Engro Foods Report (1)

5/26/2018 Engro Foods Report (1)

1/27

-


2/27

P a g e | 2

Production & Operations Management

SUBMITTED BY:

S. NEHA KHALID (12109)

SUBITTED TO:

Dr. Mohammad Irshad khan

Date: 29th

.Apr.2014


3/27

P a g e | 3

LETTER OF ACKNOWLEGEMENT

29th

Apr 2014

Dear Readers:

It is indeed an honor for us to prepare the report on production and operations

management of Engro foods which was assigned to us by Dr Irshad Khan our

course instructor, who gave us treasured insight on the subject of operations

management. His untiring support and influencing attitude of bearing with us

has surely been a driving force for us.

We would especially like to express our acknowledgement to Dr.Irshad khan

for providing us valuable directions about the professional aspects of thisreport.

Thank you.

Sincerely

Syeda Neha Khalid


4/27

P a g e | 4

TABLE OF CONTENTS

Executive summary5

Introduction7

Brands At Engro foods...9

Evaluation of production process12

Quality control at Engro foods..14

Procurement of RM15

Managing the Supply Chain..18

Distribution..22

Benchmarking at Engro foods.23

Issues and challenges24

Conclusion26

Recommendations .27

References..27

EXECUTIVE SUMMARY


5/27

P a g e | 5

Engro foods limited is one of the most reckoned companies of Pakistan. The Exxon, now

known as Engro, is operating in various fields such as Engro Asahi, Engro Vopak, Engro Paktank, Engro Chemicals and Engro Foods. This report is related to Engro foods which is

currently offering Olpers Milk, Tarang, Olwell and Olpers creams.

This report includes the strategies that describe the efficient use of infrastructure, human

resource management and technological development followed by the company objective

which is fulfilling the customers demand in the optimum way. Moreover, describing the

raw material procurement from raw milk to addition of cream, 7% fats to packaging through

UHT process which result in a 6-layered Tetra Pak Brick Aseptic packaging. Further,

procurement includes the sources of the milk supply which is direct sources and contractor

based collection. The raw milk is transferred to manufacturing plants through insulatedtankers. The transportation fleet at Engro Foods is partly owned and partly contracted that

is they make use of third party logistics. With the efficient infrastructure of the supply chain

at Engro foods, it play large part in reducing costs, improves efficiency and customer service.

Depending on the industry, companies leading in supply chain performance achieve savings

equal to three to seven percent of revenues compared with their median performing peers.

Engro Foods treat suppliers as their partners. Engro Foods reinforces its strategy of forming

long-term relationships with its suppliers by winning their trust and loyalty.

The supply chain management team at Engro foods is highly dedicated to vendor

development and is involved in providing education and training to farmers regarding bettertreatment and handling of livestock. The team also assists dairy farmers in vaccination of

livestock, improved breeding and animal husbandry practices and provision of high quality

fodder seed. Moreover, the production process includes chiiling and storage, pasteurization,

UHT treatment and then packaging. Distrinbution atEngro foods mainly contain the Priamry

as well as secondary sales which entails that Primary Sales refers to the sales of the batches

of products by the manufacturer to the distributors. Secondary Sales refers to the sales by

the distributors to the retailers from where the goods are eventually sold to the ultimate

consumer. So Engro Foods is following the traditional channel of distribution that involves

some intermediaries between the transfer from producer to the consumer.

For the continuous improvement Engro Foods ensures feedback is obtained from all

possible sources, any bad products or bad batches of products, if the consequence of any

supply chain management glitches, are accepted back by the company and exchanged for

new good stock free of cost.

Engro Foods is committed to providing the best quality of products to the consumers at the

lowest possible costs. In other words, it is a company that believes in the virtues of cost

leadership and its prioritization for quality maintenance and control is reflected in stringent

quality checks that are carried out both before and after the processing of the milk.

chain team had two options regarding the benchmark for the company operations. It had a

choice between Nestles extensive and well reputed Milk Collection Centre system, or


6/27

P a g e | 6

Haleeb Foods contractor based milk collection mechanism. It chose Nestle as a benchmark

and therefore set up its own milk collection centres based on the layout and approach

adopted by the well entrenched Nestle. However, today Engro Foods considers itself in no

need of a benchmark anymore since it has actually surpassed the performance of its

competitors


7/27

P a g e | 7

INTRODUCTION

ENGRO FOODS LIMITED is subsidiary of Engro Corporation Limited consists of seven

businesses which include chemical fertilizers, PVC resin, a bulk liquid chemical terminal,industrial automation, foods, power generation and commodity trade.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 Chemicals, formerly known as

Exxon, was taken oven by the employees and reamed Engro. Since then, it has diversified

into many fields owning and operating subsidiaries like Engro Asahi, Engro Vopak, Engro Pak

tank, Engro Chemicals and Engro Foods.

