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PROJECT ON

OUTBOUND LOGISTIC MANAGEMENT AT

INDIAN PETROCHEMICALS CORPORATION LIMITED A Project Report Submitted in Partial Fulfillment of award of MBA Degree


SUMMER TRAINING REPORT ON OUTBOUND LOGISTIC MANAGEMENT AT

INDIAN PETROCHEMICAL CORPORATION LIMITED VADODARA

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ACKNOWLEDGEMENT It gives me great pleasure and personal satisfaction in presenting this report as a part of my vocational training at Indian Petrochemicals Corporation Limited that has given me first hand experience of the Corporate World. I am indebted to many individuals who have either directly or indirectly made an important contribution in the preparation of this report. I am grateful to XYZ, Dean of XYZ COLLEGE, for giving me opportunity to experience the corporate world. I am also grateful to my faculties, Mr XYZ for their guidance.

With immense sense of gratitude, I hereby take this opportunity to thank my guide and mentor, XYZ for their kind contribution in my training.

I would like to thank the entire staff of MOP for their immense support. I would also like to thank all the respondents whose names are not mentioned here, without whom the report would not have been completed. Last but not the least I would like to place special thanks to my parents and friends for their support.

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PREFACE Globalization has ushered in new challenges and the Indian companies are facing higher levels of competition in the market place, not only from the local players but also from all organized MNCs. To be successful, the best companies will have to be smart in managing the 4 business resources of Man, Material, Money and Information. Effective planning and efficient management of flow of material and related information from the supplier to the customer through the organization forms the major responsibility of Supply Chain Management. The two months exposure to the ‘Outbound Logistic Management’ at Indian Petrochemicals Corporation Limited (IPCL), one of the largest petrochemicals company in India has given me sufficient knowledge to feel the gap between the theoretical and practical knowledge. I got to know how IPCL carries out its transportation of goods through air, road and water routes, the importance of contract between the company and the transport agency, domestic and global export procedures, promotional activities, pricing policies, warehousing etc. During my training programme I got to know that theoretical knowledge doesn’t always workout in practical life. For example: shortest route of transportation may not always be economical. I have learnt many more aspects required to mould the personality of a management student that is not taught in any classroom. As a part of my training, I was given the responsibility to solve the problem of high cycle time between the procedures of TOL to INVOICE at LDPE warehouse. Based on observation in the warehouse, several recommendations are given at the end of the report to improve cycle time. This would help the company to save high cost incurred due to improper management.

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EXECUTIVE SUMMARY I had wonderful experience of undergoing training at India’s one of the largest Petrochemicals Company, IPCL for the period of 8 weeks as a part of my MBA curriculum. The project I had taken up was pertaining to the study of outbound logistics of Industrial Products. Logistics in any organization forms the foundation of the Marketing Department. It is involved in the warehousing and dispatch of various products produced in the company’s premises. The strategic planning involves dispatch of the materials which smoothens the function of Logistics. Due to globalization, the logistic activity has undergone a drastic change. It has been modified to such an extent so as to facilitate the availability of the products to the customers in the best possible manner. IPCL has an excellent logistics system for the dispatch of its products which ensures the availability of the products to the customers on time. The newly introduced ERP system ‘SAP’ integrates different departments of IPCL facilitating the logistic function for the dispatch of solid and liquid products. It is obvious that IPCL’s Logistics systems are benchmarked as one of the best in their category of Industry on worldwide basis. The practical knowledge that I have gained during my training has broadened my view about Logistics. It has helped me to understand the topic of my study thoroughly.

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INDEX

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Page Contents Company Profile Product Portfolio Introduction to Marketing of IPCL Marketing and Operation Planning (MOP) Order Process Procedure Solid Product Cycle Movement Through SAP Distribution Channel at IPCL Introduction to Logistics Outbound Logistics at IPCL Transportation at IPCL International Trade Export Procedure Logistic Supports Marketing Pricing Policies and Promotional Measures Warehousing Role of Government in Logistics Time Motion Study Glossary Bibliography Annexure

COMPANY PROFILE

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No. 07 38 47 53 55 56 61 63 64 66 71 76 81 83 84 88 89 94 95 96


IPCL – Indian Petrochemical Corporation Limited The Indian Petrochemical Industry went through a long and turbulent gestation period. The need for development of petrochemical industry in India was highlighted and reviewed by Kane Committee as early as in 1961.All efforts and plans thereafter

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failed to gain momentum. Several international organizations like Union Carbide, Dow Chemicals, Philips Petroleum, Imperial Chemicals, Standard Oil, Burma Shell etc., proposed to participate only to withdraw subsequently. It soon became apparent that the massive commitment, to manufacture the basic building blocks and intermediates for petrochemicals must come from government itself. IPCL was a manifestation of that serious commitment. IPCL pioneering Petrochemicals Company in India was incorporated on March 22, 1969. IPCL’s business comprises of polymers, fibre, fibre intermediates, synthetic rubber, commodity chemicals, surfactants, catalysts and adsorbents backed by innovation from its technology management centre, research centre and product application centers. The company is continuously upgrading its products and processes. The company owns and operates 3 petrochemicals complex. A naphtha based complex at Vadodara and a gas based complex each at Nagothane and Gandhar. The company produced more than over a million tones of merchant products, and generates a turnover closed to Rs.100billion. Reliance Petroinvestments Ltd. (RPiL) acquired 26% of the total voting capital of IPCL and management control at a price of Rs.231 per share from the government of India. RPiL is a member of Reliance Group, founded by Dhirubhai H. Ambani. This is the single largest disinvestment till date. Subsequently RPiL made an open offer to shareholders of IPCL and acquired additional 20% of the total voting capital. RPiL today has 46% equity stake in the company.

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The Reliance Group’s petrochemicals business is conducted through Reliance Industries Limited, which is India’s largest private sector company in terms of assets, revenue and profit among others. Dhirubhai’s pioneering vision and over three decades of successful operation ingrain in IPCL a unique level of expertise, making the company competently engineered for the future. The Reliance Group is the leader in the petrochemicals industry in India, and IPCL as a significant player in this business, enjoys certain synergies with the Reliance Group. As a result of the acquisition of management control by RPiL, IPCL’s credit rating has risen from AA(AA minus) to AA.

BOARD OF DIRECTORS

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Nominees of Reliance Petro investment Ltd. Mr. Mukesh D. Ambani – Chairman Mr. Nikhil R. Meswani Mr. Anand J Jain Mr. Kamal P. Nanavaty Mr. S. K. Anand Government of India nominees Mr. G S Sadhu Mr. Ramesh I. Singh Independent Directors Mr. Lalit Bhasin Mr. Shailesh V. Haribhakti Mr. Sandeep H. Jhunarkar Mr. R. S. Lodha Registered Office P.O. Petrochemicals Vadodara – 391346 Gujarat India.

IMPROVEMENT POST CHANGE IN MANAGEMENT CONTROL

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The new management team has re-endorsed the company’s mission to create value for all stakeholders. All out efforts are being made to enhance productivity and control cost for superior value addition. The physical and cultural integration of IPCL and Reliance resulted in adopting “Best Practices” from each other. This led to optimal utilization of available resources for enhancing productivity. The benefits of change in management control are visible from the company’s performance in the very first year after the acquisition. During the year 2002-03, IPCL’s three manufacturing sites, namely, Vadodara Complex, Gandhar Complex and Nagothane Complex have recorded 14%, 29% and 9% increase in production capacity over the previous year, resulting in overall production growth of 18%. Steps have been taken to utilize all internally available hydrocarbons as feedstock or fuel, thereby reducing external purchases. This has resulted in significant savings. A comprehensive linear programming model for the entire company has been developed and implemented for optimizing manufacturing operations of all the three Complexes. With greater focus and proactive action taken by the company, the specific energy index of the company has come down to 3.65 mmKcal per MT of product from the earlier 3.76 mmKcal per MT of product.

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Net sales for all major products have increased to the previous year, as a result of initiatives for strengthening customer relationships. This has contributed to improvement in operating margins. The IT facilities and MIS have been recast in line with the best standards, and SAP system has been introduced in all three complexes with attendant benefits of enhanced efficiency at all levels. The company and its shareholders, workers and employees will continue to get benefit from Reliance’s proven vision and management strengths, established project execution capabilities, and demonstrated track record of consistent operational and financial performance. The company will also get significantly benefited from Reliance’s financial engineering skills, its capability to access capital at the most competitive terms and optimize financial costs. The company will be in a position to leverage Reliance’s proven capabilities of achieving optimal plant capacity utilization, through operational efficiencies, and low cost de-bottlenecking of capacities. The company will also enjoy the benefit of Reliance’s strong relationship with customers, technology and equipment suppliers and other constituents, in the domestic and international markets.

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REVIEW OF PERFORMANCE

2001-02 Production

3.70MT

Gross Turnover

2002-03 4.40MT

2003-04

2004-05

2005-06

4.60MT

5.18MT

5.4mT

Rs.5527crore Rs.9921 crore (US $ 2089 m)

Rs.13541 crore (US $ 3097 m)

Rs.9386 crore (US $ 2146 m)

Rs.9597 crore

Net Profits

Rs.107crore

Rs.204 crore (US $ 43 m)

Rs.273 crore (US $ 62 m)

Rs.786 crore (US $ 180 m)

Rs.1005 crore

Total Assets

NA

Rs.8054 crore (US $ 1696 m)

Rs.7222 crore (US $ 1652 m)

Rs.7675 crore (US $ 1754 m)

NA

Earning per share

Rs.4.33

Rs.8.23 (US $ 0.2)

Rs.11.02 (US $ 0.3)

Rs.31.65 (US $ 0.72)

Rs.40.47

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SWOT ANALYSIS OF IPCL STRENGTHS •

Multi-product and Multi-Location

Skilled and trained manpower

Captive power plants in all three complexes

Availability of funds for new projects

Market / product Segmentation

Utilization of RIL infrastructure for export

ISO 14001 certification for Vadodara and Nagothane Complexes WEAKNESSES

Low capacity of plants

High cost of production

High human cost component at Vadodara Complexes OPPORTUNITIES

Access to alternate feedstock suppliers

Increasing alternative usage of plastics for different purposes in domestic market

Capacity enhancement of plants at Vadodara and Gandhar Complexes THREATS

Growing bargains from domestic customers due to reduction in government duties

Loss of skilled manpower

Anti-plastic movement by environmental activists

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•

Growing competition: The domestic industry is likely to witness immense competition going forward with IOC all set to enter the segment with its Rs 64 bn project. Further, ONGC is also venturing into petrochemicals business. With commitments to reduce and eliminate tariff and non-tariff barriers, India, with huge market potential, might witness entry of global majors such as Exxon Mobil, Dow Chemicals and Shell into the business. These global majors with deep pockets can actually lead into a pricing war, which could result in squeezing margins.

•

Customs duties: Historically, the domestic industry has been protected from overseas competition by high import duties imposed by the government. However, of late, Import duty on polymers has been steadily reduced and is currently at 20%. As part of its commitment to various multilateral and bilateral trade agreements, the government is likely to reduce duties going forward and this is likely to reduce the cushion enjoyed by the domestic players as against the landed cost of imported products.

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LOGOS

The first logo consisted of a tetrahedron – representing the molecular structure of the simplest organic chemical- methane, in a circle.

This decision of the government, “Every thing under one roof” inspired the second logo of IPCL. IPCL took up the challenge of setting up the entire integrated complex at Vadodara.

