Start Up Shoe Business - Essay Example

? Start Up Shoe Business- OPERATIONAL PLAN Table of Contents Production 3 Location 4 Legal Environment 4 Personnel 7 Inventory 8 Suppliers 9 Credit Policies 10 Account Receivable and Payable 10 Reference 12 Start Up Shoe Business- OPERATIONAL PLAN Production HIGHLOWS shoe will have three adjustable heights i.e. high heel, medium heel and low heel. All these three heights can be adjusted in a single product. The heel of this innovative product will be of hard plastic. It can be rotated to adjust the desired heights from three default sizes. This feature is the key attractive feature of the product. Manufacturing cost of this product would be $25. The company will manufacture this product through their own production unit. It will source leather and other required raw materials from the local suppliers. The quality of this multi-featured shoe will be of premium standard so that it can be positioned in the market among the premium brands. Quality will be checked by the expertise of the company’s manufacturing department. Quality control activity involves checking of quality of lather and pasting. These two components of a shoe determine the overall quality of the product. Customers’ feedbacks about the product at initial stage need to be evaluated to find out necessary revisions in production process or product raw materials. Quality control is one of the most important parts of production process. The quality control department always needs to focus on the industry quality standard and position the brand by comparing general feedback of the customers about quality of this product with respect to other brands. This product will be offered in the market with high standard of customer service like 6 months after sales warranty for any kind of damages of the shoe. New shoe will be provided in case of major damages within 6 months. Production flow of this product will be controlled on the basis of the demand of the product in the market. This strategy will be adapted to faster liquidation of the inventory and lower inventory cycle. Customers’ feedback will be given higher priority for further product development in terms of quality and design of this innovative product. Location HIGHLOWS shoe will be manufactured in Springfield, MA. Springfield is one of the most popular cities in England. The manufacturing unit of this product will be established in this location. Therefore, availability of resources needs to be analyzed in this location. For developing manufacturing and warehousing unit, a large hall will be leased for the next 5 years, and the interior of the hall will be designed. This includes separating the total space into two different divisions like manufacturing unit and warehouse. In the manufacturing unit, required machineries will be installed. Electric wearing will be fixed before the installation of the machineries. The generator facility will be necessary to ensure 24 hour electric supply. Renting the required building will be cost effective for this new business as the initial investment needs to be allocated in various activities like marketing, transportation, working capital management etc. Therefore, the cost of developing a building will be allocated in other operating activities. It is the most effective business strategy for a new business to use rented fixed assets at initial stages, which also helps the company to easily withdraw the business in case of the worst case scenario in terms of market demand of the product. 2 to 3 vehicles are necessary for carrying raw material and also for supplying the products to the wholesalers as well as retailers. Again, to reduce initial capital requirements, this service will be outsourced from local transport service providers. To avoid delayed supply of raw materials, local suppliers will be involved in the production of this product. Legal Environment In order to obtain the licensing of the shoe business, an experienced attorney will have to be hired in order that all the legal requirements of the business are fulfilled and necessary permits are obtained. The first prerequisite of instituting the operations of HIGHLOWS would be to complete the obligatory paperwork as per the government norms. For staring business operation of HIGHLOWS, the company needs to make a detailed business plan and register this business plan in specific government agency. This is the only way to get license for manufacturing and selling of footwear product. There are many local brands which manufacture and sell these types of products in market but these businesses do not have any legal identity. For registration of business the company needs provide name of the business, location of manufacturing unit as well as operating headquarter. It also needs to prove estimated level of carbon emission, solid wastage and electric consumption for this business. These are the mandatory requirement for registering business for operating in a legal way. For the success of the business, it is necessary to identify an optimal legal structure and follow all the local regulations for licensing and bonding of business. It would be mandatory to acquire an ‘Employer Identification Number’ from the government authorities for the legal institution of the business. Moreover, the company would ensure that there are proper insurance coverage in place for the safety of the employees and the overall business. In addition to this, HIGHLOWS will have to abide by the