Supply chain Report on ENGRO FOODS LTD.Supply Chain Management Final Report OnSubmitted to: Sir Aamir MalikSubmittedBy:   ...
Supply chain Report on ENGRO FOODS LTD.ACKNOWLEDGEMENTWe would like to offer our humble gratitude to Allah Almighty, the m...
Supply chain Report on ENGRO FOODS LTD.   ABSTRACT   BACKGROUND:To critically examine, understand & analyze the practical ...
Supply chain Report on ENGRO FOODS LTD.My sought to choose this organization.Engro food is one of the most popular and dev...
Supply chain Report on ENGRO FOODS LTD.Engro Corporation is one of the leading Pakistani business conglomerates with stake...
Supply chain Report on ENGRO FOODS LTD.respected enterprises with more than 40 years of business in the fertilizer and che...
Supply chain Report on ENGRO FOODS LTD.LOCATION OF OFFICES:       The head office of Engro Foods is located near Sea View ...
Supply chain Report on ENGRO FOODS LTD.       The Engro plant also contributes to the local economy by employing some 200 ...
Supply chain Report on ENGRO FOODS LTD.Board of DirectorsAsad Umar ChairmanAfnanAhsanChief ExecutiveRuhail Mohammed       ...
Supply chain Report on ENGRO FOODS LTD.          ENGRO’S Departmental CHART:                                         Depar...
Supply chain Report on ENGRO FOODS LTD.Milk Procurement DepartmentAs all of our food products are milk based, the entire M...
Supply chain Report on ENGRO FOODS LTD.“Over all consumption of milk per day is 400,000 liters in Karachi only”Supply and ...
Supply chain Report on ENGRO FOODS LTD.Livestock Population:MILK PRODUCTION PER ANIMALKG/LACTATION:      Country          ...
Supply chain Report on ENGRO FOODS LTD.PAKISTAN’S MILK SUPPLY CHAIN:                   14
Supply chain Report on ENGRO FOODS LTD.Why did Engro enter the food business?“Big opportunity due to population growth and...
Supply chain Report on ENGRO FOODS LTD.   8. Ethics and integrity   9. Safety, Health and Environment   10. Team Work & Pa...
Supply chain Report on ENGRO FOODS LTD.2.Ethics and Integrity:We do care how results are achieved and will demonstrate hon...
Supply chain Report on ENGRO FOODS LTD.7.Innovation:Success requires us to continually strive to produce break through ide...
Supply chain Report on ENGRO FOODS LTD.        Nestle        HFL        Millac        Halla        Prime        Nurpur    ...
Supply chain Report on ENGRO FOODS LTD.     20
Supply chain Report on ENGRO FOODS LTD.   OLPERS MILK:       The flagship brand of Engro Foods is OLPER’s Milk.       Laun...
Supply chain Report on ENGRO FOODS LTD.    The premium cream processed hygienically from pure fresh milk, Olper’s Cream is...
Supply chain Report on ENGRO FOODS LTD.       Lead time with regards to:              Procurement of milk varies in betwee...
Supply chain Report on ENGRO FOODS LTD.       Semi-flush season (1st Aug to 31st Dec): In this season about 70-80 % milk p...
Supply chain Report on ENGRO FOODS LTD.OBJECTIVE OF SUPPLY CHAIN MANAGEMENTAT ENGRO FOODSAs per the Supply Chain Developme...
Supply chain Report on ENGRO FOODS LTD.RAW MATERIAL PROCUREMENTRaw material procurement plays the most integral part in th...
Supply chain Report on ENGRO FOODS LTD.PACKAGING MATERIALThe packaging material used by Engro Foods is supplied from Tetra...
Supply chain Report on ENGRO FOODS LTD.The main objective of Milk Collection Centre is to deal with small quantities of mi...
Supply chain Report on ENGRO FOODS LTD.    EFL SUPPLY CHAIN STRUCTURE                                      Supply Chain De...
Supply chain Report on ENGRO FOODS LTD.EFL SUPPLY CHAIN MANAGEMENTGIMMICKS:SIX SIGMA AT ENGRO :Engro is among the first Pa...
Supply chain Report on ENGRO FOODS LTD.a strong bond and long term relationship with the farmers who are willing to supply...
Supply chain Report on ENGRO FOODS LTD.   6.   Hygiene practices improvement at all levels of milk production and procurem...
Supply chain Report on ENGRO FOODS LTD. PUSH-PULL POINT:  “Every supply chain is almost always a combination of both push...
Supply chain Report on ENGRO FOODS LTD.     34
Supply chain Report on ENGRO FOODS LTD.OLPER’S PRODUCTION PROCESS:   1. MILK PROCESSING:The milk from buffalos and cows is...
Supply chain Report on ENGRO FOODS LTD.M.Sc.(Hons) Food Technology, MS Total Quality ManagementManager Quality Control-MPD...
Supply chain Report on ENGRO FOODS LTD.For outbound logistics trucks are used. They have 80% dedicated fleets&20% open tru...
Supply chain Report on ENGRO FOODS LTD.The cost of downward logistics (Sukkur) for the company is cheaper in comparison to...
Supply chain Report on ENGRO FOODS LTD.ORDER PROCESSINGThe ordering process at the warehouse starts with generation of sug...
Supply chain Report on ENGRO FOODS LTD.       Past Experience of Distributor       Market Knowledge       The use of new T...
Supply chain Report on ENGRO FOODS LTD.REVERSE LOGISTICS   SHELF LIFE OF OLPERS MILK:        71 days   RETURN POLICY OF OL...
Supply chain Report on ENGRO FOODS LTD.because it is having monopoly in the packaging sector in PakistanAs far as milk is ...
Supply chain Report on ENGRO FOODS LTD.     Marketing     SalesThis Widespread intranet is also offering a platform for de...
Supply chain Report on ENGRO FOODS LTD.Remember, Sales operation officer has mainly concerned with two modules of the Sale...
Supply chain Report on ENGRO FOODS LTD.For example Year to date   6444 / 5161 = 1.2485(its mean that they are 25% ahead of...
Supply chain Report on ENGRO FOODS LTD.Rapid Growth Spurs Demand for CRM System:Prior to the start of 2009, Engro Foods wa...
Supply chain Report on ENGRO FOODS LTD.2. PR with farmers:ENGRO has been interacting with the farmers for fertilizers and ...
Supply chain Report on ENGRO FOODS LTD.naked people have been shown with tattoos of the same stripes in order to show that...
Supply chain Report on ENGRO FOODS LTD.   OPPORTUNITIES1. Increased funding by Government:Government has decided to increa...
Supply chain Report on ENGRO FOODS LTD.   THREATS1. Competition:Competition may pose a threat because the company will hav...
Supply chain Report on ENGRO FOODS LTD.       Engro Foods is working with different NGOs to meet the Corporate Social Resp...
Supply chain Report on ENGRO FOODS LTD.Lack of Control over Distribution ChannelsThe distribution of goods to the retailer...
Supply chain Report on ENGRO FOODS LTD.RECOMMENDATION   We are recommending following important factors which we felt miss...
Supply chain Report on ENGRO FOODS LTD.REFERENCES Mr. Salman Goheer. (Head of Supply Chain at EFL) Mr. AmmarMursalin.(As...
