology, who gave me his valuable suggestion for preparing this report. I also convey my regards to Ms. CHANDRA, Faculty, who guides me during the completion of the project. I also thank my parents and all my well wishers, who helped me directly or indirectly in some way to make this project. At last I also convey my regards to almighty for the blessing , without which virtually this project would not have been possible.

VIKAS KUMAR

EXECUTIVE SUMMARY

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My project is based on INVENTORY MANAGEMENT at Indian Oil Corporation Limited, PANIPAT. INVENTORY MANAGEMENT Analysis is a post mortem of the organizations inventory system. It measures the ability of the organization to meet its material requirement efficiently or not. Its helps in calculating the appropriate amount of money should invest in the inventory without make it obsolete, timely consume and replace by new inventory. In this project, I analyzed the different aspects of inventory at Panipat Refinery. My prime objective is to interpret the policies and procedures adopted in maintaining the proper inventory. In this study, I had used Descriptive Research Design. This research design is about the characteristics of particular things. The engraved data is collected from various websites, manuals, monthly periodicals and different time periods. My analysis of the study undertaken is quite satisfactory which shows that refinery has good system of maintaining inventory. The report includes the inventory turnover ratio of three years and analysis of moving and non moving inventory items, along with the data of raw material in stock as in stores and in transit. .

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CONTENTS
PARTICULARS PAGE NO.

CHAPTER 1- INTRODUCTION OF THE COMPANY A) Introduction of the company B) SWOT ANALYSIS C) Introduction of Panipat Refinery CHAPTER 2- INTRODUCTION OF THE TOPIC CHAPTER 3- RESEARCH METHODOLOGY A) Research Methodology B) Objective of the study C) Research Design D) Method of Data Collection / Survey period CHAPTER 4- ANALYSIS & INTERPRETATION CHAPTER 5- CONCLUSION BIBLIOGRAPHY

7-36

37-47 48-54

55-62 63-65 66

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CHAPTER 1

A) COMPANYS INTRODUCTION B) INTRODUCTION OF PANIPAT REFINERY

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INTRODUCTION 0F THE COMPANY

HISTORY OF INDIAN OIL CORPORATION LTD.
The Indian Oil Corporation Ltd. operates as the largest company in India in terms of turnover and is the only Indian company to rank in the Fortune "Global 500" listing. The oil concern is administratively controlled by India's Ministry of Petroleum and Natural Gas, a government entity that owns just over 90 percent of the firm. Since 1959, this refining, marketing, and international trading company served the Indian state with the important task of reducing India's dependence on foreign oil and thus conserving valuable foreign exchange. That changed in April 2002, however, when the Indian government deregulated its petroleum industry and ended Indian Oil's monopoly on crude oil imports. The firm owns and operates seven of the 17 refineries in India, controlling nearly 40 percent of the country's refining capacity.

1958
Indian Refineries Ltd. formed in August with Mr Feroze Gandhi as the Chairman. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 9

1959
Indian Oil Company Ltd. established on 30th June 1959 with Mr S. the Chairman. Nijalingappa as

1960
IndianOil Agreement for supply of Kerosene and Diesel signed with the then USSR. MV Uzhgorod carrying the first parcel of 11,390 tonnes of Diesel for docked at Pir Pau Jetty in Mumbai on 17th August 1960.

1962
Guwahati Refinery inaugurated by Pt. Jawaharlal Nehru, Honble Prime Minister of India. Construction of Barauni Refinery commenced.

1963
Foundation laid for Gujarat Refinery Indian Oil Blending Ltd. (a 50:50 Joint Venture with Mobil) formed.

1964
Ltd. Barauni Refinery commissioned. The first petroleum product pipeline from Guwahati to Siliguri Indian Refineries Ltd. merged with Indian Oil Company with effect from 1964, and Indian Oil Company renamed as Indian Oil Corporation 1st September,

commissioned.

1965
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 India.

Gujarat Refinery inaugurated by HE Dr. S.Radhakrishnan, President of

Barauni-Kanpur product pipeline and Koyali- Ahmedabad product pipeline commissioned. IndianOilPeople maintained the vital supply of Petroleum products to

Defence Services during Indo-Pak war.

1967
Haldia Barauni product pipeline commissioned.Bitumen and marine bunkering businesses commenced.

1968
Techno-economic studies for Haldia-Calcutta, Bombay-Pune and Bombay-Manmad Pipelines submitted to Government.

1969
Marketing of Madras Refineries Ltd. products commences.

1970
Acquired 60% majority shares of IBP Co. Ltd. The same was offloaded in favour of the President of India in 1972.

1971
Dealership/reservation extended to war widows, disabled Defence personnel, freedom fighters, etc. for the first time after the Indo-Pak war.

1972
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R&D Centre established at Faridabad. SERVO, the first indigenous lubricant, launched.

1973
Foundation-stone of Mathura Refinery laid by Mrs. Indira Gandhi, Honble Prime Minister of India.

1974
64.2%. Indian Oil Blending Ltd. became the wholly-owned subsidiary. Marketing Division attained a new watershed with market participation of

1975
Haldia Refinery commissioned. Multipurpose Distribution Centres introduced at 132 Retail Outlets pioneering rural convenience.

1977
Nutan wick stove launched by R&D Centre.

1978
Phase-wise commissioning of Salaya-Mathura crude oil pipeline begins.

1981
Digboi Refinery and Assam Oil Company's (AOC) marketing operations vested in IndianOil and it became Assam Oil Division (AOD) of IndianOil. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 12

1982
Mathura Refinery and Mathura-Jalandhar Pipeline commissioned.

1983
undertaken. Proposal for the 6 MMTPA Refinery at Karnal submitted. Massive augmentation of LPG storage and distribution facilities

1984
Taluka Kerosene Depots (TKDs) commissioned for improved availability of kerosene in rural and hilly areas in addition to Multipurpose DistributionCentres. Foreshore Terminal at Kandla Port commissioned. Integrated Corporate Planning a 10-year Perspective Plan and 5-year

Long Range Plan initiated.

1985
New office complex for Registered Office of the Corporation and HeadOffice of Marketing Division in Mumbai completed.

1986
A new Foreshore Terminal at Madras commissioned.

1987
Kumaon. Test marketing of 5 kg LPG cylinders begins in 1986-87 in Garo Hills and

1989
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Salaya-Mathura crude oil pipeline suitably modified for handling Bombay

High Crude during winter.

1990
Silchar. Kandla-Bhatinda product pipeline project approv First LPG Bottling Plant of Assam Oil Division (AOD) commissioned at

1991
Digboi Refinery modernisation project initiated. Bunkering facility at Paradip commissioned.

1993
New era Micro-processor based Distributed Digital Control Systems replacing the pneumatic instrumentations began in refineries.

