rakshika patel

7/30/2019 Rakshika Patel

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SHRI CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH (768) PAGE NO: 1

A

SUMMER INTERNSHIP PROJECTREPORTON

INVENTORY MANAGEMENT

AT

SUBMITTED TO:

CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCHIN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

IN

GUJARAT TECHNOLOGICAL UNIVERSITY

UNDER THE GUIDANCE OF:

INTERNAL GUIDE

MR.NISARG JOSHI

PROFESSOR OF CPIMR

SUBMITTED BY:

RAKSHIKA PATEL

ENROLLMENT NO.: 127680592075

MBA SEMESTER II

BATCH NO.: 2012-14


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Date: 03-08-2013

Institutes Certificate

Certified that this Summer Internship Project Report Titled inventory

management at GACL is the bonafide work of Ms. Rakshika v. patel

(Enrollment No. 127680592075), who carried out the research under my

supervision. I also certify further, that to the best of my knowledge the

work reported herein does not form part of any other project report or

dissertation on the basis of which a degree or award was conferred on an

earlier occasion on this or any other candidate.

Prof. Nisarg Joshi Dr. Ashvin Dave Dr. Arti Trivedi

(Faculty-MBA) (Coordinator - MBA)


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STUDENTS DECLARATION

I, Patel Rakshika Vinodbhai (Enrollment No. 127680592075) hereby declare that the report for

Comprehensive Project Inventory Management at Gujarat Alkalies And Chemical Ltd. is a

result of our own work and our indebtedness to other work publications, references, if any,

have been duly acknowledged.

Date: 03-08-2013

Place: Ahmedabad Rakshika Patel


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PREFACE

EXPERIENCE MAKES MAN PERFECT

TRAINING IS BRIDGE BETWEEN THE THEORY AND PRACTICE"

As it is said that study with knowledge you know only theoretical work and with

experience you know the exact practical functioning and meaning

The objective of the practical training at this level is to let the student know the work

culture in an industrial environment and prevailing business practice and develop them on a

practical basis as well as theoretical.

New technologies arising are helpful to get a batter practical knowledge and

experience. Management study can never be completed without practical training and perfection

is the basic necessity of a management student. Hence, training provides a golden opportunity

with the working environment.

Training gives meaning to the knowledge of student, industrial training is the first

step of student toward the giant world and helps student to prepare themselves for the future and

supply their knowledge in practical life.

Fortunately, we got golden opportunity to visit and complete our training at Gujarat

alkalies and chemicals limited at Ranoli, vadodara. Hence, we got chance to see the department

and imbibe a lot learning of the subject.

We learn that management is manage + man +t (time, task,etc.). We all agreewith this statement and wish to include that successful management of complex organization

cant be possible through intuition of trial and error. So, theoretical knowledge should be

supplemented by practical experience.

The main objective of practical at BBA level is to develop skill in students byhelping them to gain real life knowledge about the industrial environment and business practice.


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ACKNOWLEDGEMENT

Here, we get the golden opportunity to express our sincere gratitude to the people

who supported me in completing this project successfully.

First of all, I would like to thank Mrs. Aarti (Associate director, MBA Program, Gujarat

technological University Of Ahmadabad) for giving me this opportunity to explore and gain

knowledge in the field of corporate world.

It gives a pleasure being a part of Gujarat Alkalies And Chemicals Ltd. in span of six

week (01-06-2013 to 15-07-2013). We owe our sincere gratitude to Mr. Rajkumar (Officer,

H R Department.) for giving us the permission to undergo training in such an esteemed

organization and also for providing guidelines without which this project could not have

been completed.

We would also like to thank Mr. N.R.Desai and Mr. Nisarg Joshi for acting as a guide

and mentor during the entire duration of my project.

And at the last but not least we would like to pay my acknowledgements to all the

corporate executives for taking out their precious time from their busy schedule and

providing me with relevant information which contributed significantly in my project analysis.


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TABLE OF CONTENT:

SR. NO. PARTICULARS PAGE NO.

I Introduction of the company 7-38

1.1 History Of The Company 8-11

1.2 Company Profile 12-15

1.3 Board Of Directors 16-17

1.4 ISO Certification, Vision And Mission 18

1.5 New Logo Of GACL 19

1.6 Corporate Image 20-23

1.7 SWOT Analysis: 24

1.8 Department At GACL 25

1.9 Product Profile 26-27

1.10 Milestones Of GACL 28-30

1.11 National Awards: 31-34

1.12 5 s model 35

1.13 Policy of company 36-39

II Introduction of Finance Department 40-49

III. Introduction of Inventory Management 50-78

3.2 Introduction of topic 51-58

3.2.1 Inventory Management at GACL 59-78

IV Literature review 79-83

V Research methodology 84-86

5.1 Subject of the study 85

5.2 Objectives of the study 85

5.3 Research designs 86

5.4 Source of data 86

5.5 Period of the study 86

5.6 Limitation of the study 86

VI. Data analysis and interpretation 87-96

VII Finding 97-98

VIII Recommendations 99-100

IX Conclusion 101-102

X. References 103-106

XI Annexure 107


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HISTORY OF THE COMPANY

Gujarat Alkalies And Chemical Ltd. (GACL)

is one of the largest producers of the caustic soda in the

country. Gujarat Alkalies and Chemicals Limited (GACL)

was incorporated on 29th March, 1973 in the State of

Gujarat by Gujarat Industrial Investment Corporation

Limited (GIIC), a wholly owned company of Govt. of

Gujarat, as a Core Promoter.

GACL has two units located at

Vadodara and Dahej, both in the state of Gujarat.

The Company commenced its operations in 1976

with 37,425 MTPA Caustic Soda Plant based on the

then, state-of-the-art Mercury Cell process at its

Plant which is situated 16 km North of Vadodara

near Village Ranoli on the main Railway track route

between Ahmedabad and Mumbai.

Right from the

inception, GACL hasbeen following the strategy of continuous capacity expansion

in core areas. The first stage expansion of the caustic soda

plant raising the capacity to 70,425 MTPA was undertaken in

October, 1981 followed by a diversification program to

produce 200 MTPA of sodium cyanide in December, 1982.

In 1984, the second stage expansion

to increase the capacity of caustic soda plant to

1,03,425 MTPA was undertaken. Simultaneously,

the company undertook the diversity project for

manufacture of 10,560 MTPA of chloromethane

using chlorine, a co-product of the company and in

1991, the capacity of the chloromethane production

was doubled.


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As power is the major input for

production of caustic soda and constitutes about

65%-70% of the cost production, the company along

with other corporation likes GSFC, Petrofils Co-

operative Ltd. And Gujarat Electricity Boardpromoted a gas based power unit in vadodara under

the name of Gujarat Industrial Power Company Ltd.

(GIPCL).during the year 1985. As a promoter of

GIPCL, the company gets low cost power, as the

plant is gas based and is depreciated.

Since production of caustic soda is

highly power intensive, in order to reduce power

cost and to eliminate mercury pollution, thecompany during the year 1989 converted one of its

cell house producing caustic soda from mercury

cell technology to environment friendly membrane

cell technology, thereby eliminating the total use of

mercury. The capacity of caustic coda was also

increased to 13200 MTA

The convention of second mercury cell

membrane cell was carried out during march, 1994,thereby eliminating the total use of mercury from the

complex for production of caustic coda and

increasing the capacity of the plant along with this

conversion to 17000MTA including potassium

hydroxide facility As part of this Membrane Cell

Conversion Project, a new facility for manufacture of

16500 MTA of Potassium Hydroxide Lye based on

Membrane Cell was also set up. The Company has

further set up facility for converting part of this Caustic

Potash Lye into Potassium Carbonate with a capacity of

13200

In order to add further value to its products, the

company had set up manufacturing facility for production

of 11000 MTA Hydrogen Peroxide (100%) at Vadodara

Complex during the year 1996 to utilize Hydrogen gas,

which is a co-product from Caustic Soda Process.


