Index

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.
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.
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 6th 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 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.
 COMPANY PROFILE

LIBERTY GROUP

Liberty Group was the vision of three dreamers who 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 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 of international
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.
 Mission & Vision

Mission

It’s 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 Ltd.

Liberty Whitewares Ltd.

Liberty Retail Revolutions Ltd.

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 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.
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
 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
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 crèches which give working mothers the freedom and
peace of mind to pursue their careers.

Liberty also has 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 commitment that 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.
CONTRIBUTION TO INDUSTRY:

1. Liberty has pioneered in bringing PU Technology to India. Liberty has given a presentation

on Footwear foot prints for the future in Asia Pacific Customer Conference 2000 organized

by Huntsman Polyurethane at Singapore on this technology.

2. SYMPATEX is a patented technology on Water Proofing recognized worldwide. Liberty is

the only company in India having recognition/approval of SYMPATEX on Waterproofing.

3. Safety Shoes are brought to Indian Market for the first time and an exclusive 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 was introduced to Government Sector; 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. Liberty Enterprises is the model unit for above Standard and complete testing facility is

available only with Liberty in India after FDDI.

6. Liberty is the First Footwear Manufacturing facility in India awarded with the latest ISO

9001:2000 Certification.

7 The first and only footwear Industry in India, having SAP ERP with all modules related

to Inward/Outward supply chain, Materials, Finance and Costing

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), 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.
 ORGANIZATIONAL CHART OF LIBERTY

C.E.O

C.G.M

Liberty Liberty Shoes Liberty White

Revolutions Ltd. Ltd. Ware Ltd.

Departments

H.R Finance Production Purchase Marketing R&D IT Excise

Institutional
Domestic Export
Sales

Department Heads

 C.E.O: Mr. Adesh Gupta

 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
Distribution Network:

Liberty extensive distribution channel has enabled us to develop a firm grip over the market.
Its presence in the global front led us to penetrate deep into the various markets of world and
offer our qualitative range of products. Our presence across the world is in the form of

02 Overseas Offices
14 Branch Offices
20 Overseas Showrooms
300 Liberty Exclusive Distributors
375 Retail Stores (10 outside India).

PRODUCT RANGE
The new range from Liberty is all about style, design, and comfort. The range imbibes the
spirit of fun and is trendy to the core. There is a product for every season and occasion.

 Coolers
Coolers are a brand of unisex sandals and slip-ons. Catering to a wide segment across the
country Coolers are much sought after not just in the summer season but also during the
monsoons and in the coastal regions for their water-resistant property.

 Footfun

The brand exhibits the vivacity of children in every way. Colorful and comfortable, the range has
smart sandals, elegant sports shoes and bright colored lace up to ensure a formal look for the
children.
  Force 10

Sporty and vibrant the Force 10 range has been rewriting the industry norms. Constant
technologies up gradations have made it one of the more desired brands in the category.

 Fortune

A pure male fashion brand, Fortune has the latest styles in formal footwear for men.

 Freedom

Professionals, undertaking high impact, electrical, thermal, chemical or even slippage risks,
walking over surfaces or operating in environments that expose them to dangers related to these,
use a pair of Boots that they completely rely on.

Whether you are a power plant technician, alkali unit worker, or even an X-treme sports
practitioner, you will appreciate the safety of FREEDOM Protective Professional Boots.

Made from super-resilient rubber, blended with PVC, these boots afford the protection that no
ordinary footwear can provide, no matter how well they are constructed. They are resistant to,
electrical shock, mechanical crush, chemical corrosion and extreme heat and cold. These boots
are also anti-static, anti-slippage, non-tear able.
Products
 SWOT ANALYSIS
Strengths
 Track record of growth in turnover and profits.
 Superior quality.
 Vast experience in domestic and export market.

Weakness
 High prices
 High lead time
 Less variety in sports shoes
 Less variety in sports shoes

Opportunity
 Quicker response to customers need.
 To increase share in non leather products.

Threats
 Heavy competition.
 More aggressive marketing by foreign competitors in sports shoes markets.
CHAPTER 2
 INVENTORY MANAGEMENT

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 overall 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.
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 is 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 firm’s investment in inventories. These risks must be considered in
determining the appropriate level of inventory the firm should carry.
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
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.
 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

Average Price
Method

Simple average Weighted average

method 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 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 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.
 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
  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 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.