1994
retail outlets. India's first Hydrocracker commissioned at Gujarat Refinery. Vision-2000, the Retail Visual Identity programme launched to upgrade

1995
1,443 km. long Kandla-Bhatinda product pipeline commissioned. First lndane Home Shoppe launched.

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1996
State-of-the-art LPG Import Terminal at Kandla (capacity of 6,00,000 First batch of one-year International MBA (iMBA) programme passes out tonnes per annum) commissioned. of IndianOil Institute of Petroleum Management (IIPM).

1997
group. company. Indian Oil enters into LNG business through Petronet LNG -a JV Business Development received renewed thrust with new functional

1998
Panipat Refinery was commissioned. Haldia, Barauni Crude Oil Pipeline (HBCPL) was completed. The Administrative Pricing Mechanism (APM) was withdrawn from the

Refining Sector effective 1" April 1998. Phase-wise dismantling of APM began.

1999
Indian Hydrocarbon Vision -2025" was announced at PETROTECH-99, Diesel Hydro-desulphurisation Units commissioned at Gujarat, Panipat, Manthan -- the IT re-engineering project was launched. organised by Indian Oil on behalf of the oil Industry. Mathura and Haldia Refineries.

2000
Indian Oil crossed the turnover of the magical mark of Rs l ,00,000 Crore -- the first Corporate in India to do so.

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Indian Oil entered into Exploration & Production (E&P) with the award of Y2K compatibility achieved. JNPT Terminal was commissioned.

two exploration blocks to Indian Oil and ONGC consortium under NELP-1

2001
completed. NELP-II. Eight Exploration blocks awarded to the Indian Oilled consortium under Digboi Refinery completed 100 years of continuous operation. Chennai Petroleum Corporation Ltd. (CPCL) and Bongaigaon Refinery Fluidised Catalytic Cracker Unit at Haldia Refinery was commissioned. Augmentation of Kandla-Bhatinda Pipeline (KBPL) to 8.8 MMTPA

and Petrochemicals Ltd. (BRPL) were acquired.

2002
APM dismantled. Pricing of Petroleum products decontrolled. IBP Co. Ltd. was acquired with management control. Barauni Refinery expansion project completed. New generation auto fuels IOC Premium and Diesel Super introduced.

2003
Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka.

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Retail operations began in Sri Lanka. Indian Oil became the first Indian Petroleum Company to begin downstream marketing operations in overseas market. Lanka IOC became an independent oil company in Sri Lanka Gasahol, 5% ethanol blended petrol, was introduced in select states. INDMAX unit at Guwahati Refinery commissioned.

2004
Indian Oil turned a Gas marketer by sale of regasified LNG. Indian Oil Mauritius Ltd.s 18 TMT state-of-the-art Oil Storage Terminal at Mer Rouge commissioned Lanka IOC Pvt. Ltd. (LIOC) launched in Sri Lanka. Gasahol, 5% ethanol blended petrol, was introduced in select states. INDMAX unit at Guwahati Refinery commissioned. Foundation Stone of Panipat Refinery Expansion and PX/PTA projects laid. Maiden LPG supplies to Port Blair.

2005
The year marked Indian Oil's big ticket entry into the high stakes business of E&P. Indian Oil's Mathura Refinerywas the first refinery in India to attain the capability of producing entire quantity of Euro-III compliant diesel by commissioning the Rs 1046 crore DHDT (Diesel hydrotreating unit). Indian Oil breached the Rs 150, 000 crore mark in sales turnover by clocking Rs 150, 677 in turnover in fiscal 2004. Indian Oil signed a JV agreement with GAIL to enter the city gas distribution projects in Agra and Lucknow.

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 Indian Oil allowed by Government of India to charter crude oil ships on its own instead of going through Transchart, the chartering wing of the Ministry of Shipping.

2006
Panipat Refinery capacity enhanced from 9 to 12 MMTPA World-scale Paraxylene/Purified Terephthalic Acid (PX/PTA) plant commissioned at Panipat as mother plant for polyester industry Chennai-Trichy-Madurai product pipeline dedicated to the nation.

2007
Marketing subsidiary IBP Co. Ltd. merged with parent company. Concept of SERVOXpress Centres as one-stop shops for autocare Mundra-Panipat crude oil pipeline with facilities for handling heavy crude Lanka IOC commissions Lube Blending Plant and laboratory for testing fuels and lubricants at Trincomalee Concept of LNG at the doorstep launched for customers located away from gas pipelines

services launched. oil commissioned.

2008
SERVO lubricants launched in Oman. IndianOil Chairman elected as President of World LP Gas Association.

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INDIAN OIL CORPORATION LTD.

Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the merger of Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1958). At Indian Oil, corporate social responsibility (CSR) has been the cornerstone of success right from inception in the year 1964. The Corporations objectives in this key performance area are enshrined in its Mission statement: "to help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience .From a fledgling company with a net worth of just Rs. 45.18 crore and sales of 1.38 million tonnes valued at Rs. 78 crore in the year 1965, Indian Oil has since grown over 3000 times. Indian Oil Corporation Ltd. (Indian Oil) is India's largest commercial enterprise, with a sales turnover of Rs. 2,47,479 crore (US $ 61.70 billion) and profits of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007-08. Indian Oil is also the highest ranked Indian company in the prestigious Fortune 'Global 500' listing, having moved up 19 places to the 116th position in 2008. It is also the 18th largest petroleum company in the world. Indian Oil has ambitious investment plans of Rs. 43,250 crore in the next five years. By 2011-12, the Indian Oil Group, with 80 MMTPA refining capacity in its fold, would be SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 19

playing a key role in realising Indias bid to emerge as an export-oriented hub for finished products.

PRODUCTS
Indian Oil is not only the largest commercial enterprise in the country it is the flagship corporate of the Indian Nation. Besides having a dominant market share, Indian Oil is widely recognized as Indias dominant energy brand and customers perceive Indian Oil as a reliable symbol for high quality products and services. Benchmarking Quality, Quantity and Service to world-class standards is a philosophy that Indian Oil adheres to so as to ensure that customers get a truly global experience in India. Indian Oil is a heritage and iconic brand at one level and a contemporary, global brand at another level. While quality, reliability and service remains the core benefits to the customers.

Autogas Indian Oil Aviation Service Bitumen High Speed Diesel

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 Bulk / Industrial Fuel Indane Gas SERVO Lubricants & Greases Marine Fuels & Lubricants MS / Gasoline Petrochemicals Special Products Superior Kerosene Oil Crude Oil INDIAN OIL PERFORMANCE 2008-2009

The Corporation's refineries surpassed 100% capacity utilisation and clocked the highest ever throughput of 51.4 million tonnes. Breaching the 10,000 km mark in length, the pipelines network registered the highest ever operational throughput of 59.5 million tonnes of crude oil and petroleum products. During the year 2008-09, IndianOil's sales volume registered a growth of 5.6% and went up to an unprecedented 62.6 million tonnes of petroleum products as compared to 59.30 million tonnes during the previous year. Sales of natural gas also went up to 1.7 million tonnes in 2008-09. In addition, product exports rose to 3.64 million tonnes from 3.38 million tonnes in the previous year. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 21

Among new businesses, Natural Gas marketing and Petrochemicals generated revenues of Rs. 2425 crore and Rs. 2760 crore during the year 2008-09.

