Report on SUPPLY CHAIN MANAGEMENT

English Biscuit Manu acturer

Su!"itte# to SIR S$HAIL MA%EE&

I'RA UNI(ERSITY GULSHAN CAMPUS

Group Me"!ers) *IA AHME& +,-../ ISRAR AHME& +-0,1/ MUHAMMA& 2ASI3 'URESHI +,415/ SHEI6H TAN(EER AHME& +770,/ MEHE6 'AYUM +-880/ A3RA MUNA*AM +8770/

Contents
Contents...................................................................................................................................... 2 Executive Summary..................................................................................................................... 3 INTRODUCTION......................................................................................................................... 3 SUPPLY C !IN O" E#$%...........................................................................................................& DECISION $!'IN( PROCESS%.................................................................................................& OUTSOURCIN(%......................................................................................................................... ) TR!NS!CTION !ND !LLI!NCE P!RTNERS%...........................................................................* ROLE O" PO+ER !ND ITS IN"LUENCE ON #UYERS !ND SUPPLIERS%..............................* DELI,ERY O" -U!LITY PRODUCTS TO CUSTO$ERS%.......................................................... $ODES O" TR!NSPORT!TION%............................................................................................./0 IN,ENTORY $!N!(E$ENT !ND +!RE OUSIN(%............................................................../0 DECISIONS ON PROCURIN( !ND LE!SIN(%......................................................................../0 TOT!L COST O" O+NERS IP%............................................................................................../0 CONCLUSION%.......................................................................................................................... /2

Executive Summary
Supply chain management is the continuous flow of products and services from the point of origin to the point of consumption. It is involved at every stage from production till consumption. Managing all these activities at a single time is very difficult and needs expertise to take up all activities. Purchasing of raw material is the dominant part of supply chain because it is the very first phase in supply chain and moreover the end price of the product depends upon the cost incurred during the buying of raw material. So purchasing is too be made upon factors like price, quality and term of payment. ecision are made upon these three factors, no doubt others factors are also important but these three are crucial in buying decision. !vailability of raw material, supplier power, buyer power, competition is the other factors. Supply chain also involves product manufacturing, forecasting, and smooth flow of material between intermediaries, planning, implementing and availability of end product for customer with maintaining the promised quality of product in minimum cost. "ecause of unpredictability of the demand of product, which is quite natural in every product, makes supply chain more complex and confusing. #rrors in forecasting tend to push their employees to work harder and harder. $ere the best to be done is to accept the risk as something positive, because profits are made through risk. %he problem in production scheduling of products, is the unreliability of the forecasts. "ut if company some all of these forecast of its product, then the overall forecast company will get will be enough to work on. So here we have discussed the purchasing cycle, purchasing problems, vendor involvement while decision making, multi supplier versus single supplier, terms of payment, promised quality, types of material that is purchased, purchasing conditions.

INTRODUCTION
Initially in &'() with the name of peek freans Pakistan limited a company was established which is now known and famous as with the name of #*+,IS$ "IS-.I% M!*./!-%.0#0S