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In 1995, as a part of diversification program and to meet the growing demand of its

products in the State of Gujarat and nearby areas, the Company had set up a plant for

manufacture of Technical Grade Phosphoric Acid with capacity of 26400 MTA (85% Phosphoric

Acid) at a new location at Dahej, District Bharuch. The Company also set up Membrane Cell

based grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej. Along with this,a captive 90 MW co-generation Power Plant was set up so as to ensure uninterrupted and low

cost power for its captive operations.

It has integrated manufacturing facilities

for caustic soda, chlorine, hydrogen gas,

hydrochloric acid, chloromethane, hydrogen

peroxide, phosphoric acid, carbonate, sodium

cyanide, sodium Ferro cyanide. The dahej unit

also has 90 MW captive power plants (CPP) forregular and economical power supply.

The year 2000, Gacl started the production of

caustic potash flakes in Baroda. In 2001, there was

increase in production capacity of H2O2 to 1259 MTPA.

For the year ended 31.03.2009, the company

achieved its highest ever turnover (including excise duty)

of rs.1,564.13 cr., an increase of about 18.28% fromrs.1,322.39 crore in the corresponding previous year.

Other income, for the financial year 2008-09

had been rs.43.25 crore, as compared to rs.69.75 crore

of the previous year. other income includes rs.18.22 crore

being VAT credit under sales tax incentive scheme of the

government of Gujarat and allowed as remission under

Gujarat value added tax act,2003,rs.3.79 crore

compensation for CTC(Carbon Tetrachloride)phase outunder Montreal protocol system and rs.6.79 crore for

receipt of dividend.


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DOW-GACL joint venture:

Gujarat Alkalies And Chemicals Limited (GACL), a Company promoted by Govt. of Gujarat

and leader in Caustic Chlorine in the country with a basket of 26 diversified products, and Dow

Europe GmbH, have signed a Memorandum of Understanding for exploring a long term and

strategic business relationship in the area of chlorinated organic based on the inherent strength

of both the Companies.

On 16th April, 2008, the company signed a joint venture agreement with DOW Europe GmbH for

setting up a 200,000 TPA chloromethane plant at dahej at an estimated cost of rs.600 crore with

50-50 equity partnership. A joint venture company viz., Dow-GACL Sol Venture Ltd. Has been

incorporated on 1st julty, 2008. The new company is expected to start its manufacturing

operation by mid 2012.

Dow-GACL Sol Venture Limited the Joint Venture with DOW Europe GmbH for setting up a2,00,000 TPA Chloromethane Plant at Dahej at an estimated Cost of `750 Crore with 50:50Equity partnership is progressing as per schedule and the engineering activities of this projectare going on at full stream. The project is expected to be commissioned in 2013.

Other projects:

The company has already announced its plans for a 90-100 MW captive power project,

200000TPA caustic soda project, 14000 TPA hydrogen peroxide project, 150000 TPA Polygonsproject at an investment aggregating to about rs.2600 crores over a period of next three to fouryears besides JV participation between three state PSUs viz., GSFC, GNFC and GACL forPhenol/Acetone/Poly Carbonate Projects.

The Company is also considering putting up a 600 TPD Chlor-Alkali Project, 20000 TPA SodiumChlorate Project, 100 MW Captive Co-generation Power Plant, 8000 TPA Hydrazine HydrateProject and 150 KTPA Polygons project at an investment aggregating to about `2,600 Croresover a period of next three to four years. Further a mega project for Phenol/Acetone/PolyCarbonate is being envisaged in the form of a Joint Venture company of GSFC, GNFC andGACL


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COMPANY PROFILE

Name: Gujarat Alkalies and Chemicals Limited.

Registered office: P.O. Petrochemicals-391346

Dist. Vadodara, Gujarat, India

Phone-+91-265-2232681-2

Fax-+91-265-2232130

Vadodara complex: P.O. Petrochemicals-391346

Dist. Vadodara, Gujarat, India.

Phone-+91-265-2232681-2

Fax-+91-265-2232130

Dahej complex: P.O. Dahej-392 130

Tal-Vagra, Dist. Bharuch, Gujarat, India.

Phone-+91-2641-256315-6-7

Fax-+91-2641-256220

Form of organization: Joint Venture, Public Service Unit (PSU).

Size of the organization: Large Scale organization.

Company secretary and

General manger (legal): Shri V. L. Vyas

Gujarat Alkalies and Chemicals Limited

Phone no: 0265-2230212

Fax no.: 0265-2231208

Emil-id:[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Auditors: Messrs Prakash ,

Chandra Jain & Co.

Chartered Accountants, Vadodara

Solicitors: Messrs Amarchand & Mangaldas .

& Suresh A. Shroff & Co.,

Mumbai.

Cost auditors: Messrs R. K. Patel & Co,

Cost Accountants,

Vadodara.

Registrar & share

transfer agents : MCS ltd. (unit: GACL)

Neelam apartment, 1st floor

88, sampatrao colony,

productivity road,

vadodara 390 007

Gujarat (India)

Phone : (0265)-2339397, 2314757, 2350490

E-mail :[email protected].

Total manpower strength at GACL:

Manpower is the real strength of any organization & that is so in GACL also. The

total manpower strength at GACL includes both management & Non- Management

Category.

AT DAHEJ STRENGH

Management Level 151employees

Non- Management 441 employees

Trainees & contractual 108 employees

AT BARODA STRENGHManagement Level 392 employees

Non- Management 435 employees

Trainees & contractual 100 employees
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Thus, the total manpower strength at GACL has 1627 employees.

Competitors: Banks:

Main competitors of GACL: Atual product limited.

Comfad alkalies limited.

Southern petrochemicals limited.

Modi alkalies and chemicals limited.

Century chemical limited.

Gwalior rayon & chemical limited.

Gujarat heavy chemical limited.

National alkalies and chemical limited.

Punjab alkalies and chemical limited.

Standard alkalies and chemical limited.

Tata chemical limited.

Saurastra chemical limited.

Punjab national fertilizer & chemical limited

State Bank of India(SBI) Central Bank of India(CBI)

AXIS Bank.

IDBI Bank.

UCO Ltd.

Indian Bank.

HDFC Ltd.

Dealers list:

Network of dealers for GACL, area wise:

Sr. No. Region No. of Dealers

1. Vadodara 12

2. Ahmadabad 20

3. Surat 01

4. Vapi 03

5. Saurastra 02

6. Maharashtra 16

7. North India 13

8. Andhra Pradesh 019. Bangalore 01

10. Madhya Pradesh 01

11. Kolkata 01

12. Rajasthan 01

13. Chennai 06

Total Dealers 78


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Customers:

Fertilizers

Gujarat State Fertilizer Corporation

Gujarat National Fertilizer Corporation

IFFCO Deepak Nitrite

Deepak Fertilize

Pharmaceuticals

Dr.Reddys

Aurdide Pharma

Torrent

Ranbaxy

Sun Pharma

Lupin Laboratory

Textile

Arvid Mills Ltd.

Ashima Industries Ltd.

Indian Rayon Corporation Limited.

Baroda Rayon Corporation Limited.

Agro- Chemicals

Gujarat Agrom Chemicals Limited.

Meghumani Organic

Targo

Arti Industries

Bilag Chemicals

Refinery

IOC Limited.

IPCL

Reliance Hajira And Jamnagar

Detergent

HLL Godrej

WF Limited

Nepal Lever

Nirma

Papers

JK Papers

BILT

Rams New Print

Tamil Nadu Pulp Industries.


