Inventory Control of Indian Railways

By | December 9, 2013

The Indian Railways is one of the biggest institutions in the world. It has the 2nd largest employee base in the world after Wal-Mart. It caters to the needs of nearly 8 to 9 million people per day, the largest passenger base in the world. A very effective and sound management system is required to run this humongous project. The Indian Railways uses ABC method for its spare parts management and control.

Indian Railways Inventory Control

The Indian Railways have 220 stocking depots spread over zonal railways and production units for uninterrupted supply of materials. These stocking depots stock over 2.8 lakh spare units.

The components procured by the Indian railways is divided into two parts

1. Indigenous components which are developed within the country.

2. Imported components which are imported from the other countries.

The indigenous material has a percentage of more than 96% of the total material procured by the railways annually. The imported material comprises mainly of the high end technological equipment which are not readily available in the country.

To have an effective control, the Railway Board has classified the Stores and fixed ceilings as under:-

A1 category: It includes the spare parts having an annual usage value of more than 5 lakh per annum.

A2 category: It includes all the items which have an annual usage of value between 50 thousand and 5 lakh. The stock in such cases shall not exceed the requirement for 3 months.

B1 category: It includes all the items which have an annual usage value of more than 25 thousand but less than 50 thousand. Stocks in such a case shall not exceed the requirements for 6 months.

B2 category: It includes all the items having an annual usage value of more than 10 thousand but less than 25 thousand. Stocks in such cases shall not exceed the requirement for 3 months.

C category: All the items which have an annual usage value of less than 10 thousand fall under this category. The stocks shall not exceed the requirement for 3 months.

D category: This category includes all the items which have not moved on for more than 2 years.

By scrutiny of Stores Balances, it is possible to disposes Surplus Stores which are not required and unnecessary blocking capital. The disposal of surplus stores and scrap shall be made as per extant policy of railways.

Provision of Buffer Stock:

Board has fixed the Buffer Stock Limit of 3months for indigenous items and 6 months for imported items.

Board has decided that buffer stock limit for other items may be decided by the COS in consultation with finance. However, it should be ensured that vital and safety items should be available at the level of one month stock requirement all the time and at the same time inventory balances should remain within the laid down targets.

Surplus Stores of Indian Railways

The stores which have not been issued for long time only can be considered Surplus to the requirements of the Railway. Even amongst such items there may be some it is known could be utilized for the purpose of the Railway in the near future. Purely temporary excesses over immediate or estimated requirements are not really surpluses so long as they can be issued over a comparatively short period of time.

The Surplus Stores could be due to the following reasons:

(a)    Stocks which have not been issued for a long time.

(b)   Stocks not required by the Railways due to change in design of Plants, Equipments and Rolling Stock.

(c)    Introduction of new Standards and Design.

(d)   Spares become obsolete due to scrapping the main machinery such as Rolling Stock and Plants.

(e)    Accumulation of non-standard items.

(f)    Materials no longer required by the Railways.

An essential prerequisite condition to declare any items of stores as “Surplus” stock on Railway is that such items have not been issued for railways consumption for a period of two years. Such “Surplus” stock should be classified under two heads, viz.

(a)    Movable surplus

(b)   Dead surplus

Movable Surplus:  Movable surplus stores comprise items of stores which have not been issued for a period of 24 months, it is anticipated, will be issued in the near future. Such items should be marked in the price list.

Dead Surplus: Dead Surplus Stores comprises items of stores which have not been issued for 24 months and which, it is considered, are not likely to be utilized on any railways’ maintenance programme within next two years. No item may, however may be classified as “dead surplus” unless it has been duly inspected by a Survey Committee and declared as such. Such items should be marked in the Price List.

Disposal of Surplus Stock The Stores Department of every Railway is equipped with “Surplus Stock Section” which deals effectively with the disposal of Surplus Stock, either by issue, or transfer to other Railways or by sale. For issue, the consuming departments should be asked whether the item could be utilized in the next two years or by converting into another standard item or against another standard item.

 

For transfer, other Railways and other Government departments should be asked whether the item could be utilized. By sale, it could be done either sale by tender or auction sale after the recommendation of the Survey Committee.  The Surplus Stock Section should scrutinize every public call for tender, stores, bulletins and Home indents issued by other Railways, the Directorate General of Supplies and Disposals or any other Government department or public body, and in addition examine advertisements in papers, such as the Indian Trade Journal in order to discover suitable opportunities of effecting the sales of surplus stock and over-stocks.

 

One thought on “Inventory Control of Indian Railways

  1. Pingback: Inventory Management and its Objectives | Cognited

Leave a Reply

Your email address will not be published. Required fields are marked *

7 + 1 =