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1 INTRODUCTION
“Good planning is good inventory management and good inventory management is
good financial management”. – S.K. Kuchal. Inventory comprises stock of raw materials,
work-in-process, finished products, stores and components. “John HAMPTON”— treats
inventory as "locked up capital". Inventory measured by rupee value constitutes, the major
element in the "Working Capital" (approximately 60 percent of current assets) of many
business undertaking in India.
DEFINITION OF INVENTORY
"John J. Hampton" defined inventory as “The goods for eventual resale by the firm”.
Inventory, measured by rupee value constitute the major element in the working Capital of
many business undertakings. Inventory is the value of raw materials, Consumables, and
spares, work-in-process, finished goods and scraps are called as locked up capital. The major
determinants of investment in inventory are:
Level of sales.
Length and technical nature of the production process.
Durability vs. Perish ability or styling obsolescence of the product.
Inventory involves two types of costs. The first is "Direct Costs", which is connected
to buying and holding of goods and the second is "Indirect Costs" or "Financial Costs". The
direct costs includes firstly ordering costs. These costs include cost of placing order,
Shipping, handling and quality discount etc., If the firm places few orders frequently, the
ordering cost will be higher. Secondly, carrying cost are the costs which are incurred for
storing the goods. These costs include the space insurance, obsolescence, spoilage and
damages or thefts. The indirect costs include interest paid on the capital tied up in the
inventory and the inadequacy of materials involves the cost.
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Inventory is an idle resource which is usable and has value.
It may be men, money, materials, plant acquisition, spares other stocked to meet
future demand.
A physical resource that a firm holds in stock with the intent of selling it or
transforming it into a more valuable state.
Raw Materials
Works-in-Process
Finished Goods
Maintenance, Repair and Operating (MRO)
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Objectives of inventory control
♦ Storage of inventory with a minimum of handling time and cost and to protect
them from losses by theft, fire and damage.
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Essential requirements of Inventory control
Essential to an adequate control of inventory are the following requirements.
♦ there should be proper co-ordination and co-operation between various
Concerns, viz., purchasing, departments receiving, inspection, storage, Issues
and cost departments.
♦ Purchasing should be centralized under the control of a competent Manager.
♦ There should be proper planning of materials requirements.
♦ There should be proper classification of materials with codes, materials
satisfactorily storage control procedures.
♦ There should be planned storage control and issues so that there will be delivery
of materials upon requisition to departments in the right quantity at the time they
are needed.
♦ Appropriate records should be maintained to control issues and utilization of
stores in production.
♦ The system of perpetual inventory should be operated so that it is possible to
determine at any time the amount and value of each item of material in stock.
♦ Maximum, minimum and re-ordering levels of stocks should be fixed.
♦ There should be a system of regular reporting to management regarding
materials purchase, storage and utilization.
♦ There should be an efficient system of internal audit and internal checks.
The economic order quantity is that inventory level, which minimizes the total of
ordering costs and carrying costs.
It is the question, how much to order the quantity when inventory is replenished. If the
firm is buying raw materials, the question is to purchase the quantity of each replenishment
and if it has to plan for production run, it is how much production to schedule. It may be
solved through EOQ. It involves two types of costs:
a. Ordering Cost
b. Carrying Cost
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a. Ordering Cost
Ordering cost is referred to as the cost of placing an order and securing the supplies.
Ordering cost depends upon the number of orders placed and a number of items ordered at a
time. Higher will be the ordering cost when frequent orders are placed. Similarly, lesser the
ordered quantity, higher the ordering cost.
b. Carrying Cost
Carrying cost or holding cost refers to the cost of keeping the materials which
includes capital cost, cost of storage and cost of deterioration and redundancy. Larger the
volume of inventory, higher the inventory carrying cost and vice versa.
2 * AD * CO
EOQ = CH
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ABC ANALYSIS
♦ It helps to exercise selective control when confronted with large number of items
it rationalizes the number of orders, number of items & reduce the inventory.
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A B C
Maintaining close control Maintains moderate control Maintains loose control
Size of order based on Size of order based on Size of order based on level
calculated requirement usage of inventory
Procurement from many Procured from two or three Procured from two sources
sources sources
Keeps records of receipt and Keep records of receipt and No records are kept
use use
More effort to reduce lead Moderated effort Minimum effort
time
Close checks on schedule Some checks on changes in No checks against need
revision need
Frequent ordering Less frequent ordering Bulk ordering
Continual expediting Expediting for prospective No expediting
shortages
Accurate forecasts Less accurate forecasts Approximate forecasts
Low safety stock for less Large safety stock up to 2 to Large safety stock for more
than two weeks 3 months than 3 months
High consumption value Average consumption Value Low consumption value
Inventory Turnover Ratio indicates the efficiency of the firm in producing and selling
its product. It is calculated by dividing the cost of goods soled by the average inventory:
The Average Inventory is the average of opening and closing balances of inventory.
In a manufacturing company inventory of finished goods is used to calculate inventory
turnover.
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Components of Inventory
The manufacturing inventory consists of two more components: (i) raw materials and
(ii) Work-in-Process. An analyst may also be interested in examining the efficiency with
which the firm converts raw materials into Work-in-Process and Work-in-Process into
finished goods. That is, the analyst would like to know the levels of raw materials inventory
and work-in-process inventory held by the firm on an average. The raw materials inventory
should be related to materials consumed and work-in-process to the cost of production. Thus:
Materials Consumed can be found as opening balance of raw material plus purchases
minus closing balances of raw material. Cost of Production is determined as material
consumed plus other manufacturing expenses plus opening balances of work-in-process. In
the absence of information of material consumed or cost production, raw material and work-
in-process inventories may be related to sales.
