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 SUBMITTED BY

FACULTY SRM UNIVERSITY

mba 2008-2010 REG NO. 35084151

SRM INSTITUTE OF MANAGEMENT & TECHNOLOGY MODINAGAR

DECLARATION

mS. CHANDRA

vi as umar

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

AR

PREFACE

Knowledge has two aspects - theoretical and practical and no theoretical concept is complete without having nowledge of its practical application. A few wee s 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 wor environment during their traini ng period.

As per the curriculum requirement , I did 6 wee s training in INDIAN OIL CORPORA TION LTD. In INDIA, PANIPAT. Wor ing in such a big concern, no matter for a very small period was really a matter of pride. My area of wor 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 concentr ated my wor ing 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 KUM

VIKAS KUMAR

ACKNOWLEDGEMENT

Intention, dedication, concentration and wor are very much essential to complet e any tas .But still it needs lot of support, guidance, co-operation of people t o ma e it successful. Heart full than s 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 INDIAN OIL CORPORATION LIMITED for giving me an opportunity to pursue my interns hip. I sincerely than Mr. L.D. Batra (T&D Manager) for giving me more than just a tr aining place and an opportunity for understanding of what is a good professional culture I express my deep sense of indebtness towards Mr. Ra esh Kumar Dubey (Finance Ma nager, Panipat region) for providing me valuable information .

I also offer my sincere than s to DR. N K SINHA, H.O.D. of Master of Business Ad ministration, 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 than my parents and all my well wishers, who helped me directly or indir ectly in some way to ma e 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

I would li e to than out my training.

Mr.Siddhartha for guiding and helping me immensely through

EXECUTIVE SUMMARY

My project is based on INVENTORY MANAGEMENT at Indian Oil Corporation Limited, PAN IPAT. INVENTORY MANAGEMENT Analysis is a post mortem of the organizations inventory sys tem. It measures the ability of the organization to meet its material requiremen t efficiently or not. Its helps in calculating the appropriate amount of money s hould invest in the inventory without ma e it obsolete, timely consume and repla ce by new inventory. In this project, I analyzed the different aspects of inventory at Panipat Refin ery. 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 underta en is quite satisfactory which shows that refin ery 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 st oc as in stores and in transit. .

CONTENTS

PARTICULARS PAGE NO.

Chapter 1- INTRODUCTION OF THE COMPANY

7-36

1. Introduction of the company 2. SWOT ANALYSIS 3. Introduction of Panipat Refinery

CHAPTER 2- INTRODUCTION OF THE TOPIC

37-47

Chapter 3- RESEARCH METHODOLOGY A) Research Methodology B) Objective of the study C) Research Design

48-54

D) Method of Data Collection / Survey period

chapter 4-

ANALYSIS & INTERPRETATION

55-62

chapter 5- CONCLUSION

63-65

BIBLIOGRAPHY

66

CHAPTER 1

A) COMPANYS INTRODUCTION

B) INTRODUCTION OF PANIPAT REFINERY

INTRODUCTION 0F THE COMPANY

HISTORY OF INDIAN OIL CORPORATION LTD. The Indian Oil Corporation Ltd. operates as the largest company in India in term s of turnover and is the only Indian company to ran 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, mar eting, and international trading compa

ny served the Indian state with the important tas of reducing India s dependenc e on foreign oil and thus conserving valuable foreign exchange. That changed in April 2002, however, when the Indian government deregulated its petroleum indust ry and ended Indian Oil s monopoly on crude oil imports. The firm owns and opera tes seven of the 17 refineries in India, controlling nearly 40 percent of the co untry s refining capacity.

1958 * Indian Refineries Ltd. formed in August with Mr Feroze Gandhi as the Chair man. 1959 * Indian Oil Company Ltd. established on 30th June 1959 with Mr S. Nijalinga ppa as the Chairman. 1960 * 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 India nOil doc ed at Pir Pau Jetty in Mumbai on 17th August 1960. 1962 * Guwahati Refinery inaugurated by Pt. Jawaharlal Nehru, Honble Prime Ministe r 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 * Indian Refineries Ltd. merged with Indian Oil Company with effect from 1st September, 1964, and Indian Oil Company renamed as Indian Oil Corporation Ltd. * Barauni Refinery commissioned. * The first petroleum product pipeline from Guwahati to Siliguri commissione d. 1965 * Gujarat Refinery inaugurated by HE Dr. S.Radha rishnan, President of India . Barauni-Kanpur product pipeline and Koyali- Ahmedabad product pipeline com missioned. * IndianOilPeople maintained the vital supply of Petroleum products to Defen ce Services during Indo-Pa war. 1967 * Haldia Barauni product pipeline commissioned.Bitumen and marine bun ering businesses commenced. 1968 * Techno-economic studies for Haldia-Calcutta, Bombay-Pune and Bombay-Manmad Pipelines submitted to Government. 1969 * Mar eting of Madras Refineries Ltd. products commences. 1970

* Acquired 60% majority shares of IBP Co. Ltd. The same was offloaded in fav our 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-Pa war. 1972 * R&D Centre established at Faridabad. * SERVO, the first indigenous lubricant, launched. 1973 * Foundation-stone of Mathura Refinery laid by Mrs. Indira Gandhi, Honble Pri me Minister of India. 1974 * Indian Oil Blending Ltd. became the wholly-owned subsidiary. * Mar eting Division attained a new watershed with mar et participation of 6 4.2%.

