invt of liberty 1

7/29/2019 Invt of Liberty 1

1/98

LIST OF TABLES

Table No Title Page No

LIST OF FIGURES


2/98

Fig No. Title Page No


3/98

LIST OF ABBREVIATIONS


4/98

CHAPTER 1:

EXECUTIVE SUMMARY

If development capital is what establishes a business Inventory

Management is what keeps it going. One of the most common downfalls of business is

unexpectedly high running cost. What is important is not just the size of operating costs,

but the cash flowsthat is when money has to be paid out in relation to the stream of

income arriving in. Thus Inventory Management is of prime importance.

This project is a small attempt to study the Inventory management LIBERTY

SHOES LIMITED. The project can be divided into two sections. First is the analysis of

inventory management position of the company using ratio analysis and second is the study

Inventory management systems and techniques.

Ratio analysis has been done on the basis of three years data. Ratios have been

discussed to compare inventory management performance over the years and to comment and

not the absolute values. To analyze the performance, published balance sheets of LIBERTY

SHOES LIMITED have been used. This project report is based on financial data up to 2011-

12 only. Apart from liquidity and activity ratios cash and loans & advances has been

discussed separately as these two appears to be crucial in Liberty inventory management

analysis.


5/98

CHAPTER 2:

OBJECTIVE OF THE STUDY

Main Objective

The project is designed to give an overview of Inventory Management.

Sub Objective

The study on Inventory is very important for a firm. The objectives of this study are as

follows:

To determine the changes in the Inventory position of the company.

To determine the increase or decrease in Inventory level.

To determine the various ratios for analyzing the Inventory level of the company.

To spot out strengths & weakness of business.

To Study THE operational feasibility and utility of inventory management system


6/98

CHAPTER 3:

RESEARCH METHODOLOGY

Research is an important pre-requisite for a dynamic organization to be prcised. Research is

more systematic activity directed towards the discovery and development of organized body

of knowledge. Some of the characteristics of research methodology are as follows:

1. Research is directed towards a solution of problem. It may attempt to answer a

question or determine the relation between two or more variables.

2. Research involves gathering new data for primary of first hand sources or using

existing data for new purposes.

3. Research is based on observable experience or empirical evidence.

4. Research strives to be objective and logical applying every possible test to validate

the proceed are employed the data collection and conclusion research.

DATA COLLECTION

Sources of data: 1) Primary Data which included the input received from directly the

officials and employees through questionnaire and interview.

2) Secondary data: The methodology followed in conducting the study is to

collect data regarding footwear production, working capital and its management, need of

working capital in Liberty Shoes Ltd. The facts & data were taken from magazines and

annual report of company from the books, journals and internet etc.

Method of collecting data: Questionnaire schedule & Interview method

STATISTICAL TOOL USED

The data will be shown with the help of matrix table and bar diagrams.


7/98

PRIMARY DATA ANALYSIS (Bio Profile of the Respondents):

22 percent of the officials belong to the age group of 35 and 50.

58 percent of the officials belong to the age group of 25 to 34.

Percent of the officials belong to the age group of above 50.

69 percent are male officials.

31 percent are female officials.

72 percent are graduates and above.

12 percent are those who are having technical and professional qualifications.

16 percent are undergraduates.

55 percent are those who are associated with the field.

20 percent belongs to the others category.

STEPS OF METHODOLOGY

COLLECTION OF DATA

ORGANIZATION OF DATA

PRESENTATION OF DATA

ANALYSIS OF DATA

INTERPRETATION OF DATA


8/98

CHAPTER 4:

LITERATURE REVIEW

Success of any industrial undertaking depends upon the 6 ms 1) Money

2) Manpower 3) Machine 4) Market 5) Material 6) Management

Materials are pivotal importance not less than any other Ms. Problems have their

root in material affects the efficiency of all men, machine, money & marketing decisions of

the firms and thus become the grave concern of management at all levels. If there were too

much of material problems like ideal funds lied up in excessive inventory storage and

obsolesces difficulties market pressure would arise. Thus the importance of inventory

management is realized.

A number of studies have been done in the field of inventory management by various

researchers. Some of them are given below:

1. Author:- Bern at de William year 2008

This study tells that the main focus of inventory management is on transportation

and warehousing. The decision taken by management depend s on the traditional method of

inventory control models. The traditional method of inventory management is how much

useful in these days the author tell about it. He is also saying that the traditional method is

not a cost reducing, it is so much expensive. But the managing the inventory is most

important work for any manufacturing unit.

2. Author: - Jon Schreibfeder 1992

He said that it is easy to turn cash into inventory, the challenge is to turn

inventory back into cash. In early 1990s many distributor recognize that they needed help

controlling and managing their largest asset inventory. In response to this need several

companies developed comprehensive inventory management modules and systems. These

new package include many new features designed to help distributors effectively managed

warehouse stock. But after implementing this many distributors do not feel that they have

gained control of their inventory.


9/98

3. Author:-Wolf Bagby, Managing inventory

In this study Mr. W.Bagby explains that by managing the inventory it

becomes easier for the organization to meet the profit goals, shorter the cash cycle, avoid

inventory shortage, avoid excessive carrying costs for unused inventory, and improveprofitability by decreasing cash conversion and adopt JIT system. According to this study

companies need to get smart about inventory.

Boosting financial performance is another benefit that comes from better inventory

management. Infect large number of manufacturers enjoy savings and better performance by

choosing the approach of inventory reduction.

For this company needs to maximize the cash flow and profitability and this include keeping

a watchful discerning eye on charge in supply and demand.

4. Author: - Asfaque Ahmed October 12, 2004

(Article from master requirement planning and master production scheduling)

He said that most of the manufacturing company vendors have planning and

scheduling product which assume either infinite production capacity for calculating quantities

of row material and work in progress (WIP) requirements or infinite quantities of raw

material and WIP materials for calculating production capacity. There are many problems

with this approach and how to avoid these by making sure that the product you are buying

indeed takes into account finite quantities of required materials as well as finite capacities of

work centers in your manufacturing facilities.

5. Author:- D.Hoopman April 7, 2003

(Article from inventory planning and optimization)

In this article he said that inventory optimization recognize that different

industry have different inventory profiles and requirements. Research has indicated that

solutions are priced in a large range from tens of thousands of dollars to millions of

dollars. In this niche market sector price is definitely not an indicator of the quality of

solution, ROI and usability are paramount.


10/98

6. Author:-Silver, Edward A Dec22, 2002

(Article from production and inventory management journal)

This article considers the context of a population of items for which

the assumption underlying the EOQ derivation holds reasonably well. However as is

frequently the cash in practices there is an aggregate constraint that applies to the

population as a whole. Two common forms of constraints are:

1) The existence of budget to be allocated among the stocks of the items and

2) A purchasing production facility having the capability to process at most a certain

number of replenishment per year. Because of the constraint the individual

replenishment quantities cannot be selected independently.

7. Author: - Charles Atkinson(A study on inventory management)

In the study by Mr. Charles Atkinson, he explained the inventory

management and assessment of inventory levels. As per this study inventory management

need to address two issue

Part I. How to optimize average inventory levels.

Part II. How to assess (evaluate) inventory levels.

This study tells about what the manager should do and not to do, and how

much amount should be order in one placed orders. Average inventory can be calculated by

simplistic method.

Average inventory = beginning inventory +end inv./2

8. Author:-Delaunay C , Sahin E, 2007.

A lots of work has been done but now if we want to go ahead we must have

good visibility upon this field of research. That is why we are focused on frame work for an

exhaustive review on the problem of supply chain management with inventory inaccuracies.

The author said that their aim in this work is also to present the most important criterion that

allows a distinction between the different types of managing the inventory.


11/98

CHAPTER 5:

FOOTWEAR INDUSTRY

HISTORY OF FOOTWEAR & FOOTWEAR MANUFACTURING

The first foot covering was made by our primitive ancestors. The covering was to protect

their feet from jagged rocks, burning sands, rugged terrains. Development shows that the

importance of protecting the feet was recognized. Egyptians Chinese and other civilization all

contain references to shoes.

The first shoe was made of plated grass or rawhide strapped to the feet. The early Egyptians

made some sandals from plaited papyrus leaves. It shows that sandal making was recognized

as an art, early in the history o that country. Sandals are most generally worn type of footwear

in many warm countries, often ornamented and in form that is suitable to environment in

which it is worn. Sandals continued to be the same simple kind of footwear worn in the early

century.