The inventory turnover shows how rapidly the inventory is turning into receivable through
sales. Generally, a high inventory turnover is indicative of goods inventory management. A
low inventory turnover implies excessive inventory levels than warranted by production and
sales activities or a slow-moving or obsolete inventory. A high level of sluggish inventory
amounts to unnecessary tie-up of funds reduced profit and increased cost.
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If the obsolete inventory is written off, this will adversely affect the working capital and
liquidity position of the firm. However, a relatively high inventory turnover should be
carefully analyzed a high inventory turnover may be the result of a very low level of
inventory which results in frequent stock outs: the firm may be form hand-to-mouth. The
turnover will also be very high if the firm replenishes its inventory in too many small lot
sizes. The situation of frequent stock outs and too many small inventory replacements are
costly for the firm. Thus, too high and too low inventory turnover ratios should be
investigated further. The computation of inventory turnovers for individual components of
inventory may help to detect the imbalanced investments in the various inventory
components.
INVEN- FINISHED
TORY PRODUCT
CASH
FLOW
INVEST- SALES
MENT
ABC ANALYSIS
ABC analysis is a basic analytical management tool which enables top management to place
the efforts where the results will be greatest. ABC analysis is a technique which is used to
classify the items in store based on the demand of the stock.
The NCCPL uses several types of inventories. Inventory Management is an attempt to
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control the quantity and value of the inventory. Inventory Management process starts with
classification of different type of inventories to determine the degree of control required for
each.
The ABC system is widely used technique to identity various items of inventory for purposes
of Inventory Management. This technique is based on the assumption that a firm should not
exercise the same degree of control on all items of inventories. It should rather keep a more
rigorous control on items.
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The next 70% of all items with the lowest rupee percentages are ‘C’ items.
STOCK LEVEL
For effective material control and to avoid overstocking and under stocking of materials, an
important requirement is to decide upon various levels of materials these are maximum level,
minimum level and re-order level. By taking action on the basis of these levels, each item of
material will be automatically be held with in appropriate limits of control.. These levels are
not permanent but revision according to the changes in the factors, which determine these
levels.
FACTORS
Rate of consumption of materials
Lead-time
Storage Capacity
Availability of funds for investment in inventories
Cost of storage
Risk of loss due to theft, fire etc.,
Seasonal factors
Fluctuations in market prices
Insurance costs
MAXIMUM LEVEL
Imprested system or Maximum level system reordering is made at regular time intervals. The
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maximum level of each item is predetermined. At a particular fixed period, say after one
week, a fresh collective order for all the times will be placed. This level is fixed after taking
into account some factors.
Rate of consumption of materials
Amount of capital needed and available
Storages space available
Cost of storing above normal stock
Risk of obsolescence and deterioration and
Re-order quantity
MINIMUM LEVEL
In this system, when the inventory items reaches to a predetermined minimum level, it is
replenished by the fresh purchases up to the predetermined maximum level. The minimum
level serves as a reordering point. The fresh order is placed for that much quantity which
shows deficiency in maximum level. This level is fixed by considering the following factors.
Rate of consumption
The time required under top priority conditions to acquire enough supplies to
avoid a stoppage in production.
THE FORMULA FOR COMPUTING MINIMUM LEVEL IS:
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RE-ORDER LEVEL
The prescription of re-order level (ROL) is an important technique of Inventory Management.
It fundamentally deals with “when to order” to replenish the inventories. Re-order level is
predetermined point, and when the existing stock of inventories reaches this point or falls
below it, the purchase action is initiated to replenish them.
The Re-order level is decided for each important item of inventory on the basis of following
considerations
Lead time
Average periodic consumption (Daily consumption)
Safety stock
RE-ORDER LEVEL IS DECIDED AS UNDER:
ORDERING COST
It consists of the cost of paper work for placing an order like use of paper, typing, posting,
filling etc., the cost of the staff involved in this work, the costs incidental to order like follow-
up, receiving, inspection etc., Ordering costs includes
1. Cot of placing an order with a vendor of materials
Preparing a purchase order
Processing payments
Start-up scarp generated the material
2. Ordering from the plant
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Machine setup
Start-up scarp generated from getting a production run started.
Ordering cost is ascertained as under:
CARRYING COST
Costs incurred for maintaining a given level of inventory are called Carrying Cost. They
include the cost of store keeping (stationery, salaries, rent, material handling cost etc.,)
interest on capital locked up in stores, the incidence of insurance cost, risk of obsolescence,
determined and wastage of materials, evaporation etc., When the inventories are stored it
involves following types of costs:
Interest cost due to locking up of funds
Cost of storage space
Cost of insurance and taxes.
This enables the management to avoid keeping capital locked up in undesirable items
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of materials. Inventory Turnover indicates the efficiency of the firm in producing and selling
its product. Turnover of materials is often measured by the following formula:
There are a number of different techniques employed by wholesale distributors to ensure their
inventory control is maximizing efficiency and profitability. Below are six key techniques of
inventory control for wholesalers and distributors of durable goods:
Management must decide the maximum and minimum level of stocks and supplies that need
to be kept in the warehouse or across the network of warehouse locations. Management must
also set optimized re-order levels, safety stock levels (below which supply must not be
allowed to fall) and an average inventory level to ensure costs are contained.
