MATERIAL MANAGEMENT

1. MATERIAL MANAGEMENT Spares are inevitable for a smooth running of any system. Stores and inventory play a major & significant role in economical operation of any organization. Proper storage and transaction of materials result in providing better services and in optimising material resources. Different procedures and practices are being followed by different organisations for stores management. For ease of operation and better exchange of information it is imperative to have uniform procedures within different stores of an organization.

2. MATERIAL MANAGEMENT • POWERGRID has standardised procedures for stores management of all its stores in the form of the documents “STORE’S STANDARDISED PROCEDURES AND FORMATS” VOL-I & VOL-II • The Vol-I covers the standard procedures and formats for receipt and issue of materials, updating material status, disposal of surplus and scrap and stock verification • The Vol-II covers broad procedures, policies and guidelines for storage, preservation, material handling and safety and security of materials.

3. MATERIAL MANAGEMENT • These procedures shall however not be applicable for “construction stores” in the custody of contractors engaged by POWERGRID for various jobs. • RESPONSIBILITY FOR IMPLEMENTATION • Concerned group head/store in charges • Overall responsibility : Regional head. • REVIEW These documents shall be reviewed and updated every 3years.

4. MATERIAL MANAGEMENT • BASIC TERMS IN MATERIAL MANAGEMENT • Materials : • All goods including equipments and spares as required for construction (other than under custody of contractors) and O&M of transmission system • Personal safety implements, administrative items viz. furniture, furnishings, office equipments and goods as required for township maintenance. • Consumables including stationery etc. • Scrap

5. MATERIAL MANAGEMENT 2) Maximum stock level It is the level beyond which it shall not be desirable to hold the stock. It is decided keeping in view the overall investment, storage space limitations, inventory carrying cost etc. Inventory stock holding norms for maximum level for different category of stores has been defined in the Corp MM circular No. 16 dtd. 4.4.96. The inventory for O&M spares instore shall be maintained as per norms fixed from time to time by Corp. OS/RHQ OS. Norms for administrative items shall be decided by HOD (HR).

6. MATERIAL MANAGEMENT 3)Minimum Level (Stock) It is the level below which the stock in hand shall not be allowed to fall so as to ensure the availability of materials for meeting effectively the service requirements 4) Common Pool Material” Stockofmaterials, (except personal/ administrative /civil maintenance items) available beyondstock holding norms i.e. as per Corp.MMcircular no.16 dt.4.4.06 and/or equipments/ spares available beyond OS norms, shall be deemed to be as surplus material under “Common Pool”.It shall exclude quantum of materials to be issued for “Work in Progress” (WIP)/ Construction.

7. Stock Holding Norms Of Corp,MM Sl No Category of store stock holding A) Construction Store i) Cement 2 months consumption ii) Steel section 4 “ “ B) O&M store/spares (excluding insurance spares) i) Indigenous spares 9 months consumption ii) Imported spares 12 “ “ C) Tools and consumables 6 “ “ (for testing equipment & T&P) D) POL/Gases 3 “ “ (excluding SF6 gas) SF6 Gas 9 “ “ E) Scrap 12 months accumulation

8. MATERIAL MANAGEMENT “Common Pool” material shall be meant for use of entire corporation and further deemed to be under control of Corp. MM although its upkeep/custody, till issued, shall be the responsibility of concerned store where it is lying.

9. MATERIAL MANAGEMENT 5) Re-Order Level It is the level for any item at which action for the procurement of material shall be initiated. Re-order level/quantity of any item is based on procurement lead time, consumption rate as well as uncertainties in usage of items which may differ from substation to substation. However,re-order level for periodical consumable O&M items such as SF6 gas/transformer oil etc. shall be followed as per norms fixed by CC( OS)/RHQ (OS) from time to time. Re-order level for other inventory items, if possible, can be fixed by individual Store-In charge in consultationwith O&M-In charge of Substation/Transmission Line/RHQ (OS) so to keep the inventory available all the time to meet any eventuality.

10. MATERIAL MANAGEMENT 6) Lead time (LT) It is the time required to procure material i.e the time lag between the receipt of indent and the physical receipt of material in store. This shall be fixed by the store in charge based on passed experience. Lead Time = Administrative LT + Supplier’s LT + Transportation LT 7) Safety stock This is the quantity of material to be added to the ROL for covering the uncertainties in : a) Estimation of lead time b) Estimation of lead time usage Safety stock shall be fixed for each material or a group of material based on past experience and proper analysis

11. MATERIAL MANAGEMENT 9) Mandatory Spares • These are the spares of sub station equipments/capital spares i.e equipment & unit assemblies which are identified for minimum 2-5 years ( or as per contractor operational requirement.) These spares may be required in the event of unforeseen breakdown or accident at any time during the designated life of the equipment whose non availability may affect the working of the entire “Transmission System”.These spares are ordered along with the main equipment package • These spares are capitalized along with main equipments and are considered Zero value items for accounting purposes

