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Production & Operations Management














SUBMITTED BY:
S. NEHA KHALID (12109)



SUBITTED TO:
Dr. Mohammad Irshad khan
Date: 29
th
.Apr.2014
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LETTER OF ACKNOWLEGEMENT


29
th
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 this
report.


Thank you.


Sincerely

Syeda Neha Khalid

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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
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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 Pak
tank, 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 insulated
tankers. 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 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. 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
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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
























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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 stabling
backward 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.









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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 which
individuals 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.




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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 business
development 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 offer
an 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 steadily
emerged 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.


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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 for
money, 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.

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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 savings without 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-cream
and 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.






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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 and
Storage
Pasteurization
UHT
Treatment
Packaging
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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 is
heated 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







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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 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.


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.





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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.
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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 2006
and 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.



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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 the
overall 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.






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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 in the 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..
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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 chain
performance 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 informal
sources 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 acquire
enough supply of milk to meet the forecasted demand. Since supply of milk is limited
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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.












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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 a
consistent source of income for the farmers
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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 part
of 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 their
products 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
(Engro
Foods)
Distributors Retailers
Final
Consumer
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, are
accepted 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 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 and therefore now it is viewing its own previous
performance as the standard to work against.


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 can
make 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.

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.






















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, 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. 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 fruit
markets have been analyzed in great detail












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