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Muhammad akhtar b mehtabfinal project on engro food scm

  1. 1. Supply chain Report on ENGRO FOODS LTD.Supply Chain Management Final Report OnSubmitted to: Sir Aamir MalikSubmittedBy: Nadir Ali (Roll No MBED-10-17), RaoAteeq(Roll No MBED-10-08), M.Akhtar(Roll No MBED-10-33) ShahbazAkhtar (Roll No MBED-10-44) Department of Business Administration BZU Sub Campus Dera Ghazi Khan 1
  2. 2. Supply chain Report on ENGRO FOODS LTD.ACKNOWLEDGEMENTWe would like to offer our humble gratitude to Allah Almighty, the most Graciousand themost Merciful, who gave us strength and enabled us to achieve our goals.The main purpose of the project is to know about the Practical implementation of all the conceptswe studied in the Supply Chain Management course.All the material that has been included in this report is based on data/information gathered fromvarious sources and is based on certain assumptions. Although, due care and caution has beentaken to compile this report but the contained information may vary due to any change in anyof the concerned factors, and the actual results may differ substantially from the presentedinformation.We are heartily thankful to our SCM knowledge Bank teacher; Mr.AamirAbbas Malikwhoseconstant guidance and support enabled us to develop an understanding of the subject whichultimately helped us in making of this project.At Engro Foods Limited, we would like to mention the names of1. Mr. Salman Goheer.(Head of Supply Chain)2. Mr. AmmarMursalinWho gave us their precious time & gave us all the required information about Engro FoodsSupply Chain Management. 2
  3. 3. Supply chain Report on ENGRO FOODS LTD. ABSTRACT BACKGROUND:To critically examine, understand & analyze the practical implications of supply chainmanagement course. METHODS: Analytical examination conducted through interview with EFL head of supply chain &detailed study of internet articles on Olpers, Product of Engro Foods LTD. RESULTS:Engro Foods LTD continues to experience strong growth due to many reasons in whichabove all is its Brand Equity. Olpers, EFL’S Flagship Brand is at its growth stage & it madeits place in the current competitive market due to many factors one of which is EFL’Seffective supply chain management. CONCLUSIONS:Given the highly competitive nature of the Dairy Products market, need of having smooth &flawless supply chain have traditionally been on the high side &Engro Foods LTD are on theright track. 3
  4. 4. Supply chain Report on ENGRO FOODS LTD.My sought to choose this organization.Engro food is one of the most popular and developing industry of Pakistan. Engro foods makingprogress due to effective management system.so that’s why it is rapidly growing against theircompetitors.ENGRO CORPORATIONEngro stands for “energy for growth.From inception, Engro is a legacy of continuous growth,new challenges and fulfilled promises. From fertilizers to dairy products, business solutions toPVC resin, power generation to commodity trade, at Engro their ambition is to become thepremier Pakistani enterprise with a global reach. 4
  5. 5. Supply chain Report on ENGRO FOODS LTD.Engro Corporation is one of the leading Pakistani business conglomerates with stakes in thefertilizer, food, power generation, petrochemicals, automation and terminal storage industries.Having had undergone an employee led buy out in 1992 it has expanded phenomenal in the pasttwo decades. As a holding company its subsidiaries include: Engro Fertilizers Limited Engro Foods Limited Avanceon Limited EngroPowerGen Limited Engro Polymers and Chemicals Limited EngroVopak LimitedENGRO FOODS LTD:Founded in March 2006, Engro Foods Limited is a producer and marketer of dairy products. Thecompany’s brands include Olpers Milk, Omore ice cream, and Tarang, Olwell, and Olperscream. To support these brands and their highest standards of quality, Engro Foods has investedheavily in milk processing and milk collection infrastructure. Headquartered in Karachi,Pakistan, it has offices in seven cities across the country, as well as processing plants at Sukkurand Sahiwal. Engro Foods is a subsidiary of Engro Corporation Limited, one of Pakistan’s most 5
  6. 6. Supply chain Report on ENGRO FOODS LTD.respected enterprises with more than 40 years of business in the fertilizer and chemicals industry.In the five years since its launch, Engro Foods has seen a rapid growth in sales and market share.ENGRO FOODS LIMITED is the 100% owned subsidiary of ENGRO. Thecompanys milkproduction capacity is 700k litters per day. Moreover aninvestment plan of $ 3.4 billion in EngroFoods has been approved by theboard for: expanding UHT capacity to 900k liter per day,expanding milk powder capacityto 70 kilo per day, import of 1000 cows and an ice cream plant.The company is all set forgrowth as the milk business profitability is increasing due to increasingconsumption of milkand increasing prices of dairy products. Besides selling milk, the companyalso sells thecompany also sells related products such as creams and unbranded products such asghee,and recently introduced a milk whitener; namely "Tarang". The value of the ENGROFOODS LIMITED is Rs.36 in total subsidiaries value of 63.4.ENGRO FOODS HISTORY:The plant of Engro Food Limited is located at Sukkur on 23 acre land, has the raw milkreception capability of 300,000 liters per day and UHT milk capacity of 200,000 liters per day.The plant has been established at a cost of Rs. 1 billion which provides direct employment to 750people. Engro Foods has entered the Food business through milk processing and sale with thecompany’s vision to pursue growth opportunities based on country fundamentals and ownstrength. It also positions the company to leverage its corporate social responsibility initiativesand work closely with rural communities to promote integrated farming and livestockdevelopment. This effort is expected to play a pivotal role in poverty alleviation and improvinglivelihoods of the poor in the milk collection areas.LOCATION OFPLANT: The dairy processing plant is situated at Rohri&Sahiwaal& now in Punjab aswell The office of Engro foods is situated in Sukkur. 6
  7. 7. Supply chain Report on ENGRO FOODS LTD.LOCATION OF OFFICES: The head office of Engro Foods is located near Sea View ,karachi. There regional head offices are in :  Karachi located in Business Avenue Shahrah – e - Faisal  Lahore  Multan  Rawalpindi  Peshawar  GujranwalaThey believe that there recent successes will take them to there goal which is “To be one of thebiggest players in the food business by dominating the food business, and to achieve this theywill settle for nothing less than the cream.ENGRO’S NEWPROCESSING PLANT:GEA TDS has recently completed a Euro 3 million milk processing plant for Engro Foods inPakistan. It is one of the biggest plants of its kind in Pakistan and the first ever in the Sahiwalregion. The commissioning of the plant was completed in just 2 months and operation started byend December 2007. The plant supplies the region around Sahiwal with 250,000 liters of low fat milk a day, that’s 1 million servings, and 10 million servings of Tarang (tea whitener). The plant provides a processing outlet for the local farmers who rear dairy herds of cows and, especially in the smaller farms, buffalo. 7
  8. 8. Supply chain Report on ENGRO FOODS LTD. The Engro plant also contributes to the local economy by employing some 200 people throughout the factory. The GEA TDS project was to supply equipment and engineering services throughout the process. This included milk reception; milk processing; UHT processing; powder mixing; cream handling and processing; Clean in Place (CIP) equipment such as trucks, process and filling machines; detailed engineering and project management; automation for both the process and CIP equipment; and commissioning. Raw milk receptionhandles up to 40,000 lit/hr of both cow (20%) and buffalo (80%) milk from the surrounding region’s farmers cooling it from approximately 15˚C to 4˚C for storage in the two 125m3 storage tanks. The process can pasteurize milk to 85˚C at the rate of 25,000 lit/hr and includes milk clarification and skimming; standardization for milk, cream, SNF and butter oil; butter oil dosing; a refurbished homogenizer; and degassing. Pasteurized milkis stored in 5 tanks each holding up to 75m3. Cream is pasteurized separately at a temperature of 95˚C at a rate of up to 3,500 lit/hr. UHT equipment, with indirect heating and cooling via heat exchangers, can handle up to 21,000 lit/hr. The CIP systemcovers the whole process from the delivery trucks through to the filling machines. Acid and caustic concentrates are stored on site in two tanks each with a capacity of 15m3. The whole process is controlled using PLCs supplied by Allen Bradley. PLCs are located in cooled cabinets installed on the base-frame unit of each module. All were delivered wired and I/O tested.Although Engro has only been in the food and dairy sector since 2006 the company has alreadycarved out a significant market share and is growing quickly. In such a short time it’s alreadywell on the way to achieving its goal to be one of the biggest players in Pakistan’s food industry 8
  9. 9. Supply chain Report on ENGRO FOODS LTD.Board of DirectorsAsad Umar ChairmanAfnanAhsanChief ExecutiveRuhail Mohammed Non-Executive DirectorIsar Ahmed Non-Executive DirectorShahzadaDawood Non-Executive DirectorMujahid Hamid Non-Executive DirectorMuhammed Amin Non-Executive DirectorMs. SpentaKandawalla Non-Executive DirectorAbdul Samad Khan Non-Executive Director 9
  10. 10. Supply chain Report on ENGRO FOODS LTD. ENGRO’S Departmental CHART: Departments Finance & Milk Human Quality SupplyAdministration Marketing Account Procurement Resource Assurance Chain Manager Plant Manager procurement Manager Q.C Manager Purchase Quality Assurance Logistics Officer Officer 10