 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 trial and error approach, the formula approach and the graphic approach – to
determine the economic order quantity (EOQ).

2AO

EOQ = C

Where, A is annual requirement.

O is Ordering cost.

And C is Carrying cost.

 Graphic approach:

The economic order quantity can also be found out graphically. Figure illustrates the EOQ
function. In the figure, costs-carrying, ordering and total- are plotted on vertical axis and
horizontal axis is used to represent the order size. We note that total carrying costs increase as
the order size increasers, because, on an average, a larger inventory level will be maintained, and
ordering costs decline with increase in order size means less number of orders. The behaviors of
total costs line is noticeable since it is a sum of two types of cost which behave differently with
order size. The total costs decline in the first instance, but they start rising when the decrease in
average ordering cost is more than offset by the increase in carrying costs. The economic order
quantity occurs at the point Q* where the total cost is minimum. Thus, the firm’s operating profit
is maximized at point Q*.

Minimum total cost

Carrying cost

Costs ordering cost

Q* order size (Q)

Fig -7.1Economic order quantity

Optimum productions run: The use of the EOQ approach can be extended to production runs
to determine the optimum size of manufacture. Two costs involved are set-up costs and carrying
costs. Set-up costs include costs on the following activities: preparing and processing the stock
orders, preparing drawings and specifications, tooling machines set-up, handling machines, tools,
 equipment and materials, over time etc. Production runs but carrying costs will increase as large
stocks of manufactured inventories will be held. The economic production size will be the one
where the total of set-up and carrying costs is minimum.

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.

VED Analysis:

The VED analysis is used generally for spare parts. The requirement and urgency of spare parts is
different from that of materials. A-B-C analysis may not be properly used for spare parts. The
demand for spares depends upon the performance of the plant and machinery. Spare parts are
classified as: Vital (V), Essential (E) and Desirable (D). The vital spares are a must for running the
concern smoothly and these must be stored adequately. The non-availability of vital spares will
cause havoc in the concern. The E types of spares are also necessary but their stocks may be kept at
low figures. The stocking of D types of spares may be avoided at times. If the lead time of these
spares is less, then stocking of these spares can be avoided.

The classification of spares under three categories is an important decision. A wrong

classification of any spare will create difficulties for production department. The classification of
spares should be left to the technical staff because they know the need, urgency and use of these
spares.

Assumptions: In applying EOQ formula, it is assumed that:

(i) Total demand is known with certainty.

(ii) The usage rate of material is steady.

(iii) Orders for replenishment on inventory are placed exactly when inventories reach
ordering level.

(iv) The ordering cost per order and holding cost per unit are constant.

EOQ and Total Inventory Cost: At EOQ level total inventory cost is minimum. Total
inventory cost is the sum of material purchase cost, ordering cost and carrying cost

As per the formula:

Total Inventory Cost (TIC) = Material Purchase Cost + Total Ordering Cost + Total
Carrying Cost

= (R x P) + (R/Po x Cp) + (Qo/2 x Ch)

Discount Offer and Economic Order Quantity:

Sometimes supplier offers different discounts on orders of large quantity. In such a situation,
at first we should calculate EOQ and find out TIC without considering discount offer. Then
 we should calculate TIC of each alternative offer. That quantity will be EOQ at TIC is the
lowest.

PERPETUAL INVENTORY CONTROL TECHNIQUE

Perpetual inventory system implies maintenance of up-to-date stock records and in its
broad sense it covers both continuous stock taking as well as up-to-date recording stores
books. According to Weldon, It may be defined as “a method of recording stores balances
after every receipt and issue to facilitate regular checking and to obviate closing down for
sock-taking”. The basic object of this system is to make available details about the quantity
and value of stock of each item at all times. The system thus provides a rigid control over
stock of each item of store can regularly be verified with the stock records in the bin cards
kept in the stores and stores ledger maintained in cost office.