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PRESENT LOGO

IPCL, as a corporate entity, is and what it shall strive to be. This symbol or logo reflects that IPCL is a single matrix of many diversified activities and products, emerging from one source and branching out in different directions, yet retaining its unity and identity. The lines flow upwards and outwards from a common base into infinity, reaching for unending growth, universal goodwill, general prosperity and excellence in everything. The green color used in the design reinforces the theme – aspiration and growth, rooted in the earth and in harmony with the other elements – water, light, air and space.

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VISION Be a globally preferred business associate with responsible concern for ecology, society and stakeholders’ value. We shall strive to generate best value for all associates we deal with, by constantly innovating and updating ourselves with best practices from across the world. “Think big, Think fast, and Think ahead. Ideas are no one’s monopoly”.

MISSION Continuously innovate to remain partners in human progress by harnessing science and technology in the petrochemicals domain. Continuously Innovative This concept is ingrained in IPCL’s culture. The founder chairman of our Group Shri Dhirubhai Ambani said, “Only when you dream it, you can do it” underscores our drive to become better and bigger company. Partners in human progress The products we make, find their way into products that help people with improved lifestyles. All of us at IPCL must understand and take pride in this. We must also use this concept to further connect IPCL with the external markets we serve. When we think in terms of markets we serve, we become more outside-in focused and we can better seek growth opportunities.

Harnessing science and technology We must put our knowledge in science and technology to work, to create solutions for our customers and for society.

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VALUES Integrity The relationships that are critical to our success depend entirely on maintaining the highest ethical and moral standards. As a vital measure of integrity, we will ensure the health, safety of our communities, and protect the environment in all we do. Respect for people We believe in the inherent worth of people and will honor our relationships. We, the employees of IPCL, are the engines of value creation. Our imagination, determination, and dedication are essential for growth. We will work to celebrate and reward the unique backgrounds, viewpoints, skills and talents of everyone at IPCL. Respect for people is measured by how we treat each other, by the contributions that flow from our diversity, by the productivity of our relationships, and by a job well done, no matter what the job is. Our customers are our partners in creating value; their loyalty is our greatest reward. Our shareholders are the beneficiaries of our success; their on-going commitment to us is based on returning to them consistent superior returns over time. We will strive to answer people’s most vital needs: for food, water, shelter, transportation, communication, health and medicine. Unity We are one company, one team. We believe that succeeding, as one enterprise is as important as succeeding independently. Balancing empowerment and interdependence makes us strong. We will work together; build relationships to create greater value for the customers.

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Outside-in-focus We believe that growth comes from looking at opportunity through the eyes of the customers and all those we serve. Taking an “outside-in” view ensures that our efforts are always relevant and that our unique talents are applied to “real world” opportunities. We will see through the eyes of those whose lives we affect, identifying unmet needs and producing innovative and lasting solutions. We will bring to this task all of our experience and knowledge. Agility At IPCL, we believe our future depends on speed and flexibility- mental, emotional and physical. Responding resourcefully to society’s fast-changing needs is the only road to success. We will meet the forces of change with power and grace. We will make necessary corrections that demonstrate flexibilities as well as courage, and that highlight our ability to keep ourselves aligned with a world in motion. Innovative We believe that meaningful productive change; solving problems; only comes by looking at challenges and opportunities from new angles and exercising our curiosity. In the name of innovation, we will make science a way of living. We will not only harness the science of the physical world, but the science of the mind and heart. Our job is to unlock the answers that make a fundamental difference to peoples’ lives. We will use technology to help lead society forward. We will conceive, design, engineer, and execute solutions that remove barriers to human potential and productivity. These values guide our vision, mission and all our transactions.

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QUALITY POLICY “We at IPCL are committed to meet customers’ requirements through continual improvement of our Quality Management Systems. We shall sustain organizational excellence through visionary leadership and innovative efforts.” Continual Improvement This concept finds its roots in our mission and is ingrained in IPCL’s culture. Continual improvement will lead to higher reliability in quality of products and services needed by our customers. This will make us outside-in focused and provides us with the needed drive and direction in achieving excellence in managing our business. Visionary Leadership This means that we shall collectively work to sustain excellence. Our vision is to develop enabling leaders who will carry our people to sustain excellence, to scale newer and higher benchmarks.

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ISO IN IPCL •

What is ISO? ISO is derived form the Greek word, ISOS which means Equal, Homogeneous & Uniform. ISO stands for ‘International Organization for standardization’. It is a worldwide federation of national standards bodies forms 150 countries, including India, based at Geneva, Switzerland, it promotes the development of standardization with a view to facilitating the international exchange of goods & services. ISO-9000 series was first published in 1987.

What is ISO-9000? ISO 9000 is a series of Models for Quality Assurance. It specifies uniform standards for developing and maintaining management systems procedures, methods and keeping records. Thus it is model for quality system.

What is Process model for ISO 9001? ISO – 9001: 2000 was introduced as revision in the year 2000. With this revision the concept of “Process model” was introduce to improve “Efficiency” of the system. A process is a set of system, which converts input to output.

ICOM Process of conversion utilizes certain “means” like people, system, tools, etc. and also uses certain guidelines or control like company policy, specification, standard etc. Thus a process can be managed through monitoring Input, controls, output & means (ICOM) Hence, ISO is a teamwork & participation form every corner be it operation, maintenance, materials finance etc. are essential. 22


Eight Principles of ISO-9001 1. 2. 3. 4. 5. 6. 7. 8.

Customer Focused Organization Leadership Involvement of People Process Approach System Approach to Management Continual Improvement Factual Approach To Decision Mutually beneficial supplier relationships What is ISO – 14000 (EMS)?

It was introduced in September 1986 with the publication of the ISO –14000 Standards by international organization standard, Geneva, Switzerland

ISO 14000 focuses on Management of Environment like ISO-9000 focuses on customer Satisfaction. 1. Provides a framework for Management of Environment impacts arising out of business activities, products and services. 2. Integrates this environment framework with overall business management activity 3. Contains requirement that result in a higher and steady improvement in performance level.

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Benefits of ISO14001 Internal benefit Structured and controlled environments management system (EMS) helps to: •

Enhance efficiency of internal processes.

Increases programmes.

Better cost control

Conservation of natural resources and energy.

Evidence for environment care and statutory

External Benefit Strengthens Environmental credibility with •

Customers

Statutory bodies

Community/environment group

Insurance

Judicial system

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.

ISO – 14001 Documentations Following are the documentation that contain under the ISO-14001

1. Environmental Management system Manual Environmental management system manual is the apex manual of IPCL-BC formulated on the basis of ISO14001 standard. It shows the vision of the management towards: •

Maintaining environmental norms as per statutory regulations

Conservation of natural resources and minimization of waste generation/pollution.

Minimization of environment impacts of petrochemicals operations.

Creating environmental awareness in employees and society.

Moving towards green economy through technological innovation and continual improvement.

2) Environment System procedure ESP describes the methodology and measures to achieve the vision/intent of the management stated in EMSM.

3) Environmental Aspect Register EAR provides the basis for environmental management by identifying and quantifying significant environmental aspect related to various activities, products and services by assigning impact scores.

4) Environment Legal register ELR describe the environmental legislations applicable to environment aspects of our activities, product and services.

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5) Environment management programme Considering the significant environmental aspect and techno-economic feasibility, EMP is taken to achieve the objectives and targets in line with the environment policy.

6) Operational control procedure OPC stipulates operating criteria for operations and activities that are associated with the identified significant environmental aspects in line with policy, objectives and targets. OCP also cover the situation where their absence could lead to deviations form environment policy, objectives and targets.

What are the focus area of IPCL, BC for the year ’05-’06? ISO-9001: To enhance customer satisfaction index (CSI) ISO-14001: Conservation of water resources

ENVIRONMENT POLICY The environment policy declared by IPCL reads as follows:Aims to maintain relevant environment norms as per prevailing statutory standards. Strives to conserve natural resources and to minimize waste generation in petrochemical operations. Contribute to a green economy for continual improvement and sustainable development in minimizing environmental impacts by technological innovation and research. Encourage environmental awareness in employees and society for vigilant hazard management and prevention of pollution.

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SAFETY & HEALTH POLICY The safety & health policy declared by IPCL reads as follows:Professionally manage and comply with the statutory provisions by giving high priority to health, safety and environment control programs. Ensure that technology absorbed, assimilated, upgraded and developed by the company lays emphasis on safety in and around the workplace. Ensure continuous improvement in safety and health aspects by carrying out safety audit, risk analysis etc. Constitute safety committees to promote safety awareness and ensure participation of employees in safety and health related functions. Organize structured training programs on continuous basis to educate employees and neighboring society on safety, health and loss prevention and control aspects. Ensure codification of safety standards and extend services to parties associated with the company on safety aspects. Recognize contributions made by an individual employee towards safety and health aspects.

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SIX SIGMA IN IPCL • What is Six Sigma? * Sigma (6) is: -The 18th letter of the Greek alphabet -Sigma is the symbol of Standard Deviation -A measure of variation

VISION

PHILOSOPHY

TOOL BOX

MANAGEMENT SYSTEM

DATA BASED METHOD

CUSTOMER FOCUS

BENCHMARK

AGGRESSIVE GOAL

SIX SIGMA IS A COMPREHENSIVE SYSTEM

• WHO ALL ARE DOING SIX SIGMA IN ASIA? GE, AlliedSignal, Motorola, Nokia, Toshiba, Samsung, Ford, Du Pont, Boeing, American Express, Siemens, Whirlpool, Kodak, Hyundai, Etc.

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• HISTORY OF SIX SIGMA •

Mid-80’s-A drive towards zero defects, a Metric that became a Vision.

Late 80’s, early 90’s-A methodology to achieve the goal.

Mid to Late 90’s-A comprehensive process improvement system and philosophy complementing the methodology to achieve the goal.

Today-A metaphor for business and process excellence.

BENEFITS OF SIX SIGMA – ORGANIZATION  Reduction of defects •

Lower costs

Higher customer satisfaction

Shorter cycle time

Predictable processed

 Culture change •

Focus on quality, the customer and doing it right

Pride in belong the best

Standardization for problem solving

 Highly trained workforce  Common language  Organizational, Institutional memory

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Master Black Belt: Roles: • Variable from company to company • Should make Champions life easier in mature deployment Responsibility: • Instructor and mentor of Back belts and Green belts • Training material developer • Deployment assistant to core team and champions • Keeper of project backlog list • Driver of project closure process • Leader of larger scoped projects

Black Belt: Roles: • Practitioner of DMAIC/DMADV Methodology Responsibility: • Ideally full time facilitator/leader of six sigma project team • Team should discover and recommend project solution • Executes 4 to 6 projects/ year

Green belt: Roles: • Carry the language of Six sigma deeper into the organization • Accelerate number of employees positively by Six Sigma Responsibility: • Become local advocate • Part – time implementers of smaller scope projects with direct impact to daily non Six Sigma duties • Assist BB with team activities and too application to project area

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Yellow Belt: Roles: • Extend the reach of the Six Sigma language in to the trenches. Responsibilities: • Assist Black Belts/Green Belts with data collection and tool application • Provide invaluable process expertise to Six Sigma team • Assist Process Owner with long term implementation of solution

Other Roles: •

Brown Belts: Receive same training as Black Belts but not a fully dedicated Six Sigma leader

Functional Managers: Current managers of potential Black Belt candidates that may remain involved in the reporting relationship of Black Belts

Six Sigma administrators: Assist all Six Sigma Roles in event coordination, communication, and reporting of Six Sigma activities.

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BEYOND BUSINESS INSTITUTION BUILDING IPCL has helped in establishing several institutions, which in turn help to sustain growth of the petrochemical industry. 

A pioneering data bank providing information and consultancy services in the area of petrochemicals both in India and abroad.

National committee on use of plastics in agriculture (NCPA) was constituted in 1981 and since its inception; IPCL has been actively supporting it with manpower and infrastructure. NCPA has been instrumented in propagating use of plastics in agriculture universities in different states.