  11. 11. Supply chain Report on ENGRO FOODS LTD.Milk Procurement DepartmentAs all of our food products are milk based, the entire Milk Procurement department plays acritical role in defining the quality of the end product that reaches our customers. Ensuringregular collection of fresh and pure milk right from the farmer to the factory and ascertaining thefreshness of milk all across the milk procurement process, is the responsibility of MilkProcurement department, consisting of food technologists working at the collection centers andveterinary doctors providing service to the farmers.Quality Assurance DPTTQuality Assurance is strictly followed in Engro Foods. Qualified food technologists at thisdepartment ensure that highest quality parameters are adhered to through all steps of productionand that the products reach the consumers as per promise.Pakistan’s Milk Industry OverviewWith an estimated 33 Billions Liters of annual milk production from 50 million animals managedby approximately 8 million farming households, according to latest statisticsPakistan is the 4th largest milk producing country in the world. It has a livestock and agriculture sector contributing over 10% to the GDP, and a milk economy that in value terms is 27.7% of the total agriculture sector. It is an untapped market, expected to grow an additional 3 billion liters in the next few years at a growth rate faster than most sectors. Undeniably, a sector with such credentials can bring about not just a radical change but also a dairy revolution in the country.The annual milk production of 33.6 billion liters in Pakistan is shared between a 71.1% share for the rural economy and A much smaller urban share of 29%.Only 3% of the total production of milk is processed and marketed through formal channels. For the other 97%, a multi-layered distribution system of middlemen has evolved to supplymilk.Despite only a small percentage (3%) of milk being processed, the (UHT) market is growing at asteady rate of 20% a year. 11
  12. 12. Supply chain Report on ENGRO FOODS LTD.“Over all consumption of milk per day is 400,000 liters in Karachi only”Supply and Demand: As a food item, all milk (both milk and milk equivalents) is second only to cereals in level of per capita consumption in Pakistan. The annual per capita consumption level at the national level is 190 liters. Province wise, per capita consumption stands at 246 Kg in Sindh, 132 Kg in Punjab, 86 Kg in NWFP, and 108 Kg in Baluchistan.Due to rising inflation and high poverty levels, the majority of Pakistani consumers are priceconscious. Therefore, demand for open, raw milk is high compared to processed milk. Hence, raw milk is the primary dairy product marketed in the country. The supply of milk to meet domestic demand has usually lagged. To meet this gap, powdered milk is imported every year.Current Milk Quantities Available inPakistan: 12
  13. 13. Supply chain Report on ENGRO FOODS LTD.Livestock Population:MILK PRODUCTION PER ANIMALKG/LACTATION: Country Cattle Buffalo Bangladesh 207 407 Bhutan 257 400 India 987 1,450 Nepal415 850 Pakistan 1,195 1,909 Sri Lanka 627 496SOURCE: PAKISTAN DAIRY INDUSTRY, WHITE REVOLUTIONPAPER. 13
  14. 14. Supply chain Report on ENGRO FOODS LTD.PAKISTAN’S MILK SUPPLY CHAIN: 14
  15. 15. Supply chain Report on ENGRO FOODS LTD.Why did Engro enter the food business?“Big opportunity due to population growth and indigenous sourcing. There is a huge population.One seventy million is a very big market. There are only a few countries with such a hugepopulation in the world. Besides, our people spend a lot on food. Our economy is agro-based.We get raw material at the local level.” Engro Foods CEO Sarfaraz A. RehmanEFL Aim:“Dominate the food business and to achieve this we will settle for nothing less than the cream”EFL Vision:“To become fast growing mega Food Company & also to elevate Consumer DelightWorldwide”.The Company aims to generate a significant portion of its revenue from foreign operations.Mission of EFL:Our mission is to provide satisfaction at a competitive cost, growth in diversity, and continue tocontribute to the growth of industrialization in Pakistan by being the market leader".We believe our success depends on our customers. Thus, our primary value is fulfillment of ourcustomers needs. Our manner of achieving this success is to include value for moneyCore Values: 1. Leadership 2. Innovation 3. Diversity and International focus 4. Quality and continuous Improvement 5. Candid and open communications 6. Individual growth and development 7. Enthusiastic pursuit of profit 15
  16. 16. Supply chain Report on ENGRO FOODS LTD. 8. Ethics and integrity 9. Safety, Health and Environment 10. Team Work & Partnership.1.Safety Health & Environment:We will manage and utilize resources and operations in such a way that the safety and health ofour people, our neighbors, our customers and visitors in ensured. We believe our safety, healthand environmental responsibilities extend beyond protection and enhancement of our ownfacilities, and we are concerned about the distribution, use and after-use disposal of our products. 16
  17. 17. Supply chain Report on ENGRO FOODS LTD.2.Ethics and Integrity:We do care how results are achieved and will demonstrate honest and ethical behavior in all ouractivities. Choosing the course of highest integrity is our intent and we will establish andmaintain the highest professional and personal standards. A well-founded reputation forscrupulous dealing is itself a priceless asset.3.Leadership:We have leaders of high integrity, energy and enthusiasm who have the necessary managerial,professional and people skills to inspire a group or organization to set high goals and achievethem willingly. We believe that leadership skills need to be strengthened at all levels within ourorganizations and that managerial and professionalism is a necessary foundation.4.Quality and Continuous Improvement:We believe that quality and relentless commitment to continuous improvement are essential toour ongoing success. To this end, we define quality as understanding the customer’sexpectations, agreeing on performance and value, and providing products and services that meetexpectations 100% of the time. Our motto is, “Quality in all we do”.5,Enthusiastic Pursuit of Profit:Successfully discharging our responsibilities to our shareholders to enhance the long-termprofitability and growth of our company provides the best basis of our career security andmeaningful personal growth. We can best accomplish this by consistently meeting theexpectations of our customers and providing them with value.6.Candid& Open Communication:We value communication that are courteous, candid and open and that enable each of us to doour jobs more effectively by providing information that contributes to the quality of the judgmentand decision making. 17
  18. 18. Supply chain Report on ENGRO FOODS LTD.7.Innovation:Success requires us to continually strive to produce break through ideas that result in improvedsolutions and services to customers. We encourage challenges to the status and seekorganizational environment in which ideas are generated.8.Individual Growth & Development:We strongly believe in the dignity and value of people. We must consistently treat each otherwith respect and strive to create an organizational environment.9.Teamwork& Partnership:We believe that high performing teams containing appropriate diversity can achieve whatindividuals alone cannot. Consciously using the diversity of style, approach and skill afforded byteams is strength we must continuous building into our organization.10,Diversity& International Focus:We value differences in gender, race, nationality, culture, personality and style because diversesolutions, approaches and structures are more likely to meet the needs of the customers andachieve our business goals.CORE COMPETENCY OF EFL:Aggressive style of business: launching more products in short time.MAJOR COMPETITORS:Engro Foods Limited is fully aware of its competitors. The company had to consider the areasincluding (product design, segmentation, target market, advertising, time to launch a newproduct, time for necessary changes & constant over view). The major competitors in case ofoffering the UHT milk are: 18
  19. 19. Supply chain Report on ENGRO FOODS LTD. Nestle HFL Millac Halla Prime Nurpur Nirala Dairy CrestOther than the brand mentioned above Olper’s also faces an indirect competition from the localmilkman the GAWALA.EFL Brands: 1. OLPERS MILK. 2. OLPERS CREAM 3. TARANG 4. OMORE 5. OLFRUTE 6. Olwell Hi-Cal Lo-Fat (HCFL) Milk 7. OLPERS OWNSUM 19
  20. 20. Supply chain Report on ENGRO FOODS LTD. 20
  21. 21. Supply chain Report on ENGRO FOODS LTD. OLPERS MILK: The flagship brand of Engro Foods is OLPER’s Milk. Launched on March 20, 2006, Olpers milk is EFL’s standardized and homogenized pure UHT (Ultra heat treated) milk with 3.5 % fat and 8.9 % solid non-fats. It is collected from 3000 plus villages & 10000 plus farmersIt is EFL’s premier brand, and the choice of quality-conscious consumers who only go for thebest. It is available in easy-to-open, 6-layered Tetra Pak Brick Aseptic red packaging and comeswith approx 71days shelf life. TAG LINE:The unique selling proposition for Olper’s is: SubahBakhairZindagi, but recently thecompany changed the USP to“Jo dilkholkayjeetayhainunheenkayliyayhaiOlpers”Both the tag lines have a very positive impact on Olpers image because of their drect emotionalpositioning & relation with its customers. STOCK KEEPING UNITS:The company is maintaining three SKU’s (stock keeping units) for Olpers in tetra packs that are· 1000ml· 500ml· 250ml Olper’sCream : 21
  22. 22. Supply chain Report on ENGRO FOODS LTD. The premium cream processed hygienically from pure fresh milk, Olper’s Cream is luxuriously rich in its thickness & nutritional value. It promises the richest & scrumptious assortment of tempting toppings, delicious desserts and creamiest coffee with its unique taste, also great for eating with bread etc. It was launched on September, 2006. and comes in 6-layered Tetra Pak Brick aseptic purple color packaging with 6 months shelf life.STOCK KEEPING UNITS: ¼ Litre (250 ml) : 27 packs per shrink-wrapped trayOlwell Hi-Cal Lo-Fat (HCFL) Milk : Launched on December 15, 2006, Olwell is a low-fat, high-calcium milk with the richness of pure milk. It is an ideal choice for weight-watchers and heart patients. It is also high in calcium content, which prevents osteoporosis Packed in 6-layered Tetra Pak Brick Aseptic red packaging with easy-to-open plastic cap, it comes with a 3 months shelf life.STOCK KEEPING UNITS: 1 Litre (1000 ml ) : 12 packs per carton ½ Litre (500 ml) : 12 packs per shrink-wrapped trayTOTAL SUPPLY CHAIN C OST OF Olpers: Product Cost: 75% Others: 25% Out of 25 %, 4 % is business wasteEngro FOODS INVENTORY TURNOVER:On every 26th day of month inventory at EFL gets replenish.ORDER FULFILLMENT RATE: At EFL its 86-87 % for olpers.LEAD TIME OF OLPERS: 22