Advantages of Perpetual Inventory system:

1.Saving in time: The long and costly work of stocktaking is avoided. Hence, interim and final
financial accounts can be prepared with greater convenience.
2.Arrangement of proper verification: In this system a detailed and more reliable checking of
the store is exercised because of the continuous and random checking.
3.Verification of Errors: Errors are easily located and rectified. This gives an opportunity for
preventing a recurrence in many cases.
4.Double control: Due to separate records in Bin card and stores ledger, double control is
maintained.
5. Optimum size of material: Overstocking and under stocking can be avoided because
perpetual inventory system covers verification of stock with regards to maximum, minimum
and other levels.
6.Lack of misuse of Material: Under this system, effective control on issue of material is
possible, thus misuse of material can be avoided.
7.Moral Check on Stores staff: Due to continuous checking, this system serves as a moral
check on the stores staff. They are discouraged from committing dishonesty.
8.Loss of stock due to obsolescence: It is detected at an early stage and so timely action can be
taken to prevent recurrence.

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.
Table

CLASS NO. OF ITEMS% VALUE OF ITEMS%

A 15 70

B 30 20

C 55 10

Just-in-time (JIT) System:

Japanese firms popularized the just-in-time (JIT) system in the

world. In a JIT system material or the manufactured components and part arrive to the
manufacturing sites or stores just few hours before they are put to use. The delivery of material is
synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of
carrying large inventories, and thus, saves carrying and other related costs of manufacturer. The
system requires perfect understanding and coordination between the manufacturer and supplier
in terms of the timing of delivery and quality of the material. Poor quality material or
complements could halt the production. The JIT inventory system complements the total quality
management (TQM). The success of the system depends on how well a company manages its
suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate
system and procedures to satisfactory meet the needs of manufacturers.

System of Accounting for Material Issued/Inventory Systems

Either the periodic inventory system or the perpetual inventory system may be used to
account for materials issued to production and ending materials inventory.

Periodic Inventory System

Under the periodic inventory system, the purchase of materials is

recorded in Purchase of Raw Materials Account. The opening/beginning inventory, if any, is
 recorded in a separate Materials Inventory- Opening Account. The materials available for use
during a period equal purchases plus opening inventory. A physical count is made of the
materials on hands at the end of the period to arrive at the closing/ending materials inventory.
The cost of materials for the period is determined as shown in Exhibit:

Cost of Materials Issued

Materials inventory-opening

+ Purchases

= Materials available for use

- Materials inventory-closing (based on physical count) = Cost of materials issued

INVENTORY TURNOVER RATE TECHNIQUE

One important technique of inventory control is to use inventory turnover 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.
 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 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)
 3. From here, the material is sent to stores for Quality Control and the invoices are sending
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.
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.

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 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 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 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.

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
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.

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.
CHAPTER 3
 RESEARCH METHODOLOGY
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.

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.

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

Fig: Steps of Methodology

OBJECTIVE OF THE STUDY

Main Objective

The project is designed to give an overview of Inventory Management in Liberty Shoes

Ltd.

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 and understand as to what exactly is inventory management system
 To Study the operational feasibility and utility of inventory management system
CHAPTER 4
 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

Raw Material Turnover Ratio

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

2018 576,484,922 53,608,082 10.75

2017 371,223,873 36,137,266 10.27

2016 230,779,236 132,002,490 1.74

Ratio

12

10

6 Ratio

0
2018 2017 2016
Years

Form above graph we come know that raw material turnover ratio is increased rapidly in 2017 from 1.74
in 2016 to 10.27 for 2017. Indicates that company is converting raw material into finished or semi
finished goods very quickly.
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

Holding period of raw material

Year Total Days Ratio Days

2018 360 10.75 33

2017 360 10.27 35

2016 360 1.74 206

Raw material holding Period

250

200

D 150
RHP
A 100

Y 50

S 0
2018 2017 2016
Years

As the raw material turnover ratio is increasing form to 10.27 for 2017 it indicates that firm is
taking less days for conversion as compared to 2016. In 2016 conversion period was 206 days
but in decreased to 35 days for 2017. This is shown in above graph. Before 2017 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 in 2016 .
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

