INVENTORY MANAGEMENT
OF
NEPAL OIL CORPORATION LIMITED 

	

Submitted By:
Santosh Adhikari
Prithvi Narayan Campus
T.U. Registration No: 7-1-48-1362-2001
Campus Roll Number: 244/2063

A Thesis Submitted to:
Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirements for the degree in Masters of Business Studies (M.B.S.)

Pokhara

July, 2010

Faculty of Management

RECOMMENDATION

This is to certify that the thesis
Submitted by

Santosh Adhikari

Entitled
INVENTORY MANAGEMENT OF
NEPAL OIL CORPORATION LIMITED 

has been prepared as approved by this Department in the prescribed format of
Faculty of Management. This thesis is forwarded for examination.

…................................................
             Ram Bahadur Thapa
( Thesis Supervisor )	

……...………….......................
Campus chief

	..……………………………..
Dr. Puspa Raj Sharma 
( Head of department )

Date: ……………………

Faculty of Management

VIVA-VOCE SHEET

We have conducted the viva-voce examination of the thesis presented by
Santosh Adhikari
Entitled
 INVENTORY MANAGEMENT OF
NEPAL OIL CORPORATION LIMITED 

And found the thesis to be the original work of the student written according to the prescribed format. We recommend the thesis to be accepted as partial fulfillment of the requirement for Master Degree in Business Studies (M.B.S.).
Viva-Voce Committee
Chairman, Management Research Committee	…………………………
Member (Thesis Supervisor)			…………………………..
Member (External Expert)				…………………………...
Member			                                 …………………………...

Date: …………………

                                                   DECLARATION

I hereby declare that the work reported in this thesis entitled Inventory Management in Nepal Oil Corporation Limited Submitted to Prithvi Narayan Campus Faculty of Management, Tribhuvan University is my original work. It is done in the form of partial fulfillment of requirements for the Master's Degree of Business Studies (M.B.S.) under the supervision and guidance of Mr. Ram Bahadur Thapa, Lecturer, Prithvi Narayan Campus, Pokhara.

………………
Santosh Adhikari 
Researcher
Roll No.: 244/2063
Regd. No. 7-1-48-1362-2001
Prithvi Narayan Campus
                                                            pokhara

Date: ……………….

ACKNOWLEDGEMENTS

First, I would like to express my sincere gratitude to Ram Bahadur Thapa, Lecturer of  Prithvi Narayan Campus, who as my respected teacher as well as my thesis supervisor provided me with insights into basic ideas and techniques of analysis and interpretation essential for carrying out this research work, guided me and supervised my work from the very beginning to the end, and enabled me to present the thesis in this form.

I would like to express my sincere gratitude to Dr. Puspa Raj Sharma,Prithvi Narayan Campus, Pokhara, the Head of Department of Management. I am very much indebted to all honorable teachers of Management Department for their feedback to complete this thesis in this final form.

I am also indebted to the author's of different books, journals and unpublished Master's degree thesis. I am also thankful to the librarian of Trubhuvan University Central Library and Western Regional Library of Prithvi Narayan Campus, who provide required material in time. Similarly, I could not forget to thank the management team of Nepal Oil Corporation Ltd. 

Likewise I would like to express my sincere gratitude to my all family members without whom I would not be able to complete my Master Degree. Furthermore, I would like to thank to my friends Ganesh Sharma, Shakuntala Sharma, Mankumar Shrestha, Bibek Raj Devkota, Rabindara Raj Paudel, Arjun Gyawali and Nilraj Paudel whose guidance and support during the research made this thesis successful one.

…………………..
Santosh Adhikari
Regd. No. 7-1-48-1362-2001
Roll No. 244/2063
Prithvi Narayan Campus
July, 2010

TABLE OF CONTENTS 
Recommendation
Viva Voce Sheet 
Declaration
Acknowledgement
Contents
List of Tables
List of Figures
List of Abbreviations                                                                    
Page no.
CHAPTER – I: INTRODUCTION
1.1 	Background
1.2 	Organizational structure of NOC
1.3 	Inventory Management
1.4 	Inventory Management in NOC
1.5 	Statement of the Problem
1.6 	Objectives of the Study
1.7 	Significance and Scope of the Study
1.8 	Limitation of the Study

CHAPTER- II: REVIEW OF LITERATURE
2.1	Theoretical Framework
2.1.1	Inventory Management
2.1.2 	Types of Inventory
2.1.3	Need and Importance of Inventory Management
2.1.4 	Objectives of the Inventory Management
2.1.5	Inventory Costs
2.2	Technical Formulation
2.2.1	Inventory Control
2.2.2	Techniques of Inventory Control
2.2.3	Selected Inventory Control: ABC Analysis
2.4 	Two Bin/ FIFO and LIFO
2.5	Review of Articles and Journals
2.6	Review of Related Studies on Inventory Management in Nepal
2.7	Research Gap

CHAPTER  - III: RESEARCH METHODOLOGY	44
3.1	Introduction
3.2	Research Design
3.3	Population and Sample
3.4	Nature and Source of Data
3.5 	Data Gathering Procedure
3.6	Presentation and Analysis Techniques

