PROJECT REPORT ON INVENTORY MANAGEMENT AT TATA STEEL OMQ DIVISION, NOAMUNDI

COMPANY GUIDE: CMA: Prasanta Dinda

A Project Submitted in partial fulfillment of the requirements For the award of the degree of

POST GRADUATE DIPLOMA IN MANAGEMENT

Submitted By: Geeta Shree Pingua (Roll no. 48) Department: Finance Xavier Institute of Social Service, Ranchi

Xavier Institute of Social Service, Ranchi

POST GRADUATE DIPLOMA IN MANAGEMENT (2012 2014)

SUMMER INTERNSHIP PROJECT

DECLARATION

This is to certify that the report entitled INVENTORY MANAGEMENT is in partial fulfillment of the course: Summer Internship Programme (Batch 2012-14) by me at TATA STEEL OMQ Division Noamundi. I confirm that this report truly represents my work undertaken as a part of my Summer Internship Programme. This work is not a replication of work done previously by any other Management Trainee. I also confirm that the contents of the report and the views contained therein have been discussed with the concern authority.

Signature of the Student: Date Name of the Student Roll No. Department : : Geeta Shree Pingua : 48 : Finance

ACKNOWLEDGEMENT

The satisfaction and euphoria that accompany the successful completion of the work would be incomplete unless I express my gratitude to the people whose constant guidance and encouragement made the successful completion of my project possible. First of all I would like to thank Senior Manager HR, Mr. Rajpal Sinha and Head, Finance & Accounts Department, Mr. P.K. Bal for providing me an opportunity to do my summer internship. I express my sincere gratitude to my project guide Cost & Management Accountant, Mr. Prasanta Dinda for providing his valuable time, guidance and support in my project. Last but not the least I extend my thanks to all the people who have directly or indirectly helped me in this project. Thank You Geeta Shree Pingua

Table of Contents
Introduction Inventory Management Inventory Management & Control Techniques Research Objective Research Methodology a. Scope of Study b. Sources of Information c. Limitations Company Profile Board of Directors Key Management Personnel Tata Steel OMQ Division Stores Data Analysis & Interpretation of Stores Iron Ore Production Findings Conclusion References 13-17 18 19 20-22 23-24 25-32 33-35 36 37 38 12 5-7 7-10 11

Inventory Management
Inventory: Inventory constitutes one of the significant parts of current assets of
a company, especially a manufacturing entity. On an average inventories are approximately 60% of current assets of the company. It is therefore absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment or to fall short of the inventory. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately.

Nature of Inventories:
Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various types of inventories are Raw materials These are those basic inputs that are converted into finished products through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future production.

Work-in-process These inventories are semi-manufactured products. They represent products that need some work before becoming finished products for sale.

Finished product These are those completely manufactured products which are ready for sale. Stocks of raw material and work-in-process facilitate production, while stock of finished products are meant for sale and generating revenue.

Stores and spares There is also a fourth kind of inventory i.e., stores, supplies and spares. These materials do not directly enter production, but are necessary for production process. For example, lubricants, light bulbs, etc.

Need to hold Inventories:

There are three general motives of holding inventories. These are Transactions motive It emphasizes the need to maintain inventories to facilitate smooth production and sales operations. Precautionary motive It necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative motive It influences the decision to increase or decrease inventory levels to take advantage of price fluctuations. The basic objective of inventory management is to determine and maintain optimum level of inventory investment. Both excessive and inadequate inventories are the two danger points which the firm should avoid. It should maintain stock of materials so that there is no interruption in the business operations. The firm should avoid a situation of over-investment since it leads to: Unnecessary tie-up of the firms funds Excessive carrying cost Risk of liquidity

Situation of under-investment should be avoided since it leads to: Production hold-ups Failure to meet deliveries Therefore, an effective inventory management is the one that ensures a continuous supply of raw materials, maintains an adequate supply of materials in the periods of short supply and, anticipates price changes, minimizes carrying cost and control investment in inventories and keeps it at an optimum level.