Fueled by a vision to bring to the fore innovative food products packed with quality, value

and nutrition, Engro Foods' made its foray into the consumer foods business in 2006 with

the launch of Olper's, their flag-ship all-purpose milk, which soon became a house-hold

name widely known for its rich, creamy freshness, high nutrition content and exciting,

vibrant packaging.

Within a very short span of time , it has become the house of product portfolio comprises

some of the country's biggest and best selling brands including Olper's, Olper's Lite, Olfrute,

O'more, Omung, Omung Lassi and Tarang.. Engro Foods has already set up two processing

plants at Sukkur and Sahiwal.

While research and development, production, marketing and finance do play a crucial role

in the success of any company, supply chain management is very crucial in stablingbackward and forward linkages between the company and its suppliers and its customers.

Without supply chain management, the company can not ensure that the basic raw material

reaches the plant and then leaves the plant to the clients.


8/27

P a g e | 8

VALUES

At Engro, they support our leadership culture through unique systems and policies which

ensure open communication, foster an environment of employee and partner privacy, and

guarantee the well being and safety of our employees.

Following are our core values:

Ethics and integrity

They do care how results are achieved and will demonstrate honest and ethical behavior in

all their activities. Choosing the course of highest integrity is our intent and we will establish

and maintain the highest professional and personal standards. A well-founded reputation

for scrupulous dealing is itself a priceless asset.

Health, safety and environment

They manage and utilize resources and operations in such a way that the safety and health

of their people, neighbors, customers, and visitors is ensured. We believe our safety, health

and environmental responsibilities extend beyond protection and enhancement of their

own facilities.

Innovation and risk-taking

Success requires us to continually strive to produce breakthrough ideas that result in

improved solutions and services. We encourage challenges to the status quo and seek

organizational environments in which ideas are generated, nurtured and developed. Engro

appreciates employees for well thought out risks taken in all realms of business, and for the

results achieved due to them, acknowledging the fact that not all risks will result in success.

Our people

They strongly believe in the dignity and value of their people. They must consistently treat

each other with respect and strive to create an organizational environment in whichindividuals are fairly treated, encouraged and empowered to contribute, grow and develop

themselves and help to develop each other. They do not tolerate any form of harassment or

discrimination.


9/27

P a g e | 9

Community and society

They believe that a successful business creates much bigger economic impact and value in

the community, which dwarfs any philanthropic contribution. Hence, sustainable businessdevelopment is to be anchored in commitment to engage with key stakeholders in the

community and society.

BRANDS AT ENGRO FOODS

Engro foods company continuously engaged in elevating quality standards, they pride

themselves s on finding new ways to engage their consumers with a diverse range of brands

that offer outstanding choice and quality, with a strong emphasis on innovation. They offeran exciting brand portfolio comprising some of the country's biggest and fastest growing

brands, that have slowly garnered a place in the hearts of millions of consumer.

Olper's mil

Olper's Milk is ultra-heat treated to carefully preserve its rich creamy thickness. The

country's leading all-purpose standardized UHT processed milk, Olper's Milk is sheer

indulgence in every sip and is backed by its high nutrition content and invigorating freshness

that have become synonymous with the Olper's brand.

Widely favored for its fresh wholesome taste and full-cream richness, Olper's has steadilyemerged as the leading dairy product in the market since its launch in 2006 after gaining

preference over other established brands and securing a loyal consumer base all across

Pakistan.

Available in 4 SKUs of 200 ml, 500ml, 1000 ml and 1500 ml value packs, today Olper's

combines nutrition, value and taste to deliver an unforgettable consumer experience to

every individual within every house-hold where the day begins with Olper's.