1975 * Haldia Refinery commissioned. Multipurpose Distribution Centres introduced at 132 Retail Outlets pioneering rural convenience. 1977 * Nutan wic 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) mar eting operations vested in IndianOil and it became Assam Oil Division (AOD) of IndianOil. 1982 * Mathura Refinery and Mathura-Jalandhar Pipeline commissioned. 1983 * Massive augmentation of LPG storage and distribution facilities underta en . * Proposal for the 6 MMTPA Refinery at Karnal submitted. 1984 * Talu a Kerosene Depots (TKDs) commissioned for improved availability of e rosene 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 R ange Plan initiated. 1985 * New office complex for Registered Office of the Corporation and HeadOffice of Mar eting Division in Mumbai completed. 1986 * A new Foreshore Terminal at Madras commissioned.

1987 * Test mar eting of 5 g LPG cylinders begins in 1986-87 in Garo Hills and K umaon. 1989 * Salaya-Mathura crude oil pipeline suitably modified for handling Bombay Hi gh Crude during winter. 1990 * Kandla-Bhatinda product pipeline project approv * First LPG Bottling Plant of Assam Oil Division (AOD) commissioned at Silch ar. 1991 * Digboi Refinery modernisation project initiated. * Bun ering facility at Paradip commissioned.

1993 * New era Micro-processor based Distributed Digital Control Systems replacin g the pneumatic instrumentations began in refineries. 1994 * India s first Hydrocrac er commissioned at Gujarat Refinery. * Vision-2000, the Retail Visual Identity programme launched to upgrade reta il outlets. 1995 * 1,443 m. long Kandla-Bhatinda product pipeline commissioned. * First lndane Home Shoppe launched. 1996 * State-of-the-art LPG Import Terminal at Kandla (capacity of 6,00,000 tonne s per annum) commissioned. * First batch of one-year International MBA (iMBA) programme passes out of I ndianOil Institute of Petroleum Management (IIPM). 1997 * Business Development received renewed thrust with new functional group. * Indian Oil enters into LNG business through Petronet LNG -a JV company. 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, organised by Indian Oil on behalf of the oil Industry. * Diesel Hydro-desulphurisation Units commissioned at Gujarat, Panipat, Math ura and Haldia Refineries. * Manthan -- the IT re-engineering project was launched. 2000 * Indian Oil crossed the turnover of the magical mar of Rs l ,00,000 Crore -- the first Corporate in India to do so. * Indian Oil entered into Exploration & Production (E&P) with the award of t

wo exploration bloc s to Indian Oil and ONGC consortium under NELP-1 * Y2K compatibility achieved. * JNPT Terminal was commissioned.

2001 o Digboi Refinery completed 100 years of continuous operation. * Chennai Petroleum Corporation Ltd. (CPCL) and Bongaigaon Refinery and Petr ochemicals Ltd. (BRPL) were acquired. * Fluidised Catalytic Crac er Unit at Haldia Refinery was commissioned. * Augmentation of Kandla-Bhatinda Pipeline (KBPL) to 8.8 MMTPA completed. * Eight Exploration bloc s awarded to the Indian Oilled consortium under NEL P-II. 2002 o o o o 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

* Lan a IOC Pvt. Ltd. (LIOC) launched in Sri Lan a. Retail operations began in Sri Lan a. Indian Oil became the first Indian Petrole um Company to begin downstream mar eting operations in overseas mar et. Lan a IO C became an independent oil company in Sri Lan a * Gasahol, 5% ethanol blended petrol, was introduced in select states. * INDMAX unit at Guwahati Refinery commissioned. 2004 * Indian Oil turned a Gas mar eter by sale of regasified LNG. * Indian Oil Mauritius Ltd.s 18 TMT state-of-the-art Oil Storage Terminal at Mer Rouge commissioned * Lan a IOC Pvt. Ltd. (LIOC) launched in Sri Lan a. * 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 mar ed Indian Oil s big tic et entry into the high sta es busin ess 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 commiss ioning the Rs 1046 crore DHDT (Diesel hydrotreating unit). * Indian Oil breached the Rs 150, 000 crore mar in sales turnover by cloc i ng Rs 150, 677 in turnover in fiscal 2004. * Indian Oil signed a JV agreement with GAIL to enter the city gas distribut ion projects in Agra and Luc now. * Indian Oil allowed by Government of India to charter crude oil ships on it s own instead of going through Transchart, the chartering wing of the Ministry o f Shipping. 2006 * Panipat Refinery capacity enhanced from 9 to 12 MMTPA * World-scale Paraxylene/Purified Terephthalic Acid (PX/PTA) plant commissio ned at Panipat as mother plant for polyester industry * Chennai-Trichy-Madurai product pipeline dedicated to the nation. 2007 * Mar eting subsidiary IBP Co. Ltd. merged with parent company. * Concept of SERVOXpress Centres as one-stop shops for autocare services lau nched. * Mundra-Panipat crude oil pipeline with facilities for handling heavy crude oil commissioned. * Lan a 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 2008 * SERVO lubricants launched in Oman. * IndianOil Chairman elected as President of World LP Gas Association.

