Internship Report Of Servis Industry Limited [2014]

[Internship Report]

Submitted TO:Facility Members of ManagementSemester

MBA (6th)

3 July 2014SERVICE INDUSTRY LTD

SALEH JANTable of Contents

4Executive summary

5Preface:

6Acknowledgement

7Introduction to report

7My internship program

8History of the Organization

8ASSOCIATED COMPANIES

9An Introduction to the Organization

10Mission Statement

10Objective of the Company

10Management of the Company

10COMPANY INFORMATION

10BOARD OF DIRECTORS

11Factory Management

12Accounts Departments

12Supply chain system & Accounts Departments:

13Account Payable

13Account Receivable:

14General Ledger:

14Fixed Asset:

15Material Distribution:

15Foreign Currency Rate:

16Financial Analysis:

17SWOT Analysis:

17Analysis of Service Industry LTD:

17STRENGTHS:

18Strong brand name:

18Strong market position

18Weaknesses

18Staff Motivation problem

19Inconsistent office work

19Salary package

19Lack of communication

19Opportunities:

19Product development:

20Market development

21Diversification:

21Forward integration:

21Backward integrations:

22Horizontal diversification:

22Conglomerate diversification:

22Conglomerate diversification

22Threats:

22Uncertain Govt policies

22Heavy taxes & Govt levies

23High Inflation & Interest rate

23Competitor policies

Executive summary

The internship report is for the purpose of presentation to the management to enable them to know my finding during internship.

The company is large manufacturing concern with greater market share in footwear and tyre & tube. This larger company enables me to learn about how accounting is carried out in computerized environment (ERP) oracle R12.When accounting financial characteristic of different accounting events is recorded than ERP work performed. In the beginning of the report I give introduction of the report, history and organization. I also included company mission, objective, values and field of activities in report to get early understanding.

SERVICE INDUSTRIES LTD deals in retail and whole sale of Leather shoes, cycle and motor cycle tyre & tube and Rag division.

Here I worked in accounts department of the service industries LTD (Gujarat). Where I experimental and performed various accounting function during the internship.Preface:Servis Group is one of the most esteemed corporate citizens of the country and has a rich custom spanning over half a century.Service Industries LTD Gujrat is very valuable asset of the servis group employing 5000 employees and fully equipped with tangible and intangible resources. Very hard working and reliable management, staff workers are serving SERVICE INDUSTRIES LIMITED.

Service Industries Limited is a Public Limited Company incorporated in Pakistan. Its shares are extract on Lahore and Karachi Stock Exchanges. Its registered office is located at Servis House, 2-Main Gulberg, Lahore. The principal activities of the Company are manufacture and sale of footwear, tyre & tube and technical rubber products.

My feedback report is consists of introduction to service industry LTD, its history and its organization. Main part of the report consists of my learning activities which I carry out during internship in accounts department of service industries limited (Gujarat).

I hope that this report will help others to understand the organization and accounting department system. The support of staff member enables to understand and have insight of the whole organization and write this report.

Acknowledgement

I am really thankful to the whole staff member who suggestion me accounting knowledge and helped to gain professional change. Special thanks to Mr. Muhammad Adnan Arshad who really supported me and delivered helpful knowledge to me. He provides me special guidance on ORACLE financial module. I am also thankful to Factory Controller Mr. Fahid Amjid and Mr. Gohar Shakeel (Deputy Manager) who provide me guidance.

I am really thankful to Accounts department, staff and officers who sincerely guided me for the learning purpose. Special thanks to Mr. Faisal Farooq, Mr. Fiazan Shahzad, Mr. Hassan Taqveem, Syed Sohail Abbas, Mr. AG khokhar, , Mr.Muhammad Asif, who provide me opportunity to have practical experience of their daily work and helped to understand the organization system. I am very thankful to you Mr. Saleem Nawaz HR for your co operation. Introduction to report I have divided my Report into various parts. Major part of my report is based on my work in the company. Briefing is as follows:

History of the service industries LTD This history of the Organization, when it established and started operations. What its plant locations are.

