A report submitted to

Dibrugarh University, Dibrugarh

IN THE PARTIAL FULFILLMENT OF THE PAPER
PROJECT REPORT ON-

A Case Study on the Inventory Management

System of Numaligarh Refinery Limited

OF THE B.COM (ACCOUNTING & FINANCE) COURSE

SUBMITTED BY:
NIDHI AGARWAL
Roll no:
Registration no:
Golaghat Commerce College
2010-2011
UNDER THE GUIDANCE OF:
DR. PRANJAL PRATIM DUTTA
M.COM., Ph.D.
Asstt. Deptt. Of Accountancy
Golaghat Commerce College

A
PROJECT REPORT TITLED

A Case Study on the Inventory Management System of

Numaligarh Refinery Limited
SUBMITTED TO DIBRUGARH UNIVERSITY FOR PARTIAL
FULFILLMENT OF B.COM SPECIALITY COURSE
(ACCOUNTING & FINANCE)

NAME OF GUIDE:

SUBMITTED BY:

Dr. PRANJAL PRATIM DUTTA

NIDHI AGARWAL

M.COM., Ph.D.

Roll No.:

Asstt.Professor, Deptt.of Accountancy

Registration No.:

Golaghat Commerce College

Date of Submition:

Dr. Pranjal Pratim Dutta, M.Com., Ph.D

Tel.Nos.

03774-246250 (R)
Asstt.Professor, Deptt.of Accountancy
91-9435053370 (M)
Golaghat Commerce College
mail:

E-

prnjl_dtta@rediffmail.co

Golaghat -785621 (Assam)

Ref

Date

CERTIFICATE OF THE GUIDE

This is to certify that Miss Nidhi Agarwal, student of Golaghat Commerce College has successfully
completed her project entitled A Case Study on the Inventory Management System of Numaligarh
Refinery Limited under my guidance and supervision.
She has fulfilled all the requirements of the project work under Dibrugarh University.
The project is the result of her own investigation.

(DR. PRANJAL PRATIM DUTTA)

DECLARATION

I miss Nidhi Agarwal, student of Golaghat Commerce College, do hereby declare that the project
report entitled, A CASE STUDY ON THE INVENTORY MANAGEMENT SYSTEM OF
NUMALIGARH REFINERY LIMITED, that has been submitted by me as a requirement of
B.Com Final year Course given under Dibrugarh University.

I hereby declare that this project report is an outcome of my individual effort and no part
of it has been extracted from any other published research or journals, articles or newsletters
except those specified in references.

NIDHI AGARWAL
B.Com.3rd year

PREFACE

Knowledge has two aspects - theoretical and practical and no theoretical concept is
complete without having knowledge of its practical application.
As a student of commerce, it is not limited in theoretical classes; there is practical work to
be done in the field. It is very essential for a student of commerce and has been included as a part
of syllabus.
These project work deals with Inventory Management System of NRL. Every enterprise
needs Inventory for smooth running of its activities. It serves as a link between distribution and
production process. There is generally a time lag between the recognition of a need and its
fulfillment. The greater the time lag, the higher the requirement of Inventory.
In preparing this project clarity has been given preference over brevity. The underlying
concepts have been gradually and systematically developed. The exposition is simple yet rigorous.
There has been a conscious attempt to address the relevant concerns in this project.
These have been an uphill task. In my project report an attempt has been made to bring
the matters in full. Yet I cant claim that the materials are complete, errors are likely to be there.
However I tried my level best.

ACKNOWLEDGEMENT

Every mature individual in professional life is keenly aware of his sense of indebtness to many
people who have stimulated and influenced his intellectual development. Ordinarily this feeling is
expressed in customary gesture of acknowledgement. Therefore, it seems as a right to acknowledge
my gratitude with sense of veneration to the almighty God and various people who helped me
during the course of the project work.
As it is said that Success is the sweetest flower in the garden of hard work but thinking of
success is merely creamy fudge without an adequate guidance
I would like to express my profound gratitude to Dr. Padma Lochan Bhuyan, Principal of
Golaghat Commerce College for giving me opportunity to undertake this project.
I owe a great debt of gratitude and sincere Appreciation to my supervisor, Dr. Pranjal
Pratim Dutta, Assistant Professor Deptt. Of Accountancy, who helped me by providing,
suggestions constructive criticism throughout the entire course of project. Accurate, immanent
and systematically planned working is really a precious tool to be succeeding, which I have
learned from him.
Deep appreciation has been extended to the officers of NRL, who have helped me by
providing various data for my project.
Lastly, I want to thank my dearest Parents for pitching in with their patience and
invaluable feedback. It was enjoyable discussing some of the aspects with them.

NIDHI AGARWAL

EXECUTIVE SUMMARY: My project is based on INVENTORY MANAGEMENT at Numaligarh Refinery Limited.

INVENTORY MANAGEMENT Analysis is a post mortem of the organizations inventory system. It

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

PROJECT TITLE: - A CASE STUDY ON THE INVENTORY MANAGEMENT SYSTEM OF

NUMALIGARH REFINERY LIMITED.

INSTITUTIONAL GUIDE: - Dr.Pranjal Pratim Dutta.

LOCATION: - Golaghat
DURATION: - 15-12-2010 to 10-3-2011
STATEMENT OF THE PROBLEM: - This project enables me to know various
aspects of Inventory Management System of NRL, and its importance and steps
taken by NRL in the few recent years. My project is basically to assess and analyze the
inventory in NRL.

THE OBJECTIVESOF MY STUDY ARE AS FOLLOWS:

To examine whether there was any norm for maintaining stock of raw materials.
To see the performance and development of inventory control system.
To see whether the implementation of SAP is being done by NRL.
To study how sufficient large size of inventory is maintained in Numaligarh Refinery to meet the
demand of finished goods & to meet the demand of raw material.

 To suggest measures/recommendations for the proper implementations of the inventory control

system.

RESEARCH METHODOLOGY:Research can be defined as a scientific and systematic search for pertinent information on a specific
topic. Research is an art of scientific investigation.
Research comprises of defining and redefining problems, formulating hypothesis or suggested
solutions, collecting organizing and evaluating data, making deductions and reaching conclusion and at
last carefully testing the conclusion to determine whether they fit the formulated hypothesis.

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

NATURE OF RESEARCH:Descriptive Research design is used for study.

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

SAMPLING METHOD:Sampling method use in this research is Simple random sampling and convenience, which also known
as non-probability sampling.

SAMPLE SIZE:The sample sizes for survey are the existing EXECUTIVES & HEAD OF THE DEPARTMENT of
Numaligarh refinery limited.

TYPE OF SAMPLE DESIGN:-

In this study, information will be collected from the different department of Numaligarh refinery limited.
Thus, it is a sample investigation. Here, Judgment sampling design is referred in which using probability
methods initial sampling units are selected and then additional information is obtained forming
formation supplied by initial units.

DATA COLLECTION METHOD:Data collection is the most important part of any Research project. It plays a vital role in fulfilling the
research objectives.
In this study, PRIMARY DATA collection method is used. A structured questionnaire was
developed under the supervision of experienced supervisor, which helped me to extract detailed
information with the aim of fulfilling the research objective and further information are collected from
previous reports, websites; NRL journals etc these are the SECONDARY DATA.

DATA SOURCES:Responding to this survey is mandatory. Data are collected directly from survey respondents and
extracted from administrative files. The questionnaires used in the survey have been designed to
minimize different interpretations. The survey forms were field tested with respondents to ensure the
questions, concepts and terminology were appropriate.
Significant effort is spent trying to minimize non-response during collection. Methods used, among
others, are interviewer techniques such as probing and persuasion, repeated re-scheduling and call-backs
to obtain the information, and procedures dealing with how to handle non-compliant (refusal)
respondents. If data are unavailable at the time of collection, a respondent's best estimates are also
accepted.

