SUMMER TRAINING PROJECT

ON
“SUPPLY CHAIN MANAGEMENT”

SUBMITTED TO: SUBMITTED BY:

Mr. ANURAG KUMAR KESHRI ANKUR SRIVASTAVA
MANAGER (PURCHASE) PGDM-MARKETING

DECLARATION
1 Supply Chain Management
I Ankur Srivastava declare that this project report entitled Supply Chain Management
from Hindalco Industries Ltd. (RPD) is an original piece of my experience and work done,
that has been submitted by me towards partial fulfilment of my Post Graduate Programme
in Management, under the guidance of Mr. Rajnikant Verma (Purchase Department) and
thanks to great visionary (HOD Purchase Dept.) Mr. Anurag Kumar Keshri.

Date:29-07-10 Ankur Srivastava

ACKNOWLEDGEMENT
2 Supply Chain Management
 It is a matter of great pleasure to thank all esteemed persons and my
parents who helped me to complete my final research project
successfully otherwise it would not been possible.
Acknowledgement is not only a ritual, but also an expression of
indebtedness to all those who have helped in the completion process of
the project. One of the most pleasant aspects in collecting the
necessary and vital information and compiling it is the opportunity to
thank all those who actively contributed to it.
I like to express my deepest gratitude and thanks to my Project Guide
Mr. Rajnikant Verma and HOD Mr. Anurag kumar Keshri
(Manager, Purchase) for the valuable guidance and constant
encouragement which he extended to me throughout my research
project from 03-06-2010 to 03-08-2010.

(Ankur Srivastava)

3 Supply Chain Management

 PREFACE

Summer training is an integral part of our academic curriculum. During the training a
student gets an opportunity to understand the practical aspect of theory. Training makes
understand us organization behavior. Training makes the concept clearer and gives modern
skill which helps us to understand the new business concept. During the training we get
opportunity to share our views with a knowledgeable person who help to us solve our
problem, which come in our mind related to topic. Under training we aware that books
gives us only basic knowledge, which is theoretical part but during the training we learn
numerical part as well as theoretical part.

This report is outcome of the summer training that we have undergone at Hindalco
Industries limited for the partial fulfillment of PGDM.

The topic allotted to me by the company is “Supply Chain Management of Hindalco Ind.
Ltd. (RPD)”.
A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into intermediate
and finished products, and the distribution of these finished product for final uses. Supply
chains exist in both service and manufacturing organizations, although the complexity of
the chain may vary greatly from industry to industry and firm to firm.

The project emphasizes on the financing mix of the company. I have tried to my best to
make a good report. However no one can claim perfection in it’s entirely. Preparation of
project requires perseverance, initiatives, proper guidance and direction. So it’s mandatory

4 Supply Chain Management

to take the aid of various departments. Actually project summarized forms of several
activities, But I focused towards:

 ERP involved In E-Procurement

 Vendor Development
 Vendor Rating
 Annual Rate Contract
 Vendor Waiver

5 Supply Chain Management

 CONTENT

1. INTRODUCTION TO ADITYA BIRLA GROUP

• An Executive Summary of Hindalco
6 Supply Chain Management
 • Renusagar power division Profile
• Plant Details of RPD
• Group Vision and Mission
• Department Objective and Goal’s
2. PLANT LOCATION
3. POWER PLANT OVERVIEW
4. INTRODUCTION TO THE PROJECT
• What is Supply Chain Management
• ERP involved In E-Procurement
• Vendor Development & Quality control cell
• Vendor Development
• Vendor Rating
• Vendor Waiver

5. OBJECTIVE OF STUDY

6. RESEARCH METHODOLOGY

7. FINDINGS AND LIMITATIONS

8. CONCLUSION & SUGGESTION

9. BIBLIOGRAPHY

7 Supply Chain Management

 Introduction to Aditya Birla Group.

The Aditya Birla Group is India’s first truly multinational corporation global in vision,
rooted in Indian values, A US $24 billion corporation with a market cap of US $31.5
billion and in the league of Fortune 500, the Aditya Birla Group is anchored by an
extraordinary force of 140,000 employees, belonging to 25 different nationalities. In India,
the Group has been adjudged “The Best Employer in India and among the top 20 in Asia”
by the Hewitt-Economic Times and Wall
Street Journal Study 2009. Over 50 per cent of its revenues flow from its overseas
operations.

The group’s products and services, offer distinctive consumer solutions. Its 66 state-of-the-
art manufacturing units and sectoral service span throughout the world.

Entry of Syt. Ghanshyam Das Birla

1916 - First taste of industrial management – take over of sick cotton mill in Delhi.
1918 - First limited company – Birla Brothers Limited.
The real industrial thrust in 1919 with Birla Jute in Calcutta and 1921.
Jiyajeerao Cotton – Gwalior
Birla Jute was established in defiance of Scottish monopoly.
1923 - Purchase of Kesoram Cotton.

1926 - Orient Paper Mills.

1931-33 - Bharat Sugar, Upper Ganges Sugar, New Swadeshi Sugar, New Delhi Sugar.
By 1947 - Assets wroth Rs. 25 crores in 20 companies.

Thereafter
1954 - Durgapur Iron & Steel
1957 - Gwalior Rayon, Nagda
1962 - Hindalco commencement of production
8 Supply Chain Management
1966 - Take over of Indian Rayon
1967 - Renusager power Division Commencement of Production

SOME RECENT MILESTONES

 In May 2007, Novalis became a Hindalco subsidiary with the completion of the
acquisition process. The transaction makes Hindalco the world's largest aluminium
rolling company and one of the biggest producers of primary aluminium in Asia, as
well as being India's leading copper producer.
 In May 2006, the company signed an MoU with the Government of Madhya Pradesh
for setting up a greenfield aluminium smelter and a captive power plant. The
company also entered into a joint venture with Essar Power (M.P.) Ltd. to develop
and operate coal mines at Mahan, Madhya Pradesh. The joint venture will supply
coal to the proposed aluminium smelter and power complex in Madhya Pradesh
 In May 2006, the company's copper mining subsidiary Aditya Birla Minerals
Limited (formerly Birla Mineral Resources Pty Ltd.) came out with an equity
offering and subsequent listing on the Australian Stock Exchange (ASX)
 In March 2006, the company acquired an aluminium rolling mill and wire rods
facility, from Asset Reconstruction Company (India) Limited (ARCIL), belonging to
Pennar Aluminium Company Limited
 In January 2006, the company concluded 4:1 rights issue of its shares on partly paid
basis. It was the largest ever rights issue in the history of corporate India and first
one to issue partly paid instruments
 In September 2005, the company split its shares in ratio of 10:1 in order to enhance
liquidity and to encourage participation from retail investors
 In April 2005, the company signed an MoU to establish a world class integrated
aluminium project in the state of Orissa

