Assignment # 1

Name: Sohail Wahab

Enrollment: SP21-MSEE-0007
International Logistics and Global SCM
Sir Saheer Ali

Kindly Highlight the Following Details.

1. You are Required to Find any 2 company which is currently working on

offshoring.
2. Evaluate the comparative analysis of the company's decision regarding their
offshoring location.
3. Evaluate companies logistics process and compare it with each other
4. Provide brief recommendations for the companies.
As per directives of subject teacher Sir Saheer Ali, I am analyzing the “Two (2)
companies which is currently working on Off Shoring” and find out the answers of
the above questions.

1. INTRODUCTION:

I am selecting Lucky Cement Company (LCC) and Attock Cement Pakistan Limited
(ACPL) for this assignemnet.

LCC is one of the largest producers, with 12.15 Million Metric Tons per annum
cement producer and its prodcution plants are located at Pezu KPK and at Karachi.
Whereas ACPL, a leading cement manufacturer with a brand name Falcon Cement,
remain market leader by providing consistent high quality cement. ACPL plant is
located at Hub Baluchistan.

Both companies I.e. ACPL & LCC are extending its operation by installing cement
production/grinding lines in Iraq.

2. Attock Cement & Lucky Cement currently working on offshoring.

LCC, Over the years has grown substantially and is expanding its business operations
with production facilities at strategic locations in Karachi to cater to the Southern
regions and Pezu, Khyber Pakhtunkhwa to furnish the Northern areas of the country.
Lucky Cement is Pakistan’s first company to export sizeable quantities of loose
cement being the only cement manufacturer to have its own loading and storage
terminal at Karachi Port.

ACPL, a subsidiary company on Ghaith Faroon Group which is one of the largest
foreign investor in Pakistan, has established its production line in 1980 in Hub
District of Baluchistan. To cater the increasing demand of both local and export
market, It has gradually increased its production capacities by installing three (3)
production lines and fourth (4) line is being constructed.

Lucky Cement’s is establishing a new greenfield production facility in Samawah, Iraq

with a capacity of 1.2 million tons/annum. Beside a new green field cement
production facility, Lucky cement has a grinding plant in Basra, Iraq (1.74MTPA).

ACPL is also setting up a new cement grinding plant at Basra, Iraq (0.93 MTPA) with
a total investment of 43.7 million USD.

3. Company's decision regarding their offshoring locations

The fuel and energy cost are the major components has a great impact on the
overall per ton cost of cement production, which is almost 60% of the total cost. Any
reduction in these will have direct impact on profitability. In Iraq, these are very less
as compared to Pakistan. Moreover, after the series of war imposed on Iraq,
demands of cement has increased significantly for its reconstruction. Therefore, both
comapanies I.e. ACPL and LCC has analysed this opportunity and decieded to
establish its offshore operation in Iraq. This is considerably beneficial as compared to
exporting cement from Pakistan.

Briefly the following are the major advantages expected by ACPL and LCC after their
dececision to establish off shore facility.

A. Save on Costs

Money is the number one factor that motivates both comapnies to ofshore and
relocate their business processes to the Iraq. This approach is a wise move as this
cost reduction will enables parent companies to free up financial resources that
they can use for their local operations. These include investments in research and
development.

Furthermore, it also contributes to generating additional revenues and maximizing

income, providing profits for its investors and shareholders. All of these can make
the company cost-efficient, productive, and profitable in the long term.

B. Low costs of operations and production

Manufacturing industries specially benefit from the lower operating cost for their
manufacturing processes in developing countries compared to their home country.
Companies can take advantage of the low labor cost, cheaper fules and electricity
rates, cheaper raw materials, equipment, parts, and supplies available in offshore
locations.

Both ACPL and LCC like many offshore manufacturing companies can make high
standard and quality products according to the precise specifications provided by
their clients

C. Diversified Skilled labor and Supply of Manpower

Many cement companies are facing the shortage of employees is a huge problem
today. Looking for personnel with the required skills is one of the main reasons they
offshore business processes to other countries.

Both ACPL and LCC has inducted local employees and send them offshore so that
they can get enricehd experience with international envrionment. This is a new
phenomenon in Pakistan, wherein, companies are sending off its local manpower to
their off shore establishements wherein they get a diversified experience.

This will make sure that Pakistan will have an abundant talent pool of workers with
foreign experience. Employers can ensure that these workers have the qualifications,
work experience, and skills that companies need.
D. Tax Incentive

Aside from savings in costs and tax benefits, other factors that motivate companies
to offshore their business processes are tax incentives.

The tax benefits consist of lower corporate taxes, and tax and duty-free importation
for a certain period.

A company that qualifies for incentives gets a 100% exemption from corporate
income taxes for as long as four to six years. Upon the expiration of the tax holiday
period, the company will only get a 5% special tax rate on gross income and is
exempted from paying all national and local taxes. The company will also get tax and
duty-free importation of equipment, spare parts, and supplies.

This is also one of the main reasons why LCC and ACPL are setting up offshore
business apart from putting extra pressure on export of cement and clinker.

4. Evaluate companies logistics process and compare it with each other

A. The LCC, has a smart Logistics setup providing revsionalizing access to market.
A fleet of articulated prime movers of over 100 vehicles ensures tht plant to
premises solutions are provided to over valued customers.

LCC, has an exclusive terminal at Karachi port to export cement. This makes
LCC the first and only cement company that own state-of-the-art
infrastructure and a export terminal at Karachi Port.

B. ACPL offers variety of Shipment modes thay may be order in:

Break Bulk without slings – where 50kg bags are loaded directly into the
hatches of the vessel.
Break Bulk Sling – where 50 kg bags are packed inside a Sling bag of 1MT or
2MT and then loaded inside the hatches.
Containerized – 560 Bags of 50 kg are loaded directly in a 20′ feet Container
optimizing its weight upto 28 MT net.

Private Labeled Bags: ACPL also offers customers to purchase in their own
brand instead of ACPL’s Falcon Brand. In this case customer will have to make
advance payment for the MOQ of 100,000 Bags (which makes 5000 MT of
cement and roughly 180 Containers.)

5. Provide brief recommendations for the companies

While both the companies have dynamic leadership which uses any single
opportunity to expand its business and growth. Howeve, following are the
recommendations for both the leading cement companies;
I. Explore more means and resourses to reduce increased cost of cement
production.

a) Increase percenetage of local coal and less dependancy on Imported fuel.

b) Use of Alternate Fuels locally available and also local municipality waste to
fire kiln.

c) Both companies has plants of Chinese origion which are less

efficient,environmently friendly as compared to European make. In future, both
companies have to install energy efficient plants having less power and fule
consumptions.

II. Brianstorming to reudce transportation and logistics cost in view of increased

fule costs.

III. Demand for cement has drastically increased in the Gulf region e.g. Iraq, Qatar
etc. Focus to be made to export cement at competative rates hence developing
market in new segments.

IV. Negotiate with Government to provide more facilities to cement manufacturers

meeting export targets.