CHAPTER – IV:  PRESENTATION AND ANALYSIS OF DATA
4.1 	Introduction
4.2 	Procurement procedure of NOC
4.3 	Process of Procuring Cargo
4.4 	Trend Analysis of Purchase
4.5 	Storage Facility
4.6 	Selective Inventory Control: ABC Analysis
4.7 	Distribution System of Petroleum Products
4.8 	Trend Analysis of Sales
4.9	Relationship between Total sales and Total Purchase
4.10	Inventory Turnover Ratio
4.11	Economic Order Quantity (EOQ)
4.12 	Re- Order level (ROL)
4.13 	Variance Analysis between Estimated Closing Stock and Actual Closing Stock
4.14 	Relationship between Actual Purchase and Closing stock
4.15 	Relationship between Actual Sales and Closing stock
4.16 	Pricing Mechanism of Petroleum Product in NOC Ltd.
4.17 	Estimation of purchase, sales and closing stock through Time series Analysis
4.18 	Quality Control
4.18.1	Quality Control Procedure
4.18.2	Quality Control Approach
4.18.3	Fuel Quality at NOC Depots
4.18.4	Fuel Quality at NOC’s Dealers
4.19 	Major Findings

CHAPTER – V: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 	Summary and Conclusions
5.2 	Recommendations

BIBLIOGRAPHY
APPENDICES 

LIST OF TABLES

 Page no.
Table No. 2.1 	ABC Analysis
Table No. 4.1 	Comparative Statement of Annual Purchase of Petroleum Product.
Table No. 4.2 	Description of NOC’s Storage Capacity & Spots
Table No. 4.3 	Selective Inventory Control: ABC Analysis
Table No. 4.4 	Region Wise Data of Petroleum Transporters
Table No. 4.5 	Region Wise Data of Dealers
Table No. 4.6   	Comparative Statement of Annual sales of Petroleum Products.
Table No. 4.7	Annual Total Sales and Purchase
Table No. 4.8 	Relationship between Total sales and Total purchase
Table No. 4.9 	Inventory Turnover Ratios of Individual Items of Petroleum Products
Table No. 4.10 	Total Inventory Turnover Ratio of Petroleum Products
Table No. 4.11 	Annual Estimated Closing Stock and Actual Closing Stock
Table No. 4.12 	Total Actual Purchase and Total Closing stock
Table No. 4.13 	Relation between Actual Purchase and Closing Stock
Table No. 4.14 	Total Actual Sales and Total Actual Closing stock
Table No. 4.15 	Relationship between Actual Sales and Actual Closing Stock
Table No. 4.16   Detail of Retail Selling Price (RSP) of Petroleum Products on Different Dates
Table No. 4.17	Details of Retail Selling price of Aviation Turbine Fuel on Different Date
Table No. 4.18 	Details of Working Loss of Petroleum Products
Table No. 4.19 	Enforcement Result of QCR 2048 for Dealers

                                                                                      
LIST OF FIGURES

								Page no.
Figure No. 2.1 	Cost Trade Off
Figure No. 2.2 	Inventory level under EOQ Assumption Instantaneous Delivery
Figure No. 2.3 	Instantaneous Delivery
Figure No. 2.4 	Inventory Level with Transit stock & Safety stock uncertainty
Figure No. 2.5 	Graphical Presentation of ABC Analysis
Figure No. 4.1 	Purchase Statistics of Petroleum Products
Figure No. 4.2 	Statistics of Region Wise Transporters
Figure No. 4.3 	Sales Statistics of Petroleum Products
Figure No. 4.4 	Relationship between Total Sales and Total Purchase
Figure No. 4.5 	Annual Estimated Closing Stock and Actual Closing Stock
Figure No. 4.6 	Details of Retail Selling price of Petroleum products.
Figure No. 4.7 	Details of Retail Selling Price of Aviation Turbine Fuel on Different Date
Figure No. 4.8 	Details of Working Loss of Petroleum Products

                                       ABBREVIATIONS

A         	: 	Annul Requirement
A.D	: 	Anno Domany
ADB 	: 	Asian Development Bank
ATF	: 	Aviation Turbine Fuel
B.S.	: 	Bikram Sambat
C 	: 	Carrying Cost
CIE	:	Control by Important of Exception
EOQ/Q 	:	Economic Order Quantity
F/Y                     	:	Fiscal Year
FBP	: 	Final Boiling Point
FO 	: 	Furnance Oil
HSD	: 	High Speed Diesel
IOC	: 	Indian Oil Corporation
IS	:	Indian Standard
KL	:	Kilo Liter
LDO 	: 	Light Diesel Oil
LPG	: 	Liquefied Petroleum Gas
Ltd. 	: 	Limited
M 	: 	Million
MBS	:	Master of Business Studies
MS	:	Motor Sprite
NOC	: 	Nepal Oil Corporation
NS	: 	Nepal Standard
O 	:	Ordering Cost
P.E.	:	Probable Error
QCR 	:	Quality Control Regulation
r 	:	Correlation
S.E.	: 	Standard Error
SKO	: 	Super Kerosene Oil