Core Performance
Financial Performance

IndianOils gross turnover (inclusive of excise duty) for the year 2008-09 reached a new high of Rs. 2,85,337 crore up by 15.3% as compared to Rs. 2,47,457 crore in the previous year. The Profit After Tax was Rs. 2,950 crore.

For the year 2008-09, IndianOil has received Special Oil Bonds worth Rs. 40,383 crore from the Government of India in addition to Rs. 18,210 crore received from upstream companies towards subsidy-sharing.

The Gross Refining Margin for April-March 2009 is USD 3.69 per barrel as compared to USD 9.02 per barrel during the previous year

Marketing

IndianOil maintained its dominance in the market place and clocked the highest ever level of sales during the year 2008-09. Domestic sales grew by 5.6% from 59.30 million tonnes in the previous year to 62.6 million tonnes in the year 2008-09.

Refineries

For the year 2008-09, IndianOil's eight refineries achieved the highest ever throughput of 51.4 million tonnes and 103.4% capacity utilisation, registering 8.4% growth in crude oil processing over the previous year.

IndianOil refineries clocked the lowest overall specific energy consumption of 64 MBTU/BBL/NRGF (MBN) during the year as against 67 in 2007-08. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 22

IndianOil imported a record quantity of 47.8 million tonnes of crude oil in 200809 as against 46.11 million tonnes in 2007-08.

During the year, IndianOil entered into term contracts with Angola and Brunei for import of low sulphur crude oil and over 95% of the LPG imports were finalised through term contracts.

Pipelines

During the year, IndianOil's network of underground highways breached the 10,000 kilometre mark and registered the highest ever operational throughput of 59.5 million tones.

Compared to the previous year, the crude oil pipelines registered a 6.7% growth at 38.2 million tonnes. The year was marked by the commissioning of a record number of pipeline projects, the foremost being the Paradip-Haldia crude oil pipeline and IndianOil's first Panipat-Jalandhar LPG pipeline.

Other projects commissioned during the year include the Koyali-Ratlam product pipeline, ATF Pipeline from CPCL (Manali) to Chennai AFS .

Projects

IndianOil is implementing projects of over Rs. 60,000 crore currently. Major ones

among them are: 15 MMTPA refinery at Paradip (Rs. 29,777 crore); capacity augmentation of Panipat Refinery (from 12 to 15 MMTPA, Rs. 1007.83

crore);

MS quality improvement projects at Panipat (Rs. 1,131 crore),

New Businesses

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IndianOil took big strides in new businesses during the year 2008-09.

VARIOUS DIVISIONS OF IOCL

REFINERIES DIVISION
Indian Oil controls 10 of Indias 18 refineries at Digboi, Guwahati, Barauni, Koyali, Haldia, Mathura, Panipat, Chennai, Narimanam and Bongaigaon with a current combined rated capacity of 54.20 million metric tones per annum (MMTPA)* (one million barrels per day). Indian Oil registered a record throughput of 36.63 millions tones during the year 2004-05 with a capacity utility of 88.6%. Indian Oil accounts for 42% of Indias total refining capacity. Overall Energy consumption of Indian Oil refineries was lowest at 109 MBTU/BBL/NRGF against earlier best of 111, achieved in 2003-04. Gross Refining Margin (GRM) rose by almost one dollar per barrel during the year 2004-05. It is expected to be the highest at US$ 6.25/bbl for the year 2004-05 as against $5.30/bbl in 2003-04. All refinery units are accredited with ISO 9002 and ISO 14001 certifications.

DIGBOI REFINERY (UPPER ASSAM)

The Digboi Refinery in North Eastern India is Indias oldest refinery and was commissioned in 1901. Originally a part of Assam Oil Company, it became part of Indian Oil in 1981, its original refining capacity has been 0.5 MMTPA since 1901. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 24

Modernization project of this refinery has been completed and the refinery now has an increased capacity of 0.65 MMTPA. The Digboi refinery produces distillates, heavy ends and excellent quality wax from indigenous crude oil produced at the Assam Oil fields. Petroleum products are supplied mainly to northeastern India primarily through road and by rail wagons. A new Delayed Coking Unit of 1,70,000 TPA capacity was commissioned in 1999. installed and commissioned in 2003. Hydrotreater to improve the quality of diesel. A new solvent dewaxing unit for maximizing production of microcrystalline wax was The refinery has also installed

GUWAHATI REFINERY
The Guwahati Refinery in North East India the first Public Sector refinery of the country-was commissioned in 1962 with a capacity of 0.75 MMTPA which was subsequently increased to 1.0 MMTPA through debottlenecking projects.The refinery processing only indigenous crude oil from the Assam oil fields. It supplies petroleum products to North-Eastern India and surplus products onwards to Siliguri in West Bengal in 2003. Hydrotreater unit for improving the quality of diesel has been commissioned in 2002. In 2003, the refinery installed an IndMax Unit a novel technology developed by Indianoils R & D center for upgrading heavy ends into LPG, motor spirit and diesel oil.

BARAUNI REFINERY
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The Barauni Refinery in Eastern India was commissioned in 1964 with a capacity of 2.0 MMTPA. The refining capacity was increased to 3.0 MMTPA by 1969 and further to its current capacity of 6.0 MMTPA through low cost revamping and debottlenecking. Matching secondary processing facility such as RFCC (Resid Fluidised Catalytic Cracker) and hydrotreater facilities for diesel quality improvement have been added. With the commissioning of the 6.0 MMTPA Haldia-Barauni crude oil pipeline, the refinery now received imported crude for processing. A CRU (Catalytic Reformer Unit) was also added to the refinery in 1997 for production of unleaded motor spirit. meeting future fuel quality requirements. Kanpur in Uttar Pradesh. Projects are also planned for Barauni refinery supplies distillate

products beside eastern India to northern India through a product pipeline to

GUJARAT REFINERY
The Gujarat Refinery at Koyali in Gujarat in Western India is IndianOils largest refinery. The refinery was commissioned in 1965. Its facilities include five atmospheric crude distillation units. The major units include CRU, FCCU and the first Hydro cracking unit of the country.Through a product pipeline to Ahmedabad and a recently commissioned product pipeline connecting to BKPL product pipeline and also by rail wagons/trucks, the refinery primarily serves the demand for petroleum products in Western and Northern India.When commissioned, the SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 26

Gujarat refinery had a design capacity of 3.0 MMTPA. It was increased to 4.3 MMTPA by the revamping of three distillation Units. In 1978, its processing capacity was further increased to 7.3 MMTPA by the addition of a crude distillation unit. Subsequently the crude capacity was increased to 9.5 MMTPA by 1990 and then by 12.5 MMTPA in 1999. Since it has been increased to its present capacity of 13.70 MMTPA by low cost debottlenecking.

