SUPPLY CHAIN SYSTEM

GROUP MEMBERS:
M. Zeeshan Munir M. Amir Mushtaq Sameed Sohail Mehroze Arshad EMBAFAL12019 EXMBAFAL12058 EMBAFAL12012 EMBAFAL12008

INTRODUCTION OF SUPPLY CHAIN OF MILK

Milk is the most perishable and fast moving customer good. The very first and initial requirement or feed for any human being is milk. Milk is complete diet as it contains every nutrient except iron. Fortunately Pakistan is the fourth largest producer of milk in the entire world and its annual production is surprisingly 45 billion liters which is very high. But unfortunately only 27 billion liter of milk is available for human consumption. Therefore most of the milk is lost and Pakistan cannot fulfill its demand. Despites of these facts and figures Diary Industry is playing a very crucial role in the Pakistan economy and contributing 14% to the countrys overall GDP. More than 20% of the entire population of Pakistan is involved in this sector directly or indirectly. If we talk about the Dairy Supply chain management of Pakistan, we can divide it in to two categories one is formal and 2nd one is informal sector. The share of formal sector is 4% whereas the rest of 96% of share is taken by the informal sector. In the formal sector Nestle is the market leader in Pakistan the informal sector. In the formal sector Nestle is the market leader in Pakistan and contributing 60% of market share as per fact and figure of 2008. In formal sector, milk is collected by different milk collection center. Then it is taken in to the processing plant milk is stored in cooling towers. In the processing plant, milk is processed and packed and then it is distributed to the retailer and finally milk is reached to the ultimate consumer. In formal sector we can divide it in to two sectors. In first category farm milk is collected by gawalas (milkmen) who sell the milk directly to the consumers or the milk collectors. Second case, farm milk is collected by different milk collectors who sell their milk to the retailers and these retailers provide it to end consumers.

DAIRY INDUSTRY CHALLENGES IN SUPPLY CHAIN

This business is unregulated and there is no as such involvement of government therefore the middlemen often take advantage of poor farmers and charge low prices for their milk and usually delay their payments. Large contractors often blackmail small producers and processors. Most of the farmers are uneducated and they are unaware of modern technology and equipment. And again there is no as such Government involvement to train the farmers in modern dairy practices so the famers are lacking in this area. Average Animal of Pakistani breed gives only 1300 to 2400 kg of milk per annum as compared to yield 6000 kg/animal/year in the modern world. As the farmers are not educated in their practices so due to wrong milking methods most of the cow and buffalo have expose to mastitis. Farmers have not sufficient idea of using different types of feed available in the market so they have no precaution to save their animals from diseases. Farmers are not taking the facility of any veterinary doctors which leads to decrease in the milk yield and animal is less productive for longer period of time. Milk productivity is seasonal and it is going to be the most important issue that milk producers are facing in this industry. In summer season, animals do not find enough food because grass and herbs dry out quickly. Due to higher temperature the digestive system of animal is weak and farmers yield less quantity of milk. Milk production falls in June and increases in December. The significant difference between the two seasons is really a concern for the dairy sector of Pakistan. The foremost problem dairy industry is facing is the adulteration means adding water, fats and other harmful substance to the milk that makes the milk unhealthy and less hygienic. This problem is difficult to control and requires serious consideration from both public and private sectors. Transportation, storage

and processing make this product more costly. Day by day electricity is a problem in the country therefore majority of the milkmen use ice to keep the temperature of milk low but this method is not optimal and quality of milk is affected. If we talk about the facts and figures as per World Bank reports 15%of the milk is lost at the stage of farm due to mishandling and wrong milking practices. While 5% gets wasted during the transportation stage. The buying capacity for small scale farmers is very low they do not afford high cost of feed for their animals and they are lacking advantage of economies of scale. They do not access to formal market channels and are often exploited by the middlemen who offer low prices for their milk and they enjoy the huge profit margin for their own customer.

INTRODUCTION OF NESTLE PAKISTAN LTD.