2018 849,054,442 36,720,702 23.12

2017 555,094,500 15,010,347 36.98

2016 361,110,197 9,755,839 37.01

Work in Process Turnover ratio

40
35
30

D 25
20 Ratio
A
15
Y 10
5
S
0
2018 2017 2016
Years

Form above graph we came to know that Work in process turnover ratio is decreasing from
37.01 in 2016 to 23.12 2018. The ratio was high in 2016 as compared to 2017 and 2018. The
ratio was 37.01. Indicates that company is converting semi finished into finished goods quickly
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

Holding period of W.I.P

Year Total Days Ratio Days

2018 360 23.12 15.57

2017 360 36.98 9.73

2016 360 37.01 9.72

Holding period of W I P

18
16
14
12
D 10
Ratio
8
A
6
Y 4
2
S 0
2018 2017 2016
Years

As the work in process turnover ratio is increasing form 9.72. in 2016 To 15.57 for 2018 it
indicates that firm is taking less days for conversion. Which shown in above grap
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

Finished goods turnover ratio

Year cost of goods sold Avg F.G Ratio

2018 849,054,442 26,243,339 32.35

2017 555,094,500 19,858,482 27.95

2016 361,110,197 10,940,008 33.01

Finished Goods Turnover Ratio

34
33
32
31
D 30
Ratio
29
A
28
Y 27
26
S 25
2018 2017 2016
Years

Form above graph we came know that finished goods turnover ratio is decreasing from 33.01 in 2016 to
27.95 for 2017. Indicates that company is selling goods little slowly as compared to 2016 but it is bit fast
as compared to 2018. Where the ratio for that particular period was 32.35 decreased to 11.20 for 2018 it is
satisfactory. Which shown in above graph.
Inventory to capital employed:

This ratio indicates the relationship between the total capitals employed and inventories it shows
how much capital utilized to invest in the inventories other than the other assets. The normal
manufacturing firms have low ratio of inventory total capital employed in the organization.

 Formula: Inventory / Total capital employed

Fig -8.6Inventory to capital employed

Year Inventory Total capital employed Percentage

2018 197,465,069 301,443,215 65.50

2017 121,558,000 145,492,599 83.54

2016 67,994,623 98,333,324 69.14

Inventory to capital employed

P

E 90
R
80
70
C 60
E
50
ICE
40
N 30
T
20
10
A 0
G
2018 2017 2016
Years
E

By observing above graph we can say that the firm investing huge amount in inventories
compared to other assets. It invested 83.54% of its capital in inventory in 2017 where as it
reduced to 65.50% in 2018
Inventory to current asset ratio:

This ratio indicates the relationship between the inventory and current assets. It shows the
percentage of inventory to current assets, which helps the organizations in deciding the current
assets policy which also affect the liquidity position of the organization.

 Formula : Inventory / Current assets

Inventory to current asset ratio

Year Inventory current assets Percentage

2018 197,465,069 331,314,504 59.60

2017 121,558,000 237,687,684 51.14

2016 67,994,623 117,022,625 58.10

P
Inventory to current asset ratio
E
62
R
60
C 58

E 56
54 Ratio
N
52
T 50
48
A
46
G 2018 2017 2016
Years
E

The inventory to current assets ratio in the year 2016 was 58.10% and it decreased to 51.14% in
the year 2017 but again it increased to 59.60% in 2018. It shows that the firm investing 59.60%
of its investment is for inventory only.
Inventory to total assets:

This ratio indicates the relationship between the inventory and total assets. The
significance of this ratio is it reflects the portion the inventory as a percentage of the total assets, which
helps the management deciding the utilization remaining resources profitably, since the inventory will
lock up the huge funds and reduces the profitability of the organization

 Formula: Inventory / Total assets

Inventory to total assets

Year Inventory Total assets Percentage

2018 197,465,069 990,329,087 19.93

2017 121,558,000 540,916,088 22.47

2016 67,994,623 414,901,234 16.38

Inventory to total assets

P
25
E
20
R
15
C
Ratio
E 10

N 5

T 0
2018 2017 2016
A
Years
G

E year 2016 the rate of inventory to total assets was 16.38% it increased to 22.47% in
During the
2017. But again it reduced to 19.93% in 2018. It indicates that firm investing only 19.93% in
inventory out of total assets.
Inventory to working capital:

This ratio indicates the relationship between inventory to working capital and it also indicates the
amount to inventory tied up in the working capital and it also shows the efficiency of inventory
management.