health, workplace as well as environmental rules for the safeguard of all its stakeholders. For effectual conformation with the health and safety standards, the business would utilize various processes to monitor and observe its effectiveness. HIGHLOWS will monitor whether its various business divisions are thoroughly following the environmental regulations and standards through a devoted inspection by officers, internal and external audits and reporting systems. The external audit of the business activities can be utilized in benchmarking compliance. Operating in the shoe industry would necessitate that the business focuses diligently on issues related to patents, copyrights and trademarks. The business will have to ensure that its designs and other blueprints are aptly licensed and copyrighted. Patent, copyright and trademark are very important keywords related any product. Patent refers to intellectual property which includes some important rights from state government to inventor of an intellectual property for a specific period of time. The inventor can disclose the invention in public after patenting the innovation. The procedures for patent a product like HIGHLOWS, the founder of this company needs to place exclusive rights related to the product vary widely according to national and international agreement between countries. Basically, application of patent must includes required number of claims that can describe the invention clearly. These claims need to meet the patentability requirements like non obviousness and novelty. This will ensure that any other individual or institutions can manufacture and sell the similar design product like HIGHLOWS. Copyright refers to legal protection of an original work. It is given by governments to the creator of an original work if the creator applies for copyright for publishing original work to the public. Generally, copyright is given for a limited time. The company can apply for copyright the unique design and features of HIGHLOWS so that other firms in this industry cannot copy reproduce this design. By holding the copyright for this product, the company can control who can adapt the work for other form or can perform the work or can receive financial benefit from this product. Therefore, the company can develop franchisee based distribution of this product. It is also a form of securing intellectual property like patent and trademark and applicable for any expressible for of real idea or information. The original work or invention might be subjective or descriptive like unique design of a show. Trademark is a distinctive sign which represents legal registration factor of a product or a service. As a new business the company needs to register the GHGHLOWS in government authority. Trademark is generally used by businesses and it also can be used by any individual. This used by businesses for ensuring customers that the product is comes from a unique source to a specific market. Trade mark is a pre registration stage of a product or service. Therefore, the owner of a trademark can sue legal proceedings for any kind of trademark infringement activity. The company can initially use trademark (TM) symbol to promote the brand before final registration of the product. Registration of a product especially for getting license to use R sign requires quite long time. Therefore, the company should trademark the brand or product to promote in the market and also to receive trust from target customers about the quality authenticity of the product. Legal rules and regulations on business in a country have substantial impact on the business. Businesses also get several benefits by abiding by necessary legal policies implied by government. Legal registration of business as well as patent, copyright and trademark related to its products and services are very necessary for getting finance from creditors. Sourcing of finance is main part of a business which needs these basic characteristics of a business. Therefore, the company needs to complete all legal requirements for future benefit of this business. Personnel The staffing requirement is very crucial for the continuous of any business operation. Since HIGHLOWS operates in the shoe industry, the business would require both skilled (professionals for the designing and creation of the product in addition to monitor the financial and management activities) as well as unskilled labors (for all other business activities). At the initial stage, the business would restrict to around 50 employees and would depend on placement agencies for finding the appropriate workforce. The employees would be paid fairly as per wage policy of state or central government. Leave benefit and minimum wage rate should meet the government’s wage policy especially for the lower level workers. For, expertise, the company needs to provide based on standard market remuneration rate along with level of skills and knowledge. Also there would be incentives for superior quality performance in order to enhance their quality of work. The skilled labors would require regular training and guidance so that their skills remain updated. The company intends to arrange for frequent training programs and workshops. This would require scheduling the trainings and workshop activities in addition to have written procedures ready. Furthermore, in order to ensure a smooth business operation and efficient human resource management, it would be advisable to draft the job descriptions of the