In Japan, sandals indicated the social status of the wearer by making distinct sandals for

imperial household, merchants and actors, and in fact, for the whole range of vacations and

professions. In Greece, one emphasized design and beauty, while in Rome, they made it for

military purpose to enable their legions to travel on foot.

The moccasin protects the foot in cold countries. The outline of the forepart is puckered seam

with a string gathered and tied about the ankle.

Though all this development, little attention was devoted to fitting quality and comfort. In

Europe, perfection in workmanship and styles seems to have been sought in shoes rather than

foot comfort and protection.

The most conspicuous design in the period was the peaked shoe or crackow, with a toe so

long that it made walking difficult. Till the late 1850, shoes were made only on straight last

without recognizing the left and right. There were only two widths, the slim and the stout.

Up to 1850 shoes were made by hand tools, curved awl, and some tools were added

such as pincers, lap stone hammer and variety of rubbin sticks used for finishing edges and

heels.


12/98

Efforts have been made to develop machinery or shoe production. They had all failed and it

remains or shoemaker in the United States to create the first successful machinery for making

successful shoes.

In 1845, the rolling machine was introduced which replace all the previous tools used by

hand shoemakers or pounding sole leather and increasing wear by compacting the fibers.

In 1846, Elias Howe, invented the swing machine. This major invention seems to have set up

a chain reaction of research and development.

In 1858, layman Blake, a shoe maker, invented a machine for swing the sole of shoes to the

upper. This was purchased by Gordon McKay, who improved the invention.

In 1875, a machine was developed or making different types o shoes, known as Goodyear

welt sewing machine, was developed under the management of Charles Goodyear Jr., son of

the famous inventor of vulcanizing rubber.

Invention continued, researched and progress was made. It required great sum of money to

make one shoe making machine, but it finally paid off. Today one lasting machine can last

1000 pairs or more of shoes in 8 hours a day.

HISTORY OF FOOTWEAR IN INDIA

History of footwear is nearly 5,000 year old when Egypt started covering the feet of the

people who roam about with wooden chappals.

In India, in the ancient period, our ancestors, especially the rishies who moved about

in the forests, wore wooden chappals. There is a mention of king Bharat putting forth before

lord Ram a pair of shoes, crafted from wood and coated with gold, when despite all requests,

Ram refused to accept the throne of Ayodha.

However, it is still a mystery as to when the use of footwear, in the form of chappals,

actually started in India. There is no reference of footwear in the writings and pictures related

with the Indus valley civilization. In the pictures of men & women & seals recovered from

the site, the feet of both men and women are seen bare.


13/98

In the Rig-Veda, there is no mention of any covering for foot, but the word vatturinapad

gives a clue of the warriors wearing on the foot is mentioned in the Yajurvedia and the

chappals in the Atharveda. Thus the use of footwear or chappals started around 1,500 B.C.,

approximately 3,500 years ago from now. The upanah become quite popular during the

period of Ramayana & Mahabharata (circa 1,000 B.C.), the hides of lions, tigers, deer

leopards etc were being used for making upanah.

The Mahavagga, a Buddist religious treatise, of the 6 th century B.C. gives detailed

information about upanah, classifying them into nine types of shoes & chappalssuch as

Patbadh (keen high gum boots), Ajvishan (made of goat skin), Maind-Vishan (made of

sheep skin) etc.

During the Maryan period (3rd Centruey B.C.) many varieties of footwear came into

existence. The Greek historian Arrian writes that shoes made of white leather were special

with Indians and to increase height, Indians used to wear shoes high heels.

During the Shunga period (2nd century B.C.) a class of shoe makers came into

existence. They had specialized in making shoes with good designs and durability, in

fashionable styles. These craftsmen were called Charmkar. Their work was appreciated but

social status was low.

The Kushan period was a golden era of footwear. The shakes, parathions, Greeks and

the Kushans belonging to the Chinese dynasty brought themselves various designs and styles.

A headless statue of Kanishka, made of red stone (1st century A.D.) has been recovered from

Mathura where he has shown wearing laced shoes.

In the Gupta period (4th to 6th century A.D.) the demand of footwear increased greatly

and the hides of cows, buffaloes, goats, sheep and wild animals came into much use.

Chappals and shoes of various heights (Up to the heels, knee or thigh) were in use amongst

people from all walks of life. On their coins, Samudra Gupta and other Gupta kings are

depicated wearing shoes, decorated with flowers. In the paintings of the Ajanta caves, several

horse riders are shown wearing something like shoes.

Footwear industry in India can never be a heavy industry in general and small entrepreneurs

with small investments in machinery and capital could remain for all purposes the backbone

of industry. It is the ideal industry for entrepreneurs without much of investment in the


14/98

industry assuring growing demand and profits. Availability of raw material and manpower is

not a problem. So the small sector has to play a vital role in industry development.

Depending upon the styles, type and purpose, the footwear can be broadly classified into

three groups: Chappal or open type footwear.

Sandal or strap attached footwear.

Boot & shoe or closed type footwear covering most part of the feet.


15/98

CHAPTER 6:

COMPANY PROFILE

LIBERTY GROUP

Liberty Group was the vision of three dreamers who thought of producing an Indian brand offootwear to make a basic necessity available to their countrymen.

Mr. D P Gupta, Mr. P D Gupta and Mr. R K Bansal looked beyond the geographical

boundaries and brought cutting-edge technologies to their own country. Soon the name,

Liberty became synonym to quality in the domestic market and this encouraged the

company to invest further for enhancing production capacities and to cater to the demand ofinternational markets.

Today, Liberty is not only about footwear. It has diversified into various sectors establishing

an invincible business empire of prosperity. In the domestic market it is one of the most

admired names that ensure quality. Liberty Group expanded and diversified into

manufacturing of ceramic sanitary ware under the brand name Liberty White ware With

innovations in bathroom products and accessories that go beyond graceful lines, the company

is setting new trends in Indian ceramic sanitary ware Industry.

In order to offer unusual shopping experience to the customers, the group also entered into

retailing and set up stores in the major cities under the brand name, Liberty Revolution

The Liberty Group is expanding with the passage of time and it is committed to venture into

more business areas keeping abreast with the demands and needs.


16/98

Mission & Vision

Mission

Its the mission of the Liberty Group to continuously improve the quality of its products

using cutting-edge technologies and following the latest trends. The group emerged with an

enthusiasm to offer world-class products to its countrymen and it will carry forward the same

attitude along with the determination to be the global leader.

Vision

The Group is committed to achieve the highest performance standards in each area of its

business. It envisages itself as the most trusted name all over the world.

Liberty Group of Companies

Liberty Shoes Limited

The company has a turnover exceeding U.S. $100 million and produces more than 50,000

pairs of footwear a day. The company produces varieties of ranges covering virtually every

age group and income category. The products are marketed across the globe through 150

distributors, 350 exclusive showrooms and over 6000 multi-brand outlets, and sold in

thousands every day in more than 25 countries including fashion-driven, quality-obsessed

nations like France, Italy, and Germany.

Liberty Shoes Ltd.

Liberty Whitewares Ltd.

Liberty Retail Revolutions Ltd.


17/98

Liberty Whitewares limited

With innovations in bathroom products and accessories that go

beyond graceful lines, the company is setting new standards in the

Indian ceramic sanitary ware industry. The products break the

mould to achieve balanced and coherent integration of space, form,

design and comfort. It is redefining the bathroom as a treasured

sanctuary to luxuriate in. Liberty Whiteware is a part of the Rs.

350 crore Liberty Group, and it is taking the concept of luxury to a

new level of excellence.

Liberty Retail Revolutions Ltd.

In the elite shopping avenues of fashion capitals "Revolutions" has

begun its walk. The fashion accessory and footwear stores have begun

operations in Chennai, Bangalore, Mumbai, Kolkatta, Hyderabad, Pune,

Indore and Lucknow. These are company managed and owned outlets

where the emphasis is to deliver high fashion to the customers backed

by quality service making it a delightful shopping experience. Liberty

showrooms enter the international market as the company has plans of

opening more revolution showrooms nationally & internationally.