Nestle Pak works as a subsidiary of Nestle S.A. Nestle Pak started working in Karachi since 1988 under a joint venture with Milk Pak Ltd. With its headquarter in Lahore, Nestle Pak. has four production facilities. Two of its factories are in the heart of Punjab province; Sheikhupura and Kabirwala which are multi-purpose factories, one in Islamabad and the other in Karachi, Sindh which produces bottled water. Nestle Pak is the biggest milk collector in Pakistan. Currently, it collects milk from 190,000 farmers over 145,000 square kilo meters in Punjab and Sindh. With its 8000 brands world-wide, Nestle is the leading brand in beverages and food industry. It has a separate department for supply chain management which was founded in 2001. The objective behind the creation of separate department of supply chain management is to ensure the smooth running operations from the supply of raw materials from farms or other sources to the supply of finished products into the markets.

SUPPLY CHAIN PROCESS OF NESTLE MILK PAK PAKISTAN

Nestle Pakistan has a wide range of products from nutrition to beverages, as so we chose MILK PAK to explain the supply chain of Nestle Pakistan. Milk is collected from more than 2000 village milk centers and 500-600 sub centers and then milk is transported to 25 main centers. In both stages the temperature of the milk is kept at 4 C to keep the quality of milk up to standard. After whole process of milk collection, it is transported to the Sheikhupura and Kabirwala factories. In the processing stage milk is passed through different stages i.e. standardization, pasteurization UHT treatment and packaging. After processing, milk is then reached to the factory warehouse which is near the premises of the factory. Finally milk is transported to the south, north and central regions. Then finally distributors of MILPAK carry it and transport it to the super marts and retail shops so that its available to the end consumers. Supply Chain of Nestle MILKPAK guarantees environmental friendly practices and for this they are continuously making their contributions in the society for keeping the environment safe and secure. Their ultimate objective is to make sure that the green supply chain is in practice while keeping their benefits, profits and business activities intact.

SUPPLY CHAIN VISION

Nestls ambition is to achieve high level of customer satisfaction through low cost, highly efficient operations driven by value creation and continuous improvement

SUPPLY CHAIN MISSION

Optimize and consolidate resources and processes for a low-cost but efficient. Develop and manage simplified and effective supply network to achieve a high level of service. Create a continuous improvement culture driven by performance measures and reward.

NESTLE MILK COLLECTION

Nestle has the biggest milk collection network in the country which is collected from both cows and buffaloes. Nestle has a very wide and vast network of village milk center (VMCs), sub centers which is widely spread in the country approximately more than 2000 VMCs and 500-600 sub centers. Milk contains low sodium, high fat and solid not fat (SNF) and very low in bacterial count. If the milk is not up to these standard that milk is rejected. As we know that milk is a perishable commodity in this connection to ensure milk as per quality standards different chillers are installed at the collection centers which will save the milk from bacteria development.

MANAGEMENT OF MILK COLLECTION

Nestle has 24 regions and each region collects milk from 60-70 milk collection sub centers and VMCs. Each region is headed by regional milk collection manager (RMCM) who is responsible to coordinate all the activities within its region. Territory in-charge (TIs) maintains the steady supply line with the suppliers and farmers and collects milk from 10 collection sub centers and he has some target of milk collection which he has to achieve. Volume of milk collection is calculated by national milk collection managers (NMCM). These territory volumes of milk collection are further divided in to sub center that has to be monitored on daily bases. TIs are also responsible to ensure the best quality and hygienic practices, quality testing and record keeping at the sub centers. Each sub center has assigned time so that truck collects the milk and delivers to the chillers of main collection centers. Each milk truck has capacity of maximum 8 to 10 tons. Milk is pumped from the chillers to the truck holding area which is a very efficient method. From the main distribution center near mid night through large insulated tankers of minimum capacity 20 to 25 tons shipped to factory. The insulated tankers and mid night time helps in maintaining the milk temperature below 4C during the journey. At the factory all the milk testing are once again repeated; if any of the test is not positive then milk is returned to the collection centers.

TOPICS TO BE COVERED FURTHER

MANUFACTURING OF NESTLE MILKPAK WAREHOUSE OF NESTLE IN KARACHI LAYOUT OF WAREHOUSE INVENTORY MANAGEMENT IN WAREHOUSE

DISTRIBUTION DISTRIBUTION PROCESS DISTRIBUTORS CUSTOMERS DISTRIBUTION CHANNELS DISTRIBUTION SALES TARGET COMPARISON WITH OTHER COMPETATORS GAP ANALYSIS RECOMMENDATIONS CONCLUSION