Inventory Management & Control Techniques:

1. Economic Order Quantity (EOQ) One of the major inventory management problems is to determine how much to be ordered or to be maintained which will prove optimal for the firm. This optimum inventory size is commonly referred to as economic order quantity. The concept of economic order quantity involves two types of costs:

i.

Ordering Cost The term ordering cost includes the entire cost of raw materials such as, cost of requisitioning, purchase ordering, transporting, receiving, inspecting and storing. Ordering cost increases in proportion to the number of orders placed. Thus, the more frequently inventory is acquired, the higher is the firms ordering cost and vice versa. The ordering cost decreases with the increase in inventory size because if the firm maintains large inventory levels, there will be few orders placed.

ii.

Carrying Cost Carrying cost is the cost incurred for maintaining a given level of inventory. These include costs of storage, insurance, taxes, deterioration and obsolescence. The behaviour of carrying cost is opposite of ordering cost which declines with increase in inventory size.

Thus, Economic Order Quantity is a trade-off between carrying cost and ordering cost. It can be calculated as: EOQ = 2* Quantity required*OC/CC where, OC = Ordering Cost, CC = Carrying Cost Graphical Representation of EOQ:-

2. ABC Analysis The ABC Analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, while also providing a mechanism for identifying different categories of stock that will require different management and control. The analysis suggests that inventories of an organization are not of equal value. Thus, inventories are classified into three categories in order of their estimated importance:

A items : Very tight control and accurate records. These items, because of their high value and importance in an organization, require frequent value analysis. In addition to that, an organization needs to choose an appropriate order pattern.

B items : Less tightly controlled and good records.

C items : Simplest control possible and minimal records.

3. Just In Time Systems Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt. Its central theme is based upon simplicity, quality & elimination of waste. The Just-In-Time techniques are: Reduced Setup Times Shop-Floor Layout and Production Cells Total Quality Assurance Preventive Maintenance

4. Outsourcing Outsourcing is the system of buying parts and components from outside rather than manufacturing them internally. Many companies develop a single source of supply, and some others help developing small and medium sized suppliers of components that they require. Certain companies outsource all the components and simply assemble them to make the finished product.

This project report is on Inventory Management. The inventories held by Tata Steel OMQ division are: iron ore and stores (which supplement the process of iron ore excavation and processing). The Tata Steel OMQ division deals with iron ore production which is supplied to Tata Steel Jamshedpur unit for further conversion to steel; it doesnt deal in sales of iron ore. Stores represent the inventories held to supplement the iron ore mining. Thus, these are the indirect materials and do not have a direct impact on the mining procedure.

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Research Objective
To identify and study the inventories held by the organization. To analyze and interpret the data provided by the organization. To apply inventory management technique for valuation of inventories.

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Research Methodology

Scope of Study:
My project is confined to the Tata Steel OMQ Noamundi division which has four mines operating under it: Noamundi, Katamati, Khondbond and Joda. Katamati being a small unit has been considered as a part of NIM.

Sources of Information:
The sources of information include both primary and secondary sources. But major emphasis has been given on secondary data sources.

Limitations: Time Constraint Due to lack of time availability, a detailed study of the
inventories could not be conducted.

Confidentiality of information Since all the information cannot be

shared by the organization there was restriction on detailed study of the inventories.

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Company Profile: Tata Steel

Vision:
To be the global steel industry benchmark for value creation and corporate citizenship. The company will achieve its vision through People: By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Offer: By becoming the supplier of choice, delivering premium products and services and creating value for the customers. Innovative Approach: By developing leading edge solutions in technology, processes and products. Conduct: By providing a safe workplace, respecting the environment, caring for

communities and demonstrating high ethical standards.

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Values:
The Tata Group has always been driven by five core values:

Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.

Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve.

Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide.

Unity: We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.

Responsibility: We must be responsible and responsive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.

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Tata Steel Limited: Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO))
is an Indian multinational steel-making company headquartered in Mumbai, Maharashtra, India, and a subsidiary of the Tata Group. Headquartered in Mumbai, Maharashtra, India it has its marketing headquarters at the Tata Centre in Kolkata, West Bengal. It has a presence in around 50 countries with manufacturing operations in 26 countries including: India, Malaysia, Vietnam, Thailand, Dubai, Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The Netherlands, France and Canada. In 2007 Tata Steel acquired the UK-based steel maker Corus in what was the largest international acquisition by an Indian company to date.