10/27

P a g e | 10

Tarang

Pakistan's No. 1 tea-whitening brand, Tarang is a specialized tea creamer that makes the

perfect cup of tea guaranteed to transport tea-lovers into a state of sheer bliss any time of

the day.

The only team-creamer that combines convenience with lasting quality and real value formoney, Tarang is available in liquid and powder formats that further extend the brand's

appeal to a wider audience.

With its distinctly fresh aroma, rich taste and strong focus on enhancing the tea-drinking

experience for everyone, Tarang has evolved into our biggest and most profitable brand

since its launch in 2007, after securing a firm place in the hearts of millions of tea-

enthusiasts all across Pakistan.

olfrute

The launch of Olfrute beverages in 2010 is our first non-dairy initiative and a major step

forward towards diversifying product portfolio in high potential markets.

A refreshing fruit beverage extracted from pure fruits to entice and delight even the most

discerning taste-buds, Olfrute juices are available in two SKUs of 1000 ml and 200 ml and

offer a wide assortment of exciting fruity flavors including red grape, apple, guava, green

cock-tail, mango, apricot and orange to cater to a diverse spectrum of urban consumers.

With a highly enthusiastic consumer response to our extensive range of fruity nectars, we

are confident that Olfrute juices will soon become the leading brand in the juices and

nectars category.

Dairy Omung

Sourced from pure milk, Dairy Omung is our wholesome all purpose dairy brand that

provides price and quality conscious consumers with a premium milk product at an

affordable price. Launched nation-wide in July 2011 as an alternative to milk packed with

the same amount of proteins and nutritional content as pure milk, Omung is available in 2

SKUs of 250 and 1000 ml.


11/27

P a g e | 11

Specifically targeting house-wives who consume loose milk and are responsible for the

health and well-being of their family, with Omung, consumers seeking quality products at

affordable prices can now enjoy the safety of UHT milk at a price that is far more

competitive than any other milk product in the market.

An all-purpose brand, Dairy Omung can be used for consumption in multiple ways and offers

great savingswithout compromising on their health.

Tarka

Launched in 2005, Tarrka is our premium desi ghee distinct for its pure flavor and rich

aroma. A dash of Tarrka in your favorite cuisine is all it takes to bring out the flavor of your

food and leave you craving for more.

Omore

Launched in 2009, Omor's scrumptious range of ice-cream and frozen desserts are a

glorious treat for everyone, be it children or adults. With its rich, creamy taste, high

nutrition content and wide-range of flavors and formats, Omor is a delectable ice-creamand frozen desserts brand that seeks to cater to a wide range of consumer groups and taste

palettes.

Available in more than 30 SKUs including ice-lollies, tubs, bricks, cups, cones, and sticks of

different sizes, Omor has become a household name across Pakistan.

Omang lassi

Omang lassi is offered in two flavors which is positioned as home made lassi in the

convenience of a Tetra Pak.


12/27

P a g e | 12

EVALUATION OF PRODUCTION PROCESS

Chilling and Storage

The production process at Engro Foods consists of four steps. Firstly, raw milk is collected

from milk collection centers by tankers and brought to plants for processing. On arrival, the

milk is tested for appearance, smell and

temperature, and a sample is taken for analysis in

laboratories. A series of tests are carried out relating

to the compositional and hygienic quality of the milk.

Subject to the satisfactory completion of these tests,

the milk in the tanker is then unloaded into a silo.

The milk processing factories cool the raw milk at a

temperature of 5C or less into cooling tanks prior to

being passed through heat treatment facilities. The

chilling process helps to curb bacterial growth in milk.

Pasteurization

Next comes the pasteurization stage, which is the process of boiling the milk and then

immediately cooling it to a lower temperature. The milk is

pasteurized at 85oC, which helps to kill 98% of the germs

present in the milk. Pasteurization serves as the separation

point of raw milk into different products, which include

Tarang, Olpers and Olwell. At this point the cream and fat

are removed from the milk and other special ingredients

are added along with it to the milk as per the requirements

of each product. For example, Tarang is a high-fat tea

whitener and therefore it needs more cream content and

different ingredients as compared to a product like Olwell,

Chilling andStorage

PasteurizationUHT

TreatmentPackaging


13/27

P a g e | 13

which is low fat and requires less cream. The milk after pasteurization is then standardized

as prescribed by the Pakistan Pure Food Laws at 35% Fats and 8.9% SNF (solid non fats).