1private2 limited. "efore &'(( the company was well3known on the basis of 4oint venture but in &'((, !ssociated "iscuits International ,imited 1!"I,2 which was one of the sponsored companies of united kingdom .5 changed its name which eventually changed the name of the venture to #nglish "iscuit Manufacturers Private ,imited #"M , this name still stands out up till now. !fter two years of business, in &'(6 #"M started its manufacturing process and hence that era was the beginning of the wide range of the peek freans marketing. %he continuous consistency of #"M in the field of marketing, in variety of taste and in quality differentiates this company from others. %he consistency of providing high quality biscuits to consumers for the past 78 years makes #"M has market influential in Pakistan. IS9 '88&, IS9 &788& and $!--P are the certificates which are being awarded for the first time to any Pakistani company and #"M has these certificates in their credit. %he new concept of biscuits as :food between meals; was for the first time promoted by #"M. %he output of more than 0s &< billion and '8,888 plus tons of production are the total annual sales of #"M. #ra of <888 is being considered as one of the best for #"M, from year <887 to <8&8 #"M achieved another milestone, they successively received the awards of #nvironmental #xcellent !ward. %he export of #"M products are also not limited to few countries their exports includes countries like -anada, .nited 5ingdom, .nited States 9f !merica, .nited !rab #mirates, "ahrain, Saudi !rabia, 4ibouti, Sudan and South !frica. In contrast to its exports #"M is considered as sole leader of domestic market. %he following achievements of #"M make this company as one of the best company in Pakistan. "eing such a huge company supply chain management should be effective and following is a brief over view of the supply chain process of #"M. %he impacts of IS9 certifications are huge. #"M believes that quality insurance can be maintained by proper inspections. #"M make sure that there will be continuous inspection in all the departments of the company. #"M believes that if you fail to maintain consistency and quality parameters in their product offerings then you will be vanished. Montgomery and a "P industry etc vanished due to the fact that they did were lacking on consistency and quality. /lour distribution, %emperature, #venness of the surface of biscuits, -olor of biscuits, Personal $ygiene and -leanliness are the areas where #"M have a strong inspection department. %hese are the areas of inspections and they maintains consistency and do not compromise on quality.

SUPPLY CHAIN OF E !"

ecision making process, outsourcing, transportation and alliances partners, relationship between buyer and suppliers, issuance of purchase order, inventory and warehouses are the areas which are focused the most in #"M to handle supply chain management and process.

DECISION !A#IN$ PROCESS"

%he ma4or decision process of #"M consists of three hierarchies= &. In decision making process, minor and ma4or purchasing order plays a pivotal role. %he supply chain department and the supply chain managers are responsible in #"M for purchasing raw material and procurement of non significant items. %his is the first phase or hierarchy in decision making. <. %he sponsors, top management and the finance department affect ma4or purchasing decisions apart from supply chain department and managers, because in the second phase of decision making the involvement of finance department and the involvement of top management plays an important role in budgeting so that operations can be done accordingly. >. %he last hierarchy is the approval of -#9. %he approval of -#9 after viewing the proposal decides that what should be opted or what should not be opt. ,ast year on ecember #"M faced a huge loss 4ust because of wrong decision making. %op

management was not involved in decision making process eventually the consequences were shocking. In ecember there was huge fluctuation in the prices of sugar. ?hen sugar was selling at a price of &88 #"M got an offer to buy it at a price of @) even with a discount rate #"M refused the offer. ,ater on they received another offer of () rupees and they accepted it. Aust after their acceptance the prices of sugar were rapidly reverse and sugar figures showed short fall of around &8 tons resulting in huge decrease in the prices of sugar. %hen sugar was available in the market at the price of )8. #ventually #"M suffered a huge loss and loss is quoted in the figure of billions. ue to this wrong decision the company experienced a huge loss and supply chain manager was claimed for this untimely decision.

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OUTSOURCIN$"
It is quite obvious that in supply chain management outsourcing plays a very important role because sometimes outsourcing reduces your cost. "eing such a huge company logistics are also on a huge scale therefore all functions related to logistics has been outsourced in addition packages group are carrying out the packaging activities. #nglish biscuit manufacturers have outsourced their two operations= &2 ,ogistics <2 Packaging %he reason of outsourcing logistics is that #"M is concentrating on the manufacturing of biscuits which is regarded as their main core business. %he ma4or and the most prominent company that is looking after the logistics operations of #"M is P%*, besides P%* #nglish biscuits manufacturers has divided the logistics operations to multiple different companies but as it is mentioned above P%* is the most outstanding company. Since logistics have a huge impact on the company therefore sometimes logistics may turn as an annoyance. "y outsourcing the logistics department you can save the maintenance cost of automobiles. #fficient players of market that can fulfill the demand of the customers immediately and timely are the partners of #"M. "eing such a famous and leading company of Pakistan #"M does not compromise on the fulfillment of the transportation demand. In the early era of &''8Bs the situation was totally different. #"M used to have rental warehouses and to specific stops #"M used to send its goods and after awards goods were carried out to specific different destinations and to distributors. In the above process #"M suffered some losses like spoilage of goods and time consumption. !ccording to desired locations #"M purchased warehouses and the previous system was over ruled by the new one. %he new system includes 78 footer closed containers to the ware houses where goods were being moved and inventories were stored there. 9nly the management in the warehouses is of #"M otherwise on basis of contract with the third party all the arrangement of containers are being done by the third party even the movement of goods from one place to another, from cities to warehouses and from warehouses to distributors all the work are carried out by the third party. "eing such a huge company the distribution network of #"M is also very huge and vast. /or the fulfillment of customers demand
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#"M contracts with multiple companies because a single company can not managed such a huge distribution network. %here are >88 distributors of #"M and it covers over 788 plus cities and towns.