Introduction of the organization

Its brief history, its mission, its values, and what services it provide to its customerManagement of the service industries LTDThe list of name of directors and managers in dept described here.My internship program

Its main part of my internship feedback report. It consists the detail of the work that I have done there as an internee. In service industry LTD, I worked in accounts dept. I have provided the detail of work which I carried out during my internship.

History of the Organization

The story of service industry limited started when three young and active persons established service industries after their completion of their college studies.These three persons are Ch. NAZAR MUHAMMAD, CH. MUHAMMAD HUSSAIN and CH. MUHAMMAD SAEED started business in 1941 at small scale in LAHORE. At that time they only manufacture hand bags and some other sports goods. Withina year business boom and they becomes larger supplier through whole of the India before partition.In 1954 they established production plant in Gulbarg area of District Lahore. They started producing various types of shoes. Then they decided to shift the plant from Lahore to Gujrat. So for the first step the established HILAL tanneries in 1954. Then they established another shoe factory in Gujrat. A textile mill was also established in Gujrat.Now service industry operates at very high level. Service Provides local population very huge level of job opportunities. Service is identity of Gujrat.ASSOCIATED COMPANIES

Other Associate companies of Service Industries are:

Servaid pharmacy (Pvt) LTD Service sales corporation (PVT) LTD, Lahore. Shahid Arif Instruments (PVT) LTD. Prestige industries (PVT) LTD.An Introduction to the Organization Service Industries Limited is the largest shoe manufacturing enterprise in the country. The government appreciated the efforts of the company, for the first time in 1968 when it awarded the presidents export trophy class 1. Since then, the company is the lancets exporter of manufactured articles; LEATHER, CANVAS SHOES. The company was again awarded the pride of performance trophy by thr PCCI in 1977. In the succeeding years, the company has been awarded numerous trophies of awards as an acknowledgement of its sheer hard work of dedicated efforts.At present the company has the shoe manufacturing factories at Gujrat and MURIDKE. There are five factories operating at Gujrat employing approx. 4500 registered persons and 5000 unregistered persons. These are; Leather shoe factory Cycle tyre & tube Factory

Motorcycle Tyre & tube factory

Rag DivisionThe factory has highly complicated test laboratory manned by qualified and trained personnel. Other than MCTT & RAG Division own well equipped laboratories. It is here the further products are developed and tested thus ensuring the success of the company.Leather shoe factory is ISO 9002 certified whereas other SBUS are under process. Each factory comprises of five hundred to thousand workers depending upon the workloads. The factorys peak season starts from September to April. During this period, the factory hires extra workers and lays them off after the period once the production is normal.Service Industries Limiteds Head Office is located in Gulbarg Lahore. The whole organizational authority is represented with the help of Organizational Chart, which is headed by a (president Director).The shares of the company are quoted on Lahore stock exchange.

Mission StatementThe customers are reliable on quality and reasonable price footwear and other products through the country. The employee of this organization is satisfied his management of the organization.Objective of the Company The product should meet the customer expectations

The basic concern is to satisfy customers

To provide good job opportunities and satisfactions to the people

To respect our competitors

The employees are as important as external customers Teamwork and cooperation are more important than individual action Never be satisfied with the level of the quality always strive for continuous improvement. To compromise on QualityManagement of the CompanyCOMPANY INFORMATION

BOARD OF DIRECTORS

Mr. Ahmad Javed (Chairman) Mr. Omar Saeed (Chief Executive) Mr. M. Ijaz Butt

Mr. Arif Saeed

Mr. Hassan Javed

Mr. Riaz Ahmad

Mr. Ahmad Shahid Hussain

Mr. Hamid Hussain

Mr. Manzoor Ahmad (Rep. of NIT)

Factory Management Mr. Ghulam Mohammad (G.M) Mr. Ayaz Akram (D.G.M) Mr. Fahad Amjad (F.C) Mr. G.A. Cheema Mr. Abdur Rauf Mr. Mushtaq Beig Mirza Mr. Sultan Mehmood Mr. Mohammad Imtiaz Mughal Mr. Arif MehmoodAccounts DepartmentsSupply chain system & Accounts Departments:Service industries Limited (SERVIS INDUSTRY LIMITED) has very strong customer base and market share.SERVIS INDUSTRY LIMITED sales it footwear products to two major customer service sale corporation (SSC) and RABIA & CO.