12. MATERIAL MANAGEMENT 10) O&M Spares • The spares/equipments/consumables are to be procured during O&M stage for smooth operation of the “Transmission System”. The spares of transmission line items and consumable nature of sub station are treated as inventory after commissioning of line/project. • These spares/equipment are consideredNumericalLedger / Price Store Ledger (PSL) items for accounting purposes

13. MATERIAL MANAGEMENT 12) Control Number : Control no. is a number alloted by store in charge to a particular voucher/issue/transfer of material which controls all connected transactions and posting in accounts books etc. 13) Bin : It is a space/container identified for storing a particular material. Bin(s) shall be identified with a number for its identification and traceability. 14) Bin Card : It is a card indicating the quantity of material in stock, its transaction record at any point of time. Bin card no. shall be same as that of the Bin. 15) Top/History Card : It is a card indicating name of suppliers for a material and supply status against various PO/LOA/STV/MTNs.

14. Material Codification • Codification of material with 10 Digits have been adopted. 1) Main group Code 2 Digits 2) Make Code 2 Digits 3) Sub System Code 2 Digits 4) Item Code 4 Digits Also have Location Code 3 Digits 1) Ist Digit Region/CC/RLDC 2) Next two digits Store location

15. Codification for a 400KV SF6Circuit Breaker ,CGL make Code : 29 CG 37 0000

16. Receipt of material in store Generally materials are received in the store from the following sources • Material received from supplier on the basis of PO/LOA • Material received from other stores of the same region through STV • Material diverted from other regions of POWERGRID through MTN • Material received after completion/ termination of works, O&M and other sources through MRN

17. Receipt of material in store Material receipt & handing over certificate (MRHOV) : Materials supplied by vendors & received, inspected, accepted by site in charge and directly issued to site in charge or their contractor are regularised through MRHOV. This is done to avoid double handling and re-transportation etc. Here materials are delivered directly at site and entries are made in records maintained by the concerned site.

18. RECEIPT OF MATERIAL

19. RECEIPT OF MATERIAL

20. RECEIPT OF MATERIAL

21. RECEIPT OF MATERIAL MATERIAL MANAGEMENT

23. RECEIPT OF MATERIAL On the inside cover of the SRV file, an index shall be drawn with columns such as : SRV control no. Quantity Remarks Quantity column shall be further subdivided as per the following classification of material a) T/L Material b) S/S material c) Testing equipment d) Consumables e) Cement f) Steel g) Scrap h) Miscellaneous items

24. Issue of material from store Generally issue of material from stores shall be in modes as indicated below a) Issue of material through “Store issue voucher” (SIV) by store for use in O&M and works/administrative requirement /individual requirement as per rule/disposal etc. b) Issue of material for transfer to other stores within the region through “Store transfer voucher” (STV) c) Issue of material for diversion to stores of other region through MTN

29. Reporting of material status • The store in-charge shall submit a quarterly status of surplus material available in the store to RHQ. RHQ in turn will submit a comprehensive quarterly surplus status of the region to Cop, MM. • The Region can build inventory beyond norms on specific requirements with due approval of the Regional ED • Regions cannot divert any material to other region on replenishment/non replenishment basis without diversion order of Corp,MM

30. INTER REGIONAL DIVERSION Receipt of material: • On receipt of diversion order from Corp,MM, the requisitioning store shall raise MTN in five copies countersigned by Group Head duly supported with copy of diversion order. The first four copies of the MTN with DO shall be sent to the C&M dept of the lending region. The last copy shall be retained by the requisitioning store. Unloading of material shall be arranged by requisitioning store. • Cost of transfer of material from lending store to requisitioning store shall be borne by requisitioning region and this plus cost of material shall be taken in to credit account books by finance of the requisitioning store.

31. INTER REGIONAL DIVERSION Issue Of material: • On receipt of the Corp, MM diversion order the C&M head of the lending store shall ensure availability of material without waiting for raising of MTN. Part availability/non availability of the diverted material shall be informed to Cpro,MM and lending store immediately. • On receipt of the MTN C&M head of lending region shall issue release order and forward the MTN with release order to the lending store. • Arrangement for transportation including loading, packing and transit insurance shall be arranged by lending store.

32. Formation and function of SSID Committee Regional standing committee designated as SSID • Three members one each from O&M,Finance,C&M • C&M representative is the convener of the committee • Level of the committee decided by Regional Head Sub Station level standing committee • Region can additionally have Sub Station level SSID to expedite disposal. • It is at the discretion of the regional head to decide whether a case will be dealt be Regional or SS level SSID committee.

