project report

SUMMER TRAINING REPORT On “INVENTORY MANAGEMENT & ITS ANALYSIS” AT LIBERTY SHOES LIMITED, KUTAIL

Submitted in partial fulfillment of the award of degree Of  MASTER’S OF BUSINESS ADMINISTRATION Session (2010-2012) SUBMITTED TO: -

SUBMITTED BY: -

PUNJAB TECHNICAL UNIVERSITY JALANDHAR JALANDHAR

INDERPAL SINGH M.B.A 3 rd SEMESTER  (Finance\ Marketing) ROLL NO: 104302269285

UNDER THE SUPERVISION OF MR.UTTAM SHUKLA PROFESSOR (FINANCE)

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DECLARATION

I, INDER INDERPA PAL L SING SINGH, H, stude student nt of MBA MBA III Seme Semeste ster, r, study studying ing at Chand Chandig igarh arh Business School, Landran, hereby declare that the summer training report on “Inven “Invento tory ry Manag Managem ement ent And And Its Its Analy Analysis sis”” sub submi mitte tted d to Punjab Punjab Techn Technic ical al University, Jalandhar in partial fulfillment of Degree of Master’s of Business Administration is the original work conducted by me. The information information and data given in the report is authentic to the best of  my kno knowle wledge. dge. THIS THIS SUMM SUMMER ER TRAI TRAINI NING NG REPO REPORT RT IS NOT NOT BEIN BEING G SUBM SUBMIT ITTE TED D TO ANY ANY OTHE OTHER R UNIV UNIVER ERSI SITY TY FOR FOR AWAR AWARD D OF ANY ANY OTHER DEGREE, DIPLOMA AND FELLOWSHIP.

(INDERPAL SINGH)

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DECLARATION

I, INDER INDERPA PAL L SING SINGH, H, stude student nt of MBA MBA III Seme Semeste ster, r, study studying ing at Chand Chandig igarh arh Business School, Landran, hereby declare that the summer training report on “Inven “Invento tory ry Manag Managem ement ent And And Its Its Analy Analysis sis”” sub submi mitte tted d to Punjab Punjab Techn Technic ical al University, Jalandhar in partial fulfillment of Degree of Master’s of Business Administration is the original work conducted by me. The information information and data given in the report is authentic to the best of  my kno knowle wledge. dge. THIS THIS SUMM SUMMER ER TRAI TRAINI NING NG REPO REPORT RT IS NOT NOT BEIN BEING G SUBM SUBMIT ITTE TED D TO ANY ANY OTHE OTHER R UNIV UNIVER ERSI SITY TY FOR FOR AWAR AWARD D OF ANY ANY OTHER DEGREE, DIPLOMA AND FELLOWSHIP.

(INDERPAL SINGH)

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ACKNOWLEDGEMENT

“Gratitude is not a thing of expression; it is more a matter of feeling.”  It is my pleasu pleasure re to be indeb indebte ted d to variou variouss people people,, who who direc directly tly or indir indirect ectly ly contr contribu ibute ted d in the devel developm opment ent of this this work work and and who influe influence nced d my thinki thinking, ng,  behavior, and acts during durin g the course of study. stud y. I express my sincere gratitude to Dr Hitesh Goyal, worthy Principal for providing me an opportunity to undergo summer training at Liberty Shoes Ltd., Libertypuram, Kutail. I am thankful to Mr. Rakessh Chauhan, HOD(Finance) working in LIBERTY SHOES,KUTAIL who provided me his expert advice, inspiration & moral support in spite spite of his busy schedule & assignments, assignments, and lastly Lecturers Lecturers MBA who has mainly provided me understanding of this project. I also extend my sincere appreciation to Dr.P.S.Vohra, H.O.D of  M.B.A Department who provided her valuable suggestions and precious time in accomplishing my project report.

Lastly, Lastly, I would like to thank the almighty and my parents for their moral support and my friends with whom I shared my day-to-day experience and received lots of suggestions that improved my quality of work.

(INDERPAL SINGH)

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INDEX

• • • • • • • • • • •

Title Page Acknowledgement Preface Executive Summary Introduction to the Company Introduction to the Topic Inventory Management Research Methodology Analysis and Interpretation Conclusion Bibliography Annexure

PREFACE

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1-2 3 5 6-7 8-30 31-56 57-61 62-73 74-79 80-81 82-87

LIBERTY shoes Ltd. Is the only Indian company that is among the top five manufacturers of leather footwear in the world with a turnover exceeding US $100 million. This report is all about study of Inventory Management of Liberty shoes Ltd. In this, I studied annual reports of different years of Liberty shoes Ltd. My objective is to study Inventory Management of Liberty shoes Ltd. With the help of Ratio Analysis. For this report, research design used is exploratory research design. Exploratory research design main purpose is to formulate a problem for more precise investigation. In this, I define clearly what I want to measure and employ adequate method for measuring it. Data is collected from annual reports of different years of Liberty shoes Ltd., manual, websites and books. The study contains certain limitations because enough data was not available  but all the efforts have been made to collect the relevant information through the source available. The Company is highly dependent on external debt, which bring in inflexibility in company’s operation. But still the company is in stronger position  because the profits have increased with sales.

LIBERTY SYMBOL

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EXECUTIVE SUMMARY

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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 flows – that 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 techniques. Ratio analysis has been done on the basis of three years data. For  calculating various ratios 300 days have been taken as number of working days after  deducting Sundays and holidays except for 2006-07, 2007-08 where 375 days have  been taken. Reason being the company has changed its financial year from 2006-07, therefore balance sheet figures for 2007-08 comprises of 15 months. Ratios have been discussed to compare inventory management performance over the years and to comment and not the absolute values. Therefore figures have not been converted into 12 months in this report. To analyze the performance, published balance sheets of  LIBERTY SHOES LIMITED have been used. This project report is based on financial data up to 2007-08 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.

INTRODUCTION TO FOOTWEAR INDUSTRY

Footwear is a man made outer covering of foot. It is genially made out of leather  but the same can be made with synthetic material. When the human being came into existence, they were needed to protect themselves from heat, cold dampness, dust and roughness of ground while walking, standing, or even running. So they innovate shoes for the protection of their feet.

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The importance of footwear is highly recognized in western and other advanced countries, so the footwear industry grew in full swing that originated big companies like Nike, Reebok, Gucci, and Addidas etc. But the scenario in India is somewhat different and regretfully as the industry could not develop itself despite the fact that India being second largest populated country in the world, surplus manpower and resource of raw material, whatever the reason being.