  23. 23. Supply chain Report on ENGRO FOODS LTD. Lead time with regards to: Procurement of milk varies in between 5days & 4 months Order placement to order fulfillment : 12-18 hrs SAFETY STOCK For olpers hardly 6-7 days safety stock is kept because of its low shelf life. Time to time forecasting is done in short intervals to meet the level of demand. OLPERS LIFECYCLESource: Mr Salman Goheer, Head of Supply Chain Dep’t, Engro Foods LTD.OLPER’S MILK DEMAND VARIATIONS: The demand of olpers milk usually increases in the festivity season or any event such as. Eid Ramazan and MoharramVARIATIONS IN SUPPLY OF MILK: In Pakistan there are mostly three season of milk which are as under: Flush Season: (1st Jan to 15th April): During this season there is maximum production of milk in the country. Lean Season (16th April to 30th July): Minimum production of milk in the country due to high environmental temperature, less green fodder availability and natural reproduction cycle of animals. 23
  24. 24. Supply chain Report on ENGRO FOODS LTD. Semi-flush season (1st Aug to 31st Dec): In this season about 70-80 % milk production in the country.TETRA PAKS MILK MARKET SHARESUPPLY CHAIN MANAGEMENT AT ENGROFOODSThe above chart depicts the overall supply chain management process at Engro Foods (Pvt) Ltd.These activities can be divided into three all encompassing categories as well: Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods.. 24
  25. 25. Supply chain Report on ENGRO FOODS LTD.OBJECTIVE OF SUPPLY CHAIN MANAGEMENTAT ENGRO FOODSAs per the Supply Chain Development manager at Engro Foods Mr. UmairNagi, the primaryobjective of supply chain management at Engro Foods is “ Fulfilling our customer’s demands in the optimum way”And as he himself pointed this out, it can be stated that optimization is the key word. Thus costreduction is definitely on top of the priority list for Engro but fulfilling customer’s demands isjust as important. Thus the goal of these activities is to offer the customer a level of value thatexceeds the cost of the activities, thereby resulting in a profit margin.SUPPLY CHAIN STRATEGY AT ENGRO FOODSThe supply chain strategy is obviously in line with the objective for supply chain managementwhich in turn is in line with the overall mission and values of the organization, all of which havebeen stated above. So when narrowing down to the strategy, Mr. Nagi said that it is “A give-away between “the service factor” and low cost”So if we link it to the theoretical concepts that have been taught to us in this OperationsManagement course, the basic approach towards a competitive advantage over the competitors,some established other newer entrants is a combination of low cost and rapid and flexibleresponse. As this report shall unravel most of the details regarding this claim, right now it wouldsuffice to state that an example of low cost strategy would be the location of the plants near theabundant sources of supply, farms and farmers so as to reduce the transportation cost and cost ofmilk deterioration and subsequent losses. An example of response would be the use of third partylogistics to ensure thatThese primary activities at Engro are supported by: The infrastructure of Engro: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation. Technology development: technologies to support value-creating activities. 25
  26. 26. Supply chain Report on ENGRO FOODS LTD.RAW MATERIAL PROCUREMENTRaw material procurement plays the most integral part in the success of any supply chain. Thereason being, that it is the elementary level activity and if there are flaws in it, the effectivenessemphasis on the quality of the raw materials obtained and at the same time establishing andmaintaining long term relationship with their suppliers. This way Engro Foods is playing animportant role to produce and market a range of high quality dairy in a country where a hugequantity of this commodity is wasted each year due to an inefficient farm-to-marketinfrastructure.RAW MATERIAL:The various kinds of raw materials required for the milk and cream production at Engro foodsinclude: Raw Milk Other ingredients like SNF and fats Packaging materialRAW MILKThe raw milk which is further processed in the manufacturing plants at Sahiwal and Sukkur isthe core raw material at Engro Foods because their product portfolio encompasses all dairy basedproducts. The raw milk which is mainly the buffalo milk is obtained from the various dairy farmsacross the country with most of these dairy farms being located in Sindh and Punjab region.OTHER INGREDIENTSThere are several other ingredients that are added at the various stages of the production processat Engro Foods and their respective quantities depend on the recipes of the products beingmanufactured. These include SNF that are solids not fats and fats which are adjusted to achievethe desired levels. For instance, the Olpers milk consists of 3.5% fat whereas, Tarang milk whichis the tea whitener and more creamy in nature has 7% fat, therefore, during the productionprocess, more fat is added to the milk to produce Tarang.Furthermore, SNF in milk is to be maintained at 8.9% which is also adjusted during the processdepending on the quality of milk. Another product of Engro Foods, Olwell milk which is highcalcium and low fat milk targeting the health conscious segment, requires high calcium level thatis modified during the process. 26
  27. 27. Supply chain Report on ENGRO FOODS LTD.PACKAGING MATERIALThe packaging material used by Engro Foods is supplied from Tetra Pak Ltd. It is in the form ofrolled sheets of aseptic packaging arriving at the manufacturing plant directly from the supplier.The aseptic packages are sterilised prior to filling of UHT (Ultra Heat Treated) milk, resulting ina 6-layered Tetra Pak Brick Aseptic packaging, with a 3 months shelf life.Sources of milk supplyAt Engro Foods the supply of raw milk, that is the way milk collection is done can be dividedinto: Direct Sources Contactor based collectionDirect Sources:The method of milk collection through direct sources can be defined as milk collection donethrough various dairy farmers residing in different villages. A villager called “Dhoti” isresponsible for collecting milk from his respective area and delivers milk every morning andevening to the Milk Collection Centre. The volume of milk supplied by the dairy farmers variesimmensely depending on both the size of the are covered by the dairy farmer and the availabilityof milk and at times could be as low as two litres a day.The method of milk collection from direct sources is the most preferred one by Engro Foodsmainly because of the low probability of adulteration of the milk by dairy farmers. The reasonaccounting for this is that it is easier to identify adulteration in low volumes of milk as opposedto high volume provided by the other method. However, the overall quantity of milk collectedthrough this method is very limited.Milk Collection Centre:Engro Foods maintains a full fledged Milk Collection Department to manage milk collectionthrough direct sources. It started off with hundred Milk Collection Centres in March 2006 andnow in 2008 has over five hundred and fifty Milk Collection Centres operating across thecountry. Today, Engro Foods can be regarded as having one of the largest milk collectionnetworks in the country which is unmatched in size, productivity and efficiency to meet the self-imposed commitment to quality. The vast network comprises of village milk centres which areequipped with chillers to preserve the quality prior to long hauls to the factories served byspecially designed tankers. 27
  28. 28. Supply chain Report on ENGRO FOODS LTD.The main objective of Milk Collection Centre is to deal with small quantities of milk providedby the village dairy farmers.On one hand, it has proved a regular source of income for farmersthrough an assured and growing income resulting from the sale of their milk, and on the other, ithas enabled Engro Foods to collect better quality milk in the quantities it needs. At the MilkCollection Centre a trainedmilk collection agent who tests and records every supply for qualityand fat content collects the milk and rejects the milk that does not conform to their qualitystandards or is adulterated.Contractor Based Collection:The contractor based milk collection involves collecting milk from approved suppliers who areaware of the quality standards adopted by the firm. The contractors are responsible for milkcollection from a large area and can bring about ten thousand litres of milk a day from dairyfarmers. This method of contractor based collection contributes the most to the overall quantityof milk collection. However, the company fears adulteration on part of contractors because it isharder to investigate when the volume is high.Once this milk is tested for the protein, lactose and butterfat content it is sent to the chillercontainers which protect milk from air, light and heat. This milk is then transported to the plant.These chiller containers are aseptically cleaned before milk is stored in them.Transportation of raw milk:The raw milk is transported from the milk collection centre to the manufacturing plants viainsulated tankers. The insulated tankers maintain the temperature of milk around four degreesCelsius. The reason why the tankers are insulated is to prevent the milk from getting hot in thesummer or freeze in the winter. The reflecting surface of the trucks also provides protectionagainst infrared rays and reduces the degree of heat on the tank. Also the cool temperature stopsthe production of bacteria while the milk is transported over long hauls to the manufacturing site.Normally the capacity of the regular tankers used for the transportation of milk from the milkcollection centre to the plant varies between 10,000 and 35,000 litres.The transportation fleet at Engro Foods is partly owned and partly contracted that is they makeuse of third party logistics. Moreover, the transportation routes from milk collection centres tothe manufacturing sites at Sahiwal and Sukkur are designed in a way to avoid overlapping ofroutes which otherwise would add up to the increased cost of transportation. The raw milk isnormally transported between four to six hours to avoid loss of quality. 28