employees, so that the tasks and responsibilities of each of them are apparent and comprehensible. The approach to be employed to motivate employees’ performance would be the participative approach where participation and responsibility augmentation is utilised to stimulate the intrinsic motivation of employees. Such an approach would motivate efficient employee performance and simultaneously fulfil the needs of the business on the whole. Inventory The efficient management of inventory is very crucial for any form of business. It becomes all the more important for a start up business. The inventory of HIGHLOWS would comprise raw materials like leather, adhesives, soles, etc., and the finished adjustable heel shoes. The initial inventory to be purchased in the beginning is expected to be around $50,000. The inventory conversion period is the time period required to convert raw materials into finished goods and later to trade of those shoes. This is important because it would not be wise for the business that its inventory lies ideal for long as it occupies warehouse space as well. Nevertheless, it would also be crucial to see that the inventory level of the business is refilled at regular intervals to avoid shortage of goods. Moreover, the level of inventory maintained in the warehouses would depend on the seasonal buildups owing to festive occasions etc. A tight inventory management approach would help the business in terms of efficient asset utilization. Owing to the wide use of just-in-time manufacturing as well as lean inventory management approach, shoe manufacturers can be fixed in a tough situation and not have enough stocks as retailers demand for additional volume of a fashionable shoe. Hence, HIGHLOWS would take such issues into consideration while dealing with its inventories. As per industry average in the footwear industry, the inventory turnover is about seven times in a year (Deloitte, 2004). Suppliers The primary raw materials required for the business comprise of leather, canvas, high quality rubber, plastic and adhesives. The key suppliers from whom HIGHLOWS would procure its raw materials include the following: 1) XYZ Leathers Ltd; Hareholme Methodist Church, Downham Road, London, UK. 2) ABC Leatherwear; 150, High Street, Springfield, UK. 3) Quality Footwear Materials Ltd; 175, Church Road, Broadland Business Park, Springfield, UK. XYZ Leathers Ltd and ABC Leatherwear would be the suppliers for leather while Quality Footwear Materials Ltd would supply the business with the other required materials. As leather is the key material in this business, it is highly recommended that there are backup options ready in case of contingency issues. This would avoid the risk of shortage of raw materials. Owing to the fluctuating economic and business scenario that is presently prevailing world wide, the supply costs are likely to vary and the business should be prepared to deal and accommodate with the varying expenses involved. The assessment of the character of the supplier is crucial for the delivery as well as credit policies of the business. The reliability of a supplier can be accessed from its previous record of nonpayment of credits. Credit Policies The business does not intend to sell on credit on a regular basis. However, as and when required and depending on the creditworthiness of the party involved, HIGHLOWS might give credit to the retailers. The decision to give credit to the parties and the volume of credit to be given to them would depend on the relation with the associated party in addition to the creditworthiness of the party. Generally, it would be advisable to follow the 4C’s of credit, namely, collateral, capacity to repay, conditions, and character, for assessing the credit worthiness of the parties. Account Receivable and Payable The cash conversion cycle is a valuable instrument in the management of the business’s working capital. It focuses on the span of period between when the organization must make its disbursements and when it collects its cash receivables. The average receivable collection period was also equal to the sum of average inventory period and average receivable collection period. The cash conversion cycle of a company quantifies the period to time necessary for a firm to convert the cash invested in operational activities into cash obtained from operations. It is equal to the difference between the company’s operating cycle and its average payable payment period. The shorter the cash conversion cycle, the better for a business, implying that the payable payment period of the shoe business should ideally be longer than the receivable period. However, this does not imply that the business should involve in aggressive cash collection activities to hasten its cash conversion. The business does not intend to give too much of credit to suppliers as well as retailers. However, in order to deal with clients who generally pay late, the company intends to keep a record, and make a call provided the party is 30 days late. Any party would be sent an intimation letter provided they are 60 or more days late and provided they are late by over 120 days legal actions would be taken against them. Similarly, the business would make sure to make a call to the creditors if it feels that there are chances of late payments. Reference Deloitte. (2004). Apparel and Footwear Industry. Retrieved from: http://www.deloitte.com/assets/Dcom-Venezuela/Local%20Assets/Documents/us_cb_AFI(5)(5).pdf Read More