Till the mid of 20 th century, the bulk of shoe industry was in cottage sector. Professional cobblers were responsible for production of every type of shoes. But in the past one decade the situation has completely changed because new generation of   professionals did not adopt this line as shoemaker and preferred to join white-collar   jobs.

It resulted in the diversification from schedule caste to other class of people as industrial workers. Up to eighties, Bata was the main source of supply of footwear to the cites and towns with higher standard of living. But taking into consideration the growing standard of living and demand, many new footwear companies came into light like Liberty,Corona, Action, Lakhani etc. Production of footwear at this movement is mainly at Agra, Karnal, Faridabad, Delhi, Kolkatta, Kanpur, Mumbai, Madras, and Banglore etc.

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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 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.

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COMPANY PROFILE

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COMPANY INFORMATION Board of Directors •

Adesh gupta

CEO & Executive Director

•

Shammi bansal Executive Director

•

Adarsh Gupta Executive Director

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Harish Kumar goel Director(Law & Taxation)

•

Sunil bansal Director

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Amitabh Taneja Independent Director

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Prem Chand Garg Independent Director

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Raghu Goel Independent Director

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Siddharth Sanghi Independent Director

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Surendra Kumar Arya Independent Director

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Vivek Bansal Independent Director

Audit committee •

Sunil Bansal

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Prem Chand Garg

•

Raghu Dayal

•

Vivek Bansal

Share transfer committee •

Adarsh Gupta

•

Sunil Bansal

•

Prem Chand Garg

Remuneration/Selection Committee •

Raghu Dayal

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Prem Chand Garg

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Membership & certificate •

Confederation of India industry (CII)

•

Federation of India chambers of commerce & industry (FICCI)

•

PHD chamber of commerce and industry (PHDCCI)

•

The

associated

chambers

of

commerce

and

(ASSOCHAM) •

Federation of Indian export organization (FIEO)

•

Council for leather export (CLE)

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ISO 9001

Company secretary & Vice President •

Munish kakra

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industry

of

India

LIBERTY OFFICES •

REGISTERED OFFICE

Liberty puram, 13th Mile Stone, G.T Karnal Road, Kutail, P.O.BASTRA, Distt.Karnal-132001 (Haryana) Tel. (91)-1748-251111-14 Fax. (91)-1748-251100 E-mail: [email protected]

•

CORPORATE OFFICE

2nd Floor, Tower-B, DLF Building No.8 DLF Cyber Citi, Phase II, GURGAON (Haryana) Tel. (91)-124-4616200 Fax. (91)-124-4616222 E-Mail: [email protected]

•

BRANCHES

Ahmedabad,Agra,Bangalore,Chennai,Delhi,Hyderabad,Jaipur, Jammu,Kolkata,Mumbai,Rajpura and Saharanpur.

•

BANKERS

ABN AMRO Bank N.V. Central Bank of India Corporation Bank  HDFC Bank  Hong Kong & Shanghai Banking Corporation Limited

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GROUP DATA AT A GLANCE

Year of Establishment

1954

Employment

More than 5000 employees

Business Investment

US $ 100 Million

Status of Business

Flagship company of the Group, Liberty Shoes Ltd., a public limited company listed in all major stock exchanges of India.

Present Activities

Second largest footwear manufacturer in the country having fully integrated plants to manufacture various kind of footwear with Annual Production of over 10 million pairs.

Annual Turnover Brand Equity

Over US$ 125 Million Mother Brand LIBERTY is ranked among Top 100 brands in the country. Other 10 Successful National brands, known for its respective segment of footwear 

Infrastructure

Various plants spread over 200 acres of land in and around Karnal, Libertypuram, Gharaunda in Haryana, Dehradun & Roorkee in Uttarakhand, Pounta Sahib in Himachal Pradesh supported by strong Marketing Network having 14 Branch offices 02 Overseas offices 300 Liberty Exclusive Distributors 350 Liberty Exclusive Retail Stores 20 Overseas showrooms • • • • •

Export Markets

All over the world, mainly with Europe in Germany United Kingdom France Spain Hungary • • • • •

Technology

Liberty’s patented technology “HUMANTECH” is a combination of  human craftsmanship and technological excellence with following technologies available in the world for Footwear Industry. Cemented Construction Direct PVC Injection Direct PU Injection Direct EVA Injection Direct TPU Injection • • • • •

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INTRODUCTION

Liberty Group, come a long way since it began its operations a little over 50 years ago in the cityof Karnal, Haryana. The emphasis since the very beginning has been to offer “great products at value for money / affordable prices”. This led to the development of Liberty Patented “HUMANTECH” approach which synergise traditional workmanship with state of the art technology to provide the best quality at the most competitive price.

Liberty group companies, set various benchmarks in Footwear Manufacturing within the Group’s Production facilities and also to Industry.

HISTORY: Liberty Group started operation in 1954 and today comprises of five firms, namely Liberty Footwear Company, Liberty Enterprises, Liberty Leathers, Liberty Group marketing Division and Liberty Shoes Limited. The group has an annual turnover of  Rs.500 Crores approximately. Liberty has its own studio for design and development of footwear. It manufactures footwear both for export and domestic markets. The company has carved a name for itself in the international market and is India’s largest exporter of footwear to Germany.

Liberty Shoes Limited, the public company of the group started commercial  production in 1993 and is the country’s leading footwear manufactures today. The company has state of the art production facilities at Libertypuram to manufacturer  high quality footwear and its contribution in Liberty Group’s total sale is over 30% and it’s rising steadily.

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CORPORATE PHILOSPHY:

Steeped in a philosophy that has at its core innovation, technology and advancement, we, at Liberty, pride ourselves over and above everything else on our healthy and heart-felt respect for the human ethos. That 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. That 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.

CORPORATE SAGA: With people as its leitmotif, Liberty has for over 50 years always stayed in touch with the aspirations of every successive generation even as it developed the largest range in the industry catering to every income bracket and age segment. Using the patented 'Humantech' approach that combines the best of talent with the latest in technology. From the price-conscious, value for money seeking buyer to the trendy, global, priceindifferent customer, from the with it all attitude teenager to the conservative seen it all adult just about everybody today finds a good reason for being in Liberty.

Liberty is today consolidating and expanding its following which extends from the fashion alleys to the sidewalks with styles that compliment the newest most happening trends and also by turning footwear selling into a byword for personalized service in an ambience and shoe stations in India and abroad.