Tata Steel is a top ten global steel maker and the worlds second most geographically diversified steel producer. Tata Steel primarily serves customers in the automotive, construction, consumer goods, engineering, packaging, lifting and excavating, energy and power, aerospace, shipbuilding, rail and defence and security sectors and its main plant is located in Jamshedpur, Jharkhand. The Jamshedpur plant contains the DCS supplied by Honeywell .The registered office of Tata Steel is in Mumbai.The company is listed on Bombay Stock Exchange and National Stock Exchange of India, and employs about 82,700 people (as of 2007).

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Company Policies:
Overall, the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.

Corporate social responsibility

Tata Steel believes that the primary purpose of a business is to improve the quality of life of people.

Tata Steel shall volunteer its resources, to the extent it can reasonably afford, to sustain and improve healthy and prosperous environment and to improve the quality of life of the employees and the communities it serves.

Tata

Steel

shall

conduct

its

business

ever

mindful

of

its

social

accountability, respecting applicable laws and with regard for human dignity.

Tata Steel shall positively impact and influence its partners in fostering a sense of social commitment for their stakeholders.

Quality policy Consistent with the group purpose, Tata Steel constantly strives to improve the quality of life of the communities it serves through excellence in all facets of its activities. We are committed to create value for all our customers and key stakeholders by continually standardizing, improving and innovating our offerings, systems and processes involving all our employees.

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 This policy shall form the basis of establishing and reviewing the Business Objectives and Strategies and shall be communicated across the organization. The policy will be reviewed to align with business direction and to comply with all the requirements of TQM Principles.

Human Resource Policy Tata Steel is an equal opportunity employer. Tata Steel recognizes that its people are the primary source of its competitiveness. It will pursue management practices designed to enrich the quality of life of its employees, develop their potential and maximize their productivity. It will aim at ensuring transparency, fairness and equality in all its dealings with its employees. Tata Steel shall strive continuously to foster a climate of openness, mutual trust and teamwork. In the process Tata Steel shall strive to be the employer of choice by attracting the best available talent and ensuring a cosmopolitan workforce.

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Safety Policy Tata Steels safety and occupational responsibilities are driven by our

commitment to ensure zero harm to people we work with and society at large and are integral to the way we do business.

Safety Principles

Safety is a line management responsibility. All injuries can be prevented. Felt concern and care for the employee on 24 hours safety shall be demonstrated by Leaders.

Employees shall be trained to work safely. Working safely shall be condition of employment. Every job shall be assessed for the risk involved and shall be carried out as per authorized procedures/checklist/necessary work permit and using

necessary work permit and using necessary personal protective equipment.

We shall set objective-targets, develop, implement and maintain management standards and systems, and go beyond compliance of the relevant industry standards, legal and other requirements.

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Environmental responsibilities Tata Steels environmental responsibilities are driven by our commitment to preserve the environment and are integral to the way we do business. We are committed to deal proactively with Climate Change issue by efficient use of natural resources & energy; reducing and preventing pollution; promoting waste avoidance and recycling measures; and product stewardship. We shall develop & rehabilitate abandoned sites through a forestation and landscaping and shall protect and preserve the bio-diversity in the areas of our operations. We shall enhance awareness, skill and competence of our employees and contractors so as to enable them to demonstrate their involvement, responsibility and accountability for sound environmental performance. We are committed to continual improvement in our environmental performance. We shall set objectives, targets, develop, implement and maintain management standards and system, and go beyond compliance of the relevant industry standards legal and other requirements. We will truly succeed when we sustain our environmental achievement and are valued by the communities in which we work.