18/98

Board of Directors

Mr. Adesh Gupta, Executive Director / CEO

Mr. Shammi Bansal, Executive Director

Mr. Adarsh Gupta, Executive Director

Mr. Sunil Bansal, Non Executive Director

Mr. S.K. Goel, Independent Non Executive Director

Mr Amitabh Taneja, Independent Non Executive Director

Mr. Prem Garg, Independent Non Executive Director

Mr. S.K.Arya, Independent Non Executive Director

Mr. Siddharth Sanghi, Independent Non Executive Director

Mr. Vivek Bansal, Independent Non Executive Director

Mr. Raghu Dayal, Independent Non Executive Director

Audit Committee

Mr. Sunil Bansal

Mr. Prem Garg

Mr. Raghu Dayal

Mr. Vivek Bansal

Remuneration Committee

Mr. Raghu Dayal

Mr. Prem Garg

Representative of outside consultants

Share Transfer & Share Holders/Investors Grievance Committee Meeting

Mr. Adarsh Gupta

Mr. Prem Garg

Mr. Sunil Bansal


19/98

INTRODUCTION TO PARTICULAR FIRM / DIVISION

Liberty Shoes Ltd.

Liberty Shoes Ltd. is the only Indian company that is among the top 5 manufacturers of

leather footwear in the world with a turnover exceeding U.S. $100 million.

It produces more than 50,000 pairs of footwear a day covering virtually every age group and

income category. Products are marketed across the globe through 150 distributors, 350

exclusive showrooms and over 6000 multi-brand outlets, and sold in thousands every day in

more than 25 countries including fashion-driven, quality-obsessed nations like France, Italy,

and Germany

With 50 years of excellence, today Liberty produces footwear for the entire family and is a

trusted name across the world. In the domestic market it is one of the most admired footwear

brands and holds the largest market share for leather footwear.

History

It was the 25th December of 1954 when India was nurturing its growth as a free country,

three dreamers in a small town in erstwhile Punjab thought of producing an Indian brand of

footwear to make a basic necessity available to their countrymen.

Mr. D P Gupta, Mr. P D Gupta and Mr. R K Bansal allowed their vision to cross every barrier

and brought cutting-edge technologies to their own country. Within a short span of time, the

name, Liberty became a synonym to quality footwear in the domestic market and this

encouraged the company to invest further for enhancing production capacities and to cater to

the demands of international markets.

With 50 years of excellence, today Liberty produces footwear for the entire family and is a

trusted name across the world. In the domestic market it is one of the most admired footwear

brands and holds the largest market share for leather footwear


20/98

LIBERTY SHOES LIMITED

AN INNER VIEW

LOCATION:

The company has entered into a lease agreement for 410 cannals and 17 marlas (248500sq.

yards) of land on Punit Chamber, Sector -18, Turbe. Dist-Thane.

BUILDING:

It mainly consists of eight huge halls meant for manufacturing operation facility, raw material

and finished goods storage, cutting sections, PVC Sole Section, PU Sole Section,

Administrative Block etc. the design and finishing of building is among the best.

The total area of the building is 170 lacks sq.feet (approx) and total cost of building is around

550 lacks. The building is of RC framed structure.

MACHINARY:

Five (new technology) injection-moulding machines are being used by the company for

production purpose. All the machines are imported from Italy and Germany. Production of

shoes as well as quality of shoes has been increased and problems of pasting, sole cracking

have been reduced substantially by this technology. Recently one new computerized machine

has been purchased for cutting leather. It has also been imported from Italy.

INNOVATIVE APPROACHES:

Entire production units of Liberty are interlinked by SAP, a unique ERP Solution

implemented for the first time in India in a Footwear Industry with all modules related with

Finance, Logistics & supply chain.

It is rare to see such clean, state of the art production facility in India with following

management systems and tools.

1. KAIZEN is implemented since 2000 and in practice throughout the organization.

2. 5 S Concept is introduced and in practice since 2001 and presently in matured stage.

The impact of 5S implementation is visible in all dept. and shop floors of the

organization. We may even consider these units are the model units for any Footwear

Industry

3. LEAN awareness is existing in all production floors of the organisation. Value

streams are standardized for most of the regularly produced articles. Now the Group is


21/98

in the process of integrating Lean Concept with PP Module of SAP for controlling the

flow.

4. ISO 9001:2000 CERTIFICATION is awarded to QMS of one of its units and Group is

in the process of getting for other units. Group is having an appointed MR

exclusively for monitoring the Quality System. DNV is the Certifying agency and

auditors of the QMS.

5. WASTE MANAGEMENT SYSTEM is established in one of their unit and it is a pilot

project. Wastage Identification, handling and disposal are documented and monitored

by frequent internal audits.

6. WATER MANAGEMENT SYSTEM is existing in the group. Water wastage is

almostnil- and water is re-cycled in most of their operations.

7. ISES-2000 norms are followed to ensure the best Social, Health and Environmental

Standards. This standard is monitored by Indo German Export Promotion Council of

India.

8. Liberty is the Committee member for setting the standard for Safety Shoes. The

recently released IS: 15298:2000 for Safety shoes is followed by Liberty and it is the

first in Shoe Industry have applied for Certification to use ISI Mark.

9. ENGERGY MANAGEMENT SYSTEM of Liberty is unique in Footwear Industry.

Liberty Units have got lot of incentives / discounts from Haryana State Electricity

Board for maintaining maximum Power Factor.

INTERNATIONAL EXPERIENCE:

1. Liberty has more than 25 years of experience in Export Business and enjoying Status

Holder status as Recognized Export House of India. In 80s when Soviet Market was

invaded by Indian Exporters, Liberty was the Market Leader in USSR.

2. Liberty is having its own office in Russia and Hungary for more than 2 decades.

3. Libertys major operations are mainly with Europe, Middle East, East African, South

African countries and USA.

4. Major brands of Europe, SALAMANDER, JELA, DEICHMANN, ROMIKA and USA

brands like TODDWELSH are selling only Liberty Shoes under their brand umbrella.


22/98

CORPORATE PHILOSOPHY

Steeped in a philosophy that has at its core innovation, technology and advancement, Liberty,

pride itself over and above everything else on its healthy and heart-felt respect for the human

ethos, which projects itself in the expectancy and excitement with which one greets the

arrival of the new combined with a sincere and deep regard for the old, which is appreciative

of and adopts at every stage the unique balance between modernization and tradition.

Liberty as a brand is constantly evolving to keep pace with the changing trends, styles,

beliefs, and aspirations of people while maintaining the sanctity of certain traditions like

workmanship and good value.

SOCIAL RESPONSIBILITY

People at Liberty, are ever conscious of the fact that their reputation stems not just from

quality products and technological innovations but also from the manner in which they

discharge their responsibilities towards its employees, its customers, the society and the

environment. Utmost importance is given to ensuring safe, healthy and non-discriminatory

working conditions for all Liberty employees and ethical standards and practices are

rigorously adhered to. That's why Liberty finds place in the most favored list of respectable

brands like Wal-Mart, Reebok, Nike, etc as an Equal Opportunity Employer.

In fact for Liberty, 3000 employees are all members of the extended Liberty family. So it's no

surprise that its Humantech Centers have crches which give working mothers the freedom

and peace of mind to pursue their careers.

Liberty also have a special charity fund for providing financial assistance to families who

suffer the tragedy of losing their sole earning member. It's this sense of social commitmentthat inspired it to set up the Sanjay Charitable Hospital at Karnal and join the Nation in

felicitating the winners of the Republic Day Bravery Awards with a special gift of free

footwear. Ecological awareness also happens to be uppermost on our minds.


23/98

CORPORATE GOALS

Any company if it grows which is the key to survival in the long run should clear and well

defined goals. The goals of liberty shoes limited are given below:

Liberty wants to develop a spirit of cooperation between individuals and group within

the company

Liberty wants to attain and maintain good relations between its union and

management

Liberty will endeavor to keep highly qualified employees by appropriate training and

thus raise their morale and competence.

Liberty will try to practice management of highest standard of competence and

professionalism.

Liberty will strive to remain or become the technological as well as market leaders in

footwear industry and leather product industry.

Liberty wants to be known for the quality of its products and services.

NATIONAL AND INTERNATIONAL AWARDS

Leather Export Promotion Merit Award (1975), till 1982.