HALDIA REFINERY
Haldia Refinery, the fourth in the chain of seven operating refineries of IndianOil, was commissioned in January 1975. It is situated 136 km downstream of Kolkata in the district of East Midnapur, West Bengal, near the confluence of river Hoogly and river Haldi. The refinery had an original crude oil processing capacity of 2.5 MMTPA. Petroleum products from this refinery are supplied to eastern India through two product pipelines as well as through Barges, tank wagons and tank trucks.Products like MS, HSD and Bitumen are exported from this refinery.Refinery was increased to 2.75 MMTPA through de-bottlenecking in 1989-90. Refining capacity was further increased to 3.75 MMTPA in 1997 with the installation/commissioning of second Crude distillation unit of 1.0 MMTPA capacity.Diesel Hydro Desulphurisation (DHDS) unit was commissioned in 1999, for production of low sulphur content (0.25%wt.) High Speed Diesel. at present. With augmentation of this unit, refinery is producing BS-II and Euro-III equivalent HSD

MATHURA REFINERY
The Mathura Refinery was commissioned in 1982 with an original capacity of 6.0 MMTPA. The capacity was increased to 7.5 MMTPA by debottlenecking and revamping. With its fluid catalytic cracking units, the refinery mainly produces SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 27

middle distillates and supplies them to Northern India through a product pipeline to Jalandhar, Punjab via Delhi. A hydro cracker for increasing middle distillates was also completed in 2000. The present capacity of the refinery is 8 MMTPA. In order to meet future fuel requirements, facilities for improvement in quality of MS & HSD are under installation and planned to be completed by 2005.

PANIPAT REFINERY
IndianOils seventh refinery, commissioned in 1998, is located at Panipat, 125 kms away from Delhi, the capital of India, in the state of Haryana in Northern India. The main units are OHCU (Once-through-hydro cracker), RFCC, CCRU (Continuous Catalytic Reformer unit) besides other secondary treatment units. This 6 MMTPA refinery caters to the high demand centers of Northern India. The product to increase the capacity of Panipat refinery to 15 MMTPA is already under implementation, which also takes into account future fuel quality requirements for 2005. The expansion project is expected to be completed in 2005.

MARKETING DIVISION
The Marketing Division of IOCL handles the responsibility of delivering petroleum products to the customers. The Marketing Division has set up various marketing terminals where storage tanks are built up to hold the products. The petroleum products are transferred to the marketing terminals by the Pipelines Division, which charges the Marketing Division for the same. Indian Oil caters to over 53.2% of Indias petroleum consumption. Indian Oils Marketing Network is spread throughout the country with over 23,000 sales points (the largest in the country SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 28

RESEARCH & DEVELOPMENT DIVISION

Indian Oil owns world-class research and development centre headed by Director. It provides services to all other divisions of the Corporation and bin that sense it is a form of SHARED SERVICE UNIT. Established in 1972 for the development of lube as well as refining process technologies, the Indian Oil R & D Centre at Faridabad near New Delhi has completed around 30 years of glorious service to the nation. It is one of its kind in Asia and has grown into a major technological development center of international repute in the down stream areas of lubricants, pipelines and refining processes. Over the years, it has successfully perfected the state-of-the-art lube formulation technology meeting latest national and international specifications with approvals from major original equipment manufacturers. Indian Oil markets around 450 grades of lubricants under the brand name SERVO based on its R&D technology. It has extensive laboratory and pilot plant facilities to successfully pursue projects in lube, refining and pipeline areas making it a unique technology centre. Its rich reservoir of highly qualified / specialized scientific and technical manpower has elevated this center to global status. Creativity and innovative research has led to technological innovations, some of which have received prestigious national and international awards.

ASSAM OIL DIVISION

The assets of the erstwhile Assam Oil Company were taken over by IOCL in the year 1981. It is kept as a separate division in IOCL. Assam Oil Division owns SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 29

the Digboi refinery and is also into marketing. It owns one petrol pump on the Delhi-Mathura Road.

MISSION

To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through value of products and services, and cost reduction. To maximize creation of wealth, value and satisfaction for the stakeholders. To attain leadership in developing, adopting and assimilating state-of-the-art technology for competitive advantage. To provide technology and services through sustained Research and Development. To foster a culture of participation and innovation for employee growth and contribution. To cultivate high standards of business ethics and Total Quality Management for a strong corporate identity and brand equity. To help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience.

VISION

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A major, diversified, transnational, integrated energy company, with national leadership and a strong environment conscience, playing a national role in oil security and public distribution.

VALUES
Care Stands for Concern Empathy Understanding Cooperation Empowerment Passion - Stands for Commitment Dedication Pride Inspiration Ownership Zeal & Zest Innovation Stands for Creativity Ability to learn Flexibility Change Trust - Stands for Delivered Promises Reliability Dependability Integrity Truthfulness Transparency

OBLIGATIONS
Towards customers and dealers

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To provide prompt, courteous and efficient service and quality products at fair and reasonable prices. Towards suppliers To ensure prompt dealings with integrity, impartiality and courtesy and promote ancillary industries. Towards employees Develop their capability and advancement through appropriate training and career planning. Expeditious redressal of grievances Fair dealings with recognized representatives of employees in pursuance of healthy trade union practice and sound personnel policies. Towards community To develop techno-economically viable and environment-friendly products for the benefit of the people. To encourage progressive indigenous manufacture of products and materials so as to substitute imports. To ensure safety in operations and highest standards of environment protection in its manufacturing plants and townships by taking suitable and effective measures. Towards Defence Services To maintain adequate supplies to Defence Services during Norman and emergency situations as per their requirement at different locations.

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CORPORATE OBJECTIVES

To serve the national interests in the Oil and related sectors in accordance and consistent with Government policies. To ensure and maintain continuous and smooth supplies of petroleum products by way of crude refining, transportation and marketing activities and to provide appropriate assistance to the consumer to conserve and use petroleum products efficiently.

To earn a reasonable rate of interest on investment. To work towards the achievement of self-sufficiency in the filed of Oil refining by setting up adequate capacity and to build up expertise in laying of crude and petroleum product pipelines.

To create a strong research and development base in the field of Oil refining and stimulate the development of new product formulations with a view to minimize/eliminate their imports and to have next generation products.

To maximize utilization of the existing facilities in order to improve efficiency and increase productivity. To optimize utilization of its refining capacity and maximize distillate yield from refining of crude to minimize foreign exchange outgo.

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To minimize fuel consumption in refineries and stock losses in marketing operations to effect energy conservation. To further enhance distribution network for providing assured service to customers throughout the country through expansion of reseller network as per Marketing Plan/Government approval.