 Formula : Inventory/ Working capital

Inventory to working capital

Year Inventory Working capital Percentage

2018 197,465,069 199,345,123 99.05

2017 121,558,000 146,097,210 83.20

2016 67,994,623 46,338,277 146.45

P Inventory to working capital

E
160
R 140
120
C
100
E 80 Ratio

N 60
40
T
20
A 0
2018 2017 2016
G
Years
E

In the year the ratio was 146.45% in 2016. It decreased to 83.20% for 2017 but it increased it to
99.05% in 2018. It indicates that firm investing huge amount in inventory
FINDINGS:

1. Raw material turnover ratio is increased rapidly in 2017 from 1.74 in 2016 to 10.27 for
2017.

2. As the raw material turnover ratio is increasing form to 10.27 for 2017 it indicates that
firm is taking less days for conversion as compared to 2016.

3. Work in process turnover ratio is decreasing from 37.01 in 2016 to 23.12 2018. The ratio
was high in 2016 as compared to 2017 and 2018.

4. As the work in process turnover ratio is increasing form 9.72. in 2016 To 15.57 for 2018
it indicates that firm is taking less days for conversion

5. Finished goods turnover ratio is decreasing from 33.01 in 2016 to 27.95 for 2017.
Indicates that company is selling goods little slowly as compared to 2016 but it is bit fast as
compared to 2018.

6. Company is selling goods little slowly as compared to 2016 but it is bit fast as compared
to 2018. Where the ratio for that particular period was 32.35

7. The inventory to current assets ratio in the year 2017 was 58.10% and it decreased to
51.14% in the year 2018 but again it increased to 59.60% in 2018. It shows that the firm
investing 59.60% of its investment is for inventory only.

8. During the year 2017 the rate of inventory to total assets was 16.38% it increased to
22.47% in 2018. But again it reduced to 19.93% in 2016. It indicates that firm investing
only 19.93% in inventory out of total assets.

9. In the year the ratio was 146.45% in 2016. It decreased to 83.20% for 2017 but it
increased it to 99.05% in 2018. It indicates that firm investing huge amount in inventory.

10. As the finished goods turnover ratio is increasing from 10.87 in 2017 to 12.86 for 2018
it indicates that firm is taking less days for sale. In 2018 conversion period was 12.86 days
but in decreased to 11.20 for 2018 it is satisfactory.
OPERATIONAL FEASIBILITY OF THE STUDY
It is mainly related to human organizational and political aspects. The points to be considered

are-

 What changes will be brought with the system?

 What organizational structures are distributed?

What new skills will be required? Do existing staff members have these skills? If not, can they

be trained in due course of time?

Generally project will not be rejected simply because of operational infeasibility but such

considerations are likely to critically affect the nature and scope of the eventual

recommendations. This feasibility study is carried out by a small group of people who are

familiar with information system techniques, who understand the parts of the business that are

relevant to the project and are skilled in system analysis and design process
DATA ANALYSIS

1 Are you aware about Inventory Management System?

 Yes ------------------------------------------ 75 per cent

 No ------------------------------------------- 17 per cent

 Do not know/ Cannot say ---------------- 08 per cent

80%

70%

60%

50%

Yes
40%

No
30%

Do not know/Can Not say

20%

10%

0%
Yes 75%
No 17%
Do not know/Can Not say 8%

INTERPRETATION:
The awareness level among the company officials regarding the existence, functioning and

applicability of inventory management system is high that is 75 per cent, as per the result of the

study.
2 Do you know that your company has an inventory management system?

 Yes ---------------------------------------------- 72 per cent

 No ------------------------------------------------ 20 per cent

 Do not know/ Cannot say -------------------- 08 per cent

80%

70%

60%

50%

Yes
40%
No
30%
Do not know/Can Not say
20%

10%

0%
Yes 72%
No 20%
Do not know/Can Not say 8%

INTERPRETATION:

The company officials are aware about their company having an inventory management system.