NEED OF MY STUDY:The need of my study is to fill the gap between different aspects of theoretical and practical knowledge
of financial management and to develop the required skill to take decision on sight for the best use of
my theoretical knowledge. To study how sufficient large size of inventory is maintained in Numaligarh
Refinery to meet the demand of finished goods & to meet the demand of raw material.

REVIEW OF LITERATURE:The previous important literature of the related study is reviewed that are abstract,
and significant writings of authorities in the area under the study are reviewed. It
provides a background for the development of the present and brings the reader
upto date.

HYPOTHESIS OF THE STUDY:-

Inventory system of NRL has more or less achieved its objectives and has fulfilled the needs.
NRL constitutes of highly skilled and trained professionals in their refinery.
BPCL holds the important place in the sales pattern.

LIMITATIONS OF THE STUDY:As with any exploratory research the findings of this study are to be accepted with several limitations.
Since limitations of the study can be viewed as directions for future research in the field, it is pertinent to
list limitations and futures research opportunities simultaneously.
Here following are some limitations under researches had to work:1. The time duration for executing the research study was limited. So, it was difficult to cover the
overall depth of the study about the whole organization. So, some shortfall might be present.
2. Some of the information about the respective department was not disclosed by the executives as
they dont possess any ideas regarding those issues.
3. Money available with the researchers also imposed a limitation on the comprehensive of this
research.
4. Certain data was provided by the officers from the memories, so certain omission and
commissions might be there.
5. The difference in perception of the executives can be a major constrains.
6. Organizational Restrictions: There were restrictions on the supervisor and on the respondents
to very much clear all the policy and process. No organization discloses all the recruitment and
selection policy to the outsides. Nobody in the organization is authorized to disclose all the
policies it is because of some certain principles made by the top management of the organization.
Hence, finding due to an evaluation study have its limitations.

Contents

CHAPTERS

2
3

INDEX

PREFACE
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
LIST OF TABLES
INTRODUCTION
1.1 Company profile
1.2 Refinery configuration
1.3 Product wise crude utilization pattern
1.4 Future plans
INVENTORY MANAGEMENT & ITS
OBJECTIVES
INVENTORY MANAGEMENT OF NRL
3.1 Inventory management system at NRL
3.2 Materials planning & Inventory control
management
3.3 Implementation of SAP at NRL
3.4 Materials purchasing
3.5 Physical performance of the Refinery
ANALYSIS AND INTERPRETATION
4.1 Data Analysis through Primary Data
4.2 Data Analysis through Secondary Data
4.3 Analysis of Hypothesis
4.4 SWOT Analysis
FINDINGS,
SUGGESTION,RECOMMENDATIONS &
CONCLUSION

BIBLIOGRAPHY

ANNEXURE:
QUESTIONNAIRE

Page. No

List of tables
Table Numbers

Details

Table-1

Physical performance of NRL

Table-2

Current ratio

Table-3

ITR

Table-4

Inventories of NRL

Table-5

Increase and decrease of

inventory
Sale of products

Table-6
Table-7
Table-8
Table-9
Table-10

Raw materials
consumed
Consumption of stores ,spares
and raw materials
Production wise sales pattern
of NRL
Party wise sales pattern of
NRL

Page number

CHAPTER-1
INTRODUCTION

INTRODUCTION
COMPANY PROFILE

1.1 COMPANY PROFILE OF NRL:Numaligarh Refinery has been set up in 1993 in the district of Golaghat, Assam in fulfillment of the
commitment made by the Govt. of India in the historic Assam Accord for providing the thrust towards
industrial and economic development of North-East.
Numaligarh Refinery, Popularly known as "
Assam Accord Refinery" has been set up a grass -root refinery at Numaligarh in the district of Golaghat
(Assam) in fulfillment of the commitment made by Government of India in the historic " Assam Accord"
, signed on 15-8-1985 for providing a thrust towards industrial and economic terminal
were completed within the approved cost of Rs.2724crore.
Numaligarh Refinery Limited (NRL) was incorporated on 22-4-1993. Presently Bharat Petroleum
Corporation Limited holds 51% of the company's equity. The other equity holders are Government of
Assam, Oil Industry Development Board and Oil India Limited with equity participation of 10% each.

The balance 19% equity is earmarked for a Public Issue. The refining capacity of this refinery is 3.0
MMTPA.
NRL has been able to display creditable performance since commencement of commercial production
in October, 2000. With its concern, commitment and contribution to socio-economic development of the
state combined with a track record of continuous growth, NRL has been conferred the status of Mini
Ratna PSU.
The present authorized capital of the company is Rs. 1000crores and paid up capital is
Rs.735.63crores. The shareholding pattern as on 31-03-2006 is given below:

Bharat Petroleum Corporation Limited

::

61.65%

Govt. of Assam

::

12.35%

Oil India Limited

::

26.00%

Total

::

100%

Shareholders Pattern

Bharat Petroleum
Corporation Limited

26%
12%

62%

Govt. of Assam
Oil India Limited

Product Range: NRL product range includes LPG, Naphtha, Motor Spirit (MS), Aviation Turbine
Fuel (ATF) Superior Kerosene Oil (SKO) High Speed Diesel (HSD), Raw Petroleum Coke (RPC)
Calcined Petroleum Coke (CPC) & Sulphur.

Retail Segment: Strategic decision was taken to enter into the Retail Distribution segment.
Permission was received from Govt. of India to market MS& HSD through a chain of 510 Retail Outlets
in a phased manner. Hitherto, scores of retail outlets, aptly christened 'Energy Stations' have already
been commissioned in the North East and other parts of India and the process continues.

LOCATION:-

::
::

Numaligarh Refinery and its township are well connected by air, road and rail.

::

Road distance from Guwahati to Numaligarh is 250 km through NH-37 towards east. It
takes around 5 hours by luxury coaches that operate daily in the morning and afternoon.

::

The nearest railhead is at Furkating Jn, 35 km from NRL which is approachable by a hired
taxi.

::

Temperature ranges from 7 to 24 degree celsius during winter and 18 to 35 degrees celsius in
summer.

The nearest airport is Jorhat, 70 km away from NRL site. Indian Airlines and Jet Airways
operate from/to Jorhat, four days a week.

VISION:To be a vibrant, growth oriented energy company of national standing and global reputation having
core competencies in refining and marketing of petroleum products committed to attain sustained
excellence in performance, safety standards, customer care and environment management and to provide
a fillip to the development of the region.

MISSION:

To developed core competencies in refining and marketing of petroleum products with a focus
on achieving international standards on safety, quality and cost.

To maximize wealth creation for meeting expectations of shareholders

To create a pool of knowledgeable and inspired employees and ensure their professional and
personal growth.

To contribute towards development of the region.

OBJECTIVES:To excel in its performance, NRL would strive to:

I) Maximize refinery capacity utilization and optimize product Pattern by efficient refinery operation.
ii) Ensure smooth and timely evacuation of products; create a Sound customer base and necessary
marketing infrastructure.
iii) Achieve highest standards in product quality, safety, health and Environment protection.
IV) Manage and operate the facilities in an efficient and cost effective manner for generation of adequate
internal resources.
V) Plan for production and marketing of low volume, high value products.

1.2 REFINERY CONFIGURATION:The configuration of NRL is adopted to meet the objective of maximizing middle distillates like
kerosene and diesel. This will help in reducing the overall supply deficit middle distillates in the country
and upgrade the heavier ends to the extent possible. The fully commissioned refinery yield pattern
annually is shown below.