  29. 29. Supply chain Report on ENGRO FOODS LTD. EFL SUPPLY CHAIN STRUCTURE Supply Chain DepartmentSupply Chain Customer ServiceDevelopment Department Planning Purchasing Warehousing Logistics Inbound Outbound Logistics: Milk Logistics Procurement Dispatches 29
  30. 30. Supply chain Report on ENGRO FOODS LTD.EFL SUPPLY CHAIN MANAGEMENTGIMMICKS:SIX SIGMA AT ENGRO :Engro is among the first Pakistani companies implementing six sigma across all areas andutilizing it as a management system to execute our strategic objectives. Six sigma was launchedin February 2006.Among the focus areas, employee development is the most critical and six sigma will beleveraged to help bring out the best in our people. Employees drive improvements in other areas:speed, innovation, perfection and becoming world class.Six sigma’s robust problem-solving methodology and statistical tool allows the company tobenchmark processes against global standards in a language that is comparable across anyindustry or function. It helps ensure that we sustain our promise of delivering high quality products and services toour customers – on time, everytime.Communication is critical and Engro conducted six sigma launch events country wide as well astwo internal conferences and electronic and print updates throughout the year management andnon management employees were trained extensively during 2006 & 2007 on six sigmaprinciples.Source: Mr. Hassan, HR Assistant Manger, EFL.PR WITH FARMERS:According to Mr. Ali Akbar, Director Marketing EFL,  “In order to succeed, you should ALWAYS capitalize on your STRENGHTS and NEVER on your COMPETITOR’S WEAKNESS!”ENGRO’s Strength was their fellowship with farmers for a long time. Engro has been interactingwith the farmers for fertilizers and has gained quite a good reputation over the years. It has led to 30
  31. 31. Supply chain Report on ENGRO FOODS LTD.a strong bond and long term relationship with the farmers who are willing to supply milk tothe company.This is an added advantage and strength for the company because it will never be short of milkproduction. The farmers also won’t have to look elsewhere to sell their milk.THIRD-GENERATION PLANT:EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant inPakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premiumquality and hygiene.EFFICIENT MILK PROCUREMENTDEPARTMENT:EFL MPD is provided with highly paid Procurement managers supported with a team ofqualified and experienced staff of zonal managers, area executives or milk collection controller,milk collection supervisors, mobile testers, drivers, peons and etc. In order to support theprocurement staff a separate wing of accounts is also established. This is the department withhighest number of employees. Procurement of milk is not an easy job.It stands on the following five pillars: 1. Quantity 2. Quality 3. Cost 4. Competition 5. Man PowerMilk procurement department of EFL provides a value-added service to all their milkproducers, ensuring that milk of the correct quality is produced and that sufficient raw milk isalways available to satisfy company’s needs, through the use of strategies, processes, projects,systems and policy.Procurement teams of EFL manage a number of Milk Procurement responsibilities including: 1. Ensuring that the producers are paid promptly and accurately. 2. Purchasing raw milk from producers and transporting it to factories effectively and efficiently. 3. Successful clean milk route development in various new identified areas. 4. Installation of bulk coolers in the area. 5. Milk yield improved. 31
  32. 32. Supply chain Report on ENGRO FOODS LTD. 6. Hygiene practices improvement at all levels of milk production and procurement 7. Reduction of Bacterial Count of milk. 8. Advanced training to drivers in the handling of mass milk in case of emergencies. 9. Trainings to field staff for handling of sample and client. QUALITY CONTROL SYSYTEM:Following types of quality assurance system exist in EFL to assure the procurement of the bestquality raw milk. 1. First System: Procurement department is responsible for the procurement of good quality raw milk. 2. Second System: Quality assurance department support the procurement department for procurement of good quality of raw milk.Source:ShahidHafeez Khan, Quality Control Manager-Field, Engro Foods Limited. BUSINESS QUALITY MANAGEMENT SYSTEM & KAIZEN PRINCIPLE:Mr. Salman Goheer, Head Of Supply Chain, EFL:  “We imply our strategies at large scale as well as at small scale on continuous basis according to the type of business & its requirements. We believe that quality and relentless commitment to continuous improvement are essential to our ongoing success. To this end, we define quality as understanding the customer’s expectations, agreeing on performance and value, and providing products and services that meet expectations 100% of the time. Our motto is, “Quality in all we do”.So at EFL, Business quality management & total quality management goes side by side. Here isthe practical application of it at EFL; 360 DEGREE FEEDBACKS:  “Our commitment to continuous improvement in the performance management systems for employees at all levels was reflected in adoption of the 360 Degree Feedback System. This system ensures better employees accountability, at the same time providing the employees with chances to make use of their competencies. The 360 Degree mechanism became fully operational for senior management in 2006”. Said by Mr. Hassan, HR Assistant Manger, EFL. 32
  33. 33. Supply chain Report on ENGRO FOODS LTD. PUSH-PULL POINT:  “Every supply chain is almost always a combination of both push and pull, where the interface between the push-based stages and the pull-based stages is sometimes known as the push–pull boundary & so is ours. Upstream is push based while downstream relies on pull based systems”. Said by Mr. Salman Goheer, Head of supply chain, Engro Foods LTD. PLANNING:  “Engro do planning on short term and long term basis simultaneously. Engro is mostly having long term plans and for achieving these long term plans it gains support of short term plans”. Words of Mr Salman Goheer, Head Of Supply Chain, EFL. MIS: The MIS department at Engro Foods ensures that all automation is running error-free at all times. Regularly modifying and updating the Companys accounting software is also the MIS teams responsibility.OLPER’S SUPPLY CHAIN 33
  34. 34. Supply chain Report on ENGRO FOODS LTD. 34
  35. 35. Supply chain Report on ENGRO FOODS LTD.OLPER’S PRODUCTION PROCESS: 1. MILK PROCESSING:The milk from buffalos and cows is collected into metal cans, which are then emptied into tanks,form these tanks milk after chilling to 4-5 ºC is transported to dairy plant in isolated tanks forfurther processing.At the dairy plant milk is tested for quality and milk that meets the quality parameters is againchilled and pumped into chilled holding tanks, then cleaned (either by being filtered orcentrifuged) before Pasteurization followed by standardization/toning and homogenization andthen transferred to another holding tank to await further processing. The further processing mightinclude Ultra High temperature (UHT) and aseptic filling or drying to make dried milk. 2. STANDARDIZATION AND TONINGStandardization of milk involves the adjustment of the fat content of milk, or a milk product, byaddition or removing of cream, or skim milk as appropriate, to obtain a given fat contents, whiletoning refers to adjustment of SNF contents of milk by reconstitution of milk powder in it. InEFL both these processes are used simultaneously 3. PASTEURIZATION: Pasteurization can be defined as "The heating of every particle of milk or milk product to aspecific temperature for a specified period of time without allowing recontamination of that milkor milk product during the heat treatment process." 4. HOMOGENIZATION:It is a mechanical treatment of the fat globules in milk brought about by passing milk under highpressure through a tiny orifice, which results in a decrease in the average diameter and anincrease in number and surface area, of the fat globules. The net result, from a practical view, is amuch-reduced tendency for creaming of fat globules.Other advantages of homogenizationinclude a richer flavor and possibly increased digestibility. 5. ULTRA HIGH TEMPERATURE (UHT) AND ASEPTIC FILLING The term sterilization refers to the complete elimination of all microorganisms. The foodindustry uses the more realistic term "commercial sterilization"; a product is not necessarily freeof all microorganisms, but those that survive the sterilization process are unlikely to grow duringstorage and cause product spoilage. Milk can be made commercially sterile by Ultra hightemperature (UHT) where milk is heated to 136 to 140 ºC for 3-4 seconds. This milk is thenpackaged aseptically in specially designed multilayer containers. The heat treatment andpackaging allow this milk to be stored at room temperature for extended periods of time. Ultrahigh temperature processing may cause some loss of foliate, vitamin C (which is already low inmilk), vitamin B12, and thiamin.Source: ShahidHafeez Khan 35