Haryana Government Export Award (1978-79).

International Asian Award, Jakarta (1982).

European Awards, Paris (1987).

National Award for best Export of Leather Garments (1987-88).

International Award for Good Quality, Brussels, Belgium (1988). Leather Export Award for Government of India (1991-92).

National Productivity Award from president (1997).

Council of Leather Export (CLE), Indias apex body of leather products exporters,

during the international leather fair held at Chennai, conferred is highest award the

DOYEN OF INDUSTRY upon Mr.P.D.Gupta on 5th Feb., 98.

Worldwide Prestige Award (WPA)-2001.


24/98

ORGANIZATIONAL CHART OF LIBERTY

Department Heads

C.E.O: Mr. Adesh Gupta

C.G.M: Mr. S.S Lehri

H.R: Mr. M.S Sharma

Finance: Mr. Ajay Dhingra

Production: Mr. State Khare

Domestic: Mr. Raman Bansal

Export: Mr. Sunil Goel

Institutional Sales: Mr. Haemant Mohan

D&D: Mr. Kajal Sinha

IT: Mr. Inderjit Singh

Excise: Mr. Pramod Bansal

Lab: Mr. Suresh Kumar

C.E.O

C.G.M

Liberty

Revolutions Ltd.

Liberty Shoes

Ltd.

Departments

H.R Finance Production Purchase Marketing

Domestic ExportInstitutional

Sales

R&D IT Excise

Liberty White

Ware Ltd.


25/98

ORGANISATION CHART OF INSTITUTION SALES DEPARTMENT


26/98

CHAPTER 7:

INTRODUCTION ABOUT INVENTORY MANAGEMENT

Inventories constitute the most significant part of current assets of a company like in India.

On an average, Inventories are approximately 60% of current assets in public Ltd.

companies in India. A firm neglecting the management of Inventories will be jeopardizing its

long run profitability and may fail ultimately. It is possible for a company for a company to

reduce its level of Inventories to a considerable degree. The reduct ion in excessive

inventories carries a favorable impact on a companys profitability. Inventory is composed

of assets that will sell or used in future in the normal course of business operations. The

assets, which firms store as inventory in anticipation of need, are

1. Raw material

2. Work in progress

3. Finished Goods

Inventory, is current assets, but differs from other current assets. Because only financial

managers are not involved rather, all the functional areas, i.e. finance, marketing, production

& purchasing are involved.

The job of the financial manager is to reconcile the conflicting view points of the various

functional areas regarding the appropriate inventory level in 0order to fulfill the over all

objective of maximizing the owners wealth.

Thus, Inventory management like the management of other current assets, should be related

to the over-all objective of the firm.


27/98

INVENTORY AND FINANCE MANAGER

Although inventory management usually is not the direct operating responsibility of finance

manager, the investment of funds in inventory is an important aspect of financial

management. Consequently the finance manager must be familiar with ways to control

inventory effectively, so that capital may be allocated efficiently. The greater the opportunity

cost of funds invested in inventory, the lower is the optimal level of average inventory and

also the lower the optimal order quantity, all other things held constant. The EOQ model also

can be useful to the finance manager in planning for inventory financing.

When demand or usage of inventory is uncertain. The finance manager may try to effect

policies that will reduce the average lead time required to receive inventory, once an order is

placed. the lower the average lead time ,lower is the safety stock needed and lower is the

total investment in inventory, all other things held constant. The greater the opportunity cost

of funds invested in inventory, the greater is the inventory to reduce this lead time. the

purchasing department may try to find new vendor that promise quick delivery ,or it may

pressure existing vendor to deliver faster. the production department may be able to deliver

finish goods faster by producing a smaller run. in either case, there is tradeoff between the

added cost involved in reducing the ;lead time and the opportunity cost of funds tied up in

inventory.

The finance manager is also concerned with the risk involved in carrying inventory. the major

risks involved in carrying inventory. The major risk is that the market value of specific

inventories will be less than the value at which they were acquired. Certain types of inventory

are subject to obsolescence, whether it be in technology or in consumer tastes. A change in

technology may make an electronic component worthless. A change in style may cause a

retailer to sell goods at substantially reduced prices. The principle risk is that of fluctuationsin market price. The finance manager is perhaps the best person to make an objective analysis

of the risks associated with the firms investment in inventories. These risks must be

considered in determining the appropriate level of inventory the firm should carry.


28/98

NATURE OF INVENTORY

Inventory are stock of the company is manufacturing for sale and components that make up

the product. The various forms in which inventories exist in a manufacturing company are:

1. Raw Material: Raw Material is those basic inputs that are converts into finished

goods through manufacturing process. Raw Material inventories are those units,

which will purchase & stored for future production.

2. Work in progress: Work in progress inventories are semi-manufactured products.

They represent products that need more work before they become finished

products for sale.

3. Finished goods: These are completely manufactured products which are ready

for sale. Stock of raw materials and work in progress facilitates production while

stock of finished goods is required for smooth marketing operations.

PURPOSE OF HOLDING INVENTORY

A firm also needs to maintain inventories to reduce costs and ordering costs and avail

quantity discounts. There are three main purposes or motive:

1. Transactions motive: It emphasizes the need to maintain inventories to facilitate

smooth production & sales operations.

2. Precautionary motive: It necessitates holding of inventories to guard against the

unpredictable changes in demand & supply force & other factors.

3. Speculative motive: It influences the decisions to increase or reduce inventory

levels to take advantage of price fluctuations


29/98

OBJECTIVES OF INVENTORY MANAGEMENT

Inventory Management consist various counter-balancing parts:

1. To meet the demand of the product by efficiently organizing the firms production

and sale operations.

2. To minimize the firms investment in inventory.

3. To avoid both over-stock and under-stock of inventory.

4. To eliminate duplications in ordering or replenishing stocks.

5. To minimize losses through deterioration, pilferage, wastages & damages.

6. To ensure right quality goods at reasonable prices.

7. To design proper organization for inventory management.

8. To facilitate furnishing of data for short term & long-term planning & control of

inventory.


30/98

DEFINITIONS

The following terms are used in this statement with the meanings specified:

Inventories are assets:

(a) Held for sale in the ordinary course of business.

(b) In the process of production for such sale, or

(c) In the form of materials or supplies to be consumed in the production process or in the

rendering of services.

1. Inventories encompass goods purchased and held for resale, for example, merchandise

purchased by a retailer and held for resale, computer software held for resale, or land and

other property held for resale. Inventories also encompass finished goods produced, or

work-in-progress being produced, by the enterprise and include materials, maintenance

supplies, consumables and loose tools awaiting use in the production process. Inventories

do not include machinery spares which can be used only in connection with an item of

fixed asset and whose use is expected to be irregular; such machinery spares are

accounted for in accordance with Accounting Standard (AS) 10, Accounting for Fixed

Assets.

2. Inventories should be valued at lower of cost net realizable value.

3. Cost of Inventories

The cost of inventories should comprise all costs of purchase, costs of conversion and

other costs incurred in bringing the inventories to their present location and condition.

4. Costs of Purchase

The costs of purchase consist of the purchase price including duties and taxes (other thanthose subsequently recoverable by the enterprise from the taxing authorities), freight,

inwards and other expenditure directly attributable to the acquisition. Trade discounts,

rebates, duty drawbacks and other similar items are deducted in determining the costs of

purchase.

5. Costs of Conversion

The costs of conversion of inventories include costs directly related to the units

of production, such as direct labour. They also include a systematic allocation of fixed

and variable production overheads that are incurred in converting materials into finished


31/98

goods. Fixed production overheads are those indirect costs of production that remain

relatively constant regardless of the volume of production, such as depreciation and

maintenance of factory buildings and the cost of factory management and administration.

Variable production overheads are those indirect costs of production that vary directly, or

nearly with the volume of production such as indirect materials and indirect labour.

6. The allocation of fixed production overheads for purpose of their inclusion in the

costs of conversion is on based on the normal capacity of the production facilities.

Normal capacity is the production expected to be achieved on an average over a number

of periods or seasons under normal circumstances, taking into account the loss of capacity

resulting from planned maintenance. The actual level of production may be used if it

approximates normal capacity. The amount of fixed production overheads allocated to

each unit of production is not increased as a consequence of low production or idle plant.