Many organizations have an annual inventory budget and they are usually prepared well in
advance before inventory is procured. Budgets should include the total cost of ownership to
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keep inventory on hand during that year’s account period. This includes materials cost, fixed
operational costs, carrying costs, logistics costs, redistribution costs and additional
miscellaneous costs that contribute to the total costs of ownersh
Also known as “the automatic inventory system”, this method is designed to keep a constant
track of the quantity and value of each stocked item. Many wholesale distributors leverage a
combination of an Enterprise Resource Planning (ERP) or Warehouse Management
System (WMS) in conjunction with an Inventory Optimization solution, such as EazyStock,
to optimize inventory balances. Most ERP and WMS technologies struggle to keep costs low
and service rates high, which is why optimization software can be so valuable to operations
processes.
This is a calculation used to determine how quickly inventory is used up or “turned over” in a
given time period. The higher the ratio the shorter the shelf life of the inventory and typically
leads to higher sales volume and profitability for companies with lower profit margins.
Inventory turnover should be closely watched for every item in the warehouse. Over the
course of the product’s life cycle, demand will fluctuate and cause variability in the supply
chain. Tracking demand patterns are one way to ensure product replenishment
calculations are accurate and optimized.
In order to ensure that inventory is under adequate control, management must adopt
purchasing procedures that align with actual sales history and demand pattern data. All
inventory items that have not had an inventory turnover or have not been sold within an
accounting period, typically 12 months, should be classified as obsolete stock and should be
liquidated from inventory to eliminate unnecessary carrying costs. Any item with a declining
customer demand should be flagged in the system and its safety stock level thresholds and re-
order point counts should be downwardly adjusted to mitigate risk of obsolescence and cost.
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6) ABC Analysis and ABC Classification
The fastest moving products in your inventory should be located closest to the shipping,
staging, and receiving area in the lower-right of the diagram below. As the demand for each
product decreases over time, products should be migrated backwards to free up space for
items with higher inventory turnover or for new product introductions that have high demand.
Since the majority of your picking activity is performed in a rather small area, your
warehouse layout should be optimized to reduce time spent looking for product in the back of
the warehouse.
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1.2 INDUSTRY PROFILE
The Footwear Industry is a significant segment of the Leather Industry in India. India ranks
second among the footwear producing countries next to China. India produces more of gents’
footwear while the world’s major production is in ladies footwear. The industry is labour
intensive and is concentrated in the small and cottage industry sectors. While leather shoes
and uppers are concentrated in large scale units, the sandals and chapels are produced in the
household and cottage sector. In the case of chapels and sandals, use of non-leather material
is prevalent in the domestic market. The estimated annual footwear production capacity in
1999 is nearly 1736 million pairs (776 million pairs of leather footwear and 960 million pairs
of non-leather footwear.
Shoes manufactured in India wear brand names like Florsheim, Gabor, Clarks, Salamander
and St. Michael’s. As part of its effort to play a lead role in the global trade, the Indian leather
industry is focusing on key deliverables of innovative design, consistently superior quality
and unfailing delivery schedules. India in itself has a huge domestic market, which is largely
untapped .The availability of abundant raw material base, large domestic market and the
opportunity to cater to world markets makes India an attractive destination for technology
and investments.
IMPORT
In 1999, the global import of footwear (leather and non-leather) in terms of value was around
US$ 43278 million, accounting a share of 63.42% in the total global import of leather and
leather products. Out of this, import of leather footwear alone accounted for US$ 26379
million and non-leather footwear US$ 16899 million.
EXPORT
India’s export of Leather Footwear touched US$ 331 million in 1999-2000, recording an
increase of 3.29% over the preceding year. India thus holds a share of 1.25% in the global
import of leather footwear. The major markets for Indian Leather Footwear are the U.K., the
U.S.A., Germany, Italy, France and Russia. Nearly 71% of India‘s export of Leather
Footwear is to Germany, the U.S.A., the U.K and Italy.
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In 1999-2000, export of leather footwear from India constituted 21% share of its total export
of leather and leather products. Nearly 33 million pairs of various types of leather footwear
were exported during the year, out of which shoes / boots constituted 90%.
The different types of leather footwear exported from India are dress shoes, casuals,
moccasins, sport shoes, hierarchies, sandals, ballerinas, booties.
Trends Preview
We continually research changes within the fashion industry to keep you updated with the
latest innovation in footwear trends.
Detailed analysis of catwalk and retail looks are translated into accurate forecasts for the
footwear industry.
Real-time reporting on fresh new influences is classified into clearly defined themes.
Each themed report provides a strong overview of seasonal looks along with clear and
concise observations and analysis of latest themes, moods, styles and colours palettes.
Mood analysis provides an in-depth look into footwear styles and materials for the seasons
ahead.
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directions to improve productivity in developing countries. In this report, relate their findings
on technology trends to trends in international trade. The systematic nature of the
technological change is emphasized. What implications does this have for the footwear
industry? Will the advent of new technologies pose a threat to footwear manufacturing in
developing countries? If so, what options are available to companies in these countries and
how can these options be exploited?
They say the first thing that someone notices about you is your feet and your footwear, so
why not invest in the best pair of footwear that would enhance your personality to the very
best. Footwear has evolved from being just a mere necessity as a protection for your feet to
an important accessory that ups your fashion game right away. According to Businesswire,
India is the second largest global producer of footwear after China, accounting for 9 percent
of the annual global production of 22 billion pairs. Presently about 90 percent of the footwear
produce in the country is consumed by the domestic market and the rest is exported. The
growing Indian fashion and lifestyle market has given an impetus to the footwear industry as
well.