INDIAN OIL CORPORATION LTD.

* Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the me rger of Indian Oil Company Ltd. (Estd. 1959) and Indian Refineries Ltd. (Estd. 1 958). + At Indian Oil, corporate social responsibility (CSR) has been the cornerstone of success right from inception in the year 1964. The Corporatio ns objectives in this ey performance area are enshrined in its Mission statement : "to help enrich the quality of life of the community and preserve ecological ba lance and heritage through a strong environment conscience + .From a fledgling company with a net worth of just Rs. 45.18 c rore and sales of 1.38 million tonnes valued at Rs. 78 crore in the year 1965, I ndian Oil has since grown over 3000 times. + Indian Oil Corporation Ltd. (Indian Oil) is India s largest co mmercial enterprise, with a sales turnover of Rs. 2,47,479 crore (US $ 61.70 bi llion) and profits of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007-08. + Indian Oil is also the highest ran ed Indian company in the pr estigious Fortune Global 500 listing, having moved up 19 places to the 116th p osition 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 playing a ey role in realising Indias bid to eme rge as an export-oriented hub for finished products.

PRODUCTS

Indian Oil is not only the largest commercial enterprise in the country it is th e flagship corporate of the Indian Nation. Besides having a dominant mar et shar e, 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. Benchmar ing Quality, Quantity and Service to world-class standards is a philoso phy 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, globa l brand at another level. While quality, reliability and service remains the cor e benefits to the customers.

* Autogas

* Indian Oil Aviation Service

* Bitumen

* High Speed Diesel

* 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 cloc ed the highest ever throughput of 51.4 million tonnes. Breaching the 10,000 m mar in length, the pipelines networ registered the highest ever operational throughpu t 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% an d went up to an unprecedented 62.6 million tonnes of petroleum products as compa red 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. Among new businesses, Natural Gas mar eting and Petrochemicals generated revenue

* Bul

/ Industrial Fuel

s 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 r eached 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. 4 0,383 crore from the Government of India in addition to Rs. 18,210 crore receive d from upstream companies towards subsidy-sharing. * The Gross Refining Margin for April-March 2009 is USD 3.69 per barrel as c ompared to USD 9.02 per barrel during the previous year Mar eting * IndianOil maintained its dominance in the mar et place and cloc ed the hig hest 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 ev er throughput of 51.4 million tonnes and 103.4% capacity utilisation, registerin g 8.4% growth in crude oil processing over the previous year. * IndianOil refineries cloc ed the lowest overall specific energy consumptio n of 64 MBTU/BBL/NRGF (MBN) during the year as against 67 in 2007-08. IndianOil imported a record quantity of 47.8 million tonnes of crude oil i n 2008-09 as against 46.11 million tonnes in 2007-08. * During the year, IndianOil entered into term contracts with Angola and Bru nei for import of low sulphur crude oil and over 95% of the LPG imports were fin alised through term contracts. Pipelines * During the year, IndianOil s networ of underground highways breached the 10,000 ilometre mar 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% g rowth at 38.2 million tonnes. * The year was mar ed by the commissioning of a record number of pipeline pr ojects, 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 prod uct pipeline, ATF Pipeline from CPCL (Manali) to Chennai AFS . Projects * IndianOil is implementing projects of over Rs. 60,000 crore currently. Maj or ones among them are: 15 MMTPA refinery at Paradip (Rs. 29,777 crore); * capacity augmentation of Panipat Refinery (from 12 to 15 MMTPA, Rs. 1007.8 3 crore); * MS quality improvement projects at Panipat (Rs. 1,131 crore), New Businesses * IndianOil too 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, Koya li, Haldia, Mathura, Panipat, Chennai, Narimanam and Bongaigaon with a current c ombined rated capacity of 54.20 million metric tones per annum (MMTPA)* (one mil lion barrels per day). Indian Oil registered a record throughput of 36.63 milli ons tones during the year 2004-05 with a capacity utility of 88.6%. Indian Oil a ccounts 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 1 11, 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$ 6.2 5/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 comm issioned in 1901. Originally a part of Assam Oil Company, it became part of Ind ian Oil in 1981, its original refining capacity has been 0.5 MMTPA since 1901.

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

GUWAHATI REFINERY

The Guwahati Refinery in North East India the first Public Sector refinery of t he country-was commissioned in 1962 with a capacity of 0.75 MMTPA which was subs equently increased to 1.0 MMTPA through debottlenec ing projects.The refinery pr ocessing only indigenous crude oil from the Assam oil fields. It supplies petro leum 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 no vel technology developed by Indianoils R & D center for upgrading heavy ends into LPG, motor spirit and diesel oil.

