0601014 purchase system

A
Project Report
On
“PURCHASE SYSTEM”
AT
INDIAN SEAMLESS METAL TUBES LTD.
BARAMATI
Submitted By
DEVESH KHANDELWAL
Under the Guidance of
Prof. Mahesh Gadekar
Submitted to
“University of Pune”
In partial fulfillment of the requirement for the award of the degree of
Master of Business Administration (MBA)
Through
Vishwakarma Institute of Management
Pune - 48.

ACKNOWLEDGEMENT
It gives me pleasure in presenting this project report on ‘Purchase System’ in Indian
Seamless Metal Tubes Ltd. Baramati.
I take this opportunity to express my gratitude and indebtedness to all those, who have
directly or indirectly helped me during the course of this project.
I am really thankful to Mr. Kishor Bhapkar, Asst. General Manager for his support and
co-operation in completion of my project.
I wish to express my gratefulness to our Institute Director Dr. Sharad Joshi & also
Thankful to Prof. Mahesh Gadekar who has been constant source of inspiration to me.
This project is a result of their initiative and constant motivation.
I express my hearty thanks to staff members of Stores.Dept. Excise Dept., Dispatch
Dept., Quality Dept., PPC, Weigh Bridge and workers of I.S.M.T. Baramati Without their
help this project should have been a tough work.
I express my thanks to my beloved parents & friends for their support and guidance. I
must never forget that the highest appreciation is not to utter words, but to live by them
Devesh Khandelwal

3
INDEX
Sr. No. Content Page No.
1. Synopsis 1
2. Company Profile 5
3 Objective of the study 24
4. Manufacturing Process
A)Hot Finishing
B)Cold Finishing
C)End Finishing
26
5. Purchase System
A)Pre-purchase system
B)Ordering system
C)Post Purchase system
D)Cash Purchase
41
6. Suggestion & Conclusion 62
7. Bibliography 66

4
CERTIFICATE
TO WHOMESOEVER IT MAY CONCERN
This is to certify that Mr. DEVESH KHANDELWAL is a bonafied student of our
institute “VISHWAKARMA INSTITUTE OF MANAGEMENT”. He has successfully
completed the project on “Purchase System” Undertaken in “INDIAN SEAMLESS
METAL TUBES Ltd.”, Baramati.
This is the original study of Mr. DEVESH KHANDELWAL and the sources used by
him have been acknowledged in his report. The report is submitted in the partial
fulfillment of two year full time course in MASTERS OF BUSINESS
ADMINISTRATION (2006-08) as per the rules of the PUNE UNIVERSITY.
Prof. Mahesh Gadekar Dr.Sharad
Joshi
(PROJECT GUIDE) (DIRECTOR)

6
SYNOPSIS
As a compulsory course in M.B.A. programme, every encumbant have to do a project in
respective areas.
Being a student of materials management; I have done this project in purchase system At
Indian Seamless Metal Tubes Ltd. Baramati.
As material management is the function responsible for the coordination of planning,
sourcing, purchasing, moving, storing and controlling materials in optimum manner so as
to provide a pre-decided service to the customer at a minimum cost. So that means
purchasing is one of the most part of material management.
So that study of purchase system is also vital point.
In this project after synopsis … there is introduction about the company which includes
the project, its uses customer, group, raw material etc.
The next topic contains the manufacturing process of the Indian seamless metal tubes
Ltd.

7
The next chapter includes Purchase system Indian Seamless Metal Tubes Ltd. which
covers …the details about the purchase system at ISMT Introduction, methodology.
Purchase system and other details.
As, this project is a comprehensive study of purchase system at Indian seamless metal
tubes ltd. with a deliberate effort to find out short fails and advantage of system.

8
EXECUTIVE SUMMARY
In the following presentation I have tried to study the purchasing pattern, location,
financial position and its control in Baramati for Indian Seamless Metal Tubes Ltd.
Even though India is known all over the world today as an Information and
Communication Technology powerhouse , still Manufacturing is playing a vital role and
becoming one of the booming field as more and more foreign companies are coming to
India for its manufacturing operations. A systematic approach was used to achieve the
above-mentioned objective, to minimize the error and facilitate tabulation of the
information collected.
The project is constituted with information on companies like Indian Seamless Metal
Tubes Ltd. I have tried to keep margin error as minimum as possible and existence of any
error is regretted. This project is based on Purchase System at INDIAN SEAMLESS
METAL TUBES. It focuses on, the flow of Purchase system and Supply Chain
Management. The company, ISMT ltd. Baramati is a manufacturing company producing
Seamless tubes of all types. It was interesting to study the work culture in a
manufacturing company.
The study was spread over a span of two months during which I have interacted with the
people working with regards to overall culture. An analysis of the information collected
was done and its interpretation was made.

9
Chapter No. 2
COMPANY PROFILE

10
THE COMPANY PROFILE
SEAMLESS GROUP’S VISION: -
To be the most sought after, efficient, profitable and respected producer globally of
precision seamless tubes and alloy steels.
CORE VALUES:
Integrity
Honesty
Fairness
Secularity
MISSION:
• To produce the highest quality steel, seamless tubes and tubular products for the
Bearing, Automotive, Mining, General Engineering, Energy and 'High Value
OCTG' sectors ('Target Markets') and to build significant market share globally in
these sectors.
• To provide the best value proposition (cost, quality of product and service) to our
customers in the industry. To do so through a wholehearted commitment to the
Quality Systems.
• To maximize the utilization of our assets (in terms of contribution generated).
• To create a working environment that encourages creativity, empowers people,
creates accountability and rewards performance.
• To create a self learning organization that gathers knowledge and reacts quickly
to changes in customer expectations and to other changes in the environment.

