FILEE

Supply chain Report on ENGRO FOODS LTD.
Supply Chain Management Final Report On
Submitted to: Sir Aamir Malik

SubmittedBy:
Nadir Ali (Roll No MBED-10-17),
RaoAteeq(Roll No MBED-10-08),
M.Akhtar(Roll No MBED-10-33)
ShahbazAkhtar (Roll No MBED-10-44)
Department of Business Administration

BZU
Sub Campus Dera Ghazi Khan
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ACKNOWLEDGEMENT
We would like to offer our humble gratitude to Allah Almighty, the most Graciousand the
most Merciful, who gave us strength and enabled us to achieve our goals.
The main purpose of the project is to know about the Practical implementation of all the concepts
we studied in the Supply Chain Management course.
All the material that has been included in this report is based on data/information gathered from
various sources and is based on certain assumptions. Although, due care and caution has been
taken to compile this report but the contained information may vary due to any change in any
of the concerned factors, and the actual results may differ substantially from the presented
information.
We are heartily thankful to our SCM knowledge Bank teacher; Mr.AamirAbbas Malikwhose
constant guidance and support enabled us to develop an understanding of the subject which
ultimately helped us in making of this project.
At Engro Foods Limited, we would like to mention the names of
1. Mr. Salman Goheer.(Head of Supply Chain)
2. Mr. AmmarMursalin
Who gave us their precious time & gave us all the required information about Engro Foods
Supply Chain Management.
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ABSTRACT
BACKGROUND:
To critically examine, understand & analyze the practical implications of supply chain
management course.
METHODS:
Analytical examination conducted through interview with EFL head of supply chain &
detailed study of internet articles on Olpers, Product of Engro Foods LTD.
RESULTS:
Engro Foods LTD continues to experience strong growth due to many reasons in which
above all is its Brand Equity. Olpers, EFL’S Flagship Brand is at its growth stage & it made
its place in the current competitive market due to many factors one of which is EFL’S
effective supply chain management.
CONCLUSIONS:
Given the highly competitive nature of the Dairy Products market, need of having smooth &
flawless supply chain have traditionally been on the high side &Engro Foods LTD are on the
right track.
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My sought to choose this organization.

Engro food is one of the most popular and developing industry of Pakistan. Engro foods making
progress due to effective management system.so that’s why it is rapidly growing against their
competitors.
ENGRO CORPORATION
Engro stands for “energy for growth.From inception, Engro is a legacy of continuous growth,
new challenges and fulfilled promises. From fertilizers to dairy products, business solutions to
PVC resin, power generation to commodity trade, at Engro their ambition is to become the
premier Pakistani enterprise with a global reach.
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Engro Corporation is one of the leading Pakistani business conglomerates with stakes in the
fertilizer, food, power generation, petrochemicals, automation and terminal storage industries.
Having had undergone an employee led buy out in 1992 it has expanded phenomenal in the past
two decades. As a holding company its subsidiaries include:
Engro Fertilizers Limited
Engro Foods Limited
Avanceon Limited
EngroPowerGen Limited
Engro Polymers and Chemicals Limited
EngroVopak Limited
ENGRO FOODS LTD:
Founded in March 2006, Engro Foods Limited is a producer and marketer of dairy products. The
company’s brands include Olpers Milk, Omore ice cream, and Tarang, Olwell, and Olpers
cream. To support these brands and their highest standards of quality, Engro Foods has invested
heavily in milk processing and milk collection infrastructure. Headquartered in Karachi,
Pakistan, it has offices in seven cities across the country, as well as processing plants at Sukkur
and Sahiwal. Engro Foods is a subsidiary of Engro Corporation Limited, one of Pakistan’s most
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respected enterprises with more than 40 years of business in the fertilizer and chemicals industry.
In the five years since its launch, Engro Foods has seen a rapid growth in sales and market share.
ENGRO FOODS LIMITED is the 100% owned subsidiary of ENGRO. Thecompany's milk
production capacity is 700k litters per day. Moreover aninvestment plan of $ 3.4 billion in Engro
Foods has been approved by theboard for: expanding UHT capacity to 900k liter per day,
expanding milk powder capacityto 70 kilo per day, import of 1000 cows and an ice cream plant.
The company is all set forgrowth as the milk business profitability is increasing due to increasing
consumption of milkand increasing prices of dairy products. Besides selling milk, the company
also sells thecompany also sells related products such as creams and unbranded products such as
ghee,and recently introduced a milk whitener; namely "Tarang". The value of the ENGRO
FOODS LIMITED is Rs.36 in total subsidiaries value of 63.4.
ENGRO FOODS HISTORY:

The plant of Engro Food Limited is located at Sukkur on 23 acre land, has the raw milk
reception capability of 300,000 liters per day and UHT milk capacity of 200,000 liters per day.
The plant has been established at a cost of Rs. 1 billion which provides direct employment to 750
people. Engro Foods has entered the Food business through milk processing and sale with the
company’s vision to pursue growth opportunities based on country fundamentals and own
strength. It also positions the company to leverage its corporate social responsibility initiatives
and work closely with rural communities to promote integrated farming and livestock
development. This effort is expected to play a pivotal role in poverty alleviation and improving
livelihoods of the poor in the milk collection areas.
LOCATION OFPLANT:
The dairy processing plant is situated at Rohri&Sahiwaal& now in Punjab aswell
The office of Engro foods is situated in Sukkur.
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LOCATION OF OFFICES:
The head office of Engro Foods is located near Sea View ,karachi.
There regional head offices are in :
 Karachi located in Business Avenue Shahrah – e - Faisal

