October 12, 2010 [ ]

Industrial Visit to Parle and Relaxo

A Report

10/12/2010

0 Fore School of Management

Submitted by:

Khem Singh ChauhanFMG 19B 191090

Table of Contents

I. Summary........................................................................................................................2

II. Industrial Visit – Parle Pvt Ltd......................................................................................3

III. I.I Brief on the unit visited - Parle Factory at Bahadurgarh......................................4

IV. I.2 Market Scenario of the Industry............................................................................5

V. I.3 Learning.................................................................................................................6

VI. II. Industrial Visit – Relaxo Footwear Ltd...................................................................9

VII. II.I Brief on the unit visited – Relaxo Footwear at Bahadurgarh............................10

VIII. II.2 Market Scenario of the Industry.........................................................................11

IX. II.2 Learning..............................................................................................................12

Summary

As part of the corporate grooming initiatives at Fore School of Management, New Delhi, students regularly interact with the industry through various mediums such as guest lectures, industry visits, corporate speaker series, seminars, conferences, etc. The industry visits are a vital part of the curriculum, helping in bridging the gap between class room teaching and real time business world.

The first industrial trip of our FMG 1st year was to the Parle Biscuits Pvt. Ltd factory located at Bahadurgarh, Haryana and Relaxo Footwear Ltd. located at Bahadurgarh, Haryana on the 12th October 2010.

The trip was a great eye opener to our batch which comprises predominantly of Engineering graduates but also of B.Com/BBA and B.SC graduates who normally in the Operation Managements lecture envisage bolts and nuts , had a lot of queries and doubts cleared up after this interactive learning session.

After witnessing the processes and coordination of the various processes, students realized how Operations play a significant part in the manufacturing and production sectors.

Students experienced first-hand of the manufacturing facilities at the factory and had an enlightening discussion with senior company personnel thereby gaining practical insight into the business, its manufacturing operations and the industry.

I. Industrial Visit – Parle Pvt Ltd.

I.I Brief on the unit visited - Parle Factory at Bahadurgarh

In 1929 a small company by the name of Parle Products emerged in British dominated India. The intent of its founder, MOHANLAL DAYALJI, was to spread joy and cheer to children and adults alike, all over the country with its sweets and candies. Despite the odds and unequal competition, this company called Parle Products, survived and succeeded, by adhering to high quality and improvising from time to time. A decade later, in 1939, under the leadership of NAROTTAM CHAUHAN, Parle Products began manufacturing biscuits, in addition to sweets and toffees. Since then, for almost 80 years, Parle Products has been India`s largest manufacturer of biscuits and confectionery.

Makers of the world`s largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle name symbolizes quality, nutrition and great taste. With a 40% share of the total biscuit market and a 15% share of the total confectionary market in India, Parle has grown to become a multi-million dollar company.

Parle Products has 7 manufacturing units and 51 manufacturing units on contract, also known as CMU (contract manufacturing unit). The plant at Bahadurgarh is one of largest biscuits and confectionary manufacturing plant in India.

At Bahadurgarh plant, the students were received by Mr. Vishal Joshi, the HR head of the Parle-Bahadurgarh factory. We were given a detailed presentation about the creation, evolution and functioning of the brand Parle and different processes that are combined to manufacture a host of Parle products like biscuits, confectionaries and chips. We were also briefed about various other management issues such as cost management of the factory, quality control, export, and the company’s association with World Health Organization (WHO).

The students were then taken around the factory and each process was explained to them in easy to understand and clear manner. The students could see for themselves how efficiently, hygienically and smoothly Parle was carrying out its manufacturing operation.

Later on a question and answer session was held where all questions asked by the management were answered to their complete satisfaction. The students were also given complimentary gifts by Parle as a token of appreciation.

I.2 Market Scenario of the IndustryOverview:

The total production of biscuits in India is estimated to be around 30 lakh MT, the organized sector accounts for 65% and the unorganized sector accounts for 35% of the total industry volume.