BARAUNI REFINERY

The Barauni Refinery in Eastern India was commissioned in 1964 with a capacity o f 2.0 MMTPA. The refining capacity was increased to 3.0 MMTPA by 1969 and furth er to its current capacity of 6.0 MMTPA through low cost revamping and debottlen ec ing. Matching secondary processing facility such as RFCC (Resid Fluidised Ca talytic Crac er) and hydrotreater facilities for diesel quality improvement have been added. With the commissioning of the 6.0 MMTPA Haldia-Barauni crude oil p ipeline, the refinery now received imported crude for processing. A CRU (Cataly tic Reformer Unit) was also added to the refinery in 1997 for production of unle aded motor spirit. Projects are also planned for meeting future fuel quality re quirements. Barauni refinery supplies distillate products beside eastern India to northern India through a product pipeline to Kanpur in Uttar Pradesh.

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 a tmospheric crude distillation units. The major units include CRU, FCCU and the first Hydro crac ing unit of the country.Through a product pipeline to Ahmedabad and a recently commissioned product pipeline connecting to BKPL product pipelin e and also by rail wagons/truc s, the refinery primarily serves the demand for pet roleum products in Western and Northern India.When commissioned, the Gujarat ref inery 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 fur ther increased to 7.3 MMTPA by the addition of a crude distillation unit. Subse quently the crude capacity was increased to 9.5 MMTPA by 1990 and then by 12.5 M MTPA in 1999. Since it has been increased to its present capacity of 13.70 MMTPA by low cost debottlenec ing.

HALDIA REFINERY

Haldia Refinery, the fourth in the chain of seven operating refineries of Indian Oil, was commissioned in January 1975. It is situated 136 m downstream of Kol ata 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 capac ity of 2.5 MMTPA. Petroleum products from this refinery are supplied to eastern India through two product pipelines as well as through Barges, tan wagons and tan truc s.Products li e MS, HSD and Bitumen are exported from this refinery.Re finery was increased to 2.75 MMTPA through de-bottlenec ing in 1989-90. Refinin g capacity was further increased to 3.75 MMTPA in 1997 with the installation/com missioning of second Crude distillation unit of 1.0 MMTPA capacity.Diesel Hydro

Desulphurisation (DHDS) unit was commissioned in 1999, for production of low sul phur content (0.25%wt.) High Speed Diesel. With augmentation of this unit, refi nery is producing BS-II and Euro-III equivalent HSD at present. MATHURA REFINERY The Mathura Refinery was commissioned in 1982 with an original capacity of 6.0 M MTPA. The capacity was increased to 7.5 MMTPA by debottlenec ing and revamping. With its fluid catalytic crac ing units, the refinery mainly produces middle d istillates and supplies them to Northern India through a product pipeline to Jal andhar, Punjab via Delhi. A hydro crac er for increasing middle distillates was also completed in 2000. The present capacity of the refinery is 8 MMTPA. In o rder 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 ms away from Delhi, the capital of India, in the state of Haryana in Northern Indi a. The main units are OHCU (Once-through-hydro crac er), 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 in crease the capacity of Panipat refinery to 15 MMTPA is already under implementat ion, which also ta es into account future fuel quality requirements for 2005. T he expansion project is expected to be completed in 2005.

MARKETING DIVISION The Mar eting Division of IOCL handles the responsibility of delivering petroleu m products to the customers. The Mar eting Division has set up various mar etin g terminals where storage tan s are built up to hold the products. The petroleu m products are transferred to the mar eting terminals by the Pipelines Division, which charges the Mar eting Division for the same. Indian Oil caters to over 5 3.2% of Indias petroleum consumption. Indian Oils Mar eting Networ is spread throughout the country with over 23,000 s ales points (the largest in the country

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 sens e 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 Fa ridabad near New Delhi has completed around 30 years of glorious service to the nation. It is one of its ind in Asia and has grown into a major technologica l development center of international repute in the down stream areas of lubrica nts, pipelines and refining processes. Over the years, it has successfully perfected the state-of-the-art lube formulat ion technology meeting latest national and international specifications with app rovals from major original equipment manufacturers. Indian Oil mar ets around 4

50 grades of lubricants under the brand name SERVO based on its R&D technology. I t has extensive laboratory and pilot plant facilities to successfully pursue pro jects in lube, refining and pipeline areas ma ing 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 r esearch has led to technological innovations, some of which have received presti gious national and international awards.

ASSAM OIL DIVISION

The assets of the erstwhile Assam Oil Company were ta en over by IOCL in the yea r 1981. It is ept as a separate division in IOCL. Assam Oil Division owns the Digboi refinery and is also into mar eting. It owns one petrol pump on the Del hi-Mathura Road.

MISSION

To achieve international standards of excellence in all aspects of energy and di versified 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 sta eholders. To attain leadership in developing, adopting and assimilating state-of-the-art t echnology 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 cont ribution. 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 bala nce and heritage through a strong environment conscience.

VISION

A major, diversified, transnational, integrated energy company, with national le adership and a strong environment conscience, playing a national role in oil sec

urity and public distribution.

VALUES

Care Stands for o Concern * Empathy o Understanding o Cooperation o Empowerment

Innovation Stands for + Creativity + Ability to learn + Flexibility + Change

Passion - Stands for o o o o o o Commitment Dedication Pride Inspiration Ownership Zeal & Zest

Trust - Stands for * * * * * * Delivered Promises Reliability Dependability Integrity Truthfulness Transparency

OBLIGATIONS

Towards customers and dealers 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 healt hy 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 i n its manufacturing plants and townships by ta ing suitable and effective measur es.