Market Scenario
Footwear industry in India is very optimistic right now with growing awareness about the
latest trends and consciousness among consumers. Affirms Ishaan Sachdeva, Director,
Alberto Torresi, “Be it men’s category or women’s, footwear have now become a necessary
style statement for everyone. A lot of western influence can also be noticed these days where
people are inclined towards styles like Oxfords taken from Europe and Brogues from
Ireland.” This industry has seen a tremendous growth in the last few years. The demand for
footwear products in India is increasing with each passing day. Harkirat Singh, Managing
Director, Woodland, says, “Indian footwear industry is approximately between Rs.30,000
crores to Rs.40,000 crores. And this can grow up to 100 percent by next 5 years provided the
right policies and tax structure. This market is shared between organized and unorganized
segment. The organized segment caters to about one third of the market while unorganized
players fetch the remaining 70- 75 percent market which essentially falls under micro, mini,
small and medium enterprises.” With the rising disposable incomes of the customers, India’s
domestic footwear market is booming. Rising incomes, advent of globalization, improved
employment and living standards in the country has led to the expansion in the size of this
market. Anupam Bansal, Executive Director, Liberty Group, agrees and says, “Also,
consumer’s increased exposure to plastic money and imposition of GST is going to provide
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more organized retailing and trade transparency in long term. Government of India has
already commenced the “Make in India” campaign which has been proving beneficial in
boosting manufacturing in India. Secondly, due to the ever increasing internet penetration and
adoption of internet and the overall ecosystem for e-commerce falling in place, the last
decade has been the best for this industry.”
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the same pair to office, to parties, for tea, etc., people today need different kinds of shoes for
different occasions. For example, a fitness enthusiast would need running shoes for jogging
or exercising, formal shoes for office, trendy and stylish shoes for parties and casual shoes for
a casual outing, etc. Secondly, with trends changing very fast, brands are offering varied
collections for varied seasons. So, when people visit shopping centers, they see a wide variety
of footwear from different brands and that induces them to buy more. Furthermore,
promotional offers, discounts, etc. also contribute in making their shopping more easy and
convincing.” He further maintains that the advent of footwear retail in apparel stores, the later
being a bigger sector, has lead to a massive growth in sales of footwear and thereby growth in
this industry. While Ishaan Sachdeva asserts, “With an increased contribution in household
income and change in spending patterns, the footwear sector is experiencing a great boom.
Footwear is not just a part of wardrobe but has become a huge status symbol these days.”
Furthermore, talking about different categories in footwear, Farah Malik asserts, “At present,
men’s category contributes around 60 percent of sales in the footwear segment as against
women’s share of 30 percent. Men’s footwear market is growing at a CAGR of 10 percent.
The women’s segment, however, is growing at a much faster CAGR of 20 per cent.”
Growing Opportunities
Indian market, especially the footwear market, has a lot of scope. The Indian footwear
industry is gearing up to leverage its strengths towards maximizing benefits. Resource
strength of India in the form of materials and skilled manpower is a comparative advantage
for the country, among other things. Ishaan Sachdeva says, “The increasing significance of
footwear is leading to an upsurge in the demand of footwear day by day which is further
leading to higher growth prospects of footwear industry. The easy availability of varied styles
is also increasing brand loyalty amongst the customers. The advent of such huge varieties of
footwear is growing the potential of footwear industry even in tier-II and tier-III cities as the
people are becoming more and more brand centric in these cities as well.” As said many
times, rural areas are where the real India lies. The organized sector has definitely realized
that and is now moving towards the hinterlands of India. Anupam Bansal affirms, “India has
a lot of potential in tier-II and tier-III cities and towns and therefore, Liberty is constantly
entering these towns and tapping the potential market. Approximately two-third of the
consumer market is dominated by the urban market and rest is located in the rural areas. It is
something that needs to be worked upon.” Harkirat Singh from Woodland points that the
Indian retail sector is set to grow substantially over the next few years, as the reach of
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organized retail would gradually spread to smaller towns and under penetrated areas. “Today
consumers in tier-II and tier-III cities are aware about the domestic and international brands
across categories. The market has evolved and there is a lot of potential. Currently, tier-II
cities contribute a large percentage in the total sales; however, tier-III cities are catching up in
terms of sales and are expected to grow exponentially by FY 2020,” he says. Furthermore,
talking about online market share in the hinterlands of India, Farah Malik from Metro Shoes,
apprises, “Mobile technology is revolutionizing the tier-II and tier-III markets and an online
retailer must not ignore this segment. Women are the driving force in tier-II and tier-III
online retail markets.”
Also, with a considerable rise in consumption of trendiest and most comfortable pair of
footwear, consumers today do not mind paying higher for quality products as they now
understand that ‘higher price definitely means better quality’. Harkirat Singh agrees, “India is
a price sensitive market. But today consumers do not hesitate in paying more for quality,
innovation and technology. We offer tech footwear which are water proof, anti- microbe
shoes, non- skid shoes, etc. and people actually pay for these premium tech collections
happily.” Apart from quality, people also look for good customer service which ultimately
makes their store visit more satisfying. Farah Malik explains, “Customers remain loyal if the
brand delivers on quality and a good customer service experience and are willing to pay extra
for superior customer service. If you look at the millennials, they are the first generation who
is willing consciously to spend more for better quality, for sustainability, for traceability. I
think there is a change. Moreover, delivering excellent customer service experience along
with consistent quality is imperative for any brand to retain customers.”