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Company History:
Tata Iron & Steel Company Ltd. (TISCO) is the iron and steel production company associated with the Tata group of some 80 different industrial and other business enterprises in India, founded by members of the Tata family. TISCO operates as India's largest integrated steel works in the private sector with a market share of nearly 13 percent and is the second largest steel company in the entire industry. Tata's Early Beginnings in the 1800s Jamsetji Nusserwanji Tata was born into a well-to-do family of Bombay Parsees in 1839. Tata Steel was established by Indian Parsi businessman Jamsetji Nusserwanji Tata in 1907 (he died in 1904, before the project was completed). Tata Steel introduced an 8-hour work day as early as in 1912 when only a 12hour work day was the legal requirement in Britain. It introduced leave-with-pay in 1920, a practice that became legally binding upon employers in India only in 1945. Similarly, Tata Steel started a Provident Fund for its employees as early as in 1920, which became a law for all employers under the Provident Fund Act only in 1952. Tata Steel's furnaces have never been disrupted on account of a labor strike and this is an enviable record.

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Acquisitions :

Corus is Europes second largest steel producer. With main steelmaking operations in the UK and the Netherlands, Corus supplies steel and related services to the fabrication, automotive, packaging, mechanical engineering and other markets worldwide. Corus comprises three operating Divisions, Strip Products, Long Products and Distribution & Building Systems and has a global network of sales offices and service centers, employing around 37,000 people worldwide. On 20 October 2006

Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus at 455 pence per share in an all cash deal, cumulatively valued at GBP 4.3 billion.

On 19 November 2006

Brazilian steel company Companhia Siderrgica Nacional (CSN) launched a counter offer for Corus at 475 pence per share, valuing it at 4.5billion.

On 31 January 2007

Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at 6.7 billion; as a result and pending acceptance and completion of the takeover, the joining of the two will create the fifth largest steel company in the world.

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NatSteel Holdings is headquartered in Singapore and is a leading supplier of premium steel products for the fabrication industry. It became a 100% subsidiary of Tata Steel in February 2004. NSH produces about 2 MT of steel products annually across its regional operations. In August 2004

Tata Steel entered into definitive agreements w`ith Singapore based NatSteel Ltd to acquire its steel business for Singapore $486.4 million

(approximately Rs 1,313 crore) in an all cash transaction.

Headquartered in Bangkok, Tata Steel Thailand is a major steel producer in Thailand and is the largest producer of long steel products with a manufacturing capacity of 1.7 mtpa. In 2005 Tata Steel acquired 40% Stake in Millennium Steel based in Thailand for $130 million (approx. Rs 600 crore).

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Tata companies operate in seven business sectors: 1. Communications and information technology 2. Engineering 3. Materials 4. Services 5. Energy 6. Consumer products and. 7. Chemical The Company is part of the Tata Group, Indias largest industrial conglomerate. Both Tata and Tata Steel have a long history of charitable donations and social responsibility, with Tata spending approximately 4% of the Companys profit after tax on corporate social responsibility initiatives. Tata Steel endeavours to improve the quality of life in the communities in which the Company operates. Tata Steels charitable projects have touched the lives of over 800,000 people in India. Tata Steel is now one of the world's most geographically-diversified steel producers, with operations in 26 countries and a commercial presence in over 50 countries.The Tata Steel Group, with a turnover of US$ 26.13 billion in FY 20112012, has over 81,000 employees across five continents and is a Fortune 500 company.
Tata Steels vision is to be the worlds steel industry benchmark through the excellence of its people, its innovative approach and overall conduct. Underpinning this vision is a performance culture committed to aspiration targets, safety and social responsibility, continuous improvement, openness and transparency.

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Capacity Expansion:
Tata Steel has set a target of achieving an annual production capacity of 100 million tons by 2015; it is planning for capacity expansion to be balanced roughly 50:50 between greenfield developments and acquisitions. Overseas acquisitions have already added an additional 21.4 million tonnes of capacity, including Corus (18.2 million tonnes), NatSteel (2 million tonnes) and Millennium Steel (1.2 million tonnes). Tata plans to add another 29 million tonnes of capacity through acquisitions. Major greenfield steel plant expansion projects planned by Tata Steel include:

6 million tonnes per annum capacity plant in Kalinganagar, Odisha, India. expansion of the capacity of its plant in Jharkhand, India from 6.8 to 10 million tonnes per annum.