Petrochemicals Management Development Institute (PMDI) was established in November 1991, to serve overseas training contract and create human resources for outside organization and for IPCL

Plastic Processing operator training: A scheme to general trained workforce for plastic processing industry, jointly with ITIs, Ministry of Labor and State Governments.

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ARTS AND SPORTS IPCL has a tradition of supporting activities related to arts, aesthetics and sports. 

A beautiful piece of contemporary sculpture by Shri Nagji Patel is a landmark in the city of Vadodara. It is also symbolic of IPCL’s deep commitment to promote art and culture.

A huge sports complex matching international standards has been developed at Vadodara. It has held men’s and women’s world cup cricket matches, international tennis tournaments besides being a venue to various national and state level games. Some of the IPCL players have made their mark at state and national level in various sports.

A giant mural adorns IPCL’s open-air theatre at Vadodara.

IPCL organizes regular camps for painters, graphic artists and sculptors. A Konkan craft festival was also organized at Nagothane in 1993.

The calendar themes for the last few years have depicted India’s rich cultural heritage. For instance, the famous musicians of Vadodara, the maritime heritage of Marathas,

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Nandlal Bose’s mural, British colonial art in Vadodara, and Prof. N. S. Bendre’s paintings on Nagothane.

IPCL has sponsored a book on the ‘Contemporary Art of Vadodara’.

SOCIO-ECONOMIC DEVELOPMENT The company, as a matter of policy, continues to meet some of the basic needs of the villages surrounding the complexes and developmental work is prioritized according to the needs of the people in the peripheral villages. The Company’s Social Welfare and community Development initiatives focus on the key areas of education, health care and the overall development of the communities in which the company operates. These initiatives are undertaken directly by the company and also through legally constituted trusts and welfare bodies. SVADES (Society for Village Development in Petrochemicals Area), MADER and JADER trusts have been established for up gradation of infrastructure facilities and developing the rural community in the vicinity of IPCL Complexes. The company has been quick to place all its resources at the service of the nation and community in time of crisis and emergency.

 

Health camps, Family Planning Camps, Dispensary and Mobile Medical Vans are provided to neighboring villages. Nursery and Industrial Training Institutes

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Cattle Development Centre and Vaccination camps.

Providing subsidized sanitation facilities to rural families.

Providing facilities like school building, books, and furniture for libraries play grounds, wells, approach roads and subsidized bus-service to school children.

Scholarships for graduate and post graduate students from Gujarat.

Technical assistance to the national institute for the blind.

Provision of drinking water at Nagothane villages.

Vocational training programs for the youth and women.

Tree plantation, diagnostic, eye camps, educational tours, training farmers etc..

ENVIRONMENTAL PRESERVATION IPCL professes the doctrine that any economic activity should not erode the very foundation of such activity. Development should therefore be with due regards to environment protection and not at the cost of it. IPCL has formulated a clear and focused safety, health and environment policy which reinforces the corporate commitment to these facets of business. IPCL has: 

Adopted elaborate water treatment and air monitoring at all sites.

Developed micro-organism for bio-degradation of cyanide water.

A multi-purpose hazardous waste incinerator.

Developed a 27-acre experimental farm at Vadodara where vegetables are grown and the use of treated effluents for agricultural produce studied.

A living museum of trees where 70 species proliferate over 40 acres of land.

Created an artificial lake from treated wastewater, which attracts over 100 species of birds from all over region.

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PLASTICULTURE IPCL is committed to the development of the use of plastics in agriculture also known as plasticulture. The plasticulture group works with the objective of providing quality end products like plastic firms for lining canals (Agrifilm), mulching, specialized UV stabilized film for green houses, plastic creates for packaging fruits and vegetables. It also works closely with existing organizations in agriculture sector to establish an effective distribution channel to ensure timely availability to the end users. IPCL guides existing manufacturing unit to the use of IPCL raw material and available know how. IPCL is also closely involved with the National Committee on use of Plastics in Agriculture (NCPA) under the Ministry of Agriculture.

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ACCOLADES 

Best petrochemicals company worldwide: 1990 (CI London).

ICMA award for forward technology development: 1981, 1985, 1991.

The federation of Gujarat mills & industries (FGMI) award and the development of scientific and industrial research (DSIR) award in the field of research.

National safety award 2001 from the British safety council, UK for substantial (90%) reduction n incidence rate (2002-2003).

Indira Gandhi memorial national award for best environmental and ecological implementation 2002-2003.

ISO 14001 certification 2002-2003.

Award of honor from Gujarat safety council for achieving more than 3 million man-hours accident free spells 2002-2003.

National energy conservation award – 2003 by the ministry of power.

National gas conservation award – 2003 by the ministry of petroleum and natural gas.

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PRODUCT PORTFOLIO

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LINE OF BUSINESS 

Polymers

Synthetic Rubber

Fibre & fibre intermediates

Industrial Chemicals

Surfactant

Solvents

PRODUCT LINE: Product line can be defined as the number of product having similar need of the people. IPCL has four major product lines viz... Polymer Chemical Fibre & fibre intermediates Rubber Above product lines are further classify as mentioned on the next page with particular products.

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IPCL’s Product Line

Chemicals

Acetonitrile Ammonium Sulphate Benzene Butadiene Butyl Acrylates Caustic Soda Carbon Black Feed stock Ethylene Ethyl acrylate Methyl acrylate Orthoxylene Propylene

Solvents

Cixon Hepton Solvent CIX

Surfactants

Polymers

Ethylene Oxide Linear Alkyl Benzene

Indothene Indoethene CC Indoethene HD Indoethene LL Indovin Koylene Koylene CP Koylene ADL Koylene ADL-CP

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Rubber

Cisamer 1220 Cisamer 1220GP Cisamer 1220OG Cisamer 1220PS Cisamer 1220CS

Fiber & intermediates Acrylonitrile Dimethyl Terpthalate Ethylene Glycol Indacryl Supacryl


Product Portfolio (Capacities in MTA)

Products

Vadodara Complex

Nagothane Complex

Gandhar Complex

Ethylene Propylene Butadiene Butane-1 Benzene Cixon Carbon black feedstock Acrylonitrile Indothene Indothene LL/Indothene HD Indothene HD Koylene Koylene CP Koylene ADL Indovin Cisamer Ethylene Oxide Ethylene Glycol Indacryl Supacryl Acrylates Petrez Linear alkyl benzene Para xylene Ortho xylene Solvent CIX Hepton Dimethyl Terpthalate Caustic soda Chlorine Power(mwh)

1,30,000 1,07,460 37,700 23,600 12,000 17,900

4,00,000 63,000 15,000 -

3,00,000 38,000 -

30,000 80,000 -

2,20,000

-

30,000 25,000 75,000 55,000 50,000 10,000 7,000 12,000 12,000 10,000 5,000 43,500 48,600 47,900 10,000 20,000 30,000 89

60,000 5,000 50,000 87

160000 1,50,000 10,000 1,00,000 1,30,000 1,15,000 154.5

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PRODUCT FLOW DIAGRAM: VADODARA COMPLEX

INDIAN PETROCHEMICALS CORPORATION LIMITED

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Application of Products Solid Products Main uses of polymers: Product LDPE/LLDPE

Uses Consumer packaging/film, extrusion wires, cable coatings, heavy

HDPE

duty bags, garbage bags, milk & shopping bags. Fertilizers/household packaging, woven sacks, cartons, crates,

PP PVC

luggage, pipes, paints, storage bins etc. Cement packaging, monofilament yarn, ropes, fishing nets. Water pipes, electrical conduit/wires, cables, sheets, footwear,

PBR

flexible films Automobile tyres & tubes, conveyor belts, footwear.

Main uses of fibre & fibre intermediates: Products AF/DSAF MEG CAN DMT

Uses Textiles, knitting yarns, sweeter. Polyesters Acrylic fibre, Acrylates, engineering polymers. Polyester staple fibre, polyester filament yarns, polyester. Liquid Products

Main uses of chemicals: Products LAB

Uses Raw material for household, industrial detergents,

personal care products. EO/BENEZENE/TOLUENE Phenol, dyestuff, pharmaceuticals, paints, industrial uses, Caustic Soda

caprolactum Alumina/paper.

LIST OF COMPETITORS 43


Competitors are those firms or individuals playing in the same industry i.e. producing a similar product. In other words, it means a threat to the firm in terms of acquiring the market share. The petrochemicals industry in India is dominated by three large producers in addition to us. These are RIL, GAIL & HP. Moreover, since petrochemical products can be freely imported in to India, IPCL & their domestic competitors face competition from products manufactured by global manufactures like Dow chemical, Exxon Mobil, Royal, Dutch, Shell & SABIC. They believe that their cost effective integrated petrochemicals facilities, emphasis on customer satisfaction reliability of supply & product quality provide them with competitive advantages in many of their products. IPCL changed insignificantly when RIPL, which is part of the Reliance group, acquired management control of I.P.C.L. The largest company of Reliance group is RIL, which is INDIA’S largest petrochemicals company. We believe that synergy of I.P.C.L with RIL

will enable us to compare the domestic & international market more effectively.

POLYMERS

44


RIL & IPCL have the first & second largest market share responsibility in domestic polymers. The table below gives the respective market share in terms of the industry products.

Industry HDPE LLDPE LDPE Participation

PP

PVC

TOTAL

Chemplast

__

__

__

__

5.5%

1.3%

OCM Shriram

__

__

__

__

4.3%

1.0%

DCM

___

__

__

__

8.5%

2.0%

Finolex

__

__

__

__

16.7%

4.0%

GAIL

18.6%

10.0%

__

__

__

5.4%

Haldia Petro

16.4%

21.3%

__

7.0%

__

8.7%

IPCL

26.0%

33.2%

100.0%

15.6%

27.0%

27.5%

NOCIL

7.1%

__

__

__

__

1.6%

RIL

31.9%

35.4%

__

77.4%

37.9%

48.5%

TOTAL%

100.0

100.0

100.0

100.0

100.0

100.0

FIBRE AND FIBRE INTERMEDIATES:-

45


The acrylic fibre industry has historically witnessed low profit margins and operating rates both in India & internationally. This has resulted in under utilization of capacity by them as well as most of the domestic competitors. Their competitors are:•

Acrylic limited=34%

Pashupati Acrylic limited=20%

Vardhman Acrylic limited=14%

Consolidated fibre corporation limited=10% IPCL operates 21% of the domestic production capacity. Their competitive

advantage in this market is their access to methyl acrylate which is raw material that they produce themselves. RIL is largest producer of MEG in INDIA & operates 65% of the domestic production capacity. RIL consumes a significant portion of its MEG production as raw material for its downstream polymers units. IPCL operates 24% of the domestic production capacity & are the largest merchant seller of MEG in India. The third largest producer of MEG Indian glycol limited operates 8% of production.

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INTRODUCTION TO MARKETING OF IPCL

Marketing is inevitable in present era as, “consumer is the king”. Marketing activities includes identification of unfulfilled need and wants, defines and measures which target market the organization can best serve. Decides an appropriate product, services and programmed to secure those market and calls upon every one in the organization to think and serve the customers. IPCL’s Marketing Department has six business groups, which are 1. Chemical & Business Group 2. Polymer Business Group 3. Fibre & Fibre intermediate Group 4. International Business Group 5. Marketing operations& Planning Group 6. Plastic culture The Department uses both the methods of channels of distribution i.e. direct and indirect. IPCL also has its regional offices at Ahmedabad, Bombay, Chennai, Delhi, Bangalore & Calcutta. They have their Sales Centers at Jaipur, Bhavnagar, Indore, Pune, Nagpur, Kanpur, Cochin, Patna and Bhubaneshwar. IPCL exports products like LDPE, LLDPE, HDPE, PVC, PPCP, PP, LAB, AF, MEG, PX, Yarn, PIB etc.in South Eastern Asia, Gulf countries, African countries and Europe.

