Operational Excellence

Procurement Session
General feedback from mills regarding issues
and expectations from Procurement
What do you think Procurement department’s strengths, weaknesses
and challenges are?

Strengths

Weaknesses Challenges
Procurement highlights
Section: 1
No. comparison with last year (YTD) As at May 2021 vs May 2022

No. of (PR) items No. of items delivered

6118
7284
6990
5355
19% 6150 6044 4743
5139
4567
23%
5500 5378 4191

Multan Kotri Landhi Multan Kotri Landhi

2022 2021 2022 2021

Delivery % Local Procurement Spend (Rs.)

85% 85% 262.8M 270.8M
84%
77% 76% 77% 211.6M 203.4M 205.5M 197.4M

3% 21%

Multan Kotri Landhi Multan Kotri Landhi

2022 2021 2022 2021

FY 2022 Year-to-date status As at 26 May 2022

Delivered vs Remaining
100%
1166 905
1635
Total No. of (PR) items Total No. of (PR) items
Total Summary
80% delivered not delivered
60% Company No. % No. %
Multan 6118 84% 1166 16%
40% 6118 5139
5355 Kotri 5139 85% 905 15%
20% Landhi 5355 77% 1635 23%
Grand Total 16612 82% 3706 18%
0%
Multan Kotri Landhi

Delivered Remaining
FY 2022 open items month-wise As at 26 May 2022

2021 2022
2021 2022
Multan Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Grand Total
Total Total
Open PR (items) 19 7 8 13 12 14 73 50 34 99 122 212 517 590
% 0.3% 0.1% 0.1% 0.2% 0.2% 0.2% 1.0% 0.7% 0.5% 1.4% 1.7% 2.9% 7.1% 8.1%
2021 2022
Open PO (items) 74 18 29 18 25 37 201 49 68 105 51 102 375 576
2021 2022
Kotri % Jul
1.0% Aug
0.2% Sep
0.4% Oct
0.2% Nov
0.3% Dec
0.5% 2.8% Jan
0.7% Feb
0.9% Mar
1.4% Apr
0.7% May
1.4% 5.1% Grand Total
7.9%
Total Total
Total open (items) 93 25 37 31 37 51 274 99 102 204 173 314 892 1166
Open PR (items) 14 2 2 1 4 21 44 19 37 63 103 6 228 272
% 1.3% 0.3% 0.5% 0.4% 0.5% 0.7% 3.8% 1.4% 1.4% 2.8% 2.4% 4.3% 12.2% 16.0%
% 0.2% 0.0% 0.0% 0.0% 0.1% 0.3% 0.7% 0.3% 0.6% 1.0% 1.7% 0.1% 3.8% 4.5%
2021 2022
Open PO (items) 137 25 42 34 25 51 314 30 69 91 116 13 319 633
2021 2022
Landhi% 2.3%
Jul 0.4%
Aug 0.7%
Sep 0.6%
Oct 0.4%
Nov 0.8%
Dec 5.2% 0.5%
Jan 1.1%
Feb 1.5%
Mar 1.9%
Apr 0.2%
May 5.3% 10.5%
Grand Total
Total Total
Total open (items) 151 27 44 35 29 72 358 49 106 154 219 19 547 905
Open PR (items) 5 1 2 4 8 14 34 62 58 125 155 325 725 759
% 2.5% 0.4% 0.7% 0.6% 0.5% 1.2% 5.9% 0.8% 1.8% 2.5% 3.6% 0.3% 9.1% 15.0%
% 0.1% 0.0% 0.0% 0.1% 0.1% 0.2% 0.5% 0.9% 0.8% 1.8% 2.2% 4.6% 10.4% 10.9%
Open PO (items) 89 28 28 32 53 81 311 45 126 145 170 79 565 876
% 1.3% 0.4% 0.4% 0.5% 0.8% 1.2% 4.4% 0.6% 1.8% 2.1% 2.4% 1.1% 8.1% 12.5%
Total open (items) 94 29 30 36 61 95 345 107 184 270 325 404 1290 1635
% 1.3% 0.4% 0.4% 0.5% 0.9% 1.4% 4.9% 1.5% 2.6% 3.9% 4.6% 5.8% 18.5% 23.4%
Import Procurement
FY 2022 Year-to-date status As at 26 May 2022

Status Multan Kotri Landhi Grand Total

DELIVERED 35 54 38 127
UNDER CLEARANCE 1 1 2
IN TRANSIT 2 2 4
SHIPMENT AWAITED 24 14 15 53
PAYMENT AWAITED 4 6 1 11
UNDER PROCESS 3 2 5
Grand Total 69 77 56 202
Customers’ grievances
Packing material Projects
• Can’t increase inventory • Budget overrun
• Quality complaints • Missed deadlines
• Increasing prices
• Dependency on supplier

Store & spares Import

• Open PRs backlog • Long lead time
• Delay in deliveries • Delay in processing
• Rejection
• Emergencies
Procurement Challenges
Section: 2
Procurement department’s major challenges

Procurement
planning

External Item master

factors data issues

Item code
Process
specification
limitations
s
Procurement planning
Section: 3
Problem statement