Challenges Ahead
While the footwear industry is set for an exponential growth in the times to come, there are
many challenges that are continuously erecting roadblocks in the process. “The industry is
already working towards consolidating the growth. This has seen technology being the key
element in making things possible to enhance growth. Many institutes have blossomed to
provide retail professionals to the industry which will help in the long run. The government
initiatives to taper down the real estate demands and make the pricing more pragmatic will
also give a boost to the retail industry and push it to a higher growth path,” says Anupam
Bansal. Talking about other challenges facing the industry right now, Farah Malik maintains,
“The unorganised retail market is the most dominant and popular mode of retailing and
purchase destination for the majority of India’s 1.3 billion population. Like food habits,
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footwear fashion changes every 100 kilometers. For example, the shortest heel preference in
Chandigarh is the longest preferred in Kolkata. Hence, fashion footwear has always been
dominated as well as successfully managed by local retailers. The unorganized footwear
industry also enjoys the advantage of the passion and zeal of its business owners that is
difficult to replicate across employees and store personnel. Also, footwear retailing primarily
involves touching the feet of our customers as part of service and hence the front end does
not attract the best manpower in terms of education, technical expertise and sophistication.”
Apart from these, Harkirat Singh point out that product counterfeiting is another big
challenge for the organized footwear industry. “Organised sector is something we cannot
avoid because it’s the bigger chunk of the market. But the real problem lies in stopping the
counterfeit products; its easy to sell fake shoes for the unorganized retailers but that
ultimately hampers the brand image as consumers start associating the quality and
performance of a fake product to the brand. We try to curtail that through legal processes
where we conduct raids, seize counterfeits and apply to some suit in the court, etc. But that
still possess as a big challenge for us, especially in a country like India where we don’t have
too many laws against counterfeit, he asserts.
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in Italy and Hongkong. For the forthcoming season, “Woodland is coming up with
technology driven footwear and apparels”. While Alberto Torresi is soon launching its new
collection which is a “sweet hybrid of Italian and Indian footwear”, Liberty’s Autumn/Winter
collection is going to transform the idea of being elegant and sensational without
compromising on comfort. Meanwhile, Metro Shoes have launched its new evening and
bridal shoe collection.
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1.3 COMPANY PROFILE
APACHE,” an Indian tribe known for its fearlessness and toughness, along with their
bravery, wisdom, and daring spirits have made them strong when they were once weak. Ever
since then, the “APACHE” tribe has become the symbol of victory and wisdom, and its
influence lingers on. Passing on the spirit of perpetual perfection, APACHE India was born
on 24th of February 2006. Located in Tada, Nellore District, Andhra Pradesh. It is a large-
scaled foreign-invested enterprise with a plant that takes up 314 acres of area. We’re
manufacturing the famous Adidas sports shoes.Our products are exported worldwide, with
the spirit of bravery and wisdom that “APACHE” symbolized, APACHE India plans to grow
into a large corporation that owns a technologically advanced R&D team and conveyance
plants, and possesses over 40 complete production units with 20,000 employees that
generates an average monthly volume of two million pairs of shoes. Now, APACHE India,
with steady and strong stance is spreading its wings towards the future.
Under the guidance of our management team, APACHE India hopes to achieve many
extraordinary achievements with its fully functioned organization and highly efficient
management. It continues to grow and leads its teammates into sheer brilliance. Being a large
business group, APACHE India has its own unique corporate culture-- “Human based, joint
efforts and shared benefits” are our managerial beliefs. Further more, APACHE corporate
motto-- “LOYALTY,PRACTICALITY, QUALITYand DILIGENCE” is our everlasting
objectives. Apache not only emphasizing to the value of the company itself but also to the
joining with our employees in all ways, thus to create a united APACHE India. Meanwhile,
the company management also enthusiastically support and participate in all types of social
and charitable events. During the process of constant development, many jobs have been
offered and the local economy has been greatly prospered.
Based in Qingyuan China, the APACHE Group is constantly expanding overseas; the goal is
to become globalize as well as to enforce group management. APACHE will strive to
establish 3 to 4 oversea production units in order to provide better and broader services to our
client - Adidas and become a boundless and world-class corporation. With unequaled faith
and will, APACHE India will work with all partners in a newer and stronger form to create a
bright and beautiful future!
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History of Footwear
There are evidences which show that the history of the shoe starts in 10,000 BC, that is, at the
end of the Paleolithic period (paintings of this time in caves in Spain and in the south of
France make reference to the footwear). Among the utensils of rock of the men of the caverns
there are several that were used to scrape the skins, which indicate that the art of tanning is
very old. In the Egyptian hypogeum (underground chambers used to multiple funerals),
whose age is between 6 and 7 thousand years, paintings were discovered representing the
various stages of the preparation of the leather and the footwear. In cold countries the
moccasin is the protector of the feet and in hotter countries the sandal is still the most used.
The Egyptian’s sandals were made of straw, papyrus or of palm fiber.
It’s known that only the noblemen of that time owned sandals. Even a Pharaoh as
Tutancamon paved footwear as sandals and simple leather shoes (despite the ornaments of
gold).
In Mesopotamia it was common raw leather shoes tied to the feet by straps of the same
material. The boots were symbol of high social status.
The Greek introduced new fashion as different models for right and left feet
In the middle age, men as well as women wore leather shoes whose form was similar to the
ballet slipper. Men also wore high and short boots tied in the front and in the side. The most
current material was the cow skin, but the upper quality boots were made of goat skin.