Unallocated overheads are recognized as an expense in the period in which they are

incurred. In periods of abnormally high production, the amount of fixed production

overheads allocated to each unit of production is decreased so that inventories are not

measured above cost. Variable production overheads are assigned to each unit of

production on the basis of the actual use of the production facilities.

7. A production process may result in more than one product being produced simultaneously.

This is the case, for example, when joint products are produced or when there is a main

product and a by- product. When the costs of conversion of each product are not

separately identifiable, they are allocated between the products on a rational and

consistent basis. The allocation may be based, for example, on the relative sales value of

each product either at the stage in the production process when the products become

separately identifiable, or at the completion of production. Most by- products as well as

scrap or waste materials, by their nature, are immaterial. When this is the case, they are

often measured at net realizable value and this value is deducted from the cost of the main

product. As a result, the carrying amount of the main product is not materially different

from its cost.

8. Other costs are included in the costs of inventories only to the extent that they are incurred

in bringing the inventories to their present location and condition. For example, it may be

appropriate to include overheads other than production overheads or the costs of

designing product for specific customers in the cost of inventories.


32/98

9. Interest and other borrowing costs are usually considered as not relating to bringing

the inventories to their present location and condition and are, therefore, usually not

included in the cost of inventories.

10. Exclusions from the cost of Inventories

In determining the cost of inventories in accordance with paragraph 3. It is appropriate to

exclude certain costs and recognize them as expenses in the period in which they are

incurred. Examples of such costs are;

1. Abnormal amounts of wasted materials, labour, or other production costs.

2. Storage costs, unless those costs are necessary in the production process prior to a

further production stage.

3. Administrative overheads that do not contribute to bringing the inventories to their

present location and condition, and

4. Selling and distribution costs.

12. The cost of inventories of items that are not ordinarily interchangeable and goods or

services produced and segregated for specific projects should be assigned by specific

identification of their individual costs.

13. Specific identification of cost means that specific costs are attributed to identify items of

inventory. This is an appropriate treatment for items that are segregated for a specific project,

regardless of whether they have been purchased or produced. However, when there are large

numbers of items of inventory which are ordinarily interchangeable, specific identification of

costs is inappropriate since, in such circumstances, an enterprise could obtain predetermined

effects on the net profit or loss for the period by selecting a particular method of ascertaining

the items that remain in inventories.

14.The cost of inventories, other than those dealt with in paragraph 11, should be assigned by

using the first-in, first-out (FIFO), or weighted average cost formula. The formula used


33/98

should reflect the fairest possible approximation to the cost incurred in bringing the items of

inventory to their present location and condition.

15.A variety of cost formulas is used to determine the cost of inventories other than those for

which specific identification of individual costs is appropriate. The formula used in

determining the cost of an item of inventory needs to be selected with a view to providing the

fairest possible approximation to the cost incurred in bringing the item to its present location

and condition.

The FIFO formula assumes that the items of inventory which were purchased or

produced first are consumed or sold first, and consequently the items remaining in

inventory at the end of the period are those most recently purchased or produced. Under

the weighted average costs formula, the cost of each item is determined from the

weighted average of the cost of similar items at the beginning of a period and the cost of

similar items purchased or produced during the period. The average may be calculated on

a periodic basis or as each additional shipment is received, depending upon the

circumstances of the enterprise.

16. Techniques for the measurement of the cost of inventories, such as the standard cost

method or the retail method, may be used for convenience if the results approximate the

actual cost. Standard costs take into account normal levels of consumption of materials and

supplies, labour, efficiency and capacity utilization. They are regularly reviewed and if

necessary, revised in the light of current conditions.

17. The retail method is often used in the retail trade for measuring inventories of large

numbers of rapidly changing items that have similar margins and for which is impracticable

to use other costing methods. The cost of the inventory is determined by reducing from the

sales value of the inventory the appropriate percentage gross margin. The percentage used

takes into consideration inventory which has been marked down to below its original selling

price. An average percentage for each retail department is often used.

18. The cost of inventories may not be recoverable if those inventories are damaged, if they

have become wholly or partially obsolete, or if their selling prices have declined. The cost of

inventories may also not be recoverable if the estimated costs of completion or the estimated

costs necessary to make the sale have increased.


34/98

The practice of writing down inventories below cost to net realizable value is consistent

with the view that assets should not be carried in excess of a amounts expected to be

realized from their sale or use.

19. Inventories are usually written down to net realizable value on an item-by-item basis. In

some circumstances, however, it may be appropriate to group similar or related items. This

may be the case with items of inventory relating to the same product line that have similar

purposes or end uses and are produced and marketed in the same geographical area and

cannot be practicably evaluated separately from other items in that product line. It is not

appropriate to write down inventories based on a classification of inventory, for example,

finished goods, or all the inventories in a particular business segment.

20. Estimates of net realizable value are based on the most reliable evidence available at the

time the estimates are made as to the amount the inventories are expected to realize. These

estimates take into consideration fluctuations of price or cost directly relating to events

occurring after the balance sheet date to the extent that such events confirm the conditions

existing at the balance sheet date.

21. Estimates or net realizable value also take into consideration the purpose for which the

inventory is held. For example, the net realizable value of the quantity of inventory held to

satisfy firm sales or service contracts is based on the contract price. If the sales contracts are

for less than the inventory quantities held, the net realizable value of the excess inventory is

based on general selling prices.

Contingent losses on firm sales contracts in excess of inventory quantities held and

contingent losses on firm purchase contracts are dealt with in accordance with the principles

enunciated in Accounting Standard (A.S) 4, contingencies and events occurring after the

balance sheet date.

22. Materials and other supplies held for use in the production of inventories are not written

down below cost if the finished products in which they will be incorporated are expected to

be sold at or above cost. However, when there has been a decline in the price of materials and

it is estimated that the cost of the finished products will exceed net realizable value, the

materials are written down to net realizable value. In such circumstances, the replacement


35/98

cost of the materials may be the net available measure of their net realizable value.An

assessment is made of net realizable value as at each balance sheet date.

23. Disclosure.

The financial statements should disclose:

The accounting policies adopted in measuring inventories, including the cost formula used,

and The total carrying amount of inventories and its classification appropriate to the

enterprise.

24. Information about the carrying amounts held in different classifications of inventories

and the extent of the changes in these assets is useful to financial statement users. Common

classifications of inventories are raw materials and components, work in progress, finished

goods, stores, spares and loose tools.


36/98

VALUATION OF INVENTORY

The price of materials and income of a concern is directly proportional to each other. So it is

necessary that a method of pricing materials should be such that it gives a realistic value

stocks. To safe guard public interest, the Government of India has instituted statutory controls

to prevent frequent change of material valuation method for at least three years.The following

material pricing methods are generally used:

First in First out (FIFO)

Last in First out (LIFO)

Average Price Method

Base Stock Method

Market Price Method

Standard Price Method

BENEFITS OF HOLDING INVENTORY

The major benefits of holding Inventory are the basic functions which are of crucial

important in firms production & marketing strategies.

The basic function of Inventory is to act as a buffer to decouple or uncouple the various

activities of a firm so that all do not have to be pursued at exactly the same rate

The key activities are:

1. Purchasing

2. Production

3. Selling

Average PriceMethod

Simple averagemethod

Weighted averagemethod


37/98

BENEFITS IN PURCHASING

If the purchasing of raw material and other goods is not tied to production/sales, i.e. a firm

can purchase, several advantages would become available. In the first place, a firm can

purchase larger quantities than is warranted by usage in production or the sales level.

In the second, firms can purchase goods before anticipated or announced price increase. This

will lead to a decline in the cost of production. Thus Inventory, serves as a hedge against

price increases as well as shortages of raw materials. This is highly desirable inventory

strategy.

BENEFITS IN PRODUCTION

Finished goods inventor serves to uncouple production and sale. This enables production at a

rate different from that sale. That is production can be carried on at a higher or lower than the

sales rate. This would be of special advantage to firms with a seasonal sales pattern. In their

case, the sales rate will be higher than the production rate during the part of the year (peak

season) and lower during the off-season. The choice before the firm is either to produce at a

level to meet the actual demand. In brief, since inventory permits least cost production

scheduling. Production can be carried on more efficiently.