11
HISTORY:
The Indian Seamless Metal Tubes Limited was promoted in 1977 by a group of
technocrats to produce specialized seamless tubes in India. Beginning with an installed
capacity of 15,000 metric tons per annum, ISMT commenced production in 1980 with the
installation and commissioning of an Assel mill in technical collaboration with
Mannesmann Demag Meer of Germany.
Subsequently, in 1990 the production capacity was raised to 50,000 metric tons per
annum with the addition of a second Assel Mill. In 1995 The Indian Seamless Metal
Tubes Limited promoted another company, Indian Seamless Steels and Alloys Ltd.
(ISSAL), to produce alloy steel, the raw material used in the manufacture of seamless
tubes, giving ISMT better control over product quality as well as deliveries.
Seamless group has three companies in 1990 company started by KALYANI STEEL
Ltd...(Tube division). But the continuous growth of company is going on; in 1994 the
production of seamless tube started at that time the company was renamed as Kalyani
Seamless Tubes Ltd. (ISMT), Baramati. Seamless group has started the company at
Ahmednagar in 1997 as “The Indian Seamless Tubes Ltd. (ISMT) Ahmednagar. “The
third plant was located in Jejuri in 1994 as “Indian Seamless Steel & Alloys Ltd
(ISSAL).Jejuri”.
In April 2000 The Indian Seamless Metal Tubes Limited acquired Kalyani Seamless
Tubes Ltd. (KSTL), the other major Indian manufacturer of seamless tubes. The
combined entity which retained the name The Indian Seamless Metal Tubes Ltd emerged
as not only the largest producer of seamless tubes in India but also as one of the largest
and most diversified producers of specialized seamless tubes worldwide with - an
installed capacity of 150,000 metric tons of tubes per annum in the size range of 6mm to
273mm.

12
In 2005 The Indian Seamless Metal Tubes Ltd and Indian Seamless Steels and Alloys Ltd
merged to form ISMT Limited. This Company is the largest integrated manufacturer of
specialized seamless tubes in the Asia Pacific Region. Currently ISMT Limited has an
installed capacity of 155,000 tpa and 250,000 tpa for seamless tubes and alloy steel
respectively.
Currently all tubes at ISMT Limited, are manufactured through the Assel Mill route’s. As
a result, these tubes are ideal for applications such as the manufacture of bearings,
automobile parts, drill rods, hydraulic cylinders, gas cylinders, boilers, etc.
Apart from tubes, ISMT Limited also manufactures a wide range of value added products
for each of these industries. These include items such as bearing rings, gear blanks,
shifter sleeves, cages for constant velocity joints, swaged & machined axles, threaded and
coupled casings, couplings and a host of similar products.
These three companies are now successfully working. The executive chairman of
Seamless group is Mr. B. R. Taneja. Head office of ISMT group is in Pune. Marketing
office is in Pune, Mumbai, Delhi, Calcutta, and Chennai.

13
Management
B. R. Taneja - Chief Executive Officer:-
B. R. Taneja is one of the founders of the Company. He has degrees in engineering and
management and started his career with the Indian Tube Company. He is a technocrat -
manager and has led the Company from the front to its current position. He has also
founded Taneja Aerospace & Aviation Ltd (TAAL) which is the first and the only private
sector company in India to manufacture civil aircraft. In addition to focusing on corporate
strategy he takes a keen interest in public policy.
O. P. Kakkar - Managing Director:-
O. P. Kakkar has been associated with ISMT Limited since its inception. He has degrees
in mechanical engineering management and was working with the Indian Tube Company
before joining the Company. He has played a key role in the founding of the Company
and he currently manages and oversees its entire operations.
Rajiv Goel - Chief Financial Officer:-
Rajiv Goel is a qualified Chartered Accountant. He is responsible for the entire Financial
Management of ISMT including fund management, accounts, administration. He has
been a significant contributor to the design and implementation of the growth strategies
of the Company
Salil Taneja - President (Corporate Strategy & Development):-
Salil Taneja has degrees in mechanical engineering and management. He is responsible
for Corporate Strategy and Human Resource Development in the company. In addition he
plays an active management role in ISMT's group company, Taneja Aerospace &
Aviation Ltd. (TAAL), the only private sector aircraft manufacturing company in India.

14
Nirmal Chandra - President (Projects & Product Development):-
Nirmal Chandra has been associated with ISMT Limited since its inception. He is a
graduate in Mechanical Engineering and started his career with the Indian Tube
Company. He has a very strong technology/manufacturing as well as commercial
background. Today he occupies a key position in the company and manages the
expansion project of the tube as well as steel mills.
V. Bal Subramanian - Joint Managing Director:-
V. Bal Subramanian is a graduate in metallurgy and prior to joining ISMT Limited has
had extensive work experience in various areas of operations in steel plants of Steel
Authority of India Limited (SAIL). Along with Mr. O.P. Kakkar he oversees the entire
operations of the company.