An Executive Summary:

9 Supply Chain Management

ADITYA BIRLA GROUP

The Aditya Birla Group was the first in Indian to venture overseas, by starting a joint
venture in Ethiopia. Thereafter, over the last quarter century, this group has
started 20 very successful and diversified ventures spread through the Asian
region. It has been declared by Euro money that this is the only truly
multinational group of India.
At present, the group has more than 50 manufacturing units, producing a diverse range of
products, financial service, trading and computer consultancy. It is also expanding its
activities in the field of telecom, oil refinery, power generation, copper smelter etc.

Globally the Aditya Birla Group is:

• A metals powerhouse, among the world’s most cost-efficient aluminium

and copper producers. Hindalco-Novelis from its fold is a Fortune 500 company. It is the
largest aluminium rolling company. It is one of the three biggest producers of
primary aluminium in Asia, with the largest single location copper smelter.
• No.1 in viscose staple fibre
• The fourth largest producer of insulators
• The fourth largest producer of carbon black
• The 11th largest cement producer globally
• Among the world’s top 15 BPO companies and among India’s top three
• Among the best energy efficient fertilizer plants

In India:
• A premier branded garments player

• The second largest player in viscose filament yarn

• The second largest in the chlor-alkali sector

• Among the top five mobile telephony companies

• A leading player in life insurance and asset management

10 Supply Chain Management

• Among the top three supermarket chains in the retail business

Rock solid in fundamentals, the Aditya Birla Group nurtures a culture where success does
not come in the way of the need to keep learning afresh, to keep experimenting.

Beyond business – “Reaching Out”

A value based, caring corporate citizen the Aditya Birla Group inherently believes in the
trusteeship concept of management. A part of the group’s profits is ploughed back in to
meaningful welfare driven initiative that make a qualitative difference to the lives of
marginalized people. These activities are carried out under the aegis of the Aditya Birla
Center for community initiatives and Rural Development spearheaded by Mrs. Rajashree
Birla.

Beyond business — the Aditya Birla Group is:

• • Working in 3,700 villages

• • Reaching out to seven million people annually through the Aditya Birla Centre for
Community Initiatives and Rural Development, spearheaded by Mrs. Rajashree Birla
• • Focusing on: health care, education, sustainable livelihood, infrastructure and
espousing social causes
• • Running 41 schools and 18 hospitals
Transcending the conventional barriers of business to send out a message that “We care”.

GROUP PHILOSOPHY RESTS ON FOUR PILLARS:

 CUSTOMERIZE
 PEOPLE- IZE
 STRATEGIZE
 INSTITUTIONALIZE
11 Supply Chain Management
GROUP VALUES

OUR VALUES ARE NON NEGOTIABLE, THEY ARE NEVER TO BE JETTISONED,

FOR US OUR VALUES ARE OUR WELLSPRING. THESE ARE:
 INTEGRITY
 COMMITMENT
 PASSION
 SEAMLESSNESS
 SPEED

Renusagar Power Division Profile

Particular Details

Company Name : Hindalco Industries Ltd.

Establishment year : Incorporates in 1958 but

12 Supply Chain Management


Address of Registered Office
Address of company
Turn over of the company
Generation
Commercial production began
in 1962.
: Century bhavan, 3rd floor,
Dr. Annie Besant road, worli
Mumbai -40025
: Renusagar Power Plant
P.O.-Renusagar
Dist. – Sonebhadra,
U.P.
: Rs. 18.5 thousand crore &
Asset Valued at Rs. 8.5
thousand crore.
: 746 MW Captive Power Plant.

Telephone No. : 05446-277161/62/63

Fax No. : 05446-277164/278596
Website : http:// www.hindalco.com
: http://www.adityabirla.com
Types of Company : Power Generation Plant
Nature of Business : Produced Electricity for own
Plant, Consumption.

ABG Business : Electricity (Also Produced

Aluminum, copper, cement,
Carbon black, textiles,
Fertilizers Chemicals, Mining
Insulator, Gas, Software, BPO,
Finance insurance, Telecom, Retail)
Contact Person : Mr. Nishant Kumar Gupta
HOD of Purchase : Mr. Anurag Kumar Keshri
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Manpower statement:-

1. Technical Staffs 732

2. Commercial Staffs 243
3. Total HOD’s 28
4. Temporary manpower / Contract Workman 2000-4000
(As per requirement)
5. No. of Department 52
6. Total Department with section 60

Total strength-
Staff : 975
Workers: 1790 2765

List of Machinery:-
Installed Capacity in MW : 746
Number of Units : 10
Unit Description:-
a. Boiler : 11 Nos.
b. Turbine : 10 Nos.
Production capacity : 742 MW

Fact File about the Company (Hindalco Industries Ltd.):-

1. India’s Largest & lowest cost aluminum producer

2. Largest Producer of White cement in India
3. Fastest Growing Copper Company in India
4. World Leader in Viscose Staple Fiber
5. Leading Private sector Mutual Fund & Insurance Company.
14 Supply Chain Management
 6. Successful Forays in to Software & BPO
7. World’s Third Largest Producer of Insulator.

PLANT DETAILS OF RENUSAGAR POWER DIVISION

RenuSagar Power Division is a division of Hindalco Industries Ltd. for Generating and
supplying uninterrupted Power exclusively to the interact Alumina Complex at Renukoot,
UP. RenuPower is located at RenuSagar, Almost at the pithead of Singrauli Coal Mines of
Northern Coal Fields Ltd. In the vicinity of Govind Vallabh Pant Sagar (popularly known
as Rihnad Lake) in the district of Sonebhadra of the State Uttar Pradesh, India. The Total
installed capacity of plant is about 746 MW and comprises of 10 T.G. Set 11 Boilers.
RenuSagar Power Plant is one of the most efficiently Operating at a plant load Factor of
around 100.8%.

