Inventory Management - MIDAS Safety
Inventory Management - MIDAS Safety
Inventory Management - MIDAS Safety
EFFECTS ON ORGANIZATION
SUBMITTED BY:
1. WAQAS AHMED KHAN (09025)
2. SYED OWAIS AHMED (10001)
SUBMITTED TO:
ACKNOWLEDGEMENTS
The Study of Inventory Management in Midas Safety in the work wear garment
Sector was undertaken by the students of IBA (as mentioned in title page).
We would like to express our sincerest gratitude to Team MIDAS for their
cooperation, assistance and contribution in successfully executing this study.
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WRITERS COMMENTS
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I.
MIDAS SAFETY
MIDAS SAFETY is part of a large international group, Midas Safety Solutions. Their
factories are located in Pakistan, Sri Lanka, India and Bangladesh with distribution
offices in Dubai and Sales and Marketing offices in Canada. They are the 4th largest
exporter of safety gloves globally with markets in the USA and Europe. Midas
Safety represents a group of factories which are vertically integrated to control our
use of natural resources like cotton and natural rubber. MIDAS Safety has its
production facilities in Karachi (SGL FB Area and SGL Knitting Unit) and Faisalabad
(SGL Gloves Unit and SGL Spinning Unit), whereas, Beltexco Limited and MIDAS
CLOTHING LIMITED are located in the Karachi Export Processing Zone."
MIDAS SAFETY
MIDAS
COOPERATE &
INDUSTRIAL
CLOTHING
MIDAS
CLOTHING
LTD.
INDUSTRIAL
CLOTHINGS
LTD.
MIDAS SAFETY
LTD.
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No. of Floors: 02
No. of Floors: 04
No. of Floors: 04
1.
Product Range
365 Days Corporate Wear (such as Chino trousers with pleats, Combat
trousers with knee pads, jackets etc.)
Food Range (such as chef jackets, skull caps, ladies dust coats, aprons
etc.)
2.
Buyers / Customers
DHL
Boyd Cooper
NHS
Royal Mail
Skydda
Modyf
Juba
Nv De Ruck Paul
3.
Regular Suppliers
Carrington
Dong Jin
HonFeng
Lucky Textiles
Sapphire
Sarena
Thai Taffeta
WERNERFELT
3M (Reflective Tapes)
A&E Threads
Avery Dennison
HUAMEI Threads
YKK (Zippers)
Zhejiang Weixing
JP Coats (Thread)
China Star
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A GARMENT INDUSTRY
CUTTING DEPARTMENT
FINISHING DEPARTMENT
STITCHING DEPARTMENT
PACKING DEPARTMENT
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II.
MISSION STATEMENT
III.
VISION
IV.
QUALITY POLICY
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ORGANOGRAM
HR & Admin
Manager
Assist. Admin
& Compliance
Finance
Manager
Accountant
Marketing
Manager
Assistant
Marketing
Manager
Import &
Export
Manager
Logistic
Incharge
Assistant
Accountant
I.E. Executives
I.E. Manager
Training
Department
Cutting
Incharge
CEO
GM
Production
Manager
Fabrication
Manager
Fabric
Inspector
Cutting
Supervisors
Stitching
Incharge
Stitching
Supervisors
Finishing
Incharge
Finishing
Supervisors
Store Incharge
Store Keeper
Knitting &
Dyeing
Incharge
Knitting
Supervisor
Dyeing
Supervisor
Asistant
Merchandiser
Merchandising
Manager
Merchandisers
Sample Master
Purchase
Manager
Cutting Q.C.
Quality
Assurance
Manager
Assistant QA
Manager
Q.A.
Line Q.C.
Finishing Q.C.
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VALUATION OF INVENTORY
The FIFO method, LIFO method and Weighted Average Cost method are three ways
of valuing your inventory. In this lesson we're going to look at all three methods with
examples.
At the end of each period (month or year) one should do a physical inventory count
to determine the number of inventory on hand.
Then you need to place a value on the goods. One would think this would be easy the value of the goods is simply how much they originally cost. Unfortunately there is
a bit more to it than just this.
There are three methods used when valuing the goods that you have on hand at the
end of the period.
1. The First-In-First-Out Method (FIFO)
This method assumes that the first inventories bought are the firestones to be
sold, and that inventories bought later are sold later.
The value of our closing inventories in this example would be calculated as follows:
Using the First-In-First-Out method, our closing inventory comes to $1,100. This
equates to a cost of $1.10 per lollypop ($1,100/1,000 lollypops).
It is very common to use the FIFO method if one trades in foodstuffs and other
goods that have a limited shelf life, because the oldest goods need to be sold before
they pass their sell-by date.
Thus the first-in-first-out method is probably the most commonly used method in
small business. Well, probably...
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Using the Last-In-First-Out method, our closing inventory comes to $1,000. This
equates to a cost of $1.00 per lollypop ($1,000/1,000 lollypops).