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THE CREDO:

•

To ensure that the method we use is the latest technology world-over.

•

To follow the highest standard of honest workmanship in whatever we make.

•

To walk that extra miles to ensure customer satisfaction worldwide.

•

To remain a true cosmopolitan to the spirit.

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To remain a great corporation to associate with, to work for, to know that: “We Are About People”.

LIBERTY RANGE:

The family brand style personified with something for every need. Be it formal or  casual, at office or at the beach, a conference or a soiree - Liberty fits in effortlessly.

MANUFACTURING:

What gives Liberty the edge is vertically integrated manufacturing infrastructure on technology basis with completely in-house state of the art production facilities which includes 8 DESMA machines for PU Direct Injection, 15 Machines for PVC Direct Injection, 3 Machines for EVA Injection, 3 PU Injection units for unit sole, six lines for cement lasted injection and one machine for the latest TPU Injection. Above  production facilities are maintained with focus on environment cleanliness ISES 2000 norms, provides a complete range of family footwear of all seasons and occasions, covers the entire domain of industrial safety and health footwear requirements.

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Liberty also has the ISO: 9001-2000 certification for its Quality, Management System, a testimony to all the system and procedures in place.

Liberty is a technology driven company ‘HUMANTECH’ – Liberty’s patented technology is combination of human craftsmanship and technological excellence.

Liberty has production facilities at the following locations: •

Gharaunda, Haryana, (Approx.95 K.M. from Delhi)

•

Libertypuram, Haryana (Approx.102 K.M. from Delhi)

•

Karnal, Haryana, (Approx.124 from Delhi)

•

Satiwala, Pounta Sahib, Himachal Pradesh (Approx 225 K.M. from Delhi)

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Batamandi, Paunta Sahib, Himachal Pradesh (Approx 229 K.M. from Delhi)

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Dehradun, Uttranchal (Approx. 300 K.M. from Delhi)

•

Roorkee, Uttranchal (Approx. 150 K.M. from Delhi)

GROUP COMPANIES:

Liberty Retail Revolutions Limited Liberty Retail Revolutions Limited, the company behind the Revolutions store is a 100% subsidiary of Liberty Shoes Limited The company is producing 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 fashiondriven, quality-obsessed nations like France , Italy , and Germany.

Setting new benchmarks in the retail business in India Liberty Retail Revolutions caters to the aspirations of the style-driven in India with an exclusive chain of  upmarket showrooms, Revolutions Concept Stores, at fashion centres across India. It’s a concept that has opened new frontiers in retail selling - never seen before 18

fashion hubs, catering to individual styles and looks, in an ambience as magical and exciting as the products lined up – a world class range in footwear fashion and accessories.

Liberty Whiteware Limited The newest member of the Liberty Group introduced a range of ceramic sanitary ware and accessories of European design that’s inspired by a lifestyle of sheer elegance. Where beauty and functionality achieve perfect harmony. Form compliments finesse. And tradition blends seamlessly into innovation. Produced at a Rs.50 crore state-ofthe-art plant at Neemrana Industrial Area of Rajasthan the Beach range of fine  bathroom products and accessories including WCs, bidets, washbasins, and shower  trays, comprising five distinctive collections each with its own definitive character  and style.

BRANDS This family brand is style personified with something for every need. Be it formal or  casual, at office or at the beach, a conference or a soiree Liberty fits in effortlessly. COOLERS They’re cool and they’re hot. They’re hap and they’re happening. Perfect for those hot summer  days. When the sun blisters and the heat strokes, they keep the feet cool and comfortable. But why limit the pleasure to summers?! Here’s one brand of  sandals that stays cosy and comfy all year round. FOOTFUN Something for those little feet as they learn to walk. Airy, light and comfortable with lycra uppers and no laces. In fairy-tale colors and designs. FORCE-10 The flair, the style and ease that forces the world to take notice. A happening range of sports shoes in far  out colors that provides the perfect footnote to a head-turning presence.

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FORTUNE Genuine leather uppers and extra light poly soles help complete the power dressing in men with élan and panache.

GLIDERS Cool and comfortable, trendy and with it. A range of  stunning brogues and smart lace ups that will be noticed and talked about every step of the way. Unmistakably a part of Generation You. SENORITA Walk tall, walk light and walk with amazing style. Rediscover the little girl that lurks not far behind in every woman, laughing and loving every moment of  life. TIPTOPP It’s what Mrs. Junejas of the world love to be seen in. Strappy styles and comfortable heels. And colors that become the envy of all and sundry. Perfect for  conquering the neighbourhood in designs that are the latest rage the world over.

WARRIOR  Smart, stylish professional gear crafted from leather  uppers and direct injection P.U. soles with steel toe caps and offering the widest range of styles in safety shoes. To master the art of being confident and surefooted on slippery grounds and danger ones. WINDSOR  The premium is on lightness, style and comfort which makes it ideal for men who take every challenge effortlessly in their stride.

FREEDOM

A new introduction in the safety footwear segment in Nitrile PVC material, offering customers with waterproof, fire retardant and shock free product in economic range. A safety footwear for  industrial use.

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RESEARCH & DEVELOPMENT: Our 2-way channel partners dig their feed back deep and constantly. Hammering String of creative workman at the manufacturing center to produce not just faceless shows dancing down conveyor belts but shoes with character. So the centers have  poled 53 years of the research and continuous flow of emotions to redefine the R & D center at Libertypuram. Fusing technology with the sweat of sagacity. Some call it Research & Development Wing some put a price to investments in the “Emotional Technology“ that it comes out as. We call the process HUMANTECH and it

 priceless.

Liberty also very active in the area of Research & Development and has a number of  “firsts” to its credit like:

1. Liberty pioneered the PU (Polyurethane) technology in India in footwear industry in 1982 and today is the largest producers of footwear with this technology in Asia.

2. Liberty has developed new material TPE (Thermo-Plastic-Elastomer) for high quality formal footwear.

3. Liberty has developed a high quality Eva Compound for beach footwear.

4. Liberty was the first company commissioning a latest CAD/ CAM System.

5. Die Less Leather cutting machine which is directly attached with its Design & Development Section for speedy process of development of new models of  footwear.

6. Liberty is the only factory in India having water proofing technology approved by SYMPATEX, a name known for water proofing technology worldwide.

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7. Liberty Management is very thin in size comparing with a huge work force in front line operation.