As HINDALCO is increasing its aluminium productions, it has become necessary to

augment the power capacity of its thermal plant at Renusagar.M/S HINDALCO
industries limited (HIL) has an integrated aluminium complex with a manufacturing
capacity of 2,42,000 tonnes per annum of primary aluminium metal and 4,50,000tonnes
per annum of alumina at Renukoot. HINDALCO is also producing rolled and extruded
aluminium products with an annual production capacity of 80,000 and 13,700 tonnes
per annum respectively and properzie redraw rods with an annual capacity of 40,000
tonnes per annum.
Renusagar power plant is ranked one among the best-operated captive power plant with
highest generation, plant load factor and utilization factor and lowest specific oil
consumption and D.M. water consumption.

Milestones in the construction of the Power plant

TG Commissioned On Boiler Commissioned On

No. of Sets Date of No. of Boiler Date of
15 Supply Chain Management
 Commissioning Commissioning

T.G. No.-1 04.10.1968 Boiler No.1 17.06.1967

T.G. No.-2 09.09.1967 Boiler No.2 21.11.1967

T.G. No.-3 02.11.1981 Boiler No.3 08.06.1982

T.G. No.-4 09.04.1983 Boiler No.4 01.02.1983

T.G. No.-5 31.03.1989 Boiler No.5 18.09.1981

T.G. No.-6 23.03.1997 Boiler No.6 06.05.1991

T.G. No.-7 27.03.1998 Boiler No.7 28.03.1997

T.G. No.-8 31.03.1998 Boiler No.8 27.03.1998

T.G. No.-9 29.11.2002 Boiler No.9 31.03.1998

T.G. No.-10 31.03.2003 Boiler No.10 31.03.2003

Boiler No. 11 31.03.2003
Unique Features of Renusagar
• First captive power plant for Aluminum Industries established and commissioned

way back in 1967.

• Power plant established at the pithead of Coal Mines of Northern Coal Fields
Limited enabling coal transportation by ropeway.
• Renusagar Power Plant consistently opening at a Plant Load Factor of above 90%
for last three decades and is comparable to the best work – wide.

16 Supply Chain Management

 • First Training Centre of the country recognized by Central Electricity Authority,
Govt. of India. Technical Training and Management Development Centre
(TTMDC) has been organizing structured training programs for introduction and
orientation level training for new entrants, skill development programs for all levels,
workers general development programs, TPM and WCM training programs and
managerial effectiveness programs for staff.

PERFORMANCE
As the aluminum smelter need continuously and steadily power supply, high plant
availability and operation at rated capacity, is the permanent importance for Renusagar
power plant availability factor (PAF) and plant Load Factor (PLF) of around 100.8% and
more consistently for over two decades (against the national average of 55%) right from its
inception. 11 It has dispelled the misconception that such a high PAF and PLF cannot be
achieved by the thermal power plant using a low-grade coal.

CONTRIBUTION IN THE FIELD OF POWER SECTOR

It is the credit of RENUPOWER that despite the fact it uses high ash (35%) and abrasive
coal, high PAF and high PLF has been achieved by it. Consistently modification in the ID
Fans, dust collectors and indigenous methodology of prolonging the life of pressure port
tubes was a trend-setter, its result oriented approach to bring down tube leakage to less
than per bottle per annum, has worldwide acclaim. Renusagar is an acknowledged leader to
the thermal power plant. It adopted modern touch techniques from initial stages itself and
was able to limit its planned overhaul duration by restrain to PERT/CPM.

GREEN AND CLEAN COLONY

17 Supply Chain Management

ENERGY CONSERVATION

18 Supply Chain Management

Renusagar is conscious of energy conservation has made concentrated effort to reduce and
limits its auxiliary power and oil consumption per unit generated has been maintained at
less than 0.8 ml per Kwh. Against the national average about 11 ml per Kwh for its size of
units.

Training and Development activities at Renusagar

Are grouped into three categories:

 Functional/Technical Programmes
 Managerial/Behavioural Programmes
 Supporting Programmers
Catering to the need of organizational initiatives like ISO Certification (ISO 9001, ISO
14001, and OHSAS 18001), QC, WCM Implementation, ERP etc.

19 Supply Chain Management

While Induction & Orientation Level Training (IOLT), Technical Skill Development
Programmes, Management and Supervisory Development Programmers, Mock Drills and
Supportive Programmers on ISO-14001 and ISO-9001 and OHSAS 18001 are aimed at
knowledge and skill development. A number of initiatives like departmental Learning
System and Coaching (LSC), Mentoring, Quality Circle, Inter Unit Visits, One Point
Lessons, KAIZENS contributes to creating an open atmosphere and spread the implicit &
explicit knowledge concentrated in different pockets of the organization

.ASH DISPOSAL AREA

Renusagar Power Division is allotted an area measuring 61.2 Hectares (151.25 acres) for
construction of new Ash pond by the Forest Department under Govt. Grant Act after due
approval from MOEF on 10 years lease basis. The State Environment Department while
recommending the case for transfer the land to Renusagar has imposed a condition to
develop a Green Belt of 100 meters on Eastern Side and 50 meters on Southern Side of the
pond which was duly adhered.
The above land is in the form of a valley and uneven hilly terrain. The volume available for
ash storage after construction of the embankment is about 107 Lacs M3. The quantity of
ash produced from all the ten units is around 17.6 Lacs M3 per year which is average of
36% in the coal consumed in a year.

20 Supply Chain Management

21 Supply Chain Management
Fly ASH utilisation Plant

As we know RPD is producing around 17.6 Lacs M3 Ash per year. And it is very well
utilised by Supplying it free to not only Ultratech Cement but also to other Private Cement
factories situated around the present location. As we saw how well planned and well
designed RPD is dumping ash. It has another wild card which helped hindalco to bag ISO-
14000,is Fly ASH Utilisation Plant which Produces nearly 40 different Product from
Bricks to pots,Road blocks to Pavement tiles.