The products of this company are tyres and tubes are sold various customers all over the country and in other countries as well. SERVIS INDUSTRY LIMITED sales its tyre as division products to motor bike manufacturer, whole sellers and retailers.

When customers demand is increased for cycles. Than sales of cycles are start when the organization receives order from customer. The customer demand detail is sent to the Costing Department. Costing department then estimate the total cost expected to be increased in terms of material, labor and other direct costs.The estimated material demand is sent to the relevant procurement managers. They purchase the material for use in production process. When all necessary material and labour hours are available then production process is started. Production manager are given targets with defined deadlines. After production process is completed then finished goods are delivered to the stores. Finished goods dispatched to customer within the due date. When goods are dispatched to the customer invoice is generated. The stores dispatch data is integrated with order management module (OM). OM records financial data on post basis. This data is shifted to the accounts department along with the invoices. Both are verified with each other by Assistant Manager. After verification this record is considered final Accounts Department. All adjustment to the records is made by accounts department like Debit notes and credit notes. All records are verified by assistant manager and validated and final accounting is created by manager accounts. Invoices are move up against the purchases made by procurement managers for use in production process. AP accountant enters purchase invoices and then Deputy Manager validates its invoices and creates final accounting for the events. There are different subs Modules in ERP financial: AP (Account Payable)

AR (Account Receivable)

GL (General ledger)

FA (Fixed Asset)

Material distribution

Foreign currency

Account Payable This beginning records the purchase on credit. All purchases are recorded in AP sub module. Invoices are entered in the record through AP. All Debit notes to supplier are recorded in AP. Debit notes are issued to supplier against material rejection, excess rate, excess quantity and 1% deduction on immediate payment. When urgent payment is made 1% amount is deducted from there the gross amount as well of taxes and Government levies.Payments could also be made from AP sub module. Purchase cycle could be completed from this sub module. Purchase accounting to payment accounting could be made here. All payments to supplier are recorded in AP Sub Module. After validation transactions final accounting is created by Deputy Manager.Account Receivable:This sub module records the accounting finished goods sold on credit. Company is sales footwear, cycle and auto tyres and tube to different parties. The credit sale is recorded in this sub module AR.Head office issue Sale tax invoices to customer. After this AR supervisor check the data and create final accounting record. And same person issue credit notes to customer and after that manager accounts validates the DN and create final accounting. Credit notes are issued against surplus quantity, excess rate and against rejection. All these types of credits notes are recorded in accounting book. All receipts from customer are recorded by head office.General Ledger:General ledger is used to record internal documents like cover company material transfers, expenses and head office advices for expenses.It is also use to generate different statements like customer account statement, supplier statement and zonal tax authority account statements etc.

Fixed Asset:

This sub module records the fixed asset in system. There are different classifications for assets like;

Free hold property

plants and machinery

equipment

power plant

All assets are recorded according in the relevant head according to their nature use.All depreciable assets are depreciated greater than lives of the assets. For depreciation different accounting estimates are used regularly different for different class of the assets. Assets schedule can be prepared from this sub module. Different types of reports can be generated about assets from this subordinate module whether value based or category wise. Material Distribution:This sub module actually identify the form of material is transfer to other part of the company. Its report is available when transaction I.D no is entered into the system using this sub module.

This subordinate module basically solves the intercompany transfers uncertainty about the type of material actually transferred.Foreign Currency Rate:This secondary module gives the foreign exchange rate in different currencies. The rate could be used in export invoice at the spot time. As calculate the value of invoice the spot rate of foreign currency is used. Financial Analysis: Sales revenue is raised by 24% in first half of 2011 of this company. This signifies healthy growth in current economic scenario of continuously decreasing purchasing power is decreased, higher inflation and conditions prevailing in the country.