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BOARD OF DIRECTORS

Name Address (R) Address (0) Phone Nos.(O)FFICE/(T)LX/

(G)RAM/(F)AX/(M)OBILE/(R)ESIDENCE

Dr. VareshSinhaI.A.S

Chairman,

GACL

15, Sumangalam

Society,

Drive-in Road,

Near Asia

School,

Thaltej,

Ahmedabad -

380 004

Chief Secretary

Government of Gujarat

Block No. 1, 3rdFloor,

New Sachivalaya,

Gandhinagar - 382 010

O-07923250301 / 23250303

F-079-23250305

E-mail:

[email protected]

Shri D. J.Pandian

I.A.S

KH-214,Sector - 19,Gandhinagar -382019

Principal SecretaryEnergy &PetrochemicalsDepartment,Government of Gujarat,Block 5, 5th Floor,New SachivalayaGandhinagar - 382 010

O-079-23250772-3,23235571F-079-23250797, 23251755E-mail:[email protected]

Dr.Hasmukh

AdhiaI.A.S

12, JudgesBunglowBodakdevAhmedabad -380 054

Principal SecretaryFinance DepartmentGovernment of GujaratBlock No:4, 5th FloorNew SachivalayaGandhinagar - 382 010

O-079-23250611/13F-079-23250605R-079-26840009M-99784 05430E-mail:[email protected]

Shri G. C.Murmu

I.A.S

Plot No. 11Sector-2

Gandhinagar -382 019

Chairman & ManagingDirector,

Gujarat IndustrialInvestmentCorporation Ltd,8th Floor, Block No-11,Udyog Bhavan, Sector -11,Gandhinagar-382 011

O-079-23237712/13,23249641/441,

23252215F-079-23232316F-079-23236230R-079-23254849M-94273 06119E-mail:[email protected]@rediffmail.comwebsite : www.giicindia.com
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.giicindia.com/http://www.giicindia.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Shri G. M.YadwadkarNominee of

IDBI Ltd.

Jolly MakerApartmentNo. 2Flat No. 21

Cuffe ParadeColabaMUMBAI-400005

Chief Genaral Manager,Large Corporate GroupIDBI Bank Ltd.IDBI Tower, 9th Floor,

WTC ComplexCuffe Parade, ColabaMUMBAI-400 005

O-022-2215413966552184F-022-22186966M-098980 05959

E-mail:[email protected]

Dr. SukhDev

Plot No. 120Iscon Mega CityNear SterlingHospitalBHAVNAGAR-

364 001

M-098111 08447, 098739 57590R-0278-6499072E-mail:[email protected]

Shri J. N.Godbole

604-A, CottageLand CHS,Plot No. 16/A,Sector 19/A,Nerul (East)NAVI MUMBAI -400 706 .

R-022-27720565M-098210 53454, 09324 053454F-022-27708148E-mail:[email protected]@gmail.com

Shri M. S.DagurI.A.S

ManagingDirector

"GACL House",41-A, UrmiSociety,ProductivityRoad,Vadodara - 390007

Managing Director,Gujarat Alkalies andChemicals Limited,PO-Petrochemicals-391346,Dist - Vadodara

O-0265-2232801, 2230030F-0265-2232130E-mail: [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ISO CERTIFICATION, VISION AND MISSION

ISO CERTIFICATION

GACL has got quality certificates under ISO CETIFICATION. ISO certification is given by

BIS body. For this first of all initial application is sent to the concern body. On the basis of

this application after initial auditing they will give ISO certificate.

IS/ISO 9001-2000 is for proper maintenance and documentation.

IS/ISO 14001-2004 is for SHE policy i.e. safety, health and environment.

IS/ISO 18001-2000 is for occupational safety and health hazards.

VISION

To continue to be identified and recognized as a dynamic, modern and eco-friendly

chemical company with enduring ethics and values

MISSION

To manage our business responsibly and sensitively, in order to address the needs of

our Customers & Stakeholders.

To strive for continuous improvement in performance, measuring results precisely, and

ensuring GACL's growth and profitability through innovations.

To demand from ourselves and others the highest ethical standards and to ensure

products and processes to be of the highest quality


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NEW LOGO OF GACL

What new logo of GACL says?

Taking into consideration the aspect of the global warming and need to address to the

cleaner and green environment the logo of the GACL company has been conceived to

represent a responsible corporate.

The abbreviated GACL goes in different fashion.

G represents, globe, which encompasses the vision, mission and objectives that the

corporation tries to achieve.

A represents, the core competence of the company as a manufacture of alkalies and

related chemicals.

C represents chemicals.

L represents limited liability.

Promoting green technology retries GACLs motive to envision a green earth and a

clean environment.

The green attitude of company is addressing the aspects of global warming.

The colors blue and yellow reflects the rising temperature that can adversely affect some

region with excessive rainfall while some others with beat waves and drought.


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CORPORATE IMAGE:

GACL is a forward-looking company, set up in the year 1973. 30 years is along time. Long enough to test the character of any organization. Be it recession, inflation,increased competition or changing governments, we've lived it all. And for sure, all theturbulences have made GACL a stronger and a progressive company.

Our stern resolve to manufacture quality chemicals and trek customersatisfaction to a new height has yielded unbelievable results. From an initial capacity of37,425 TPA Caustic Soda, we have grown to be the largest producer in India, with acapacity of 3, 58,760 TPA. Spread over 2 complexes at Vadodara and Dahej.

Knowing that the time ahead may prop-up newer hurdles, GACL has already

started to diversify and expand its existing infrastructure to consolidate its supremacy in Chlor-Alkali and other integrated downstream products.

PEOPLE: OUR VALUED ASSETS

World-class technology and self-reliance are baseless without brains that work

ardently to produce high quality chemicals. People are our real assets, whom we nurture and

harness to get the very best out of them.

Our conviction is:

People make the organization.

A sense of belonging is a must for dedication and loyalty.

Employees give their best when the company cares for them.

Ethical and transparent operations have contributed to a very great extent in

bringing a turnaround at GACL. Excellent labor relationship helped the company in achieving

very high manpower production turnover per employee per annum. This is also a result of a

thin and lean workforce, which is lead by the professional management.

GREEN ALL THE WAY

Nature bestows human race with umpteen benefits. Clean air, Lush green trees,

GACL's commitment towards the environment is undying. Safe and unadulterated nature is

high on our list of priorities; we are an organization with Green Attitude.

A dedicated senior executive heads a Safety and Environment Department to

maintain high standards of safety and a harmonious relationship between environment and

technology. The company has planted more than 1, 00,000 plants and it keeps maintaining


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the same. With tree plantation being a regular feature, it plants 1000 sapling every year.

Rainwater harvesting and collection is a part of routine activity at GACL. This water is then

utilized for the maintenance of green belts.

The vermin culture concept has been implemented in the premises to convertwaste generated by the canteen, gardens and plants to vermin compost. GACL has been a

pioneer in adopting the environment friendly and energy efficient technologies. It converted to

Membrane Cell Technology from Mercury Cell Technology way back in 1989 and since 1994

all the plants are running on Mercury free Membrane Cell Technology.

As a matter of strategy, the company has placed sensors at strategic locations

in and around the complex to monitor ambient air quality. For disposal of solid waste, GACL

has secured dedicated landfill site conforming to the hazardous Waste Management Act.

Being a member of Effluent Channel Project, it releases its liquid effluent in this channel and

adheres to the necessary parameters of the Gujarat Pollution Control Board before

discharging it into the channel.

World Class Technology

Technology moulds generations. Our endeavor to continually upgrade technologyhas allowed us to optimize resources, thus bringing down the cost of production andincreasing revenues.

Acquired through the best and prestigious collaborations means that they meet

international specifications for our products Besides, our manufacturing plants are eco-friendly, which ensure that the environment is well looked after. The location of both theplants 'Vadodara' and 'Dahej' has dual advantage of proximity to the raw material suppliersand the end users.

While the capacity utilization is about 70% in the Caustic Soda Industry, GACL'splants are working at almost 100% capacity.... thereby utilizing the assets to the fullest extent.Further the company takes pride in having honored its commitments without fail. Thecompany has made its presence felt across the globe even against stiff competition byexporting products to USA, Europe, Australia, Africa, Far & Middle East countries, China &South Asian Markets.

GACL has adapted to the age of information technology for fast and uninterruptibleinformation exchange. Both plants of Vadodara and Dahej are connected by VSAT and leaselines. This provides on-line information at any given point of time.

SELF-RELIANCEVarious factors that influence the success of any corporation, the self-sufficiency

rank the foremost. We at GACL understand this all too well. Power, being a major input tothe electrolytic Caustic Soda process, we promoted a joint captive power plant, GujaratIndustries Power Company Limited to meet our energy requirements for Vadodara Complex.


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Our complex at Dahej is also integrated with a captive co-generation plant ofcapacity of 90 MW. Cost effective natural gas was substituted as fuel in place of Naphtha forCaptive Power Plant. The plant load factor has increased and surplus power is supplied toState grid. This has helped achieve economies of operations.