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LOGISTIC ACTIVITIES FOR DIFFERENT PRODUCTS Fibre Group Fibre division forms 15% of the business of IPCL in terms of its sales %. The customer profile varies from tiny sector to middle to very large volume ones. There are about 40 customers, majority of which are located in the North. The Product is supplied directly on delivery basis and also from warehouse located in Ludhiana to cater to the requirements of the customers.

Chemical Group Chemical division is forming approximate 20% of the total Business of IPCL in terms of its sales percentage. The customer profile varies from tiny sector to middle to very large ones. The scattered number of customers figures out to 200. The product is supplied either on delivery basis or directly to the customer.

Polymer Group The polymer business forms about 65% of the total business of IPCL. The customer profile varies from tiny sector to medium to very large volume ones. The customers are spread throughout the country totaling to about 20,000. The product is supplied to the customers: a) Via Distributors and Consignment stockist. b) Via Direct sales.

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OBJECTIVES OF MARKETING MANAGEMENT The main activity of the development includes the following: •

Strategic market development.

Formulations of marketing plans/cash flow plan

Competitor’s strategy updated and co-operative strategic responses.

Expert marketing as a tool of value addition.

Setup of an effective and efficient system for expenditure.

Prepare all necessary production and sales reports.

Floating various tenders and preparation of tender documents.

Strategic integration of development plans with national plans.

MARKET SEGMENTATION It is a fact that only marketer cannot get maximum benefit from any analysis of marketing as a whole. Therefore, to suit with the proper market of the products of the organization, the marketer has to divide the total market into sub markets where the group of consumers is having some similar needs and wants, to get maximum buyers response to marketing programme. The conventional way is to segment the market into variables like age, sex, family, size, income, occupation, family life cycle, etc. Here main products are intended to industrial use. Therefore, the main targets are the industries that are based on the following terms: -Petrochemicals Products

- Plastics

-Solvents

- Chemicals

IPCL produces such products that are directly or indirectly related to different communities. For example plastic products like LDPE, HDPE etc. has broad usage in our day-today life, not directly as LDPE or HDPE but they are converted into usable goods by other manufacturers as per the demand of the market.

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For e.g. we are using, Polyethylene bags in out day-to-day life, which is made by LDPE. Thus every industry which is using plastic is the market for IPCL. It is true for other products also. Thus total industrial approach is right thing for IPCL and it is doing so. However common people cannot directly use IPCL’s products. Marketing Department is the nerve center of any organization. It is the most vibrant part responsible for the distribution of the products produced by an organization. For an industrial goods manufacturing company like IPCL, which is market driven it is its Marketing Department that has to be at its service all the time. The Marketing Department is divided in: A. PRODUCTS MANAGEMENT B. SALES MANAGEMENT C. SUPPORT MANAGEMENT (A) PRODUCTS MANAGEMENT The Products Management is further divided into 3 sub-groups. They are as below: a) POLYMERS Business Group (PBG) b) CHEMICALS Business Group (CBG) c) FIBRES & FIBRE Intermediates Group (F & FIBG) The Polymers group handles all the Polymer Products. A General Manager to whom the Deputy General Manager, Product Manager and other Officers reports, heads the Polymer group. The structure of Chemical and Fibre group is similar to Polymer group except that they are headed by a Deputy General Manager. Chemicals and Fibre are not as large groups as Polymers, thereby requiring comparatively less manpower.

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(B) THE SALES MANAGEMENT The sales management group comprises of exports and domestic market. 1. INTERNATIONAL BUSINESS GROUP (IBG): IPCL is essentially a manufacture exporter i.e. exports its manufactured product. In some cases it is also a merchant exporter i.e. it provides raw materials which some companies further process it and then IPCL exports it. IPCL’s major exporting countries are South East Asian countries, Africa, South America and Australia. Most of IPCL’s products are on FOB (Free On Board) basis. FOB means that IPCL has to pay cost incurred to load the material on ships. It also exports the products on C&F (Cost and Freight) basis. C&F means that the company has to pay the costs incurred in loading the goods at the customer’s warehouse. Among Polymers, IPCL exports PVC, LDPE, LLDPE, HDPE and APPWAX. Among Chemicals, IPCL exports LAB, CSF, CSP and MEG. Among Fibre, IPCL exports only Acrylic fibre. In India IPCL has a distributor for distribution of its products. Similarly for overseas, it has associates like AMGULE, VINMAR etc. These associates help in identifying IPCL’s customers abroad. IPCL sets its product prices based on the South Asian Market.

(C) SUPPORT MANAGEMENT Support group assists the marketing development in carrying out its activities. These groups do not directly assist in the marketing activities, but do so indirectly. IPCL’s marketing group has 3 support groups, viz: 1. Strategic Marketing Group (SMG) 2. Product Application Center (PAC) 3.Marketing Operation and Planning (MOP)

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These groups collect vital inputs in terms of keeping updated, latest trends and development in the domestic and international markets. They carry out special studies related to overall marketing functions from time to time. They communicate to various departments and give them feedback about their activities.

1. SMG (Strategic Marketing Group) This group essentially carries out activities related to market research, market intelligence, setting up data. It also carries out specific assignments and market related studies. Their line of control is restricted to carrying out market specific or product specific studies, getting latest information, co-coordinating with other product manager in setting of prices.

2. PAC (Product Application Center) PAC acts as an interface between the company and the customers. It is the technical hand of the marketing department. It helps in developing new products in the market. If the consumer has any problem regarding the quality, grade etc of the product they have to approach to the PAC. PAC also has to communicate the information gathered by it to the business groups.

3. MOP (Marketing Operation and Planning) MOP is essentially a logistic group. The most important activity of MOP is to facilitate movement of goods from the company’s plant to its distributors and customers. It coordinates with different transport companies in order to carry out effective distribution of goods.

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MARKETING OPERATIONS AND PLANNING (LOGISTIC GROUP) IPCL has achieved considerable progress in the area of logistics in terms of its selling strategy due to the economic reforms that resulted in opening of the domestic market to the international competition. Special groups were set up to collect and compile market information for a better response to the market challenges. Appropriate marketing strategies were worked out based on this information. The movement of product is done through an Annual Transportation Contract basis, which is finalized during the month of April every year. The company’s market is widely spread over 20 countries in Asia, Africa and Europe, besides the domestic market. The growth has been possible because of the sound marketing, Application Development, customer service, sales and distribution network. The Sales and Distribution network comprises of 5 Regional Offices, 5 Sales centres, 6 sales offices, 79 distributors and over a 100 distribution points spread across the country. The company also provides technical assistance and customer service at each of its Regional offices.IPCL’s market friendly approach can be known by how well it is serving its customers. It assures of providing services to over 90% customers within 50 kms reach and to maximum 5% of the customers beyond 100 kms. None of the customers have to travel for more than 250 kms for IPCL’s Products.

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IMPORTANCE OF MOP (LOGISTICS GROUP) MOP group is the backbone of the whole organization which is responsible for the warehousing and movement of the product from different plants to various customers, distributors, Regional Offices, etc. The principle task of MOP is Logistics management. The logistics movement of Solid, Liquid, Gaseous products is done either by roadways, railways or even by pipelines. MOP is responsible for moving about 5 lakh MTs of IPCL’s products annually. The Regional offices collect the orders and submit their requirements to the Polymer business Group, Chemical Business Group and Fibre business Group respectively. The Respective Business groups then send the requirements to the Marketing Operations and Planning groups. The MOP group undertakes all the logistic activities. The other activities include processing freight bills for payment, coverage of insurance polices, hiring of warehouses/storage tanks, appointment of surveyor, appointment of C&F Agents for export, movement through rail, shipping and roadways. IPCL has 5 Regional offices at Delhi, Mumbai, Calcutta, Chennai and Ahmedabad respectively. Its sales centers are at Baroda, Daman, Hyderabad, Indore, Ludhiana and Kanpur. Its sales offices are at Baroda, Bhavnagar, Jaipur, Nagpur, Pune and Rajkot.

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ORDER PROCEDURE PROCESS IPCL customers can place their orders through its regional offices or its distributors. They have to make advance payment through check/DD/Cash. The major function of different Regional offices is to receive payment, to make the sales orders and to calculate relevant taxes and discounts and attend to customer complaints. If all conditions are satisfied, then Regional officers enters the customer order in SAP system. At the head office the concerned Business group receives the customer orders from five Regional offices located all over the India. The major function of Business group is to decide the prices of different materials, customer wise allocation and region wise allocation of the materials. After checking the availability of material, Business Group releases the pending order through SAP system to MOP (Marketing, operation & planning) department. The major function of MOP is to check the availability of material in different warehouses, to make the dispatch plan, to release the dispatch plan to the concerned transporters and to see that the respective loading for the day gets over well in advance. The final dispatch plan is prepared and given to the transporters in the previous day evening. MOP also gives some additional dispatch plan throughout the day, which again depends on the order that comes from the head office. Transporters have to place their trucks in advance. The Product Transfer Department (PTD) releases the material to respective transporters and in turn transporters deliver the material to customers.

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SOLID PRODUCT MOVEMENT CYCLE THROUGH SAP Sr. No. 1

Transaction Code

Description of Transaction

ZPOR

2

YTTS TPN

3

YTTS TOL

4

VLO2N

5

ZIPS

6

YTTS MGX

Pending Order Report The MOP prepares this report in advance based on the availability of material stock and then the indents are placed to the transporter. Truck Tracking System Truck Parking Entry Based on the indents placed to the Transporters, they arrive with their respective trucks, each of the truck is allotted the Truck Reporting no. Truck Tracking System Truck Order Linking Once the truck is reported, order linking takes place based on the quantity, type/grade of the material to be dispatched in that truck. Picking and Post goods issue. After the truck order linking is done, material picking note is prepared based on the type, grade and quantity of material to be moved from a particular location. Invoice Processing and Printing After the truck is loaded with the required quantity of material, the MPN is handed over with the invoice to the transporter before he leaves. Truck Tracking System Main Gate Exit After checking the weight and Tolling of order, the truck is allowed to move.

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PROCEDURE The MOP department every evening receives pending order which is to be dispatched the next day, from the concerned business group. According to the pending order and the production quantity / stock availability at different warehouse, final dispatch plan (plant wise & transporter wise) is prepared and given to the transporters in the evening. MOP also gives some additional dispatch plan for the day, which again depends on the order that comes from the head office. Transporters are informed of the plan in advance. Transporters thus get the plan in the evening and they have to place their trucks the next day. If they fail to place their truck, then they have to pay the non-placement penalty, which is 25 Rs. /MT i.e. 500 Rs for one truck of 20MT. The non-placement plan is given to other transporters or trucks are hired from the open market, and the difference in the rate will be deducted from the respective transporters account. After trucks arrive at the IPCL parking plaza, trucks and their document are checked and then TPN is done. Document, which are checked at the parking plaza are driving license, PUC, RC book, Insurance of truck and National permit. Before entry of the trucks inside the complex, driver has to attach a muffler to the truck for safety purpose. Then the truck goes at weighbridge for weighing the empty truck (WBN). After these the order linking is done at the concerned warehouse (TOL). The warehouse employees then place the material that is to be dispatched at the loading point, with the help of forklift operator who will put the respective material at the loading point. There are two forklifts each at loading point and at packaging point for each warehouse. After the material has been placed at the loading point, labors will load the material in the truck. IPCL has signed labor contract with two labor contractors and concerned contractor has to bring certain number of labors as mentioned in the contract. Then the Product Transfer Department (PTD) makes invoice (INV) cum challan of the truck. (Invoice cum challan-Annexure) The truck then goes at weighbridge (WBX). At this point the security checks the weight and compares with the initial i.e. tear weight and finds out the difference between them. If the difference is much higher then the truck is sent back to the warehouse. After this, Main Gate Exit (MGX) of the truck is done by the security.