To avail of all viable opportunities, both national and global, arising out of the liberalization policies being pursued by the Government of India. To achieve higher growth through integration, mergers, acquisitions and diversification by harnessing new business opportunities

FINANCIAL OBJECTIVES
To ensure adequate return on the capital employed and maintain a reasonable annual Dividend on its equity capital. To ensure maximum economy in expenditure. To manage and operate the facilities in an efficient manner so as to generate adequate internal resources to meet revenue cost and requirements for project investment, without budgetary support. To develop long-term corporate plans to provide for adequate growth of the activities of the corporation. To endeavor to reduce the cost of production of petroleum products by means of systematic cost control measures. To endeavor to complete all planned projects within the stipulated time and cost estimates.

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PRINCIPAL SUBSIDIARIES
Indo Mobil Ltd. (50%); Avi-Oil Ltd. (25%); Indian Oil tanking Ltd. (25%); Petronet India Ltd. (16%); Petronet VK Ltd. (26%); Petronet CTM Ltd. (26%); Petronet CIPL Ltd. (12.5%); IndianOil Petronas Ltd. (50%); Indian Oil Panipat Power Consortium Ltd. (26%); Indian Oil TCG Petrochem Ltd. (50%); Librizol India Pvt. Ltd. (50%).

PRINCIPAL COMPETITORS
Bharat Petroleum Corporation Ltd. Hindustan Petroleum Corporation Ltd. Royal Dutch/Shell Group of Companies.

SWOT ANALYSIS
STRENGTHS
HIGH FOREIGN EXCHANGE DEBT.
IOCL has managed to significantly cut its borrowing cost due to high share of foreign exchange debt. Its share of foreign exchange borrowings is increasing with foreign exchange loans crossing 50% of its total debt compared to 42% at the end of the last financial year.

HIGHEST MARKET SHARE

As India's flagship national oil company, Indian Oil accounts for 56% petroleum products market share, 42% national refining capacity and 67% downstream pipeline throughput capacity. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 35

EXPERTISE IN OIL & GAS INDUSTRY

Indian Oil is one of the leaders in providing engineering, construction and consultancy services to the pipeline industry. Highly qualified professionals with vast experience execute pipeline projects from concept to commissioning and provide services for construction supervision and project management.

FOREIGN SUBSIDIARIES AND JOINT VENTURES

Indian Oil is strengthening its existing overseas marketing ventures and simultaneously scouting new opportunities for marketing and export of petroleum products in foreign markets. Two wholly owned subsidiaries are already operational in Sri Lanka and Mauritius, and regional offices at Dubai and Kuala Lumpur are coordinating expansion of business activities in Middle East and South East Asia regions. The Corporation has launched eleven joint ventures (listed separately) in partnership with some of the most respected corporate from India and abroad .

WEAKNESSES
STRINGENT CORPORATE POLICIES
The decisions relating to administration are taken at the corporate level. Even minor proposals are to be referred to the top management. This leads to a delay in decisionmaking.

LACK OF MARKETING EFFORTS

Among the public sector oil companies, Indian Oil Corporation is the only one to follow a weak marketing strategy. It in only in the recent years that the company has started to market its products. However, still the efforts seem to be weak when compared with the competitors like BPCL and HPCL. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 36

PROMOTION POLICY
Most of the public sector companies seem to suffer from these lacunae. The employees are promoted mainly on the basis of experience and not on the efforts and initiatives displayed by the employee in his work. This results in demotivation and lack of interest for their work on the part of the hardworking employees, who then tend to shift jobs to satisfy their need for self-esteem.

TENDER PROCESS
The policy of selection of the lowest bidder tends to affect the quality of the products/services on some occasions. A more simplistic procedure is also likely to generate some savings for the company, since tendering process leads to expenses on account of advertisement.

OPPORTUNITIES
Exploration and Production
Indian Oil is metamorphosing from a pure sectoral company with dominance in downstream in India to a vertically integrated, transnational energy behemoth. The Corporation is making investments in E&P and import/marketing ventures for oil and gas in India and abroad, and is implementing a master plan to emerge as a major player in petrochemicals by integrating its core refining business with petrochemical activities.

THREATS
Entry of Big Private players
The opening up of the oil sector for private players poses a threat even for this wellestablished company. With Indian players like Reliance and Essar and foreign players SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 37

like Shell planning their entry into the Indian scenario, the road seems to be tough for Indian Oil.

INTRODUCTION TO PANIPAT REFINERY

Panipat Refinery is the seventh refinery of Indian Oil. It is located in the historic district of Panipat in the state of Haryana and is about 23 km from Panipat City. The original refinery with 6 MMTPA capacity was built and commissioned in 1998 at a cost of Rs. 3868 crore. Panipat Refinery has doubled its refining capacity from 6 MMT/yr to 12 MMT/yr with the commissioning of its Expansion Project. The major secondary processing units of the Refinery include Catalytic Reforming Unit. In order to improve diesel quality, a Diesel Hydro Desulphurisation Unit (DHDS) was subsequently commissioned in 1999. Referred as one of Indias most modern refineries, Panipat Refinery was built using global technologies from IFP France; Haldor-Topsoe, Denmark; UNOCAL/UOP, USA; and Stone &Webster, USA. It processes a wide range of both indigenous and imported SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 38

grades of crude oil. It receives crude from Vadinar through the 1370 km long SalayaMathura Pipeline which also supplies crude to Koyali and Mathura Refineries of IndianOil. Petroleum products are transported through various modes like rail, road as well as environment-friendly pipelines. The Refinery caters to the high-consumption demand centres in North-Western India including the States of Haryana, Punjab, J &K, Himachal, Chandigarh, Uttaranchal, as well as parts of Rajasthan and Delhi. The LPG produced from the refinery is pumped through a dedicated pipeline to IndianOils Kohand Bottling plant where bottling and bulk despatches are done. Panipat Refinery has also developed new products like 96 RON petrol, and sub Zero diesel for the Indian army. It is already operating above 100% capacity for the last four years.

PRODUCTS FROM REFINERY

With the expansion of Panipat Refinery to 12.0 MMTPA total high speed diesel produced from entire refinery will meet BS-II and BS-III Grade required for NCR. After stabilisation of units, the high value product yield from the refinery will be further improved by reducing the production of black oil like HPS and Bitumen. With state-of the-art matching secondary processing facilities was approved at a cost of Rs.4165 crore.