Towards Defence Services To maintain adequate supplies to Defence Services during Norman and emergency si tuations as per their requirement at different locations.

CORPORATE OBJECTIVES

* To serve the national interests in the Oil and related sectors in accordan ce and consistent with Government policies. * To ensure and maintain continuous and smooth supplies of petroleum product s by way of crude refining, transportation and mar eting activities and to provi de appropriate assistance to the consumer to conserve and use petroleum products efficiently. * To earn a reasonable rate of interest on investment. * To wor towards the achievement of self-sufficiency in the filed of Oil re fining by setting up adequate capacity and to build up expertise in laying of cr ude and petroleum product pipelines. * To create a strong research and development base in the field of Oil refin ing and stimulate the development of new product formulations with a view to min imize/eliminate their imports and to have next generation products. * To maximize utilization of the existing facilities in order to improve eff iciency and increase productivity. * To optimize utilization of its refining capacity and maximize distillate y ield from refining of crude to minimize foreign exchange outgo. * To minimize fuel consumption in refineries and stoc losses in mar eting o perations to effect energy conservation. * To further enhance distribution networ for providing assured service to c ustomers throughout the country through expansion of reseller networ as per Mar eting Plan/Government approval. * To avail of all viable opportunities, both national and global, arising ou t of the liberalization policies being pursued by the Government of India. * To achieve higher growth through integration, mergers, acquisitions and di versification by harnessing new business opportunities

FINANCIAL OBJECTIVES

To ensure adequate return on the capital employed and maintain a reasonable annu al 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 ad equate internal resources to meet revenue cost and requirements for project inve stment, without budgetary support. To develop long-term corporate plans to provide for adequate growth of the activ ities of the corporation.

To endeavor to reduce the cost of production of petroleum products by means of s ystematic cost control measures. To endeavor to complete all planned projects within the stipulated time and cost estimates.

PRINCIPAL SUBSIDIARIES Indo Mobil Ltd. (50%); Avi-Oil Ltd. (25%); Indian Oil tan ing Ltd. (25%); Petron et India Ltd. (16%); Petronet VK Ltd. (26%); Petronet CTM Ltd. (26%); Petronet C IPL Ltd. (12.5%); IndianOil Petronas Ltd. (50%); Indian Oil Panipat Power Consor tium 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 fo reign 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 en d of the last financial year. HIGHEST MARKET SHARE As India s flagship national oil company, Indian Oil accounts for 56% petroleum products mar et share, 42% national refining capacity and 67% downstream pipelin e throughput capacity. EXPERTISE IN OIL & GAS INDUSTRY Indian Oil is one of the leaders in providing engineering, construction and cons ultancy services to the pipeline industry. Highly qualified professionals with v ast experience execute pipeline projects from concept to commissioning and provi de services for construction supervision and project management. FOREIGN SUBSIDIARIES AND JOINT VENTURES Indian Oil is strengthening its existing overseas mar eting ventures and simulta neously scouting new opportunities for mar eting and export of petroleum product s in foreign mar ets. Two wholly owned subsidiaries are already operational in S ri Lan a and Mauritius, and regional offices at Dubai and Kuala Lumpur are coord inating expansion of business activities in Middle East and South East Asia regi ons. The Corporation has launched eleven joint ventures (listed separately) in p artnership with some of the most respected corporate from India and abroad . WEAKNESSES

STRINGENT CORPORATE POLICIES The decisions relating to administration are ta en at the corporate level. Even minor proposals are to be referred to the top management. This leads to a delay in decision-ma ing. LACK OF MARKETING EFFORTS Among the public sector oil companies, Indian Oil Corporation is the only one to follow a wea mar eting strategy. It in only in the recent years that the compa ny has started to mar et its products. However, still the efforts seem to be wea when compared with the competitors li e BPCL and HPCL. PROMOTION POLICY Most of the public sector companies seem to suffer from these lacunae. The emplo yees are promoted mainly on the basis of experience and not on the efforts and i nitiatives displayed by the employee in his wor . This results in demotivation a nd lac of interest for their wor on the part of the hardwor ing 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 li ely to generate some savings for the company, since tendering process leads to expen ses on account of advertisement. OPPORTUNITIES Exploration and Production Indian Oil is metamorphosing from a pure sectoral company with dominance in down stream in India to a vertically integrated, transnational energy behemoth. The C orporation is ma ing investments in E&P and import/mar eting ventures for oil an d gas in India and abroad, and is implementing a master plan to emerge as a majo r player in petrochemicals by integrating its core refining business with petroc hemical activities. THREATS Entry of Big Private players The opening up of the oil sector for private players poses a threat even for thi s well-established company. With Indian players li e Reliance and Essar and fore ign players li e Shell planning their entry into the Indian scenario, the road s eems to be tough for Indian Oil.