DESIGN & DEVELOPMENT: Liberty has well established state of the art design centers which are constantly engaged in designing and developing latest trend setting footwear for the young fashions conscious Indian consumers. On an average 4000 new styles are developed every year out of which roughly 1200 styles are selected and introduced in the market in two seasons i.e. spring / summer and fall, winter.

FINANCIAL

If you think a company that has helped 50 million people think on their feet in style is  big stuff, you have seen very little yet. For us the future plans are not something that can be termed as crystal gazing but neatly enclosed ideas idea and deliverables in continuum. We are fast building new brands and products, improving the all times favorites and expending our marketing infrastructure and honing to our skills to further the delight of the consumer. With an over all 25% boom planned each year for  the next 5 year you could says that India is only true blue footwear manufacturing multinational is just peaking over the edge.

 DISTRIBUTION NETWORK: We have distribution network rivals the human arterial system. An reticulate network  of retailer showrooms, and exclusive outlets with a reach like blue – green marine octopus a structured 2-way feeder-feed back system that both gives and receives an organization of our size would have gone out-of-orbit without a firm support system. Thanks to the vision and drive of our corporate think tank, we now have a sales network that brings the breath-taking world of super footwear right at your feet within

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seconds. A virtual room service at zero cost, if you will. A marketing system that we have conceived and created, it is understandably, the envy of competition.

MORE STORES FROM LIBERTY:

Liberty group is expecting to add Rs.70 crores from its footwear retail business. The company will invest Rs.7 Crores towards expending “Revolution” - its exclusive footwear showroom. This year company will add 10 more stores to take it to 25. The company has also entered the manufacturing of white ware segment of sanitary and  bathroom products. Liberty is looking at introducing new design this season too. The company has expended its retail presence in over 100 stores across small and big cities.

 LIBERTY PLANS TO EXPANDS GLOBAL PRESENCE  Liberty group has also establish manufacturing plant in Uttrakhand state and opening 25 exclusive outlets across the country as well as in 7 overseas centers. Each outlet is estimated to see an investment of Rs.7.5 million.

With a turnover of Rs.500 crores the company is emerging as an multinational brands with about 350 Exclusive distributors all over the world. “as opposed to the earlier  model of expending retail outlets we plan to bring down the number of retailer from 5000 to 4000. We do not want retail presence for name shake; the ideas to have real  brand presence”, Liberty plans to open super premium at Singapore, Kualampur, Dhaka, Columbo and Dubai . The currently exports about 25% of footwear production to Germany, Italy, France, United States and the Middle East.

STRENGTH: At Liberty we upgrade and re-engineer our design every 6 months so that you have something new, with it and futuristic every time you visit us. Our shoes are much more than just B.E. Witching leather work. We understand that a shoe for you is an extension of your personality. And for one who keeps moving onto to stables of desire 23

loaded with exciting world fashions trends we craft the dreams with the help of  Capital Fashion Technologists shut away not in dream bars but with their heart minds on the pules of future fashion.

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 national highway no.1 main G.T. road in Libertypuram, Kutail, district Karnal. The site is around 115 KM from Delhi on national highway between Chandigarh and Delhi. The site is 15KM from Karnal and is well connected with major cities and has all basis infrastructure facilities.

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

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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. KAIZ AIZEN is impl implem emen ente ted d sinc sincee 2000 2000 and and in prac practi tice ce thro throug ugho hout ut the the organization.

2. 5 S Concept Concept is introduc introduced ed and in practic practicee since 2001 and and presently presently in mature matured d stage. The impact of 5 S implementation 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 awareness is existing existing in all production production floors of the organisation. organisation. Value Value streams are standardized for most of the regularly produced articles. Now the Group is in the process of integrating Lean Concept with PP Module of SAP for controlling the flow.

4. ISO 9001: 9001:2000 2000 CERTI CERTIFIC FICATI ATION ON is awarded awarded to QMS QMS of one of its its units and Group Group is in

the proce process ss of getti getting ng for other other units units.. Group Group is having having an

appointed MR exclusively for monitoring the Quality System. DNV is the Certifying agency and auditors of the QMS

5. WASTE WASTE MANAG MANAGEME EMENT NT SYSTEM SYSTEM is establi established shed in one of their their unit and it is a pilo pilott

proj projec ect. t. Wast Wastag agee Iden Identi tifi fica cati tion on,, hand handli ling ng and and disp dispos osal al are are

documented and monitored by frequent internal audits.

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6. WATER MANAGEMENT SYSTEM is existing in the group. Water wastage is almost –nil- and water is re-cycled in most of their operations.

8.

ISES ISES-2 -200 000 0 norm normss are are foll follow owed ed to to ensu ensure re the the bes bestt Soci Social al,, Heal Health th and and

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

9.

Libe Libert rty y is the the Com Committe itteee mem member ber for set setti ting ng the the sta stand ndar ard d for Saf Safet ety y

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 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. Liber Liberty ty has mo more re than 25 years years of exper experie ience nce in Ex Expor portt Busin Busines esss and enjoy enjoying ing Status Holder status as “Recognized Export House” of India. In 80’s when Soviet Market was invaded by Indian Exporters, Liberty was the Market Leader in USSR.

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

3. Liberty Liberty’s ’s major major operation operationss are mainly mainly with Europe, Europe, Middle Middle East, East East African, African, South African countries and USA.

4. Major brands of Europe, SALAMANDER, JELA, DEICHMANN, DEICHMANN, ROMIKA ROMIKA and USA brands like TODDWELSH TODDWELSH are selling only Liberty Shoes under their brand umbrella.

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CONTRIBUTION TO INDUSTRY : 1. Liberty Liberty has has pioneered pioneered in bringing bringing PU Techno Technology logy to India. India. Liberty Liberty has given given a  presentation on Footwear foot prints for the future in Asia Pacific Customer  Conferen Conference ce 2000 organiz organized ed by Huntsma Huntsman n Polyur Polyuretha ethane ne at Singapor Singaporee on this this technology.

2. SYMPAT SYMPATEX EX is a patente patented d technology technology on Water Proofing Proofing recogni recognized zed world world wide. Liberty is the only company in India having recognition/approval of SYMPATEX on Waterproofing.

3. Safet Safety y Shoes Shoes are brought brought to Indian Indian Market Market for the first first time time and an exclusi exclusive ve  brand WARRIOR was launched by Liberty in Industrial Segment shoes. Our  safety shoes are meeting all DIN / EN standards in respective segments.