Composition of Mixture used for bricks and Pots

Ash 128kg

Gypsum 16kg

Lime 26kg

Sand 30kg

200kg

22 Supply Chain Management

 GROUP VISION AND MISSION

Renusagar Vision

“To be one of the best operated and maintained Captive Power Plant, with enviable Plant
Load Factor, to supply uninterrupted power to Hindalco Renukoot at lowest cost.”

Renusagar Mission

“To pursue creation of value at all levels of plant Operations for our customers,
Shareholders, Employees and Society at large.”

23 Supply Chain Management

 DEPARTMENTAL OBJECTIVE

“From right Source,For desired Quality,At Right time,At Optimal cost, In Right Quantity.”

GOAL OF PROCURREMENT DEPTARTMENT

1. “The department shall Strive to Procure from right source of Desired Quality at right
Time at Optimal Cost,in Right Quantity”.

2. “The procurement system encompasses all the material procured by the Purchase
Department”.

24 Supply Chain Management

 PLANT LOCATION

25 Supply Chain Management

 POWER PLANT OVERVIEW

Make
Sr.No. Unit Capacity(MW) Turbo Boiler
Generator

1. TG# 1 67.5 GE(USA) CE(USA)

2. TG# 2 67.5 GE(USA) CE(USA)

3. TG# 3 77 SIEMENS/ BHEL

(Consortium) CE(USA)

4. TG# 4 77 SIEMENS/ BHEL

(Consortium) CE(USA)

5. TG# 5 68 BERGMANN BHEL

BORSIG

6. TG# 6 74 ABB(GERMANY) BHEL

7. TG# 7 74 ABB(GERMANY) BHEL

8. TG# 8 77 GE (USA) BHEL

9. TG# 9 80 SIEMENS BHEL

(GERMANY)

10. TG# 10 80 SIEMENS BHEL

(GERMANY)

26 Supply Chain Management

 INTRODUCTION TO THE PROJECT

What is Supply Chain Management?

Supply chain management (SCM) is the management of a network of interconnected

businesses involved in the ultimate provision of product and service packages required by
end customers (Harland, 1996). Supply Chain Management spans all movement and
storage of raw materials, work-in-process inventory, and finished goods from point of
origin to point of consumption (supply chain).
Another definition is provided by the APICS Dictionary when it defines SCM as the
"design, planning, execution, control, and monitoring of supply chain activities with the
objective of creating net value, building a competitive infrastructure, leveraging worldwide
logistics, synchronizing supply with demand, and measuring performance globally."

Supply chain management is a cross-function approach including managing the movement

of raw materials into an organization, certain aspects of the internal processing of materials
into finished goods, and the movement of finished goods out of the organization and
toward the end-consumer. As organizations strive to focus on core competencies and
becoming more flexible, they reduce their ownership of raw materials sources and
distribution channels. These functions are increasingly being outsourced to other entities
that can perform the activities better or more cost effectively. The effect is to increase the
number of organizations involved in satisfying customer demand, while reducing
management control of daily logistics operations. Less control and more supply chain
partners led to the creation of supply chain management concepts. The purpose of supply
chain management is to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and the velocity of inventory movement.

27 Supply Chain Management

PRELIMINARY PURCHASE REQUISITION

• Experience has proved that no inventory control mechanism can be effective and
fruitful unless material procurement is controlled and regulated at the very
procurement plan stage itself.
At Renusagar, maintenance department prepares the preliminary purchase requisition in the
proposal from (rough/hand written) and sends it for review to the inventory control cell.
This PR mentions the type of spares or consumables and its criticality in terms of purpose
for which it is proposed to be procured.

The inventory control cell first determines the PR value on the basis of last procurement
rate or quotation and assigns ERP number/ code. It also supplements information in respect
of:
 Stock in stores
 Pending PR quantity with expected delivery
 Consumption pattern for past 3 years, and
 Delivery schedule suitability, considering consumption plan.
The industrial engineer associated with the inventory control cell ascertains availability of
material or it’s equivalent with other departments and gets same spares for use. He also
explores possibility of using alternative material which may be available in stock or
purchase value of which would be comparatively lower.

MANAGEMENT INFORMATION SYSTEM

Inventory control cell prepares following monthly MIS report:

 Comparative stock statement under- critical, non-critical and insurance for various
departments and identifies increase/reduction vis-à-vis previous month as also ideal.
 Statement on specific items with details, which contributed to increase in the
inventory in the particular month along with the consumption plan.

28 Supply Chain Management

  The above report is discussed amongst the HOD’S during MPR (monthly
performance review meeting). These are discussed with the president during
monthly financial review meeting.

Inventory control cell also prepare following quarterly report

 XYZ ANALYSIS
 INSURANCE STOCK REVIEW
 AGE ANALYSIS OF SPARES
PERIODIC (ANNUAL) REVIEW FOR REGULAR ITEMS
In case of high regularly used data is collected abut their past consumption and unit/
boiler/ department-wise requirement for the next financial year, as projected by the user
department. The entire requirement for is consolidated and after deliberation, the
composite quantity with phased deliveries is communicated to the purchase department for
placement of annual/bi-annual orders. Items covered under the above exercise include:

 Boiler tubes.
 Grinding rolls
 Bearings
 Ariel ropeway spares etc.
Based on the ABC analysis, consumable regular items are reviewed and their
ROL/ROQ are revised annually. In certain cases if there is a departure from the
norms/practices, ROL/ROQ are reviewed and revised midterm ROL/ROQ formulated for
auto-identifying by stores department, cover the following major consumable groups:
 Battery, types, tubes etc.
 Oil & lubricants
 Chemical
 Steel
 Welding electrodes & accessories etc.

29 Supply Chain Management

 For removing abnormalities and to introduce more effective system, even for low
value regular spares and consumables, ROL/ROQ are being determined in place of
the prevalent maxima/ minima system.75
FUNCTIONAL FEATURE OF PURCHASE DEPARTMENT

AT RENUSAGAR

The method of purchase can be subdivided into four methods:

 Comparative bids
 Annual rate contract
 Proprietary items
 Repeat orders
The purchase department work involves:

 Making purchases

 Vendor development & rating

 Product development
 Market development

STRENGTH OF PRESENT SYSTEM

At RPD various project are being carried out to control the inventory as discussed
earlier & the success story of these analysis are quite satisfactory such as:
 Last three years data of non/slow moving items shows declining trend from 161.62
(in lacs) in 2006-2007 to 111.45 in 2007-2008 to 94.32 in 2008 -2009.
 In order to keep the stores items as per ROL/ROQ and avoiding stock out position.
 Purchase requisition is simplified in terms of no. of destination traveled from
originator to buyers.
30 Supply Chain Management
 Purchase requisition is being sent online, hence tremendous time saving
achievement.
 PR status is updated on-line.
 PR internal lead-time reduced through ERP system.
 Assessment committee and disposal committee is formed by RPD management on
October 2003. for disposal of obsolete items
 By the continuous monitoring efforts, shop floor inventory reduced from Rs. 250
lacs to 86 Lacs.