15
CEO's Message:-
ISMT's performance this year bears testimony to the fact that the company has come a
long way in terms of enhancing capabilities, production efficiencies and the ability to
grapple with a very dynamic market situation.
Following the merger in Nov 2005 of The Indian Seamless Metal Tubes Limited and
Indian Seamless Alloys Limited, ISMT successfully integrated the people and the
processes of these two companies so as to reposition itself as an integrated precision
seamless tube manufacturer service levels to our steel as well as tube customers.
Our growth driver is international business. Exports have been growing steadily and we
expect that in the next 3-4 years we will export to 50 percent of our tube production to
some of the most discerning markets of the world, a very challenging task if you consider
that we will be increasing our capacity and production very substantially during this
period.
We have embarked upon an expansion plan that would increase our tube making capacity
to 475,000 metric tones per annum (from a current level of 155,000 tpa) and our steel
making capacity to 500,000 tpa (from a current level of 250,000 tpa) such that it able to
keep up with the tube capacity. We expect that this project will cost in the region of
Rs. 250 crores and will come on stream in the last quarter of 2007/2008. The expansion
will improve our competitiveness through improved material utilization and reduced
process cost. We expect that the new mill will optimal utilization levels within three
years of the commissioning.
To become one of the leading specialized seamless tube manufacturers in the world we
have to move faster and more nimbly than our global competitors.
I am glad to mention that the Company increased its Net Sales by 13 percent to Rs. 1197
crores and it’s Net Profit (before non recurring items) by 26% to 129 crores. Given the
robust fundamentals of the economy and the consequent growth in demand for our
products and our expanding capacity we are confident of a bright future.

16
COMPANY HIGHLIGHTS:-
The largest integrated specialized seamless tube manufacturer in India.
One of the most diversified manufacturers of specialized seamless tubes in the world,
producing tubes in the range of 6 to 273 mm OD.
One of the most modern alloy steel plants in India that produces a wide range of alloy
steels from 20 to 225 mm diameter.
Specialized teams provide end to end solutions to industry-specific customers.
Capacity augmentation underway with an investment of about Rs. 3 billion.

17
Group Companies
ISMT North America:-
ISMT North America is a wholly owned subsidiary of ISMT Limited and provides a wide
spectrum of seamless tube products, steel and a hands-on level of service for the diverse
North American marketplace.
Taneja Aerospace and Aviation Limited (TAAL):-
Taneja Aerospace and Aviation Limited (TAAL), a group company of ISMT, is the first
and the only private sector aircraft manufacturing company in the country. In addition to
manufacturing a six seat aircraft TAAL manufactures advanced aero-structures and parts
for the Indian and international aerospace industry. It is also the sole marketing
representative for Cessna in India for its business class jets.
Structo Hydraulics AB, Sweden:-
Structo Hydraulics AB, Sweden, a subsidiary of ISMT Ltd., is among Europe's leading
suppliers of tubes and engineering products for the hydraulic cylinder industry. Structo
has more than 400 years experience in the field of iron and steel processing. The
company’s product range includes cold drawn seamless tubes, cold drawn welded tubes,
roller burnished cylinder tubes and cold formed tubes and components.

18
TURNOVER:
Turnover of ISMT, Baramati is about 300 to 350 crores and Turnover of ISMT group is
about 400 crores.
ABOUT THE COMPANY:
“ISMT, Baramati “is situated in Baramati MIDC section –B.
Total areas covered by ISMT are 105 acres .There are mainly three sections:
1. HOT MILL SECTION
2. COLD MILL SECTION
3. END FINISHING SECTION
The company manufactures seamless tubes varying from outer dia.6 to 273 mm. The
thickness of tubes varies from 5 to 35 mm. The waste product sends to ISSAL for re-
melting, the total capacity of plant is 1, 50,000 tm. Per annum. The company was
approved by ISO-9002-TUV in 1996.

19
SALIENT FEATURES OF THE PLANT:-
Continuous Rolling Mill with 12 strands coupled with de-scaler
QUALITY POLICY:
To deliver products and services that delights customers and creates long term
relationship through continuous improvement in
• Process and system
• Product and services
• Response time on development of products and services
• Technology and skills
• Motivation and development of Human resources
“Progress Through Partnership”
Computer controlled addition of Ferro Alloys in LRF
In line Vacuum Degassing (All heats manufactured have to undergo Vacuum
Degassing)
Automatic Mould Level Controller (AMLC) in Castor
Round Caster-12/18 Mtr. radius (1st in India)
In mould EMS in CCM resulting in uniform macro structure

20
INDIAN SEAMLESS TUBES LIMITED
DEPT. HEAD
QUALITY
DEPT. HEAD
PURCHASE
DEPT. HEAD
PERSONNEL
DEPT. HEAD
MARKETING
DEPT. HEAD
FIANANCE
SEC. INCH.
STORES
SEC. INCH.
PPC
ACTING DEPT
HEAD QUALITY
SEC. INCH. PROCESS
& PRODUCT AUDIT
SECT. INCH. AREA
SALES OFFICER
SECT. INCH.
MKT. SERVICES
SECT. INCH. TECH.
SALES & SERVICES
SECT. INCH.
DEPT. HEAD
FINANCE
SECT. INCH.
DEPT. HEAD
PPC
DEPT. HEAD
OPERATION
SEC. INCH.
HOT FINISH
SEC. INCH.
COLD FINISH
SEC. INCH.
END FINISH
SEC.INCH.
MAINT.
PRESIDENT
SEC. INCH.
QUALITY CONTROL
SEC. INCH.
CUSTOMER SERVICE
SEC. INCH.
QUALITY SYSTEM
SECT. INCH.
EXPORT
DEPT. HEAD
ENGG.