1. CRUDE AND VACUUM DISTILLATION: It was deigned by EIL and has the CDU and VDU
capacity of 3.0 MMTPA respectively and was commenced on April 1999.
2. DELAYED COOLER UNIT: It was designed EIL,has the capacity of 0.306 MTPA and it was
commenced on September 1999
3. HYDROGEN UNIT: - It was licensed from HALDORTOPSOE Denmark and it has the
capacity of 38000 TPA, commenced on February 2000.
4. HYDROCRACKER UNIT: - The licensor is CHEVRON, USA having capacity of 1.1 MMTPA
and was commenced on June 2000.
5. SULPHUR RECOVERY BLOCK:-It was deigned by EIL has the capacity 4000TPA and was
commenced on July 2000.
6. COKE CALCINATON UNIT: - The licensor is svedala, USA having capacity of 0.104
MMTPA and was commenced on May 2004.
7. MOTOR SPERIT BLOCK:-MSB Capacity is 225 TMTPA. Naphtha Hydro treatment unit
(NHTU) and catalytic reforming unit (CRU) have been commenced on July 2006.Isomerisation
unit (ISOM) is under commissioning.

1.3 PRODUCT WISE CRUDE UTILIZATION PATTERN

PRODUCT

QUANTITY (IN MT)

%ON CRUDE

CRUDE

3000000

100.00

LPG

83600

2.79

NAPHTHA

250000

8.33

LT-DISTILLATES

333600

11.12

ATF

85000

2.83

SKO

1102000

36.73

HSD

1095000

36.50

MD-DISTILLATE

2282000

76.07

FO

0.00

RPC

80380

2.68

CPC

0.00

SULPHUR

4000

0.13

HEAVY ENDS

84380

2.81

TOTAL PRODUCT

2699980

90.00

Current marketing channel/set up:-

 Marketing of major products from the refinery, namely, Naphtha, MS, SKO and HSD is being done
through BPCL.
NRL is also marketing small quantity Ms and HSD through retail network the ENERGY
STATIONS.
NRL is also marketing some quantity of Naphtha to domestic customer and through export.
LPG and ATF are being marketed through PSU Oil Marketing companies, like BPCL, IOCL, and
HPCL.
The specialty products, namely, RPC, CPC and Sulphur are being marketed directly by NRL.
MS and HSD are also supplied to RIL and EOL.A pipeline between Numaligarh to Siliguri has been

set up and was monitor by oil India Limited. Also major portion of oil is dispatch through this pipe
line.

1.4 FUTURE PLANS:The Company has identified following major projects/schemes to be undertaken for feasibility
study/implementation in a phased manner.
Wax Project: NRL has identified the Wax Project for production of high value paraffin and
micro-crystalline wax utilizing inherent properties of Assam Crude. A draft Detailed
Feasibility Project (DFR) has been prepared through M/s Engineers India Limited and a
financial appraisal of the project as well as market survey has recently been carried out. The
proposal for implementing the project is being put up for necessary approval.
Naphtha Splitter Unit: In order to supply 160 TMTPA of petrochemical grade Naphtha to
the proposed Assam Gas Cracker Project as feed stock, the process package for a Naphtha
Splitter Unit within the Refinery has been prepared. M/s Engineers India Limited has been
engaged for preparation of the Basic Engineering and Design Package (BEDP) and the
process of selection of the project management consultant (PMC) has been initiated.
Euro-IV MS Production: Studies have been carried out in-house at NRL and through
process licensor of the Motor Spirit Plant, M/s Axens of France for production of Euro-IV
MS in Numaligarh Refinery.
Euro-IV HSD Production: To cater to future need of high quality environment friendly
diesel, a study is being carried out by NRL as well as by engaging consultants to explore the
feasibility of producing Euro-IV HSD at 100% capacity utilization of the refinery.

CHAPTER-2
INVENTORY MANAGEMENT
&
ITS OBJECTIVES

INVENTORY MANAGEMENT: Inventory is tangible property held for sale in the ordinary course of business, or in the process of
production for such sale, or for consumption in the production of goods or services for sale, including
maintenance supplies and consumable stores and spare parts meant for replacement in the normal
course. Inventory normally comprises of raw materials, work-in-process, finished goods including byproducts, stores and spare parts and loose tools. Inventory constitutes a major element of working capital
which needs efficient management. Inventory management covers fixation of minimum and maximum
levels, determining the size of inventory to be carried, deciding about the issues, receipts and inspection
procedures, determining the economic order quantity, proper storage facilities, keeping check over
obsolescence and ensuring control over movement of inventories. Thus, it is important that inventory is
properly controlled.
Management of inventory consisting of raw materials, stores and spares and finished goods is a
vital area of concern for any public enterprise, especially in the case Of manufacturing industries.
Excess inventory holding leads to excessive carrying cost on account of interest, storage and handling
charges, insurance, record keeping, inspection and risk of deterioration in quality and thus adversely
affects the profitability of the organization. Even though the optimum level of inventory varies from
industry to industry, it is generally considered that the value of inventory as a percentage of annual
consumption should not exceed 33 per cent and the value of finished goods to net sales should be about
one months sale (i.e., 8.33 per cent).

WHO SHOULD ATTEND

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

WHAT WILL COVER

The strategic role of inventory management techniques.

 Establish the optimal inventory level.

Inventory planning and replenishment.
Distribution center and warehousing operations.
Inventory accuracy and audits.
Inventory management, measurement and reporting.
Inventory forecasting and demand management.

OBTECTIVES OF INVENTORY MANAGEMENT:

Inventory of finished goods should be maintained at sufficient high level so that the demand of
customers may be fully satisfied .Similarly, inventory of raw materials should also be sufficient so that
manufacturing process can be run smoothly. In case of inadequate inventory of finished goods, there is
always risk of being out of stock and in case of inadequate inventory of raw materials; there is always a
risk of manufacturing process being halted. Therefore the major responsibility of inventory management
is to determine the sufficient level of inventory required in business. Since inventory is a major asset and
it involves a lot of funds, inventory level should not be excessive. Excessive inventory increases costs
because extra funds are involved in it. Therefore, inventory management also tries to minimize the
sufficient level of inventory. Thus, both inadequate & excessive quality of inventory is undesirable in the
business.
The Term inventory management includes two conflicting tasks:1) To maintain a sufficient large size of inventory to meet the demand of finished goods & to meet the
demand of raw material by production department.
2) To keep the investment in inventories at minimum level by efficiently organizing the purchase & sales
operations.

RISKS & COSTS OF EXCESSIVE INVENTORY

Excessive carrying cost.
Risk of loss of liquidity.

 Risk of price decline.

Risk of deterioration of goods.
Risk of obsolescence.

RISKS OF INADEQUATE INVENTORY

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

COST OF INVENTORIES
Relevant inventory costs which change with the level of inventory are listed below:Ordering Cost: - The cost of ordering includes:

Paper work costs , typing & dispatching

Order inspection cost , checking & handling

Carrying Cost: - Carrying cost involves:

Capital Cost.

Storage & handling cost.

Insurance.

Taxes.

The cost of funds invested in inventory.

Stock out cost: - Stock out cost involves:

Expenses of placing special orders

Expediting income orders.

Cost of production delays.

TECHNIQUES OF INVENTORY MANAGEMENT:

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

(C) Danger Level = Consumption * Maximum Reorder Period

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

3) Economic Order Quantity:Economic Order Quantity is the quantity where ordering cost is equal to non ordering cost.
EOQ is made up of two parts:
a) Ordering Cost - these costs are associated with the purchasing or ordering of materials. This cost
of ordering includes:
Paper work cost , typing & dispatching
Order inspection cost, checking & handling.

b) Non - Ordering Cost - These are the costs for holding the inventories. This cost involves:

Capital Cost.
Storage & handling cost.
Insurance.
Taxes.
The cost of funds invested in inventory

CHAPTER-3
Inventory Management
System at NRL

3.1 INVENTORY MANAGEMENT SYSTEM AT NRL: Raw materials and Intermediates are valued at cost or net realizable value, whichever is lower.
Cost is determined as follows:
Raw materials on weighted average cost.
Intermediate Stocks at raw material cost plus cost of conversion.