4. PU technology technology was introduced introduced to to Government Government Sector, Sector, Liberty Liberty has set the standard as member of the BIS Committee. BIS Standard IS: 15298: 2000, applicable for  Safety shoes is the Standard on which Liberty is producing Safety shoes for more than one decade.

5. Liber Liberty ty En Ente terpr rprise isess is the model model unit unit for for above above Standar Standard d and and comple complete te testi testing ng facility is available only with Liberty in India after FDDI.

6. Liber Liberty ty is the the First First Footw Footwea earr Manufa Manufact cturi uring ng facil facility ity in India India awar awarded ded with with the latest ISO 9001:2000 Certification.

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The first first and only only footwe footwear ar Industry Industry in India India,, having having SAP SAP ERP with with all all modules modules related to Inward/Outward supply chain, Materials, Finance and Costing

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8. Liber Liberty ty has pioneer pioneered ed blend blend of NITRI NITRILE LE Rubber Rubber with with PVC in 1996 to make make it more versatile for cold countries usage.

9. Liber Liberty ty has has devel develope oped d new new mater material ial TPE (The (Therm rmo o Plast Plastic ic Elast Elastom omer) er) for high high quality formal footwear. This material has better properties than PVC or TPR  conventionally used for formal.

10. Liberty Liberty is expandin expanding g its operation operation by manufac manufacturi turing ng non woven hags which are environment clean.

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SOCIAL CONTRIBUTION : 1. Liberty Footwear Training Institute formed by our Directors is developing the local public as technicians of Footwear Industry.

2. Management of Liberty Sponsors the children of Liberty Employees for higher  studies, gives training and employment after graduation in FDDI.

3. Social and Environmental Standard ISES-2000 is in practice with Liberty. This standard is being monitored by Indo German Export Promotion Project in India.

4. The products being used by Liberty are Eco-friendly and providing latest technology to Industry when Indian Markets related with Environment & Safety are not even aware about the new standards and technology.

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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), India’s 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.

CORPORATE GOALS

•

Liberty wants to develop a spirit of cooperation between individuals & group within the company.

•

Liberty wants to attain & maintain good relations between its union & management.

•

Liberty will endeavor to keep highly qualified employees by appropriate training and thus raise their morale & competence.

•

Liberty will try to practice management of highest standard of competence &  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 for its products & services.

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PROJECT REPORT

31

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 determine the absolute figures for the last two years

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INTRODUCTION ABOUT INVENTORY MANAGEMENT

33

INTRODUCTION

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 reduction in “excessive” inventories carries a favorable impact on a company’s  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 owner’s wealth. Thus, Inventory management like the management of other current assets, should be related to the over-all objective of the firm.

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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 trade off 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 fluctuations in 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.

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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

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OBJECTIVES OF INVENTORY MANAGEMENT

Inventory Management consist various counter-balancing parts:

1. To meet the demand of the product by efficiently organizing the firm’s  production and sale operations. 2. To minimize the firm’s 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.

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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

Simple average method



Base Stock Method



Market Price Method



Standard Price Method

Weighted average method

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BENEFITS OF HOLDING INVENTORY The major benefits of holding Inventory are the basic functions which are of  crucial important in firm’s 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

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

39

 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.

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INVENTORY CONTROL Effective inventory management requires an effective control system for the inventories. In managing inventories, the firm’s 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 inflexibility – the 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

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(1)

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 1.1 Preparing a purchase order or requisition form 1.2 Receiving, inspection and recording the goods received

Ordering costs increase with the number of orders; thus more frequently inventory is acquired, the higher the firm’s 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.

(2)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 that order size at which annual total costs of ordering and holding are the, minimum. We can follow three approaches – the trail and error approach, the formula approach and the graphic approach – to determine the economic order quantity (EOQ).

2AO EOQ =

Where, A is annual requirement. O is Ordering cost. And C is Carrying cost.

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C

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 safetystock – some minimum or buffer inventory as cushion against expected increased usage and delay in delivery time.

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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. ‘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 unit’s 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

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VALUE OF ITEMS

A B C

ITEMS% 15 30 55

45

% 70 20 10

INVENTORY MANAGEMENT AT LIBERTY

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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 monitor A 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 ;

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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 the balance requirement to the predetermined and  predecided suppliers. 2.

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

3.

Then quality and quantity is being checked in the stores.

4. The invoices are being recived in SAP. 5. 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

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PROCESS CYCLE

Manufacturing processs

49

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:

Making of shoe.



Soling (complete shoe).



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.

Non-Leather Shoe-Soling / Injection Moulding:-

The non-leather shoe upper undergo a process known as the “ PVC INJECTION MOULDING PROCESS ” under 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 for sole making which get stucked to the upper with the help of injecti

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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 be specified 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 are 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 .

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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 

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Closing material: 1. Thread 2. Tongue 3. Tape intake (eyelet tape) 4. Eyelet brass 5. Adhesive neufix 6. Adhesive rubber solution 7. Binding nylon 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 genuine 14. Plastic heel 15. Label printed stock, glider black/red.

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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

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RAW MATERIAL AT LIBERTY

VALUATION CLASS Raw material & comp-IMP Raw material & comp-IND Mfd EVA soles Mfd PU soles Mfd PVC soles Trd PU soles-IND Trd PVC soles-IND Trd PU soles-IMP Packing materials-IMP Packing materials-IND TOTAL (RAW MATERIAL)

JAN (crores) 0.13 2.59 0.11 0.52 0 0.28 0 0.05 0 0.24 3.91

FEB (crores) 0.14 3.19 0.1 0.6 0.02 0.3 0.05 0.05 0 0.37 4.82

MARCH (crores) 0.13 2.99 0.11 0.54 0 0.35 0.06 0.04 0 0.31 4.54

APRIL (crores) 0.13 2.47 0.11 0.36 0 0.34 0.01 0.04 0 0.26 3.72

WORK IN PROGRESS AT LIBERTY

55

MAY JUNE (crores) (crores) 0.13 0.14 2.58 2.36 0.11 0.11 0.28 0.43 0 0.02 0.29 0.39 0 0 0.04 0.04 0 0 0.27 0.28 3.7 3.76

RESEARCH METHADOLOGY

RESEARCH METHODOLOGY

56

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

STEPS OF METHODOLOGY

57

COLLECTION OF DATA ORGANIZATION OF DATA PRESENTATION OF DATA ANALYSIS OF DATA INTERPRETATION OF DATA

COLLECTION OF DATA

58

There are two methods of collection of data which are as follows:1. Secondary Method 2. Primary Method

Secondary Method

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.