INTRODUCTION TO PANIPAT REFINERY

Panipat Refinery is the seventh refinery of Indian Oil. It is located in the his toric district of Panipat in the state of Haryana and is about 23 m from Panipa t City. The original refinery with 6 MMTPA capacity was built and commissioned i n 1998 at a cost of Rs. 3868 crore. Panipat Refinery has doubled its refining ca pacity from 6 MMT/yr to 12 MMT/yr with the commissioning of its Expansion Projec t. 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 usin g global technologies from IFP France; Haldor-Topsoe, Denmar ; UNOCAL/UOP, USA; and Stone &Webster, USA. It processes a wide range of both indigenous and import ed grades of crude oil. It receives crude from Vadinar through the 1370 m long Salaya-Mathura Pipeline which also supplies crude to Koyali and Mathura Refineri es of IndianOil. Petroleum products are transported through various modes li e 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 Ind ianOils Kohand Bottling plant where bottling and bul despatches are done. Panipa t Refinery has also developed new products li e 96 RON petrol, and sub Zero dies el 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 pro duced from entire refinery will meet BS-II and BS-III Grade required for NCR. Af ter stabilisation of units, the high value product yield from the refinery will be further improved by reducing the production of blac oil li e HPS and Bitumen . With state-of the-art matching secondary processing facilities was approved at a cost of Rs.4165 crore.

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

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

CHAPTER-2

PRISM

INTRODUCTION OF THE TOPIC

INTRODUCTION OF THE TOPIC

INVENTORY MANAGEMENT

MEANING

Inventory management is concerned with eeping 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 res ults in large inventory carrying cost . An efficient system of inventory managem ent will determine :1. What to purchase? B) How much to purchase?

C) D)

From where to purchase? Where to store?

Inventory management is the active control program which allows the management o f 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 c reate 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 o f a typical petroleum refining company involves a wide spectrum of activities, s tarting from crude purchase and crude transportation to refineries, refining ope rations, product transportation and finally delivering the product to the end us er.

WHO SHOULD ATTEND Factory and inventory control professionals, manufacturing and production contro l managers, industrial engineers, plant managers, material and purchasing manage rs, factory superintendents and customer/technical service managers who can bene fit from enhancing their inventory management techniques. WHAT WILL COVER o o o o o o o o 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 productio n scheduling from arrival of basic inputs to the production process.

* Wor In Progress : An inventory of partially completed units allows the sep aration of different phases of the production process.

* Finished Goods : An inventory of finished goods allows separation of produ ction from selling.

* Cash & Mar etable Securities : Cash & Mar etable Securities can be thought of as an inventory of liquidity that allows separation of collection from disbu rsement.

OBTECTIVES OF INVENTORY MANAGEMENT

Inventory of finished goods should be maintained at sufficient high level so tha t the demand of customers may be fully satisfied .Similarly , inventory of raw m aterials should also be sufficient so that manufacturing process can be run smoo thly. In case of inadequate inventory of finished goods , there is always ris o f being out of stoc and in case of inadequate inventory of raw materials , ther e is always a ris of manufacturing process being halted. Therefore the major re sponsibility of inventory management is to determine the sufficient level of inv entory 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 fund s are involved in it .Therefore , inventory management also tries to minimize th e sufficient level of inventory. Thus , both inadequate & excessive quality of inventory is undesirable in the bu siness. Inventory management should maintain the inventory at sufficient level s o that it is neither excessive nor short of requirement. The Term inventory management includes two conflicting tas s :1) To maintain a sufficient large size of inventory to meet the demand of finis hed goods & to meet the demand of raw material by production department. 2) To eep the investment in inventories at minimum level by efficiently organi zing 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 supp ly. * To maintain sufficient inventory of finished goods so that the demand of t he customers are duly met. * To minimize the carrying costs of inventory namely cost of godown , insura nce expenses, cost of funds involved in inventory etc. * To arrange for sale of slow moving items. * To control investment in inventory & eep it at an optimum level.

RISKS & COSTS OF EXCESSIVE INVENTORY

* Ris of brea down in manufacturing process. * Ris of not meeting demand of customers.

Relevant inventory costs which change with the level of inventory are lister bel ow :-

Ordering Cost :- The cost of ordering includes : * Paper wor costs , typing & dispatching * Order inspection cost , chec ing & handling. Carrying Cost :- Carrying cost involves : * * * * * Capital Cost. Storage & handling cost. Insurance. Taxes. The cost of funds invested in inventory. out cost :- Stoc out cost involves :

* Expenses of placing special orders. * Expediting income orders. * Cost of production delays.

* Transactive Motive * Precautionary Motive * Speculative Motive

Stoc

ACCOUNTING OF STORES

* * * * *

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

RISKS OF INADEQUATE INVENTORY

COST OF INVENTORIES

NEED OF INVENTORIES

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 us er Departments shall not be permitted to have any stoc of materials with them i n the form of sub-stores. However, in certain cases a nominal stoc of a few urg ent 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 la h and above is lying in sub stores of plant as on 31st March shall be include d in inventory in the financial ledger as material at site account which shall b e reversed in the next year. Details procedure as prescribed in the Materials Management Manual is to be foll owed for all functions of the stores section of the Materials . a general outlin e of the functions is as under:

o o o o o

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 followi ng functions:

* PASSING AND ACCOUNTING OF TRANSPORTATION BILLS

All railway/streamer/air freight inward receipt and the road transport consignme nt notes shall be received in the stores Section of Materials. For ta ing the de livery of the consignments. The Stores shall enter these documents in a Daily Re ceipt Register. Transport bills will be initially received by the Materials t. and sent to Finan ce . duly verified with reference to the purchase order and also lin ing the sam e with the GR Notes The certified bills of freight received from stores section shall be priced doing YMIROOTH transactions wherever the freight bill is directl y lin ed to a Purchase order. The Finance will release payment only after due ch ec ing of bills with reference to the transport contract and other relevant docu ments. In case the freight bill cannot be lin ed to Purchase order the same shal l be charged to freight expenditure account. For all freight bills, passed payme nt 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 pa yment to vendor.

