Overall Costing Example of Shoe Upper Production in India

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The organizations of production in Agra are of three distinct types. First, the export oriented 60 odd firms who are mainly family business or partnership firms. A few larger ones are private limited companies. This cluster does not have any presence of corporate sector or MNCs. In 100 per cent export oriented units works on a conveyer belt system. In shoe upper production line 40- 50 workers are involved and in finished shoe manufacturing another 40-50 workers work in single production line. On an average 400-500 shoe upper and finished shoes can be produced in each production line in a day. In smaller exporting firms and in larger workshops producing for domestic market, the production line is much less mechanized. In this type of production organization, a single production line for upper requires 9-10 workers and for complete shoe production another 8 workers get involved. In this production system, the cutting of leather is mechanized, shoe upper production is partly mechanized and finishing of shoes is relatively more mechanized. A single production line consisting of 18 workers can produce 180-200 complete shoes per day. Some activities like hand stitching, embroidery, stamping are often outsourced. In small workshops and home based units it is artisan based craft where workers largely work with small tools. Only for sole pasting heater chamber is used.

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In Agra traditionally artisans specialized in one of the five major activities of shoe making. These activities are cutting of leather, stitching/shoe upper making, lasting, pasting and finishing. The young artisans were trained in the specific skill and this specialization resulted in higher skill when they were trained as apprentices under the supervision of master in larger workshops. In home based units the young artisans had more opportunities to learn several activities but at a lower skill level. Most of the exporting firms concentrate on men’s and women’s footwear and only few of them specialize in children footwear. Children footwear requires larger variation in size, color and stringent norms of different chemicals used. Most of the raw materials are sourced from local merchants and only in few cases leather and other accessories are imported. In large export units production goes on almost throughout the year but however the peak period last for six months as footwear supplied from Agra go for summer and autumn season.

For domestic market production takes place for 9 to 10 months. Small home based units largely operate for 6-7 months because of proliferation of tiny units and competition from cheaper molded shoes from China. For domestic market production takes place during festival season that lasts from August to October. Other important period is from November to April when most of the marriages take place. For domestic market the non-production period of April to June is utilized for preparation of sample for ensuing festival season. Normally the home based units prepare 50-60 samples and workshop based firms produce 150-200 samples with various designs. The requirement of preparation of samples with different designs has increase substantially in the last one decade because of faster changing consumer taste and import of fashionable cheaper shoes from China. These designs are sent to dealers who procure orders from all over the country. The quick turnover of design has led to the increasing frequency of use of PVC last and decline in use of wooden last. The start-up cost of establishing firms have gone up because of increasing mechanization in various size class of firms and preparation of larger number of samples in the forthcoming season. The establishment cost of home based unit requires minimum investment of Rs. 50,000.

In the high end i.e. export oriented firms for establishing shoe upper production line it costs Rs. 10 lakhs and for complete shoe production line it costs Rs. 30 lakh. The capital cost of large sized domestic manufacturing workshop is around Rs. 10 lakh. Footwear exporting firms are leather based. In domestic market the proportion of synthetic leather based shoes has been going up substantially. At low end of slippers it is completely non-leather based casual wear.

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