LPG

NAPHTHA

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BITUMEN

SULPHUR

MOTOR SPIRIT

HEAVY PETROLEUM STOCK SKO HSD

ATF

INTEGRATED POLICY ON QUALITY, SAFETY, HEALTH & ENVIRONMENT (QSHE)

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''PRISM'' (Panipat Refinery Integrated System of Management) Integrated Policy On Quality, Safety, Health & Environment

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CHAPTER-2 INTRODUCTION OF THE TOPIC

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INTRODUCTION OF THE TOPIC

INVENTORY MANAGEMENT
MEANING
Inventory management is concerned with keeping enough products on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Excessive level of inventory results in large inventory carrying cost . An efficient system of inventory management will determine :A) B) C) D) What to purchase? How much to purchase? From where to purchase? Where to store?

Inventory management is the active control program which allows the management of sales, purchases and payments. Inventory management software helps create invoices, purchase orders, receiving lists, payment receipts and can print bar coded labels. An inventory management software system configured to ware house, retail or product line will help to create revenue for the company. The petroleum refining industry has effectively embraced the software solutions to optimize the business supply chain to maximize the profit margins and create order in the chaos of numerous opportunities and challenges. The supply chain of a typical petroleum refining company involves a wide spectrum of activities, starting from crude purchase and crude transportation to refineries, refining operations, product transportation and finally delivering the product to the end user. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 43

WHO SHOULD ATTEND

Factory and inventory control professionals, manufacturing and production control managers, industrial engineers, plant managers, material and purchasing managers, factory superintendents and customer/technical service managers who can benefit from enhancing their inventory management techniques.

WHAT WILL COVER

The strategic role of inventory management techniques . Establish the optimal inventory level. Inventory planning and replenishment. Distribution center and warehousing operations. Inventory accuracy and audits. Inventory management, measurement and reporting. Inventory forecasting and demand management. Lead-time analysis and reduction.

TYPES OF INVENTORY
Raw Material : An inventory of raw material allows separation of production scheduling from arrival of basic inputs to the production process. Work In Progress : An inventory of partially completed units allows the separation of different phases of the production process. Finished Goods : An inventory of finished goods allows separation of production from selling. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 44

 Cash & Marketable Securities : Cash & Marketable Securities can be thought of as an inventory of liquidity that allows separation of collection from disbursement.

OBTECTIVES OF INVENTORY MANAGEMENT

Inventory of finished goods should be maintained at sufficient high level so that the demand of customers may be fully satisfied .Similarly , inventory of raw materials should also be sufficient so that manufacturing process can be run smoothly. In case of inadequate inventory of finished goods , there is always risk of being out of stock and in case of inadequate inventory of raw materials , there is always a risk of manufacturing process being halted. Therefore the major responsibility of inventory management is to determine the sufficient level of inventory required in business . Since inventory is a major asset and it involves a lot of funds ,inventory level should not be excessive. Excessive inventory increases costs because extra funds are involved in it .Therefore , inventory management also tries to minimize the sufficient level of inventory. Thus , both inadequate & excessive quality of inventory is undesirable in the business. Inventory management should maintain the inventory at sufficient level so that it is neither excessive nor short of requirement. The Term inventory management includes two conflicting tasks :1) To maintain a sufficient large size of inventory to meet the demand of finished goods & to meet the demand of raw material by production department. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 45

2) To keep the investment in inventories at minimum level by efficiently organizing the purchase & sales operations.

MAIN OBJECTIVES
To ensure a continuous supply of raw material. To maintain sufficient inventory of raw materials in periods of short supply. To maintain sufficient inventory of finished goods so that the demand of the customers are duly met. To minimize the carrying costs of inventory namely cost of godown , insurance expenses, cost of funds involved in inventory etc. To arrange for sale of slow moving items. To control investment in inventory & keep it at an optimum level.

RISKS & COSTS OF EXCESSIVE INVENTORY

Excessive carrying cost. Risk of loss of liquidity. Risk of price decline. Risk of deterioration of goods. Risk of obsolescence.

RISKS OF INADEQUATE INVENTORY

Risk of break down in manufacturing process. Risk of not meeting demand of customers.

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COST OF INVENTORIES
Relevant inventory costs which change with the level of inventory are lister below :Ordering Cost :- The cost of ordering includes : Paper work costs , typing & dispatching Order inspection cost , checking & handling. Carrying Cost :- Carrying cost involves : Capital Cost. Storage & handling cost. Insurance. Taxes. The cost of funds invested in inventory. Stock out cost :- Stock out cost involves : Expenses of placing special orders. Expediting income orders. Cost of production delays.

NEED OF INVENTORIES
Transactive Motive Precautionary Motive Speculative Motive

ACCOUNTING OF STORES

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GENERAL OUTLINES OF STORES FUNCTIONS The Authority for receipt, storage and issue of all materials is centralized in the Materials Department subject to exception permitted in certain cases. The user Departments shall not be permitted to have any stock of materials with them in the form of sub-stores. However, in certain cases a nominal stock of a few urgent items can be permitted for meeting emergencies. Items issued from stores to user . shall be charged off from inventory. However, a list of items of Rs. One lakh and above is lying in sub stores of plant as on 31st March shall be included in inventory in the financial ledger as material at site account which shall be reversed in the next year. Details procedure as prescribed in the Materials Management Manual is to be followed for all functions of the stores section of the Materials . a general outline of the functions is as under: Receipt & Transportation. Custody & Issue. Inventory Control . Surplus Stores . Disposal of surplus, unserviceable assets & scrap materials.

FUNCTIONS OF FINANCE STORES SECTION

The section dealing with accounting of stores in the Finance. shall have following functions: PASSING AND ACCOUNTING OF TRANSPORTATION BILLS

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All railway/streamer/air freight inward receipt and the road transport consignment notes shall be received in the stores Section of Materials. For taking the delivery of the consignments. The Stores shall enter these documents in a Daily Receipt Register. Transport bills will be initially received by the Materials t. and sent to Finance . duly verified with reference to the purchase order and also linking the same with the GR Notes The certified bills of freight received from stores section shall be priced doing YMIROOTH transactions wherever the freight bill is directly linked to a Purchase order. The Finance will release payment only after due checking of bills with reference to the transport contract and other relevant documents. In case the freight bill cannot be linked to Purchase order the same shall be charged to freight expenditure account. For all freight bills, passed payment vouchers shall be prepared and signed by the authorized officers after which the same shall be forwarded to the Cash Section for preparation of cheque and payment to vendor.

ACCOUNT

OF

RECEIPTS,

ISSUES,

RETURN

AND

TRANSFER

OF

MATERIALS In SAP the reservations are prepared through a Maintenance order in case of maintenance job (TCODE IW31). The same captures the total details of location, equipment, etc. For issue of chemicals and misc materials direct reservations are created (T-CODE MB21). In case of capital job reservations are created by giving Network No. which is attached to a Project No. (TCODE CN21).