* ACCOUNT OF RECEIPTS, ISSUES, RETURN AND TRANSFER OF MATERIALS

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

* NON-MOVING ITEMS AND DISPOSAL OF SURPLUS AND SCRAP MATERIALS

All items (except for non valuated stoc items) which are not moving for two yea rs shall be classified into three categories as under:a) "Category I" shall contain all items with inventory value exceedingRs.10,00,0 00 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 a nd upto Rs.1,00,000 d) Category IV shall contain items with inventory value upto Rs.50,000

* FREQUENCY OF STORES VERIFICATION

Stoc verification should be so arranged that : a) All items, the stoc value of which exceeds Rs.1,00,000/- are verified at lea st twice a year. b) All items, the stoc 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 Ac counts Officer will draw up annual and monthly schedules for the above verificat ion in consultation with the Stores Officer in accordance with the value given i n annual inventory statements. The Accounts Officer will arrange to maintain proper records of the stoc verifi cation sheets for the discrepancies prepared by stoc verifiers.

TECHNIQUES OF INVENTORY MANAGEMENT

1) Determination of stoc Level :-

(A) Minimum Level = Rerdering Level ( Normal Consumption * Normal Reordering Per iod ) (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 or dering 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 wor cost , typing & dispatching * Order inspection cost , chec ing & handling.

b) Non - Ordering Cost - These are the costs for holding the inventories. This c ost involves: * * * * * Capital Cost. 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 consumptio n. Category C : Under this category 70% of the items contribute about 10% of value of consumptio n.

5) VED Analysis :The VED Analysis is used generally for spare parts. The requirements & urgency o f 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:

Desirable spare parts: May be avoided at times.

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

7) XYZ Classification: The XYZ Classification has the value of inventory stored as the basis of differe ntiation. X items are those whose inventory values are high while Z items are th ose whose value is low.

In Indian Oil Corporation Limited A-B-C Analysis technique is used for inventory management.

Necessary but stoc

ept at low figures.

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 metho d , weighted average prices are ta en with price of each type of material in sto c are ta en together.

* First In - First Out Method: Under FIFO Method , items received first are assumed to be used first & therefor e prices charged are those paid for early purchase. Care has to be ta en to ensu re that each quantity is issued at the correct price.

* Base Stoc Method: Under this method , the base quantity is carried forward at the cost of the orig inal stoc . If a quantity of goods larger than the base stoc is owned at the en d of any period , the excess will be carried at its identified cost or at the co st determined under FIFO Method.

* Last In- First Out Method: Under LIFO , it is assumed that the stoc sold or consumed in any period are tho se most recently acquired or made. The result at the LIFO Method is to charge cu rrent revenues with amount approximating current replacement cost.

CHAPER 3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Solving a research problem by using various research methods in a systematic ma nner is research methodology. It may be understood as a science of studying how research is done scientifically. Researcher not only need to now how to develo p certain indices or tests, how to calculate the mean, mode, or standard deviati on or chi square, how to apply particular research techniques, but they also nee d to now which of these methods or techniques are relevant and which are not, a nd what would they mean and indicate and why. Researcher also need to understand the assumptions underlying various techniques and they need to now the criteri a by which they can decide that certain techniques and procedures will be applic able to certain problems and others will not. All this means that it is necessar y 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 comp aring it is relative advantage and disadvantage with those alternatives, which h ave 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 Panip at refinery.

Sub Objectives

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 mater ial. 2) To study about the investment in inventories. 3) To study the continuous supply of raw material. 4) To now how the funds are utilized.

However the main objective of this study is to fill the gap betwee n different aspect of theoretical and practical nowledge of financial managemen t and to develop the required s ill to ta e decision on sight for the best use o f my theoretical nowledge.

5) To extend the

nowledge.

RESEARCH DESIGN

Meaning of research Research in common parlance refers to a search for nowledge. Research can be expl ained as a movement, a movement from nown to un nown. It is actually a voyage o f discovery. * Research always starts with a question or problem. * 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 n owledge of the subject studied. So Research is scientific and systematic search for gaining information and now ledge on a specific topic or phenomena.

Research Design Research Design is the plan and structure of investigation so conceived as to obt ain 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 pr oduct use varies with income, age, sex or other characteristics; or the number w ho saw a specific television commercial. To be of maximum benefit, a descriptive study must only collect data for a defin ite purpose.

This project study is related with the inventory management so the data is colle cted in this regard only. I studied the various types of inventory through out the training period.

Your objective and understanding should be clear and specific. It is a urvey method.

ind of s

METHODS OF DATA COLLECTION

TYPES OF DATA

PRIMARY DATA SECONDARY DATA

This project is mainly based on the secondary data and information beside this p rimary data is also used.