The financial performance for the period under review is given below

Half year ended June 30 Quarter ended June 3020132012Variance20122011 Variance

Sales revenue5,7444,620+24%3,0702,435+26%

Profit before tax375350+7%154152+1.3%

Profit after tax283234+21%10789+20%

EPS23.519.4+21%8.97.4+20%

Both businesses contributed in top line growth in first half of 2011with Footwear growing by 23% and Tyre and Tube by 25%.

Footwear revenue is Rs. 3,692m against Rs. 2,991m and is mainly driven by Exports which has shown remarkable growth of 47% and closed at Rs. 1,260m against Rs. 856m in equivalent period last year. Growth in Local Footwear remained at 14%. Tyre & Tube revenue closed at Rs. 2,019m against Rs. 1,614m last year fuelled by growth of 30% in motor cycle business.

Gross profit ratio turn down to 14.6% from 16.1% of the consequent period last year. Increase in raw material prices impacted both Footwear and Tyre and Tube businesses. The company's pretax profit is harmfully impacted by the weakness in profitability of the Tyre distribution. The Footwear businesses are continuously to do well both in sales and profitability.SWOT Analysis:Analysis of Service Industry LTD:SWOT is very famous model to analyze different internal and external factors. SWOT breakup is as follows:

Strength

Weaknesses

Opportunities

Threats

STRENGTHS:

Service Industry Limited is very old and larger organization. It has following strengthOld management & workers is one of the key to success. Because these entire employees are well trained and have more experience. The management knows enough the organizational systems. These all are qualified and competent they know how to run the organization. This management and staff are all committed to the quality slogan of the service group.Strong group can eservis industry limited support whole organization. Servis Group also influence servis industry limited shares market value, image and market share. It counters financial problem for working capital and investment for further developments.Owned go downs servis industry limited has large number of depart downs all over the country. This creates efficiency in its logistic operation.

Forward integration retail stores are owned by its associate company. Servis sale corporation (SSC) This gives a chance to serve customer in an efficient manner without relying outside retailers. This type of group structure has saved middle man margin for its own group.Strong brand name:

It has enabled the group further spout other segments of market. Customers are confident at the quality foot wear products and tyre and tube of servis industry limited.

Strong market position Servis has been established since 1941. It has it has strong relationship with customers and have very large market share as compared to its competitors. As service supply customer with quality and reliable product which gain customer confidence. Now the current position of servis industry limited shows that servis has beaten our competitors out of market and captured their market shares. Tyre distribution has strong relationship for a long time. All motor cycle manufacturer and Assembler use servis tyres and tubes. All major customers are Servis industries client. Weaknesses There are many weaknesses in any of the organizational system along with its strengths. Following are some weaknesses that are accurred in servis industry limited;Staff Motivation problemThe management cannot motivate the staff members. Staff is working with no motivating factor. De motivation causes inefficiency in staff work. Salary packages should be related to adjust for variable factor. Centralization avoided the staff to work free and local management is not in position to take quick decision according to local requirements. On the other hand it create horizontal communication barrier. Top head office control approach cause less teamwork and lower motivation. If the management motivates the staff then they are performed well work. Management increase the salary packages of staff members; they perform the well work and achieved the targets that are set of the organization.Inconsistent office work

Head office control the servis industry limited accounts department. The staff is always seen disturbed due to head office interval. And does not sure that about their is real job report staff consider the job as task base jobs. The staff has to fulfill the tasks that are required by head office in conditions of any type of settlement, report about customer suppliers and any financial report.