NON-MOVING MATERIALS

ITEMS

AND

DISPOSAL

OF

SURPLUS

AND

SCRAP

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All items (except for non valuated stock items) which are not moving for two years shall be classified into three categories as under:a) "Category I" shall contain all items with inventory value exceedingRs.10,00,000 and above.. b) "Category II" shall contain all items with inventory value above Rs.1,00,000 and upto Rs.10,00,000 c) "Category III" shall contain all items with inventory value above Rs.50,000 and upto Rs.1,00,000 d) Category IV shall contain items with inventory value upto Rs.50,000

FREQUENCY OF STORES VERIFICATION

Stock verification should be so arranged that : a) All items, the stock value of which exceeds Rs.1,00,000/- are verified at least twice a year. b) All items, the stock value of which exceeds Rs,25,000 and upto Rs.1 lacs are verified atleast once in two years, and c) All remaining items below Rs.25,000/- are verified once in five years. The Accounts Officer will draw up annual and monthly schedules for the above verification in consultation with the Stores Officer in accordance with the value given in annual inventory statements. The Accounts Officer will arrange to maintain proper records of the stock verification sheets for the discrepancies prepared by stock verifiers.

TECHNIQUES OF INVENTORY MANAGEMENT

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1) Determination of stock Level :(A) Minimum Level = Rerdering Level ( Normal Consumption * Normal Reordering Period ) (B) Maximum level = Reordering Level + Reordering Quantity ( Minimum Consumption * Minimum Reordering Period ) (C) Danger Level = Consumption * Maximum Reorder Period

2) Inventory Turnover Ratio :Inventory Turnover Ratio = Cost of good sold / Average inventory at cost

3) Economic Order Quantity :Economic Order Quantity is the quantity where ordering cost is equal to non ordering cost. EOQ is made up of two parts : a)Ordering Cost These costs are associated with the purchasing or ordering of materials. This cost of ordering includes : Paper work cost , typing & dispatching Order inspection cost , checking & handling. b) Non - Ordering Cost - These are the costs for holding the inventories. This cost involves: Capital Cost. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 51 Storage & handling cost.

 Insurance. Taxes. The cost of funds invested in inventory.

4) A-B-C Analysis :The materials are divided into three categories viz , A, B & C Category A : Under this almost 10% of the items contribute to 70% of value of consumption. Category B : Under this category 20% of the items contribute about 20% of value of consumption. Category C : Under this category 70% of the items contribute about 10% of value of consumption.

5) VED Analysis :The VED Analysis is used generally for spare parts. The requirements & urgency of spare parts is different from that of materials. Spare parts are classified as: Vital (V) , Essential (E) , Desirable (D) Vital spare parts: These are most for running the concern smoothly. Essential spare parts: Necessary but stock kept at low figures. Desirable spare parts: May be avoided at times.

6) HML Classification:

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The HML( High, Medium, Low) Classification is similar to ABC Classification , but in this case instead of the assumption value of the item , the unit value of the item is considered.

7) XYZ Classification:
The XYZ Classification has the value of inventory stored as the basis of differentiation. X items are those whose inventory values are high while Z items are those whose value is low. In Indian Oil Corporation Limited A-B-C Analysis technique is used for inventory management.

INVENTORY MANAGEMENT &VALUATION

Average Cost Method:

For determining the valuation of inventories , consistency from year to year is of prime importance & for this average cost method is appropriate. In this method , weighted average prices are taken with price of each type of material in stock are taken together. First In - First Out Method:

Under FIFO Method , items received first are assumed to be used first & therefore prices charged are those paid for early purchase. Care has to be taken to ensure that each quantity is issued at the correct price. Base Stock Method:

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Under this method , the base quantity is carried forward at the cost of the original stock. If a quantity of goods larger than the base stock is owned at the end of any period , the excess will be carried at its identified cost or at the cost determined under FIFO Method. Last In- First Out Method:

Under LIFO , it is assumed that the stock sold or consumed in any period are those most recently acquired or made. The result at the LIFO Method is to charge current revenues with amount approximating current replacement cost.

CHAPER 3 RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY
Solving a research problem by using various research methods in a systematic manner is research methodology. It may be understood as a science of studying how research is done scientifically. Researcher not only need to know how to develop certain indices or tests, how to calculate the mean, mode, or standard deviation or chi square, how to apply particular research techniques, but they also need to know which of these methods or techniques are relevant and which are not, and what would they mean and indicate and why. Researcher also need to understand the assumptions underlying various techniques and they need to know the criteria by which they can decide that certain techniques and procedures will be applicable to certain problems and others will not. All this means that it

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is necessary for the researcher to design this methodology for his problem as the same may differ from problem to problem. It certainty offers an opportunity to researcher to justified his choice by comparing it is relative advantage and disadvantage with those alternatives, which have been rejected. This part is divided into four sections:1. Research design. 2. sample design. 3. Data collection method 4. Analysis pattern.

OBJECTIVE OF THE STUDY

Main Objective
The objective of the study is to assess and analyze the inventory in Panipat refinery.

Sub Objectives
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1) To study how sufficient large size of inventory is maintained in the Panipat Refinery to meet the demand of finished goods & to meet the demand of raw material. 2) To study about the investment in inventories. 3) To study the continuous supply of raw material. 4) To know how the funds are utilized. 5) To extend the knowledge. However the main objective of this study is to fill the gap between different aspect of theoretical and practical knowledge of financial management and to develop the required skill to take decision on sight for the best use of my theoretical knowledge.

RESEARCH DESIGN
Meaning of research
Research in common parlance refers to a search for knowledge. Research can be explained as a movement, a movement from known to unknown. It is actually a voyage of discovery. Research always starts with a question or problem. SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 57

Its purpose is to find answers to questions through the application to the scientific method. It is a systematic and intensive study directed towards a more complete knowledge of the subject studied.

So Research is scientific and systematic search for gaining information and knowledge on a specific topic or phenomena.

Research Design
Research Design is the plan and structure of investigation so conceived as to obtain answers to research questions.

Nature of Research
Descriptive Research design is used for study. Descriptive research as the name suggests is designed to describe something for example the characteristics of users of a given product ; the degree to which product use varies with income, age, sex or other characteristics; or the number who saw a specific television commercial. To be of maximum benefit, a descriptive study must only collect data for a definite purpose. Your objective and understanding should be clear and specific. It is a kind of survey method. This project study is related with the inventory management so the data is collected in this regard only. I studied the various types of inventory through out the training period.

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METHODS OF DATA COLLECTION

TYPES OF DATA

PRIMARY DATA

SECONDARY DATA

This project is mainly based on the secondary data and information beside this primary data is also used. 1) Primary data:- primary data are to be collected by the researcher , they are not present in reports or journals etc. and can be collected through a number of method which can be classified as follow Personal interview of sample. Telephonic interview. E- Mails. Observations. Questionnaires. Interviews.

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Primary data for my project : The primary data for my research is the dispatch registers maintained by the company to know the purchase and stock of inventory in the organization.