21
ABOUT THE PRODUCT:
The name Indian Seamless Tubes Ltd. Baramati .Itself suggests that product is seamless
tubes.
The company produces quite wide range of seamless tubes.
The manufacturing is of 3 types so the 3 types of tubes are produced.
All these tubes are produced in Carbon Alloys (Low or Medium) are hot rolled….Cold
finished, threaded and coupled.
The seamless tubes are divided in 3 categories according to manufacturing process.
Process O.D. Range
(mm)
Wall Thickness
(mm)
Production Capacity
Per Annum
Hot Rolled 38.1-224.5 4.5-30.0 45000 MT
Cold Drawn 20-105.0 2-18 25000 MT
Cold Pilgered 18-90-0 0.5-16 20000 MT

22
ISMT'S STEEL DIVISION:-
ISMT has one of the most modern alloy steel plants in India. The factory, located at Jejuri
(within a 100 km radius of ISMT's Tube plants) has a capacity of 190,000 MT per
annum. The primary production facilities include an Electric Arc Furnace, a Ladle
Refining Furnace, a Vacuum Degassing Plant, a Continuous Caster and a twelve stand
"no-twist" Rolling Mill. Along with these facilities, there are a variety of finishing and
testing equipment that enable the company to meet even the most stringent of customer
requirements.
ISMT has established itself as one of the leading suppliers of carbon and alloy steels in
India. The company is QS 9000 and ISO 9002 approved. ISMT's product mix includes
both rounds as well as round cornered squares. These items form the basic raw material
inputs for industries such as forging, seamless tube making, automobile and auto-
ancillaries, textile machinery, fasteners and other engineering applications.

23
PRODUCT RANGE:-
ISMT is one of the largest and most diversified manufacturers of specialized seamless
tubes in the world producing tubes varying from 6mm to 273mm. These tubes are used in
a variety of applications such as the manufacture of auto-components, bearing races,
OCTG products, drill rods, boilers, heat-exchangers etc.
Apart from tubes ISMT manufactures a number of value added products such as cold
rolled and machined rings for bearings and constant velocity (CV) joints, swaged and
machined axles for trucks, steering columns for two-wheelers and ready-to-hone tubes for
hydraulic cylinders.

24
CATEGORIES OF STEELS MANUFACTURED:-
• Alloy & Alloy Spring Steels
• High Alloy Steels
• Micro Alloyed & Boron Steels
• Ball Bearing Steels
• Free Cutting / Semi Free Cutting Steels
• Carbon & Carbon Spring Steels
PRODUCT RANGE:-
• Cast rounds
• Rolled rounds
• Rolled rounded corners squares (RCS)
• Bright bars
GRADES:-
With a relatively low heat size (35 to 45 tons) in the Electric Arc Furnace, the
company has the ability to produce virtually any grade of steel, even in small batch
quantities for a particular customer. However the typical grades produced are as
follows.

25
THE RAW MATERIAL USED:
The raw material used for the production of the seamless tubes is solid bar of steel called
as BILLET.
These BILLETS is supplied by domestic suppliers like:
BIHAR ALLOYS
INDIAN SEAMLESS STELL & ALLOYS LTD. JEJURI
KALYANI STEEL LTD. PUNE
MAHINDRA USING AND STEEL COMPANY LTD.
STEEEL AUTHORITY OF INDIA.
VISAKHAPATNAM STEEL PLANT.

26
END USE OF THE PRODUCT:
As Indian Seamless Metal Tubes Ltd Baramati is well established .Indian Seamless Metal
Tubes Ltd. Has got a very good market in INDIA as well as abroad for the manufactured
tubes.
END USE OF TUBES:
1) Bearing Rings
2) Boiler and superheated piping.
3) Casing and line piping.
4) Automotive party viz. Axies, steering columns etc.
5) Chemicals and petrochemicals and process industries.
6) Gas cylinders, Hydraulic cylinders.
7) General Engineering.

27
CUSTOMERS
1. Automotive Axales ,Mysoor
2. Bajaj Auto Ltd Aurangabad
3. Bajaj Auto ltd Pune
4. Bajaj Tempo Ltd. Pune
5. Cethar vessels Ltd Chennai
6. FAG precision bearing ,Baroda
7. Greaves Ltd .Pune
8. LML Ltd.Kanpur
9. Nel National Engg. Industries Jaipur
10. NRB Bearing Thane
11. ONGC –Oil and Natural Gas Corporation
12. SKF, Bangalore
13. SKF ,Pune
14. Telco ,Pune & Jamshedpur
FOREIGN
1. Hanwah (FAG) ,South Korea
2. IF Allccia corporation ,Italy
3. Korea Divac ,South Korea
4. SKF ,Italy
5. SKF , South Africa
6. Ssanyong Motor Co. Japan
7. Sumitomo Co Australia
8. Soddipan U.A.E.
9. Thiel And Hoche Co. Germany
10. Trans field corporation ,Australia
11. Tai-chang Corp ,Japan
12. Van –Lee –Van .U.K.

29
OBJECTIVE
• To understand the purchase system and find out the gaps and suggest suitable
action plans to improve the same.
• To collect data on Inventories receipts & issue and find out effectivness of
Purchase system.
• To understand the nature of purchase like source, frequency and volumes.
• To understand their financial dispositions role of credit, flexibility.

30
Chapter No.4
MANUFACTURING
PROCESS

31
MANUFACTURING PROCESS
The Important thing of the manufacturing in ISMT is that it is almost completely
automated and through there are 3 different routes of the process …... the procedure from
billet to hot finished tube is similar in all 3 ways.
Once the tube is hot finished it is then processed in different routes according to final
requirement basically through cold mill or end Finishing.
1) Hot Finishing
2) Cold Finishing
Cold Drawn
Cold Pilger
3) End finish section.

