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Storage and Warehouse Techniques

Spring 2014 Section: Z



Olpers Storage and Distribution Network

Submitted By:
Murtaza Makati 12805
Adeel Afzal 12807
Adnan Ahmad Siddiqi 12808
Muhammad Faraz 12459


Table of Contents

Company Profile ..................................................................................... 3
Location of Plant ................................................................................... 5
Location of Offices ................................................................................. 9
Organization Chart ............................................................................... 10
Supply Chain Structure .......................................................................... 11
Milk Industry Profile ............................................................................. 12
Supply and Demand .............................................................................. 13
How Industry Works (Marketing Channels) ................................................ 14
Rural Marketing Chain: .......................................................................... 14
Urban Marketing Chain: ......................................................................... 14
Processed Marketing Chain: .................................................................... 15
Inbound Logistics: ................................................................................. 18
Milk Collection from Various Cities of Sindh & Punjab: ................................ 18
Demand Fluctuation of Olpers Milk .......................................................... 26
Reverse Logistics .................................................................................. 26
Packaging: ........................................................................................... 27



Company Profile

Engro Corporation Limited is one of Pakistans largest conglomerates with businesses
ranging from fertilizers to power generation.
In the interest of better managing and overseeing businesses of subsidiaries and affiliates
that are currently part of Engros capital investments, Engro Chemical Pakistan Limited
converted into a holding company structure. As part of this process, two major changes
occurred with effect from January 1, 2010; Engro Chemical was renamed as Engro
Corporation Limited and it demerged and transferred its fertilizer business into a separate
wholly owned subsidiary, Engro Fertilizers Limited.
Currently Engro Corporations portfolio consists of seven businesses which include
chemical fertilizers, PVC resin, a bulk liquid chemical terminal, industrial automation,
foods, power generation, and commodity trade.
Engro Foods Limited is subsidiary of Engro Chemical Pvt. Ltd. which is one of the most
reputed enterprises in Pakistan with more than 40 years of diversified business operations
in the areas of fertilizer and chemicals. Engro Foods started its business operations in
March 2006 and with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers
cream, it has established itself as a major player in the foods business. Engro Foods has
already set up two processing plants at Sukkur and Sahiwal. With the ever expanding milk
collection network and processing facilities, the Supply Chain has geared us for the growing
sales of our products.
Engro has started milk processing facility to produce and market branded UHT milk, cream,
and other milk products. The plant is located in Sukkur, it started their operations in March
2006. Engro procure raw milk supplies from Sindh and lower Punjab. They introduced
their milk product with the name of Olpers in March 2006.


Vision Statement
Aim at transforming the company within the five years into first national food industry
giant, then into regional force and finally into a global player

Mission Statement
Build branded food business to improve quality of life by offering tasty, affordable and high
nutritional products to our consumers while maximizing stakeholder`s value.

Location of Plant
North Plant:
Located at a dstance of 8 kilometeres from the National Highway Lahore, the Engro Foods
North Plant started its commercial production in December 2007 in the well known dairy
hub of Sahiwal.
Established with a vision to be amongst the biggest dairy plants in Pakistan. Our SWL plant
team also managed to deliver a reduction of more than 20% in maintenance costs.
In 2011, our North Plant continued its stringent focus on safe operations crossing 3 million
safe man hours with a record production of more than 1 billion packs in dairy an
achievement that fueled our target to cross 6 million injury-free man hourse for thr site.
Simultaneously with an inherent costsaving mechanism built in to te manufacturing
framewark, the plant embarked on a plan to revamp its power generation system with a
dual fuel solution an innovation that has led to cost savings of Rs. 40 million per year.
As the scale of production increases for Engro Foods, the plants output continues to reflects
growth, rising significantly year
after year.









South Plant:
Covering a total area of 27 acres of land at a distance of 1.5 kilometers from the Sukkur
Barrage, the Engro Foods South Plant is the only third generation UHT unit in the country.
Commissioned in the year 2006, the South Plant has evolved to cater to the needs of our
key flagship brands Olper`s Milk, Olper`s Cream, Tarka Ghee, Olwell, Olper`s lite, Tarang,
Owsum, Olfrute Juices, Dobala Cream and Daily Omung.
With a commitment to operational and quality excellence, the South Plant has crossed a
safety milestone of 3.6 million man-hours.

Nara Dairy Farm:
Building on our vision to elevate consumer deligh and ensure high nutrition value in all our
products, Engro Foods decided to enter the intensive dairy farming practice, giving us an
edge over sompetition.
Our state-of-the-art Nara Dairy Farm at Sukkur is equipped to respond to rapid increase in
demand for quality milk incorporating cutting-edge developments in the dairy sector. The
Nara Farm is spread across over a geographical expanse of 50 acres with additional acreage
available for future expansion and fodder production.
As a stepping stone in our journey towards creating milestones, we decided to import our
firest shipment of 1600 cattle from Australia and through carious interventions
acclimatized the foreign breed to the local climate eventually leading to a 2.5 time
increase in milk yield per animal.
The farm is fully capable of producing high nutrition forages through crop management,
processing of high nutrition feed and via cow cooling systems to combat summer heat to
produce world class quality milk at par with local and international quality standards.
As the first ISO certified dairy farm of the country, the Nara Dairy Farm currently houses
over 3000 cattle including both young stock and dry animals.