Salary package Salary packages of middle men are not so good that are not motivated these persons. Because they are accomplish very difficult requirements on this salary packages. If the salary package is increase then they work with full devotion. So that middle level staff salary package should be adjusted for monthly performance allowances. Wages of worker should be adjusted as compared to the quality of the work. As this will additional make positive impact on other workers and force them to work and produce quality output. Lack of communication

The main weakness is that lack of communication between the staff members and upper level management. This is the main reason that produced low quality product and efficiency of staff work. This is really Importance to educate the staff and worker for quality of work. Opportunities:Product development:

Service industries Limited group structure allow that eservice industry limited market new products to exiting customer as well as it can bring innovation in it outlet products. With the help of eservice customers can easily buy the products and give the order for buying the products. With the help of eservice we can introduce new products and new article and that can increase the profitability of the organization. As its survive infrastructure has capacity and flexibility to extend its product and segment portfolio.Servis industry limited manufacture only tires and tubes for cycles and motor bikes. Company has never still ribbon the auto tyres and tubes manufacturing. if we compare with its competitor like Panther which has started manufacturing tyre and tubes for various types of vehicles like cars, tractors, trawlers and wagons. Servis industry limited start manufacturing and marketing the tyres and tubes for heavy vehicle then service to have unbeatable position in the market. Market development

Servis group has still never has marketed its product to many globally attractive markets. These available markets can bring large amount of revenue for the nation, especially in, AFRICA, MIDDLE EAST and GULF countries. Servis manufacture it products at low cost so servis industry limited in position to offer its customer product at low price. Servis industry limited also manufacture high quality products for privileged class of the population. This will counter the competitive competition of companies which manufacture and market high quality product.Diversification:Servis industry limited has strong financial position so that it could eservis industry limited further diversified its activities. As there are various types of diversification option available:

Forward integration Backward integration Horizontal diversification Conglomerate diversificationForward integration:Currently Servis industry limited is manufacturing Foot wear products and tyres & tubes in Gujrat plant. If it adopt forward integration than it should invest in retail business for it products. Current servis industry limited associate company has its own retail shops for foot wear products. Company has an opportunity to invest for retail business of tyre and tubes.

Backward integrations:Purchasing supplier is backward integration. Servis industry limited purchases all types of materials from outside companies. This can cause various problems for servis industry limited:

Uncertainty of supplies Quality of supplies No control over prices in case of suppliers monopoly Middle man margin of profit

In this condition can be countered backward integration. Servis industry limited can takeover it major supplier to remove all types of uncertainties. For example NATIONAL PETRO CARBON LTD is major supplier of raw material for tyre partition products. Servis industry limited has to agree at their terms due to their monopoly. The uncertainty related to these types of parties can be removed by obtained of these of companies. Horizontal diversification: Its means that acquiring company with same nature of business and type of operations. For example, acquiring Bata company production plant and Borejan company production plant is horizontal diversification. Conglomerate diversification:Conglomerate diversification is unrelated diversification. This of portfolio has very unrelated businesses and products in the portfolio. Such as acquiring flour mills and textile mills for better diversify and smooths annual profits.Threats:When new brand or new players enter the market that is a time passes new investors come in footwear sector and tyre tube manufacturing business. This causes increase in competitive competition. When competition are increased then price of the product are increased as compared to the quality of the products and cost of the products also increased. As recently many company entered the foot wear industry. Many Chinese Company entered the market with low price products.Uncertain Govt policies Security power and financial problem and Government policies that are affect on industry sector. There has no certain direction and policies that are support to businesses to sustain in the current highly competitive environment. Heavy taxes & Govt levies Government of Pakistan has not taken broader steps for development of industry sector. Recently Government increases sales tax from 16% to 17% SED 1% is already applicable. This increase in taxes discourages growth in sales.

On the other hand import duties increased the cost of imported goods. No relaxation has been given to investors in this financial year. High Inflation & Interest rate

High inflation rate cause increase in cost of production, high depreciation cost thus lower profitability.

Interest rate increase causes high finance cost as servis industry limited has many let out assets which cause mostly power generator. Competitor policies Competitor policies can also influence the organization as it is possible that it they decrease their product sale price so that servis industry limited might have to turn around for better customer response. Servis industry limited should always be ready itself to adjust its policies according to the competitor action. Servis industry limited would avoid wearing a way of market share. G T Road Gujrat

[G T Road Gujrat University]Page 6