72 per cent of the respondents do have this awareness as against 20 per cent+08 per cent of the

respondents who are either not aware or not able to provide any information in this regard.
3 Do you agree that there should be an inventory management system in place in any

organisation / company?

 Agree ------------------------------------------------ 68 per cent

 Disagree --------------------------------------------- 12 per cent

 Do not know/ Cannot say ------------------------- 20 per cent

70%

60%
Agree
50%
Disagree

40%
Do not know/Can Not say

30%

20%

10%

0%
Agree 68%
Disagree 12%
Do not know/Can Not say 20%

INTERPRETATION:

According to the response to the above question, it appears that every company/organization should have

a system or mechanism in place for managing their inventory.

4 For what reasons do you feel that there should be an inventory management system?

 To smoothen operational requirement --------------------- 27 per cent

 To save time ---------------------------------------------------- 22 per cent

 To maintain accountability and transparency ----------------30 per cent

 Other reasons --------------------------------------------------- 15 per cent

 Do not know/ Cannot say ------------------------------------ 06 per cent

30%

To smoothen operational 25%

requirement
To save time 20%

To maintain accountability and 15%

transparency
Other reasons 10%

Do not know/ Can not say

5%

0%
To smoothen operational requirement 27%
To save time 22%
To maintain accountability and
30%
transparency
Other reasons 15%
Do not know/ Can not say 6%

INTERPRETATION:

To everyone’s surprise, 30 per cent of the respondents feel that it is for accountability and

transparency purpose that inventory records are maintained and hence the need for an inventory

management system. This is followed by the need for saving time and the requirement of

operational smoothness.
5 Do you agree that the inventory management system in your company has fulfilled the

needs for which it was evolved?

 Strongly Agree --------------------------------------20 per cent

 Agree ------------------------------------------------- 47 per cent

 Disagree ----------------------------------------------15 per cent

 Strongly Disagree ---------------------------------- 07 per cent

 Do not know/ Can not say ------------------------11 per cent

50%
Strongly Agree
45%
Agree
40% Disagree
35% Strongly Disagree
30% Do not know/ Can not say

25%
20%
15%
10%
5%
0%
Strongly Agree 20%
Agree 47%
Disagree 15%
Strongly Disagree 7%
Do not know/ Can not say 11%

INTERPRETATION:

From the above response, it appears that the inventory management system has more or less achieved its

objectives for which it was in place. This is evident from the 67 per cent of the respondents’ opinion who

have either agreed or strongly agreed in favour of this proposition. However the response of 22 per cent

of the respondents who think otherwise also speaks something.

6 What according to you is the major benefit of going for an inventory management

system by your company?

 It has made storage and retrieval of material easier --------- 37 per cent

 Improved Sales Effectiveness ---------------------------------- 26 per cent

 Reduced Operational Cost ----------------------------------- 18 per cent

 Other Benefits -------------------------------------------------- 10 per cent

 Do not know/ Cannot say ------------------------------------ 09 per cent

40%
It has made storage and 35%
retrieval of material easier
30%
Improved Sales Effectiveness
25%
Reduced Operational Cost 20%
15%
Other Benifits 10%
5%
Do not know/ Can not say
0%
It has made storage and retrieval of
37%
material easier
Improved Sales Effectiveness 26%
Reduced Operational Cost 18%
Other Benifits 10%
Do not know/ Can not say 9%

Interpretation:
As regards the benefits of having an inventory management system by the company, the
respondents are of the opinion that the major benefit lies in relaxation in terms of storage and
retrieval of material. This is followed by increasing efficiency and reduction in operational cost.
However, all these benefits are interlinked and the separation between them is more analytical
than anything else.
7 Do you have skiled professionals in your company for inventory management?

 Yes ----------------------------------------------- 48 per cent

 No ------------------------------------------------- 30 per cent

 Do not know/ Cannot say ---------------------- 22 per cent

50%

45% Yes

40%
No
35%
Do not know/Can Not say
30%

25%

20%

15%

10%

5%

0%
Yes 48%
No 30%
Do not know/Can Not say 22%

INTERPRETATION:

Recruitment of skilled professionals well versed with latest inventory management technology,

lacks a bit in this domain.