Primary Method

The primary data were collected from asking many individuals, employee of the company. They provide me relevant information for completing my study.

ORGANISING THE DATA The information / data collected during data process are organizing and presented in a comprehensible sequence to make the understandable. The data, thus obtained is then edited, classified and put in a tabulated form to make it understandable.

 PRESENTATION OF DATA

After organizing the data , it is ready for presentation. These are presented in different modes like charts, tables, and diagrams etc. the main objective of presentation is to  put collected data into a easy reliable form.

ANALYSIS OF DATA After organizing and presenting the data, the researches then has to proceed towards conclusions by logical inferences.

59

The whole data is then analyzed: 1. By bringing raw data to measured data. 2. Summarizing the data 3. Applying analytical methods to manipulate the data so that their inter  relationship and quantitative meaning become evident.

 INTERPRETATION 

Interpretation is the last and main step of research methodology. Interpretation means to bring out meaning of data & to convert mere data into information. After analysis the data, various conclusion are found out on the basis of logical inferences. Without interpretation research study cant be completed.

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ANALYSIS AND INTERPRETATION

1.LIQUIDITY RATIOS 1.1 CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILTIES

YEAR Current Assets Current

2005-2006

2006-2007

1,34,94,75,847 75,67,58,438

1,81,20,38,152 1,37,98,19,154

2007-2008 1,80,59,34,193 1,32,78,92,788

Liabilities

Current Ratio

1.78

1.31

2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

1.36

Current Assets Current Liabilities Current Ratio

2005-2006

2006-2007

2007-2008

INTERPRETATION 1. IDEAL CURRENT RATIO IS 2:1. 2. The current ratio has increased from 1.47 to 1.78 between the year 2004-2005 and 2005-2006. Then it decreased to 1.31 in the year 2006-2007 and then increased 1.36 in the year 2007-2008. 3. This shows that the short term liquidity of the company is not good.

1.2 QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES

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YEAR Quick Assets Current

2005-2006

2006-2007

2007-2008

81,29,79,812 75,67,58,438

1,05,02,99,837 1,37,98,19,154

1,04,40,61,085 1,32,78,92,788

1.07

0.76

0.79

Liabilities

Quick Ratio 1.2 1 0.8

Quick Assets 0.6

Current Liabilities Quick Ratio

0.4 0.2 0 2005-2006

2006-2007

2007-2008

INTERPRETATION 1. THE IDEAL QUICK RATIO IS 1:1 2. The quick ratio of the company has increased from 0.94 to1.07 between the year 2004-2005 and 2005-2006. Then decreased to 0.76 and0.79 in the year  2006-2007 and 2007-2008. 3. This means that the company cannot meet its short term obligations.

1.3 CASH RATIO = CASH AND BANK/CURRENT LIABILITIES

YEAR

2005-2006

2006-2007 62

2007-2008

Cash Current

2,94,45,561 75,67,58,438

4,62,40,483 1,37,98,19,154

4,49,26,777 1,32,78,92,788

Liabilities 0.039

Cash Ratio

0.033

0.034

0.039 0.038 0.037 0.036 0.035

Cash

0.034

Current Liabilities

0.033

Cash Ratio

0.032 0.031 0.03 2005-2006

2006-2007

2007-2008

INTERPRETATION 1. The cash ratio has first increased from 0.032 to 0.039 between the year 20042005 and 2005-2006 and then decreased in the year 2006-2007 and then increased by 0.001 in 2007-2008. 2. This reveals that the cash position of the company is not sound.

2. ACTIVITY RATIOS INVENTORY TURNOVER RATIO = NET SALES / INVENTORY

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YEAR Net Sales Inventory

Inventory

2005-2006

2006-2007

2,21,11,97,993 53,64,96,035 4.12

2,37,54,48,269 76,17,38,315 3.12

2007-2008 2,57,89,34,907 76,18,73,108 3.38

Turnover Ratio

4.5 4 3.5 3 2.5

Net Sales

2 1.5 1 0.5 0

Inventory Turnove r  Ratio

Inventory

2005-2006

2006-2007

2007-2008

INTERPRETATION 1. This shows that the company is somehow efficient in generating the inventory into sales. 2. The inventory turnover ratio has decreased from 4.75 to 3.12 between the years 2004-2005 and 2006-2007and increased to 3.38 in

2007-2008.

2.1 DEBTORS TURNOVER RATIO = SALES/DEBTORS

YEAR Sales Debtors

Debtors

2005-2006

2006-2007

2,21,11,97,993 48,33,85,817 4.57

2,37,54,48,269 72,08,94,474 3.29 64

2007-2008 2,57,89,34,907 72,41,47,983 3.56

Turnover Ratio 5 4 Sales

3 2

Debtors

1

Debtors Turnover  Ratio

0 20052006

20062007

2007-2008

INTERPRETATION 1. The debtor turnover ratio has first increased from 4.12 to 4.57 between the year 2004-2005 and 2005-2006 and then decreased in the year 2006-2007 and then increased in 2007-2008. 2. This shows that the debtor management system is try to maintain their   position.

AVERAGE COLLECTION PERIOD = NUMBER OF WORKING DAYS / DEBTORS TURNOVER RATIO

YEAR Number of Working

2005-2006

2006-2007

365

365 65

2007-2008 365

Days Debtors

4.57

Turnover

3.29

3.56

Ratio 80 days

Average

110 days

102 days

Collection Period INTERPRETATION 1. The average collection period has decreased from 89 days to 80 days between the year 2004-2005 and 2005-2006 and then increased in the year 2006-2007 and again decreased in 2007-2008. 2. More the average collection period less efficient is the debtor management system.

WORKING CAPITAL TURNOVER RATIO = SALES / NET WORKING CAPITAL

YEAR Sales Net

Working

2005-2006

2006-2007

2,21,11,97,993 59,27,17,409

2,37,54,48,269 43,22,18,998

Capital

66

2007-2008 2,57,89,34,907 47,66,97,765

3.73

Working Capital

5.50

5.41

Turnover Ratio 6 5 Sales

4 3

Net Working Capital

2 Working Capital Turnover Ratio

1 0 2005-2006

2006-2007

2007-2008

INTERPRETATION 1. The working capital turnover ratio has first decreased from 5.32 to 3.73  between the year 2004-2005 and 2005-2006 and then increased to 5.50 in the year 2006-2007 and then decreased by 0.09 in the year 2007-2008.