BENEFITS IN SALES

The maintenance of inventory also helps a firm to enhance its sales effort. For one thing, if

there are no inventories of finished goods, the level of sales will depend upon the level of

current production. A firm will not be able to meet demand instantaneously. There will be a

lag depending upon the production process. If the firm has inventory, actual sales will not

have to depend on lengthy manufacturing process.


38/98

INVENTORY CONTROL

Effective inventory management requires an effective control system for the inventories. In

managing inventories, the firms objective should be in consonance with the shareholders,

wealth maximization principle. To achieve this, the firm should determine the optimum level

inventory. Efficiently controlled inventories make the firm flexible. Inefficient control results

in unbalanced inventory and inflexibilitythe firm may sometimes run out of the stock and

sometimes may pile up unnecessary stocks. This increases the level of investment and makes

the firm unprofitable. To manage inventories efficiency, answers should be sought to the

following two questions:

1. How much should be ordered?

2. When it should be ordered?

The first questions, how much to order relates to the problem of determining economic

order quantity (EOQ), and is answered with an analysis of costs of maintaining certain

level of inventories.

The second question, when to order arises because of uncertainty and is problem of

determining the reorder point.

ECONOMIC ORDER QUANTITY

One of the major inventory management problem is to be resolved is how much inventory

should be added when inventory is replenished. If the firm is buying raw materials, is has

to decide lots in which it has to be purchased on each replenish. If the firm is planning a

production run, the issue is how much production to schedule. These problem, are called

order quantity problems, and the task of the firm is to determine the optimum or

economic order quantity.

Determining an optimum level of inventory level involves two types of costs:

1. Ordering costs

2. Carrying costs


39/98

ORDERING COST

This category of cost is associated with the acquisition or ordering of inventory. Firms have

to place orders with suppliers to replenish inventory of raw material. The expenses involved

are referred to as ordering costs. Included in the ordering costs are involved in

Preparing a purchase order or requisition form

Receiving, inspection and recording the goods received

Ordering costs increase with the number of orders; thus more frequently inventory is

acquired, the higher the firms ordering costs. On the other hand, if the firms maintain large

inventory levels, there will be few orders placed and ordering costs will be relatively small.

Thus, ordering costs decrease with increasing size of inventory.

CARRYING COST

Costs incurred for maintaining a given level of inventory are called Carrying costs. They

include: Storage. Insurance, taxes, Deterioration and Obsolescence. Carrying costs vary with

inventory size. This behavior is contrary to that of ordering costs which decline with increase

in size of inventory. The economic size of inventory would thus depend on trade-off between

carrying costs and ordering costs.

The optimum inventory size is commonly referred to as economic order quantity. It is thatorder size at which annual total costs of ordering and holding are the, minimum. We can

follow three approachesthe trial and error approach, the formula approach and the graphic

approachto determine the economic order quantity (EOQ).

2AO

EOQ = C

Where, A is annual requirement.

O is Ordering cost.

And C is Carrying cost.


40/98

RE-ORDER POINT

The problem, how much to order is solved by determining the economic order quantity, yet

the answer should be sought to the second problem, when to order. This is a problem of

determining the re-order point. The re-order point is that inventory level at which an order

should be placed to replenish the inventory. To determine the re-order point under certainty,

we should know: (a) Lead time, (b) average usage, and (c) economic order quantity.

Lead time is the time normally taken in replenishing inventory after the order has been

placed. By certainty we mean that usage and lead time do not fluctuate. Under such a

situation, re-order point is simply that inventory level which will be maintain for

consumption during the lead time.

That is: Re-order point= Lead Time* Average usage.

SAFETY STOCK

It is difficult to predict usage and lead time accurately. The demand for material may

fluctuate from day to day or from week to week. Similarly, the actual delivery time may be

different from the normal lead time. If the actual usage increases or the delivery of inventory

is delayed, the firm can face a problem of stock-out which can prove to be costly for the firm.

To guard this problem, the firm may maintain a safety-stock some minimum or buffer

inventory as cushion against expected increased usage and delay in delivery time.

SELECTIVE INVENTORY CONTROL

ABC ANALYSIS

Usually a firm has to maintain several types of inventories. It is not desirable to keep the

same degree of control on all of the items. The firm should pay maximum attention to those

items whose value is the highest. The firm should, therefore, classify inventories to identify

which items should receive the most effort in controlling. The firm should be selective in its

approach to control investment in various types of inventories. This analytical approach is

called ABC analysis and tends to measure the significance of each item of inventories in

terms of its value. The high value items are classified as An item and would be under the

tightest control. C items represent relatively least value and would be under simple control.


41/98

B items fall in between these two categories and require reasonable attention of

management. The ABC analysis concentrates on important items is also known as control by

importance and exception (CIE). As the items are classified in the importance of their

relative, this approach is also known as proportional value analysis (PVA).

The following steps are involved in implementing the ABC analysis:

1. Classify the items of inventories, determining the expected use in units and the

price per unit for each item.

2. Determine the total value of each item by multiplying the expected units by its

units price.

3. Rank the items in accordance with the total value, giving first rank to the item

with highest total value and so on.

4. Compute the ratios of number of units of each item to total units of all items and

the ration of total value of each item to total value of all items.

5. Combine items on the basis of their relative value to form three categories A, B

and C

6. The data in the following table illustrate the ABC analysis.

CLASS NO. OF ITEMS% VALUE OF ITEMS%

A 15 70

B 30 20

C 55 10


42/98

INVENTORY TURNOVER RATE TECHNIQUE

One important technique of inventory control is to use inventory turn over ratios. These

ratios are calculated to assess the efficiency in use of inventories. Following control ratios

can be computed for inventory analysis:

Inventory Turnover Ratio = Cost of goods sold/ Average Inventory

Where Average Inventory = (Opening Inventory + Closing Inventory)/2

Inventory Turnover Ratios can be calculated separately for raw materials and finished goods.

(A) Raw Material Turnover Ratio = Raw Material Consumed/ Average stock of Raw

material.

(B) Finished Goods Turnover Ratio = Cost of Goods Sold/ Average Stock of Finished

Goods

Average Age of inventory of inventory Turnover in Days = Days during the period/ Inventory

Turnover Ratio

(i) Average inventory to total cost of production = (Average Inventory/ total cost of

production) x 100

(ii) Slow Moving Stores to Total Inventory = Average Cost of Slow Moving

Stores/Average Inventory

(iii) Inventory Performance Index = (Actual Material Turnover Ratio/ Standard Material

Turnover Ratio) x 100

These ratios provide a broad framework for the control and provide the basis for future

decisions regarding inventory control. The ratios provide a tough indication of when

Inventory levels are going to be high. Even if it appears from the ratio that the levels are too

high there might be a perfectly good reason why the level of Inventory is being maintained.

The ratios also indicate the situation and trend. However, the limitation of ratios should be

kept in mind. They are not an end themselves, but only tools of sound Inventory

Management.


43/98

INVENTORY MANAGEMENT AT

LIBERTY

Every industry needs raw material search, so as footwear industry. LIBERTY also does this

raw material search for finding cheaper source of raw material.

LIBERTY does this to find the nearest supplier.

to reduce lead time.

LIBERTY works on ABC analysis for fund management. There are three categories of such

items in ABC analysis

Category A: items of higher value and importance.

Category B: items of medium value and importance.

Category C: items of lesser value and importance.

LIBERTY always monitors category items, in the sense that these items should not be kept

idle because these items need lot of funds. So, they are very careful for a category item. They

keep only that much stock which is required immediately and equal to that of lead time.

MATERIAL MANAGEMENT DEPARTMENT AT LIBERTY;

1. Material management department at LIBERTY receives purchase requisition

Production Planning and Control Department. On the basis of that requirement, they

check their stock and adjust that in available stock and issue the purchase order of thebalance requirement to the predetermined and predecided suppliers.

2. On receipt of material from the supplier, the invoices are entered in DMR (daily

material register)

3. From here, the material is sent to stores for Quality Control and the invoices are send

to computer section of material management department. Now both the departments

function primarily or side by side.

4. Then quality and quantity is being checked in the stores.


44/98

5. The invoices are being received in SAP.

6. After quality control the material is given to the store keeper for proper storage and if

there is any deviation either in quality or quantity of material than, the quality reports

are send to account department by quality control department for proper handling of

bills.