UHT Treatment

The pasteurized milk is then passed through the UHT (Ultra

Heat Treatment). This is the most sophisticated and advanced

stage in milk processing. In this process the milk passes through

140 deg ree centigrade in the first 3 seconds and it is then

immediately cooled to 20 degree centigrade in the next 5

seconds, which in turn kills all the bacteria.

The UHT process can be achieved either through indirect or

direct heating systems. In the indirect method the milk isheated by steam passing through stainless steel pipes outside

milk tanks. In the direct method either the steam is directly injected into the milk or the milk

is forced through a fine nozzle into a tank filled with steam. Engro Foods makes use of the

direct system for the UHT process.

Packaging

Following the heat treatment, the milk is cooled in a sterile

vacuum chamber. After the heat treatment the milk is

cooled and packed in Tetra Pak cartons as soon as possible

to prevent contamination. The packaging process is also

carefully monitored. The packages undergo stringent

controls to check that they are sterilized. The milk is then

filled into the cartons under aseptic conditions. The

cartons are filled automatically and continuously under completely sterile conditions and

then heat-sealed


14/27

P a g e | 14

QUALITY CONTROL AT ENGRO FOODS

It goes without saying that Engro Foods is committed to

providing the best quality of products to the consumers

at the lowest possible costs. In other words, it is acompany that believes in the virtues of cost leadership

and its prioritization for quality maintenance and control

is reflected in stringent quality checks that are carried out

both before and after the processing of the milk.

Before Processing

Quality control procedures are introduced right at the point of milk collection, that is at the

milk collection centres. Lab tests are conducted in order to check the milk for any

adulteration and in fact the dhodhis are also educated to avoid adulteration of milk. An

expert is stationed at these MCCs to ensure that the tests are conducted properly. Once the

milk is approved and dispatched within 6 hours to either the Sahiwal or Sukkur plant, the

next Quality check is carried out right at the time of milk reception at the plant where it is

once again examined by qualified Chemists and Micro Biologists by conducting various tests.

It is only after the milk clears certain tests that the Quality Control department accepts it

and transfers it to the cooling plants.

After Processing

Quality control experts are involved throughout the production process. After the packaging

process is complete, Quality control resurfaces this time not only to ensure that the

packages are sterilized but also to ensure that the milk packages are of the prescribed

weight. And after a final approval, the milk products are considered fit for delivery and

transferred to the warehouse. The organization strives to achieve even better and better

quality of the products which is why it collaborates with various research agencies to work

on the development of the products.


15/27

P a g e | 15

PROCUREMENT OF RAW MATERIAL

Raw material procurement plays the most integral part in the success of any supply chain.

The reason being, that it is the elementary level activity and if there are flaws in it, the

effectiveness emphasis on the quality of the raw materials obtained and at the same time

establishing and maintaining long term relationship with their suppliers. This way Engro

Foods is playing an important role to produce and market a range of high quality dairy in a

country where a huge quantity of this commodity is wasted each year due to an inefficient

farm-to-market infrastructure.

Raw material

The various kinds of raw materials required for the milk and cream production at Engro

foods include:

Raw Milk Other ingredients like SNF and fats

Packaging material

Raw Milk

The raw milk which is further processed in the manufacturing plants at Sahiwal and Sukkur

is the core raw material at Engro Foods because their product portfolio encompasses all

dairy based products. The raw milk which is mainly the buffalo milk is obtained from the

various dairy farms across the country with most of these dairy farms being located in Sindh

and Punjab region.

Other ingredients

There are several other ingredients that are added at the various stages of the production

process at Engro Foods and their respective quantities depend on the recipes of the

products being manufactured. These include SNF that are solids not fats and fats which are

adjusted to achieve the desired levels. For instance, the Olpers milk consists of 3.5% fat

whereas, Tarang milk which is the tea whitener and more creamy in nature has 7% fat,

therefore, during the production process, 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

process depending on the quality of milk. Another product of Engro Foods, Olwell milk

which is high calcium and low fat milk targeting the health conscious segment, requires high

calcium level that is modified during the process.