PROFITABILITY RATIOS OPERATING PROFIT RATIO = OPERATING PROFIT X 100 SALES

YEAR

2005-2006

2006-2007

Operating Profit Sales

31,48,62,163 2,21,11,97,993 14.24

31,28,91,662 2,37,54,48,269 13.17

Operating Profit Ratio

67

2007-2008 32,99,64,549 2,57,89,34,907 12.79

14.5 14 13.5 13 12.5 12 2005-2006

2006-2007

2007-2008

INTERPRETATION 1. The operating profit first increases to 14.24% in the year 2005-2006 and then decreases to 13.17% and 12.79% in the year 2006-2007 and 2007-2008. 2.

This shows that the operating cost of the company has increased from 20042005 to 2007-2008.

NET PROFIT RATIO = NET PROFIT AFTER TAX X 100 NET SALES

YEAR Net

Profit

Tax Net Sales

2005-2006 After

2006-2007

18,49,28,514

17,01,94,555

2,21,11,97,993

2,37,54,48,269 68

2007-2008 16,05,13,611 2,57,89,34,907

8.36

Net Profit Ratio

7.16

6.22

10 8 6

Net Profit After Tax Net Sales

4

Net Profit Ratio 2 0 2005-2006

2006-2007

2007-2008

INTERPRETATION 1. The net profit ratio first increases from 5.03 to 8.36 in the year 2004-2005 and 2005-2006 and then decreases to 7.16 in the year 2006-2007 and too decreasing in 2007-2008. 2. This reveals that the efficiency in manufacturing, administering and selling the  products is decreasing.

3. LONG TERM SOLVENCY RATIOS DEBT EQUITY RATIO = OUTSIDER’S FUNDS/SHAREHOLDER’S FUNDS

YEAR Outsider’s funds

2005-2006

2006-2007

25,80,06,52 69

38,70,96,269

2007-2008 1,14,81,89,285

4 81,67,40,225 0.32

Shareholder’s funds

Debt

Equity

98,85,72,605 0.39

3,95,92,73,396 0.29

Ratio

0.4 0.35 0.3 0.25

Outsider’s funds

0.2

Shareholder’s funds

0.15

Debt Equity Ratio

0.1 0.05 0 2005-2006

2006-2007

2007-2008

INTERPRETATION

1. The debt equity ratio is decreasing which means that the company’s dependence on the external debt is decreasing. 2. This shows greater flexibility in the company’s operation.

INTEREST

NET PROFIT BEFORE INTEREST AND TAXES

COVERAGE

=

FIXED INTEREST CHARGES

RATIO

YEAR

2005-2006

2006-2007

Net profit before

27,48,63,625

26,65,57,054

24,44,21,752

4,74,18,093

8,81,68,867

13,34,56,945

interest taxes Interest

2007-2008

and

70

5.8

Interest

3.02

1.83

Coverage Ratio

6 5 4 3 2 1 0 2005-2006

2006-2007

2007-2008

INTERPRETATION

1. The interest coverage ratio first increases between the year 2004-2005 and 2005-2006 and then decreases in the year 2006-2007 and in 2007-2008. 2. A low ratio indicates excessive use of debt.

71

SUGGESTION

72

SUGGESTIONS AND RECOMMENDATIONS FOR INDIAN FOOTWEAR INDUSTERY 1. In India as most of the population is under low-income group, they wear  unbranded or local brand shoes. So the company which can capture this income group especially living in villages and small towns will be the winner. 2. As the exclusive showroom play an important role in making and marking the image of company. So there should be policy for exclusive showroom. 3. Quality control operations should be modernized effectively as people are more educated and give more preference to quality. 4. Television has become the most effective mode of advertising. New trend of  naming programs before the actual name of programs give more insertion in the minds of people as there was performance on Zee T.V called LIBERTY PUBLIC DEMAND. 5. There should be some special brands, which should be available only in exclusive showrooms to attract the crowd there. 6. There should be no bargain with the quality of the product. 7. Showroom owners tend to heavily tend to heavily depend on the brand image rather than they’re own skills and knowledge regarding product. So the big companies should try to internationalize their products and image and should give a psychological feeling of being a universal brand. 8. Regular meeting should be organized by the companies to educate the showroom owners regarding new innovation, their features as well as new  policies. 9.

Claim policy regarding replacement etc. should be clearly made by the company and followed in spirit of the world.

73

STEPS TAKEN BY LIBERTY

74

STEPS TO BE TAKEN BY LIBERTY

1. Most of customers felt Liberty as a premium product company (which is true to much extent), which is out of reach of common man. It is suggested that an economical range of footwear should also be introduced to capture the lowincome group people who account for most of the population in villages & small towns. 2. Companies should control, review and improve their discount policy so as to improve company’s image. 3. New designs and colours should be introduced in Ladies section, as ladies every time demand something new. 4. More attention should be paid to customer’s complaints and efforts should be made to remove them. 5. The placement of defected pairs should be paid more attention so as to remove dissatisfaction among the exclusive showroom owners. 6. A Company persons should regularly visit exclusive showrooms and listen to the problems and find solution to them as is done by Bata Company. 7. Some special planning on appointment of dealers should be there to avoid the complications. 8. Trough inspection of stock should be done to avoid mixing of inferior quality stock with fresh stock, which is send to dealers. 9. The company should allow at the most two exclusive showrooms in one city. That too should be atleast 2—3 K.M apart to attract customers from all the localities.

75

LIMITATIONS

76

LIMITATIONS Although every effort have been made to collect the relevant information through the source available, still some relevant information could not be gathered. 1. The time duration could not provide ample opportunity to study every detail of  management in the company. 2. There are restrictions not to visit some specific areas. 3. The concered executives were having very busy schedule. 4. The company on account of confidential reports has not disclosed some figures 5. Estimates are based upon predictions.

77

BIBLIOGRAPHY

78

BIBLIOGRAPHY

BOOKS •

Pandey, I.M., “Financial Management”, Ed.

2007,

VIkas

Publishing House Private Ltd., New Delhi. •

Gupta, Shashi K., “Management Accounting”, Ed.2007, Kalyani Publishers, New Delhi.

•

KOthari, C.R., “Research Methodology”, Ed.2007, New Age International (P) Limited, Publishers, New Delhi.