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Process
Sewing: junction of the parts that compose the "cabedal"(upper part of the footwear).
In many companies this sector is subdivided into preparation, chamfer and sewing;
Pre-manufactured: manufacture of soles, shoe heels and slippers. Many companies
don’t have this sector because there are specialized factories that produce these
materials;
distribution: it controls the volume of production, revises the quality of the materials
and distributes them to the sections of assembling and final touch (finishing);
assembling: set of operations that join the upper part of the footwear with the sole;
finishing: final operations linked to the presentation of the footwear as brushing,
painting and cleaning;
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assembling and finishing: in many companies these two sectors are organized in
assembling line, that is, work rates replaced in line and the elaborating product
incorporates the partial operations of each worker until the end of the line, where the
product results finished;
Expedition: packing, boxing and sending to the destination market.
General details
Company Name
APACHE FOOTWEAR INDIA PRIVATE LIMITED
Corporate Identification Number (CIN)
U19202AP2006PTC049219
Ownership Type
private
Primary Business Type
Year of establishment
20/02/2006
Age of Company
12 Years 17 Days
Category
Company limited by shares
Sub Category
Indian Non-Government Company
Primary Location
Tada
Main Language
ENGLISH
Registered Address
APACHE SEZ, MAMBATTU VILLAGE, Tada, Andhra Pradesh,524401
Date of Balance sheet
2014-03-31
Date of Last Annual General Meeting
2014-09-26
APACHE FOOTWEAR INDIA PRIVATE LIMITED is a private limited Company
incorporated on 20/02/2006 and is 12 Years 17 Days old. It is classified as Indian Non-
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Government Company and is registered at RoC-Hyderabad. Its authorized share capital is
Rs. 1200000000 and its paid up capital is Rs. 1059678750.
APACHE FOOTWEAR INDIA PRIVATE LIMITED 's Annual General Meeting (AGM)
was last held on 2014-09-26. As per records from Ministry of Corporate Affairs (MCA),
this company's balance sheet was last filed on 2014-03-31.
Directors of this company are CHIEN CHUNG CHEN and CHAO SUNG TSAI.
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Apache Corporation's revenue from 2007 to 2017 (in million U.S. dollars)
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2.1 NEED OF THE STUDY
As the global inventory scenario is moving at very fast pace. Apache footwear Indian
pvt Ltd., being a manufacturing concern had huge number of items and the inventory
constitutes of variety of items. There is a need for the system to be devised on value basis. So
that effective control can be exercised on inventory.
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2.2 SCOPE OF THE STUDY
The choice of area of the study for the project work was given after initial study of
company's operations and the system of working. Though the company has several
departments, the prime area of my interest was in Finance.
The scope of an inventory system defines which needs it addresses, including valuing
the inventory, measuring the change in inventory and planning for future inventory levels.
The value of the inventory at the end of each period provides a basis for financial reporting
on the balance sheet. Measuring the change in inventory allows the company to determine the
cost of inventory sold during the period. Together, inventory values and level changes allow
the company to plan for future inventory needs.
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2.3 OBJECTIVES OF THE STUDY
1. To know the about Inventory Management in Apache footwear Indian pvt Ltd.,
4. To know the minimum and maximum consumption level of the raw material of the
company.
5. To draw the conclusion and offer feasible suggestions to improve the efficiency of
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2.4 RESEARCH METHODOLOGY
The process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.
Primary Data
First hand information was collected from experts of Finance department on their
course of actions towards collections.
Secondary Data
The second hand information was collected from annual reports, schedules, budgets,
company website (www.apache.com), and previous reports etc.
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2.5 LIMITATIONS OF THE STUDY
Time period for the study has been limited to make a detailed analysis i.e. only 8
weeks.
Much of the data is collected from secondary source and the analysis is made on five
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3.DATA ANALYSIS AND INTERPRETATIONS
The first question, how much to order, relates to the problem of determining
Economic Order Quantity (EOQ), and is answered with an analysis of costs of certain
level of inventories. The second question, when to order, arises because. Of uncertainty
and as a problem of determining the re-order point.
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EOQ for an item is arrived by the following formula,
2 * AD * CO
EOQ = CH
Ordering Cost
The term ordering cost is used in case of raw materials (or supplies) and includes the
entire costs of acquiring raw materials. They include costs incurred in the following
activities: requisitioning, purchase ordering, transporting, receiving, inspecting and
storing (store placement) ordering costs increase in proportion to the number of orders
placed. The clerical and staff costs, however, do not have to vary in proportion to the
number of order placed. And one view is that so long as they are committed costs, they
need not be reckoned in computing ordering cost. Alternatively, it may be argued that as
the number of orders increases, the clerical and staff force released now can be used in
other departments. Thus, these costs may be included in the ordering costs. It is the more
appropriate to include clerical and staff costs on a pro rata basis.
Carrying Cost
Cost incurred to maintaining a given level of inventory are called carrying costs. The
including storage, insurance, taxes, deterioration and obsolescence. The storage costs
comprise cost of storage space (warehousing cost), storage handling costs and clerical and
staff service costs (administrative costs) incurred in recording and providing special
facilities such as fencing, lines, racks etc.,
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Ordering Costs and Carrying Cost
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TABLE NO.1
1200000
1000000 884577.9
ORDERS
767009.1
800000
607488 598927.9 571933.1
600000
468733.1
400000
195923.4
200000
0
LEAD-A
LEAD-E
LEAD-D
LEAD-B
LEAD-F
LEAD-C
LEAD-G
LEAD-H
LEAD-I
MATERIALS
INTERPRETATION
The above data indicates in the year 2013 indigenous items like Lead-A and Lead-C
are increased based on the company orders and the EOQ respectively.
