Madras Refineries Limited.

Abstract

Describes the inventory practices used by Madras Refineries with respect to crude and finished products (diesel, kerosene, aviation turbine fuel, etc.) inventory. The steps taken for managing inventory of crude are: continuous contact with suppliers, predicting availability of crude over a planning cycle, and taking corrective action in time. Close contact with customers, improved logistics, and careful monitoring of refinery operations have resulted in low finished goods inventory. Willingness to take reasonable risks to keep inventory low is derived from the overall corporate culture. The incentives for holding low inventories results from the government's pricing policies and plant design. The case leads to identification of the steps needed for inventory management. Inventory control by comparison of desired and actual levels of inventory; cost effective management of factors leading to inventory; and developing a low inventory culture. The case also serves as a basis in motivating just in time inventory practices.