The organized sector is valued at above Rs 8000 crores. The biscuit industry is estimated to grow over 15-17% in the next few years. The per capita consumption of biscuits in India is 2.0 kg. India is ranked 3rd after US and China amongst the global biscuits producers. The export of biscuits is approximately 17% of the annual production, the export of sweet

biscuits for year 2007-08 was Rs 145.93 Cr and for year 2008-09(April-Dec) was Rs 280 Cr, the major exporting regions were Haiti, Angola, USA, Ghana, UAE.

The imports are not significant amount as compared to the total consumption. The penetration of biscuits in urban and rural market is 85% and 55% respectively. The Biscuit industry employs almost 3.5 lakh people directly and 30 lakh people

indirectly. Main Categories of Biscuits: Glucose, Marie, Sweet, Salty, Cream & Milk. Glucose biscuits accounts for more than 50% of the total biscuit market value, Parle G dominate this market with more than 60% share followed by Britannia and ITC.

Major brands The Indian biscuit industry is dominated by major brands like Parle, Britannia, and Sunfeast. Also the category has strong regional brands such as Priya Gold-North, Cremica-North & West, Dukes-South and Anmol-East & North.Other popular brands Horlicks, Biskfarm-East, Rose-Andhra Pradesh & South, Sobisco-East and North East also launched in Andhra Pradesh and Madhya Pradesh., Nezone- North East, Bakewell.Market Share Breakdown: The Indian biscuit industry is dominated by brands like Parle, Britannia and Sun feast.

I.3 Learning

PARLE BRANDS(Few of them)

Biscuits Confectionary SnacksParle G Melody Must BitesMonaco Mango Bite SixerKreams Poppins JeffsChox Kismi Toffee Sixer jeeraNimkin Orange Kandy Monaco Smart CheepsHide & Seek Bourbon Kismi GoldParle Marie

This was a great way to learn about the manufacturing process in general and the nuances of the industry. We had a wonderful interaction with senior company management, wherein a combination of lecture and questions & answers session helped the students enhance our learning. In addition to satisfaction of the students’ intellectual curiosity, our appetite was also duly taken care and they delightfully savored on various Parle products. We found the industrial visit very useful and thanked the company executives for the same.

We learnt about the various stages involved in the production of Biscuits and Confectionary. With respect to the various fields of management like Operations Management, marketing management, HRM and financial management, the learning can be summarized as:

In Operations, the manufacturing process is taken into account, wherein various steps are involved for the production of biscuits and confectionary. The process of biscuit manufacturing involves following steps:

1st step: MIXING At first we were watching how the mixture of biscuits is prepared. In this they were using some ingredients i.e. MAIDA, SALT, MILK, GHEE, SUGAR etc.2nd step: MOULDING After mixing the ingredients they mould them into shape of biscuits with wording Parle-g.3rd step: BAKING In the third step we found that the biscuits are send to the big Owens for baking use ten types of temperature 1st 220 then 350 and in last 220 c. 4th step: COOLING After baking the biscuit, procedure of cooling is done.5th step: PACKAGING In last step, packaging of the biscuits is done and is forwarded for big cartoons packaging.

In Marketing, Parle has been a phenomenal success because of its pricing strategy. It has been able to keep the prices of its products to a much lower cost by lowering the cost of production and utilizing the waste generated to an extent, such that it is now been copied by other players in the market. The waste product is being sold out to farmers for feeding cattle, thus generating extra income besides minimizing waste. Parle Products Pvt. Ltd has adopted HACCP (Hazard Analysis & Critical Control Point) system, which is the Japanese technique for the qualitative food production

PRODUCTION CAPACITY

Biscuits Brand Production/dayMonaco 25 tonKrack Jack 50 tonParle G 100 ton

Waste Percentage:- waste percentage of around 1.5-2%.They classified the waste into two kind of waste

1 RB(Recyclable)2 SB(Sewageable)

Sewageable waste is the waste which they sold to farmers or any person who ultimely feed that to the animals.It is also the source of revenue for them.

FINANCIAL ASPECTS

Revenue of the whole Parle group around 5000 crores.