SPREADING OUR WINGSThe unshakeable desire to deliver quality products to our customers means that

our products are well accepted, both in India and the world over. Domestic customers areassured of prompt delivery of quality products at their doorsteps through our well-establishednetwork of dealers and consignment stockiest. Overseas customers are serviced directly orthrough agents.

Caustic-Chlorine being it's prime product, the company has diversified intovalue added products like Sodium Cyanide, Chloromethane, Hydrogen Peroxide, PotassiumCarbonate, Phosphoric Acid, etc.

These value added products provide dual benefit to the organization by hedgingagainst cyclical fluctuations in the Chlor-Alkali Industry. GACL sells 24 products today,maintaining its leadership in Caustic-Chlorine industry with 16% market share and hasemerged as a major player in the segment of value added products.

THE ZEST TO INVENT

The mercurial nature of the chemical industry demands continuous inventionand innovation. We have a well-equipped R & D centre, recognized by the department ofScience and Technology, Government of India, working on new and safer processes/

technologies, value added products and import substitutes.

We are the proud recipients of national awards for:

Excellence in research and development from the department of Science and Technology,Government Of India.

Pollution Control and Environment Protection from Chemtech Foundation for developing a processfor manufacturing Sodium Ferro cyanide from the waste stream Sodium Cyanide process.

Novel energy conservation and integration programme in chemical plant from the Indian ChemicalManufacturers Association.

GACL is a pound recipient of "National Energy Conservation Award" by Bureau of Energy

Efficiency (BEE), Ministry of Power, Govt. of India for three consecutive years since 2004.At Dahej, the system to recover Calcium Chloride from waste of the Phosphoric Acid Plantreduces the discharge of aqueous effluent to the sea.

QUALITY MATTERS

We are committed to utmost customer satisfaction, which is the drivingforce for progress. Adhering to international standards, with no laxity in any sphere,we are successfully a favored supplier for our range of products.

To consolidate this and to gain international credibility, we had obtained quality

system certificate under IS/ISO 9001:2000, ISO 14001:1996 and IS 18001:2000.


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GROWTH STRATEGY

To remain the largest producer in chlor-alkalies.

To maintain highest quality & be the first choice of the customer

To remain in the lowest production through captive power To have downstream value added product & flexibility of product for better margins & winder

market.


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SWOT ANALYSIS

Strengths:

> Single largest producer of caustic soda in the country with the production capacity of

27000 TPA, having industry share of 13.75%

> Leader in chlor_alkali industry

> Low cost power from GIPCL Baroda.

> Integrated downstream plants

> In house research and development

> Dedicated manpower

> Proximity to raw material source and market.

> Excellent industry relation.

> Strong and committed workforce.

> The company has been awarded ISO 9001:2000 certificate from 20 th Nov. 2003.

> National awarded by government of India 1993 for contribution of R&D department of

the company in the pollution control environment protection.

Weakness:

> High price> Highly power intensive as power

> Companys products in commodity group and therefore the price are purely marketdriven

> The supply of natural gas for the power plants varies depending upon availability.

Opportunities:

> Foreign market demand for companys product in foreign market is high therefore GACLhas golden opportunity to gain share market by exporting its products to foreigncountries.

> Excess capacity in power plant will help in setting up downstream projects for increasingthe capacity of caustic soda production

Threats:

> The chlor_alkali industry is cyclical in nature.

> The industry has faced overcapacity in the country

> Dependence on the performance of consuming sectors.

> Threat of the impact of the slowdown Indian economic growth


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DEPARTMENT AT GACL:

1.) Technical department

Production department

Engineering department

Quality control department

Safety &environmental department

Research and development department

2.) Non-technical department

Purchase department

Marketing department

Export department

Dispatch department

Human resource department Security department

Secretary department

Management system (MS) department

Finance department


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PRODUCT PROFILE

Caustic Soda Group

Caustic Soda Flakes

Caustic Soda Lye

Caustic Soda Prills

Sodium Hypo Chlorite

Liquid Chlorine

Compressed Hydrogen Gas

Hydrochloric Acid

Caustic Potash Group

Caustic Potash Flakes

Caustic Potash Lye

Potassium Carbonate

Chloromethane Group

Methyle Chloride

Methylene Chloride

Carbon Tetrachloride

Chloroform

Sodium Group

Sodium Cyanide

Sodium Ferro Cyanide


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Hydrogen Peroxide Group

Hydrogen Peroxide

Bleach win

Phosphoric Acid Group

Phosphoric Acid

Calcium Chloride Flakes

Calcium Chloride Powder

Others

Dilute Sulphuric Acid

Scale win

Aluminum Chloride Anhydrous

New Products

Poly Aluminum Chloride

Stable Bleaching Powder

Power and salt are major raw materials for the manufacture of caustic soda using

electrolyte process. Major reasons for location is: GACL has ensured self located to west cost &

therefore has advantage of being close to source of major raw material i.e. salt.

GACL has also an advantage in terms of quality & price for selling its products. The raw

materials used for production is also manufactured by GACL itself. GACL sells its products to

companies producing chemicals, fertilizers, pharmacy co. etc. GACL also export its products to

countries like Tanzania, Nepal, Sri Lanka, Turkeys, Mauritius, etc.


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MILESTONES OF GACL

YEAR EVENTS

1973 Inception of the company

1973 Foundation store of caustic chlorine plant

1976 Commissioning of 37425 MTA caustic chlorine plant

1981 Expansion of caustic chlorine plant

1982 Commissioning of 2n stage expansion of caustic chlorine plant

1982 Commissioned Sodium Cyanide plant with a capacity of 2000 TPA.

1986 GACL went in for a diversification project to manufacture Chloromethane.

1987 Commissioned Caustic Soda Flaking unit with a capacity of 26400 TPA.

1989 First revamp to energy efficient and environment friendly Membrane Cell technology.

1992 Commissioned Sodium Ferro cyanide plant (100 TPA) based on in-house Research &Development.

1994 Converted balance manufacturing facilities to Membrane Cell & expanded its Caustic Sodacapacity to 153500 TPA.

Commissioned caustic potash plant with a capacity of 16500 TPA.

Expanded caustic flaking unit to 53000 TPA.

1995 First certification IS/ISO 9002:1994.

Phosphoric Acid Plant started production at Dahej.

1996 Hydrogen Peroxide plant commissioned.

1998 Commissioning of 300 TPD of Caustic Soda & 90 MW power plants at Dahej.

2000 Commissioning of Caustic Potash/Flakes, Vadodara.

2001 Increase in H2O2 Capacity to 12540 MTA.

2003 Up gradation of ISO Certificate from 9002:1994 to 9001:2000.

2004 ISO 14001:1996 Certificate for Vadodara Complex and Dahej Complex.

Commissioning of Calcium Chloride plant at Dahej.

2005 IS 18001:2000 Certificate for Vadodara Complex and Dahej Complex.

2006 Commissioning of poly aluminum chloride plant at dahej complex


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2007 Commissioning of poly aluminum chloride at Vadodara with same capacity

Commissioning of hydrogen peroxide at Dahej with capacity of 12540 TPA

Commission Anhydrous aluminum chloride with capacity of 16500 TPA

2008 Commissioning of wind power project at Moti Sindhodi , Kutch on 13/02/2008 with

23.75 MW. Rs.122.02 crores

2009 Commissioning of second phase of wind mill project of 39 MW at Gandhidham

Started on12/01/2009. In the month of February 2009 all WTG have been

commissioned

2009 RA-10 commissioned in the month of October in MC-11

2009 Dr. M fitter commissioned on 21/11/2009

2009 G-58 electrolyses (E-1, 2, 8 and partly) are commissioned on 15/12/2009.

2009 One more electrolyses commissioned for 50 TDP production of CSL stated at Dahej

CSL plant

2010 21-MW wind mill project commissioned on 22/03/2010

2010 50 TDP Caustic Soda De-bottlenecking Project

2010 200 TDP Waste Heart Caustic Evaporation Project

2011 25 TDP CaCl2 plant at Sodium Cyanide complex of Vadodara has commissioned on

20/01/2011

2011 25 TDP stable bleaching powder plant at Dahej is commissioned on 02/03/2011

2011 42 TDP Hydrogen Peroxide plant (Phase 11) is commissioned at Dahej on 27\06\1


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NATIONAL AWARDS

GACL got following national awards:

1. Gujarat Chemicals Association - Excellent achiever Award for valuable contribution in Chemical

Industry received in February, 2010

2. Indian Chemical Council Award for Excellence in Energy Conservation and Management-2008received in December, 2009.

3. The Gujarat Safety Council Award for Zero Accident during the year 2008 for Vadodara and

Dahej Complexes received in December, 2009.