 Finished products are valued at weighted average cost or net realizable value inclusive of North
East Excise duty benefit, whichever is lower.
Annual Report 2009-10
103
Stores and spares are valued at weighted average cost. Obsolete, slow moving/non moving
stores for 3 years and above and other materials including project materials in the field as
surplus are provided for in full so as to value them at Rs. Nil.

The refinery produces different petroleum products, especially domestic and automobile fuels such as
LPG, Naphtha, ATF, SKO, BS-II Grade HSD, Euro-III Grade HSD, RPC and elemental sulphur as
byproduct. The main existing units of NRL are as under:

UNITS

CAPACITY

Crude Distillation Unit (CDU)

3.00 MMTPA

Vacuum Distillation Unit (VDU)

1.32 MMTPA

Delayed Coke Unit (DCU)

0.306 MMTPA

Hydro Cracker Unit (HCU)

1.10 MMTPA

Hydrogen Generation Unit (H2U)

38000 TPA

Motor spirit Unit (MSU)

225 TPA

Coke Calcination Unit (CCU)

0.104 MMTPA

Sulphur Recovery Unit (SRU)

4000 TPA

PRODUCTS OF NRL:-

Products

TMT

% Wt. on Feed

LPG

96

3.2

NAPHTHA

32

1.1

MS

185

6.2

313

10.4

ATF

132

4.4

SKO

270

9.0

HSD

1856

61.9

2258

75.3

RPC

50

1.7

CPC

44

1.5

SULPHUR

0.1

99

3.3

F&L

330

11

TOTAL

3000

100

Light Distillates

Middle Distillates

Heavy Ends

3.2 Materials Planning and Inventory Control Management

The materials department of NRL is mainly classified into 4 parts. These parts are:

Materials planning are the scientific way of determining the requirement of

consumables, spares, accessories etc to be procured or stocked for uninterrupted operations of the
company.

Classification of Materials
The materials of NRL are broadly classified into 3 categories. These are:
1. Direct Charge Item
2. Stock Item
3. Non Stock item.

1. Direct Charge Item

Items like consumables, spares, and accessories etc which are not regularly required are termed
as direct charge items. Also all capital nature items fall under this category, requirement of direct charge
items are generally decide by the various departments depending on their need.

2. Stock item
There are a large number of items comprising of consumables, spares, and accessories etc
which are regularly consumed by various departments for day-to-day activities of the company. In order
to maintain uninterrupted supply of these items for fey to day activities these items are stocked in the
godowns of NRL depending upon the demand and lead time of procurement. These items are termed as
stock items. The requirement, procurement, and warehousing of stock items is monitored by materials
department. Some of the examples of stock items at NRL are casings, tubing, rock bits,
drilling/production consumables, chemicals, cement, spares, stationeries, nut-bolts, bearings, V-belts etc.
the stock of all the stock items in terms of value constitutes the inventory of the company.

Classification of stock items

The stock items can be classified into the following categories:

N
F
O

R
R I
N
S
U
R
A
N
C
E

S
R
ET
GO
U
LC
A
RK

S
R
C
E
H
V
E
I D
E
U
W
L
E

Schedule items
Requirement of these items is dependent upon the well policy and onward drilling programmed.
Items like casings, tubing, rock bits, drilling and production consumables, etc. are covered under this
category. The requirement estimates are made on the basis of programmed for type of wells to be drilled
(e.g. development/exploratory, deviated/straight hole, etc.) and the well design policies during the year.
These are generally very high value items and hence proper monitoring is necessary in view of their
vital nature and high value. Excess stock of these items may results in very high inventories.

Review Items
Requirement of these items are projected by the user departments depending on the future project
jobs, operations envisaged by them. Procurement is planned in consultation with the past consumption
trend as well as projection given by the department. Examples of review items are Line Pipe, Chemicals
etc.

Regular Items
This category includes regular consumables and spares having more or less set pattern of
consumption. The requirements of these items are based on past consumption.

Insurance Items
These items are normally very high value items and do not follow any set pattern of
consumption, hence requirement cannot be predicted. These are functional parts of a machine with high
degree of reliability and low probability of failure. Non-availability may lead to costly shutdown. The
loss due to the shutdown may be enormous compared to the cost of the item. Therefore, minimum stock
is maintained as suggested by the user. Examples of such items are Crankshaft of gas engine, spares of
gas turbine etc.

NFO Items
These items are called as No Further Order items. These items arises out of various reasons like
scrapping of main equipment, certain items are identified for which replenishment is not required. Such
items are deleted from stock range when stock gets exhausted.

RR Items
These items are called as reorder on request items. These items do not follow any set pattern of
consumption, but are either required for project jobs or any planned activities. Requirement of these
items are based on the advice of user department and procurement is based on their projected
requirement. This include items e.g. electrical/telephone cables, etc.

3. Non-Stock Items
Non stock items are other than those stock items. These items do not have regular
consumption. Replenishment of purchaser requisition of these items is taken by user department. The
planning of non-stock items is done by the users themselves. These items are not stored by materials
department. The example of non-stock items can be calendar, diary etc.

Material Code:
All materials held in stock by NRL have been codified and classified in order to facilitate easy
identification & monitoring. In total NRL has approx of 5500 codes.

Scheme of Material Code:

Item Code No. (ITC Code): 2710
Product Description: P E T R O L E U M P R O D U C T
An eight digit material code is allotted for each stock item
a) The first two digits represent the main group e.g. 01 Casing and
Compressor Spares, etc.

Attachments; 22 Gas

b) The third and the fourth digits represent the sub-group e.g. 22-08 - Gas Compressor SparesChicago Pneumatic Model
105 & 500.
c) The fifth, sixth, seventh and eighth digits represent the serial number of the item within the subgroup.

Material Code Book:

A Material Code Book is generally maintained in which the following particulars in respect of all stock
items are recorded in the material code serial order:
(a) Material Code Section, Material Code Sub-section and Item serial Number.
(b) Full description and specifications, Testing / inspection requirements, part number etc.
(c) In case of components/accessories brief description of the main machinery/ equipment to which these
belong.
(d) Unit of measurement and its code.
The copies of the Material Code Book are circulated to the various user departments. Separate
volume of the Material Book is maintained for each Material Code Section. Each Section of the Material
Code Book has a Main Index Sheet, which gives broad details of various sub-sections of a particular
Material Code Section.

3.3 IMPLEMENTATION OF SAP AT NRL:Numaligarh Refinery Limited has successfully implemented SAP in a record time of 5 months. The GoLive was inaugurated by Mr. B K Das, Managing Director NRL in presence of Mr. N. Sridhar, Director
SAP, Mr. R. C. Choudhary, Director (Technical ) NRL, Mr. T K Ananth Kumar, Director ( Finance) NRL
and a host of senior officers and other employees of the company. The project appropriately named
IMPETUS (Improvement in Performance through up gradation of System) was formally given a go
ahead in a solemn function in NRLs Marketing Terminal. NRL has always remained in the forefront
while absorbing latest technologies. NRL was the first Oil Company in India to implement full suite of
ERP application in 1998.
SAP is used by 9 out of top 10 Fortune 500 Oil and Gas Companies. SAP is a suite of business
applications which is used to optimize the Supply Chain processes. Apart from usage in marketing
endeavors, the implementation is expected to bring in major benefits to the organization in the various
areas of operations besides ensuring optimum utilization of resources. An important feature of
implementation is that NRL has utilized group companies consultants besides SAP consultants thereby
optimizing the implementation cost.

QUALITY POLICY:
They strongly believe that quality performance is an integral part of our business and are accordingly
committed to attain sustained excellence in all our activities connected with refining, storage, dispatch
and marketing of petroleum products.
In pursuance of the above Policy, they shall:

Ensure that the quality of our petroleum

products consistently meets the stipulated
specifications
and
the
environmental
requirements.
Adhere to the requirement of Quality Management Systems conforming to ISO
9001:2000 in all the relevant activities throughout the organization.
Review our policy for continual improvement of the effectiveness of Quality
Management Systems.
Review the performance of relevant processes for effectiveness and efficiency and strive
to improve upon them continually through setting of objectives.