32
1. HOT FINISHED TUBES
Billet Preparation
Rotary Table Hearth Furnace (RTHF)
Piercing Mill
Assel Mill
Walking Beam Furnace
Sizing Mill
Descaler
Stretch Reducing Mill

33
1) BILLET PREPARATION:-
This is the first stage where first action on Raw material i.e. Billet is taken. At the station
the billet is cut to the required size with the help of Gas cutting set.
2) ROTARY TABLE HEARTH FURNACE:-
After cutting the billet to the required size, the billet is loaded on the roller conveyor and
transferred to the Rotary Table Hearth Furnace where the billet is heated to the piercing
temperature (about 200 c)
3) PIERCING MILL:-
The mill is cone type from manufacturing DEMAG ,Germany and consist of 2 rolls
rotating in opposite direction at about 300-350 RPM with mandrel to pierce the hot billet
received from RTHF.Each of the roll is given by 2200 KW DC motor. The first Hollow
tube is generated in this mill .Some of the special feature include closer dimensional
tolerance and Capability to produce high alloys e.g. stainless steel. Most of the operation
are based on hydraulic and with PLC control.

34
4) ASSEL MILL:-
Assel mill sometimes called Elongation mill is from Manneramann DEMAG Germany
and consist of 3 rolls at 120 deg. These Rolls are driven by 1400KW inside the tube
received from piercing mill. The main function of this mill is to control the wall thickness
to the required dimension.
5) HOT SAW:-
The hot saw consist of a circular blade rotating at very high speed and its purpose is to
cut the bulged end of the tube processed in Assel mill.
6) WALKING BEAM FURNACE:-
The purpose of this furnace is to reheat the tube to a certain temperature (about 950 deg).
So that the tube can be further processed to give that final dimension. The furnace
operates on the principle of walking beam furnace.

35
7) DESCALER:-
The tube in walking beam gets scale on its surface which needs to be removed before
final specifications are achieved. This is done with the help of Descaler which consist of
a high pressure water pump connected to a nozzled ring placed such, the tube will pass
through ring and gets decaled due to high pressure jet of water.
8) SIZING MILL:-
The sizing mill consist of 3 Roll stands placed one after other .each having 2 rolls .The
sizing mill is used to give the final dimension to the tube having outer diameter between
730mm and 245 mm.
9) STRETCH REDUCING MILL:-
The stretch reducing mill consist of 16 number of roll stand each having 3 rolls placed
one after in reducing diameter fashion. Each roll stand is driven by separate DC motor.
The SRM is used to give final dimension to the tube having outer diameter between
44.5mm and 130 mm.

36
COLD FINISHED TUBE
Surface Treatment Plan
Push Pointing
Cold Raw Bench
Roller Hearth Furnace
Straightener
Bundling, Oiling, Dispatch
Bad Saw
FVDI (Final Visual Dimentional Inspection)
Eddy Current Tester
Stenciling

37
1. SURFACE TREATMENT PLAN:-
The purpose of STP is for the treatment of the surface of tubes before they are processed
in cold draw benches .The plant consists of 10 No. of tanks containing various baths. The
major operation include Pickling of tube in acid bath so as to remove loose scale on the
tube surface and dipping the tubes in soap bath till a soaping layer is deposited on the
tube surface. The soap layer helps as lubricant while drawing, makes the process smooth
and increases production rate and tool life.
2. PUSH POINTING:-
The process of push pointing is to reduce the outside diameter of the tube at one end so
that this end can pass through the Die in Draw bench and can be pulled by the carriage of
draw bench. All the operation are hydraulic.
3. COLD DRAW BENCH:-
Once the tubes are push pointed the tubes are then drawn in cold draw bench (1)-30T and
CD-75 T. The capacity of the draw bench ranges from 19mm OD to 120 mm OD and
2mm WT to 15 mm WT. The name 30 T and 75 T indicates the maximum drawing load.

38
4. ROLLER HEARTH FURNACE:-
After the tubes are drawn they are required to get the specified mechanical and
metallurgical properties. This is achieved in electricity fired Roller Hearth Furnace of
Capacity 3 /T/hr. The furnace has 2 different zone maintained at desired temperature. The
tubes are charged from one end and collected at the other end.
5. STRAIGHTAINER:-
After the tube have come out of three Roller hearths Furnace the tubes are straightened in
the straitening machine 50 Dia and 120 Dia.
6. BAND SAW:-
The straightened tubes are cut to the specified length at the Band saws with maximum
capacity 266 mm Dia.

39
7. EDDY CURRENT TESTER:-
The tubes are tested for any cracks at the outer diameter of the tube by non-destructive
method-eddy current testing. The machine has been supplied by M/s Technofour, Pune.
The machine has got high production capacity of around 1000 mtn/hr.
8. FVDI:-
The tubes are finally inspected for all the parameters at FVDI (i.e. Final Visual
Dimensional Inspection). The parameter include outside diameter, inside, diameter, wall
thickness, length surface condition etc.
9. STENCILING, BUILDING, OILING & DESPATCH:-
The tubes are stenciled according to the customer’s requirement. The tubes are then
bundled with the help of strapping machine. The tubes are then coated with rust
preventive oil and dispatched or are kept in dispatch awaiting bin.

40
COLD PILGER ROUTE
This route consists of the following steps
Surface Treatment Plant
Cold Pilger
Band Saw
Straightener 90
Spiral Tester
FVDI (Final Visual Dimensional Inspection)
Bad Saw
Stenciling, Bundling & Dispatch

41
1. SURFACE TREATEMENT PLAN:-
The purpose STP is for treatment of the surface of tube before they are processed in cold
draw benches. The plant consists of 10 no. of tanks containing various baths. The major
operations include pickling of tubes in acid bath so as to remove loose scale on the tube
surface, phosphate to give a porous layer on tube surface so the soap can be adhered to
the tube surface, end dipping the tubes in soap layer helps as lubricant while drawing,
makes the process smooth and increases production rate and tool life.
2. COLD PILGER:-
The Pilgers facilitate cross sectional area reduction of tube around 70% as compared to
30 % in Draw benches .The cold pilgers CP90 and CP55 are supplied by
elecrostalazhmash production Associate USSR. The figure 90 & 55 indicate the
maximum outgoing diameter of finished tube. The cold pilger CP 45 & CP 70 are
secondhand pilgers from Germany. The Pilger better microstructure and surface finish.
The end use mainly includes bearing tubes.