Location of Offices
The head office of Engro Foods is located at 3rd floor of Carlton Hotel & Club.
There regional head offices are in :
o Karachi located in Business Avenue Shahrah e - Faisal
o Lahore
o Multan
o Rawalpindi
o Peshawar
o Gujranwala

They believe that there recent successes will take them to their goal which is To be one of
the biggest players in the food business by dominating the food business, and to achieve
this they will settle for nothing less than the cream.

Organization Chart




Supply Chain Department
Customer Service
Department

Purchasing

Planning
Supply Chain
Development
Warehousing Logistics
Inbound
Logistics Milk
Procurement
Outbound
Logistics

Dispatches
Supply Chain Structure















Milk Industry Profile
Pakistan is the worlds fifth largest producer of milk but even then it has to import powder
milk to meet the domestic needs. About 30,000 tons of milk powder is imported from
Poland and other European countries to meet the country requirements. The Government
is spending huge amount of foreign exchange amounting to about Rs. 807 million every
year on the import of milk and dairy products. Some milk processing firms produce milk
powder locally but most of that is used for reconstitution in seasons of scarcity. About 80
percent of the milk, especially in and around big cities is used for milk tea. In cities, milk is
largely consumed for tea whitening (2.3 billion liters), drinking (2.3 billion liters), and
desserts etc (2.2 billion liters).
There is a great need to enhance yield per animal and this should be through the
improvement in the genetic potential of local breeds and production of high quality fodder
and feed. Milk output should not be sought through increase in animal numbers. Scarcity of
feed, and its high cost is a major limiting factor in urban dairying. At present there is
insufficient quantity as well as quality of fodder, so animals are underfed, weak, thin, and
consequently produce less milk and meat.
With large numbers of farmers getting into commercial dairying and forage
production, middlemen have emerged who have contracted hundreds of small farmers in
remote villages and towns of difficult accessibility. The middlemen visit households on
motorcycles and purchase milk early in the morning at much lower prices than in city
markets. They have contracts with urban hotels and households to deliver milk to them.
Due to high prices in the big towns, milk is transported on the roof of buses from hundreds
of kilometers. Payment is usually monthly. Poor farmers with 2-3 buffaloes and cows
usually find their animal feed and meet some of the important domestic needs from milk
money. These small dairymen are happy to earn sufficient profit to meet their family needs
of milk and animal feed from the sale of the milk and still save reasonable amounts.
Packed milk and milk products are sold throughout the country in big, medium, and
even small towns. Hence there is a tremendous need for high quality and cheap fodder to
get maximum value from stock kept in villages, towns and stall fed in the peri-urban and
urban areas.
The major milk companies purchase milk from association members at suitably
sited milk collection centers for different villages. Milk is purchased according to its fat
content. Improved forage seed, livestock health care, and breed improvement facilities
through artificial insemination are provided to members at subsidized rates.
Over all consumption of milk per day is 4 Lakh 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 price conscious. Therefore, demand for open, raw milk is high compared to processed
milk as indicated in the chart above. 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. During July 2007- June 2008, dairy products14
worth Rs.2320.42 million ($38.6 million) 15 were imported. The Statistics Division lists the
product only as Milk and Milk Food for Infants.



How Industry Works (Marketing Channels)

The three marketing channels in Pakistan are rural, urban, and processed
marketing chains. An overview of these is given below:

Rural Marketing Chain:

A significant proportion of the milk produced in rural areas is consumed at source within
the hamlet or village, either through farmstead consumption or in some cases, direct sales
by the farmer to the neighborhood. The remaining 30-40% is marketed through an
intricate marketing chain consisting of multiple layers of intermediaries .Figure below
elaborates the rural milk marketing chain and the price of milk at each node in the chain.

Urban Marketing Chain:

An estimated 9 to 12 million liters of milk every year are consumed by the urban
consumers in Pakistan. To satisfy some of this urban demand, milk is produced in urban
and peri-urban areas of the country, accounting for 5% and 15% of the total milk
production, respectively. Since this milk is not sufficient to meet the entire urban
demand, the deficit is met by rural producers, as explained in the analysis of the Rural Milk
Marketing Chain above.
Peri urban dairy farms are located on the outskirts of major cities. These are usually
owned by market oriented farmers and, owing to the scale of their operations, can be
classified into two general groups. Most of the farmers operate on relatively small scales by
keeping 10 to 50 dairy animals. On the other hand, larger farmers usually keep up to 500
livestock heads. This later category of farm can be either owned or operated by a
progressive farmer individually or it can be a part of the peri-urban cattle colonies that
have been established on the outskirts of major cities.
In the Urban Milk Marketing Chain, the producer has relatively more control over
the supply chain as the consumer is easily accessible and is also willing to pay a high price
for milk. Hence, in many instances, farmers in the Urban Milk Marketing Chain integrate
production and marketing functions in their operations, and instead of relying on a
middleman, the milk is directly sold by the farmer. Figure below depicts the pre-urban
marketing chain.