5 million tonnes per annum capacity plant in Chhattisgarh, India.

(Tata

Steel signed a memorandum of understanding with the Chhattisgarh government in 2005; the plant is facing strong protest from tribal people).

3 million tonnes per annum capacity plant in Iran. 2.4 million tonnes per annum capacity plant in Bangladesh. 10.5 million tonnes per annum capacity plant in Vietnam (feasibility studies are underway).

6 million tonnes per annum capacity plant in Haveri, Karnataka.

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Board of Directors:

Key Management People:

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Tata Steel OMQ Division

Tata Steels Raw Materials Division, also referred to as the OMQ (Ores, Mines & Quarries, consists of four units

Noamundi Iron Mine (NIM) Joda East Iron Mine (JEIM) Khondbond Iron Mine (KIM) Katamati Iron Mine (KTM)

While the OMQ fulfills 100% raw material needs of the Jamshedpur Steel Works and the requirement of sister concerns, Tata Steels Global Minerals Group has the responsibility for managing raw material assets across the globe. The chromite and manganese mines and their operations have been amalgamated under the Ferro Alloys & Minerals Division that acts as a separate profit centre. The Companys Raw Materials operations in India are spread across the states of Jharkhand and Orissa and more than 1500 personnel are working in different mines of OMQ. All the four units are ISO 9001 (Quality Management System), ISO 14001 (Environment Management System) and ISO 18001 (Occupational Health & Safety Assessment Series) certified. As steel production in India is projected to grow to over 120 Million tonnes by the year 2015, expansion plans for OMQ includes enhancement of production capacity from the current level of 13 MTPA to 18 MTPA in the coming years.

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Noamundi Iron Mine (NIM) Location: West Singhbhum district of Jharkhand, around 126 Km from Jamshedpur. As NIM is the headquarter of the OMQ division, the Divisional Head General Manager (OMQ) operates from Noamundi. The mine is one of the best open cast iron ore mines in the world having state-of-the-art and sophisticated mining operations. Continuous improvement and upgradation of processes ensures sustainable mining and responsible utilization of natural resources.

Joda East Iron Mine (JEIM) Location: Keonjhar district of Odisha Mining operations at the Joda East Iron Mine started in 1956 and it has one of the richest deposits of iron ore. At present it employs around 400 personnel. The JEIM operations spread over an area of almost eight sq. km and the iron ore here is of hard and massive type and runs on top of the hill practically from end to end. Mining is done by the conventional Open Pit Benching System but processes are constantly evolving through innovations and knowledge management practices. Today, with its wealth of natural resources, Odisha is the focal point of development for many industries. Tata Steels involvement in the overall development of Odisha takes everything within its fold and the Company is committed to establish the State as one of the most advanced in the country.

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Khondbond Iron Mine Location: Keonjhar district of Orissa, around 18 km from Joda East Iron Mine The Khondbond mine has deposits of sponge grade iron ore and also occurrences of manganese ore. The iron ore deposit in this mine is worked by mechanised open cast mining in a series of 6 m high benches. The Crushing Plant at Khondbond, established in 1994, crushes the ore in three stages to produce lump ore, which is dispatched for sponge iron making to M/s. Tata Sponge Iron Ltd. (TSIL) at Joda, while the fines are transported to the Steel Works at Jamshedpur. At Khondbond around 115 persons are working at present.

Katamati Iron Mine Location: Keonjhar district of Orissa The Katamati lease held by the Company is the southern extension of Noamundi Iron Mine in Jharkhand. The mine was earlier operated by manual opencast method. Subsequently, in 2003, the mining operations were mechanised by a series of 6m high benches. The runof-mine ore is transported to the Noamundi Iron Mine, and processed at the LRP Plant for Wet Processing. Around 25 personnel are engaged in this mine.