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TABLE NO. 2
ECONOMIC ORDER QUANTITY (2013-2014)
900000 857415.8952
778638.5699
800000
700000
608770.4427
600000
ORDERS
500000
425982.0477 410296.4271
382263.0582
400000
309913.5389
300000
206267.3246
200000
118106.85
100000
0
LEAD-A
LEAD-F
LEAD-H
LEAD-E
LEAD-I
LEAD-G
LEAD-B
LEAD-C
LEAD-D
MATERIALS
INTERPRETATION
The above table shows in the year 2014 indigenous items like Lead-A, Lead-D and
imported items like Lead-F, Lead-H increased as compared to the year 2013 respectively.
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TABLE NO. 3
ECONOMIC ORDER QUANTITY (2014-2015)
2000000
1306525.806
1232910.711
1500000
999862.5682
872086.4981 845860.8362
ORDERS
1000000 598729.1058
371490.1401
500000
16495.46548
0
LEAD-D
LEAD-C
LEAD-F
LEAD-G
LEAD-H
LEAD-A
LEAD-B
LEAD-E
LEAD-I
MATERIALS
INTERPRETATION
The above table shows in the year 2015 indigenous items like Lead-A, Lead-D and
imported items like Lead-F, Lead-H decreased as compared to the year 2012 respectively.
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TABLE NO. 4
COMPARISON OF ECONOMIC ORDER QUANTITY
2500000
2000000
ORDERS
2012-2013
1500000
2013-2014
2014-2015
1000000
500000
0
LEAD-A LEAD-B LEAD-C LEAD-D LEAD-E LEAD-F LEAD-G LEAD-H LEAD-I
MATERIALS
INTERPRETATION
In the year 2015 the items like Lead-A, Lead-B's EOQ and company orders are
increased when compared to previous years. In the year 2014 Lead-E, Lead-F, Lead-G’s
EOQ and Company Orders are decreased when compared to 2013 respectively.
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TABLE NO. 5
Cumulat
% of No. of % of Cumulative % of
Class Quantity Value ive
Qty items Items % Value
%
INTERPRETATION:
In the year 2012-2013, there are 5 items which constitutes 0.75% and 70.58% in the
total value which comes under "A" category, 18 items which constitutes 3.47% and 20.33%
in the total value which comes under "B" category and 639 items which constitutes 662% and
9.09% in the total value which comes under "C" category.
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TABLE NO. 6
Cumul
% of No. of % of Cumulative % of
Class Quantity Value ative
Qty items items % Value
%
INTERPRETATION:
In the year 2013-2014, there are 9 items which constitutes 0.33% and 70.51% in the
total value which comes under "A" category, 24 items which constitutes 0.89% and 20.36%
in the total value which comes under "B" category and 2651 items which constitutes 98.7%
and 9.13% in the total value which comes under "C" category.
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TABLE NO. 7
No. Cumulat
% of % of Cumulative % of
Class Quantity of Value ive
Qty Items % Value
items %
INTERPRETATION
In the year 2014-2015, there are 12 items which constitutes 0.42% and 71.73% in the
total value which comes under "A" category, 9 items which constitutes 0.32% and 18.3% in
the total value which comes under "B" category and 2789 items which constitutes 99.2% and
9.97% in the total value which comes under "C" category.
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TABLE NO.8
INVENTORY TURNOVER RATIO
INTERPRETATION:
From the above table it was observed that in the year 2016-17consumption of raw
materials and work in process is more i.e. 174 and 16.18 in the year 2015-16.
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TABLE NO.9
17.4
18
16 15.29
14
11.47
12
Times 10
7.37 8.54
8 Raw Materials
6
4
2
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
Years
INTERPRETATION
The above data indicates raw material turnover Ratio is 7.37 times in the year 2012-
13 and it is increased continuously to 15.29 in the year 2016. Then, it is increased to 17.4 in
the year 2017.
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TABLE NO. 10
18 16.18
16
13.38
14
10.07 10.62
12
Times 9.6
10
8
6
4
2
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
Years
Work in Process
INTERPRETATION
The above data indicates work-in-process turnover ratio is 10.07 times in the year.
But, it is decreased to 9.6 in the year 2014.Then, it is increased to 10.62 in the year 2015 and
16.18 in the year 2017.
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TABLE NO. 11
24.63
25
20 16.78
15.42
15 13.16
12.04
Times
10
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
Years
Finished Goods
INTERPRETATION
The above data indicates finished Goods ratio is 16.78 times in the year 2013. But, it
is decreased continuously to 13.16 in the year 2015. Then, it is increased to 24.63 in the year
2016.
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TABLE NO. 12
6
5.1
5
4.26
4 3.32
Times 3.11
2.89
3
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
Years
Inventory
INTERPRETATION
The above data indicates inventory turnover ratio is 3.11 times in the year 2013. But, it
is increased to 5.1 in the year 2014. Then, it is decreased to 2.89 in the year 2015. Again it is
increased to 3.32, 4.26 in the year 2016 and 2017 respectively.
Inventory turnover ratio declined for year by year that is company production is also
declined. Subsequently sales are also declined.