8. What categories of professionals are managing your company inventory?

 Skilled and trained --------------------------------- 32 per cent

 Only skilled but not trained ----------------------- 16 per cent

 Non skilled but trained professionals -------------- 20 per cent

 Non skilled and non trained professionals --------- 25 per cent

 Others --------------------------------------------------- 07 per cent

35%

Skilled and trained 30%

25%
Only skilled but not trained
20%
Non skilled but trained
professionals 15%
Non skilled and non trained
10%
professionals
Others 5%

0%
Skilled and trained 32%
Only skilled but not trained 16%
Non skilled but trained professionals 20%
Non skilled and non trained
25%
professionals
Others 7%

INTERPRETATION:

As already stated above in the earlier question, availability of trained and skilled professionals

for inventory management needs serious attention of the company.

9. Do you agree that your company gives more emphasis on software than skilled

manpower with regard to inventory management?

 Strongly Agree -------------------------------------- 18 per cent

 Agree ------------------------------------------------- 52 per cent

 Disagree ----------------------------------------------- 15 per cent

 Strongly Disagree ------------------------------------- 07 per cent

 Do not know/ Cannot say ---------------------------- 08 per cent

60%
Strongly Agree

50% Agree

40% Disagree

Strongly Disagree
30%

Do not know/ Can not say

20%

10%

0%
Strongly Agree 18%
Agree 52%
Disagree 15%
Strongly Disagree 7%
Do not know/ Can not say 8%

INTERPRETATION:

The above response gives an impression that the company puts greater emphasis on software

than skilled manpower for inventory details management.

10. Do you think that the software used by your company is according to the design and

needs of the system?

 Yes -------------------------------------------------- 86 per cent

 No ---------------------------------------------------- 10 per cent

 Do not know/ Cannot say ------------------------- 04 per cent

90%

80%
Yes
70%
No
60%
Do not know/Can Not say
50%

40%

30%

20%

10%

0%
Yes 86%
No 10%
Do not know/Can Not say 4%

INTERPRETATION:

The company appears to be using the software according to the system requirement and design

and according to the customers’ needs.

11. What is the prime challenge before your company with reheard to inventory

management?

 Lack of trained professionals ------------------------------- 42 per cent

 Maintenance cost --------------------------------------------- 21 per cent

 Changing requirements of customers ------------------------- 27 per cent

 Other problems -------------------------------------------------- 06 per cent

 Do not know/ Cannot say ------------------------------------- 04 per cent

45%
Lack of trained professionls
40%
35%
Maintenance cost
30%
Changing requirements of 25%
customers 20%
Other problems 15%
10%
Do not know/ Can not say
5%
0%
Lack of trained professionls 42%
Maintenance cost 21%
Changing requirements of customers 27%
Other problems 6%
Do not know/ Can not say 4%

INTERPRETATION:

Lack of availability of trained professions coupled with maintenance cost and changing needs of

the customers are perceived to be the inventory challenges before the company.
12. What is the future of inventory management system in your company?

 Will continue as a successful mechanism --------------------- 43 per cent

 May change according to time ----------------------------------- 33 per cent

 Shall collapse ------------------------------------------------------- 12 per cent

 Do not know/ Cannot say ----------------------------------------- 12 per cent

45%

40%

35%
Will continue as a
successful mechanism 30%
May change accoeding to
25%
time
Shall collapse 20%

15%
Do not know/ Can not say
10%

5%

0%
Will continue as a successful
43%
mechanism
May change accoeding to time 33%
Shall collapse 12%
Do not know/ Can not say 12%

INTERPRETATION:

The future of inventory management system at Liberty Shoes Pvt L td appear to pretty good,

going by the response of our study.

CHAPTER 5

 SUGGESTION AND
RECOMMENDATIONS

 LIMITATIONS

 CONCLUSION
SUGGESTIONS AND RECOMMENDATIONS FOR INDIAN
FOOTWEAR INDUSTRY
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.