TRANSACTION AND ALLIANCE PARTNERS"

#nglish biscuit manufacturers 1#"M2 believe in partnerships. In every regard #"M accommodates their suppliers and they are being considered as business partners. %he help and the assistance of suppliers in #"MBs core business that is vendors of flours, sugar and printed films are 4ust because of long term relations that are being built between #"M and their suppliers. !part from this #"M also evaluates and rates their suppliers on regular basis. SupplierBs contributions in the company are highly valued and appreciated and #"M also acknowledges their suppliers responses. /urthermore suppliers and alliance partners are also invited in the annual functions of the company along with their spouse where #"M acknowledges the contributions of their alliance partners. #"M believes that success is possible only with the assistance of their alliance partners. #arlier this year #"M has highlighted the problematic areas in a discussion meeting. #"M has field work and flour, sugar and vegetable based palm oil are considered as one of the main inputs of agricultural produce. #"M has not built up strategic alliances as such, but is still in process of doing so. 9ne of their pro4ects is in progress in which they are working on building alliances with the suppliers. #"M would send their own inspection teams so that the quality levels can be ensured at each critical level.

ROLE OF PO%ER AND ITS INFLUENCE ON SUPPLIERS"

UYERS AND

Perfect competition is prevailing in Pakistan and it is only a sellerBs market. *ot only with biscuits manufacturers but with other confectionary items #"M has a competition as well. Sometimes #"M has to compromise with the terms and conditions of the suppliers because of the fact that there is no win3win condition with the suppliers due to such immense rivalry and competition. FOR E&A!PLE #"M kept on struggling hard for two years to do business with 0!/$!*. -ontinuous ignorance from 0afhan did not slow down the process of discussion
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meetings of #"M. /or a long period of five years both these companies had worked together but eventually their working relation was broken due to 0afhanBs non fulfillment of demands and other issues. Subsequently the alliance of these both companies came to an end but it did not lasts for too long, 4ust after six months 0afhan and #"M came in terms with each other again. Packages went through the same scenario. #"M convinced packages too for a long period of time. .ltimately it took few years to #"M to convince them. /or the providence of excellent quality films that are used in family packs of biscuits #"M convinced the well renowned company of Pakistan so that they can have a competitive edge over their rivals in quality and packaging. &C of the total cost is incurred while importing raw materials. %hough they sell at international prices only, but as #"M is a huge company and their volume is huge too #"M can state their terms to some extent in a market where monopoly is very high. In order to attain control over number of things like costs, monopoly, quality etc #"M has now started to buy materials from their suppliers in order to deal with up with issues. *ow there is an upper hand of #"M over its suppliers by the introduction of this new system. .nfortunately in the case of flour there is still a lacking that should be addressed by #"M. 0egardless of the fact that #"M is one of the biggest flour buyers, the flour millers back offs and prefer selling in direct market due to the terms and conditions of #"M. /lour millers are still not that much educated and sufficient to cope up with the terms of #"M like 1the availability of generators, better infrastructure etc2. In supply chain management strong relationships are also required with our alliance at the time of complex conditions and at the time of difficulties. #"M locks the quantity and the price with its supplier for the required time period of the contract. So, the price fluctuations do not affect the deals in this way. FOR E&A!PLE as #"M is one of the leading biscuits manufactures they use to buy tons of sugar, a quantity around &8,888 tons from %-P 1%rading -orporation of Pakistan ,td2. !s they usually buy sugar once in a year and buy in a bulk therefore confusion a chaos occurs in the market when #"M enters into the market. %he reason behind this chaos is that #"M buys in bulk and a seller goes out of stock and regular buying gets deeply affected. %here are few situations where alliance is not that important. Sometimes alliance eliminates the competition. #"M says that building alliance is not important when in case of perfect competition. %here is no need of alliance if all the producers are making products with no
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differentiation. FOR E&A!PLE according to #"M it does not make any logic to build alliance with PS9, Shell and Suparco companies for the fulfillment of diesel and ,P+. %he consumption of diesel and ,P+ in #"M is in a huge volume. In contrast to this, there are few areas in which building strategic alliance plays an important role. %hose areas are the purchasing of flour. In Pakistan all the producers are manufacturing the same flour and perfect competition occurs but #"M preferred quality, clean and hygienic flour. #"M build strategic alliance only with those suppliers who posses the quality and hygiene attributes.