2) Secondary data:- Secondary data are the data collected for some purpose other than the research situations; such data are available from the sources such as books, company reports, journals, rating organization, census department etc.. The secondary data are readily available and therefore they are less costly and less time consuming. Sources of secondary data are Internets. Book and journals. Company reports. Census department. Research work of others. Secondary data for my project: Mainly the used in this project is secondary. The data is the already maintained in the manuals.

SURVEY PERIOD
Survey period is 6 weeks from June 15th, 2009 to July 24th, 2009. It is not enough periods for the study to get the accurate a specific result of the study.

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CHAPTER 4 ANALYSIS & INTERPRETATION

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STORES and SPARES

PARTICULARS 2006-2007 Rs.LAKHS 20072008 Rs. AT REFINERY IN TRANSIT TOTAL 21980 4693 26673 LAKHS 31823 3037 34860 47994 2471 50465 2008-2009 Rs. LAKHS

Analysis
Panipat refinery is a big processing plant which requires the materials, tools and other required items on time because delay in availability of these materials may cause a big loss to the company so by the year their manufacturing capacity is increasing their demand is also increasing so they increase their capacity of materials in stores and also give orders to their vendors so they also available the goods on time. Because SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 62

vendors also need time to manufacture the goods according to the need and order by the company and supply to their place.

PROCESS CHEMICALS
PARTICULARS AT REFINERY IN TRANSIT TOTAL 2007-08 4172 Nil 4172 2008-09 16139 Nil 16139

Analysis
As while refining and manufacturing of petroleum from crude oil there is need of some chemicals which are highly acidic handle with great care and caution so this type of chemicals refinery manufacture themselves so have their storage at refinery itself there is no amount is in transit. They have sufficient capacity to produce and store at their place itself.

INVENTORY TARGET vs. ACTUAL

FOR THE YEAR 2008-09 PARTICULARS CHEMICALS STORES& SAPRES TOTAL TARGET 12651 30200 42851 ACTUAL 16139 31854 47993

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Analysis
Due to increasing manufacturing capacity of plant, company set the target amount of chemicals and stores & spares for the year 2007-2008 with a high amount of chemicals out of which company used the actual amount of 4172.43 means companys processing is going on in a better direction they have sufficient amount to use further if they required. But in stores and spares company required material above the settled target because stores & spares have no limitation they can be fail by using, breakdown while working, or may get free or obsolete, so many reasons may cause their demand high of stores & spares.

INVENTORY TURNOVER RATIO

It is computed by dividing the cost of goods sold by the average inventory. Thus, Inventory Turnover Ratio=Cost of Goods Sold/Avg. Inventory PARTICULARS SALES Av. INVENTORY INVNTORY TURNOVER RATIO 2006-07 in lakh) 2146123 226842 (Rs 2007-08 in lakh) 3318902 363536 (Rs 2008-09 in lakh) 4065554 350792 (Rs

9.46

9.12

11.58

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Analysis
As inventory turnover ratio indicates how fats inventory is sold. A high ratio is good from the view point of the liquidity and vice versa. A low inventory turnover ratio signifies that inventory does not sell fast and stays on the shelf or warehouse for a long time. As the refinery having a high turnover ratio which signifies that inventory is not staying in a shelf or warehouse for a long time they can be easily sold after manufacturing so it means company have a good sales in comparison to the average inventory of the refinery.

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ABC ANALYSIS
2007-08 PARTICULARS Materials A Segment B Segment C Segment 2077 6147 38792 Value 4.42% 2008-09 Materials Value 949 1.88% 10.5% Inventory Value 70% 20% 13.07% 5300 82.51% 44216

87.62% 10%

Analysis
A B C system is an inventory management technique that divides inventory into three categories of descending importance based on the rupee investment in each. The items included in group A involve the largest investment. The group C consists of items of inventory which involve relatively small investment although the number of items is high. The B group stands in midway. Same process is followed in the refinery, as they have nearly 51000 items in their inventory list so out of all the items they categories the items on the basis of their number and investment in the A B C category because while using they required very SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 66

quickly without any delay in time so by dividing such category it helps in easy finding and accounting of these materials.

CHAPTER - 5

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CONCLUSION

CONCLUSION
After studying the inventory management of Panipat refinery and by seeing the last years performance and records it has resulted that refinery has sufficient inventory system due to which they have a good working status. As we have seeing the data of stores & spares, oil in tanks and pipelines, chemicals and A B C analysis from which we know that refinery has approx 51000 items in their inventory and all they will be utilized on time, some of them stored in stores for the time of emergency but after a time they also get change because of obsolesce. In year 2008-09 they have fewer inventories in comparison to last year because of new technologies and set up. The vendors try to provide best technology to their customers so the companies try to store less and after receiving an order they place the new order SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 68

for the material, spares & stores items. With the help of A B C system they divide their 51000 items on the basis of the investment and number of parts. Inventory management of the refinery is need only up gradation which already done by refinery stores manager and keepers because if the parts, chemicals, spares, coils, pipes, wires etc may get outdated or their manufacturing date get expired may cause a high damage to the plant so to avoid any damage or loss we have to be use the new inventory according to time and check before use as it will not have any hole or possibility of damage. As inventory storing, ordering and keeping all will be based on the capacity of the plant and the Panipat refinery plant is one of the biggest plant out of the IOCL plants, so it required a good amount of inventory to be stored in their stores to avoid the breakage of the plant manufacturing process as breakdown of one day may cause a high loss of earning for the plant as the reason due to which plant get stop is nearly about 5lakh20lakh but the profit ratio of one day is near 2crore-7crore so we should be alert and attentive towards the inventory system of the plant. For example the plant requires the air fin coolers for the plant which would be supplied from Gujarat by a vendor; they required minimum time to manufacture them near 6-8 months so for that we have to place the order before 8 months so we get on time. Although the sales of IOCL are increasing and which has resulted in the increase in income, still the company is not able to manage an increase in profits because of a simultaneous increase in the amount of expenditure. The IOCL has earned handsome amount of profits even the profits have been decreasing from past few years. But, this state is temporary due to high price in world crude oil prices and another reason is that the mostly amount of oil is imported from the outside which may also a reason of reducing the profit ratio as comparison to the expectation and capacity of the company. The study has its own importance in its own way. With the help of this study one can know about the existence and survival and success of IOCL and efforts, and related to SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 69

the topic i.e. INVENTORY MANAGEMENT, of the Panipat refinery that they have a transparent process which can easily be understand and adjust by the employees as they have a proper management that after receiving order get check all the goods and approved by their higher authorities to avoid the loss and damage of health and wealth.

BIBLIOGRAPHY
WEB
www.google.com www.iocltenderexpress.com www.iocl.com www.investopedia.com

BOOKS
SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 70

MANAGEMENT ACCOUNTING (M Y KHAN) MANAGEMENT ACCOUNTING (RAVI M. KISHOR)

OTHERS
Company Generals Manuals related to stores and spares Sap accounting manuals Data related to balance sheet and generals

SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR Page 71