4. Certificate of Honor for achieving more than 30 lakh accident free man hours of operation inVadodara Complex from The Gujarat Safety Council received in December, 2009.

5. Certificate of Appreciation for achieving 10 lakh accident free man hours of operation in DahejComplex from The Gujarat Safety Council received in December, 2009.

6. Century International Quality ERA Awards for the year 2009 by Business Initiative Directions

received in December, 2009.

7. Certificate of Merit for Export Performance and Promotion for the year 2009 received fromFederation of Gujarat Industries, Vadodara.

Sr. No Name of the

Award

Purpose of the Award Name of the

Organization

Date of

receiving the

Award

YEAR 2008

1. National energy conservation award (2nd prize for vadodara unit) in chlor-alkali

sector.

2. GACL got an award named amity corporate excellence award for excellence

working of organization by amity international business school.


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Year 2007

3. AIOE industrial

relations award

2005-06

corporate initiative in the

field of industrial

relations.

All India

origination of

employers,Govt. of India

5 January

2007

4. Genentech

corporate

excellence

award 2007

Chemical sector of

vadodara unit.

Vadodara

corporation.

22 February

2007

5. Gujarat state

safety

performanceaward

Shield and certificate of

honor for accident free

days

Govt. of Gujarat 2007

6. National award Excellence in cost

management-2006 for

manufacturing unit in the

category of public sector.

Institute of cost

and work

account of India

ICWAI, Govt. of

India

2 July 2007

7. National Energy

ConservationAward - 2007 :

Second Prize in

the Chlor-Alkali

Sector

For consistent

performance on energyconservation.

Bureau of

EnergyEfficiency

(BEE),Min. of

Power, Govt. of

India

14

December2007

Year 2006


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8. AIOE Industrial

Relations Award

2005-2006

Corporate initiative inthe field of industrialrelations, socialsecurity andpromoting Bi-partism

All India

Organization of

Employers

05 January

2007

9. National Energy

Conservation Award

2005: National Level

(Chlor-Alkali Sector)

1st prize (Vadodara

Complex) & MeritCertificate (Dahej

Complex)

Energy

Conservation at

Vadodara

Complex by His

Excellency the

President ofIndia.

Bureau of Energy

Efficiency

(BEE),Min. of

Power, Govt. of

India

14

December

2005


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10. Merit Award for ICWAI

(Vadodara)

National Merit

Award for

Excellence in Cost

Management -

2004

Institute of Cost &

Works Accountants

of India (ICWAI),

New Delhi

12

March

2005


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5 S MODEL

The 5 S model of GACL for obtaining better & improved results into :

A neat and clean factory

Higher productivity

Reliable delivers Improved safety

Meet deadlines

Constant growth

Profit Maximization

Higher quality


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POLICIES OF COMPANY

QHSE PolicyPurchase policy

Energy Policy

HIV/AIDS Policy

Information Technology Policy

Human resource Policy

Training & Development Policy

Corporate Social Responsibility Policy

Supply Chain Policy


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FINANCE DEPARTMENT

Organizational hierarchy:

ChiefExecut

iveOffice

rsGeneralManager

DepartmentalGeneralManager

Chief Manager

Senior Manager

Senior Officer

Officer

Junior Officer

Senior Assistant

Junior Assistant

Clerk


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FINANCE DEPARTMENT:

In GACL finance department is divided into 10 sections:

1. Central Accounting Section,

2. Banking Section,

3. Loan Section,

4. Insurance Section,

5. Sales Accounting Section,

6. Bill Passing Section,

7. Establishment Section,

8. Costing & Budgeting Section,

9. Inventory Accounting Section,

10. Internal Audit Section (outsourced)

(1) Central accounting section:

This section verifies the accounts maintained by all the departments. Central accounting

section is the heart of finance department. It prepares P&L A/C and balance sheet from

the information collected from all the finance sections. Financial statements and

accounts are prepared on monthly, quarterly, & annual basis and are sent to SEBI.

Profitability is calculated on day-to-day basis and is reported to managing director.

The other functions of this section are:

Verify the accounts maintained by all the departments and make financial analysis of the

statement and also give suggestion and recommendation. It also maintains fixed assets register and also calculate depreciations.

It also works upon different rations and does ratio analysis.

A dividend analysis is done here.

This section is also involved in annual report preparation and provides all the required

information to the management.

Prepare profitability statement every day to check, whether the company is going

correctly as per the targets

(2) Banking section:Banking section checks out the details of the banking transactions and maintains the

balance of bank a/c.

The basic tasks performed by this section are:

It prepares bank reconciliation statement.

It collects cheque from the marketing department.

It makes payment to the suppliers. GACL users E-payment for ease of payment.

The cash credits are monitored by this section. So, that interest payment can be

controlled. Credit limit of the company dep0ends on the negotiated days contract.


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GACL CO. enjoys cash credit facilities through working capital limit Up To Rs.

130 crore with 7 banks.

To secure cash credit, co. has to decide cycles. GACL has 60 days cycle based on

nature of production. GACL gives credit management appraisal report to bank to securecash credit. Cash credit limit is for 1 year co. has to renew cash credit limit every year

based on operation expenditure.

(3) Loan section:

This section deals with all the financial institutions and banks for the financial

requirement of the company. It applies for short term or long term loan of the company

and repayment is also taken care of.

Tasks performed by this section are as follows:

a.) Preparation of project report and corporate plan of company to obtain financial

assistance for companys new project.

The project is only approved after proper market appraisal, technical appraisal, financial

appraisal, economical appraisal, managerial appraisal. The report includes the present

and future estimates.

b.) Give project report to financial institution for acquiring finance. This section will

negotiate with bank for payment term & rate of interest and make long term

arrangements for new project.

For this GACL prepare financial projection i.e. how it can generate profitability.

Total profit= existing project profit = new project profit.

Then GACL CO. send application to bank, bank will see & if interested it will call co. to

provide financial assistance.

Terms & conditions of banks will have to be followed like:

Repayment schedule will have to be submitted.

Other charger will have to be paid.

Submit the securities in case if secured loan or assets are borrowed.Company can borrow 3 types of loans:

Long term loan

Short term loan

External commercial loan(EC)

GACL right now can avail 5-7% short term loan and raise commercial papers-

4.31%/4.40% for the period of 90 days.

Being GACL the government co. it can borrow from GSFC (Gujarat state financial

service).


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c.) Credit rating exercise.

To rate the credit limit of company, co. appoints any government authority. GACL has

appointed CARE (credit and analysis research limited) for this purpose. And it will

negotiate with banks for interest rate etc.

d.) Timely payment.

This section also looks after the timely repayments of loan borrowed. If timely payment

is not done all assets will get converted into NPA (non-performing assets) and company

would be declared as a default in CIBIL

(4) Insurance sections:

Tasks performed by this section are:

1.) To cover companys assets. To cover maximum coverage with minimum insurance cost,there are two policies for covering assets:

a.) Fire policy:It mainly covers plants & machinery along with extra covers of natural disasters e.g. Floodcover etc.

b.) IAR policy:(Industrial all risk policy)It covers plant & machinery with maximum risk coverage. There is no requirement for takingextra covers as there are no exclusions in this policy. Machinery breakdown, water supplystoppage etc is also included in this policy.

GACL has taken IAR policy. (Industrial all risk policy)2.) Motor vehicle policies.For plant vehicles and Non-plant vehicles like, ambulance, fire tenders etc.