 Lahore
 Multan
 Rawalpindi
 Peshawar
 Gujranwala
They believe that there recent successes will take them to there 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.
ENGRO’S NEWPROCESSING PLANT:
GEA TDS has recently completed a Euro 3 million milk processing plant for Engro Foods in
Pakistan. It is one of the biggest plants of its kind in Pakistan and the first ever in the Sahiwal
region. The commissioning of the plant was completed in just 2 months and operation started by
end December 2007.
The plant supplies the region around Sahiwal with 250,000 liters of low fat milk a day,
that’s 1 million servings, and 10 million servings of Tarang (tea whitener).
The plant provides a processing outlet for the local farmers who rear dairy herds of cows
and, especially in the smaller farms, buffalo.
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The Engro plant also contributes to the local economy by employing some 200 people
throughout the factory.
The GEA TDS project was to supply equipment and engineering services throughout the
process. This included milk reception; milk processing; UHT processing; powder mixing;
cream handling and processing; Clean in Place (CIP) equipment such as trucks, process
and filling machines; detailed engineering and project management; automation for both
the process and CIP equipment; and commissioning.
Raw milk receptionhandles up to 40,000 lit/hr of both cow (20%) and buffalo
(80%) milk from the surrounding region’s farmers cooling it from approximately 15˚C to
4˚C for storage in the two 125m3 storage tanks.
The process can pasteurize milk to 85˚C at the rate of 25,000 lit/hr and includes
milk clarification and skimming; standardization for milk, cream, SNF and butter oil;
butter oil dosing; a refurbished homogenizer; and degassing.
Pasteurized milkis stored in 5 tanks each holding up to 75m3. Cream is pasteurized

separately at a temperature of 95˚C at a rate of up to 3,500 lit/hr. UHT equipment, with
indirect heating and cooling via heat exchangers, can handle up to 21,000 lit/hr.
The CIP systemcovers the whole process from the delivery trucks through to the
filling machines. Acid and caustic concentrates are stored on site in two tanks each with
a capacity of 15m3.
The whole process is controlled using PLCs supplied by Allen Bradley. PLCs are
located in cooled cabinets installed on the base-frame unit of each module. All were
delivered wired and I/O tested.
Although Engro has only been in the food and dairy sector since 2006 the company has already
carved out a significant market share and is growing quickly. In such a short time it’s already
well on the way to achieving its goal to be one of the biggest players in Pakistan’s food industry
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Board of Directors
Asad Umar Chairman
AfnanAhsanChief Executive
Ruhail Mohammed Non-Executive Director
Isar Ahmed Non-Executive Director
ShahzadaDawood Non-Executive Director
Mujahid Hamid Non-Executive Director
Muhammed Amin Non-Executive Director
Ms. SpentaKandawalla Non-Executive Director
Abdul Samad Khan Non-Executive Director
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ENGRO’S Departmental CHART:
Departments
Finance & Milk Human Quality Supply

Administration Marketing
Account Procurement Resource Assurance Chain
Manager Plant Manager procurement
Manager Q.C Manager Purchase
Quality Assurance
Logistics Officer
Officer
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Milk Procurement Department

As all of our food products are milk based, the entire Milk Procurement department plays a
critical role in defining the quality of the end product that reaches our customers. Ensuring
regular collection of fresh and pure milk right from the farmer to the factory and ascertaining the
freshness of milk all across the milk procurement process, is the responsibility of Milk
Procurement department, consisting of food technologists working at the collection centers and
veterinary doctors providing service to the farmers.
Quality Assurance DPTT

Quality Assurance is strictly followed in Engro Foods. Qualified food technologists at this
department ensure that highest quality parameters are adhered to through all steps of production
and that the products reach the consumers as per promise.
Pakistan’s Milk Industry Overview

With an estimated 33 Billions Liters of annual milk production from 50 million animals managed
by approximately 8 million farming households, according to latest statistics
Pakistan is the 4th largest milk producing country in the world.
It has a livestock and agriculture sector contributing over 10% to the GDP, and a milk
economy that in value terms is 27.7% of the total agriculture sector.
It is an untapped market, expected to grow an additional 3 billion liters in the next few
years at a growth rate faster than most sectors. Undeniably, a sector with such credentials
can bring about not just a radical change but also a dairy revolution in the country.
The annual milk production of 33.6 billion liters in Pakistan is shared between a
71.1% share for the rural economy and

A much smaller urban share of 29%.
Only 3% of the total production of milk is processed and marketed through formal channels.
For the other 97%, a multi-layered distribution system of middlemen has evolved to supply
milk.
Despite only a small percentage (3%) of milk being processed, the (UHT) market is growing at a
steady rate of 20% a year.
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“Over all consumption of milk per day is 400,000 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.
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.
Current Milk Quantities Available in

Pakistan:
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Livestock Population:
MILK PRODUCTION PER ANIMAL

KG/LACTATION:
Country Cattle Buffalo
Bangladesh 207 407

Bhutan 257 400
India 987 1,450
Nepal415 850
Pakistan 1,195 1,909
Sri Lanka 627 496
SOURCE: PAKISTAN DAIRY INDUSTRY, WHITE REVOLUTION

PAPER.
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PAKISTAN’S MILK SUPPLY CHAIN:
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Why did Engro enter the food business?
“Big opportunity due to population growth and indigenous sourcing. There is a huge population.
One seventy million is a very big market. There are only a few countries with such a huge
population in the world. Besides, our people spend a lot on food. Our economy is agro-based.
We get raw material at the local level.” Engro Foods CEO Sarfaraz A. Rehman
EFL Aim:
“Dominate the food business and to achieve this we will settle for nothing less than the cream”
EFL Vision:
“To become fast growing mega Food Company & also to elevate Consumer Delight
Worldwide”.
The Company aims to generate a significant portion of its revenue from foreign operations.
Mission of EFL:
Our mission is to provide satisfaction at a competitive cost, growth in diversity, and continue to
contribute to the growth of industrialization in Pakistan by being the market leader".
We believe our success depends on our customers. Thus, our primary value is fulfillment of our
customer's needs. Our manner of achieving this success is to include value for money
Core Values:
1. Leadership
2. Innovation
3. Diversity and International focus
4. Quality and continuous Improvement
5. Candid and open communications
6. Individual growth and development
7. Enthusiastic pursuit of profit
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8. Ethics and integrity

