Inventory Management at Iocl

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INVENTORY MANAGEMENT- PURCHASE AND PROCUREMENT
Page 1

A
PROJECT REPORT
ON 
INVENTORY MANAGEMENT-PURCHASE AND
PROCUREMENT PROCEDURES
AT
IOCL (BARAUNI REFINERY)

EXECUTIVE SUMMARY

Petroleum oil is the lifeline of modern civilization. It is needed equally for both domestic andindustrial purposes. Its demand has increased multiple-folds and yet to increase on war scale dueto rapid industrialization and fast urbanization. Both developed and developing countries areutilizing oil resources continuously for their progress and prosperity. In such a situation, oil products management becomes very important because oil resources are non renewable or conventional sources of energy. Oil companies employ many techniques to minimize purchaseand inventory costs to enhance profits.Inventory management is vital in an oil plant. This project ”INVENTORY MANAGEMENT-PURCHASE AND PROCUREMENT PROCEDURES AT IOCL BARAUNI” has beencompleted in IOCL, Barauni. It deals with proper purchase operation, handling of materials andoil management processes. Purchase procedures play a very important part in inventorymanagement. Cost reduction measures can be taken right from the purchase process. Variousmethods involved in purchase procedures have been studied. Thousands of spares and parts arestored by material management department. Their proper upkeep and maintenance are importantfor the refinery. Here the materials are classified on the basis of ABC analysis based onmonetary values. This method is applied because materials are quite large. They are more than30,000 in number. Other basic concepts of inventory have also been studied and explained. The project is also related to oil management in the last chapter. Efficient purchase of crude oil and proper management of finished products can add to the profitability of the company. Thecompany maintains the storage of several finished products for further distribution.Indian Oil Corporation Ltd. (Indian Oil) is India's largest commercial enterprise, with a salesturnover of Rs. 2,47,479 crore (US $ 61.70 billion) and profits of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007-08. Indian Oil is also the highest ranked Indian company in the prestigious Fortune 'Global 500' listing, having moved up 30 places to the 105th position in2009. It is also the 18th largest petroleum company in the world. For the year 2007-08, theIndian Oil group sold 59.29 million tonnes of petroleum products, including 1.74 million tonnesof natural gas, and exported 3.33 million tonnes of petroleum products.The Indian Oil Group of companies owns and operates 10 of India's 20 refineries with acombined refining capacity of 60.2 million metric tonnes per annum (MMTPA, .i.e. 1.2 million barrels per day). These include two refineries of subsidiary Chennai Petroleum Corporation Ltd.

 
INVENTORY MANAGEMENT- PURCHASE AND PROCUREMENT
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(CPCL). The Corporation's cross-country network of crude oil and product pipelines, spanningmore than 10,000 kms and the largest in the country, meets the vital energy needs of theconsumers in an efficient, economical and environment-friendly manner. Indian Oil is investingRs. 43,393 crore (US $10.8 billion) during the period 2007-12 in augmentation of refining and pipeline capacities, expansion of marketing infrastructure and product quality upgradation aswell as in integration and diversification projects.

In financial parlance, Inventory is defined as the sum of the value of raw materials, fuels &lubricants, spare parts maintenance consumables, semi processed materials and finished goods atany given point of time. Operational definition of Inventory would be: "The amount required rawmaterials, fuels, lubricants, spare parts and semi-processed material, stocked for smooth runningof the plant". Since these resources are idle when kept in stores, inventory is defined as an idleresource of any kind having an economic value.

The main reasons for holding inventory...
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