57


FLOW DIAGRAM FOR DISPATCH PROCEDURE OF SOLID PRODUCTS

TPN (TRUCK PARKING ENTRY) ENTRY OF THE TRUCKS WB (WEIGH BRIDGE)

WBN (WEIGH BRIDGE ENTRY) ENTRY TRUCK IS WEIGHED

INV (INVOICE) INVOICE DONE WBX (WEIGH BRIDGE EXIT) LOADED TRUCK IS WEIGHED

MGX (MAIN GATE EXIT)

58

LOADING TIME

PICK UP NOTE

CYCLE TIME

TOL (TRUCK ORDER LINKING) TRUCK ENTERS THE WAREHOUSE


LIQUID AND GAS PRODUCTS Liquid products • • • • • • • • • • • • • • • •

Benzene Aromatic Feedstock C6 TOLUOL Raw Toluol (RTLOL) NAPTHA C-7 BUTADINE LAB HNP LR2528 HEAVY ALKYLATE MEG PEG ETHYACRYLATE METHYLACRYLATE BUTYLACRYLATE AMMONIUM SULPHATE

GAS PRODUCT • • • • •

C-4 RAFFINATE –I C-4 RAFFINATE - II ETHYLENE OXIDE NITROGEN SLOP OIL

59


LOADING PROCEDURE FOR LIQUID PRODUCTS In case of liquid loading procedure, customers have to send their trucks for loading the material. In case of stock transfer and export, transportation is carried out through RELOGISTCS. Chemical Group located in Vadodara makes sales orders. Order procedure for liquid product is same as solid products.

STEPS FOR LOADING OF TANKERS: • •

• • • • • • • •

The customer orders are tailed with Daily Dispatch Plan. Entry of trucks (TPN). Here documents such as original RC BOOK, insurance, PUC, Tankers fitness certificate (Issued by chief controller of explosives), Driver License, National permit, Pressure test (carried out by private as well as government agencies) etc are Checked. After this trucks are physically checked. Then the Truck Order Linking (TOL) is done. Weigh Bridge Entry (WBN). After WBN, if the tanker is of Relogistics then it is sent for testing. Now, Tankers are sent for loading. After loading the material weight bridge exit (WBX) is done. Load office exit. (LOX) Invoice preparation. Main Gate Exit (MGX)

LOADING POINTS There are 13 loading points for loading liquid at IPCL Vadodara complex . Sr. PRODUCT NUMBER OF LOADING No. POINTS 1 BENZENE 2 2

NAPTHA

3

3

C-6

1

4

LAB

2

5

HNP

2

6

MEG

2

7

LR 2528

1

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DISTRIBUTION CHANNEL AT IPCL

The distribution channel for solid products is shown in the following block diagram.

Customer Sales

IPCL Plant

Warehouse

Stock Transfer

IPCL Warehouse

CUSTOMER

Distributors Warehouse

CUSTOMER

Export

CUSTOMER

The distribution is basically done through road with the help of trucks. IPCL has made a contract with some transporters for transferring its goods to the different cities in India. IPCL follows 1 level channel for distributing its goods through out the country. IPCL sells its goods through distributors warehouse located in different cities of India. It also provides door delivery of the goods to its customers. IPCL follows three types of distribution strategies. 1) Stock Transfer 2) Direct Sales 3) Export

61


SUPPLY CHAIN MANAGEMENT Supply chain management includes the collection of activities from procurement of raw material to production to delivery to the end users. SCM is the co-ordination or integration of a series of activities/processes; which procure, produce, and deliver products and /or services to customer. Place is the key element of the marketing mix with which logistics interfaces directly. Customer service is an output of the logistics system.

LOGISTICS OBJECTIVE: Minimize total costs of the product to the customer where Total costs = Transportation costs + Warehousing costs + order processing costs + lot quantity costs + inventory carrying costs.

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INTRODUCTION TO LOGISTICS DEFINITION: “Logistic means management of the flow of goods or material from point of origin to point of consumption and in some cases even to the point of disposal.” The Council of Logistics Management (CLM) defines: Logistics is that part of supply chain process that plans, implements and controls the efficient, effective flow of and storage of goods, services and related information from the point of the point of consumption in order to meet the customers’ requirement.

LOGISTICS INBOUND LOGISTICS In inbound logistics, the material moves from the supplier to the company’s raw material warehouses, then transportation of raw material from ware houses to the plants i.e. to the production houses.

OUTBOUND LOGISTICS It is mainly concerned with 3 types of logistics. 1. Primary logistics: - in which materials moves from plant area to C&F agent. (Cost and freight) or from company warehouses to the C&F warehouse. 2. Secondary logistics: - in which materials flow would be from C&F agents to the end users (customers) or wholesaler or retailer. 3. Tertiary logistics: - in which material flow from the retailer to the customers.

OUTBOUND LOGISTICS AT IPCL 63


Block diagram of order procedure for solid products Order CUSTOMER PLACE THE ORDER

PRODUCT DELIVERED THROUGH TRANSPORTERS

PTD TTTTT (WAREHOUSE)

(ADVANCED PAYMENT BY CHEQUE OR DRAFT) RELEASES DISPATCH PLAN

REGIONAL OFFICES PLACE THE ORDER IN SAP

PENDING ORDER RELEASES

HEAD OFFICE (BUSINESS GROUP)

MOP DEPARTMENT

EXPLAINATION The customers of the IPCL are located all over India. The customer places the order at their respective Regional offices. The customer has to make advance payments through the cheque, DD or cash. The major functions of different Regional offices are to receive payment, to make the sales orders and to calculate relevant taxes and discounts and attend to customer complaints. If all conditions are satisfied then Regional offices enters the customer order in SAP system. At the head office the concern Business group receives the customer orders from five Regional offices located all over the India. The major functions of Business group are to decide the prices of different materials, customer wise allocation and region wise allocation of the materials.

64


After checking the availability of materials, Business group releases the pending order through SAP system to MOP (Marketing, operation & planning department) The major function of MOP is to check the availability of material in different warehouses, to make the dispatch plan, to release the dispatch plan to the concerned transporters and to see that the respective loading for the day gets over well in advance. The final dispatch plan is prepared and given to the transporters in the previous day evening. MOP also gives some additional dispatch plan throughout the day, which again depends on the order that comes from the head office. Transporters have to place their trucks for the additional plan given throughout the day. The Product Transfer Department (PTD) releases the material to the respective transporters and in turn transporters deliver the material to customers. PRIME ACTIVITIES OF LOGISTICS: The key activities of logistics are:

1) Inventory Maintenance It is usually not possible or practical to provide instant production or instant delivery to customers. In order to achieve a reasonable degree of product availability, inventories need to be maintained as buffers between supply and demand. The extensive use of inventories results in the fact that, on the average, they account use of approximately on third of logistics costs, making inventory maintenance a key logistics activity.

2) Order Processing Order processing cost tends to be minor as compared to transportation or inventory maintenance costs. Nevertheless, it is a primary logistics activity. Its essential nature comes from the fact that there is a critical time element in getting goods and services to customers. Also it is the primary activity that triggers product movement and service delivery.

3) Transportation

65


For most firms, transportation is the most important logistics activity, simply because it absorbs, on the average, approximately two thirds of logistic costs. “Transportation” refers to the various methods for moving a product. Road, rail, water and air are just a few of the popular choices. Management of the transportation activity usually involves in making choices regarding the method of shipment, the routings, and the utilization of vehicle capacity. TRANSPORTATION AT IPCL

Effective transportation management can help to reduce the total cost. It functionally provides two major functions: product movement and product storage. Here at I.P.C.L. Baroda Complex, the main model used for transportation are well managed and effective in cost. The transportation is done by road and pipeline. Pipeline is used to bring the raw material to plant and final product at loading point. The road transportation is used for solid and liquid products. For delivery of the products, mainly 19 transporters are selected through bidding which covers each and every region of India. Various regions of India are allocated to particular transporter. After selecting transporter, the contract procedure takes place. In contract, the contract conditions are written which are prepared by expertise of I.P.C.L.

ROAD TRANSPORTATION SALIENT FEATURES OF TRANSPORTATION CONTRACT

A contract period is generally for one year.

The trucks should be in perfect roadworthy condition and equipped with all necessary permits and licenses.

The contractor is responsible for paying road tax, entry tax, goods tax, RTO tax and all other taxes, levies and surcharges.

66


The contractor is responsible for providing required number of trucks as per indent for each destination within specified working hours. In case of failure, I.P.C.L. has the right to hire the trucks at open market rates and deduct the difference of rates from the defaulting contractor.

The consignment should be delivered within the permissible transit period, failing which penalty will be imposed for each day of delay.

Trans-shipment is strictly prohibited. The transporter is solely responsible for any act of negligence.

The contractor is required to submit his bills along with necessary documentary evidence regarding safe delivery of goods at the destination, within the prescribed time limit.

Neither the corporation nor the transporter is liable for any failure or any delay if caused by Force Majeure, i.e. reasons like fire, explosion, flood, earthquake, strikes, epidemics, government and other uncontrollable acts.

A reasonable security deposit as a percentage of estimated value of contract is obtained from the contractor to take care of any financial loss caused to the corporation by the contractor.

Delivery of goods – It means that the delivery of current quantity and quality of goods as per invoice at the destination and obtaining the proof of delivery of the consignment from the consignee on the lorry receipt. This shall include the signature and rubber stamp of the consignee, receipt quality, date and time of receipt, shortages, damages, cut and torn quality, sweeping quantity.

Transit loss and Accidents - I.P.C.L. shall recover the full value of the shortage quantity of goods, caused in the interalia due to in damage, pilferage and theft in transit or non-delivery etc.

The driver of the vehicle should carry the duplicate copy of the excise invoice which indicates excise particulars. In the event of loss of such documents, drivers shall file a FIR at the nearest police station.

67


The event of an accident, theft, pilferage, I.P.C.L. is entitled to recover the entire value of the goods.

In the event of an accident, robbery, theft, pilferage, vehicle having been stolen or lost or vehicle meeting any uncured incident, necessary actions required under the law to be taken.

Malpractices and Contamination of goods – The transporter shall ensure that the goods do not get contaminated due to any cause whatsoever.

If a vehicle used under this agreement found to be involved in any malpractice by the vehicle owner or the driver or any other person, I.P.C.L. shall blacklist the vehicle and immediately suspend its operation.

Transit Period – A standard transit time is decided for each route is decided. For vehicles taking more than such a transit time, penalty shall be levied.

RLW Restrictions (Registered Laden Weight) –The transporter shall ensure that the weight and the volume of the goods that are loaded for consignment in the vehicle is within the RLW limits prescribed by the vehicle RTO.

PUC (Pollution under Control) – The vehicles shall comply under all pollution requirements including PUC certificate.

Termination – The agreement shall stand automatically terminated in the event of 1. Any party being adjudicated, insolvent or being a company resolved or ordered to be wound up 2. Where breach, default or violation of any of the terms of the agreement is committed. 3. The agreement can be terminated by each party by giving a written notice of 30 days to the other party without incurring any liability.

CONDITIONS FOR THE CONTRACT IN IPCL

68


1.

The corporation reserves the right of accepting or rejecting the whole or any part of the tender. The tenderer should code competitive or workable rate for operating throughout the contract period.