9. Safety, Health and Environment
10. Team Work & Partnership.
1.Safety Health & Environment:

We will manage and utilize resources and operations in such a way that the safety and health of
our people, our neighbors, our customers and visitors in ensured. We believe our safety, health
and environmental responsibilities extend beyond protection and enhancement of our own
facilities, and we are concerned about the distribution, use and after-use disposal of our products.
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2.Ethics and Integrity:

We do care how results are achieved and will demonstrate honest and ethical behavior in all our
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.
3.Leadership:
We have leaders of high integrity, energy and enthusiasm who have the necessary managerial,
professional and people skills to inspire a group or organization to set high goals and achieve
them willingly. We believe that leadership skills need to be strengthened at all levels within our
organizations and that managerial and professionalism is a necessary foundation.
4.Quality and Continuous Improvement:

We believe that quality and relentless commitment to continuous improvement are essential to
our ongoing success. To this end, we define quality as understanding the customer’s
expectations, agreeing on performance and value, and providing products and services that meet
expectations 100% of the time. Our motto is, “Quality in all we do”.
5,Enthusiastic Pursuit of Profit:

Successfully discharging our responsibilities to our shareholders to enhance the long-term
profitability and growth of our company provides the best basis of our career security and
meaningful personal growth. We can best accomplish this by consistently meeting the
expectations of our customers and providing them with value.
6.Candid& Open Communication:

We value communication that are courteous, candid and open and that enable each of us to do
our jobs more effectively by providing information that contributes to the quality of the judgment
and decision making.
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7.Innovation:
Success requires us to continually strive to produce break through ideas that result in improved
solutions and services to customers. We encourage challenges to the status and seek
organizational environment in which ideas are generated.
8.Individual Growth & Development:

We strongly believe in the dignity and value of people. We must consistently treat each other
with respect and strive to create an organizational environment.
9.Teamwork& Partnership:
We believe that high performing teams containing appropriate diversity can achieve what
individuals alone cannot. Consciously using the diversity of style, approach and skill afforded by
teams is strength we must continuous building into our organization.
10,Diversity& International Focus:

We value differences in gender, race, nationality, culture, personality and style because diverse
solutions, approaches and structures are more likely to meet the needs of the customers and
achieve our business goals.
CORE COMPETENCY OF EFL:

Aggressive style of business: launching more products in short time.
MAJOR COMPETITORS:
Engro Foods Limited is fully aware of its competitors. The company had to consider the areas
including (product design, segmentation, target market, advertising, time to launch a new
product, time for necessary changes & constant over view). The major competitors in case of
offering the UHT milk are:
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Nestle
HFL
Millac
Halla
Prime
Nurpur
Nirala
Dairy Crest
Other than the brand mentioned above Olper’s also faces an indirect competition from the local
milkman the GAWALA.
EFL Brands:
1. OLPERS MILK.
2. OLPERS CREAM
3. TARANG
4. OMORE
5. OLFRUTE
6. Olwell Hi-Cal Lo-Fat (HCFL) Milk
7. OLPERS OWNSUM
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OLPERS MILK:
The flagship brand of Engro Foods is OLPER’s Milk.
Launched on March 20, 2006, Olpers milk is EFL’s standardized and homogenized pure
UHT (Ultra heat treated) milk with 3.5 % fat and 8.9 % solid non-fats.
It is collected from 3000 plus villages & 10000 plus farmers
It is EFL’s premier brand, and the choice of quality-conscious consumers who only go for the
best. It is available in easy-to-open, 6-layered Tetra Pak Brick Aseptic red packaging and comes
with approx 71days shelf life.
TAG LINE:
The unique selling proposition for Olper’s is: SubahBakhairZindagi, but recently the
company changed the USP to“Jo dilkholkayjeetayhainunheenkayliyayhaiOlpers”
Both the tag lines have a very positive impact on Olpers image because of their drect emotional
positioning & relation with its customers.
STOCK KEEPING UNITS:

The company is maintaining three SKU’s (stock keeping units) for Olpers in tetra packs that are
· 1000ml
· 500ml
· 250ml
Olper’sCream :
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The premium cream processed hygienically from pure fresh milk, Olper’s Cream is
luxuriously rich in its thickness & nutritional value.
It promises the richest & scrumptious assortment of tempting toppings, delicious desserts
and creamiest coffee with its unique taste, also great for eating with bread etc.
It was launched on September, 2006.

and comes in 6-layered Tetra Pak Brick aseptic purple
color packaging with 6 months shelf life.

¼ Litre (250 ml) : 27 packs per shrink-wrapped tray
Olwell Hi-Cal Lo-Fat (HCFL) Milk :

Launched on December 15, 2006, Olwell is a low-fat, high-calcium milk with the
richness of pure milk.
It is an ideal choice for weight-watchers and heart patients.
It is also high in calcium content, which prevents osteoporosis
Packed in 6-layered Tetra Pak Brick Aseptic red packaging with easy-to-open plastic cap,
it comes with a 3 months shelf life.
1 Litre (1000 ml ) : 12 packs per carton
½ Litre (500 ml) : 12 packs per shrink-wrapped tray
TOTAL SUPPLY CHAIN C OST OF Olpers:
Product Cost: 75%
Others: 25%
Out of 25 %, 4 % is business waste
Engro FOODS INVENTORY TURNOVER:
On every 26th day of month inventory at EFL gets replenish.
ORDER FULFILLMENT RATE:

At EFL its 86-87 % for olpers.
LEAD TIME OF OLPERS:
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Lead time with regards to:

Procurement of milk varies in between 5days & 4 months
Order placement to order fulfillment : 12-18 hrs
SAFETY STOCK
For olpers hardly 6-7 days safety stock is kept because of its low shelf life. Time to time
forecasting is done in short intervals to meet the level of demand.
OLPERS LIFECYCLE
Source: Mr Salman Goheer, Head of Supply Chain Dep’t, Engro Foods LTD.
OLPER’S MILK DEMAND VARIATIONS:

The demand of olpers milk usually increases in the festivity season or any event such as.
Eid
Ramazan and
Moharram
VARIATIONS IN SUPPLY OF MILK:

In Pakistan there are mostly three season of milk which are as under:
Flush Season: (1st Jan to 15th April): During this season there is maximum production
of milk in the country.
Lean Season (16th April to 30th July): Minimum production of milk in the country due
to high environmental temperature, less green fodder availability and natural
reproduction cycle of animals.
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Semi-flush season (1st Aug to 31st Dec): In this season about 70-80 % milk production
in the country.
TETRA PAKS MILK MARKET SHARE
SUPPLY CHAIN MANAGEMENT AT ENGRO

FOODS
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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OBJECTIVE OF SUPPLY CHAIN MANAGEMENT

AT ENGRO FOODS
As per the Supply Chain Development manager at Engro Foods Mr. UmairNagi, the primary
objective of supply chain management at Engro Foods is
“ Fulfilling our customer’s 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 customer’s 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”
So if we link it to the theoretical concepts that have been taught to us in this Operations
Management course, the basic approach towards a competitive advantage over the competitors,
some established other newer entrants is a combination of low cost and rapid and flexible
response. As this report shall unravel most of the details regarding this claim, right now it would
suffice to state that an example of low cost strategy would be the location of the plants near the
abundant sources of supply, farms and farmers so as to reduce the transportation cost and cost of
milk deterioration and subsequent losses. An example of response would be the use of third party
logistics to ensure that
These primary activities at Engro are supported by:
The infrastructure of Engro: organizational structure, control systems, company culture,

etc.
Human resource management: employee recruiting, hiring, training, development, and
compensation.
Technology development: technologies to support value-creating activities.
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RAW MATERIAL PROCUREMENT
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.
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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.
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.
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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 trainedmilk 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.
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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EFL SUPPLY CHAIN STRUCTURE
Supply Chain Department
Supply Chain Customer Service

Development Department
Planning Purchasing
Warehousing Logistics
Inbound Outbound
Logistics: Milk Logistics
Procurement
Dispatches
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EFL SUPPLY CHAIN MANAGEMENT

GIMMICKS:
SIX SIGMA AT ENGRO :
Engro is among the first Pakistani companies implementing six sigma across all areas and
utilizing it as a management system to execute our strategic objectives. Six sigma was launched
in February 2006.
Among the focus areas, employee development is the most critical and six sigma will be
leveraged to help bring out the best in our people. Employees drive improvements in other areas:
speed, innovation, perfection and becoming world class.
Six sigma’s robust problem-solving methodology and statistical tool allows the company to
benchmark processes against global standards in a language that is comparable across any
industry or function.
It helps ensure that we sustain our promise of delivering high quality products and services to
our customers – on time, everytime.
Communication is critical and Engro conducted six sigma launch events country wide as well as
two internal conferences and electronic and print updates throughout the year management and
non management employees were trained extensively during 2006 & 2007 on six sigma
principles.
Source: Mr. Hassan, HR Assistant Manger, EFL.
PR WITH FARMERS:
According to Mr. Ali Akbar, Director Marketing EFL,
 “In order to succeed, you should ALWAYS capitalize on your STRENGHTS and
NEVER on your COMPETITOR’S WEAKNESS!”
ENGRO’s Strength was their fellowship with farmers for a long time. Engro has been interacting
with the farmers for fertilizers and has gained quite a good reputation over the years. It has led to
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a strong bond and long term relationship with the farmers who are willing to supply milk to
the company.
This is an added advantage and strength for the company because it will never be short of milk
production. The farmers also won’t have to look elsewhere to sell their milk.
THIRD-GENERATION PLANT:
EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant in
Pakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premium
quality and hygiene.
EFFICIENT MILK PROCUREMENT

DEPARTMENT:
EFL MPD is provided with highly paid Procurement managers supported with a team of
qualified and experienced staff of zonal managers, area executives or milk collection controller,
milk collection supervisors, mobile testers, drivers, peons and etc. In order to support the
procurement staff a separate wing of accounts is also established. This is the department with
highest number of employees. Procurement of milk is not an easy job.
It stands on the following five pillars:
1. Quantity
2. Quality
3. Cost
4. Competition
5. Man Power
Milk procurement department of EFL provides a value-added service to all their milk
producers, ensuring that milk of the correct quality is produced and that sufficient raw milk is
always available to satisfy company’s needs, through the use of strategies, processes, projects,
systems and policy.
Procurement teams of EFL manage a number of Milk Procurement responsibilities including:
1. Ensuring that the producers are paid promptly and accurately.

2. Purchasing raw milk from producers and transporting it to factories effectively and
efficiently.
3. Successful clean milk route development in various new identified areas.
4. Installation of bulk coolers in the area.
5. Milk yield improved.
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6. Hygiene practices improvement at all levels of milk production and procurement

7. Reduction of Bacterial Count of milk.
8. Advanced training to drivers in the handling of mass milk in case of emergencies.
9. Trainings to field staff for handling of sample and client.
QUALITY CONTROL SYSYTEM:

Following types of quality assurance system exist in EFL to assure the procurement of the best
quality raw milk.
1. First System: Procurement department is responsible for the procurement of good

quality raw milk.
2. Second System: Quality assurance department support the procurement department for
procurement of good quality of raw milk.
Source:ShahidHafeez Khan, Quality Control Manager-Field, Engro Foods Limited.
BUSINESS QUALITY MANAGEMENT SYSTEM &

KAIZEN PRINCIPLE:
Mr. Salman Goheer, Head Of Supply Chain, EFL:
 “We imply our strategies at large scale as well as at small scale on continuous basis
according to the type of business & its requirements. We believe that quality and
relentless commitment to continuous improvement are essential to our ongoing
success. To this end, we define quality as understanding the customer’s
expectations, agreeing on performance and value, and providing products and
services that meet expectations 100% of the time. Our motto is, “Quality in all we
do”.
So at EFL, Business quality management & total quality management goes side by side. Here is
the practical application of it at EFL;
360 DEGREE FEEDBACKS:

 “Our commitment to continuous improvement in the performance management systems for
employees at all levels was reflected in adoption of the 360 Degree Feedback System. This
system ensures better employees accountability, at the same time providing the employees with
chances to make use of their competencies. The 360 Degree mechanism became fully operational
for senior management in 2006”.
Said by Mr. Hassan, HR Assistant Manger, EFL.
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PUSH-PULL POINT:
 “Every supply chain is almost always a combination of both push and pull, where the
interface between the push-based stages and the pull-based stages is sometimes known as
the push–pull boundary & so is ours. Upstream is push based while downstream relies on
pull based systems”. Said by Mr. Salman Goheer, Head of supply chain, Engro Foods
LTD.
PLANNING:
 “Engro do planning on short term and long term basis simultaneously. Engro is mostly
having long term plans and for achieving these long term plans it gains support of short
term plans”. Words of Mr Salman Goheer, Head Of Supply Chain, EFL.
MIS:
The MIS department at Engro Foods ensures that all automation is running error-free at
all times. Regularly modifying and updating the Company's accounting software is also
the MIS team's responsibility.
OLPER’S SUPPLY CHAIN
33
34
OLPER’S PRODUCTION PROCESS:

1. MILK PROCESSING:
The milk from buffalos and cows is collected into metal cans, which are then emptied into tanks,
form these tanks milk after chilling to 4-5 ºC is transported to dairy plant in isolated tanks for
further processing.
At the dairy plant milk is tested for quality and milk that meets the quality parameters is again
chilled and pumped into chilled holding tanks, then cleaned (either by being filtered or
centrifuged) before Pasteurization followed by standardization/toning and homogenization and
then transferred to another holding tank to await further processing. The further processing might
include Ultra High temperature (UHT) and aseptic filling or drying to make dried milk.
2. STANDARDIZATION AND TONING

Standardization of milk involves the adjustment of the fat content of milk, or a milk product, by
addition or removing of cream, or skim milk as appropriate, to obtain a given fat contents, while
toning refers to adjustment of SNF contents of milk by reconstitution of milk powder in it. In
EFL both these processes are used simultaneously
3. PASTEURIZATION:
Pasteurization can be defined as "The heating of every particle of milk or milk product to a
specific temperature for a specified period of time without allowing recontamination of that milk
or milk product during the heat treatment process."
4. HOMOGENIZATION:
It is a mechanical treatment of the fat globules in milk brought about by passing milk under high
pressure through a tiny orifice, which results in a decrease in the average diameter and an
increase in number and surface area, of the fat globules. The net result, from a practical view, is a
much-reduced tendency for creaming of fat globules.Other advantages of homogenization
include a richer flavor and possibly increased digestibility.
5. ULTRA HIGH TEMPERATURE (UHT) AND ASEPTIC FILLING

The term sterilization refers to the complete elimination of all microorganisms. The food
industry uses the more realistic term "commercial sterilization"; a product is not necessarily free
of all microorganisms, but those that survive the sterilization process are unlikely to grow during
storage and cause product spoilage. Milk can be made commercially sterile by Ultra high
temperature (UHT) where milk is heated to 136 to 140 ºC for 3-4 seconds. This milk is then
packaged aseptically in specially designed multilayer containers. The heat treatment and
packaging allow this milk to be stored at room temperature for extended periods of time. Ultra
high temperature processing may cause some loss of foliate, vitamin C (which is already low in
milk), vitamin B12, and thiamin.
Source: ShahidHafeez Khan
35
M.Sc.(Hons) Food Technology, MS Total Quality Management
Manager Quality Control-MPD, Engro Foods Limited
EFL’S LOGISTICS & WAREHOUSING

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. Logistics network is thus completely
outsourced i.e. they are relying on 3PLS as according to
Mr Salman Goheer, EFL head of supply chain: “We have outsourced all non core processes
of our business like transportation to minimize system wide cost.”
EFL do have their own distribution network but transportation services are all outsourced.
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 40 in total
& 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 Sukkur and
Sahiwaal factories, and is distributed in the same amount to the distributors all over the Pakistan.
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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:
 Sukkur (Mother ware house)
 Sahiwaal (Mother ware house)
 Rawalpindi (Central ware house)
Sukkur:
Adjacent to the manufacturing plant which covers whole of the south i.e. Sindh & Baluchistan,
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 whole of the of the central.
Rawalpindi:
It is a satellite warehouse with a covered area of 30,000 sqft 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 there required
orders in terms of quantities and size of packets, it is done through dedicated fleets which is 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
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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

Maripur and it is being operated by transporter him
self.
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 equibator 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.
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ORDER PROCESSING
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 materials very efficiently by using latest equipment for raw materials &
finished goods.
They use specialized milk tanks as mentioned above for the inbound of raw milk & for
finished goods they use proper palletization, then fork lifters are used to put the pallets in the
right place in the warehouse which is then cross docked.
DISTRIBUTION NETWORKS
Olpers focus on every major city of Pakistan.
All the transportation is outsourced.
Olpers have 350 distributors across 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
SELECTION CRITERIA OF OLPERS FOR DISTRIBUTORS SELECTION :

Financial Strength of Distributor
Efficient Infrastructure
Logistic Fleet
Efficient and Trained Sales Force
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Past Experience of Distributor

Market Knowledge
The use of new Technology (IT)
NEGOTIATION ON PRICE :
 Olpers doesn’t negotiate on price with distributors there is a fix Mark-up/Commission
which is 4% for all distributors
SALES TARGET FOR DISTRIBUTORS:

Monthly sales targets are established after discussing the market requirement with the
distributors.
VALUE ADDITION BY DISTRIBUTORS:

Distributor’s credibility and goodwill is not used as a tool to pressurize the retailer to buy the
bulk but they are taken into confidence by product features, quality and brand. Afterwards
distributor repute plays a value addition role to whole transaction.
CUSTOMER’S FEEDBACK:
Customer feedback is required for further planning which is the responsibility of the distributor
to provide to Olpers’ team.
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. Whereas sales department is also
responsible for the dispatch of the desired goods by the customer.
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REVERSE LOGISTICS
SHELF LIFE OF OLPERS MILK:
71 days
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 normal losses rate of 0.40 % due to defected Milk.
Source : Mr Salman Goheer, Head Of Supply Chain, Engro Foods ltd.
PACKAGING
Engro Foods is committed of reducing the environmental impact of packaging, without jeopardizing the
safety, quality or consumer acceptance of its
products.EFL is dependent upon Tetra Pak for the
packaging of its entire dairy products. Tetra Pak is
the only option available to Olpers for packaging
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because it is having monopoly in the packaging sector in Pakistan

As far as milk is concerned 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 away that avoid contamination of processed products. And
also protects the product against contamination until the product reaches the consumer.
EFL ERP SYSTEM

ECPL has its own dedicated Network of Intranet with a backbone of Internet & PTCL Fiber
lines. Through this sophisticated & widespread intranet, All Business functions of E.F.L are
integrated with each other like;
Production
Logistic
Accounts & finance
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Marketing
Sales
This Widespread intranet is also offering a platform for developing and deploying critical
business applications to support business operations and management decision making across the
Internet worked enterprise. Many customers application has been developed at ECPL, which
helps in
Order Processing
Inventory Control
Sale management & reporting
executive information system
These applications are designed to interface with, and access, existing company database and
legacy system. This software for such uses has been then installed on intranet web Servers.
Employees at regional offices including Head office can access and run applications using web
browsers from anywhere on the network whenever needed.
EFL’S SALE & DISTRIBUTION SYSTEM:
This application helps in the accomplishment of daily sales operations & management. The
application has five different modules i.e.
Setup
Transaction
Query
Report
Administration
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Remember, Sales operation officer has mainly concerned with two modules of the Sales &
distribution system i.e.
Transactions; This module helps to process, distributors Payment information,
Secondary Sales, Order processing and their Claims.
Reports; The Report modules convert distributor’s transactional information into
differenttypes of reports like:
1. Regional Order Summary Report

2. Primary Sales Report both Invoice Based & order Based
3. Secondary Sales LPD Report
4. Primary & Secondary Day wise Report
5. Distributors detail Ledger
6. Distributors Payment Receipt Report
7. Stock Pending & Cancellation Report
8. Distributors Claim Summary Report
9. Logistics Reports
10. Distributor Account Statement Report
All above-mentioned reports can generate from different angles like
o Regional report
o Area Wise Report
o Territory Wise Report
o Distributor wise
o Day wise etc
Reporting of the primary sales:

Primary sales are updated as a result of “ORDER PROCESSING”.
The regional office receives the allocation for next one day. The primary report shows us two
factors that are value and volume. It shows us that how much target has been achieved up till
now in the year considering 250ml, 500ml and 1000ml and total UHT milk.
We divide the target achieved by the team up till now with target set.
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For example Year to date

6444 / 5161 = 1.2485(its mean that they are 25% ahead of their target)
Similarly we can find the Month to date volume wise and also value wise
Reporting of the secondary sales:

First of all T.S.Os report all the secondary sales from the last day via fax as per company policy.
These records are first updated manually. This gives us the record for the opening stock, stock
received by the distributor yesterday, month to date sales and secondary sales. Then all the
information given by the TSO’s is fed into (EFL Sales & Distribution Systems).
Payment procedure:
Three instruments are considered for payment procedures:

1. Remittance plus.
2. Demand draft.
3. Pay orders.
As a result payment receipt report is generated which shows us the name of all the distributors
who made the payments and weather the payment was sent via remittance plus our demand draft
etc and name of the branches through which the remittance was sent.
Afterconducting the payment procedures another document is generated which is known as the
Distributors Account statement summary. When distributor sends us the amount it is credited in
our account as it becomes or liability that is because we have not delivered the stock yet.
Distribution claim:
The distribution has to process all the claims before 6th of every month on the given formats.
These claims are verified by the TSO’s and are sent to the regional office for verification after
the verification at the regional office the claims are logged on to the system and are sent to the
head office after verification from the head office the acknowledgement is sent to the distributor.
CRM AT EFL
Engro Foods Keeps Track of 60,000-Strong Consumer Base with On Demand CRM Solution.
“We are a commodity business, and it is vital for us to be on our toes. We run reports on the
Oracle CRM system to find out which customers are loyal to our brands and which ones are
also buying other brands. We can then look more closely at the reasons for the switch and
work on winning these customers back. This is something we simply cannot do using
spreadsheets. The ability to see and act on this type of information is a competitive
advantage.” – Danish R. Syed, Head of Consumer Relationship & Manager Innovations,
Engro Foods Limited
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Rapid Growth Spurs Demand for CRM System:

Prior to the start of 2009, Engro Foods was relying on Microsoft Excel spreadsheets to record
and manage customer information. While this was acceptable when the company was first
launched, it proved untenable when the business began expanding.
“Our business has grown more than 10 times in the past three years,” said Danish R. Syed,
head of consumer relationship & manager innovations, Engro Foods.
Information At Tips:
The Oracle CRM system has enabled Engro Foods to dispense with spreadsheets to record
and track information. Customer data is now entered and stored in a central database,
eliminating the need for repetitive manual entry and ensuring the accuracy and currency of
information. The system also provides a single, complete customer history, where
previously transaction and personal details were dispersed over multiple spreadsheets.
“The system tracks details such as birthdays and anniversaries, which allows us to
interact with customers at those times that are meaningful to them,” said Danish. “It is
a way for us to build strong relationships with our most important customers.”
“With Oracle looking after the system for us, the chances of errors are less and if any issues
do come up, we know they can be resolved quickly,” said AtifMuhammed Ali, manager,
applications, Engro Foods. “As we expand the use of the solution, we know we can count on
Oracle to guide us through the process.”
SWOT ANALYSIS OF ENGRO FOODS
STRENGTHS
1.Engro’s back:
Olper’s is a brand of ENGRO foods. This means that consumers can relate their former image of
ENGRO foods to Olper’s. ENGRO is a well established brand name in Fertilizer, IT and
infrastructure business. The brand is well known so customers will automatically have a brand
association with Olper’s and see it as a premium quality product. ENGRO is world renowned so
it can easily attract foreign investors in backing it against other competitors such as Nestle.
ENGRO foods can easily afford research and development costs for Olper’s have in order to
introduce new products. It can also distribute the brand through better channels because of its
long term relationship with distributors in the agriculture sector.
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2. PR with farmers:
ENGRO has been interacting with the farmers for fertilizers and has gained quite a good
reputation over the years. It has led to a strong bond and long term relationship with the farmers
who are willing to supply milk to the company. This is an added advantage and strength for the
company because it will never be short of milk production. The farmers also won’t have to look
elsewhere to sell their milk.
3. Positive response from customers:

In first year, EFL crossed 1.4 billion sales figure which shows customers’ satisfaction upon
EFL’s products.
4. Its taste: quality proposition and world-class quality proposition system.
5. Strong consumer & product research:

Olper’s done a strong consumer & product research before and after launching the product. This
has provided them the perfect launching pad to eventually emerge as a global player in the food
industry. To develop its future portfolios, EFL has hired various global research partners like AC
Nielsen, Mindshare, JWT Asiatic and MARS marketing and advertising agencies.
6.Third-Generation Plant:
EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant in
Pakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premium
quality and hygiene. Moreover, it is also setting up another milk processing plant in Central
Punjab (Sahiwal) with an investment of Rs. 2 billion (US $ 33million).
WEAKNESSES:
1. Olwell TVC:
Olwell ad which is based on Western life style, ENGRO foods brand management showed a man
who put off his clothes & remain just in his undergarments, or half nude lady in a cat walk or
men admiring the figures of a lady in mix gender health club. In this ad they are creating
associations with the brand through the stripes, which is a highlight of Olwell packaging. Half
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naked people have been shown with tattoos of the same stripes in order to show that they are
loyal consumers of Olwell. Also, the talent, situations and locations connects well with the ad to
give Olwell a premium positioning. The brilliant marketing people at ENGRO Foods failed to
analyze is that the market they are targeted the ad on, is Pakistan, where practicing Muslims
reside, who have strong religious beliefs. When making the ad, the brand managers were focused
on, making an ad that should give the brand the most premium look and feel amongst the target
consumers but on the other hand they were least bothered about the ethics, religious beliefs and
cultural values.
2. Owning Red Color:

The company has not owned the color red like Nestle has a green Milkpak; Haleeb has a blue
carton etc. This may create problems because when a consumer enters a grocery shop, then
he/she might have problems in recalling the brand because there is no color association attached
to Olper’s. The company may need to find a suitable color in which to focus its upcoming
marketing strategies.
3. Low Quality Milk:

EFL is not having its own dairy farms; it largely collects loose milk from farmers &gawalas
through its 40milk collection centers, which sometimes is of low quality and impure because
they add vegetable oil to milk to get higher prices.
4. Packaging:
EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is the
only option available to Olper’s for packaging because it is having monopoly in the packaging
sector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it could increase the
production costs.
5. Milk collection & distribution costs:

EFL’s 34 out of 40 milk-collection centers are located in Punjab, whereas its only
milkprocessing facility is situated near Sukkur (Sindh). It increases the milk collection &
distribution costs; and also increases the chances of milk getting spoiled because of increased
travelling time.
6. Narrow brand portfolio:

It has been more than a year now, when EFL launched its first dairy product, Olper’s Milk on
March20, 2006. But EFL’s brand portfolio still consists of just 3 products i.e. Olper’s Milk,
Olwell Milk and Olper’s Cream. Whereas its competitors like Nestle and Haleeb Foods have a
much diversified line of dairy products.
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OPPORTUNITIES
1. Increased funding by Government:

Government has decided to increase farmers’ funding. This is an opportunity for ENGRO foods
because previously due to weather conditions and other reasons there was lots of wastage of milk
but now that can be reduced as farmers will be better able to store milk for longer time periods.
2. Increased consumption of PLM:
Competition may create opportunities for the company because each competitor in the milk
industry wants to increase penetration of processed liquid milk and so they will create awareness
for consumers through different advertising media. This will ensure the increase in the
consumption of processed milk instead of lose milk and so will in turn lead to increase in sales
for the company. Therefore there will be an opportunity for accelerated growth.
3. Awareness:
Growing dissatisfaction with loose milk and increasing awareness about health and Hygiene
issues have led to increased processed milk consumption.
4. Third largest producer of milk:

Pakistan is the Third largest producer of milk in the world with a total production of 32 billion
liter of milk a year, whose value is more than that of the combined value of wheat and cotton,
from a total herd size of 50 million milch animals (buffaloes andcows). Livestock accounts for
46.8 percent of agricultural value added and about 10.8 percent of the GDP. Milk is the largest
commodity from the livestock sector accounting for 51 percent of the total value of the sector.
Due to the steps taken by the government and private sector, country’s annual milk production is
expected to grow at an additional 3 billion litres in the next few years. This is quite an
opportunity for ENGRO foods as there is lot of growth in this part of the sector.
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THREATS
1. Competition:
Competition may pose a threat because the company will have to maintain its leadership in an
expanding market so that it doesn’t lose its market share to its competitors. For Olper’s it might
be difficult to penetrate in a market where the loyalties exist for such brands as Nestle and
Haleeb. These brands have been in the milk industry far too long and have left a mark in the
minds of consumers in terms of quality. Competition seems to be getting tougher as a result of
new players entering the dairy market.
2. Perceptions and Price Differentials:

Consumers’ perceptions and price differentials can cause a threat for the company. It is
important that Olper’s comes up to the expectations of the customers and fulfills its conformance
quality that is the company meets its promised specifications. Consumer’s preferences change
with time and prices might create certain barriers in terms of the profit margins for Olper’s. For
example, lose milk is still cheaper than packaged milk and that is also one factor that people still
prefer to buy lose milk.
FUTURE PLANS OF ENGRO FOODS LTD.