Packaging material

The packaging material used by Engro Foods is supplied from Tetra Pak Ltd. It is in the form

of rolled 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 in a 6-layered Tetra Pak Brick Aseptic packaging, with a 3 months shelf life.


16/27

P a g e | 16

Sources of milk supply

At Engro Foods the supply of raw milk, that is the way milk collection is done can be divided

into:

Direct Sources Contactor based collection

Direct Sources:

The method of milk collection through direct sources can be defined as milk collection done

through various dairy farmers residing in different villages. A villager called Dhoti is

responsible for collecting milk from his respective area and delivers milk every morning and

evening to the Milk Collection Centre. The volume of milk supplied by the dairy farmers

varies immensely depending on both the size of the are covered by the dairy farmer and the

availability of 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 Foods

mainly because of the low probability of adulteration of the milk by dairy farmers. The

reason accounting for this is that it is easier to identify adulteration in low volumes of milk

as opposed to high volume provided by the other method. However, the overall quantity of

milk collected through this method is very limited.

Milk Collection Centre:

Engro Foods maintains a full fledged Milk Collection Department to manage milk collection

through direct sources. It started off with hundred Milk Collection Centres in March 2006and now in 2008 has over five hundred and fifty Milk Collection Centres operating across

the country. Today, Engro Foods can be regarded as having one of the largest milk collection

networks 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 are equipped with chillers to preserve the quality prior to long hauls to the factories

served by specially designed tankers.

The main objective of Milk Collection Centre is to deal with small quantities of milk

provided by the village dairy farmers. On one hand, it has proved a regular source of income

for farmers through an assured and growing income resulting from the sale of their milk,

and on the other, it has enabled Engro Foods to collect better quality milk in the quantities it

needs. At the Milk Collection Centre a trained milk collection agent who tests and records

every supply for quality and fat content collects the milk and rejects the milk that does not

conform to their quality standards or is adulterated.


17/27

P a g e | 17

Contractor Based Collection:

The contractor based milk collection involves collecting milk from approved suppliers who

are aware of the quality standards adopted by the firm. The contractors are responsible for

milk collection from a large area and can bring about ten thousand litres of milk a day from

dairy farmers. This method of contractor based collection contributes the most to theoverall quantity of milk collection. However, the company fears adulteration on part of

contractors because it is harder to investigate when the volume is high.

Once this milk is tested for the protein, lactose and butterfat content it is sent to the chiller

containers 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 via

insulated tankers. The insulated tankers maintain the temperature of milk around four

degrees Celsius. The reason why the tankers are insulated is to prevent the milk from

getting hot in the summer or freeze in the winter. The reflecting surface of the trucks also

provides protection against infrared rays and reduces the degree of heat on the tank. Also

the cool temperature stops the 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 milk collection 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

make use of third party logistics. Moreover, the transportation routes from milk collection

centres to the manufacturing sites at Sahiwal and Sukkur are designed in a way to avoid

overlapping of routes which otherwise would add up to the increased cost of transportation.

The raw milk is normally transported between four to six hours to avoid loss of quality.


18/27

P a g e | 18

MANAGING THE SUPPLY CHAIN

Objective of Supply Chain Management at Engro Foods

As per the Supply Chain Development manager at Engro Foods Mr. Umair Nagi, the primary

objective of supply chain management at Engro Foods is

Fulfilling our customers demands inthe optimum way

And as he himself pointed this out, it can be stated that optimization is the key word. Thus

cost reduction is definitely on top of the priority list for Engro but fulfilling customers

demands is just as important. Thus the goal of these activities is to offer the customer a

level of value that exceeds the cost of the activities, thereby resulting in a profit margin.

Supply Chain Strategy at Engro Foods

The supply chain strategy is obviously in line with the objective for supply chain

management which in turn is in line with the overall mission and values of the organization,

all of which have been 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

S The 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..


19/27

P a g e | 19

supply chain management (SCM) is a broadened management focus that considers the

combined impact of all those involved in the production of goods and services, from

suppliers to manufacturers to wholesalers to retailers to final consumers and beyond to

disposal and recycling.

The supply chain philosophy ensures that customers receive the right products at the right

time at an acceptable price and at the desired location.

A fundamental premise of supply chain management is to view the network of facilities,

processes, and people that procure raw materials, transform them into products, and

ultimately distribute them to the customer as an integrated chain rather than as separate

players working together.