31 Supply Chain Management

 PROCUREMENT PROCESS USING ERP
ERP

ERP stands for enterprise resource planning. It is a software solution that helps companies
to gain competitive edge by integrating all business process and optimizing the resource
available.
The traditional application system treats each transaction separately. It is build around
strong boundaries of specific functions that they are meant to cater to. ERP stops treating
these transactions separately as stand alone activities and consider them to be part of inter
linked processes that make up the business. An ERP system stores data generated as a
result of diverse transactions that are confined to any departmental or functional
boundaries, but are rather integrated to be used by multiple users, for multiple purposes
and at multiple places.
ERP should not be mistaken as a magic tool that can transform anything overnight. Its
successful implementation is a long journey towards enterprise excellence.
To support such a diverse system, companies need sophisticated information technology
infrastructure and other important enabling tools like workflow, Workgroup, Groupware’
Internet, Intranet, Data ware housing etc. These entire components together from the ERP
backbone.

ERP FOR HINDALCO

Today business is become an ever-changing phenomenon due to Large-scale production

facilities, new product development, technology up gradation, sales strategy, capacity
utilization, capacity expansion changing business scenarios, mergers & acquisitions and
opening of economies. These increasing business complexities warrant fast response,

32 Supply Chain Management

which in turn requires accurate data. The organization needs to be proactive and plan ahead
of time. To do business optimization, HINDALCO on hand requires tools such as extended
ERP including and SCM applications, and on the other hand, needs to change itself to a
learning organization focusing on its people, skills, core competency culture and practices.

IF DO NOT GO FOR ERP

33 Supply Chain Management

Improved customer service by way of visibility of orders and order status, efficient
distribution system and reduced operational expenses are some of the important business
benefits which is derived from ERP.

In addition ERP initiative provides us an opportunity to re-look at existing processes,

remove redundancy by way of systemization and benchmarking, standardization of process
across units for seamless integration and provide foundation for e-commerce. Ever since
the advent of e-commerce, trade boundaries are becoming a history. Today, a virtual store
is a reality. Conducting on Internet business is no longer in choice.
Not that is happening only in developed countries, but also in India. In India total value of
Internet trade in the last year was Rs. 600 Cr. By the year 2008 it is expected to cross Rs.
50,000 Cr. As per Mckinsey-Nasscom report to be successful e-commerce enabled
enterprise, having an Internet site is just not sufficient. We must have our business
processes and all the back-end mechanism like production planning, order status & its
visibility, predictable delivery date and customer service in place. To sell on Internet we
must know details of our stocks lying at any location

SYSTEM FOR PR PROCESSING THROUGH E.R.P.

Business Requirement:-

1. All the Purchase Requisitions will be routed through Inventory Control Cell (As defined
in the System)

2. The items and values within the sanctioning authority of Sr. Executive President (Refer
Order No. Sr.EP/00/81 dt. 29.08.2003) will be processed in sequential order as under:-
2.1.ICC will submit hard copy of PR to Secretary to Sr. Executive President, who will
obtain approval from Sr. Executive President.
2.2.Shri Kurien Thomas will retain and maintain a file of such approved PRs and will
send a copy to ICC or communicate ICC about the status.
2.3.Routing PR will then be done by ICC.

34 Supply Chain Management

 Note: PR amount above 20 Lacs and items i.e. imported, furnitures, Computers,
Telephones, Decorative electrical goods and House hold items/ House hold electrical
goods and the like are to be got approved by Sr. Executive President.

3. Procurement of IT related items will be done as per Sr. Executive Presidents Office
Order Nos. EP/010/105 dated 21.10.2000, EP/00/44 dated 6.4.2001, SrEP/00/81 dated
29.8.2003 and Director (Whole Time) circular dated 28.12.2001. Hence PR for such
items will be released only from IT department for which all requirements will be sent
to IT department.
4. The Central Stores will release PR for the ROL item. Apart from revised ROL item
(under ERP) following consumable are also added in ROL items:-
• Ribbon Cassettes
• Toner Cartridges
• Ink Cartridges
• Print Heads
• Floppy Diskettes
• Zip Disks
• Screen Anti Radiation

Process Requirement:-
5. All the Block sanction & special sanction items has to be processed in Oracle with
appropriate Task Codes as mentioned below:-
5.1.Block Sanction
• Department has to obtain Task Code from Accounts Department
• The entire PR will be raised in G19 organization in Oracle only.
5.2.Special Sanction
• Task Code has been fixed which will be 9500 for all the items & PRs.
• All the PR will be raised in G02, G05, G08, G11, G14 & G17 organization for
units 1-5, 6, 7, 8,9 & 10 respectively in Oracle only.

35 Supply Chain Management

 Note: HOD will contact Technical Cell for procuring the item under Block or
Specia1Sanction.

For rest of the procurement category and organization will be allocated by ICC.
6. Before raising PRs end users to ensure correctness in:-
• Item Description
• Unit Cost, Criticality, Legacy code
• Organization
In case any discrepancy the same is to be got corrected from ICC before processing
PRs.
7. End users to fill in the information viz. Locator, Cost Code & Task Code (if any) at
Line level i.e. item wise while raising PRs.
8. The following to be strictly taken care while the PR is in review process:-
8.1.In case ICC has rejected all the items of the PR with necessary justifications, end
users should not reuse the PR.
8.2.If quantity of any PR line has been suggested to be reduced to zero, then the line has
to be deleted and may not be reused for any new item.
8.3.If PR for any additional Item(s) are required to be raised it may be done with the
help of Fresh PR. In no case it should be added in an existing PR sent to Originator
by ICC for review.
9. In order to keep a track of deptt. wise Survey/ Shutdown items Location and cost code
combination as suggested in the enclosed sheet to be used. In case, correct combination
is not used the PR will be rejected/ sent back to originator by ICC.
10.Alteration of PR after the approval from ICC has to be strictly avoided and end users
are requested not to alter any PR lines/Qty after being approved by ICC. Under extreme
circumstances, if Supervisor feels need of revision over the received PR by ICC, it will
be mandatory on part of Supervisor to re-route the PR through Originator and ICC.
11.End users are further requested not to delete or overwrite the ICC comments in the
Long Description. If comments have to be added for their necessary reference, it may
be added in the end without changing the existing comments.