3.) Other miscellaneous policies.

a.) Stock policy and work in progress policy.

b.) Sales turnover policy(material inward-outward)

c.) Group personal accidents policy

d.) Cash policy(for protecting hard cash with cashier)

e.) Fidelity guarantee policy(protection of cash in transit)

f.) Sate indemnity policyg.) D&O policy(directors & officer liability policy)

h.) Public liability policy (due to production hazards nearly area gets affected.)

i.) Visitors insurance policy(group)

We trainees were covered under this cover.

j.) Export credit guarantee (ECGC) policy.

When foreign supplier becomes weak this policy can be enchased.

Every year there is renewal of all policy expecting ECGC policy (its renewed after 2 yrs.)

k.) House building advance policy:

If employees wish that GACL should take policy for their house loan then this policy is taken.Premium would be paid as 50% by company.


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(5) sales accounting section:

The section deals with accounting of sales transactions. It maintains the details of

sales and debtors account and related adjustment. It also maintains collection period

(age analyses) and it is very necessary from the management point of view. It dealswith external parties such as government bodies, manufactures, direct dealers, sub

dealers, and traders etc.

The main functions of this section are:

Completes all the formalities related to sales tax, excise duty.

Recover money from the purchaser.

Age analysis (collection period)

Internal and external audit

Compliances( submit report to management)

(6) Bill passing section:

This section makes the payment of routine expenses like payment for purchase as per

order made by purchase department and of the new project.

All the bills related to plant, come to this department for the sanction. For e.g. purchase

are checked and approved. For local purchase bill GRV (goods receipt voucher) is

needed. Only after the bills have been approved payments will be made.

Functions are:

(a) Goods receipt voucher (GRV) is issued for materials received. Materialsinclude- raw materials, stock, salt etc.

Details of GRV: lorrys receipt, challis 9suppliwers proof), suppliers name, departments

indent, excise gate pass, etc.

Accepted GRVs billing:

Details: material code, unit, quality received,

Inspection-accepted/rejected, Remark etc.

(b) Purchase order:

It is issued by purchase department at time of purchasing.

Details are: description of material, quality, unit, rate terms & conditions (if any charges,

excise duty, taxes, insurance etc.), delivery schedule3, etc.

(c) payment recommendation advice

Recommendation of bills passed by suppliers is done in this section.

Purchase journal voucher is prepared then bill is passed and payment is made at the

end. Bank payment voucher is made by this section which includes-bill no., partys

name& address.

Bank payment voucher is sent to the bank where cherub is issued to the party. Partys

a/c is credited at the end.

(7) Establishment section:


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This section works with the HR department. It calculates the salary for all the employees

including both management and non-management cadre. They prepare form 16 which

is prepared under section 203 income tax acts, 1961 and form 12b. They also look after

at the employees claim and pension & leave encashment, gratuity at a time ofretirement.

Provident fund scheme of GACL as per employee provident fund & miscellaneous act

1952

a. Employees own contribution-12% Basic+ DA

b. Companys Own Contribution-12% Basic+ DA -8.33%(pension fund)

c. That is out of the companys contribution 8.33% is deposited in the employees

pension fund on salary up to rs.6500/-i.e. max rs.541/- and remaining 3.67% is

deposited in the employees provident fund.d. VPF (Voluntary provident fund) contribution is maximum 10% of basic + DA.

e. Refundable loan rs.30000/-, non-refundable loan for new house, repairing, education,

marriage gift etc.

f. EDLI(employee deposit linked insurance) scheme in case of employees death

amount to be paid to nominee is Rs. 60000/-

The provident fund of GACL is invested in state and central government. Securities and

bonus, the interest earning of which are credited to the EPE at the rate of interest

declared by the central provident fund commissioner or the MD.

In GACL there is a provision of withdrawing 90% of total contribution before one year

from the date of retirement. It is tax free provision

E.g. salary Rs. 10,000/-

Employees contribution 12% basic +DA Companys contribution 12% basic +DA

i.e. 1200 i.e. Rs.1200

PF (1200-541) = Rs.659 PENSION FUND

8.33% of max rs.6500/-

i.e. Rs.541/- or rs.541/-

In GACL, there is super annulations policy with LIC of India

Total contribution to provident fund:

= Emp.s contribution+ cos contribution

= 1200+ (1200-541)

= Rs.1859/-


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On behalf of employees 15% of Basic + DA are kept with LIC up to 60 years it is tax free

provision. Employee gets 9.45% interest per annum.

Employee can have this benefit only after completion of 10 years service. It is only for

management employees and not for trainees.

This is for sustaining employees in the company. After confirmation of service, one can

become its member (not the ones who are on probation period.)one can claim LIC to

start pension + to withdraw 1/3rd of it only once in lifetime. For new employees who are

highly qualified, if they don`t want to be the member of super annotation scheme, can

receive rs.120/- per month for this, but it would be taxable.

(8) Costing & budgeting section:

This section makes the estimation of cost the company and makes the budget in

advance and tries to reduce the cost and improve efficiency. This section prepares themonthly cost incurrence budget and monitors it. Company has to ascertain the variable

cost, semi variable cost and fixed cost of manufacturing activities. This is because it

helps to calculate the right price of the products and also for calculating breakeven

point. This section provide the perfect data of cost of production

(9) Inventory accounting section:

This section maintains all the information of inventories regarding incoming,

consumption, closing stock, and on that basis monthly and annual report are made

product wise and it is presented before the management board.

(10) Integral audit section:

This section is outsourced by the GACL Company.

In this internal auditor do audit of all the work done by various head of department and

see that whether the transactions are recorded as per the accounting standards or not.

Auditors are appointed by managing director of GACL.

Auditors: Messrs Prakash ,Chandra Jain & Co.

Chartered Accountants, Vadodara

Cost auditors: Messrs R. K. Patel & Co,

Cost Accountants,

Vadodara.


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Working capital management:

(Rs.In

lakhs)

Wor

king

capit

al

man

age

men

t at

GA

CL

at setting up the working capital required by the company in the financial year. The

amount of Working capital required by the company is financed by state bank of India.

The company has to provide the income statement and the balance sheet to the state

bank of India and after analyzing the financial statement the bank sets the limit of

working capital financed by the company through cash credit which is availed form

different banks at a lower rate of the prevailing market arte through negotiations.

GACL is efficiently managing its working capital trough the effective Management of

inventory, cash and receivables. The payment and collection system of the company

also plays an important role in the optimum working capital management of the

company.

The payment is made through the purchase department in consultation with the finance

department and the collection is done by marketing department and the majority of the

payment is received through e-banking which ensures the fast collection of receivables.

Banks Sanction limit cash credit % Interest

SBI 5500.00 10%

HDFC 1000.00 11.25%

AXIS 1000.00 10.25%

IDBI LC 500.00 -

CBI LC 600.00 10%

UCO 1000.00 10%

IB 2500.00 9.75%

CBI 900.00 8.94%

TOTAL 13000.00


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Cash management:

Cash is managed at GACL in a very simple way. There is a monthly statement of receipt

and payments in which all the receipt and the payment is included. This statement is

divided into 3 parts.

Revenue receipts.

Revenue payments

Financial payments

The first part of the statement is revenue receipt in which the collection of sales is

included which is taken from the marketing department. The various payments for

material energy, sales tax, marketing commission etc. Is in the revenue payment

category and these figures are taken from the respective departments. All the financial

payments are included in the third part of the statement and the payments of interest

and capital expenditure is also included in this part.


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INVENTORY MANAGEMENT

Meaning of inventory management

In any business or organization, all functions are interlinked and connected to each other and areoften overlapping. Some key aspects like supply chain management, logistics and inventory form

the backbone of the business delivery function.

Therefore these functions are extremely important to marketing managers as well as finance

controllers.

Inventory management is a very important function that determines the health of the supply

chain as well as the impacts the financial health of the balance sheet. Every organization

constantly strives to maintain optimum inventory to be able to meet its requirements and avoidover or under inventory that can impact the financial figures.

Inventory is always dynamic. Inventory management requires constant and careful evaluation of

external and internal factors and control through planning and review. Most of the organization

has a separate department or job function called inventory planners who continuously monitor,

control and review inventory and interface with production, procurement and finance department.