ISSUE OF MATERIAL TO CONVEYER

On receipt of material required slip from production planning and control department the

stores issue and send the material to different conveyor as mention on the required slip.

PROCESS CYCLE

Manufacturing process:

The company has three kinds of production lines:-

1. PVC Injection Moulding Process.

2. Stuck on / Lasting Process.

3. EVA Injection Moulding Process.

The manufacturing process can be divided into the following:-

1. Making of shoe.

2. Soling (complete shoe).

3. Finishing & packing.

NON LEATHER SHOES:-

Non-Leather Shoe Uppers:

In non leather upper making process, laminated cloth/synthetic material is cut on the cutting

machines according to required size of the uppers, then these cut compound of the uppers

undergo for stitching process where the required components are stitched together to make

the upper.


45/98

Non-Leather Shoe-Soling / Injection Moulding:-

The non-leather shoe upper undergo a process known as the PVC INJECTION

MOULDINGPROCESSunder which upper is tied upon the last which is mounted on the

machine according to the size roll. In the process PVC granules are used as raw material forsole making which get stucked to the upper with the help of injection.

LEATHER SHOES:-

Leather Shoe Upper:-

In leather shoe upper making process leather is cut by hand or on the cutting machines

according to the required size of uppers. Machines cutting process is based on dyes which are

prepared separately for each model. Cutting by hand is on the basis of the pattern to bespecified for each model of the uppers. After skiving and folding these components are

assembled together with the help of stitching machines as per the type of upper required.

Leather Shoe Soling / Stuck-On Process:-

In stuck on process, shoe is made by readymade sole which can be of PU, TPR, EVA,

LEATHER etc.Upper is lasted on the shoe last according to the size roll with the help of

machines. Thereafter sole according to the upper size is taken and they get stucked together

with the help of pasting process. After completing the sole attachment, lasts are removed and

then the shoe is finished with the help of trimming machines and stamping machines.

FINISHING AND PACKING:-

Both Leather and Non-Leather shoe are given the required finished touches by putting insole,

padding, tissue paper etc and after attaching tags, laces etc, are packed in boxes dispatch

EVA INJECTION MOULDING PROCESS

The raw material used for the process is EVA (ethyl vinyl acetate) granules which are fed

into the barrel with the help of hoppers (suction device). After entering into the barrel, a paste

of the granules is formed by heating and then this paste is injected into the moulds as per

shape and size of the required footwear. EVA Injected range of slippers, sandals represent the

most advanced step in the technology for a market.


46/98

RAW MATERIAL USED:

CUTTING MATERIAL

1. Cloth strobe

2. Padded foam

3. Goat skin

4. Softy (cow leather)

5. Cow Venus black

6. Toe puff sheet

7. Foam P.U

8. T.P counter sheet

9. Heavy nylex black

10.Silicon spray

11.Laminated cloth (rexine)

12.Laminated cloth (skin fit)

13.Laminated cloth (mesh)

14.Laminated cloth (RIB)

15.Laminated cloth (canvas)

16.Laminated cloth (EVA lycra)

17.Laminated cloth PVC lining)

18.Leather

19.Leather lining

20.Camarilla lining

21.Fleece lining

22.Rubber

CLOSING MATERIAL:1. Thread

2. Tongue

3. Tape intake (eyelet tape)

4. Eyelet brass

5. Adhesive neufix

6. Adhesive rubber solution

7. Binding nylon


47/98

8. Label

9. Adhesive rubber latex

10.Tape cotton

11.Piping polyester

PACKING MATERIAL:

1. Boxes

2. Shoe lift

3. Marketing bag corporate small/non woven

4. Adhesive sticker pictogram

5. Hologram liberty footwear

6. Silica gel blue

7. Tissue paper white/poster paper

8. Tag card

9. Tag pin

10.Carton

11.Carton label

12.Price stickers

13.Hologram genuine14.Plastic heel

15.Label printed stock, glider black/red.

LASTING MATERIAL:

1. Adhesive P.U 107

2. Adhesive nefix

3. EVA Sole

4. EVA Sheet

5. Sole

INJECTION MATERIAL:

1. PVC Compound

2. EVA Compound

3. PVC Master batch

4. EVA Master batch.


48/98

CHALLENGES: SINGLE INTEGRATED SYSTEM

Liberty Shoes Ltd was on a path of rapid expansion. With Liberty aiming at markets

spread across the globe, transparency of, and control over, business operations across the

extended organization was posing a big challenge for the top management. Liberty

needed a single integrated and, more importantly, universal solution which would enable

them to establish central transaction and management control. This would, in turn, enable

accurate and on time generation of consolidated MIS reports, helping top management to

monitor the health of individual companies efficiently.

Second, the local management needed systemic support to run their day to day operations.

Generating timely and accurate MIS reports, recording daily transactions and reporting to

central office on time was a great challenge at all the individual offices. Another

important area which needed immediate attention was inventory management. Thus, it

was clear that we needed a system that would be universal, as well as handle country

specific localization needs.

Decision to implement SAP Business One

Liberty Shoes Ltd looked for a solution that was universal yet locally adaptable. They

evaluated a few options before deciding on SAP Business One. Liberty felt that SAP

provided them the much needed adaptability and flexibility. SAP also inherently

possessed control and check features for management control which was important for

Liberty Shoes Ltd, considering their future global expansion plans. Also, SAP was web-

enabled, had the necessary reporting capabilities and had local product support at all the

locations considered for implementation. So, SAP was a clear winner.

Managing a multi location implementation

The biggest challenge Liberty had to deal with was managing simultaneous implementation

across global locations. While the company put together a competent internal team, they

realized that not many members had firsthand experience working at these locations nor did

they have an understanding of the local systems in place.

After a careful consideration, Octopus-e International was selected as the implementation

partner for all the locations. Octopus-e set up an experienced team to handle the complexities


49/98

of the project. The Big Bang implementation approach was followed and implementation was

kicked off in July 2006 across all the locations simultaneously. Standard modules including

sales, purchase, inventory, finance and banking were implemented and the solution was

customized according to local tax and reporting structures. Even though there were

challenges in coping with language issues and understanding the local context, Octopus-e

drew on their experience to deal with them, says Atul Sherry, Director, Octopus-e

International. Liberty Shoes ltd needed a common chart of accounts for all the companies;

mapping the chart of accounts across the three countries accurately was quite challenging for

the implementation team. With the help of the dedicated internal team and our own team, the

implementation was completed in just three months.

SYSTEM ANALYSIS

System Analysis refers into the process of examining a situation with the intent of improving

it through better procedures and methods. System Analysis is the process of planning a new

System to either replace or complement an existing system. But before any planning is done

the old system must be thoroughly understood and the requirements determined. System

Analysis is therefore, the process of gathering and interpreting facts, diagnosing problems

and using the information to re-comment improvements in the System. Or in other words,

System Analysis means a detailed explanation or description. Before computerized a system

under consideration, it has to be analyzed. We need to study how it functions currently, what

are the problems, and what are the requirements that the proposed system should meet.

System Analysis is conducted with the following objectives in mind:

Identify the customers need.

Evaluate the system concept for feasibility.

Perform economic and technical analysis.

Allocate functions to hardware, software people, database and other system elements.

Establish cost and schedule constraints.

Create a system definition that forms the foundation for all the subsequent engineering

work.

Requirement Analysis/ SRS of the Component.


50/98

PROBLEM DEFINITION

To provide the basic services related to the Supply of the material to maintain their PRE-SO

(Supply Order) and POST-SO details. The product will take care of all the supply orders. Pre-

So is maintained from the starting of the financial year. It is concern to keep the records of

each Supply Order, which is received, from firm, supplying equipments. These equipments

are then assigned a unique ISG Number given by BRO, further they are supplied to different

project departments of BRO. The reference of Last Purchase Price (LPP) of the equipments

corresponding to the ISG (Initial Stocking Guide) is maintained to form the transaction sheet

of the particular financial year.

PERFORMANCE REQUIREMENTS

The following performance characteristics should be taken care of while developing the

system:

User friendliness: The system should be easy to learn and understand so that new user

can also use the system effectively, without any difficulty.

User satisfaction: The system should meet user expectations.