2. EMD (Earnest Money Deposit) – EMD of successful tenderer shall either be converted in to security deposit towards the fulfillment of contract or refunded after submission of bank guarantee. 3. Security deposit – in case of cash security deposit the balance amount is paid by way as under •

Demand Draft

Bank guarantee from any nationalized bank or specified bank in favor of IPCL.

4. Corporation shall pay interest @ 8% per annum on the cash/DD security

deposit.

5. FORCE MAJEURE – uncontrollable conditions like fire, explosion, and natural causes like flood, earth wake, strikes etc. neither the corporation nor the transport contractor shall be liable or deemed to be in fault. 6. Settlement of dispute/ arbitration – in case of any disputes the rules of arbitration of Indian council of arbitration shall be binding of the party.

RAILWAY TRANSPORTATION •

Railway transportation also plays an important role in outbound logistic of I.P.C.L

Planning stage - Ensures availability of orders, material availability (i.e. grade wise as per the order), availability of loading labors, cleaning of wagons etc. 69


Demurrage is the penalty for delay in loading the material in the wagons which is maximum 5 hours.

Warfare is the penalty for unloading the material from the wagons and removing it from the platforms to the company’s destination. Maximum time limit is 5 hours.

WRF (Wagon Registration Fee) is Rs.600/- for 4 wheelers and Rs. 800/- for 8 wheelers.

I.P.C.L. product fall under category 210 for railway transportation, the prices of which are already mentioned in the category list of the railways.

‘Church gate’ is the controlling station for Western Railways.

Cancellation of booking for wagons is allowed before 48 hours.

Railway Receipt is issued by the railway authority where it is mentioned ‘said to contain so and so material’. It means railway believes what the company says but it is not responsible for any deviation in the quantity during transportation.

• •

For safety company seals all the wagons with one- time locks. Railway has the authority to check the goods any time for quantity and security purpose.

• •

Destinations are informed of the plan in advance for smooth transportation. Insurance of the consignment is taken for compensation if any damage or loss of goods takes place.

Advantage of railway transportation is that it spreads less pollution and the government earns revenue. It is cheaper way of transportation when goods are to be transported to farther distances in bulk.

Disadvantage – There are more chances of damage in handling of goods during railway transportation.

TRANSPORTATION BY WATER ROUTE INTERNATIONAL TRADE IMPORT:

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Import has been defined as bringing into India the goods from a place outside the India. India includes the territorial water of India. Territorial waters extend up to 12 nautical miles into the sea from the coast of India. The liability to pay import duty commences as soon as goods enter the territorial water of India. However for administrative purpose, it is collected when the goods are unloaded on the land of India. EXPORT: Export has been defined as taking goods out of India to a place outside India. The liability to pay export duty commences as soon as goods leave the territorial waters of India. However, for administrative purpose it is collected when goods are on the vehicle for transport out of India.

EXPORTS THEORY RELATING TO THE TOPIC Export is one of the most lucrative business activities in India. The government also provides various incentives to the exporters for earning valuable foreign exchange for the country by meeting their requirements for importing modern technology and essential inputs. Besides, the income from export business is also exempted to the specified extent under the Income Tax Act, 1961. Refund of central excise & custom duty on export is also made under the duty drawback scheme of the govt. There is no sales tax on products meant for exports. Various schemes have been simplified to a great extent under new EXIM policy 2002-2007.

Definition of International Logistics: Designing and managing of a system that controls the flow of material in and out of International Corporation. Logistics gained recognition since World War II when, marketing became predominant over manufacturing, requiring concentrated attention to customer wants.

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The word “logistic” means “the movement, storage and supply of troops and equipment.” The important point about Logistics is that it is much more than transportation or the mere physical movement of goods. International logistics decision affect the number and location of production and storage facility, production schedule, inventory management and even firm’s level of involvement in international competition. In other word we can say that it is closely associated with the ‘Just in Time (JIT) management technique.’ Basically, logistics is the ability to get the right product at the right place at the right time. Overall it is the planning, organizing, controlling and execution of the flow of goods from purchasing through production and distribution to the final customer in order to satisfy the requirements of the market. It combines production, distribution and transportation on global basis. So, the basic function of Logistics in international competition, is to create “Place and Time utility” in goods, locating them at the right place, at the right time and also in right quantity to customer demand.

CATEGORIES OF EXPORTERS Exporter means a person who exports or intends to export and holds a valid ImportExport code number. Exporters can be categorized in to the following: 

Merchant Exporter – He is one who manufactures goods from the market or from a manufacture and then sells them to foreign buyers.

Manufacture Exporter – He is one who manufactures goods himself and intends to export such goods to foreign buyers.

Export oriented unit, and

Export processing zone – Units undertaking to export their entire production of goods and services may be set up under the EOU scheme and EPZ scheme.

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HANDLING OF EXPORTS For any manufacturer to commence export, he has to follow four basic steps:

Willingness to export and have need for world market survey.

Establish a buyer and negotiate.

Complete all formalities relevant to his products as per the requirement of the country of origin.

Find a suitable clearing and forwarding agent to handle the actual export of the goods. The succeeding pages are devoted to actual movement of cargo from the point of origin till the point of discharge.

EXPORT MARKETING IPCL export a wide range of products to approximately 13 countries. Major 3 markets are China, Vietnam and the European Union which accounted for approximately 54%, 19% and the 8% respectively of total exports. I.P.C.L. obtains “Training House status from the government which gives certain administrative and regulatory advantage”. With growing international competitiveness, IPCL was able to make deeper impact in advance in global petrochemical markets.

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This is reflected in IPCL’S increased export.

During the year 2004-2005, I.P.C.L. exported 1,638 crore (US $ 374 million) worth manufacturing goods. Indian Petrochemicals Corporation Limited is now a Reliance group company. An integrated IPCL-Reliance marketing team markets the company’s products. The integration aims to facilitate customer to shop his entire raw material needs from a single window. In view of this the B2B facilities of IPCL as well as Reliance have been merged.

ROLE OF A C.H.A.; FREIGHT FORWARDER & LOGISTICS IN INTERNATIONAL TRADE: CUSTOMS HOUSE AGENT: “According to sec. 146 of the customs act 1962, CHA is a person licensed under the central board of Excise & Customs regulation to act as an agent for the transaction of any business relating to entry or departure of conveyances or the import or export of goods at any customs station”.

NEED FOR A CHA: FRIGHT FORWARDER: LOGISTICS AGENT: The import or export of goods involves quite a lot of procedural formalities. These formalities have to be observed by importer, exporter or passenger as the case may be. But in most cases, the custom station would be far away and it may not be possible for the importer / exporter to attend to such work promptly. As clearance is allowed only after the completion of formalities and payment of duty, a provision for licensing customs house agents, to present the importer / exporter for the clearance work, has been made in the customs act 1962.

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SERVICES PROVIDED BY CHA: 1. Preparing the customs entry form and assuring that all the necessary documents are in order for processing through customs channels. 2. Calculating the amount of duty according to the “Tariff Act�. 3. If necessary, requesting extensions of the general order time from the collector of customs. 4. Providing the surety bond required by the customs authority, which guarantees full payment of all duties. 5. Arranging for the goods to be transferred under bond from the port of entry to an interior destination for customs clearance. 6. Obtaining special permits for immediate delivery of perishable goods. 7. Preparing the warehousing entry bond and arranging for goods to be transferred to the bonded warehouse. 8. Arranging for the withdrawal of goods from the bonded warehouse in part or completely. Payment of duties will be made accordingly to the quantity of goods withdrawn. 9. Pursuing appropriate channels if disagreements occur with customs over rate or value of appraised goods.

EXPORT PROCEDURE START EXPORT ORDER ORDER ACCEPTANCE LETTER OF CREDIT PRODUCTION & PROCUREMENT

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MARINE INSURANCE POLICY INVOICE PACKING LIST SDF (STATUTORY DECLARATION FORM) CERTIFICATE OF ORIGIN AR-E1 FORM SHIPPING BILL STOP

PROCEDURE: 1. EXPORT ORDER: An export order is a commercial transaction, which is important to the exporter & the importer, and is also of concern to their respective countries, since it affects the balance of payment position of both the countries. The exporter is required to produce copies of export order to various government departments / financial institutions. The company receives the confirmed export order / purchase order from its overseas customer on agreed terms & conditions. 2. ORDER ACCEPTANCE: The order acceptance is another important document prepared by the exporter, confirming the acceptance of order placed by the importer. Under this document, the

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exporter commits the shipment of goods covered at the agreed price during a specified time. It normally covers the name & address of the indenter, consignee, port of shipment, country of final destination description of goods, terms of payments etc. 3. LETTER OF CREDIT(L/C): L/C is a document issued by the importer’s bank in favor of the exporter, giving him authority to draw bills up to a particular amount covering a specified shipment of goods & assuring him of payment against the delivery of shipping documents. The buyer’s bank sends original L/C to the exporter & after obtaining it, the accounts manager after verification accepts it. 4. MARINE INSURANCE POLICY: If the delivery term is on CIF, it becomes obligatory for the exporter to arrange for insurance. The exporter thus arranges for transit insurance & obtains insurance policy & cover note from the insurance company.

5. COMMERCIAL INVOICE: It is one of the most important documents issued by the seller in the standardized format. The invoice is usually made out for the full realizable amount of goods as per the trade term. The Logistics department makes six copies of this document once the goods are ready for dispatch. If the export documents are drawn under L/C, the description of goods in the commercial invoice must correspond with description in the credit. 6. PACKING LIST: It is a list showing details of goods contained in each parcel / shipment. Shows itemby-item the contents of the containers, measurements, weight parcels shipped to enable the buyer / receiver of the shipment to check shipment. Packing list has to be prepared in the aligned document format.

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7. GR FORM / SDF: Guaranteed remittance form is a declaration, a definite undertaking between the exporter & the RBI to deposit the amount of foreign exchange mentioned in the L/C to the bank within six months from the date of shipment. Purpose of GR form is to enable RBI to ensure that export proceeds from the export are received in India through proper banking channels only within reasonable time limits. GR form is in aligned documentary format and is prepared in duplicate. On account of introduction of Electronic Data Interchange (EDI) system at certain customs offices, where shipping bills are processed electronically, the existing declaration in GR form is replaced by a declaration from SDF (Statutory Declaration Form). GR form is used in case of manual documentation. The customs authority, for onward submission to RBI retains the original copy. Duplicate copy of this form is given to exporter after it is custom attested & this document must pass through the medium of an authorized dealer in foreign exchange in India within 21 days of shipment.

8. GSP CERTIFICATE / CERTIFICATE OF ORIGIN: The EEC member countries have adopted the generalized system of preferences. Under GSP, manufactures and semi-manufactures from developing countries including India will be entitled to a concessional rates of import duty in these countries. 9.

AR-E1 FORM: This form is for central excise clearance. Excise is basically production tax. It is payable to the government whenever, goods produced in India are ready for distribution in India. Since goods meant for export are to be sold abroad, such goods are exempt from paying excise duty. There are 2 methods for payment of central excise duty:



To pay the excise duties on goods meant for export & then claim refund of the same, after showing the proof of exports.

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

Export under bond: To provide a security to the government, the exporter makes a bond with the central excise authorities. Money debited in his account will later on be credited after proof of exports is presented. Goods are removed from factory without prior payment of duty subject to the execution of bond with security for a sum equivalent to the duty chargeable on the goods to be exported. AR-E1 form i.e. the exemption certificate is to be prepared in sixtuplicate, in such cases. Original, duplicate & yellow copy: - Customs. Triplicate, quadruplicate & quintuplicate copies: - Central excise department. After the shipment is done, the custom attend original & duplicate copies of AR-E1 form which is sent to central excise department as proof of export & then the bond is credited.