Definition of inventory management

Inventory is an idle stock of physical goods that contain economic value, and are held in variousforms by an organization in its custody awaiting packing, processing, transformation, use or salein a future point of time. Any organization which is into production, trading, sale and service of aproduct will necessarily hold stock of various physical resources to aid in future consumption andsale.

While inventory is a necessary evil of any such business, it may be noted that the organizationhold inventories for various reasons, which include speculative purposes, functional purposes,physical necessities etc.

Inventory management

PurchaseDirectsales

Brachtransfer

Point ofsale

Finance


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Input Process Output

Raw materials Work in process Finished goods

Consumable

required forprocessing e.g. fuel,

bolts & nuts etc.

required in

manufacturing

Semi finished production in

various stages, lying withvarious department like

production, WIP stores,

QC, final assembly,

packing etc.

Finished goods at

distribution centersthroughout supply chain

Maintenance items/

consumables

Production waste and scarp Finished goods in transit

Packing materials Rejections and defectives Finished goods with dealers

Local purchased

items required for

production

Spare parts stocks & bought

out items

Defectives, reject and sales

returns

Repaired stock and parts

Motives for holding inventory

Transaction motive

It emphasizes the need to realization of inventories to facilitate smooth production andsales operation.

Precautionary motive

It emphasizes the need to hold the inventories against the risk of unpredictable changesin demand and supply of ever and other factors.

Speculative motive

It influences the decision to increase or the inventory levels so as to take advantages of

price fluctuations.

The three motives are to be balance properly to arrive at the optimum level of inventory inorder to effective control.

Need for inventory management


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1. Meet variation in production demand

Production plan changes in response to the sales, estimates, orders and stocking patterns.

Accordingly the demand for raw material supply for production varies with the product plan aswell as batch quantities. Holding inventories at a nearby warehouse helps issue the required

quantity and item to production just in time.

2. Cater to cyclical and seasonal demand

Market demand and supplies are seasonal depending upon various factors like seasons;

festivals etc and past sales data help companies to anticipate a huge surge of demand in the

market well in advance. Accordingly they stock up raw materials and hold inventories to be able

to increase production and rush supplies to the market to meet the increased demand

3. Economies of scale in production

Buying raw materials in larger lot and holding inventory is found to be cheaper for the companythan buying frequent small lots. In such cases one buys in bulk and holds inventories at the plantwarehouse

4. Take advantages of price increase and quantity discounts

If there is a price increase expected few months down the line due to changes in demand andsupply in the national or international market, impact of taxes and budgets etc, the companystend to buy raw materials in advance and hold tocks as a hedge against increased costs.

Companies resort to buying in bulk and holding raw material inventories to take advantages ofthe quantity discounts offered by the supplier. In such cases the savings on account of thediscount enjoyed would be substantially higher that of inventory carrying cost.

5. Reduce transit cost and transit times

In case of raw materials being imported from a foreign country or from a far away vendor withinthe country, one can save a lot in terms of transportation cost buy buying in bulk and transportingas a container load or a full truck load. Part shipments can be costlier.

In terms of transit time too, transit time for full container shipment or a full truck load is direct and

faster unlike part shipment load where the freight forwarder waits for other loads to fill the

container which can take several weeks.

There could be a lot of factors resulting in shipping delays and transportation too, which can

hamper the supply chain forcing companies to hold safety stock of raw material inventories.

6. Long lead and high demand items need to be held in inventory

Often raw material suppliers from vendors have long running into several months, coupled with

this if the particular item is in high demand and short supply one can expect disruption of

supplies. In such cases it is safer to hold inventories and have control.


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Accounting method for inventory management:

Specific Identification

Weighted Average Cost Moving-Average Cost

FIFO and LIFO.

Inventory Turnover is a financial accounting tool for evaluating inventory and it is not

necessarily a management tool. Inventory management should be forward looking.

The methodology applied is based on historical cost of goods sold. The ratio may not

be able to reflect the usability of future production demand, as well as customer

demand. Business models, including Just in Time (JIT) Inventory, Vendor Managed Inventory

(VMI) and Customer Managed Inventory (CMI), attempt to minimize on-hand

inventory and increase inventory turns. VMI and CMI have gained considerable

attention due to the success of third-party vendors who offer added expertise and

knowledge that organizations may not possess.

Relevant Inventory Costs:

Ordering costs

Receiving and inspections costs

Holding or carrying costs

Shortage cost


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Benefits of inventory management

In a report by Stylus, he highlighted the following as some of the benefits of inventory

management (Stylus, 2008):

Inventory management systems can help reduce the time to respond to changing

market demand of products and can help control excess stock

IMS provide a means for business to effectively manage or control their inventory

IMS helps businesses to constantly analyze their business processes such as sales

and purchasing in order to make efficient inventory decisions

Stylus systems also reported that inventory management systems IMS can provide

total insight on stock transactions

Stylus systems also stated that IMS can provide hands on knowledge on inventory

which might lead to increased sales and efficient customer services.

INVENTORY CONTROL

According to business link in an article, an organization has an efficient inventory control

only when they have the "right amount of stock in the right place and at the right time"

(Business link, 2006). Inefficient Inventory control can leads slower sales and disappointed

customers.

Inventory control basically deals with reducing the total cost of inventory. Inventory control

is very relevant for businesses, especially businesses dealing with a large variety of

products. As site by Hossein Arsham, Inventory management or control can be used tostreamline warehouse processes in order to track orders and shipment (Arsham, 2006).

Other important applications of inventory management systems are in manufacturing,

shipping, and receiving. As stated by Arsham, there are three main factors in inventory

control decision making process (Arsham, 2006).

1. The cost of holding the stock: this is the cost associated carrying inventory over time

and involves having items in storage. This includes interest, taxes, insurance, spoilage,

breakage and warehousing cost like light, rent.


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Methods of Inventory Control

Today, the growth of businesses has provided a necessity to develop a more

complicated and highly analytical form of inventory management. The above inventory

management systems became difficult and inefficient. As a result, computer systems to

control inventory was introduced. These systems include:

Point-of-sale terminals: this stores information of each item that is used or sold.

Off-line point-of-sale terminals: this transmits sales information directly to the supplier's

computer system. The supplier then uses this information to ship necessary items

automatically to the retailers

The last method for inventory control is carried out by an external agency. As

sited by Floyd Hedrick, it involves removal of unwanted products from stock which can be

returned to the manufacture. This however has to occur after an agreement and frequent

scheduled visit by the manufacturer's representative to the large retailer in order to record

stock count and writes the reorder. The main aim of the above systems was to provide a

more efficient system that will be able to identify the cost of each inventory. According to

the report, two main control values are used:

1. The Economic order quantity (EOQ) that is the size of the order

2. The reorder point which is the lowest quantity that a stock or an item can be before

more quantity is ordered.

The Economic Order Quantity (EOQ) is a formula that is used mainly for calculating the

annual cost for ordering an item. It is widely used by most businesses and involves theactual cost of placing an order, the cost of carrying inventory as well as the annual sales

rate.


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Inventory management at GACL

Many of the items company need for day to day maintenance and operations. The time to

procure these materials may be longer due to various reasons and it is not possible to procurethese materials when instantaneously required. It is therefore necessary to keep stocks of such

items.

Even for those items which are readily available in the market, it may not be economically to buy

these items every time as buying in piecemeal involve additional cost to the administration.

Therefore it is cheaper to buy in bulk and stock some of these items and supply indenters

through such stocks.

On the other hand inventory is very valuable resource for uninterrupted production and on the

other hand excess of inventory holding locked up capital. Optimum level of stock is necessary forGACL. As it is having continuous production optimum inventory is maintained so that production

is not affected due to shortage of raw materials.

GACL is using ABC analysis technique for the purpose of inventory management. GACL is

having more than one supplier for its raw materials as the quality required by GACL is large

which cannot be supplied by a single supplier. The procurement of raw material is done through

yearly rate contracts which are finalized in the beginning of the financial year. They consumed

and valued the inventory by following weighted average method.

GACL uses its stocks for getting credit for working capital from financial institutions. So inventory

management is very important issue for continuous production as well as financing its working

capital.

Process of purchasing inventory:

As per GACL, material management is for effective utilization of material resources toachieve organizational goal.