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TABLE NO. 13
25
20
TIMES
15
10
0
2012-13 2013-14 2014-15 2015-16 2016-17
YEARS
INTERPRETATION
The above data indicates inventory turnover ratio is 3.11 times in the year 2013. But, it
is increased to 5.1 in the year 2014. Then, it is decreased to 2.89 in the year 2015.
Inventory turnover ratio declined for year by year that is company production is also
declined. Subsequently sales are also declined.
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TABLE NO. 14
Raw Materials 49 42 31 24 21
Work in Process 36 38 34 27 22
Finished Goods 22 30 27 15 23
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TABLE NO. 15
Raw Materials 49 42 31 24 21
15
10
5
0
2012-13 2013-14 2014-15 2015-16 2016-17
Years
INTERPRETATION
Inventory holding period is 49 days in the year 2013. But, it is decreased to 42 days in
the year 2014. Then, it is decreased continuously to 21 days in the year 2017 respectively.
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TABLE NO. 16
Work in Process 36 38 34 27 22
36 38
40
34
35
30 27
25 22
Times
20
15
10
5
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
Years
Work in Process
INTERPRETATION
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TABLE NO. 17
Finished Goods 22 30 27 15 23
30
30 27
22 23
25
20
Times 15
15
10
0
2008-09
2013 2014 2009-10
2015 20162010-11
2017 2011-12 2012-13
Years
Finished Goods
INTERPRETATION
Finished Goods holding period is 22 days in the year 2013. But, it is increased to 30
days in the year 2014. Then, again it is decreased to 15 days in the year 2016 and increased to
23 days in the year 2017 respectively.
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TABLE NO. 18
Raw Materials 49 42 31 24 21
Work in Process 36 38 34 27 22
Finished Goods 22 30 27 15 23
140 125
116
120 108
100 85
80 71
Times
60
40
20
0
2008-09 2009-10 2010-11 2011-12 2012-13
2013 2014 2015 2016 2017
Years
INTERPRETATION
Inventory holding period is 116 days in the year 2013. But, it is decreased to 71 days in
the year 2014. Then, it is increased continuously to 108 days in the year 2016 and decreased
to 85 days in the year 2017 respectively.
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TABLE NO. 19
Raw Materials 49 42 31 24 21
Work in Process 36 38 34 27 22
Finished Goods 22 30 27 15 23
140
120
100
80
TIMES
60
40
20
0
2008-09
2013 2009-10
2014 2010-11
2015 2011-12
2016 2012-13
2017
YEARS
INTERPRETATION
The above data indicates inventory holding period is 49 days in the year 2013. But, it
is decreased to 42 days in the year 2014. Then, it is decreased continuously to 21 days in the
year 2014 respectively.
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SAFETY STOCK
Safety stocks are held to protect against the uncertainties of demand and supply. An
organization generally knows the average demand for various items that it needs. However,
the actual demand may not exactly match the average and could well exceed it. To meet this
kind of a situation, inventories may be held in excess of the average for expected demand.
Similarly, the average delivery time (that is, the time elapsing between placing an order and
having the goods in stock ready for use, and technically called as the lead time) may be
known. But unpredictable events could cause the actual delivery time to be more than the
average. Thus, excess stocks might be kept in order to meet the demand during the time for
which the delivery is delayed. These inventories which are in excess of those necessary just
to meet the average demand (during the average lead time period), held for protecting against
the fluctuations in demand and lead time.
Safety stocks should be as small as possible for A materials, since those materials have a
high value, which means that even small stocks would generate a high inventory value.
For C parts also, the safety stocks shouldn’t be too high, but they can contain more buffers
than the A material stocks because the value of C materials is lower.
Lead time is the period that elapses between the recognition of a need and its fulfillment.
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For example the safety stocks are determined in table below:
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SAFETY STOCK FOR AGM ITEMS
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5.1 FINDINGS
As the procurement of the orders is not according to the requirement of the orders
received, a major part of the inventory is held up as non-moving.
The stores department depreciation is increased during the year 2012-2013 and 2013-
2014. They calculated depreciation on dead items also this is affected to coming loss.
Have not been implementing any evolved technique in material or stores management
like two bin system or Just in Time.
The company has to maintain sufficient stocks of finished products to meet reasonable
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5.2 SUGGESTIONS
The company has to concentrate more on Research and Development so that it can
Weekly inventory report should be prepared without fail. This helps to ensure quality,
The company has to eliminate dead inventory as depreciation is charged even on the
Company should strive for "getting the right goods to the right places at the right time
Company has to distinguish between bottleneck items, critical Items (high risk, high
opportunity).
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5.3 CONCLUSIONS
The company can reduce ordering cost by the following proper inventory
JUST-IN-TIME
1) Reducing Cost
2) Improving Quality
3) Improving performance
4) Improving Delivery
5) Adding Flexibility
6) Increase Innovations
JIT is not about automation. It not only eliminates waste but also helps for controlling
inventory by providing the environment to perfect and simplify the processes. It is collection
of techniques used to improve operations. It can also be a new production system that is used
advantages are realized. JIT principles can be applied to all parts of an organization: order
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ELIMINATION OF WASTE
c) Transportation waste.
d) Inventory waste.
e) Processing waste.
f) Waste of motion.
Inventory control is the “Life System” control needed for continuous operation in all
businesses. Inventory can be compared to the life blood of the human body. Just as used-up
red and white cells need replacement in the human body in the correct quantity and quality at
the right time for continuous operation.
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BIBLIOGRAPHY
REFERENCE BOOKS
JOURNALS
Investment Monitor
WEBSITE
www.apache.com
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