  36. 36. Supply chain Report on ENGRO FOODS LTD.M.Sc.(Hons) Food Technology, MS Total Quality ManagementManager Quality Control-MPD, Engro Foods LimitedEFL’S LOGISTICS & WAREHOUSING INTEGRATED LOGISTICS:Engro Foods Pakistan makes sure that their product namely Olpers is available, no matter whereyou are in Pakistan.We integrate processes from the farm to markets, and ensure products are delivered to you at theright time, at the right place and in the right quantity. Logistics network is thus completelyoutsourced i.e. they are relying on 3PLS as according toMr Salman Goheer, EFL head of supply chain: “We have outsourced all non core processesof our business like transportation to minimize system wide cost.”EFL do have their own distribution network but transportation services are all outsourced. INBOUND LOGISTICS: For inbound logistics dedicated long vehicles are used. Inbound logistics concerns raw milk transportation to the plant. Raw milk comes from the dairy farms to the milk collections centers which are 40 in total & are located in different villages where some quality checks are conducted to ensure the milk quality, if its up to the mark than it is stored, till it reaches the 9,000 liter capacity which is than collected by dedicated specialized vehicles to transport it to the plant for production. Once the vehicle reaches the plant premises, once again a quality check is repeated before emptying the container. MILK COLLECTION FROM VARIOUS CITIES OF SINDH & PUNJAB Lakhi. Ahmed pur east. Rani pur. Nawab shah. Dharki. Dhokri Rohri and Sahiwaal. OUTBOUND LOGISTICS:On average, every alternate day Olpers Milk truck arrives at each ware house from Sukkur andSahiwaal factories, and is distributed in the same amount to the distributors all over the Pakistan. 36
  37. 37. Supply chain Report on ENGRO FOODS LTD.For outbound logistics trucks are used. They have 80% dedicated fleets&20% open truckingespecially for the northern areas of Pakistan.Outbound logistics concerns finished milk movement from manufacturing plant to the warehouse& to distributors. There are 3 warehouses of olpers:  Sukkur (Mother ware house)  Sahiwaal (Mother ware house)  Rawalpindi (Central ware house)Sukkur:Adjacent to the manufacturing plant which covers whole of the south i.e. Sindh & Baluchistan,the logistics usually take 1 day to arrive at olpers warehouses in Karachi from theirmanufacturing factory at Sukkur.Sahiwaal:Adjacent to the manufacturing plant which covers whole of the of the central.Rawalpindi:It is a satellite warehouse with a covered area of 30,000 sqft which is on rental basis & it costs600,000/month. Its responsibility includes fulfilling the orders of the northern regionIn addition to Karachi:The transportation of finished goods from Sukkur to Karachi is done through a dedicated truckwhich can easily carry a 50 feet container, which is done by Naulakha Transport agency.There responsibility is to pick the goods from Sukkur and deliver it to Karachi warehouse and onaverage there are 15 round trips in a month.From Karachi warehouse it is delivered to the respective distributors according to there requiredorders in terms of quantities and size of packets, it is done through dedicated fleets which is on amonthly rental basis.Capacity Of 50 feet Truck:Size of item No. Of cartons1 liter 934250 ml 15521.5 liter 890500 ml 1497 37
  38. 38. Supply chain Report on ENGRO FOODS LTD.The cost of downward logistics (Sukkur) for the company is cheaper in comparison to theupward logistics (Karachi). Since open trucks return empty once the product reaches the Karachiwarehouse.WAREHOUSING The company has three warehouses out of which two are located within the production plant i.e. in Sukkur&Sahiwaal and the other being the central warehouse located in Rawalpindi. Sukkur warehouse having a capacity of 1.6 million liters with a daily average dispatch of 350,000 liters & a pallet capacity of 2000. Sahiwaal warehouse having a capacity of 4 million liters with a daily average dispatch of 400,000 liters & having a pallet capacity of 5000. They are having a cross dock warehousing system at Maripur and it is being operated by transporter him self. Using pallets to stock the cartons. Each pallet has a capacity of 800 liters. Fork lifters are used to stock the pallets to the desired dock The temperature of the warehouse should be maintained at 25-28 degrees in order to keep milk in its fresh condition. Because of its perishable nature they are using the FIFO inventory system. There is a climate control system in there warehouses as the temperature of Sukkur&Sahiwaal shoots up to 45 degrees in summers. They are maintaining 6-7 days safety stock. Once the packaging is done the milk is stored in equibator for three more days in a warehouse before loading it on the truck to make sure that the quality of the milk is up to the standard. 38
  39. 39. Supply chain Report on ENGRO FOODS LTD.ORDER PROCESSINGThe ordering process at the warehouse starts with generation of suggested order list (SOL)triggered through the system, SOL is done to determine the future demand forecast,determination of items to be ordered and how much to reorderMATERIAL HANDLINGMaterial handling is a process of handling the material in a proper way so that the rate of losses& damages can be minimized for good.Olpers manage their materials very efficiently by using latest equipment for raw materials &finished goods. They use specialized milk tanks as mentioned above for the inbound of raw milk & for finished goods they use proper palletization, then fork lifters are used to put the pallets in the right place in the warehouse which is then cross docked.DISTRIBUTION NETWORKS Olpers focus on every major city of Pakistan. All the transportation is outsourced. Olpers have 350 distributors across Pakistan.According to the distribution, Pakistan is divided into three geographical zones and then infurther Regional Sales Offices. North Zone o Rawalpindi. o Peshawar. Central Zone o Lahore o Gujranwala o Multan South Zone o Karachi o Hub o Punjgur o Nawab shah SELECTION CRITERIA OF OLPERS FOR DISTRIBUTORS SELECTION : Financial Strength of Distributor Efficient Infrastructure Logistic Fleet Efficient and Trained Sales Force 39
  40. 40. Supply chain Report on ENGRO FOODS LTD. Past Experience of Distributor Market Knowledge The use of new Technology (IT) NEGOTIATION ON PRICE :  Olpers doesn’t negotiate on price with distributors there is a fix Mark-up/Commission which is 4% for all distributors SALES TARGET FOR DISTRIBUTORS:Monthly sales targets are established after discussing the market requirement with thedistributors. VALUE ADDITION BY DISTRIBUTORS:Distributor’s credibility and goodwill is not used as a tool to pressurize the retailer to buy thebulk but they are taken into confidence by product features, quality and brand. Afterwardsdistributor repute plays a value addition role to whole transaction. CUSTOMER’S FEEDBACK:Customer feedback is required for further planning which is the responsibility of the distributorto provide to Olpers’ team. PURCHASE ORDERSPurchase order is an instrument given by the buyer to the seller mentioning the specification ofgoods, quantity & price in order to get the timely delivery of the goods from the customer.In the case of Olpers the distributor is the buyer who first submits the payment in advance andthen gives the purchase order to the sales department via e-mail whenever he is low oninventory. These e-mails are then processed in the form of a proper purchase order, which is thensend to the finance department for invoicing purpose. Whereas sales department is alsoresponsible for the dispatch of the desired goods by the customer. 40
  41. 41. Supply chain Report on ENGRO FOODS LTD.REVERSE LOGISTICS SHELF LIFE OF OLPERS MILK: 71 days RETURN POLICY OF OLPERS MILK:Olpers Milk has an efficient return policy for inventory in case of any defect.  Every carton and item has assigned a certain batch number.  If any defect has found in item or carton (in small quantity) then the batch number of that item or carton is noted and disposes the defected item right on there and if it is large number than it will taken back by the same delivery truck who dispatches the orders to the distributors.  Once the large number of defected milk is back to the company, than it is drained.  They have a normal losses rate of 0.40 % due to defected Milk.Source : Mr Salman Goheer, Head Of Supply Chain, Engro Foods ltd.PACKAGINGEngro Foods is committed of reducing the environmental impact of packaging, without jeopardizing thesafety, quality or consumer acceptance of itsproducts.EFL is dependent upon Tetra Pak for thepackaging of its entire dairy products. Tetra Pak isthe only option available to Olpers for packaging 41
  42. 42. Supply chain Report on ENGRO FOODS LTD.because it is having monopoly in the packaging sector in PakistanAs far as milk is concerned packaging is very important. It is perishable item which requires special packaging to preserve it for few months. To meet this objective Olpers delivers fresh milk to its customer via using tetra Pak, without sacrificing in health measures. Engro Foods have following objectives in mind regarding packaging of Olpers:  Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity.  Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation.  Avoid the use of substances that can adversely impact the environment during packaging production and disposal.  Decrease packaging waste at all stages in the supply chain, including package manufacturing, utilization and disposal.  Increase the use of recycled materials wherever possible, and increase the recyclables and compatibility of packages with existing waste management schemes.  Packaging materials are Stored in a dry place away from manufacturing areas and it is used in a clean and sanitary manner which is non toxic  Packaging is carried out in away that avoid contamination of processed products. And also protects the product against contamination until the product reaches the consumer. EFL ERP SYSTEMECPL has its own dedicated Network of Intranet with a backbone of Internet & PTCL Fiberlines. Through this sophisticated & widespread intranet, All Business functions of E.F.L areintegrated with each other like; Production Logistic Accounts & finance 42
  43. 43. Supply chain Report on ENGRO FOODS LTD. Marketing SalesThis Widespread intranet is also offering a platform for developing and deploying criticalbusiness applications to support business operations and management decision making across theInternet worked enterprise. Many customers application has been developed at ECPL, whichhelps in Order Processing Inventory Control Sale management & reporting executive information systemThese applications are designed to interface with, and access, existing company database andlegacy system. This software for such uses has been then installed on intranet web Servers.Employees at regional offices including Head office can access and run applications using webbrowsers from anywhere on the network whenever needed. EFL’S SALE & DISTRIBUTION SYSTEM:This application helps in the accomplishment of daily sales operations & management. Theapplication has five different modules i.e. Setup Transaction Query Report Administration 43