Supply chain management plays a large part in reducing costs, improves efficiency and

customer service. Depending on the industry, companies leading in supply chainperformance achieve savings equal to three to seven percent of revenues compared with

their median performing peers.

Effective supply chain strategies often require changes in processes and traditional roles. All

members of the supply chain must be open to new methods and ideas and must show a

high degree of flexibility.

Supplier-Relationship Management (SRM) at Engro Foods

There are various methods that can be used to achieve the goals of supply chain

management. Engro Foods believes in making its suppliers partners in the firms strategy to

be able to satisfy an ever-changing market place. It believes in forming long-term partnering

relationships with its suppliers rather than engaging in price wars and procuring raw

materials on a short-term basis. It endeavors to achieve its goals by strengthening

relationships within the links of the chain.

Engro Foods procures fresh milk from both informal and formal sources. The informalsources include traditional milk collectors, small, medium, and large-scale dodhis. The

formal sources include third-party milk collectors who not only supply milk to Engro Foods

but also to various industry players including Haleeb Foods and Nestle. This results in

cutthroat competition amongst the major players to obtain adequate quantity of milk to

meet the projected level of sales.

Companies engage in different competitive practices, like price wars, especially when

demand for milk and milk products is high, usually during the summer season. During the

summer season, demand for milk exceeds the supply so companies foresee great

opportunity to increase their sales and profitability given that they are able to acquireenough supply of milk to meet the forecasted demand. Since supply of milk is limited


20/27

P a g e | 20

contractors prefer to sell to those companies who not only offer the best price but who also

treat them as an integral part of the supply chain.

Engro Foods reinforces its strategy of forming long-term relationships with its suppliers by

winning their trust and loyalty. It does so by helping its farmers when they are going

through a difficult time i.e. during the flush season. In the flush season farmers have an

excessive supply of milk whereas the demand for milk is low. It usually happens during the

winter season when supply of milk tends to exceed the demand. Since fresh milk is a highly

perishable item it demands prompt and efficient collection from milk producers for use by

consumers and manufacturers of milk products. Therefore are increasingly concerned about

their milk supply.

Engro Foods relieves the farmers by purchasing milk from them when no other company is

willing to do so. Since processed milk has a shelf life of three months Engro Foods processes

the raw milk and stores it in buffer tanks for later use. Another strategy employed by the

company to reduce the imbalance between demand and supply and make effective use of

this milk is to convert it in powdered form. Powder milk has a shelf life of 2 years so they can

store it for a longer time period this way. When demand for milk tends to increase in the

market they utilize the powdered milk by dissolving it and converting it back to its liquid

form.

This builds a mutual relationship of trust and loyalty between the milk farmers and Engro

Foods since this strategy is beneficial to the farmer since it creates a steady channel for their

excessive supply of milk in the flush season. This approach has proven favorable for Engro

Foods as well, since the farmers have now become loyal to their company and are willing to

supply them at the best possible price.


21/27

P a g e | 21

VENDOR DEVELOPMENT

Pakistan is one of the largest producers of milk in the world. About 20 million tonnes of milk

is produced in Pakistan whose value comes up to a total of around Rs 150 billion annually,

which is much higher than Rs 100 billion for cotton and Rs 40 billion for sugarcane. The per

capita availability of milk at present is 185 liters, which is the highest among the South Asian

countries.

Although the figures seem quite impressive but if we compare Pakistans productivity of

milk with other countries it is still very low. The low milk-yield in our country is evident from

the fact that while it has more buffaloes and cows than North America it produces less than

quarter of milk than the latter. Pakistan, with dairy animal population of 18 million,

produces just 20 billion liters of milk animal as compared to 86 billion liters produced in

North America, which has a dairy animal population of 17 million. Pakistans yield per

animal is also very low as compared to countries like Australia where the yield per animal is

around 20 liters where as in Pakistan it is just around 4-5 liters per animal. Helping the

farmers to help increase the average milk yield is all the more necessary as milk surpasses all

other commodities.

The low yield per animal in Pakistan can be largely attributed to the extreme lack of

knowledge and awareness amongst our local farmers regarding the treatment of livestock.