MANUAL •

Annual Reports

WEBSITES •

www.liberyshoes.com

•

www.libertyfreedom.com

79

ANNEXURE

80

LIBERTY

BALANCE SHEET AS AT 31st MARCH,2006 PARTICULARS FUNDS EMPLOYED Shareholder's Funds

Share Capital

17,04,00,000

Reserves and Surplus

64,63,40,225

81,67,40,225

Loan Funds

Secured Loans

48,81,18,223

Unsecured Loans

23,03,68,701

71,84,86,924

Deferred Tax

Deferred Tax Laibility

7,62,83,137 1,61,15,10,286

APPLICATIONS OF FUNDS Fixed Assets

Gross Block

79,70,30,417

Less: Depreciation

31,21,63,209

 Net Block

48,48,67,208

Add: Capital Work in Progress

91,82,688

49,40,49,896 6,42,62,581

Investments CURRENT ASSETS,LOANS AND ADVANCES

Inventories

53,64,96,035

Sundry Debtors

48,33,85,817

Cash and Bank Balance

2,94,45,561

Loans and Advances

30,01,48,434 1,34,94,75,847

Less: Current Liabilities

22,26,20,721

Provisions

7,36,57,317

 Net Current Assets

1,05,31,97,809 1,61,15,10,286

81

PROFIT AND LOSS ACCOUNT For the year ended 31st March, 2006

(Amount in Rs.) PARTICULARS INCOME

SALES

2,21,11,97,993

less: Excise Duty

16,23,68,219 2,04,88,29,774 1,11,11,202

Other Income Increase/ (Decrease) in Stocks EXPENDITURE Raw Material Consumed and Finished Goods Purchased Manufacturing Expenses Payments and Benefits to Employees Administration, Selling and Miscellaneous Expenses Interest & Financial Charges Excise Duty Depreciation  Profit before tax  Provision for Taxation Current Tax Fringe Benefit Tax

6,49,73,637

2,12,49,14,613

96,67,26,712 19,95,13,409 19,91,55,747 43,20,32,918 4,74,18,093 15,12,462 3,99,98,538

1,88,63,57,879 23,85,56,734 4,88,26,320 35,05,000

Deferred Tax Profit before tax add/(less): Taxation adjustments of previous years(net)

12,96,900 18,49,28,514 42,01,294

Earlier year adjustment  Net Profit for the year 

54,964 18,91,84,772

Add: Opening balance  Net Profit available for appropriations APPROPRIATIONS Tranfer to General Reserve Interim Dividend Tax on Dividend Balance carried over to Balance Sheet Earning Per Share of Rs.10/- each

1,69,31,283 20,61,16,055 6,00,00,000 2,53,50,000 35,55,338 11,72,10,717 12.88

BALANCE SHEET AS AT 31st MARCH,2007

82

PARTICULARS FUNDS EMPLOYED Shareholder's Funds

Share Capital

17,04,00,000

Reserves and Surplus

81,81,72,605

98,85,72,605

Loan Funds

Secured Loans

1,04,03,01,231

Unsecured Loans

23,92,47,480

1,27,95,48,711

Deferred Tax

Deferred Tax Laibility

7,30,34,307 2,34,11,55,623

APPLICATIONS OF FUNDS Fixed Assets

Gross Block

1,10,55,30,324

Less: Depreciation

35,54,78,429

 Net Block

75,00,51,895

Add: Capital Work in Progress

8,14,32,312

83,14,84,207 18,49,99,976

Investments CURRENT ASSETS,LOANS AND ADVANCES

Inventories

76,17,38,315

Sundry Debtors

72,08,94,474

Cash and Bank Balance

4,62,40,483

Loans and Advances

28,31,64,880 1,81,20,38,152

Less: Current Liabilities

43,53,53,212

Provisions

5,20,13,500

 Net Current Assets

1,32,46,71,440 2,34,11,55,623

PROFIT AND LOSS ACCOUNT

83

For the year ended 31st March, 2007

(Amount in Rs.) PARTICULARS INCOME

SALES

2,37,54,48,269

less: Excise Duty

15,39,92,692 2,22,14,55,577

Other Income

1,67,28,098

Increase/ (Decrease) in Stocks

20,12,80,051

2,43,94,63,726

EXPENDITURE

Raw Material Consumed and Finished Goods Purchased

1,21,22,49,787

Manufacturing Expenses

20,19,18,212

Payments and Benefits to Employees

21,23,26,510

Administration, Selling and Miscellaneous Expenses

47,36,32,514

Interest & Financial Charges

8,81,68,867

Excise Duty

25,16,943

Depreciation

4,63,34,609

2,24,43,47,442 19,51,16,284

 Profit before tax  Provision for Taxation

Current Tax

2,46,36,260

Fringe Benefit Tax

35,34,300

Deferred Tax

32,48,830

Profit after tax

17,01,94,554

add/(less): Taxation adjustments of previous years(net)

8,97,143

Earlier year adjustment

7,40,683

 Net Profit for the year 

17,18,32,380

Add: Opening balance

11,72,10,717

 Net Profit available for appropriations

28,90,43,097

APPROPRIATIONS

Tranfer to General Reserve

6,00,00,000

Balance carried over to Balance Sheet

22,90,43,097

Earning Per Share of Rs.10/- each

9.99

BALANCE SHEET AS AT 31st MARCH,2008

84

PARTICULARS FUNDS EMPLOYED Shareholder's Funds

Share Capital

17,04,00,000

Reserves and Surplus

97,77,89,285

1,14,81,89,285

Loan Funds

Secured Loans

1,03,31,65,873

Unsecured Loans

17,49,91,716

1,20,81,57,589

Deferred Tax

Deferred Tax Laibility

7,08,75,737 2,42,72,22,611

APPLICATIONS OF FUNDS Fixed Assets

Gross Block

1,26,06,40,151

Less: Depreciation

40,60,66,799

 Net Block

85,45,73,352

Add: Capital Work in Progress

1,54,92,360

87,00,65,712 20,33,98,812

Investments CURRENT ASSETS,LOANS AND ADVANCES

Inventories

76,18,73,108

Sundry Debtors

72,41,47,983

Cash and Bank Balance

4,49,26,777

Loans and Advances

27,49,86,325 1,80,59,34,193

Less: Current Liabilities

42,93,74,450

Provisions

2,28,01,656

 Net Current Assets

1,35,37,58,087 2,42,72,22,611

PROFIT AND LOSS ACCOUNT

85