The LIFO method is commonly used in the U.S.A.
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Using the weighted average cost method, our closing inventory amounts to $1,059. This
equates to a cost of $1.06 per lollypop ($1,059/1,000 lollypops).
Oddly enough, the LIFO method is the preferred inventory valuation method in the
United States but is disallowed in non-US countries. The FIFO method and the weighted
average cost method are used in non-US countries. In recent years there have been calls
for the standardization of accounting rules throughout the world, and talk specifically
about disallowing LIFO in the US (or making the rest of the world follow the LIFO
system). As of this writing the matter has not been resolved and the differences in
inventory valuation still exist.
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Inventory Policy
Scope
This policy is applicable on all the Companies of the Group (Midas Group) with in
geographical area of Pakistan.
Measurement of inventory
Inventories are valued at the lower of cost and net realizable value. Cost of finished
goods, both manufactured and purchased, raw material and components is
determined on weighted average basis. The cost of work-in-process and finished
goods includes direct materials, labor and applicable production overheads. Goodsin-transit are valued at cost comprising invoice value and other expenses incurred
thereon.
Net realizable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses.
Quantity Risk:
The basis for assessing the quantity risk is the inventory ageing (i.e. the time since
inventory in in stock)
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Valuation reserves shall be computed and recorded category wise according to the
following table:
S.
No.
1.
2.
3.
4.
5.
6.
Ageing
Up to 3
months
More
than 3
months
More
than 6
months
More
than 1
year
More
than 2
years
More
than 3
years
Any
other
material
Spares &
Maintenance
Chemicals*
Packaging
Material
Fabric
Yarn
0%
0%
0%
0%
0%
0%
0%
0%
0%
15%
0%
0%
20%
0%
0%
25%
10%
10%
40%
25%
50%
75%
25%
25%
70%
50%
100%
90%
50%
50%
90%
75%
90%
90%
For chemicals where expiry period is less than 2 years at the time of procurement,
specific provision shall be recorded in due consideration to the expiry period.
For slow-moving items, i.e. inventory items whose consumption did not exceed 10%
of actual quantities on hand during the past twelve months (excluding spare parts),
an annual physical inventory check shall be performed at the time of regular periodic
inventory and a report submitted to the relevant Business Unit Head by warehouse
in-charge for a decision for disposal or otherwise.
a) Technical Risk
A technical risk exists when inventories become technically obsolete due to new
company or third-party developments, or they have defects. Technical risk may also
arise where inventories are associated with a specific order, by postponement of an
order or by bankruptcy proceedings as an example.
For simplification purposes, the same valuation percentages as for quantity risks can
be used. If possible, the percentage for technical risk may be established as early as
a month before the balance sheet date and applied to the balance as of the balance
sheet date. For obsolete items a valuation reserve up to 90% may be recorded
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except for chemicals where 100% provision may be recorded. Obsolete items are
items which are no longer able to be sold or used in the production process.
Provision for technical risk shall be recorded in the same month where triggering
event arose.
b) Price Risk
If the market price of a finished goods inventory item is less than its recorded cost
(after reserves for quantity and technical risks have been established), the inventory
item is recorded at the market price. The term market in the phrase lower of cost
and market means current replacement cost.
The valuation reserve for price risk shall be calculated by BU management in
accordance with the lower of cost and market principle.
Recording:
On at least quarterly basis inventory valuation reserves shall be created in
accordance with the provisions above
Warehouse department in coordination with Business Unit head shall prepare
working for recording of valuation reserve in accordance with this policy. The related
JV approved in accordance with LOAM, shall be forwarded to relevant Finance
Department.
The said policy will be subjected to review by the Advisory Board after six months of
implementation
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WORK FLOW
Goods Receipt
Start
Receiving of
Material
Delivery
Challan
Purchase
System
Quality
Stores
MIDAS SAFETY
If Material fail
By QC
If Material Pass
By QC, then stack
respective location
End
Inform to purchase
and material
return to supplier
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Stores
Stores
MIDAS SAFETY
Start
Request Raised
Dispatch material
To concern unit
End
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System
Stores
MP / Quality
MIDAS SAFETY
Start
Manual MRN
generated
Material stack at
designated
location
Material Check
against MRN
MRN Feed in
system
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System
Stores
Cutting dept
MIDAS SAFETY
Start
System generated
MIR Raised
Receive material
as per MIR
Prepare Packing
List
MIR issuance
posted in system
End
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Start
Material request
by MP to Stores
Ready Box
Preparation
System
Quality
Stores
Market Place
MIDAS SAFETY
Inspect Ready
Box by Quality
MIR issuance
posted in system
End
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Start
Receive Material
from Supplier
Purchase
Quality
Stores
MIDAS SAFETY
End
Material
Inspection offer to
QA
Inform to
Purchase
Material
Inspection
If Material is not
OK by Quality
Inform to supplier
for recall material
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