Processed Marketing Chain:

Most of the milk in the country is marketed in raw, liquid form. According to industry
estimates, only 3-5% of the milk is marketed as processed milk. Currently, there are more
than 20 dairy processing plants operating in the country. The major product produced by
these processing plants is UHT or Pasteurized milk. Other products include powdered milk,
butter, cream, and lassi, etc. However, UHT milk is the most predominant form of product
produced by these plants.


Tetra Pak Milks (Market Share)




MilkPak
43%
Olper's
23%
Good Milk
16%
Haleeb
13%
Others
5%
Olpers Supply Chain

Integrated Logistics
Engro Foods Pakistan makes sure that their product namely Olpers is available, no matter
where you are in Pakistan.
We integrate processes from the farm to markets, and ensure products are delivered to you
at the right time, at the right place and in the right quantity.

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 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 the
Sukkur and Sahiwaal factories, and is distributed in the same amount to the distributors all
over the Pakistan.
For outbound logistics trucks are used. They have 80% dedicated fleets & 20% open
trucking especially 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:
1. Sukkur (Mother ware house)
2. Sahiwaal (Mother ware house)
3. Rawalpindi(Central ware house)



Sukkur:
Adjacent to the manufacturing plant which covers whole of the south i.e. Sindh &
Balouchistan The logistics usually take 1 day to arrive at Olpers warehouses in Karachi
from their manufacturing factory at Sukkur.

Sahiwaal:
Adjacent to the manufacturing plant which covers the whole of the central.
Rawalpindi:
It is a satellite warehouse with a covered area of 30,000 sq ft which is on rental basis & it
costs 600,000/month. Its responsibility includes, fulfilling the orders of the northern
region


In addition to Karachi:
The transportation of finished goods from Sukkur to Karachi is done through a dedicated
truck which 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 on average there are 15 round trips in a month.

From Karachi warehouse it is delivered to the respective distributors according to their
required orders in terms of quantities and size of packets, it is done through dedicated
fleets which are on a monthly rental basis.

Capacity of 50 feet Truck:

Size of item No. Of cartons
1 liter 934
250 ml 1552
1.5 liter 890
500 ml 1497

The cost of downward logistics (Sukkur) for the company is cheaper in comparison to the
upward logistics (Karachi). Since open trucks return empty once the product reaches the
Karachi warehouse.


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 Mari pur and it is being operated
by transporter himself.

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 equbitor 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.

Ordering Process:
The 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 reorder.

Material Handling:
Material 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 material handling very efficiently with the help of latest equipment for
raw material as well as for finished goods. They use specialized milk tanks as mentioned
above for the inbound of raw milk & for finished goods they use proper palletization and
then to place these pallets they use fork lifters to put the pallets in the right place in the
warehouse which is cross docked.

Distribution Networks

Olpers focusing on every major cities of Pakistan.
The distribution is outsourced.
Olpers have 160 distributors all over Pakistan.

According to the distribution, Pakistan is divided into three geographical zones and then in
further 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

Distributors in Karachi:
Olpers have seven distributors in Karachi which are as follows.
Aftab traders covers Defense & Clifton
SAS distributors covers Johar, Malir, Landhi & Korangi
Pacific distributors covers Ghulshan & Bhadurabad, Tariq road
S.I traders covers covers Garden & Old Karachi
Tawakal Distributors P.E.C.H.S & Sadar
S.Care traders covers New Karachi & North Karachi
M & Sons covers Nazimabad & OrangiTown


Receiving of Material

The following documents are used when Olpers is received by the distributors. The
transportation of material is affected under the delivery challan.

Copies Colors Purpose Distribution
Original White Transportation Materials section
Advice
Duplicate Yellow Payment Carrier
Advice
Triplicate Green Advance copy Shipping
Quadruplicate Blue Work Order Transporter


Purchase Orders

Purchase order is an instrument given by the buyer to the seller mentioning the
specification of goods, 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
and then gives the purchase order to the sales department via e-mail whenever he is low on
inventory. These e-mails are then processed in the form of a proper purchase order, which
is then send to the finance department for invoicing purpose. Also sales department is also
responsible for the dispatch of the desired goods to the customer.

Demand Fluctuation of Olpers Milk

The demand of Olpers milk usually increases in the festivity season or any event such as.
Eid
Ramazan and
Moharram

Following are two Seasons when demand fluctuate
Lean (March-Sep) Demand Decreases
Flush (Oct-Feb) Demand increases

Reverse Logistics

Shelf Life of Olpers Milk
Olpers Milk has 71 days of shelf life.

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 losses rate of 0.85% due to defected Milk.

Packaging:

Engro Foods is committed to reducing the environmental impact of packaging, without
jeopardizing the safety, quality, or consumer acceptance of its products.

As far as milk is concern 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 a way that avoids contamination of processed products. And
also protects the product against contamination until the product reaches the consumer.

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