42
3. BAND SAW:
The tubes coming out of pilger are very much long (about 15-20mtrs) because of heavy
cross sectional area reduction and elongation. These are required to be cut at the middle
to make it convenient for handing and further processing. These are cut and the band saw
machine fitted next to pilgers.
4. STRAIGHTENER 90:
The tubes are straightened at the straightening machine 90dia.Upto straightness of 1:1000
mm.
5. SPIRAL TESTER:
The tubes are then tested in spiral machine for any cracks at the inside as well as outside
diameter. The machine is from NDT system Ltd. U.K. The machine works on the
principle of Ultrasonic testing.

43
6. BAND SAW:
The crack free tubes passed through the spiral tester are then cut to the required length as
specified by the customer. This is done at the band saw next to spiral tester.
7. FVDI:
The tubes are finally inspected for all parameters at FVDI i.e. Final Visual Dimensional
Inspection. The parameters include outside Diameter, inside diameter, wall thickness,
length surface condition. Etc.
8. STENCILING , BUILDING ,OILING AND DESPATCH:
The tubes are stenciled according to the customer’s requirement. The tubes are then
bundled with the help of strapping machine. The tubes are the coated with rust preventive
oil and dispatch or kept in dispatch awaiting bin.

44
END FINISHED SECTION:
The End finished name itself indicates in function. The ends of tube are finished as
required by the customer e.g. threading or beveling. The facility is set up in collaboration
with Gage maker, U.S.A. The end finished facility is certified by the American Petroleum
Institute (API) .A well finished gage room is strength of the facility.

45
Chapter No. 4
PURCHASE SYSTEM

46
PURCHASE SYSTEM
INTRODUCTION:-
In organizations, depending on the size and nature of operation, the quantum of purchase
anywhere between a few thousand of rupees and hundred of crores of rupees. Naturally,
this necessitates formalized system and procedures for case of operation and
accountability. Formal procedure have to be laid down in initiating purchase, selecting
suppliers, placing purchase orders, follow-up, receiving materials and so on.

47
CONSUMABLE GOODS:-
1. Furnace Oil (More than 15000 lit/day)
2. Light Diesel Oil( 500 lit/day)
3. Hydraulic Oil(6000 lit/day)
4. Greases (5 barrel monthly)
5. Acids
6. Chemicals
OTHER MATERIALS :-( STORE MATERIALS)
Mechanical spare parts,
Electrical spare parts,
Electromechanical spare parts,
Other consumable items,
Store contain up to 6 to 6500 number of items approximately value of Rs. 7.2 to 7.4
crores.
STOCK / NON STOCK MATERIALS:-
STOCK ITEM which items re required for frequently for manufacturing and non-
manufacturing operations. This item required 3 to 4 times per month & it is non drawing
items.
NONSTOCK ITEMS which items are not required for manufacturing and non
manufacturing operations.

48
SOME STOCK ITEM LIST:-
1) Dispatch:-
Nylon slings ropes; hand gloves, oxygen gas purity, and Dissolve acetylene gas.
2) Scraps:-
Oxygen gas purity, Dissolve acetylene gas
3) PPC:-
Oil paints, hand gloves, oxygen gas purity, Dissolve acetylene gas, Brush for oil paints.
4) Mech., Maintenance:-
Oil paints , Thinner for general purpose , hand gloves , Cotton waste , Industrial Grease ,
Bearing locknut, Washer, Screw, Hydraulic acid , Nut , Bolt, pneumatic hose, gear box,
5) Electrical Maintenance:-
Hand gloves, Cotton waste, Cable, Semi conductor fuse, Bearing, Socket head.
6) Project:-
Plain washer, Roller chain, oil paint, Bolt, Washer, Screw.
7) Mill:-
Welding electrode, Oil paint, Hand Gloves, Nylon rope, Bolt, Nut.
8) Mill Tool Room:-
Thinner for general purpose, Spare for M/c, Washer, Grease, Cotton waste.
9) Cold Draw:-
Paint , Thinner ,Protective oil , cutting oil ,Light diesel oil, Sulphuric acid, Nylon Slings
rope , Binding wire .

49
9) Cold Pilger:-
Oil paint, Thinner, protective oil, Brush, hand gloves, Diesel oil, Metal tag, Socket head
cap, hose clip.
10) EFS:-
Oil paint, Thinner , protective oil, Brush ,Hand gloves, Diesel Oil, Metal tag, Socket head
cap , hose clip, spare for beveling M/c , Allen key, Pneumatic hose.
11) Quality Assurance:-
Crack check paint, cotton waste, spray gun, Hand gloves, Polish paper.

50
NON STOCK ITEM:-
1) Direct Office:-
Office chair, Printer cartridge, Xerox paper Floppy, Ball pen, Computer printer, Writing
Pad, Greeting Cards.
2) Account:-
Computer stationery, inventory tag, cash receipt, book, preprinted invoice, CENVAT set
A4.
3) Excise:-
Envelop plain, carbon paper, Computer stationery.
4) Dispatch:-
Wooden Block, invoice modvet (CENVAT)
5) Time Office:-
Muster book
6) Administration:-
First aid medicine, Visitor gate pass, Canteen coupon, Hose keeping item supply,
envelop, letter head , shirt, trouser stitching.
7) Store:-
Computer floppy, Disk box, Computer stationery.
8) Maintenance:-
Bearing, drill for operation, Hacksaw blade, wielding accessory, brush, plate, bolt, nut,
socket head, cap screw, key, shaft, liner, gear, cartridge, seal, sleeve, oil seal, hose clip,
pneumatic cylinder, spare, computer stationery, timing belt, washer, and ring.