Aim for minimization of losses and continual improvement of plant performance and
competency of the employees.

Maintain focused attention on Customer Satisfaction.

3.4 Materials Purchasing:

The flow work for purchase section is mentioned below:

I. The planning section Creates purchase requisitions for stock items & send to the purchase section for
requirement of material.

II. Planning Section receives purchase requisition for Non-Stock items created by various departments
duly signed & released in the system by the authorized signatories & forward to the respective purchase
section. The concerned purchase section of Materials Dept prepares the NIT (Notice Inviting Tender).
III. Scrutiny of application and approval of short listed parties by the Materials Department
IV. Receives the quotation from vendors.
V. The quotations are sent to the intending Dept for the technical evaluation.
VI. After getting the evaluation and approval of short listed parties, the quotations are tabulated to find
the lowest quotation.
VII. Based on the tabulations, recommendation is made on the lowest technical bidder .In some cases
the lowest bidder may be rejected due to technical faults
VIII. The material department prepares purchase proposal based on lowest bidder.
IX. This Purchase Proposal is sent to Purchase Section of F&A department for its verification.
X. The section after scrutiny of the Purchase Proposal makes Purchase Order.

The process of raising an indent or making a requisition for a commodity is given as below:

RAISING

ISSUE TO THE RESPECTIVE DEPARTMENT

SETTING UP OF

PAYMENT
MADE TO
SUPPLIERS

TENDERING

GR
N

RETURN IF
NOT
SATISFIED

MATERIALS ENTERED

PURCHASES:The purchases made by NRL can be divided into two parts:1. Indigenous Purchase
2. Foreign Purchase
The total purchase during the current year was around 450-500crores.

Scrap Disposal:NRLs inventory consists of Scrap Materials. A Technical Committee after examining the items not in
use declares the same as Scrap and obtains Management Approval for the same. Upon declaration of the
items as Scrap, the said items are placed under the disposal of M/s MSTC (Material Scrap Trading
Corporation Ltd.) through Materials Department. Disposal of scrap is done by competitive bidding
process conducted by M/s. MSTC Ltd. Total Rs.150.43lakhs (approx) worth of scraps were disposed
during the year 2009-10 as compared to Rs. 126.76lakhs (approx.) during the previous year.

STORAGE AND WAREHOUSING:There are many godowns at NRL for the purpose of storage of item.

List of Godowns:-

1
General items like engineering and electrical
2
Safety Items
3
Productions Items and pumps
(e.g. compressors)
4
Drilling and Chemical Items
5
Civil Items
6

Automobiles

Petrol Pumps

Issuing of Materials:The materials department of NRL is basically based on centralized purchasing as it is not possible to
make record of the requirements of various departments. Thus each department makes it necessary
purchases of their own materials. These materials are properly maintained and stored and issue of these
items is made to various departments as per their requirement.

CURRENT INVENTORY POSITION:The current inventory position of NRL is very good. The reduction in inventory can be improved
through proper inventory planning and close monitoring.

Function of Materials Planning and Inventory Control Sections

Following are the main functions of materials planning and inventory control management:
1. Codification of stock items, GI no allotment and amendment of GI vocabulary
2. Review of stock items and indenting and follow up
3. Monitoring of critical item
4. Action for write off/disposal of surplus item
5. Scrutiny or consolidation of direct charge indents
6. Updating of specialized and standardized item list

Inventory Control Wing:

The main objective of the IC Wing is to control the inventory of stock items in accordance with the
inventory norms.

Inventory Norms:
The main objective of inventory control system is to control the inventory of stock items in accordance
with the inventory norms which are mentioned below:
ABC Analysis (Based on Consumption Value)
HML Analysis (Based on Unit Value)
FSN Analysis (Based on Movement)
XYZ Analysis (Based on Stock Value)
With the help of above tools A, H, F, X category items are identified which are smaller in
number and constitutes about 85% of the inventory value and are closely monitored to avoid excess
inventory. List of slow and non-moving items are prepared and circulated to various departments.

Gas pipeline: The commissioning of the first phase of the Duliajan-Numaligarh gas pipe line is a
welcome development that would open that would open up new possibilities in the states energy sector.
The 193km-long high-pressure pipe line implemented at a cost of Rs380crore will now enable
Numaligarh Refinery Limited (NRL) to receive one million standard cubic metre natural gas per day
from Oil India Limited, which could be use as a substitute for costly Naphtha. The Naphtha thus saved
would feed the upcoming Assam gas cracker project. The recent steep hike in natural gas prices poses
the risk of rendering the gas based power stations economically unviable. Circumstances, therefore,
warrant a role back of the hike that was quite steep at 120 percent.

3.5 PHYSICAL PERFORMANCE OF THE REFINERY:

During the year 2009-10, the refinery processed crude throughput of 2.619 MMT as against 2.251 MMT
in the previous year. This is the highest ever crude throughput achieved by the refinery since its
commissioning in the year 2000. The capacity utilization of the refinery is primarily governed by the
crude receipt from OIL/ONGC. The crude receipt during the year was 2.560 MMT. The capacity
Utilization of the crude distillation unit stood at 87.3%. Distillate yield during year was recorded at
85.32% against the previous years figure of 84.72%.
During the year, the refinery produced 1.230MMT of Bharat Stage II grade HSD and 0.405MMT
of Euro III grade HSD. Production also included 0.057 MMT of Liquefied Petroleum Gas (LPG), 0.304
MMT of Motor Spirit (MS) conforming to BS-II with 0.057 MMT of EuroIII equivalent and 0.043
MMT of Aviation Turbine Fuel (ATF). Apart from this, Company produced 0.005 MMT of Euro-IV MS
during the year. Total Calcined petroleum coke produced during the year was 0.034 MMT. Total
products evacuated from the refinery NRL contributes to Chief Minister's Relief Fund, Assam during the
year was 2.349 MMT against the production of 2.364MMT which is highest since commissioning of the
refinery.

CHAPTER-4
Analysis
&
Interpretation

4.1 Following are the data collected through primary sources:

1. Are you aware of about inventory management system?

YES

80 percent

NO

17 percent

Do not know / cant say

03 percent

3%

17%
YES
NO
Dont know/cant say
80%

Interpretation: The awareness among the company officials regarding the existence, functioning
and applicability of inventory management system is high that is 80%, as per the result of the
study.

2. Do you know that your company has an inventory management system?

 YES

78 percent

NO

18 percent

Do not know / cant say

04 percent

80%

78%

70%
60%
50%
40%
30%
18%

20%
10%
0%

4%

YES

NO

Do not know/ cant say

Interpretation: The company officials are aware about their company having an inventory
management system, 78% of the respondents do have this awareness as against 18% + 04% of the
respondents who are either not aware or not able to provide any information in this regard.

3. Do you agree that there should be an inventory management system in place in

any organization/company?

 Agree

72 percent

Disagree

15 percent

Do not know/ cant say

80%

13 percent

72%

70%
60%
50%
40%
30%
20%

15%

13%

Disagree

Do not know/cant say

10%
0%

Agree

Interpretation: According to the response to the above question, it appears that every
company/organization should have a system or mechanism in place for managing their inventory.

4. For what reasons do you feel that theres should be an inventory management
system?

To smoothen operational requirement

To save time
To maintain accountability and transparency
Other reasons
Do not know/cant say

30 percent
12 percent
40 percent
10 percent
08 percent

40%
40%
35%

30%

To smoothen operational
requirement

30%

To save time

25%

To maintain accountability
and transparency

20%
15%

12%

10%

10%

Other reasons

8%

Do not know/cant say

5%
0%

Interpretation: To everyones surprise, 40% of the respondents feel that is for accountability
and transparency purpose that inventory records are maintained and hence the need for an
inventory management system. This is followed by the need for saving time and the requirement
for operational smoothness.