Our farmers fail to cater to the needs of animals since dont they feed the animals well and

dont give them enough water. The farmers fail to understand that animals too have

different requirements and they should be provided as such only then can the productivity

be enhanced.

The supply chain management team at Engro foods is highly dedicated to vendor

development and is involved in providing education and training to farmers regarding better

treatment and handling of livestock. The team also assists dairy farmers in vaccination of

livestock, improved breeding and animal husbandry practices and provision of high quality

fodder seed.

This has resulted in the creation of a mutually beneficial relationship with the farmers

translating into opportunities for the rural population in Pakistan, which despite being the

seventh top milk producer of the world suffers from low productivity.

This assistance makes all the difference in a country like Pakistan where dairy farming is

more a social activity than commercial, particularly in the rural areas like interior Sindh and

Punjab where the major source of milk are the households which keep an average of just 3-

4 buffaloes. The supply chain development team has successfully been able to change the

traditional beliefs and attitudes of farmers who valued milk as something to be kept only for

the family and not for selling purposes. By changing the beliefs of dairy farmers, Engro

Foods has not only created a source of supply for its milk products but has also created aconsistent source of income for the farmers


22/27

P a g e | 22

DISTRIBUTION

Sales

The sales of Engro foods products are divided into :

1. Primary Sales

2. Secondary Sales

Primary Sales refers to the sales of the batches of products by the manufacturer to the

distributors. Secondary Sales refers to the sales by the distributors to the retailers from

where the goods are eventually sold to the ultimate consumer. So Engro Foods is following

the traditional channel of distribution that involves some intermediaries between the

transfer from producer to the consumer.

LOGISTICS

For the sake of transportation of the finished goods right from the Engro Foods maintained

warehouses that are situated right next to the facility uptil the distributors, a fleet of trucks

is maintained by Engro Foods themselves while partof the transportation has also been outsourced,

employing a tactic known as third party logistics. A

third-party logistics provider is a firm that provides

outsourced or "third party" logistics services to

companies for part, or sometimes all of their supply chain

management function. Third party logistics providers

typically specialize in integrated warehousing and

transportation services that can be scaled and customized

to customers needs based on market conditions and the

demands and delivery service requirements for theirproducts and materials

As far as the responsibility for distributing the goods is concerned, the outreach of the Engro

Foods and the third party logistics is limited to the distributors only. Engro Foods has

almost 200 distrbutors all over Pakistan. Some of the distributors deal with larger areas and

larger orders while others are the smaller ones. For the larger orders, the finished goods are

transported directly to the distributors agreed upon point of delivery while for the smaller

distributors, goods are also being delivered and deposited in warehousing facilities

maintained by Engro Foods in some important locations all over Pakistan, and it is from

there that the smaller orders for the distributors are processed and either delivered or

Manufacturer(EngroFoods)

Distributors RetailersFinal

Consumer


23/27

P a g e | 23

picked by the distributors themselves. The network of distributors is very extensive and

extends all the way to Afghanistan.

CONTINUOUS IMPROVEMENT

Feedback and its integration in the supply chain is essential to

the continuous improvement of an organization that places so

much importance on supply chain management. Engro Foods

ensures feedback is obtained from all possible sources. As a

result, contact is maintained with distributors regarding the

consumers reaction or any complaints that they may have. In

fact, any bad products or bad batches of products, if the

consequence of any supply chain management glitches, areaccepted back by the company and exchanged for new good

stock free of cost. Feedback is also collected directly from the consumers via the company

website, which allows consumers to lodge any complaints, put forward any queries, or just

drop by their comments. The same information is also collected through the presence of the

company address and phone number on all the packages, thus making the organization very

accessible to the consumers.

BENCHMARKING AT ENGRO FOODS

Engro Foods certainly believes in benchmarking in order to achieve a better standard of

performance. When the organization was being established back in March 2006, the

company and in particular its dynamic supply chain team

had two options regarding the benchmark for the

company operations. It had a choice between Nestles

extensive and well reputed Milk Collection Centre

system, or Haleeb Foods contractor based milk

collection mechanism. It chose Nestle as a benchmarkand therefore set up its own milk collection centres

based on the layout and approach adopted by the well

entrenched Nestle. However, today Engro Foods

considers itself in no need of a benchmark anymore since it has actually surpassed the

performance of its competitors and therefore now it is viewing its own previous

performance as the standard to work against.