Break up of that revenue is

Biscuits segment- 4000 crore

Confectionary segment- 1000 crore

HUMAN RESOURCE

Human resource capacity was around 1000 operators and 90 executive staff at Bahadurgarh plant.Out of 1000 operatore 500 were on contract and 500 were permanent employee.

CSR (corporate social responsibility)At bahadurgarh plant as a csr activity management has distributed free lunch boxes in the government school,they distributed free hand pump.Parle Centre of Excellence as an institution is dedicated to enrich the lives of people through conducting various cultural programs across all region to facilitate the all round development of the children. Every year, Parle organises Saraswati Vandana in the state of West Bengal during the festival of Saraswati Puja, inviting schools from all across the state to participate. The event is one of much fanfare and celebration, keeping alive the culture and traditions of ages. Our involvement in cultural activities has seen the inception of Golu Galata in Tamil Nadu, held during Navratri. Its gives a platform to all the members of a household to showcase their creativity and being judged by immanent personalities. Thousands of families participate and celebrate the occasion on a grand scale.

STRATEGIC DECISION

As raw material cost like sugar, maida has skyrocketed in the recent past. Parle has made the strategy to combat the rising raw material cost. Company has kept all the product selling price constant but has reduced the quantity and given more focus on cost cutting through reduction of wastage, Thats why company is looking for automation so that it can save some labour cost also.

II. Industrial Visit – Relaxo Footwear Ltd.

II.I Brief on the unit visited – Relaxo Footwear at Bahadurgarh

Relaxo Footwear commenced its journey with the manufacture of Hawaii slippers. It has now grown into a large-scale entrepreneurship catering to the basic needs of the quintessential Indian citizen. From a modest sale figure of Rs. 1 million in 1977 to more than Rs. 5000 million last year; the company has experienced a record-breaking growth since inception. Today, the company manufactures over 3 lakh pairs of footwear per day, which approximately adds up to over 10 million pairs per year. Each pair is given thorough attention by the dedicated and skilled employees working at the 10 state-of-the-art manufacturing units in Northern India. Thus, it is no small wonder that the annual turnover has multiplied 2.4 times in the last 3 years from Rs. 305 crore in 2007-08 to a whopping Rs. 550 crore in 2009-10.

RFL is one of India's large quality conscious footwear companies. Headquartered in Delhi, India, it maintains a fine combination of comfort, style and workmanship and is embarking on appreciable growth plans for the future. It stepped into the footwear industry in 1976. It started off with the manufacture of Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school and leather shoes.

In the year 1995-96 the company transformed from solely a trading/marketing agency to that of a full-fledged manufacturing unit by putting up a facility to produce 50000 pairs of Hawaii and lightweight chappals per day on a two-shift basis at Bahadurgarh, Haryana. This project was part financed by RFL's maiden public issue aggregating Rs.4.50 crores issued at a premium of Rs.50 per each share of face value of Rs.10.

The company has established 6 manufacturing plants spanning North India. These are located in Delhi, Bahadurgarh (Haryana) and Bhiwadi (Rajasthan). With a cumulative area of over 120,000 sq. feet, these units have a huge set up enabling massive production. Each manufacturing unit is equipped with world-class machinery and hi-tech product testing laboratories. IN FY10, Hawaii footwear (Relaxo) could contribute ~40% of sales, Light slippers (Flite) ~40% and Sports shoes and sandals ~20% of sales.

At Bahadurgarh plant, the students were received by Mr. Virender, Vice President of the Relaxo Footwear - Bahadurgarh plant. We were given a detailed presentation about the creation, evolution and functioning of the plant and different processes that are combined to manufacture a host of Relaxo products like Flite, Schoolmate, Hawai and Sparx. We were also briefed about various other management issues such as cost management of the factory, quality control, export and waste management.

II.2 Market Scenario of the IndustryThere are nearly 4000 units engaged in manufacturing footwear in India. The industry is dominated by small scale units with the total production of 55%. The total turnover of the footwear industry including leather and non-leather footwear is estimated at Rs.8500-9500 crore (Euro 551.3-1723.1 Million) including Rs.1200-1400 crore (Euro 217.6-253.9 Million) in the household segment.