5. Do you agree that the inventory management system in your company has
fulfilled the needs for which it was evolved?

Strongly agree
Agree
Disagree
Strongly disagree
Do not know/cant say

15%

5%

22 percent
50 percent
15 percent
05 percent
08 percent

8%

22%

Strongly agree
Agree

50%

Disagree
Strongly disagree
Do not know/cant say

Interpretation: From the above response, it appears that the inventory management system has
more or less achieved its objectives for which it was in place. This is evident from the 77% of the
respondents who either agreed or strongly agreed in favour of this proposition. However, the
response of 23% of the respondents who think otherwise also speaks something.

6. What according to you is the major benefit of going for an inventory management
system by your company?

It has made storage and retrieval of material easier

Improved Sales Effectiveness
Reduced Operational Cost
Other Benefits
Do not know /Cant say

35 percent
27 percent
20 percent
12 percent
08 percent

40%
35%
30%

35%
It has made storage and
retrieval of material easieR
Improved Sales
Effectiveness

27%

25%
20%

Reduced Operational Cost

20%
Other Benefits

15%
10%

12%
Do not know /Cant say

8%

5%
0%

Interpretation: As regards the benefits of having an inventory system by the company, the
respondents are of the opinion that the major benefits lies in relaxation in terms of storage and
retrieval of materials. This is followed by increasing sales effectiveness and reduction in
operational cost. However, all these benefits are interlinked and the separation between them is
more analytical then anything else.

7. Do you have skilled professionals in your company for inventory management?

YES

50 percent

NO

30 percent

Do not know/ cant say

20 percent

50%
50%
45%
40%
35%

30%

30%
25%

20%

20%
15%
10%
5%
0%

YES

NO

Do not know/ cant say

Interpretation: Requirement of skilled professionals well vesed with latest inventory

management technology. It clarifies that 50% respondents agree that the company has skilled
professionals for the inventory system.

8. What category of professionals is managing the inventory system of your

company?

Skilled and trained

35

percent

Only skilled but not trained

Non skilled but trained professionals

17 percent
20
percent

Non skilled and non trained professionals

25

Non skilled and non trained professionals

03 percent

percent

35%

35%
30%
25%
20%

Skilled and trained

25%

Only skilled but not

trained

20%

Non skilled but

trained professionals

17%

15%

Non skilled and non

trained professionals

10%

Non skilled and non

trained professionals

3%

5%
0%

Interpretation: As already stated availability of trained and skilled professionals for inventory
management needs serious attention of the company.

9. Do you agree that your company gives more emphasis on software than skilled
manpower with regard to inventory management?

Strongly agree
Agree
Disagree
Strongly disagree
Do not know/cant say

20 percent
50 percent
12 percent
10 percent
08 percent

8%
10%

20%
Strongly agree
Agree
Disagree
Strongly disagree
Do not know/cant say

12%

50%

Interpretation: The above response gives an impression that the company puts greater
emphasis on software than skilled manpower for inventory details management.

10. Do you think that the software used by the company is according to the design
and needs of the system?
YES

85 percent

NO

12 percent

Do not know/cant say

03 percent

3%
12%

YES
NO
Do not know/cant say

85%

Interpretation: The Company appears to be using the software according to the system
requirement and design and according to the customers needs.

11. What is the prime challenge before your company with regard to inventory
management?

Lack of trained professionals

Maintenance Cost
Changing Requirements of Customers
Other problems
Do not know/cant say

45 percent
17 percent
28 percent
06 percent
04 percent

45%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

28%
17%

sa
y

kn

cu

/c

an

st
om

na
io
ss
fe
ro

m
ir
e
u
q
re

ot

ts

ed
in
tr
a
of
ck
La

4%

rs

ls

6%

Interpretation: Lack of availability of trained professionals coupled with maintenance cost and
changing needs of the customers are perceived to be the inventory challenges before the company.

12. What is the future of inventory management system in your company?

Will continue as a successful mechanism

May change according to time
Shall collapse
Do not know /cant say

7% 3%
30%

60%

60 percent
30 percent
07 percent
03 percent

Will continue as a
successful mechanism
May change according to
time
Shall collapse
Do not know /cant say

Interpretation: The future of inventory system of Numaligarh refinery appears to pretty good,
as by the response it will continue as a successful mechanism.

4.2 Following are the data collected through secondary sources:

TABLE 1- Physical performance of NRL during the year 2005 to 2010

Financial
Year

(In TMT)
Heavy Ends

Light distillates

Middle Distillates

05-06

Crude
Throughput
Quantity
(%)*
2132626
71

Quantity
276032

(%)#
14.1

quantity
1578114

(%)#
80.6

quantity
103710

(%)#
5.3

06-07

2503848

83

333627

14.7

1829069

80.7

104963

4.6

07-08

2568652

86

349189

15.2

1851369

80.4

101034

4.4

08-09

2251446

75

311640

15.5

1619496

80.3

84684

4.2

09-10

2619082

87

370612

15.7

1891513

80.0

103529

4.4

NOTE:(%)* indicates % capacity utilization on design capacity of 3000 TMT.

(%) # indicates % on actual crude throughput.

Analysis: Above table reveals that the physical performance of NRL which has been in a good
position from year to year.

Bar diagram showing the percentage of the physical performance of NRL in the last
5 years.

Physical Performance of NRL

80.00%

71%

69%

67%

70.00%

70%

67%

60.00%

LPG

50.00%

MS
SKO
HSD

40.00%

ATF
30.00%

20.00%

9%
10.00%

4.74% 5%

2%

18.00%

17.00%

8%

9%

11.00%
9%

2%

4%

2%

2%

2%

18.00%

7%
2%

2%

2%

0.00%

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Sources: - Annual report 05-10 of Numaligarh Refinery Limited.

TABLE 2- Current ratio of NRL during the year 2005-2010

Financial Year

05-06

06-07

07-08

08-09

09-10

Current Ratio

1.45

1.41

1.25

1.44

1.50

Percentage

21%

22%

18%

20%

21%

Note: Current Ratio (CR) =Current Assets (CA)/Current Liabilities (CL)

Analysis: Analysis of current ratio of NRL shows fluctuating scenario during the last five years since
2005 to 2010. Table 2 shows the year wise current ratio position of NRL. From the figure it appears that
during the financial years 2005-2006 and 2006-2007 and 2007-2008, the current ratios are gradually
decreased from 1.45 to 1.25. This indicates poor liquidity position of the company. However, in the
financial year 2008-2009 and 2009-2010 significant improvements have been made compared to 07-08.
This indicates that the liquidity position of NRL is fluctuating and even thought it is in improving trend
but the capacity to meet the short-term financial obligations is still below the optimum level.

Diagram showing the current ratio of NRL in the last 5 years

Current Ratio

21%

21%

20%

20%

18%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited

05-06
06-07
07-08
08-09
09-10

TABLE 3- Inventory turn- over ratio (ITR) of NRL during 2005-2010

Financial year

05-06

06-07

07-08

08-09

09-10

ITR (Days)

35.21

33.76

20.74

22.31

51.98

Percentage

21%

20%

13%

14%

32%

Note:
Inventory turn- over ratio (ITR) = Cost of goods sold/Average finished goods stock
Cost of goods sold = Sales revenue Gross profit

Analysis:
As inventory turnover ratio indicates how fats inventory is sold. A high ratio is good from the view point
of the liquidity and vice versa. A low inventory turnover ratio signifies that inventory does not sell fast
and stays on the shelf or warehouse for a long time.
As the refinery having a high turnover ratio which signifies that inventory is not staying in a shelf or
warehouse for a long time they can be easily sold after manufacturing so it means company have a good
sales in comparison to the average inventory of the refinery. Table 3 shows the year wise ITR of NRL.
From the figure it appears that during the financial year 2005-2006 and 2006-2007 and 2007-2008 and
2008-2009, the company was having low inventory turn over ratio. However, in the financial year 20092010 significant improvements have been made compared to 08-09. Thus the product demand in the
market is improving this year.