24/27

P a g e | 24

ISSUES AND CHALLENGES

Demand Supply Imbalances

The first challenge that Engro Foods has to deal with is the reconciliation between demand

and supply, where the two are following different patterns throughout the year. While

demand reduces during the winters and increases during the summer, the supply chain

team in its quest for establishing trust and harmony with the dhodhis,has to accept milk

throughout the year. Thus in order to ensure that the all year round supply is utilized well,

Engro Foods actually converts the excess supply into powdered milk, which is much easier to

store and much more resistant to deterioration over time as compared to liquefied milk.

Hence, this is a challenge that Engro is attempting to meet to the best of its resources and

capabilities.

Lack of Control over Distribution Channels

The distribution of goods to the retailer who then sells it to the final consumer is a

responsibility that is not directly under Engro Foods but rather being handled by the

approximately 200 distributors Engro Foods supplies to. This leads to a difficulty in

exercising control and supervision 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 being employed, feedback is being collected nevertheless and

contact is maintained with the distributors as much as possible.

Lack of Knowledge amongst Farmers

A major issue that is faced on the raw materials procurement side is the lack of awareness

and insufficient knowledge that is common amongst various small farmers in the villages

milk is collected from. These farmers not only lack knowledge about ways to optimize the

milk extracted 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, Engro Foods is trying to make a difference by spreading awareness amongst these

farmers through education, training while also organizing vaccination programs that canmake the livestock resistant to various diseases.

Infrastructure Issues

The two plants are located in the interior areas of punjab and sindh and the villages from

where the milk is procured, whether in adjacent or far-flung areas, mostly lack proper roads

and highways that would enable milk to be transported easily and in lesser time. as a result,

delays may occur which might disrupt the overall production process. but these problems

are addressed by the maintenance of adequate supply at the premises at all times in the

form of powdered milk in order to deal with any sort of contingency situation.


25/27

P a g e | 25

Limitations of the Research

This report has been compiled entirely on the basis of the interview we conducted of Mr.

Umair Nagi, Supply Chain Development Manager, Engro Foods and some secondary

research which was largely internet based. No documents were shared with us by the

company. A major constraint for the research was the inability of the team to visit the actual

plant which is situated far away from home in Sahiwal and Sukkur, while the Milk Collection

Centres that form a significant part of supply chain management at Engro Foods also could

not be observed because of their hard to access locations. Thus, the report has been

prepared with these constraints in tow at every juncture.


26/27

P a g e | 26

CONCLUSION

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 Chemicals, formerly known as Exxon, wastaken oven by the employees and reamed Engro. Since then, it has diversified into many

fields owning and operating subsidiaries like Engro Asahi, Engro Vopak, Engro Pak tank,

Engro Chemicals and Engro Foods. Engro Foods started its business operations in March

2006 and it hasnt looked back ever since its inception .Within a very short span of 2 years, it

has become the house of four quality dairy milk brands: Olpers Milk, Tarang, Olwell, and

Olpers cream. Engro Foods hasalready set up two processing plants at Sukkur and Sahiwal.

To maintain the high quality of these brands, Engro Foods has invested heavily in milk

processing and milk collection infrastructure .After the success of these dairy products,

Engro Foods now plans to venture beyond the dairy sector. For this purpose, grain and fruitmarkets have been analyzed in great detail


27/27

P a g e | 27

RECOMMENDATIONS

They should also start to manufacture powder milk in order to meet the domestic

demand.

Olpers Lite advertising should conform to local values.

Develop an integrated awareness plan in order to aware the people about the

quality of the UHT milk as compared to other pasteurized or loose/fresh milk.

Engro Foods Limited is not having its own dairy farms. Engro Foods Limited needs to

have their own Dairy Farm so that they can meet the increasing demand and to have

quality milk procurement as well.

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 its an opportunity for them

to grab & enjoy the flavor.

REFRENCES

www.engrofoods.com

www.google.com

www.engro.com
http://www.engrofoods.com/http://www.engrofoods.com/http://www.google.com/http://www.google.com/http://www.google.com/http://www.engrofoods.com/

Date post:	16-Oct-2015
Category:	Documents
Upload:	neha-khalid
View:	103 times
Download:	9 times

Engro Foods Report (1)

Documents