36 Supply Chain Management

 Cooperation of all concerned is solicited to strengthen the Inventory control activity.

VENDOR DEVELOPMENT & QUALITY CONTROL CELL

VDQC is a part of purchase dept. Consisting of members from Purchase dept. They play a
crucial role in enrollment of new Vendor in the Vendor Data Base.
Process of Vendor Enlistment through VDQC
a. New application for registration
b. Selected applications are reviewed in Monthly meeting of VDQC.
c. Selected applications are forwarded to user or Originator Dept for review or
feedback
d. Vendor Rating according to Parameter is done.
e. If Selected,then presented in meeting for enlistment.
f. Vendor Assesment form(VAF) is issued to vendors along with purchase order incase

of trail Purchase Order.

g. Review VAF form in VDQC monthly meeting

h. If approved then Registration letter is issued by Convener.

i. Enlist name in Approved Vendor list (material wise) with Status’T’ in case of
vendor selected through VDQC.

Note: Rejected forms are kept in database only if they carry potential and are
rejected beacuse of high number of Vendors in the list according to the material.

37 Supply Chain Management

 VENDOR DEVELOPMENT

Vendor development has been done and there rating is done on the basis of quality, price
service & lead-time. For new vendors the preliminary survey and revaluation is done in the
quietest possible time.Types of Vendor Development:

a. Type I: By Facilitating & Devloping product technology of vendors premises to

supply items of critical nature available from limited sources only.

b. Type II: By Market Intellegence

c. Type III: By inter unit comparision of common Items.

d. Type IV: By tapping ancillary unit of OEMS.

e. Type V: By information recieved from newspaper,product catalogue or directly

from Vendors.

f. Type VI: By Discussion with originator(user) regarding application of Items.

g. Type VII: By discusing with OEMS to top Authorized Sources.

Considered Parameter

Sl. Term Parameter Score Weightage

1. Catagory OEMS 10

Other Manufacturer 8

38 Supply Chain Management

 Authorized Dealer 6

Sub-Contractor 4

Trader 2 0.20

2. Location Kolkata 10

A-Class City(Metro’s) 8

B-Class Cities 6

C-Class Cities(Town) 4

Others 2 0.20

3. Payment Credit (30 days+) 10

Credit(Upto 30 Days ) 8

Part Advance 6

Doc through Bank 4

Proforma 2 0.20

4. Turnover 500 Cr + 10

1-500 cr 8

50lac-1cr 6

10-50Lacs 4

Less than 10 Lacs 2 0.20

5. Certification ISO 10
ISI 8
Award MFG/Excellence 6
SSI/NSI & Ancillary 4

39 Supply Chain Management

 Others 2 0.20
1.00

SYSTEM OF VENDOR WAIVER

a. Vendor Rating at Vendor Level

b. Vendor rating at Vendor Site

c. Duration of Vendor Policy

d. Overall Vendor Rating

e. Effect of short Supply of Shipment Quality

f. Vendor rating according to delivery

Rating Weightage

i. Delay upto 15 days 35 35

ii. Delay from 16-30 Days 30 30

40 Supply Chain Management

 iii. Delay from 31-60 25 25

iv. Delay above 61 days 10 10

Rating consist of two major parts:\

A. Quality - 65%

B. Delivery - 35%

Rating according to the Overall Vendor rating:

85-100 - Excellent

65-84 - Good

40-64 - Satisfactory

Below 40 - Poor

Post-Rating action:All active Vendorsto be Informed that there performance of last

Financial year as per Following:

A Grade: Appreciation letter with Congratulation

B Grade: Appreciation Letter to meet expectations with scope of improvement.

C Grade: Performance is Adequate but need improvement

D Grade: Warning Letter.

Some Facts About Vendor Rating:

 Vendor rating Done on Annual Basis.

 Vendor rating Done on The basis of Quality (65%) and Delivery time (35%)

41 Supply Chain Management

  Rating Communicated to all vendors with Encouragement for further improvement.

 Companies policies,Certifications etc are shared with Vendors.

 We monitor Vendor Rating on Half Yearly Basis.

Vendors Satisfaction Survey:

 Vendor Satisfaction Survey is carried out Annualy.

 System established since 2001.

 Detail questionaire sent to Vendor giving their feedback

 Feedback compiled & action plan prepared and Implemented.

Parameter for Vendor Satisfaction Survey:

i. Corporate Image

ii. Proffesional Approach

iii. Communication

iv. Managerial Competency

v. Well defined System

vi. Planning & schedulling

vii. Commitment

viii. Valuable Suggestions.

VENDOR WAIVER
42 Supply Chain Management
Vendor Waiver is a new and very Dynamic policy which focuses on shortening the time
period of Procurement system. It is a system which will provide waiver to special category
of Vendors in the list at the time of reciept at Main Stores.