Pie-diagram showing the ITR of NRL in the last 5 years

ITR (Days)

21%
32%

21%
14%
13%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited.

2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

TABLE 4- Inventories of NRL during 2005-2010

Financial Year

05-06

06-07

07-08

08-09

(In Crore)
09-10

Inventories

798.09

821.04

921.38

978.53

1550.16

Percentage

16%

16%

18%

19%

31%

Analysis: Above table reveals the inventories of NRL in the last five years. It has been increasing year
after year.

Pie-diagram showing the inventories of NRL of last five years

Inventories

16%

2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

31%
16%

19%

18%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited.

TABLE 5- Increase and (Decrease) of Inventory at NRL in 2005-2010

Financial Year
Increase(Decrease)
Percentage

05-06
93.87
11%

06-07
(64.51)
(7)%

07-08
74.02
8%

08-09
15.06
2%

(In crore)
09-10
625.40
72%

Note:
Increase and (Decrease) of inventory = value of closing stock of finished goods and stock in process
value of opening stock of finished goods and stock in process.

*The value in the brackets shows negative figures

Analysis: Above table reveals the increase and decrease of inventory at NRL. From the figure it
appears that the company was facing decrease of inventory in 06-07. However, significant
improvements have been made compared to 06-07.

Pie-diagram showing increase and decrease of inventory in last 5 years.

Increase(Decrease)

11%

2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

7%
8%
2%
72%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited.

TABLE 6- Sale of Products of NRL in 2005-2010
Financial Year
Sale of Products
Percentage

05-06
5820.37
15%

06-07
7930.32
20%

07-08
8764.16
22%

08-09
8853.35
23%

(In crore)
09-10
7874.09
20%

Analysis: Above table reveals the sale of products of NRL during 2005-2010. From the figure its
clear that the sale of products of NRL was in increasing trend in 2005-2006 and 2006-2007 and 20072008 and 2008-2009, but in 2009-2010 it got decrease as compared to 2008-2009.

Pie-diagram showing the sale of products in the last 5 years.

Sale of Products

20%

15%
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010

20%
23%
22%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited

TABLE 7- Raw materials consumed at NRL during 05-10.

(In
Crore)
Financial Year
Raw material
consumed
Percentage

05-06
4261.10

06-07
5713.38

07-08
6820.13

08-09
7042.99

09-10
6519.44

14%

19%

22%

23%

22%

Note: Raw material consumed = Opening stock + Purchase Closing stock

Analysis: Above table reveals the consumption of Raw materials in the last 5 years. The consumption
was increasing year after year till 2008-2009, but in the year 2009-2010 the consumption got reduced by
1% as compared to previous year.

Pie-diagram showing the Raw materials consumed in the last 5 years.

Raw material consumed

14%

21%

2005-2006
2006-2007

19%

2007-2008
2008-2009

23%

2009-2010

22%

Sources: Annual report of 05-10 of Numaligarh Refinery Limited

TABLE 8-Consumptions of Stores, Spares and Raw materials in 2005-2010.

Financial Year
Stores, spares and materials
Percentage

05-06
25.93
27%

06-07
9.31
9%

07-08
11.13
11%

08-09
37.55
39%

(In crore)
09-10
13.20
14%

Analysis: The above table reveals the consumption of stores, spares and raw materials in the last five
years. From the figure it appears that during the financial year 06-07 and 07-08 the consumption got
highly reduced as compared to 05-06. However, the company made significant improvement in 08-09 as
compared to 07-08. But the company again faced a downfall in 09-10. It shows that the consumption of
the company is showing fluctuating scenario in the last five years.

Pie-diagram showing the consumption of Stores, Spares and Raw materials during
05-10.

Stores, Spares and Materials

14%

2005-2006
2006-2007

27%

2007-2008
2008-2009
2009-2010

10%

39%

11%

Sources: Annual report of 05-10 of Numaligarh Refinery limited.

Table 9- Production wise sales pattern of NRL for the year 05-10.

Financial Year

Production wise sales pattern in percentage

2005-2006

LPG
2.15%

MS
4.74%

SKO
8.96%

HSD
70.76%

ATF
4.67%

RPC
0.77%

CPC
0.70
%

2006-2007

2%

11%

9%

69%

4%

1%

1%

2007-2008

2%

18%

8%

67%

2%

1%

1%

2008-2009

2%

17%

9%

67%

2%

1%

1%

2009-2010

2%

18%

7%

70%

2%

1%

1%

Analysis: The above table reveals that the sales of products is showing fluctuating scenario in the last
five years. The sales product of MS, HSD,RPC and CPC have been in increasing position whereas the
other products like LPG,SKO, ATF has shown fluctuating sales throughout the five year. However, its
in an improving position

Bar-graph showing the product wise sales pattern of NRL.

Production wise sales pattern

80.00%

71%

69%

70.00%

67%

70%

67%

LPG

60.00%

MS
SKO

50.00%

HSD

40.00%

ATF
RPC

30.00%
20.00%
10.00%

18.00%

17.00%

18.00%

11.00%
9%
9%
9%
8%
7%
4.74% 5%
4%
2%
2%
2%
2%
1%
1% 2%
1%
1% 2%
1%
1% 2%
1%
1%
1%
1% 2%

0.00%
2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Sources: Annual report of 05-10 of Numaligarh Refinery limited.

Table 10- Party wise sales pattern of NRL for the year 2005-2010.

CPC

Financial
Year
2005-2006

BPCL

IOCL

HPCL

83%

3%

2006-2007

80%

2007-2008

Retail

Direct

8%

Essar, Reliance
& Shell
1%

2%

1%

8%

1%

1%

5%

5%

80%

6%

1%

1%

7%

5%

2008-2009

79%

5%

1%

1%

10%

4%

2009-2010

77%

5%

1%

2%

10%

5%

Analysis: The above table reveals that the sales pattern in BPCL was 83% in 05-06, which got reduced
and finally holds only 77%. The sales pattern of IOCL has been in a fluctuating scenario from 05-06.
Whereas, HPCL shows a great downfall in the sales pattern after 05-06. However Essar, Reliance
&Shell increased the sales pattern during 09-10. The sales pattern of Retail and Direct is in increasing
trend throughout the year.

Bar-graph showing the party wise sales pattern of NRL in last 5 years

Party wise Sales pattern

90% 83%

80%

80%

79%

80%

77%

70%

BPCL

60%

IOCL
HPCL

50%

ESSAR & SHEEL

RETAIL

40%

DIRECT

30%
20%
10%
0%

8%
3% 1%
2%
1%
2005-2006

8%

5%
5%
1%
1%

2006-2007

6% 7%
5%
1%
1%
2007-2008

10%
5%
4%
1%
1%
2008-2009

10%
5%
5%
2%
1%
2009-2010

Sources: Annual report of 05-10 of Numaligarh Refinery limited.

4.3 Analysis of Hypothesis:

Objective:- To know whether the inventory system of NRL has more or less achieved its objectives.

Hypothesis 1:
H0-NRL has more or less achieved its objectives.
H1- NRL has not achieved its objectives for which it was in place.

Hypothesis1: Accepted: From the study and data analysis its clear that NRL has achieved its set
Objectives for which it was in place. Thus the Null hypothesis i.e. H0 is accepted.

Objective:- To know whether NRL constitutes of highly skilled and trained professionals in their

refinery.

Hypothesis 2:
H0- NRL constitutes of highly skilled and trained professionals
H1- NRL lacks in skilled and trained professionals.