33. Functions Of SSID Committee • Identification & classification of items in to scrap/surplus category • Recommendation of the extent of utilization of surplus items within region for ongoing/future works • Deciding the extent/mode of repair of worn out /damaged items in terms of its economy and service life after repair or declare as scrap. • Recommending mode of disposal i.e through tender/auction, directly or through agent. • Fixing reserve price/salvage value of the items recommended for disposal as scrap. • Fixing sale price of surplus material for disposal

34. Sale of surplus and scrap Sale of surplus : • For sale of surplus, if necessary, SSID committee shall specifically certify that the material shall not be required for next two years in the region or in other regions as ascertained by Corp,MM • There is no procurement action for these material in the region/Corp CS. The recommendation of the committee on recommendation of Corp,MM ,the region can dispose as per DOP. SEBs/Utilities to be preferred. Sale of scrap : • Scrap can be disposed as per decision of SSID committee. • Approval of competent authority as per DOP is to be obtained • Disposal directly by the region through NIT/Auction/Selling agent.

35. Physical stock verification of material Stock verification is carried out tocheck stockdiscrepancy arising out of : • Human error of omission/commission • Weight difference • Improper storage • Measurement difference • Improper documentation • Loss due to corrosion/erosion • Theft/pilferage etc. • Material received/issued but not posted

36. Stock verification shall be carried out by a committee constituted by Regional Head at appropriate level. Representative from O&M, Finance and store. • Also carried out by physical verifiers appointed by Management from time to time. • The committee constituted by Regional Head gives feedback about functions of individual store, compliance of procedures, and suggest improvement in store function. The store shall assist the finance to ensure that the PSL balance tallies with the stock ledger and Bin card.

37. Stock verification field book No discrepancy : Verified found correct Discrepancy : Short/Excess Discrepancy voucher in 3copies Original copy-Store incharge Second copy – Finance Third copy – Retained by verifier • Reconciliation : On receipt of SDV the store incharge shall reconcile various receipts and issues and offset the surplus against shortages for the same item. The store in charge shall investigate the reasons for discrepancy.

38. The persons associated with store or user department can be examined and if fraud or theft is suspected necessary action can be initiated. • A-B-C analysis: In case overall discrepancy in the store for the entire region is considerable value wise, an A-B-C analysis may be carried out with categories as defined below : i) A-Category item > or = Rs One lac ii) B-Category item < or = Rs 10,000 and < 1lac iii) C-Category item < Rs 10,000

39. Every attempt shall be made to reconcile : i) 90% or more for A-Category item ii) 80% or more for B-Category item iii) As much as possible for C-Category item Regional C&M Department of RHQ will advise action plan to all stores of the region Store in charge shall submit report of the reconciliation efforts made and its outcome to Finance department of Group /RHQ.

40. Write-off And Adjustment Procedures • Based on reconciliation report received from store in charge, Finance shall cross check and if found in order, same shall be entered in the Bin card/stock ledger/PSL/Stock verification field book and SDV with remark as tallied. • The losses due to weight difference and corrosion and erosion shall be after approval of competent authority as per DOP • Even after all checks, if discrepancy still exists store in charge shall initiate proposal for reconciliation and adjustment/write-off from competent authority as per DOP.

41. On receipt of approval for store discrepancy the store in charge shall issue an “Adjustment SIV” for shortage of material and an “Adjustment SRV” for excess material. • The Adjustment voucher along with copy of approval of competent authority is then sent to finance department for adjustment (debit)/(credit) in finance books and entry in PSL.

42. STORAGE OF MATERIALS • There are a wide range of materials in store • All materials are susceptible to deterioration due to aging, weathering etc. Besides material deterioration accelerates due to improper storing. Main objectives of proper storage are as follows: i) To keep material in scientific manner and safe from all kinds of damage, deterioration and spoilage. ii) To ensure materials in custody are available in perfect and serviceable condition for use. iii) To reduce capital investment in store

43. STORAGE OF MATERIALS • It isabsolutely essential to follow specific instructions/guidelines of manufacturers/ suppliers for storage. • It is mandatory to follow specific instructions/ guidelines of respective organisation when the materials are covered under i)Maintenance contract ii) Guarantee/warrenty iii) Insurance policy iv) Material is hypotheticated

44. Major requirements for a proper storage i) Store hygiene ii) Cleanliness iii) Ventilation iv) Segregation of infested material v) Illumination vi) Proper handling • Storage of Cement i) Stored in dry rooms over polythene/plastic sheets on a raised platform and away from walls to avoid ingress of moisture. ii) Bags should be placed close together to reduce circulation of air.

45. iii)Piles should not be more than eight bags high iv) Piles should be covered with plastic/polythene to prevent ingress of moisture from top. v) Mixing of cement of different batches should be avoided. • Storage of steel: i)Should be stored in raised ramps without accumulation of water at the base • Storage of gases in cylinder i) Protect cylinders against mechanical damage ii) Keep valve caps in place unless they are in use iii) Avoid exposure to excessive heat

46. Storage Of O&M Spares

47. Storage Of O&M Spares

48. All store materials are to be insured against theft and burglary Centralised insurance policy is taken for all stores of the Region from RHQ

49. THANK YOU