1) Primary data:- primary data are to be collected by the researcher , the y 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.

Primary data for my project : The primary data for my research is the dispatch registers maintained by the company to now the purchase and stoc of inventor y 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 boo s, company reports, journals, rating organization, census department etc.. T he secondary data are readily available and therefore they are less costly and l ess time consuming. Sources of secondary data are

Secondary data for my project: Mainly the used in this project is secondary. The data is the already maintained in the manuals.

Survey period is 6 wee s from June 15th, 2009 to July 24th, 2009. It is not enou gh periods for the study to get the accurate a specific result of the study.

CHAPTER 4

ANALYSIS & INTERPRETATION

* * * * *

Internets. Boo and journals. Company reports. Census department. Research wor of others.

SURVEY PERIOD

STORES and SPARES PARTICULARS 2006-2007 Rs.LAKHS 2007-2008 Rs. LAKHS 2008-2009 Rs. LAKHS AT REFINERY 21980 31823

47994 IN TRANSIT 4693 3037 2471 TOTAL 26673 34860 50465 Analysis Panipat refinery is a big processing plant which requires the materials, tools a nd 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 o f materials in stores and also give orders to their vendors so they also availab le the goods on time. Because vendors also need time to manufacture the goods ac cording to the need and order by the company and supply to their place. PROCESS CHEMICALS PARTICULARS 2007-08 2008-09 AT REFINERY 4172 16139 IN TRANSIT Nil

Nil TOTAL 4172 16139 Analysis As while refining and manufacturing of petroleum from crude oil there is need some chemicals which are highly acidic handle with great care and caution so is type of chemicals refinery manufacture themselves so have their storage at finery itself there is no amount is in transit. They have sufficient capacity produce and store at their place itself. INVENTORY TARGET vs. ACTUAL FOR THE YEAR 2008-09 PARTICULARS TARGET ACTUAL CHEMICALS 12651 16139 STORES& SAPRES 30200 31854 TOTAL 42851 47993 of th re to

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 c hemicals out of which company used the actual amount of 4172.43 means companys pr ocessing is going on in a better direction they have sufficient amount to use fu rther if they required. But in stores and spares company required material above the settled target beca use stores & spares have no limitation they can be fail by using, brea down whil e wor ing, or may get free or obsolete, so many reasons may cause their demand h igh of stores & spares. INVENTORY TURNOVER RATIO It is computed by dividing the cost of goods sold by the average inventory. Thu s, Inventory Turnover Ratio=Cost of Goods Sold/Avg. Inventory

PARTICULARS

SALES 2146123 3318902 4065554 Av. INVENTORY 226842 363536 350792 INVNTORY TURNOVER RATIO 9.46

2008-09

(Rs in la h)

2007-08

(Rs in la h)

2006-07

(Rs in la h)

9.12 11.58

Analysis As inventory turnover ratio indicates how fats inventory is sold. A high ratio i s good from the view point of the liquidity and vice versa. A low inventory turn over 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 n ot 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 averag e inventory of the refinery.

ABC ANALYSIS 2007-08 2008-09 PARTICULARS Materials Value Materials

Value Inventory Value A Segment 2077 4.42% 949 1.88% 70% B Segment 6147 13.07% 5300 10.5% 20% C Segment 38792 82.51% 44216 87.62% 10%

Analysis A B C system is an inventory management technique that divides inventory into th ree categories of descending importance based on the rupee investment in each. T he items included in group A involve the largest investment. The group C consist s of items of inventory which involve relatively small investment although the n umber of items is high. The B group stands in midway. Same process is followed in the refinery, as they have nearly ir inventory list so out of all the items they categories the of their number and investment in the A B C category because equired very quic ly without any delay in time so by dividing elps in easy finding and accounting of these materials. 51000 items in the items on the basis while using they r such category it h

chapter - 5

CONCLUSION

CONCLUSION After studying the inventory management of Panipat refinery and by seeing the la st years performance and records it has resulted that refinery has sufficient inv entory system due to which they have a good wor ing status. As we have seeing the data of stores & spares, oil in tan s and pipelines, chemi cals and A B C analysis from which we now 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 o f new technologies and set up. The vendors try to provide best technology to the ir customers so the companies try to store less and after receiving an order the y place the new order 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 nu mber of parts. Inventory management of the refinery is need only up gradation wh ich already done by refinery stores manager and eepers because if the parts, ch emicals, 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 chec before use as it will not have any hole or possibility of damage. As inventory storing, ordering and eeping 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 sto res to avoid the brea age of the plant manufacturing process as brea down of one day may cause a high loss of earning for the plant as the reason due to which p lant get stop is nearly about 5la h-20la h but the profit ratio of one day is ne ar 2crore-7crore so we should be alert and attentive towards the inventory syste m 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 becau se 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 y ears. 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 expec tation and capacity of the company. The study has its own importance in its own way. With the help of this study one can now about the existence and survival and success of IOCL and efforts, and related to 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 empl oyees as they have a proper management that after receiving order get chec all the goods and approved by their higher authorities to avoid the loss and damage of health and wealth.

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