10. SHIPPING BILL: Shipping bill is the main document required by the customs for allowing shipment. Basically shipping document is of 4 types. a)

DEPB Shipping Bill (Blue)

b) Duty Drawback Shipping Bill (Green) c) Shipping Bill for Duty Free Goods (White) d) DEEC Shipping Bill (White) Shipping bill is a document, which has to be filled with the customs in order to enable the goods to be made ready for export. Shipping bills are prepared in 6-7 copies. 1. Original – It is for customs statistical record.

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2. Duplicate – It is a proof of examination of cargo. The customs authorities write a report on the backside of it. Original and duplicate copies are kept with the customs only. 3. Triplicate – This is DEPB / Drawback copy. 4. Quadruplicate – It is the export promotion copy. It is a proof that goods are actually exported out of India. 5. Triplicate & Quadruplicate copies are returned to the exporter after it is customs attested. 6. Port trust copy I 7. Port trust copy II – Port trust copies or transference copies go along with the truck / cargo to the gateway port of customs. 8. Port trust copy III – Port trust III is a CWC (Central warehousing corporation) copy.

LOGISTICS SUPPORTS MARKETING The “four P’s” of the marketing mix require that for a firm to be successful any marketing effort must integrate the ideas of having the right product, at the right price, publicized with proper promotion, and available in the right place. Logistics plays a critical role particularly in support of getting the product to the right place. Primary goal of logistics is to provide customer service. Achieving customer satisfaction requires an integrated effort both internally and with suppliers and ultimate customers and these can be achieved with the help or Logistics Management. Following figure summarizes the tradeoffs required between and among the major elements of the marketing mix and logistics.

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. COST TRADE-OFFS REQUIRED IN MARKETING AND LOGISTICS

PRODUCT

PRICE

PROMOTION

PLACE /CUSTOMER SERVICE LEVELS

L O G I S T I C S

INVENTORY CARRYING COSTS

TRANSPORTATION COSTS TRAFFIC & TRANSPORTATION

INVENTORY MANAGEMENT REVERSE LOGISTICS PACKAGING

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M A R K E T I N G


WAREHOUSING COSTS

LOT QUANTITY COSTS

WAREHOUSING & STORAGE PLANT & WAREHOUSE SITE SELECTION

MATERIAL HANDLING PROCUREMENT

ORDER PROCESSING & INFORMATION COSTS ORDER PROCESSING LOGISTICS COMMUNICATIONS DEMAND FORECASTING /PLANNING

PRICING POLICY IN IPCL 1. Ex-factory as well as ex-point selling pricing is inclusive of excise duty. 2. For payment of excise duty on ex-factory sales, freight should not be included. 3. For ex-factory sales, excise duty shall be paid after considering deduction of cash discount if applicable. 4. Quantity discount if applicable will not be deducted from the basic price for the purpose of excise duty. 5. Cash discount if applicable is to be allowed post excise on the list price. 6. Prices for prime grades of products are higher than the non-prime grades and waste. 7. Prices are inclusive of standard packing charges. 8. Quantity discounts more the quantity 9.

purchased more the discount is given.

Cash Discount is given in the form of early payment incentives before dispatch of product etc. No cash discount is given on waste.

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10. Additional discount is given to exporters. 11. Credit policy (14 days interest free credit) for customers and dealers. 12. Cash sales, interest @24% will be charged for delayed payment.

PROMOTIONAL MEASURES •

Sponsorship of events like cricket.

Conduct seminars, symposium and trade fairs.

Encourages entrepreneurship.

Grade selection card.

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Supporting activities of logistics are: -

Warehousing.

-Materials Handling.

-

Protective Packaging

-Acquisition.

-

Product Scheduling

- Information Maintenance.

WAREHOUSING All the solid products are packed in specified weight. Different products are packed in different weights, which are given below. POLYMER GROUP:Product Name

Specified Weight

LDPE PPCP PVC PP-IV

25kg. (Standard) 25kg. (Standard) 25kg. (Standard) 25kg. (Standard)

RUBBER GROUP:Product Name

Specified Weight

PBR – I PBR - II

30-35kg. Approximately 30-35kg. Approximately

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FIBRE GROUP:Product Name

Specified Weight (Per Bale)

AF DSAF

250kg. (Approximate) 300kg (Approximate)

LOCATION OF PRODUCTS After packaging of the products, they are stored in the proper location according to the batch. Dispatchable quantity of production is cleared after proper quality check where the gradation of the products is determined. After the quality check, it is transferred to the warehouse and gets entered in the SAP system. Wooden pallets are used for carrying the polymer products of 40 bags of 25kg each. Weights are stacked (1 ton) and moved by the forklift truck. The equipments used in the packaging, stacking and moving products are shown as below:-

FORKLIFT TRUCK

CONVEYER

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HANDLING, STORAGE, PACKAGING, PRESERVATION & DELIVERY:Storage of the Finished Product: Finished products are received from the plant by the product transfer department (PTD). This functions as an interface between the marketing department & the production department. However in the recent restructuring of the functional activities of IPCL there is a plan to eliminate the PTD. Packaging: Bagging is done with a semi automatic machine. Lot number or bale number is marked on each of the bags. Care is taken to ensure that only graded material packed in intact bags are dispatched. In case of quality complain by the customer the batch no. or lot no. printed on the bag will help in tracing out the cause of the complaints. The package material use by IPCL’s environment friendly as it can be recycled for further use; proper care is taken in transporting the material in order to prevent any damage to the bags or to the materials. Preservation: Packed bags are stored in warehouse to prevent exposure to rain and sunlight. In rare circumstances when warehouse is full, bags are stored in an open area with proper protection to prevent effect of rain and sunlight on the bagged material. Delivery: The delivery procedure followed in IPCL is very systematic after the introducing of SAP each transaction is cent percent full proof. In the delivery process there is a convenient tracking system in which one is able to see the status of the vehicle loading and arrival at the final destination. The goods when they reach the destination are received by the consignee and a goods receipt note is prepared. Any deficiency in the receipt of material

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needs further action such as recovery from the transporter or lodging claim with the insurance company. Thus, the total product movement is well secured.

IPCL WAREHOUSES AT DIFFERENT LOCATIONS Ahmedabad

Indore

Baroda

Daman

Silvassa

Mumbai

Nagpur

Calcutta

Delhi

Ludhiana

Kanpur

Faridabad

Ghaziabad

Bangalore

Chennai

Hyderabad

IMPORTANCE AND USE OF LOGISTICS Logistics gained recognition since World War II, when marketing became predominant over manufacturing, requiring concentrated attention to customer Wants. Concurrently, logistics is the delicate fulcrum-balancing product with consumption. Hence it plays a very important role in International Competition. The most important point about logistics is that it is much more than transportation or physical movement of goods. Basically, the art of logistics is the ability to get the right product at the right place at the flow of goods from purchasing through production and distribution to the final customer in order to satisfy the requirements of the market. It combines production, warehousing distribution and transportation on global basis. So the basic function of logistics in International Trade is to create place and time utility in goods, locating them at the right place, at the right time and also in the right quantity, to customer demand.

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ROLE OF GOVERNMENT IN LOGISTICS In Indian context, the government plays a significant role in logistics. Some of the important legislations that affect logistics are: 1. Central Sales Tax (CST) is a tax on interstate commodity sales. In situation where there is a resale in the receiving state, local sales tax is also incurred. CST is not incurred if there is a branch in the receiving state for the organization, and then the interstate movement would be considered as a stock transfer. Often, organizations set up branches in every state more as a means of avoiding CST rather then as a functional requirement. 2. Excise duty is a tax on each product produced in the factory. 3. Octroi

A logistics implication of octroi is that if warehouses and transshipment

points are out side the octroi limit then octroi needs to be paid. 4. MODVAT, which stands for Modified Value Added Tax. It ensures that double charging of excise duties is prevented and eliminates the need for repayment and future collection of refund of such duties. When a product that attracts excise is used as a component for another product, the raw material inventory costs would now be lower, thus facilitating planned procurement.

5. The Motor Vehicle Act, 1988, has brought in strict regulations to prohibit overloading of trucks and ensure better quality of drivers. But some of the northern states illegally allows for overloading of the trucks.

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REPORT ON CYCLE TIME STUDY AT LDPE WAREHOUSE OBJECTIVE

To reduce the time between the procedures of TOL to INVOICE at LDPE (low density polyethylene) warehouse.

To understand the logistics, time and motion study in outbound logistics at IPCL Baroda Complex.

Understanding the behavior of contract laborers of warehouse.

TIME DURATION OF STUDY •

We selected the period of 4 days i.e. from 10/06/06 to 14/0606 out of 30 days of June. For effective study, we used the data of all the 4 days i.e. all the trucks which came to the LDPE warehouse.

SOURCE OF DATA FOR ANALYSIS •

SAP-YTTS MODULE is used for TOL (Truck Order Linking) which is done at the warehouse after the process of WBN (Weigh Bridge Entry).TOL is done based on the quantity, type/grade of the material to be dispatched.

SAP-VLO2N is done after TOL, for making material picking note based on the type, grade and quantity of material to be moved from a particular location.

SAP- ZIPS is used for Invoice Processing after the truck is loaded with the required quantity of material. The Invoice is handed over to the transporter along with the MPN (Material Picking Note).

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FACTORS AFFECTING TOTAL CYCLE TIME OF TRUCK The main purpose of any project is to study the system and find the problems and loopholes, which exits in the system as here at IPCL Baroda complex. We have been assigned the problem of high cycle time and for that we have to observed the system and found out the solution for reduction of cycle time. For that we observed the system from various aspects and we found out some reasons that were increasing cycle time. IPCL is dealing in a monopolistic market, so optimum utilization of time is also very important factor, as the profits equally depends on the production as well as the time saved and optimally utilized time could add to more of the profit of the company. 1. Improper handling of forklift and materials – The laborers at different warehouses are not handling the material properly they are throwing bags in the truck while loading which damages the bags. In every consignment. 2 – 3 bags get damaged which increases the time of loading and the cost because company has to replace this bag with the new one. In a day about 50 trucks are coming therefore the amount of loss is very high. Many a times improper handling of forklifts also damages the bags. 2. Contract laborers – The laborers at warehouses are on contract basis. So they are not managed by IPCL. This results in insufficient laborers present at the loading point and it increase the loading time. 2. Lack of Professionalism - People at IPCL are still living in the government organization era. Privatization’s effect is very low in work culture. Many of the employees are having casual approach towards their work. They are passing their work to others which increase the processing time. They also take long lunch breaks, frequent and long tea breaks which hampers the system badly. Now the system is fully automated because of SAP but adaptation of new technique is difficult for them and still people don’t know much about it.

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4. Improper distribution of laborers – Company is not placing laborers properly at the ware houses. 5. Lack of supervision – There is lacks of supervision while laborers are loading the trucks which results in improper handling of bags. 6. Improper distribution of trucks – From the graph, we can say that there is lack of proper distribution of trucks during the entire day. We have divided the total time of TOL and INVOICE of truck in three different ranges so that we can see that maximum numbers of trucks came between 12:00 to 16:30 hours. This improper distribution of trucks is due to the transport market which affects the logistic system very badly.

OBSERVATIONS •

There is a lack of coordination between transporters and the warehouse department. So the department is unaware of the exact status of the no of trucks coming to IPCL and its arrival timing.

Due to lack of coordination, the labors are also not aware of the trucks arrival schedule. This results in less no of laborers when the work load is more and vice a versa.

Sometimes the driver of the truck has to wait because there is no one to attend him when he comes for TOL.