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Inventory - Stores
Stores include the components that supplement the process of conversion of raw material into finished good. In Tata Steel, the items in stores are classified into 3 sections:a) General Section (12) b) Plant Section (12) c) Equipment Section (9). a) General Section It includes Lubricants Safety items like Helmets, etc. Tyres Nut Bolts Wire Rope b) Plant Section It includes Impact Rolls Roller Bearings Pillow Blocks Ball mill Mud gun Rock Drill and its parts Breaker and its parts Gears & Shafts Shank adapter Coupling Sleeve Bustle pipe Pneumatic Ventillation Fan Rack assemblies for mining shovels

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c) Equipment Section It includes Jaw Crusher Cone Crusher Electrode Filter Coupler Mining Jack Hammer DTH Hammer Pneumatic Drifter and its parts

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Inventory Receipt and Issue Process:

Receipt of items When the items are received by the stores department and their details are stored in the computer system. The software used for receipt, issue and handling of inventory is SAP. Then a Goods Received Note (GRN) is prepared. After preparation of (GRN), Invoice Verification (IV) is done. There are 2 types of items: excisable and non excisable. Invoice Verification is necessary excisable items. In Invoice Verification (IV), the quantity and quality of items are checked and in case of any incongruity, the items are returned and the data is entered. Issue of items The items are issued on the basis of FIFO (First in First Out) method.

Obsolete and Dead Items Obsolete Items When the goods become obsolete, they are sent to auction and sold out. Dead Items Dead items are the items which come to use after a period of 5 years or more. They remain, unmoved, in the warehouse for at least 5 years. These are also termed as slow-moving items.

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Data Interpretation & Analysis

Data Related to Consumption by Stores:-

2012
Opening Stock Closing Stock Annual Consumption Daily Consumption Average Inventory Inventory Turnover Days of Inventory Holding 233 2024000369 288791972.6 1780761000 4946558.333 1156396171 1.539922948

2013
288791972.6 430392147 2236099000 62011386.111 359592059.8 6.218432635 57

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Graphical Representation of Daily Consumption of Material:

7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 1 2

The consumption of materials has increased in 2013 as compared to the previous year. On an average, the daily consumption of stores was 4946558.333 in 2012 and, in 2013 it increased to 6211386.111. It means there was 25.57% increase in consumption.

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Graphical Representation of Inventory Turnover:-

Inventory Turnover
7 6 5 4 3 2 1 0 1 2

From the above figure it can be found out that the inventory turnover in 2013 is higher than that in 2012. While in 2012 the inventory turnover took place only once, in 2013 it took place 6 times. The inventory holding period has reduced from 233 days to 57 days. The above two graphs show that there has been an increase in the consumption of materials as well as improvement in the inventory turnover which is a good sign. It means the materials are being utilized efficiently and their unnecessary stocking has been reduced.

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Data related to Economic Order Quantity (EOQ):-

2012

2013

Lead Time

55

55

Maximum Consumption

6935766.667

8893566.667

Minimum Consumption

3499933.333

4834966.667

Average Consumption

5217850

6864266.667

Daily Consumption

4946558.333

6211386.111

Minimum Stock

272060708.3

341626236.1

Maximum Stock

2040731634

377557883.5

Safety Stock

94485416.69

111611500

Average Stock

1156396171

359592059.8

Reorder Point

1428456879

701218295.9

EOQ

1768670925

35931647.39

The data relating to lead time is not the exact figure.

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Graphical Representation of Maximum and Minimum Stock:Minimum Stock Maximum Stock

2040731634

272060708.3

341626236.1 377557883.5

The maximum stock level in 2013 has been decreased by 81% in comparison to the previous year. While minimum stock level has been slightly increased by 25%. As it can be seen in 2012 maximum stock was much higher and the difference between maximum and minimum stock too was greater. The maximum stock level may have been decreased to avoid unnecessary holding of stocks and their obsolescence. The minimum stock level has been increased to lower the risk of stock out.

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Graphical Representation of Safety Stock:-

Safety Stock
115000000 110000000 105000000 100000000 95000000 90000000 85000000 1 2 Safety Stock

Safety Stock level has been increased in 2013 from 94485416.69 to 11161150. It can be seen that alongwith increase in minimum stock level the safety stock too has been increased.