Now a days Hindalco is waiving some vendors on the criterion of Self Certification norms:

a) Percentage Rejection in Last Two Years

b) Vendors should be OEMS or OEMS authorized Distributor or Dealer

c) Consumption Patternin last two year

d) Proposed List of Vendor will be sent to respective dept by SCM Sub-Committee

Bi-Annually.

e) New Addition/deletion will be finalised by SCM Sub-Committee with Proper

Approval.

f) As this Policy is to Reduce the time of procurement,there are many other

reduction policies active:

a) Reduce Inventory-

I. Reduce Gap Between Customer Oredr cycle and Logistic Lead time.

II. Quick response time

III. Delivery in Small quantities

IV. Numerous JIT deliveries

V. Centralization of Inventory

b) Reduce Cycle time in procurement Dept(P.R,Bidding,P.O)

c) Order filling procees must be Shortened

d) Material Planning is must

e) Manufacturing Process must be analysed before procurement

43 Supply Chain Management
 f) Transportation must be active.

Some Cost Reduction Policies in procurement:

a) Product Substitution

b) Change in manufacturing methods

c) Supplier Proccess Improvement

d) Transport mode & packaging must be modified

e) Integrate Inward Logistic Schedule

f) Quality Assuarance through Self-Certification

g) Upgrade Vendor to Co-Maker

Vendors to Co-Makers: Valuable’s are always valued, thats what Hindalco want to
make their Vendors feel about them. They try to integrate Vendors in the Supply Chain
more deeply,for that they imply:

a) A Vendor/Supplier Joinintly involved in

I. New Product Development

II. Cost Effective logistics

III. Customer Complains Handling(Customer’s are User Dept)

b) Considered Extensive support in helping in reduction of Vendor Cost

c) Achieve Mutual Benefits though colaboration and Closely Integrated Planning.

Various Cost Cutting Techniques

a) Process Enhancement Proccess Mapping

44 Supply Chain Management
 b) Lead Time compression ARREST Method

c) Put Time Reduction Reverse B & F

d) Cycle Time Shortening Reverse B & F

e) Waste time reduction ARREST Method

f) Increase Visibilty in S.C Electronic linking

ARREST METHOD:

A: Aggreement

R: Review

R: Reduction

E: Elimination

S: Simplification

T: Technological Implimentation

Supplier Teaming:

45 Supply Chain Management

CAUSES OF HIGH INVENTORY AT RENUSAGAR

a) Variety of equipments
b) Project surplus
c) High lead time/sources of supply are to for flung
d) Modification/ improvement in design system
e) Obsolescence of machinery
f) Rate inflections (increased)
g) No proper policy to declare insurance spares (high)
h) Long duration of TG survey
i) Propriety spare

46 Supply Chain Management

 OBJECTIVE OF THE PROJECT

 TO GET PRACTICAL INDUSTRIAL EXPOSURE.

 EXPLAIN SUPPLY CHAIN MANAGEMENT

 STATE THE IMPORTANCE OF PURCHASING AND MATERIAL
MANAGEMENT.
 THE TASK IS TO ANALYZE THE SUPPLY CHAIN MANAGEMENT SYSTEM

OF HINDALCO INDUSTRIES LTD. & TRACE OUT THE DRAWBACK OF

THE CURRENT SYSTEM & GENERATING AN IDEA TO TOUCH HIGHER
LEVEL OF COMPETENCY IN CONTROLLING THE PROCUREMENT
PROCESS.

47 Supply Chain Management

  TO ANALYZE THE CURRENT ERP SYSTEM IN MANAGING THE

PROCUREMENT.
 TO CUT SHORT THE PROCUREMENT PROCESS BY INTEGRATING MORE
OF E-PROCUREMENT.
 TO ANALYZE THE DATA OF ANNUAL RATE CONTRACT TO STUDY THE

PRESENT TREND IN ACCORDANCE TO PREVIOUS DATA AT RPD.

 TO ANALYZE THE INDUSTRIAL SUFFICIENCY IN MANAGING THE
INVENTORY.
 TO ANALYZE THE MATERIAL REQUIREMENT PLANNING PROCEDURE.
 TO STUDY THE PREVIOUS 4 FINANCIAL YEARS DATA TO FIND OUT
CONSISTENT AND REGULAR VENDORS,WHO CAN ENJOY VENDOR
WAIVER ACCORDINGLY
 TO ANALYZE THE CURRENT PROCEDURE OF VENDOR DEVELOPMENT
& RATING.
 TO STUDY AND PLAN A NEW AND MORE EFFECTIVE SYSTEM OF
VENDOR WAIVER.

RESEARCH METHODOLOGY:

Descriptive and conclusive types of research is conducted. On the basis of the empasis laid
on the analysis of the information and the data the type of research used in descriptive
research. This kind of research is needed to provide a theoretical framework and
background on which, total knowledge and operational practices can be used and judged.
The major purpose of descriptive research is description of the state of affairs, as it exits at
present.
RESEA
RCH DESIGN

48 Supply Chain Management

The study is carried out on the basis of information and data collected from Purchase and
Central Stores of Hindalco Ind. Ltd(RPD).

The following procedure is followed

I. The research includes interpretation of Procurement process at Hindalco.

II. Understanding the Supply Chain/Purchase policies of Hindalco.

III. Determining the Purchase Cycle.

IV. Analyzing the Vendor rating and Vendor Waiver.

V. Evaluation and conclusion.

DATA COLECTION METHOD

The data is collected through both primary and secondary methods.

PRIMARY METHOD
Information gathered from Annual reports and discussions with the employees of various
departments and my project guide/mentor.

SECONDARY METHODS
Secondary data is being collected through following methods;

I. Hindalco’s JIT planner and Supply Chain guide.

II. Annual report and manuals available in the training centre.
III. Information from USER software used by hindalco.
IV. Company annual report and other publication.
V. Other training documents available at the training centre.
VI. Company Website

49 Supply Chain Management

Data Analysis
Data is analysed on the basis of available information.

FINDINGS AND LIMITATIONS

FINDINGS:-

PROCUREMENT PROCESS

SHORTENING OF REGISTRATION PROCESS IN VDQC

As we have gone through the long and very time taking period of New registration under
VDQC cell of purchase dept. We need to find out some ways out of the schedule in the
dept and sort this problem.

Changes needed to shorten the registration process:

50 Supply Chain Management

  Meetings must be organized regularly/bi-monthly

 To cut short the time lag we must involve originator from the respective dept which
will decrease the feedback time.

 VDQC must specifically focus on Critical Items as they are in Scarce.

 Analysis of vendors Comments must be particular,as they can help in placing the
vendor.