Response time: The response time of all the operations should be low. This can be made

possible by careful programming.

Error handling: Response to user errors and the undesired situations should be taken

care of to ensure that the system operates without halting.

Safety: The system should be able to avoid or tackle catastrophic behavior.


51/98

DATA FLOW DIAGRAM

The Data Flow Diagram shows the flow of data or information. It can be partitioned into

single processes or functions. Data Flow Diagrams can be grouped together or decomposed

into multiple processes. The DFD is an excellent communication tool for analysts to model

processes and functional requirements. Used effectively, it is a useful and easy to understand

modeling tool. It has broad application and usability across most software development

LIBERTYY

Firm

V/E/P Type

Supply

Stores

SO Num

Part Num

ISG Num

Nomenclature

Rate

ESD,WSDTP

PriceList

Type

Address

Name

Projects

M

N

1

M


52/98

projects. It is easily integrated with data modeling, workflow modeling tools, and textual

specs. Together with these, it provides analysts and developers with solid models and specs.

Alone, however, it has limited usability. It is simple and easy to understand by users and can

be easily extended and refined with further specification into a physical version for the design

and development teams. The different versions are Context Diagrams (Level 0), Partitioned

Diagrams (single process only -- one level), functionally decomposed, and leveled sets of

Data Flow Diagrams.

DATA STORE

A repository of information. In the physical model, this represents a file, table, etc. In the

logical model, a data store is an object or entity.

DATA FLOWS

DFDs show the flow of data from external entities into the system, showed how the data

moved from one process to another, as well as its logical storage. There are only four

symbols:

1. Squares representing external entities, which are sources or destinations of data.

2. Rounded rectangles representing processes, which take data as input, do something to it,

and output it.

3. Arrows representing the data flows, which can either, be electronic data or physical items.

4. Open-ended rectangles representing data stores

There are several common modeling rules for creating DFDs:

1. All processes must have at least one data flow in and one data flow out.

2. All processes should modify the incoming data, producing new forms of outgoing data.

3. Each data store must be involved with at least one data flow.

4. Each external entity must be involved with at least one data flow.

5. A data flow must be attached to at least one process.


53/98

TECHNOLOGIES USED

Hardware

Processor : Pentium III Processor

RAM : 256 MB

Hard Disk : 20 GB

Software

Visual Studio .Net 2003

Microsoft SQL Server 2000


54/98

A Microsoft SQL Server 2000

Benefits:

Post implementation, Liberty ShoesLtd has experienced major benefits within a short period

of time.

Second, consolidated MIS reports generation which was earlier quite cumbersome is now

completely streamlined. Management can now take informed and accurate decisions based on

these reports. The Inventory Management System (IMS) in Liberty Shoes Ltd offers effective

inventory management strategies to increase the added value possibilities of your ad space.

Ad space will be utilized optimally and the actual offer may differ in price depending on the

inventory availability and may be considered in the banner delivery.

Inventory Mangment

System

Enter

Deliver

Re ots

Pre-SO

Rate List

Send ISG Num LPP Reference

Work Sheet

Genrate Re ort


55/98

RAW MATERIAL AT LIBERTY

JAN FEB MARCH APRIL MAY JUNE

VALUATION CLASS (crores) (crores) (crores) (crores) (crores) (crores)

Raw material & comp-IMP 0.13 0.14 0.13 0.13 0.13 0.14

Raw material & comp-IND 2.59 3.19 2.99 2.47 2.58 2.36

Mfd EVA soles 0.11 0.1 0.11 0.11 0.11 0.11

Mfd PU soles 0.52 0.6 0.54 0.36 0.28 0.43

Mfd PVC soles 0 0.02 0 0 0 0.02

Trd PU soles-IND 0.28 0.3 0.35 0.34 0.29 0.39

Trd PVC soles-IND 0 0.05 0.06 0.01 0 0

Trd PU soles-IMP 0.05 0.05 0.04 0.04 0.04 0.04

Packing materials-IMP 0 0 0 0 0 0

Packing materials-IND 0.24 0.37 0.31 0.26 0.27 0.28

TOTAL (RAW MATERIAL) 3.91 4.82 4.54 3.72 3.7 3.76

ANALYSIS AND INTERPRETATION


56/98

FINANCIAL RATIOS RELATED TO INVENTORY.

Raw material turnover ratio:

Raw material turnover ratio is velocity at which raw material converted into goods

ready for sale. If raw material turnover ratio is high then company is efficiency converting

into finished goods.

Formula: Material consumed / Average raw material

Form above graph we come know that raw material turnover ratio is increased rapidly in

2007 from 1.74 in 2006 to 10.27 for 2007. Indicates that company is converting raw material

into finished or semi finished goods very quickly

Raw Material Turnover Ratio

Year Raw material consumed (Rs) Avg R.M Ratio

2008 576,484,922 53,608,082 10.75

2007 371,223,873 36,137,266 10.27

2006 230,779,236 132,002,490 1.74

Ratio

0

2

4

6

8

10

12

2008 2007 2006

Years

Ratio


57/98

Holding period of raw material:

It refers to the number of days taken for the production unit to convert raw material to finish

goods.

Formula: 360 /Raw material turnover ratio

As the raw material turnover ratio is increasing form to 10.27 for 2007 it indicates that firm is

taking less days for conversion as compared to 2006. In 2006 conversion period was 206 days

but in decreased to 35 days for 2007. This is shown in above graph.

Before 2007 there was no production process they were converting semi finished goods into

finished products hence to start their own production process they hold the raw material in2006 .

Holding period of raw material

Year Total Days Ratio Days

2008 360 10.75 33

2007 360 10.27 35

2006 360 1.74 206

Raw material holding Period

0

50

100

150

200

250

2008 2007 2006

Years

D

A

Y

S

RHP


58/98

Work in Process Turnover ratio:

Work in process turnover ratio is velocity at which W.I.P converted into goods ready

for sale. If W.I.P turnover ratio is high then company is efficiency converting into finished

goods.

Formula: Cost of production/ Average W.I.P

W.I.P turnover ratio

Year Cost of production Avg W.I.P Ratio

2008 849,054,442 36,720,702 23.12

2007 555,094,500 15,010,347 36.98

2006 361,110,197 9,755,839 37.01

Form above graph we came to know that Work in process turnover ratio is decreasing from

37.01 in 2006 to 23.12 2008. The ratio was high in 2006 as compared to 2007 and 2008. The

ratio was 37.01. Indicates that company is converting semi finished into finished goods

quickly

Work in Process Turnover ratio

0

5

10

15

20

25

30

35

40

2008 2007 2006

ears

D

A

S

Ratio


59/98

Holding period of W.I.P:

It refers to the number of days taken for the production unit to convert semi finished goods

into finish goods.

Formula 360

W.I.P turnover ratio

As the work in process turnover ratio is increasing form 9.72. in 2006 To 15.57 for 2008 it

indicates that firm is taking less days for conversion. Which shown in above graph

Holding period of W.I.P

Year Total Days Ratio Days

2008 36023.12

15.57

2007 360 36.98 9.73

2006 360 37.01 9.72

Holding period of W I P

0

2

4

6

8

10

12

14

16

18

2008 2007 2006

Years

D

A

Y

S

Ratio


60/98

Finished goods turnover ratio:

Finished goods turnover ratio is velocity at which finished goods converted into for

sale. If finished goods turnover ratio is high then company is efficient.

Formula: Cost of goods sold

Average finished goods

Form above graph we came know that finished goods turnover ratio is decreasing from 33.01

in 2006 to 27.95 for 2007. Indicates that company is selling goods little slowly as compared

to 2006 but it is bit fast as compared to 2008. Where the ratio for that particular period was

32.35 decreased to 11.20 for 2008 it is satisfactory. Which shown in above graph.

Finished goods turnover ratio

Year cost of goods sold Avg F.G Ratio

2008 849,054,442 26,243,339 32.35

2007 555,094,500 19,858,482 27.95

2006 361,110,197 10,940,008 33.01

Finished Goods Turnover Ratio

25

26

27

28

29

30

31

32

33

34

2008 2007 2006

Years

D

A

Y

S

Ratio


61/98

Inventory to capital employed:

This ratio indicates the relationship between the total capitals employed and

inventories it shows how much capital utilized to

invt of liberty 1

Documents