DELI'ERY OF (UALITY PRODUCTS TO CUSTO!ERS"

#"M main focus is on the timely and safe delivery. %he process of delivering the goods to its customers measures the efficiency of the company in the department of supply chain management. #"M believes that if there will be strong delivering schedule then there will be strong supply chain process. %he quality of products is ensured in such a way that inspection teams perform their responsibilities in every stage of production, even when supplier comes up with the material. /or inspection #"M have well technological laboratories. !fter examining each an every step #"M makes &88C assures that their products are of high quality. !fter manufacturing quality products #"M assures a timely delivery to their distributors. *ow in recent times when #"M owns their warehouses timely delivery is not an issue, in their early time of establishment when they did not have the warehouses delivery use to take a time of <8 to <) days but now this lead time has been reduced to < to > days 4ust because of warehouses. %he biggest benefit of warehouses is that now it hardly takes > days to reach the final product in the hands of distributors. In the past #"MBs delivery process was slowD they start production only at the time when suppliers gave them an order and in order to fulfill the suppliers required demand lead time was comparatively > times more as of today. istributors receive the final product delivery late due to slow modes of transportation. "ut now #"M is far more efficient, immediate and quick in their procedures of delivery and quick, speedy modes of transportation are used now days.

!ODES OF TRANSPORTATION"
#"M uses all three modes of transportation but mode of air is only used when material is required on urgent basis and for incoming only. /or small sphere parts mode of air is used by #"M. "y other two modes i.e. by road and sea they export their products.

IN'ENTORY !ANA$E!ENT AND %AREHOUSIN$"

#"M saves the stock for two days for being on the safe side but apart from this they use /I/9 1first in first out2 system and AI% 14ust in time2 system. %o have an inventory and warehouse free from dust particles and air pressure they have introduces a new technology named as hygiene system. %his system also helps #"M in managing inventory in maximiEe space. #"M have warehouses in different areas of Pakistan altogether they have six warehouses two of them are located in 5arachi and !ttar with factory, one in Sukkur, one in Multan and one in /aisalabad.

DECISIONS ON PROCURIN$ AND LEASIN$"

"eing the market leader in Pakistan #"M can afford the procurement of new equipment, "ut when urgent need of equipment arises #"M opt for used equipments because the import of new equipments takes huge time and for the fulfillment of urgent need #"M sometimes uses the used of second hand equipments in place of new equipments. ''.'C is the ratio of using new equipments and only 8.&C is the ratio of used equipments in #"M. #"M stated that by using used equipment the level of risk increases to a huge amount in order to minimiEe risk new equipments should be used. ecisions of procuring new equipments are done by top management and they are bought on cash not on leasing. #nglish biscuit manufacturers hardly utiliEe used equipments because #"MBs core value is to give quality products to customers and they hardly comprise on quality.