IMPROVEMENT IN E-PROCUREMENT

In this Purchase Dept,i came to know the working of effective Supply Chain Management.
I learnt all about Procurement from the user to the Vendor. In this long cycle Hindalco
effectively Implemented MIS using ORACLE1Ii. Requisition is Generated on MAXIMO
by the user Dept/Originator. Then requisition is forwarded to the Inventory Control Cell.
From ICC the requistion is automatically transfered Oracle to the Particular Buyer. Then
Purchase Requisition is generated and forwarded to the Enlisted Vendors with the bidding
date or response. Offer sent by vendors are given to buyer on Due date by the system or
HOD.Then buyer sent it to Originator for approval.After Offer is returned the Bidd is
prepared, and this process of Bidding actually takes around 10 days which make the whole
51 Supply Chain Management
cycle minimum a month long. Then the Purchase Order(PO) is Aproved and Signed by the
Appropriate Authority.

But as we are using MIS to control the Procurement we can link out System with the
official website www.gyanudaya.com we can officially create a safe space in which we can
Open A Tendor and a Mail /Msg will be forwrded to the Vendors/Suppliers of particular
Item code.

There will be specific Page where Each specific vendor can log in and quote there bid for
the further process. And after last date of of Bidding A comparative bid will be prepared
and forwarded to all Originators and Buyer’s respectively.

After bidding Process each buyer can go to a negotiation page where open negotiation will
take place.Which will lead to Price leadership. And we will get the Cheapest(L1), but as
per Company’s Norms we must ensure the qyuality to be(T1).

So if we make this process more Buyer and vendor friendly then we can save valuable 4-
5days in the procurement cycle.

VENDOR RATING

Vendor Rating is Done through a system based on two parameter’s,those are QUALITY &
DELIVERY PERFORMANCE.

Salient features of the system:

 Weighted Average of Quality Suppliers,Measured through number of Rejections and

technical Verification by Originator.

 Weighted Average of deliveries,Is measured through considering the delivering

period.

52 Supply Chain Management

  In overall rating 65% weight has been assigned to Quality and 35% to delivery
performance.

After Detailed study of Annual Vendor Rating we Found as follows:

Overall Score Grade Percentage of Vendor

85%& Above A 79.7%

65% - 84% B 13.6%

40% - 64% C 5.7%

Below 40% D 1.0%

VENDOR WAIVER

In our Study of Vendor Waiver we made out many important points,and we know the
importance of Vendor waiver as it will help in shortening the procurement cycle on a
broader sense. As it takes a lot of time in technical scrutnisation when the consignment is
recieved at the Stores. And if we find out a way out in which we give a proper waiver to
the Vendors who fall in our criterion.

But as we have studied the Self-Certifying Vendors. It is a list of vendors who follow some
set of norms. But if we need to implement it in a broader sense then we have to keep a
account of some more points which may act as deciders.\

53 Supply Chain Management

NEW CRITERION OF VENDOR WAIVER

1. Vendor Must follow Self-Certiying criterion’s.

2. Vendor Overall as well as Quality Grade must be valued.

3. Vendors Consistency must be checked for Last four years and New Vendors must
only waived after four years of continuous business.

4. Cost must be always Preffered in the Procedure of Vendor Waiver.

5. Items like Critical, Import and Special category must not be applicable in the Vendor
Waiver.

6. Local dealers in a Reachable Radius must be Waived after Prolonged Service with
Consistency.

LIMITATION’s

 While we talk about limitations,we are talking about our real time problems which
can be faced in implementation of this all distinguised new Formulated idea’s.

 One of the main limitation was lack of time as i have undergone only 8 weeks of
training.

 Lack of interpersonal communication with Vendors.

 In the Improvement of Procurement Process

54 Supply Chain Management

  It is not easy to schedule Meeting’s Bi-Monthly.

 As the Meeting’s are needed to be arranged in accordance to the Availiability

of User dept/Originator.

 It is needed to study the whole Documents attached and to verify the

technicality of the item.So this Process takes time and cannot be completed in
a day.

 Some Critical Items are very Crucial for the Power Plants they are always
needed for production and so the Vendors are fixed and mostly they are
OEMS.

 In the Improvement of E-Procurement

 It is not easy to develop a safe space for vendor’s as well as Buyers.

 Providing large number of ID and Password to vendors is not possible.

 Linking huge number of data from Oracle to the Website is not very
easy.

 It need’s the Vendor must be Computer friendly and can handle it

easily.

 Proper Database must be maintained and upgraded more frequently

which is tougher.

 In the Vendor Rating

 As the Rating is done taking into accounts many things so it makes it

tougher.

 It need’s to be upgraded whenever any kind of changes are found in the

Vendor Database.

55 Supply Chain Management

  Each information is needed to be coveyed to User as well as stores for Proper
grading.

 In the Vendor Waiver

 Items like Critical, Import and Special category may not be applicable in the
Vendor Waiver.

 It is really dangerous to Buy any product and recieve it without Scruitnization.

 It cannot be provided for many items which are really critical in nature and
Number of such item’s is really very high.

 Vendor Waiver if not applied wisely it will become a system where local or
daily or highly consumables are bought without any technical test.

56 Supply Chain Management

 CONCLUSION & SUGGESTION

The process of planning, implementing and controlling efficient cost effective flow and
storage of goods, services and related information from point of origin to point of
consumption for the purpose of conforming to fulfillment of requirements. The Renusagar
Power Plant offers India a change to leap frog from above depression to area of global
competitiveness and prosperity and regain India’s Commercial value. In light of these fact
that the stores of Renusagar is Maintaing nearly 35,000 items.And the inventory is reduced
by manyfolds by applying new policies like TPM,WCM,JIT,KAIZEN and many more
management principles.

So I suggest after a prolonged study all the above plans can be implemented if the
limitations are sorted out. If these plans are put in action then the purchase Process will
become short and more cost-effective. Training Vendors and Buyer’s may make the
Bidding system easy and accessible to each one involved in the Process and will result in
more cost effective Purchases.

So we can say Hindalco ind. Ltd. Renupower division is good place for learning of
efficiency and effective’s.

57 Supply Chain Management

 BIBLIOGRAPHY

Book’s Reffered:

Foundation of Supply Chain Manangement – Prof. Richardson

Marketing research – Alvin C Burns & Ronald F Bush

Principles of Marketing – Philip Kotler & Armstrong

Purchasing & Supply Management - Donald. W.Dobler & David N.Burt

Website’s Reffered:

www.adityabirla.com

www.hindalco.com

www.google.com

www.renugyansagar.com

58 Supply Chain Management

59 Supply Chain Management