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 low-income 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 person 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 at least 2—3 K.M apart to attract customers from all the localities.
 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 concerned 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.
 CONCLUSION

Inventory is a quantity or store of goods that is held for some purpose or use (the term may also
be used as a verb, meaning to take inventory or to count all goods held in inventory). Inaccurate
inventory counts can cost you sales and delay shipments past the promise date. Out-of stock
items as well as overstocked items in inventory can be devastating to your business.
Additionally, an overstated or understated inventory valuation can result in incorrectly reported
assets within your financial statements. Inventory Management offers comprehensive reporting
capabilities to keep you on top of inventory status. Centralized inventory management
consolidates inventory information by tracking lot numbers, on-hand levels and expiration dates,
making the re-ordering process more efficient. It also enables simultaneous tracking and
documenting supplies during studies to reduce redundant data entry and increase workflow
efficiency.

The biggest challenge Liberty Shoes Ltd 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. 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 Shoes Ltd 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 widespread
offices and 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.
 ANNEXURE

LIBERTY

BALANCE SHEET AS AT 31st MARCH,2009

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

Investments 6,42,62,581

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

PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2009

(Amount in Rs.)

PARTICULARS

INCOME

SALES 2,21,11,97,993

less: Excise Duty 16,23,68,219

2,04,88,29,774

Other Income 1,11,11,202

Increase/ (Decrease) in Stocks 6,49,73,637 2,12,49,14,613

EXPENDITURE

Raw Material Consumed and Finished Goods Purchased 96,67,26,712

Manufacturing Expenses 19,95,13,409

Payments and Benefits to Employees 19,91,55,747

Administration, Selling and Miscellaneous Expenses 43,20,32,918

Interest & Financial Charges 4,74,18,093

Excise Duty 15,12,462

Depreciation 3,99,98,538 1,88,63,57,879

Profit before tax 23,85,56,734

Provision for Taxation

Current Tax 4,88,26,320

Fringe Benefit Tax 35,05,000

Deferred Tax 12,96,900

Profit before tax 18,49,28,514

add/(less): Taxation adjustments of previous years(net) 42,01,294

Earlier year adjustment 54,964

Net Profit for the year 18,91,84,772

Add: Opening balance 1,69,31,283

Net Profit available for appropriations 20,61,16,055

APPROPRIATIONS

Tranfer to General Reserve 6,00,00,000

Interim Dividend 2,53,50,000

Tax on Dividend 35,55,338

Balance carried over to Balance Sheet 11,72,10,717

Earning Per Share of Rs.10/- each 12.88

QUESTIONNAIRE

1 Are you aware about Inventory Management System?

 Yes

 No

 Do not know/ Cannot say

2 Do you know that your company has an inventory management system?

 Yes

 No

 Do not know/ Cannot say

3 Do you agree that there should be an inventory management system in place in any

organisation / company?

 Agree

 Disagree

 Do not know/ Cannot say

4 For what reasons do you feel that there should be an inventory management system?

 To smoothen operational requirement

 To save time

 To maintain accountability and transparency

 Other reasons

 Do not know/ Cannot say

5 Do you agree that the inventory management system in your company has fulfilled the

needs for which it was evolved?

 Strongly Agree

 Agree

 Disagree

 Strongly Disagree

 Do not know/ Cannot say

6 What according to you is the major benefiit of going for an inventory management

system by your company?

 It has made storage and retrieval of material easier

 Improved Sales Effectiveness

 Reduced Operational Cost

 Other Benifits

 Do not know/ Cannot say

7 Do you have skiled professionals in your company for inventory management?

 Yes

 No

 Do not know/ Cannot say

8. What category of professionls are managing your company inventory?

 Skilled and trained

 Only skilled but not trained

 Non skilled but trained professionals

 Non skilled and non trained professionals

  Others

9. Do you agree that your company gives more emphasis on software than skilled

manpower with regard to inventory management?

 Strongly Agree

 Agree

 Disagree

 Strongly Disagree

 Do not know/ Cannot say

10. Do you think that the software used by your company is according to the design and

needs of the system?

 Yes

 No

 Do not know/ Cannot say

11. What is the prime challenge before your company with rehard to inventory

management?

 Lack of trained professionals

 Maintenance cost

 Changing requirements of customers

 Other problems

 Do not know/ Cannot say

12. What is the future of inventory management system in your company?

 Will continue as a successful mechanism

 May change according to time

 Shall collapse

 Do not know/ Cannot say