There are four function of material management:

1.) Purchasing

2.) Stores management,

3.) Inventory control,

4.) Scrap disposal (obsolete/surplus item)


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Purchasing:

The use of scientific approach along with buying is purchasing. Purchasing is handled bythe purchase department.

SCOPEThis Purchase Procedure described shall be followed for procurement of all the

items required for operation & maintenance as well as for capital items.

A broad list is given below:a. Raw Materials & Auxiliary chemicalsb. Packing materialsc. Project items, specifically indented to purchase department.d. Capital Itemse. Steel & cementf. Consumable items

g. Replacement of equipments & Spare Partsh. Items required for repairs and maintenance of building, plant & machinery etc. and other

equipmentsi. Contracts for clearing, handling, loading and transportation of incoming materialsj. Procurement of materials under Annual Rate Contractk. Safety Items, Employee Welfare Items & others items of administrative nature

This purchase procedure meets requirement for purchase functions for PurchaseDepartment, in general and procedures for purchase of salt, raw materials, aux. chemicalsand packing materials, imported materials as well as procedures for Administrative jobs &Maintenance jobs.

No item, other than specified in this procedure should be purchased directly by theuser department. However, in exceptional cases, user department may carryout purchaseactivities directly. Approval of competent authority is to be obtained for the purchaseactivities carried out directly by user department.

RESPONSIBILITY:The purchase functions shall be the responsibility of head of department of the

Materials Management Department. All indents for purchases duly processed inaccordance with the procedure laid down, herein after, should be forwarded to Head ofDepartment [Materials Management], for necessary action. The indentors from variousdepartments shall not send enquiries, invite quotations, or enter into correspondence or

negotiations with suppliers.

However, in case of extreme urgency, user department may enter intocorrespondence asking only technical clarifications/confirmations with all copies of thesame to Purchase Department. This can be exercised only with due approval of head ofdepartment of the concerned user department.

Project Group during Project execution stage, may carry out purchasefunctions themselves as per the procedure described in Chapter-24.However project itemsfor which indents will be generated, the purchase procedure as mentioned in subsequentchapters for general items will be followed.


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As per the present practice, purchase function for following are taken care bythe department concerned in view of nature & urgencies of the activities.

However, for transparency & better coordination there shall always be a committee withnominee of Finance department & Purchase department at appropriate level.

1) Contracts for transportation of finished goods: Marketing Department.2) Printing of balance sheet & Chairmans Speech forannual general meeting: SecretarialDepartment.3) Procurement activities for A.G.M.: Secretarial/Admin Department.4) Miscellaneous Administrative items Like Crockery, Calculators, Visiting Cards, andGreeting Cards: Administration Department

Procedure shall be followed for various services by the designated departmentsauthorized to carryout activities for purchase and service / sales contracts.

The basic steps that have to be carried out for procurement of any raw materials or

required equipment are as under:

1.) Vendor qualification & registration vendors list.

The selection of suppliers for various requirements can be done by following means:

I. Presently available updated approved vendors list.II. Suggested suppliers by the inventors for items not covered under approved vendor

list.III. Introduction letters from new suppliers through websites or by the visits of their

representatives approaching GACL.

The responsibility of registration of suppliers shall be with Material Management(MM) Department. They will prepare a list of Approved Vendors capable of supplyingvarious types of equipments, materials and services, confirming to specific requirements ofthe departments concerned.

The list is to be approved by head of department (Material Management) & headof department of respective user department. Purchase department shall update this listfrom time to time based on past performance of the suppliers andrecommendation/concurrence of head of department of respective user department forexisting & newly registered suppliers.

The Approved Vendor List shall be compiled for the following groups but not limited tothem.a) Industrial Saltb) Other Raw Materials & Auxiliary chemicalsc) Packing materialsd) Imported materials including spare parts etce) Mechanical Items indigenousf) Electrical Items indigenousg) Instrument Items indigenoush) Civil items Indigenousi) Calibration contractors for weighing machines

j) Administrative Items, TK Office & Security itemsk) Safety & Environment Connected items


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l) Computer & MIS related itemsm) Printing & Stationery itemsn) Any other group/requirement relevant to purchase functionso) Annual rate contract for supplies & services

Main functions of purchase department are: Registration of new suppliers.

Evaluation of performance.

De-registration / holiday of suppliers:

Supplier may be put on holiday for a specified period with the approval of

head of departments of MM & the user departments.

Review & updating of Vendor List

2.) Purchase Indent.

The indents shall be complete & clear in all respects with regard to itemdescription/specifications, its unique relevant item code number, physical dimension asapplicable, with relevant drawings whenever required to be enclosed, indent no. & date,project head, budget head, cost center, capital/revenue/min-max, technical evaluationrequired or not, vetting of purchase order required or not, imported or local, last purchaseorder reference, stock quantity, pipe line quantity, current year consumption quantity & lastyear consumption quantity, required date of delivery, estimated value, indentors signature,approving authoritys signature, suggested vendors (For items not covered in approvedvendor list) special remarks etc., The third party inspection certificate requirement /guarantee / warrantee certificate requirements shall also be mentioned in the indents.

The suggested vendors shall be only for the items which are not listed invendor list. For all other items vendor list shall be strictly followed by PurchaseDepartment.

There are two categories of purchase indents:A) Regular indents to be raised by user department directly.B) Min-Max to be raised by Stores department for engineering items of consumable

nature and where some minimum stock is required to be maintained in the stores.

For items not covered under Min-Max list the indentors from various departments will raiseindent for purchase in the form of designated computerized Purchase Indent as enclosedat Annexure-III and forward it to Purchase Department.

For items covered under Min-Max list, Stores Department will raise computerized indentemerging out of planning/review based on past consumption, inventory levels,minimum/record level etc., and forward to Purchase Department.

The Indenting Department shall also raise indents for items, though covered underMin/Max that may be required in abnormal quantities and/or for specific jobs/schemes onthe basis of requirements given by concerned users.


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3.) Enquiry.

SENDING ENQUIRIES GENERAL:

Upon receipt of the indents from various indentors enquiries shall be issued by the

Purchase Department., as per the procedure laid down below. The normal practice thatshall be adopted is closed limited tendering system. Vendors to whom enquiries are to besent are selected from the Approved Vendor List or otherwise based on the provisions laiddown in Chapter-2.

An enquiry in relevant prescribed standard format (Annexure-IV) for enquiries forindigenous suppliers is prepared in detail on the selected vendors in general. In case ofurgency, enquiry can be sent by Fax or E-mail also. For Imported items, enquiry can beprepared as per Standard format (Annexure-V) or letter form or Fax/E-mail form.

The enquiry shall include detailed technical specifications, general commercial terms andconditions along with required delivery period, mode of transport etc., for the items/materialfor which enquiry is floated. The enquiry is signed by competent authority as per delegationof powers. The duly signed enquiries are then sent to the selected vendors as per vendorlist.

All the enquiries should be sent, by courier/Speed post with recorded delivery. WhereverCourier/Speed post services are not available, enquiry may be sent by Regd. A.D.Acknowledgement details should be available, so as to ensure that enquiry is received byall bidders. The enquiry is subject to the Terms and Conditions printed on the overleaf ofenquiry sheet or as may be specified in the main format as per requirement from time totime.

In all enquiries, offers shall be invited in two parts in two separate sealed envelopes:Part-I Technical Unpriced bid containing the following:Complete technical specifications of items offered. All the commercial terms & conditionslike payment terms, delivery period, guarantee etc.

Part-II: Priced bid quoting the following:Unit rates of each item & total value Applicable taxes & duties. Packing, forwarding & freightcharges However, for normal routine items like fuses, gaskets, fasteners, lighting fittings,relays, other hardware items, consumables etc. and/or for small value items up toRs.50000=00 parties are not required to submit separate technical un priced bids and onlycommercial offers can be considered.

While issuing the enquiries it should be ensured that it shall not be issued to the vendorwho are deregistered or put on holiday.

It shall be clearly indicated in enquirya) Negotiations may or may not be held. Therefore parties should quote best prices basedon which order can be finalized. (Further negotiations, if required, may be he

rakshika patel

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