India's share in global leather footwear imports is around 1.4% Major Competitors in the export market for leather footwear are China (14%), Spain (6%) and Italy (21%).

The footwear industry exist both in the traditional and modern sector. While the traditional sector is spread throughout the country with pockets of concentration catering largely to the domestic market, the modern sector is largely confined to select centers like Chennai, Ambur, Ranipet, Agra, Kanpur and Delhi with most of their production for export.

Assembly line production is organized, and about 90% of the workforces in the mechanized sector in South India consist of women. In fact, this sector has opened up plenty of employment opportunities for women who have no previous experience. They are trained to perform a particular function in the factory itself.

India has emerged in recent years as a relatively sophisticated low to mediumcost supplier to world markets –The leather industry in India has been targetedby the Central Government as an engine for economic growth. Progressively, theGovernment has prodded and legislated a reluctant industry to modernize. India was noted as a supplier of rawhides and skins semi processed leather and some shoes.

Few Interesting Facts:

- The Indian footwear retail market is expected to grow at a CAGR of over 20% for the period spanning from 2008 to 2011.- Footwear is expected to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-07.- Presently, the Indian footwear market is dominated by Men's footwear market that accounts for nearly 58% of the total Indian footwear retail market.- By products, the Indian footwear market is dominated by casual footwear market that makes up for nearly two-third of the total footwear retail market.- As footwear retailing in India remain focused on men's shoes, there exists a plethora of opportunities in the exclusive ladies' and kids' footwear segment with no organized retailing chain having a national presence in either of these categories.- The Indian footwear market scores over other footwear markets as it gives benefits like low cost of production, abundant raw material, and has huge consumption market.

II.2 Learning

S No. Factory Location Products Manufactured1 RFL I Bahadurgarh Hawaii, Spark Hawaii2 RFL II Bahadurgarh Hawaii3 RFL III Bhiwadi Hawaii4 RFL IV Bahadurgarh Flite5 RFL V Haridwar Sparx Shoes & Sandals6 RFL VI Bahadurgarh Flite, Schoolmate, Casualz, Sparx DIP7 RFL VII Bahadurgarh Canvas8 Nu Wave Shoes Delhi Schoolmate, Casualz9 Patel Oil Mills Delhi Canvas, Bahamas, Sparx Fabricated Hawai10 Marvel Polymers Delhi Sparx Shoes & Sandals

Distribution Channel at Relaxo

The production unit manufactures the footwear and sends them directly to the franchises. The franchises then have the option to either sell the goods from their own franchise store or act as distributors for the secondary market.

Operations

Paletizing Section

EVA Injection

PVC Injection

Assembly

Dispatching

Finance

Corporate Governance has occupied pivotal position at Relaxo Footwear Limited since inception. The business has, since then, been conducted in the most transparent and ethical manner. All the necessary steps have been taken, with changing socio-economic scenario, to ensure that the conduct of business is as per the policies of the Management namely “Honesty, Transparency and Ethical Behaviour”. The Company’s Policies and Practices are aimed at efficient conduct of business and in sincerely and effectively meeting its obligations towards its stakeholders through an effective and professional Board of Directors, complete and timely dissemination of information through timely disclosures and maximization of shareholders’ wealth.

Marketing

Relaxo is advertising its brand through Television and creating awareness about Hawaii chappal especially. It is an Indian brand and the marketing agency hired is very well taking advantage of this fact by aiming all the advertisements at the Indian consumer.

Human Resource Management

The Company during the year organised training and development programmes to boost up the morale of employees, maintain work life balance and to create a feeling of team-work to develop capabilities to enhance its leadership in the talent domain. Areas for focus have been leadership development, sales and quality of services. The Industrial Relations in all the units of the Company continued to be cordial during the year under review.

Suggestions for Improvement

Go for diversification and venture into upper market segment Focus more on brand building Large scope of automation and investment in technology would be beneficial.