TOTAL COST OF O%NERSHIP"

#"M performs variance analysis in three different categories which are !cquisition cost, ownership cost and last post ownership cost. Ac)uisition cost"

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/or every raw material they have predefined quality parameters 1specifications2. #very supplier of the company has those specifications and the specifications are defined as the complete set of instructions that will be containing all the information of raw material that company will buy. %he providence of raw material by the suppliers is totally based on the predefined quality parameters 1specifications2. #"M compensate their suppliers after having all the information regarding price and cost of raw material. #ven though if there is no source of information about the cost of raw material then #"M compensate their suppliers according to the fair rates of market. !part from having the knowledge about raw material #"M also knows all the information regarding their suppliers i.e. how many machines are available to your suppliers, their dimensions and their siEe as well. In order to reduce the total cost #"M tells their suppliers to made maximum number of products by running that machinery only which is required for production. #"M keep on observing their suppliers. #"M also knows all about product attributes. %hey posses completed information about the colors too. Perhaps #"M knows the exact price at which suppliers buy the color, they also knows the price associated while using that color and exact market price at which the color purchase are been done. In order to control acquisition cost efficiently #"M works on Eero deficiency and makes contract with only those who can fulfill the predefined quality parameters. O*ners+i, cost" #"M believes that downtime cost should be managed efficiently as it is very significant so #"M monitors their downtime cost <7F6. #ven if #"M bears downtime cost they can afford it as the matter of fact their production is on maximum. !t the time of emergency #"M uses those heavy spear parts that #"M tends to save and store in their warehouses. %o achieve the level of cost minimiEation #"M produces products according to predefined levels of manufacturer. ! machine requires preventive as well as remedial or routine maintenance. SpecialiEed engineers look after the preventive maintenance on weekly basis where as workers looks after the routine maintenance. Irrespective of the material cost there is around a budget of approximately lack rupees used for downtime cost. !s the name #"M is associated with quality so for maintaining the good quality of biscuits #"M uses their own power generators as this benefit #"M in two ways. %he 4erk can destroy the biscuits and a generator prevents the company from these 4erks

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and these generators reduce the unit cost of electricity as well as compare to 5#S-. /or cost saving #"M looks for every single available possibility and opportunity. Post o*ners+i, cost" Successively winning of #nvironmental #xcellence !wards for seven years since <887 indicates that #"M is also environmental friendly and is among one of the best companies of Pakistan. %o know and have customerBs demands, expectation in mind #"M now and then conducts surveys to attain all the information regarding and related to their customers and if customers have any problems or complaints then companyBs main focus turn on to solve that problem. %o keep up a track or record of customer complaints #"M has established customer courts in different parts and in different provinces like Pun4ab, 5hyber Pakhtunkhwa and in Sindh as well. #"M is the only company in Pakistan who has given his customers a right to come into a court and register their complaints and #"M pays a huge value or amount to customerBs on hisFher demand from the companyBs account.

CONCLUSION"
.ndoubtedly #"M is a market leader, 4ust because of their quality products and consistency. #"M is an excellent company as the matter of fact that volumes of each product are extraordinarily huge and they are maintaining all of them very efficiently. In #"M there is only G!G quality products no G"G or G-G quality products are being manufactured. #"M never compromises on quality as they have inspections teams for the assurance of quality products. If any defect is found by the inspection teams then those raw materials and finished goods are returned back to the suppliers. %hat is why #"M claims that there is no deficiency in the company hence #"M works with faultless suppliers. %hese are the key qualities of #"M which makes this company stand out from the rest of the companies. #"M does not compromise with the terms and conditions with the suppliers. #"M is seeking for building transaction alliance so that they may have a reliable source or alliance in the times of need. In short #nglish biscuits manufacturers #"M have an ideal supply chain management and process.

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