51
9) Electrical maintenance:-
Carbon brush, flexible copper cable, diode, Transistor, Terminal connector, switches,
limit switch, fuse, torch, bearing, battery, push button.
10) Project:-
Bearing, socket, steel bar, flange, copling, sleeve,
11) Mill:-
Wielding electrode, Wielding accessory, Hydraulic hose, wire rope, wielding rod, guide
shoe, plate, nut
12) Mill Tool Room:-
Mandrill, Grinding wheel, bearing plate, grease, hose, piercing mill M/c .spare, screw,
and safety equipment.
13) Cold Draw:-
Couplers, end cap for tube, tally sheet report book, die cold draw, industrial grease, and
bandwagon blade
14) Cold Pilger:-
Material for cold pilger dies, spring, process control, chart, end cap for tubes, grease.
15) EFS:-
Casing long book, Cartridge, screw, spare for material tester seal, end caps, tread
protector, Allen key, seal, thinner.
16) Quality Assurance:-
Plain grinding wheel, incandescent bulb, washer, spare for eddy current, computer
stationery, measurement tape, steel tape.

52
RECEIPT OTEM VALUATION (value in lakhs)
Month March April May June
Stock 96,58,249 77,23,231 1,00,51,614 1,08,92,657
Non-stock 82,66,131 65,67,152 90,48,465 87,75,880
ISSUE ITEM VALUATION (value in lakhs)
Month March April May June
Stock 98,62,472 77,56,813 1,05,68,059 1,06,92,682
Non-stock 90,00,362 76,71,851 78,54,884 84,33,889

53
ASST. MANAGER
PURCHASE
PUR. OFFICER
MAINT. SPARES
PUR. OFFICER
HARDWARE & CONS.
PUR. OFFICER
BARAMATI
PUR. OFFICER
BARAMATI
V.P. PURCHASE
DY. MANAGER
PURCHASE
PUR. OFFICER
RAW MATERIALS
PUR. OFFICER
CM TOOLINGS
PUR. OFFICER
HM TOOLINGS

54
THE SYSTEM MAINLY CLASSIFIED IN 3 TYPES:
1. Pre-purchase system
2. Ordering system
3. Post Purchase system.
Salient feature of (each) system:-
1. PRE-PURCHASE SYSTEM :-
Initiating the purchase through requisition, traveling requisitions, selection of suppliers,
obtaining quotations and evaluating them are broadly pre-purchase activities.
2. ORDERING SYSTEM:-
Having selected the supplier and the rate agreed, the buyer places the purchase order on
the supplier, expressing the terms and conditions. The purchase order once accepted
becomes a binding contract.
3. POST PURCHASE SYSTEM:-
Commitment of time and money, Receipt, invoice checking.

55
Indenting Materials by Indentor
Through PR
Finding out the Sources Supply
Sending the enquiries to suppliers
Receiving the quotations
Analysis and comparative study of Quotations
Final negotiations defining terms and discussion
Calling the parties for discussion (if required)

56
STEPS INVOLVED IN PRE –PURCHASE SYSTEM:
Pre –purchase system is used for the systematic purchasing.
It means it is used for systematic analysis of the sources available in the market.
Actually pre-purchase system includes s:
• Intending the material by Indenter.
• Finding out the source.
• Sending enquiries to suppliers.
• Collecting Quotations.
• Analysis and study of Quotations.
• Final negotiation after discussing with parties.
• The Indenter Departments such as production, Personnel, Maintenance etc. raise
the requirement by submitting a purchase requisition slip.
• Material is first checked for its material code. Dif the material is new and the item
code does not exist for the same.
• Item code is generated for submitting the slip signed by the Dept. Head of the
Indenter Dept. o store Dept.
• The material code is then generated.
• Then the Indenter goes to EDP Dept. and generate the purchase requisition
against the material code generalized four copies are printed out.

57
• The PR slip is sent to store Dept. To fill the current stock of the material. After
signing of stores authority the purchase requisition is then sent to Vice President
Operations approval. If PR is approved then it goes to Dept. Baramati.
• Acceptance Number is allocated to PR by Purchase Dept. (Baramati).
• PR for items as consumable etc. is required to be generated by the stores Dept.
For this list of Low Stock Warning items (LSW) is prepared by stores Dept.
When the stock level goes below minimum level the intimation is given to
purchase Baramati. This does not require any PR.
• When PR is completed with its all formalities PR number. I generated
The four Copies filed by:
Purchase Dept. Baramati
Purchase Dept. Pune
Stores Dept.
Indenter
Then the decision to be taken whether the material should be cash purchase or locally
procured. Then the quotations are received by parties and after discussion the p party is
finalized.

58
B. ORDERING SYSTEM
Preparation of Purchase order Performa
Generation of Purchase order
Dispatching the Purchase Order.
Copies to various parties
i.e. supplier, store, Accounts Dept. Etc.