Company has planned to make Omore world class premier quality brand like existing
brands of Engro Foods.
Company is also working on dry milk (KhushkDoodh) like cereals in coming years.
They have planned to move other dairy products as are being offered by its competitors
like yogurt, flavored yogurt (raita), cereal for babies etc
They future plans of own farms are also on board. It’s a way to improve quality by
removing all doubts in consumer minds about old milk collection ways form govala
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Engro Foods is working with different NGOs to meet the Corporate Social Responsibility
in country. They are working with UNDP to initiate women’s veterinary workers
program
They also signing a micro financing model for dairy farming with Pakistan Poverty
Alleviation Fund (PPAF)
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 Nestle’s 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.
ISSUES AND CHALLENGES

Supply chain management in a country grappling with numerous uncertainties and that too in the
dairy milk industry is replete with difficulties, challenges and bottlenecks. Engro foods is no
exception and the supply chain team has to deal with various issues and challenges day in day
out.
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.
51
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.
Limitations of the Research

This report has been compiled entirely on the basis of the interview we conducted ofMr. Salman
Goheer. (Head of Supply Chain).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.
52
RECOMMENDATION
We are recommending following important factors which we felt missing in their supply
chain:
1. To build a regional ware house in Karachi that fulfills there supply side gap & to reduce
upward logistics cost.
2. EFL is not having its own dairy farms; it largely collects loose milk from farmers
&gawalas through its 40 milk collection centers, which sometimes is of low quality and
impure because they add vegetable oil to milk to get higher prices. EFL needs to have
their own Dairy Farm so that they can meet the increasing demand as their market share
is growing by 12% annually & to have quality milk procurement as well.
3. EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak
is the only option available to Olpers for packaging because it is having monopoly in the
packaging sector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it
could increase the production costs so they need to invest their funds for having their own
packaging system.
4. 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 it’s an opportunity for them to grab &
enjoy the flavor.
53
REFERENCES
 Mr. Salman Goheer. (Head of Supply Chain at EFL)

 Mr. AmmarMursalin.(Assistant of Mr. Salman)
 Mr. UmairNagi (Supply Chain Development Manager at EFL)
 Mr.Dilshad Ahmad(Quality Controll Officer EFL)
 Mr. Ali Akbar, Director Marketing EFL
 Mr. Hassan, HR Assistant Manger, EFL.
 Pakistan Dairy Industry, white Revolution paper
 www.engrofoods.com
 www.google.com
54

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Supply chain Report on ENGRO FOODS LTD.

Supply Chain Management Final Report On

Submitted to: Sir Aamir Malik

Department of Business Administration

At Engro Foods Limited, we would like to mention the names of

1. Mr. Salman Goheer.(Head of Supply Chain)

My sought to choose this organization.

Engro Fertilizers Limited

Engro Foods Limited

Engro Polymers and Chemicals Limited

ENGRO FOODS LTD:

ENGRO FOODS HISTORY:

 Karachi located in Business Avenue Shahrah – e - Faisal

ENGRO’S NEWPROCESSING PLANT:

Pasteurized milkis stored in 5 tanks each holding up to 75m3. Cream is pasteurized

Ruhail Mohammed Non-Executive Director

Isar Ahmed Non-Executive Director

ShahzadaDawood Non-Executive Director

Mujahid Hamid Non-Executive Director

Muhammed Amin Non-Executive Director

Ms. SpentaKandawalla Non-Executive Director

Abdul Samad Khan Non-Executive Director

ENGRO’S Departmental CHART:

Finance & Milk Human Quality Supply

Manager Plant Manager procurement

Manager Q.C Manager Purchase

Milk Procurement Department

Quality Assurance DPTT

Pakistan’s Milk Industry Overview

Pakistan is the 4th largest milk producing country in the world.

71.1% share for the rural economy and

Supply and Demand:

Province wise, per capita consumption stands at 246 Kg in Sindh, 132 Kg in

The supply of milk to meet domestic demand has usually lagged.

Current Milk Quantities Available in

MILK PRODUCTION PER ANIMAL

Bangladesh 207 407

SOURCE: PAKISTAN DAIRY INDUSTRY, WHITE REVOLUTION

PAKISTAN’S MILK SUPPLY CHAIN:

Why did Engro enter the food business?

8. Ethics and integrity

1.Safety Health & Environment:

2.Ethics and Integrity:

4.Quality and Continuous Improvement:

5,Enthusiastic Pursuit of Profit:

6.Candid& Open Communication:

8.Individual Growth & Development:

10,Diversity& International Focus:

CORE COMPETENCY OF EFL:

STOCK KEEPING UNITS:

It was launched on September, 2006.

STOCK KEEPING UNITS:

Olwell Hi-Cal Lo-Fat (HCFL) Milk :

ORDER FULFILLMENT RATE:

LEAD TIME OF OLPERS:

Lead time with regards to:

OLPER’S MILK DEMAND VARIATIONS:

VARIATIONS IN SUPPLY OF MILK:

TETRA PAKS MILK MARKET SHARE

SUPPLY CHAIN MANAGEMENT AT ENGRO

OBJECTIVE OF SUPPLY CHAIN MANAGEMENT

“ Fulfilling our customer’s demands in the optimum way”

SUPPLY CHAIN STRATEGY AT ENGRO FOODS

“A give-away between “the service factor” and low cost”