  44. 44. Supply chain Report on ENGRO FOODS LTD.Remember, Sales operation officer has mainly concerned with two modules of the Sales &distribution system i.e. Transactions; This module helps to process, distributors Payment information, Secondary Sales, Order processing and their Claims. Reports; The Report modules convert distributor’s transactional information into differenttypes of reports like:1. Regional Order Summary Report2. Primary Sales Report both Invoice Based & order Based3. Secondary Sales LPD Report4. Primary & Secondary Day wise Report5. Distributors detail Ledger6. Distributors Payment Receipt Report7. Stock Pending & Cancellation Report8. Distributors Claim Summary Report9. Logistics Reports10. Distributor Account Statement ReportAll above-mentioned reports can generate from different angles like o Regional report o Area Wise Report o Territory Wise Report o Distributor wise o Day wise etcReporting of the primary sales:Primary sales are updated as a result of “ORDER PROCESSING”.The regional office receives the allocation for next one day. The primary report shows us twofactors that are value and volume. It shows us that how much target has been achieved up tillnow in the year considering 250ml, 500ml and 1000ml and total UHT milk.We divide the target achieved by the team up till now with target set. 44
  45. 45. Supply chain Report on ENGRO FOODS LTD.For example Year to date 6444 / 5161 = 1.2485(its mean that they are 25% ahead of their target) Similarly we can find the Month to date volume wise and also value wiseReporting of the secondary sales:First of all T.S.Os report all the secondary sales from the last day via fax as per company policy.These records are first updated manually. This gives us the record for the opening stock, stockreceived by the distributor yesterday, month to date sales and secondary sales. Then all theinformation given by the TSO’s is fed into (EFL Sales & Distribution Systems).Payment procedure:Three instruments are considered for payment procedures:1. Remittance plus.2. Demand draft.3. Pay orders.As a result payment receipt report is generated which shows us the name of all the distributorswho made the payments and weather the payment was sent via remittance plus our demand draftetc and name of the branches through which the remittance was sent.Afterconducting the payment procedures another document is generated which is known as theDistributors Account statement summary. When distributor sends us the amount it is credited inour account as it becomes or liability that is because we have not delivered the stock yet.Distribution claim:The distribution has to process all the claims before 6th of every month on the given formats.These claims are verified by the TSO’s and are sent to the regional office for verification afterthe verification at the regional office the claims are logged on to the system and are sent to thehead office after verification from the head office the acknowledgement is sent to the distributor. CRM AT EFLEngro Foods Keeps Track of 60,000-Strong Consumer Base with On Demand CRM Solution.“We are a commodity business, and it is vital for us to be on our toes. We run reports on theOracle CRM system to find out which customers are loyal to our brands and which ones arealso buying other brands. We can then look more closely at the reasons for the switch andwork on winning these customers back. This is something we simply cannot do usingspreadsheets. The ability to see and act on this type of information is a competitiveadvantage.” – Danish R. Syed, Head of Consumer Relationship & Manager Innovations,Engro Foods Limited 45
  46. 46. Supply chain Report on ENGRO FOODS LTD.Rapid Growth Spurs Demand for CRM System:Prior to the start of 2009, Engro Foods was relying on Microsoft Excel spreadsheets to recordand manage customer information. While this was acceptable when the company was firstlaunched, it proved untenable when the business began expanding.“Our business has grown more than 10 times in the past three years,” said Danish R. Syed,head of consumer relationship & manager innovations, Engro Foods.Information At Tips: The Oracle CRM system has enabled Engro Foods to dispense with spreadsheets to record and track information. Customer data is now entered and stored in a central database, eliminating the need for repetitive manual entry and ensuring the accuracy and currency of information. The system also provides a single, complete customer history, where previously transaction and personal details were dispersed over multiple spreadsheets. “The system tracks details such as birthdays and anniversaries, which allows us to interact with customers at those times that are meaningful to them,” said Danish. “It is a way for us to build strong relationships with our most important customers.”“With Oracle looking after the system for us, the chances of errors are less and if any issuesdo come up, we know they can be resolved quickly,” said AtifMuhammed Ali, manager,applications, Engro Foods. “As we expand the use of the solution, we know we can count onOracle to guide us through the process.” SWOT ANALYSIS OF ENGRO FOODS STRENGTHS1.Engro’s back:Olper’s is a brand of ENGRO foods. This means that consumers can relate their former image ofENGRO foods to Olper’s. ENGRO is a well established brand name in Fertilizer, IT andinfrastructure business. The brand is well known so customers will automatically have a brandassociation with Olper’s and see it as a premium quality product. ENGRO is world renowned soit can easily attract foreign investors in backing it against other competitors such as Nestle.ENGRO foods can easily afford research and development costs for Olper’s have in order tointroduce new products. It can also distribute the brand through better channels because of itslong term relationship with distributors in the agriculture sector. 46
  47. 47. Supply chain Report on ENGRO FOODS LTD.2. PR with farmers:ENGRO has been interacting with the farmers for fertilizers and has gained quite a goodreputation over the years. It has led to a strong bond and long term relationship with the farmerswho are willing to supply milk to the company. This is an added advantage and strength for thecompany because it will never be short of milk production. The farmers also won’t have to lookelsewhere to sell their milk.3. Positive response from customers:In first year, EFL crossed 1.4 billion sales figure which shows customers’ satisfaction uponEFL’s products.4. Its taste: quality proposition and world-class quality proposition system.5. Strong consumer & product research:Olper’s done a strong consumer & product research before and after launching the product. Thishas provided them the perfect launching pad to eventually emerge as a global player in the foodindustry. To develop its future portfolios, EFL has hired various global research partners like ACNielsen, Mindshare, JWT Asiatic and MARS marketing and advertising agencies.6.Third-Generation Plant:EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant inPakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premiumquality and hygiene. Moreover, it is also setting up another milk processing plant in CentralPunjab (Sahiwal) with an investment of Rs. 2 billion (US $ 33million). WEAKNESSES:1. Olwell TVC:Olwell ad which is based on Western life style, ENGRO foods brand management showed a manwho put off his clothes & remain just in his undergarments, or half nude lady in a cat walk ormen admiring the figures of a lady in mix gender health club. In this ad they are creatingassociations with the brand through the stripes, which is a highlight of Olwell packaging. Half 47
  48. 48. Supply chain Report on ENGRO FOODS LTD.naked people have been shown with tattoos of the same stripes in order to show that they areloyal consumers of Olwell. Also, the talent, situations and locations connects well with the ad togive Olwell a premium positioning. The brilliant marketing people at ENGRO Foods failed toanalyze is that the market they are targeted the ad on, is Pakistan, where practicing Muslimsreside, who have strong religious beliefs. When making the ad, the brand managers were focusedon, making an ad that should give the brand the most premium look and feel amongst the targetconsumers but on the other hand they were least bothered about the ethics, religious beliefs andcultural values.2. Owning Red Color:The company has not owned the color red like Nestle has a green Milkpak; Haleeb has a bluecarton etc. This may create problems because when a consumer enters a grocery shop, thenhe/she might have problems in recalling the brand because there is no color association attachedto Olper’s. The company may need to find a suitable color in which to focus its upcomingmarketing strategies.3. Low Quality Milk:EFL is not having its own dairy farms; it largely collects loose milk from farmers &gawalasthrough its 40milk collection centers, which sometimes is of low quality and impure becausethey add vegetable oil to milk to get higher prices.4. Packaging:EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is theonly option available to Olper’s for packaging because it is having monopoly in the packagingsector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it could increase theproduction costs.5. Milk collection & distribution costs:EFL’s 34 out of 40 milk-collection centers are located in Punjab, whereas its onlymilkprocessing facility is situated near Sukkur (Sindh). It increases the milk collection &distribution costs; and also increases the chances of milk getting spoiled because of increasedtravelling time.6. Narrow brand portfolio:It has been more than a year now, when EFL launched its first dairy product, Olper’s Milk onMarch20, 2006. But EFL’s brand portfolio still consists of just 3 products i.e. Olper’s Milk,Olwell Milk and Olper’s Cream. Whereas its competitors like Nestle and Haleeb Foods have amuch diversified line of dairy products. 48