59
Ordering system is the actual procedure of preparing the purchase order.
The ordering system includes;
Preparing purchase order Performa according to terms and conditions negotiated.
The PO Performa is entered in the computer.
The PO Performa draft print is checked by purchase Officer and then the
Amendments are made. The 6 copies of Amendments is distributed to :-
Supplier
Stores Dept
Purchase Dept.
Accounts Dept.
File
Progress
• The material is searched in local market. If it is not available local market then the
responsibility goes to purchase officer (Pune).
• If the PO already exists then it repeated again Emergency items are cash purchased.
In cash of capital items procurement the total supply condition is thoroughly analyzed
by the Indenter and industrial Engg. Dept. while approving the PO draft.

60
POST PURCHASE SYSTEM
Follow up pf Material with Supplier
Receipt Material by Store Dept.
Inspection of Materials received by Indentor
Preparation of GRIR
Forwarding the GRIR to Accounts Dept.
To release the payment.

61
This system actually includes the receipt of material inspection of material, inspection of
material, preparation of GRIR etc.
In this system the stores Dept. actually plays a very vital and prominent role.
• The follow up of material is done by communication between purchase Dept.
Pune & Purchase Dept. Baramati.
• Actually Indenter also does the work to follow up by keeping watch on pending
PRS.
• Then the material is received by the stores Dept. The delivery challan is
proceeded to stores with entry on gate. Also it is included in IMR daily report (i.e.
Incoming Material report).
• Then the raw material /material are inspected by Quality Dept. The inspection
report note is also important for preparation of GRIR.
The GRIR is prepared; the four copies are sent to:
Purchase Dept.
Stores Dept.
Indenter
Accounts Dept.
• The purchase Dept. Pune and Accounts Dept. Pune follow up the payment according
to terms and conditions mentioned in purchase order. The cheques and /or prepared
and payment is done. For the payment the rejection, deviation is also considered.

62
CASH PURCHASE
This is a very simple process, does not having too much complication.
Sometimes the procedure becomes length so after receiving the PR item is decided to the
cash purchased.
The reason for Cash purchase may be:
• Emergency of the specific item.
• Non availability of the supplier on credit basis.
• Less time available to complete the purchasing procedure through PO Performa,
PO method.

63
Decision to cash purchase the item
Rough cost is estimated by previous data (generally)
Sanctioning the Cash Purchase by V.P. Operations.
Getting advance amount from account.
Procurement of Material
Settlement of Advance by GRIR copy
GRIR preparation

64
OPEN-PURCHASE SYSTEM
In some cases the Indenter sometimes needs the material regularly (consumables).
So to avoid the PO Performa, PO no. need all that excise problems each time, the
purchase order is kept open.
That means the purchase order consists of party name and name of item. The column of
quantity is kept “OPEN” that means blank. So with this you can purchase huge amount of
that particular item frequently. But these types PO have some time limit for it.
For example consumable like diesel is frequently needed for ISMT so the PO is kept
OPEN as far as the Diesel item is considered.

65
ROLE OF EDP:
As well all know that today industrialization, the computer plays an important role in the
Organization.
Indian Seamless Tubes Ltd. Is also much modernized with very well linked computer
system. The almost all Dept. In ISMT all dept. are linked with EDP by providing at least
one terminal.
The computers in EDP are used for:
• Preparation of PR
• Generation of PO
• Updating of PR
• Preparation of GRIR
But the most important to codify the item. The material or item code is generated or
infact has to generate in EDP. Usually 11 digit item code.

66
Chapter No. 6
CONCLUSION &
SUGGESTION

67
CONCLUSION
The design of the purchase system at Indian Seamless Tube Ltd. Is very good but the
loophole are existing as the same is not being followed. These can be eliminated reduced
by analyzing and implementing the suggestion made above.
Formulating and integrated Purchases /material system connecting Baramati and Pune
computer system. Inydlementation of vendor rating system, sending PO copy , to the
Indenter will definitely reduce the discrepancies between supplier /purchase , Indenter
/purchase , purchaser/stores, supplier/Accounts dept.
The scope of the project was only purchased system, likewise stores management also
can be studied and whole material system can be made further efficient.

68
GAPS
In Indian Seamless Purchase system, following gaps has been noticed:
• Lack of proper & effective minimum (stock) & maximum (stock) levels.
• Proper lead time calculation of internal and external things.
• Application of inventory models ABC & FSN analysis.
• Proper indenting and procurement cycle for non-stock items.
• Stock out situation happened during the period.
FINDINGS OF STOCK
• The company is having about Rs.5 crores (approx.) of stock during the period.
The valuation of non-moving stock is as high as Rs1.5 crores, which itself is very
high. The control mechanism should be implemented to avoid the availability of
such high amount of non-moving stock items.
• The average Purchase made for Rs. 2-3 Crores during the period.

69
SUGGESTIONS
The main purpose of the Purchase system is to provide the material at right time, right
quantity and at right price. To achieve this, effective integration of Material management
is required. To smoothen the Purchase system, following suggestions has been noted:
1. EOQ model is to be implemented.
2. Imported stock purchasing & stock replenishment system should be maintained.
3. Integrated materials management system should be implemented.i.e.
Computerized Inventory system.
• Minimum and Maximum Stock Levels.
• Re-ordering Levels.
• Minimum Order Quantity.
• To evaluate correct consumption v/s purchasing.
4. Maximum Inventory Turnover ratios.
5. Vendor Analysis.

71
BIBILOGRAPHY
1. Ammer Dean s. - Material Management
2. Gopal Krishnan & - Material management an
Suderhan Integrated Approach.
3. Patil A.R. - Material Management
4. Gopal Krishnan - Purchase & Materials Management.

0601014 purchase system

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (17)

Similar to 0601014 purchase system

Similar to 0601014 purchase system (20)

More from Supa Buoy

More from Supa Buoy (20)

Recently uploaded

Recently uploaded (20)

0601014 purchase system