Hypothesis2: Rejected: From the study and data analysis it can be seen that NRL doesnt
possess that much skilled and trained professionals as much they require. Thus the Null
hypothesis i.e.H0 is rejected, and the alternative hypothesis i.e.H1 is accepted.

Objective:- To know whether BPCL holds the important place in the sales pattern of NRL.

Hypothesis 3:
H0- BPCL holds the important place in the sales pattern of NRL.
H1- BPCL doesnt hold the important place in the sales pattern of NRL.

Hypothesis3: Accepted: From the data analysis its clear that in the last five years BPCL is
holding the 1st and important place in the sales pattern. Thus the Null hypothesis i.e. H0 is
accepted.

4.4 SWOT Analysis:

The SWOT (strength, weakness, opportunities and threats) analysis has been a
useful basic Frame work for strategic planning and organizational performance
management. This study discusses the analysis under below:

STRENGTHS: The strengths of Numaligarh Refinery Limited are as follows

Strong liquidity position

Financial results
Good manufacturing and testing facilities.

WEAKNESSES:

The weaknesses inherent in the Numaligarh Refinery

Limited are as follows

Declining market share in sector.

Non autonomy
Distribution dependence

OPPORTUNITIES: The Refinery has the following opportunities

Expansion of retail business

Assam Gas Cracker Project
High potential for market growth in India

THREATS: The Refinery is surrounded by the following threats

Rising capital cost in the refining sector

Fluctuations in the oil and gas prices
Competitors are giants

CHAPTER-5
Findings, Suggestions,
Recommendations
&
Conclusion

Findings:
The outcome of the study can be specified as follows1. Numaligarh Refinery Limited faces the problem of competition.
2. Organization facing the problem of proper skilled employees in the production Department.
3. There is no proper sequence & acknowledgement board for certain items in store Department .It
is not good when external auditing held in company.

4. In organization store assistants have no proper knowledge about engineering goods & raw
materials.
5. The company puts greater emphasis on software than skilled manpower for inventory details
management.
6. The inventory management system of NRL has more or less achieved its objectives for which it
was in place.
7. ITR shows that the product demand in the market has been improving this year.

Suggestions:
On the basis of the analysis certain suggestion are required to make for the future
course of action. From the survey I found some drawbacks. So I suggest some
suggestion which help in long run in improving the companys overall growth and
services in future. The suggestions are as follows:

1. In store department items should placed their proper sequence & acknowledgement.
2. There should be proper record of wastage. It is good for the company.
3. Store manager should give the proper knowledge about engineering & raw materials.
4. Organization should have proper staff in HR/Personnel department.
5. Personnel manager should listen grievances of the employees personnel.
6. The organization should give proper knowledge & training for unskilled employees about their
work.

Recommendations:
There are some points may be given as recommendation constructed for inventory
monitoring and controlling, which consists some following elements:

 The Inventory Turnover Ratio may be improved if the management takes actions to investigate
the causes of differences/ shortages of Stores and spares and thus remove the losses from the
accounts, if any.
The management of the plant should incorporate TQM (Total quality management), particularly
in all departments of production to ensure better sales and reduce the inventory of finished
products.
Proper storage facilities are recommended to prevent loss of inventory due to the lack of it or
faulty methods of storage.
To maintain the special pricing to dispose off unusually slow moving items.
More effective exercise should be followed of vigilance against imbalance of raw material and
work in progress which tends to limit the utility of stocks.

The time to updating of issuing and receiving is to be done.

The inventories should not be mixed or scattered.
Scraps should not stored with the inventory in the store, which occupies the space of inventory
and increases the task of managing the inventory

Conclusion:

The result of my studies and surveys conducted, revealed that all the objectives of the project
have been fulfilled. The analysis of the data collected has shown that the overall performance in respect
to utilization of inventories is

satisfactory during the study period. After studying the inventory

management of Numaligarh refinery and by seeing the last five years performance and records it has
resulted that refinery has sufficient inventory system due to which they have a good working status.
The study has its own importance in its own way. With the help of this study one can know about
the existence and survival and success of NRL and efforts, and related to the topic i.e.
INVENTORY MANAGEMENT, of the Numaligarh refinery that they have a transparent process which
can easily be understand and adjust by the employees as they have a proper management that after
receiving order get check all the goods and approved by their higher authorities to avoid the loss and
damage of health and wealth.
On the whole it can be said that Numaligarh refinery follows some of the best techniques of
Inventory management system.

BIBLIOGRAPHY
BOOKS:

 Pandey I M: Financial Management-Ninth Edition, Vikas Publishing House,2003

Kothari, C.R.: Research Methodology- Method and Techniques, Second Edition, Wishwa
Prakashan, New Delhi, 2002

Jain P K: Management Accounting, Tata McGraw-Hill Publishing Company Limited,2002

Piasecki Dave: Inventory Management, McGraw-Hill; 3 edition,2003
Annual Reports of NRL (05-06,06-07,07-08,08-09,09-10)

OTHER READINGS/ PERIODICALS:

Circulars and Journals. ( Rodali: House Journals of NRL issues of 2009-10)

Auditors Report, Directors Report & Investors Report
Newspapers: Assam Tribune (5th March 2011) , Times of India
Magazines: Business World, Business Today

INTERNET SOURCES:
http://www.wikipedia.com//
http://www.nrl.co.in//
http://www.inventorymanagement.com//

ANNEXURE

QUESTIONNAIRE

Dear Sir/Madam,
In partial fulfillment of the requirement of the B.Com 3rdyear course from Golaghat Commerce College,
under Dibrugarh University, the project titled A Case Study on the Inventory Management System of
Numaligarh Refinery Limited, has been undertaken by me.
I would be grateful to you if you could spare some time for your kind co-operation towards answering
the queries given below.

Thanking you
Nidhi Agarwal
B.Com.3rd year

Name

:-

Designation
Address

::-

Contact No (If any)

:Please tick () the option you think is best.
1. Are you aware about Inventory management system?
a) YES
b) NO
c) Do not know/cant say
2. Do you know that your company has an Inventory Management System?
a) YES
b) NO
c) Do not know/cant say

3. Do you agree that there should be an Inventory Management System in place in any
organization/company?
a) Agree
b) Disagree

c) Do not know/cant say

4. For what reasons do you feel that there should be an Inventory Management System?
a) To smoothen operational requirement
b) To save time
c) To maintain accountability and transparency
d) Other reasons
e) Do not know/cant say
5. Do you agree that the inventory management system in your company has fulfilled the
needs for which it was evolved?
a) Strongly agree
b) Agree
c) Disagree
d) Strongly disagree
e) Do not know/cant say
6. What according to you is the major benefit of going for an Inventory Management system
by your company?
a) It has made storage and retrieval of material easier
b) Improved Sales Effectiveness
c) Reduced Operational Cost
d) Other Benefits
e) Do not know/cant say
7. Do you have skilled professionals in your company for inventory management?
a) YES
b) NO
c) Do not know/cant say
8. What categories of professionals are managing the inventory system of your company?
a) Skilled and trained
b) Only skilled but not trained
c) Non skilled but trained professionals
d) Non skilled and non trained professionals
e) Others
9. Do you agree that your company gives more emphasis on software than skilled manpower
with regard to inventory management?
a) Strongly agree

b) Agree
c) Disagree
d) Strongly disagree
e) Do not know/cant say
10. Do you think that the software used by your company is according to the needs or design
of the system?
a) YES

b) NO

c) Do not know/cant say

11. What is the prime challenge before your company with regard to inventory management?
a) Lack of trained professionals
b) Maintenance cost
c) Changing requirements of customers
d) Other problems
e) Do not know/cant say
12. What is the future of inventory management system in your company?
a) Will continue as a successful mechanism
b) May change according to time
c) Shall collapse
d) Do not know/cant say
DATE...

SIGNATURE