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Graphical Representation of Reorder Point:-

Reorder Point
1428456879

701218295.9

Reorder Point is the level at which the organization will place order for procurement. It has been reduced from 1428456879 to 701218295.9.

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Graphical Representation of Economic Order Quantity:-

1768670925

EOQ

35931647.39 1 2

The economic order quantity (EOQ) too has reduced to a greater extent from 1768670925 to 35931647.39 i.e. it has reduced by above 95%. The EOQ (Economic Order Quantity) is the reorder quantity. With the decrease in reorder level there has been decrease in reorder quantity also.

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Inventory - Iron Ore

Following table shows iron ore production of the three mines: Noamundi, Joda East Iron Mine and Khondbond. The KHB mines has the lowest capacity of all the three. Noamundi unit has the greatest capacity of them all; Joda has comparatively lower than the former but the difference is very slight.

Iron Ore Production (for 2 years):

Mi n e s Noamundi Joda Khondbond Total

FY 2012 7717852.4 5170969.2 299741.06 13188563

FY 2013 8372090.8 5927019.1 704976.47 15004086

% C h an ge 8.476949279 14.62104761 135.1951615 13.7658952

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Graphical Representation of Growth rate (2 years):-

% Change
160 140 120 100 80 60 40 20 0 NIM JEIM KHB

There has been increment in all the three mines in the corresponding year 2013 compared to its previous years. So there has been overall increase in the year 2013. In case of KHB mines there has been a steep increase of 135% in iron ore production, as compared to the previous year. It means either there has been an increase in its plant capacity or it has been able to exploit its resources optimally. Overall there has been approx. 13% increase.

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Iron Ore Production (Quarterly basis):2013 Interpretation:

Mines Q1 Q2 Q3 Q4 Noamundi 1974589.37 1928592.07 2038725.75 2430184 Joda 1350753.4 1552060.52 1707255.66 1316949 Khondbond 146476.17 137570.77 211071.02 209858.5 Total 3471818.94 3618223.36 3957052.43 3956991 Growth rate 5.144775644 4.216937073 9.36451502 -0.00155
Graphical Representation of Growth rate (Quarterly basis-2013):-

% Change
9.36451502

5.144775564 4.216937073

-0.001552165 Q1 Q2 Q3 Q4

The above data shows an increase in iron ore production throughout the year 2013. From Q1 to Q4 there has been increase in production. But compared to the previous quarters the last quarter Q4 doesnt depict any major change. Also in Q2 the production in Noamundi and KHB shows a decline. The production rate has kept on increasing from Q1 to Q3, but in Q4 the production rate decreased

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Findings
The consumption of materials as well as inventory turnover has increased. This may be due to increase in iron ore production.

Maximum Stock level may have been reduced in order to control cost by minimizing overstocking and unnecessary purchases.

Minimum Stock level may have been increased to mitigate the risk of stock outs.

There may be increase in the sales and thereby production of steel in Tata Steel. Since iron is the major raw material of steel, increase in its production demands increase in production of iron ore.

It also depicts that there has been increase in the production capacity of iron ore and therefore, production has been kept on increasing.

The KHB showed 135.19% increase and Joda depicted 14% rise in the production rate. This means the plants are gradually optimally exploiting their resources. The KHB division has doubled its production which means there has been capacity addition in this mining unit.

In the year 2012, the production was 13188562.63 and in 2013 it was 15004086. Also the organization has forecasted to produce 17.78 mn tones of iron ore for 2014. Till date, Noamundi OMQ division has been able to fulfill the need of the company and meet the target.
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Conclusion
After analyzing the components of inventory management of Tata Steel OMQ Division it has been found that the organization has a sound and effective inventory management system. It always keeps a check on its inventory in order to control cost without hampering its production. The organization has been able to achieve the target for both the years and has mostly depicted a rising trend in its production. It has effectively met the requirements of the company. This concludes that Tata Steel OMQ Division is running effectively and has been able to manage its inventories effectively.

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References
www.tatasteel.com www.enwikipedia.com www.investopedia.com Financial Management (Author: I.M.Pandey) Company Documents & Data

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