  49. 49. Supply chain Report on ENGRO FOODS LTD. OPPORTUNITIES1. Increased funding by Government:Government has decided to increase farmers’ funding. This is an opportunity for ENGRO foodsbecause previously due to weather conditions and other reasons there was lots of wastage of milkbut now that can be reduced as farmers will be better able to store milk for longer time periods.2. Increased consumption of PLM:Competition may create opportunities for the company because each competitor in the milkindustry wants to increase penetration of processed liquid milk and so they will create awarenessfor consumers through different advertising media. This will ensure the increase in theconsumption of processed milk instead of lose milk and so will in turn lead to increase in salesfor the company. Therefore there will be an opportunity for accelerated growth.3. Awareness:Growing dissatisfaction with loose milk and increasing awareness about health and Hygieneissues have led to increased processed milk consumption.4. Third largest producer of milk:Pakistan is the Third largest producer of milk in the world with a total production of 32 billionliter of milk a year, whose value is more than that of the combined value of wheat and cotton,from a total herd size of 50 million milch animals (buffaloes andcows). Livestock accounts for46.8 percent of agricultural value added and about 10.8 percent of the GDP. Milk is the largestcommodity from the livestock sector accounting for 51 percent of the total value of the sector.Due to the steps taken by the government and private sector, country’s annual milk production isexpected to grow at an additional 3 billion litres in the next few years. This is quite anopportunity for ENGRO foods as there is lot of growth in this part of the sector. 49
  50. 50. Supply chain Report on ENGRO FOODS LTD. THREATS1. Competition:Competition may pose a threat because the company will have to maintain its leadership in anexpanding market so that it doesn’t lose its market share to its competitors. For Olper’s it mightbe difficult to penetrate in a market where the loyalties exist for such brands as Nestle andHaleeb. These brands have been in the milk industry far too long and have left a mark in theminds of consumers in terms of quality. Competition seems to be getting tougher as a result ofnew players entering the dairy market.2. Perceptions and Price Differentials:Consumers’ perceptions and price differentials can cause a threat for the company. It isimportant that Olper’s comes up to the expectations of the customers and fulfills its conformancequality that is the company meets its promised specifications. Consumer’s preferences changewith time and prices might create certain barriers in terms of the profit margins for Olper’s. Forexample, lose milk is still cheaper than packaged milk and that is also one factor that people stillprefer to buy lose milk. FUTURE PLANS OF ENGRO FOODS LTD. Company has planned to make Omore world class premier quality brand like existing brands of Engro Foods. Company is also working on dry milk (KhushkDoodh) like cereals in coming years. They have planned to move other dairy products as are being offered by its competitors like yogurt, flavored yogurt (raita), cereal for babies etc They future plans of own farms are also on board. It’s a way to improve quality by removing all doubts in consumer minds about old milk collection ways form govala 50
  51. 51. Supply chain Report on ENGRO FOODS LTD. Engro Foods is working with different NGOs to meet the Corporate Social Responsibility in country. They are working with UNDP to initiate women’s veterinary workers program They also signing a micro financing model for dairy farming with Pakistan Poverty Alleviation Fund (PPAF) BENCHMARKING AT ENGRO FOODSEngro Foods certainly believes in benchmarking in order to achieve a better standard ofperformance. When the organization was being established back in March 2006, the companyand in particular its dynamic supply chain team had two options regarding the benchmark for thecompany operations. It had a choice between Nestle’s extensive and well reputed MilkCollection Centre system, or Haleeb Foods’ contractor based milk collection mechanism. Itchose Nestle as a benchmark and therefore set up its own milk collection centres based on thelayout and approach adopted by the well entrenched Nestle. However, today Engro Foodsconsiders itself in no need of a benchmark anymore since it has actually surpassed theperformance of its competitors and therefore now it is viewing its own previous performance asthe standard to work against. ISSUES AND CHALLENGESSupply chain management in a country grappling with numerous uncertainties and that too in thedairy milk industry is replete with difficulties, challenges and bottlenecks. Engro foods is noexception and the supply chain team has to deal with various issues and challenges day in dayout.Demand Supply ImbalancesThe first challenge that Engro Foods has to deal with is the reconciliation between demand andsupply, where the two are following different patterns throughout the year. While demandreduces during the winters and increases during the summer, the supply chain team in its questfor establishing trust and harmony with the dhodhis, has to accept milk throughout the year. Thusin order to ensure that the all year round supply is utilized well, Engro Foods actually convertsthe excess supply into powdered milk, which is much easier to store and much more resistant todeterioration over time as compared to liquefied milk. Hence, this is a challenge that Engro isattempting to meet to the best of its resources and capabilities. 51
  52. 52. Supply chain Report on ENGRO FOODS LTD.Lack of Control over Distribution ChannelsThe distribution of goods to the retailer who then sells it to the final consumer is a responsibilitythat is not directly under Engro Foods but rather being handled by the approximately 200distributors Engro Foods supplies to. This leads to a difficulty in exercising control andsupervision of the overall distribution activities. Accurate information with regard to sales,proper storage, timely delivery, and appropriate marketing procedures cannot be obtained easily.However, Mr. Nagi insists that even though third party logistics and secondary sales are beingemployed, feedback is being collected nevertheless and contact is maintained with thedistributors as much as possible.Lack of Knowledge amongst FarmersA major issue that is faced on the raw materials procurement side is the lack of awareness andinsufficient knowledge that is common amongst various small farmers in the villages milk iscollected from. These farmers not only lack knowledge about ways to optimize the milkextracted from their animals but also are unaware about the ways to take care of the animals.This leads to lower productivity and smaller quantities of milk being produced. However, EngroFoods is trying to make a difference by spreading awareness amongst these farmers througheducation, training while also organizing vaccination programs that can make the livestockresistant to various diseases.Infrastructure IssuesThe two plants are located in the interior areas of Punjab and Sindh and the villages from wherethe milk is procured, whether in adjacent or far-flung areas, mostly lack proper roads andhighways that would enable milk to be transported easily and in lesser time. As a result, delaysmay occur which might disrupt the overall production process. But these problems are addressedby the maintenance of adequate supply at the premises at all times in the form of powdered milkin order to deal with any sort of contingency situation.Limitations of the ResearchThis report has been compiled entirely on the basis of the interview we conducted ofMr. SalmanGoheer. (Head of Supply Chain).Engro Foods and some secondary research which was largelyinternet based. No documents were shared with us by the company. A major constraint for theresearch was the inability of the team to visit the actual plant which is situated far away fromhome in Sahiwal and Sukkur, while the Milk Collection Centres that form a significant part ofsupply chain management at Engro Foods also could not be observed because of their hard toaccess locations. Thus, the report has been prepared with these constraints in tow at everyjuncture. 52
  53. 53. Supply chain Report on ENGRO FOODS LTD.RECOMMENDATION We are recommending following important factors which we felt missing in their supply chain:1. To build a regional ware house in Karachi that fulfills there supply side gap & to reduce upward logistics cost.2. EFL is not having its own dairy farms; it largely collects loose milk from farmers &gawalas through its 40 milk collection centers, which sometimes is of low quality and impure because they add vegetable oil to milk to get higher prices. EFL needs to have their own Dairy Farm so that they can meet the increasing demand as their market share is growing by 12% annually & to have quality milk procurement as well.3. EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is the only option available to Olpers for packaging because it is having monopoly in the packaging sector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it could increase the production costs so they need to invest their funds for having their own packaging system.4. They should expand their brand portfolio by investing in yogurt market as their competitors are enjoying it just because of low competition their otherwise Milk pack has its brand name in drinking milk market only. So it’s an opportunity for them to grab & enjoy the flavor. 53
  54. 54. Supply chain Report on ENGRO FOODS LTD.REFERENCES Mr. Salman Goheer. (Head of Supply Chain at EFL) Mr. AmmarMursalin.(Assistant of Mr. Salman) Mr. UmairNagi (Supply Chain Development Manager at EFL) Mr.Dilshad Ahmad(Quality Controll Officer EFL) Mr. Ali Akbar, Director Marketing EFL Mr. Hassan, HR Assistant Manger, EFL. Pakistan Dairy Industry, white Revolution paper www.engrofoods.com www.google.com 54

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