The fork lifter in order to finish off the work quickly, damages the bags while lifting two pellets simultaneously. This results in increased loading time due to replacement of the damaged bags. It is also an unsafe practice.

There is as such no regulation on the arrival and departure of the contract laborers. They come and go as per their own wish.

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The laborers don’t have food facilities and that which is available is very expensive for them. So this results in their inefficiency to work till late night.

Lack of co-ordination between MOP staff and PTD staff results into lack of proper management.

There is improper distribution of laborers, so in some warehouse there are more laborers working and at other ware houses- less number of laborers working.

Sometimes the SAP system gets hanged up which affects the cycle time.

It is observed that during shift change, the movement of all the trucks comes to a standstill so as to let the employee vehicles move freely. Moreover the processing of TOL and INVOICE also stops due to shift change. This factor is unavoidable.

RECOMMENDATIONS •

Supervisor should be there when trucks are getting loaded so that laborers work properly and damage of bags and loading time can be reduced. Laborers sit idle until all the material is brought to the loading point. Supervisor should force them to start loading as soon as the first pallet or crate has been brought to loading point.

The overall performance of warehouse depends on MOP staff at warehouse but there is lack of co-ordination between PTD staff i.e. operational person at warehouse and MOP staff. The MOP staff should be given some power so that they can get work done from them and before any holiday or staff change, they must inform MOP staff at warehouse.

Warehouse person already have their dispatch plan. So they know about their daily work well in advance. The warehouse person should bring material at loading point in the morning before the truck comes for loading instead of bringing material after the truck comes. This would save time.

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The warehouse department should keep themselves informed about the no of arrival of trucks 1 day in advance so that the laborers can be managed easily and the work can be carried out without any delay. This would also help the labor contractor to place the no of labourers required on a particular day.

There lifting of 2 pellets by the fork lifter should be avoided which would avoid any damage to the bags.

Proper food facility should be provided by the contractor so as to increase the efficiency of the laborers.

The forklift truck can directly be taken near the truck to be loaded so that the bags can be directly paced inside. This would save time and less number of laborers are required. This procedure has been successfully implemented at RIL at Hajira. But for this the warehouse infrastructure should be modified for the smooth operation of the forklift truck.

LIMITATION OF STUDY •

Used vary small sample size i.e. only four days out of 30 days of June.

Time period of study was during general shift hours i.e. between 8a.m. to 5p.m. So could not observe the activities till 10p.m.

CONCLUSION •

The standard deviation comes to nearly 182.921 minutes. Thus prolonged cycle time can be reduced to some extent by controlling factors like labor management and between coordination between the employees. But factors like shift change which leads to prolong cycle time are uncontrollable.

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GLOSSARY

PVC – POLY VINYL CHLORIDE LDPE – LOW DENSITY POLY ETHYLENE PBR – POLY BUTADIENE RUBBER PPCP – POLY PROPYLENE CO-POLYMER PP – POLY PROPYLENE AF – ACRYLIC FIBRE DSF – DRY SYNTHETIC FIBRE HDPE – HIGH DENSITY POLY ETHYLENE DMT – DIMETHYL TERAPHTHALATE MEG – MONOETHYLENE GLYCOL ACN – ACRYLONITRILE LAB – LINEAR ALKYL BENZENE EO – ETHYLENE OXIDE HNP – HEAVY NORMAL PARAFFINS PEG – POLY ETHYLENE GLYCOL DSAF – DRY SPUN ACRYLIC FIBRE NCPA

NATIONAL

COMMITTEE

ON

USE

OF

PLASTICS

AGRICULTURE FGMI – THE FEDERATION OF GUJARAT MILLS & INDUSTRIES DSIR – DEVELOPMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH GR form - GUARANTEED REMITTANCE FORM CIF – COST, INSURANCE AND FREIGHT CF – COST AND FREIGHT ICC – INTENATIONAL COUNCIL OF COMMERCE FOB – FREE ON BOARD L/C – LETTER OF CREDIT CHA – CUSTOM HOUSE AGENT

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IN


BIBLIOGRAPHY BOOKS: BOOKS AND JOURNALS OF IPCL ANNUAL REPORTS OF IPCL LOGISTICAL MANAGEMENT- DONALD J. BOWERSOX & DAVID J. CLOSS STATISTICS FOR MANAGEMENT – RICHARD I. LEWIN & DAVID S. RUBIN

WEBSITES: www.google.com www.ipcl.co.in www.myiris.com www.hinduonnet.com www.equitymaster.com www.dmlogistic.com www.indiainfiline.com

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ANNEXURE OBSERVATION

Sr.No .

DATE

1

10/06/2006

TRUCK MOVEMENT TIMINGS CYCLE TIME IN TOL INVOICE MINUTES 9:48

10:09

61

2

10/06/2006

10:14

11:05

51

3

10/06/2006

11:25

11:55

30

4

10/06/2006

11:53

14:28

155

5

10/06/2006

11:54

14:25

151

6

10/06/2006

12:01

14:32

151

7

10/06/2006

13:33

15:07

94

8

10/06/2006

13:10

15:39

149

9

10/06/2006

14:27

16:34

127

10

10/06/2006

14:36

15:39

63

11

10/06/2006

17:59

18:42

43

12

10/06/2006

18:24

18:55

31

13

10/06/2006

19:08

19:20

12

n=no of samples=13 Standard deviation= 439.9023

NO OF LABOURERS IN THE WAREHOUSE-27

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QTY.IN MT 10 10 17 16 15 16 10 16 02 16 10 19 10

TIME/MT IN MIN

6.1 5.1 1.8 9.7 10.1 9.43 9.4 9.3 63.5 3.90 4.30 1.6 1.2

TIME/MT / LABOR 164.7 137.7 48.6 261.9 272.7 254.61 253.8 251.1 1714.5 105.3 116.1 43.2 32.4


Sr.No . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

DATE 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006 12/06/2006

TOL INVOICE 10:46 11:31 10:57 11:36 11:54 13:55 13:01 14:00 12:57 13:58 13:04 14:01 13:47 14:04 14:30 15:14 14:34 15:16 16:04 16:53 16:20 16:55 16:32 17:11 16:31 16:56 16:34 17:23 17:00 17:26 18:00 18:43 18:36 19:26 18:40 P 19:31 18:42 19:50 19:28 20:18 19:30 20:50 19:52 20:51

CYCLE TIME IN MINUTES 45 39 121 59 61 57 17 44 42 50 35 39 25 49 27 43 50 51 68 49 80 58

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QT.

TIME/MT IN MIN

10 10 10 16 16 16 16 16 16 16 16 16 14 16 11 15 10 20 20 15 10 10

4.5 3.9 12.1 3.7 3.7 3.67 1.1 2.8 2.6 3.1 2.2 2.4 1.8 3.1 2.5 2.9 5.0 2.6 3.4 3.3 8.0 5.8

TIME/MT /LABOR 153 132.6 411.4 125.8 125.8 124.78 37.4 95.2 88.4 105.4 74.8 81.6 61.2 105.4 85 98.6 170 88.4 115.6 112.2 272 197.2


n=no of samples=22 Standard deviation= 79.93431

NO OF LABOURERS IN THE WAREHOUSE-34 Sr.no 1 2 3 4 5 6 7

Date 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006

TOL 10:34 11:32 12:08 12:18 12:23 13:00 13:07

INVOICE 11:38 11:46 12:35 14:10 14:12 14:13 14:15

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006 13/6/2006

13:12 13:14 13:10 13:25 13:26 13:10 14:19 14:20 14:25 14:29 15:16 14:43 14:39 14:46 14:36 15:03 15:42 15:57 15:59 19:16

15:53 14:49 14:20 15:52 16:04 15:49 16:39 16:40 16:54 16:42 19:33 18:32 17:12 17:43 17:44 18:26 19:44 19:11 19:20 19:40

CYCLE TIME IN MINUTS

QT.

TIME/MT IN MIN

64 14 242 112 108 74 68 161 95 70 147 158 155 140 140 150 133 257 228 153 180 188 203 242 194 201 24

16 10 10 10 16 15 16 16 16 10 20 15 16 15 15 15 16 15 15.5 15 10 16 16 15 16 10 16

4 1.4 24.1 11.2 6.8 4.9 4.3 10.1 5.9 7.0 7.3 10.5 9.7 9.3 9.3 10 8.3 17.1 14.7 10.2 18.0 11.8 12.7 16.1 12.1 20.1 1.5

NO OF LABOURERS IN THE WAREHOUSE-25 n=no of samples=27 Standard deviation= 136.6325

98

TIME/MT/ LABOR 100 35 602.5 280 170 122.5 107.5 252.5 147.5 175 182.5 262.5 242.5 232.5 232.5 250 207.5 427.5 367.5 255 450 295 317.5 402.5 302.5 502.5 37.5


Sr.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

DATE 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006 14/6/2006

TOL 11:05 11:08 11:00 11:10 12:21 12:24 12:23 12:34 12:39 12:50 12:55 13:04 13:27 13:35 14:22 14:24 14:28 14:33 14:45 15:37 15:51 15:53 16:20 16:24 16:31 17:03 17:53 18:59 19:45 19:44

INVOICE 11:35 11:38 11:13 11:37 13:49 13:47 13:48 13:51 13:50 14:14 14:18 14:20 14:54 15:00 16:01 16:47 16:03 16:53 16:44 16:58 18:37 18:35 18:30 18:40 18:46 18:42 18:19 19:55 20:37 20:38

CYCLE TIME IN MINUTES

QTY IN METRIC TONS

TIME/MT IN MIN

30 30 13 27 88 83 85 76 71 84 83 76 87 85 99 143 95 140 119 81 166 162 130 135 135 99 26 56 52 54

10 10 16 10 10 16 16 16 16 10 16 15 15 20 15 10 16 16 10 16 15 16 10 16 16 10 04 16 16 09

3 3 0.9 2.7 8.8 5.2 5.3 4.8 4.4 8.4 5.2 5.1 5.8 4.3 6.6 14.3 5.9 8.8 11.9 5.1 11.1 10.1 13.0 8.4 8.4 9.9 6.5 3.5 3.3 6

TIME/MT /LABOR 69 69 20.7 62.1 202.4 119.6 121.9 110.4 101.2 193.2 119.6 117.3 133.4 98.9 151.8 328.9 135.7 202.4 273.7 117.3 255.3 232.3 299 193.2 193.2 227.7 149.5 80.5 75.9 138

n=no of samples=30 Standard deviation= 75.2148

NO OF LABOURERS IN THE WAREHOUSE-23

Average S.D. = 439.9023+79.9343+136.6325+75.2148 4 = 182.921

99


Number of truck

Time of TOL

14

08:00 – 12:00

51

12:00 – 16:00

25

16:00 – 20:00

TOL OF TRUCK FOR 10 TO 14TH JUNE 60

51

50 40 NO. OF 30 TRUCKS 20

25 no of truck

14

10 0

8:00-12:00

12:00-16:00 16:00-20:00 TIME

HIGHEST TOL TAKES PLACE BETWEEN 12:00 NOON TO 16:00 HOURS

100


Number of truck

Time of

11 32 43

INVOICE 08:00 – 12:00 12:00 – 16:00 16:00 – 20:00

INVOICE OF TRUCKS FOR 10 TO 14TH JUNE 50

43

40 NO. OF 30 TRUCKS 20

32

no of truck

11

10 0

8:00-12:00

12:00-16:00 16:00-20:00 TIME

HIGHEST NO OF INVOICES ARE MADE BETWEEN 16:00 TO 20:00 HOURS

101


102


PROJECT ON OUTBOUND LOGISTIC MANAGEMENT AT INDIAN PETROCHEMICALS CORPORATION LIMITED