1.Too many PRs for same items

2.Stock out due to no buffer stock
3.Mix bag PRs
4.Very less quantity of demands (EOQ / MOQ)
5.Absence of maintenance service agreements
Excel
Proposed Solution
Scheduled consolidated PRs for routine item categories for BPA

Belts
Bearings Lubricants

Packing material
Electronics
Paper cones Manufacturing items
BPA – already implemented in Oracle
SALIENT FEATURES
• SPEND CAP
• EFFECTIVE DATES
• FIXED PRICE
• BPA TERMS
• RELEASE ORDER
MECHANISM

CONTROLS
BPA will limit user to create
release order if amount
exceeds spend cap and is not
within effective dates
Process Improvement Team Project
Challenge your mind
PIT Project

Project Title: Consolidation Project - Paper Rims

Department: Supply Chain
Section: Procurement
Team Members: Tashfeen Ahsan, Ahsan Danish

Project Planning Analysis and Proposed Solution Implementation & Follow-

Major Process Variations: up
Area for Improvement:
Scattered demands of paper rims 1. Consolidate no. of PR
and high no. of P2P transactions. 2. Annual blanket PO Completion Date:
3. Negotiation with supplier October 30, 2019
Problem Statement:
Tool Usage: Implementation Plan –
Users initiate frequent demands of Major Steps:
paper rims throughout the year Tool Rationales/Benefit of usage
resulting in high no. of P2P 1. Annual PR
2. Annual PO
transactions. Tool Rationale 3. Monthly deliveries
Goal Statement: Pareto Identify highest volume 4. Monthly invoices
of papers

Reduction of P2P transactions by Brainsto Identifying possible Steps taken to Sustain

rm solutions
approximately 80% Improvement
5. Monitoring of PRs
Business Case: 6. Delivery before start of
1. To consolidate no. of PR month.
2. To consolidate no. of PO
Business Impact:
Customers: (Hard and Soft Benefits)
All H/O departments • 30 PRs annually
• 4 Blanket POs
Improvement: • 12 deliveries
Baseline: • 12 invoices
Current no. of PRs annually = 150 • Fixed Price
and no. of POs = 150 • Standard lead time
• Less administrative cost
Target: • Less man hours
Reduce annual PR and PO to 80%

Improvement:

80% PRs reduced Proposed Solutions:

97% POs reduced
92% deliveries reduced 4. Annual PR instead of frequent
92% invoices reduced PRs
5. Annual Blanket PO instead of
frequent PO
Blanket Purchase Agreements we did last year

LUBRICATION TISSUE
BEARINGS TONERS PAPERS RIM
SPRAYS PAPER

Rauf Electronics
Advantages Shortcomings service agreement
 POs reduced  Since we did not commit quantities,
 Cost reduced therefore suppliers did not hold stock
 Smooth supplies for us, resulting in some BPAs early
 Invoices reduced termination.
 Timely service  Despite BPA, suppliers increased prices
due to inevitable economic conditions
Our approach
TRANSACTIONAL CONTRACTUAL
PROCUREMENT PROCUREMENT

 HIGH NO. OF PRS / POS  SINGLE BPA / CONTRACT

 LOW VALUE PER TRANSACTION  HIGH VALUE

 PRICE FLUCTUATION  FIXED PRICE (VOLUMETRIC DISCOUNTS)

 SUPPLY SHORTAGES  STOCK COMMITMENT

 CONSUMPTION MAY INCREASE  BETTER CONTROL OF CONSUMPTION

 REPETITIVE MANAGEMENT  ONE TIME MANAGEMENT

Example of cost avoidance through planning
PKR 9 Million
Saving in pack-mat
Working towards BPA – Steps
According to 80 / 20 Rule
If we plan for top 1000
1. Shortlist categories for working items which is 13%, we will
be able to cover 48% of
2. Shortlist frequent items the PRs.
3. Decide stock period (1 month / 3 month)
4. Insert tentative expected quantities
5. Raise consolidated PRs
6. Agree BPA with suppliers
7. Release order by mill store Excel
Items' specification issues
Section: 4
Problem statement
Information often missing in Consequences due to missing
item codes information
• Brand name • Too much correspondence
• Model no. among user, buyer & supplier
• Size • Varying requirements received
• Part no. against same item code
• Machine details • Rejections
• PR backlog
Examples of incomplete specifications
Item Code Item Description Error in specifications
10-25000917-01-000-000 F.E.T K1120 description?
10-16009904-01-000-000 TUBE CLAMP (P#36301-146001641) SCH-338 for which machine? Make?
10-16002095-01-000-000 SPINDLE BRAKE PIN for which machine? Make? Part# ?
10-10000140-01-000-000 BALL BEARING 6201 ZZ make?
10-11000358-01-000-000 V BELT A23 make?
10-34000044-01-000-000 CUTTING DISC 4 INCH X 1MM make?
10-14000571-01-000-000 AIR PRESSURE PIPE 8 X 10MM make? Material?
10-14000617-01-000-000 FLEXIBLE PIPE 2 INCH make? Material? Gauge?
15-49000298-01-000-000 DIGITAL CLAMP METER AC & DC make? Model?
15-49000116-01-000-000 COMBINATION SPANNER 10 MM make? Model?
10-23000149-01-000-000 COOLING FAN 110V 6" make? Part#?
10-25000013-01-000-000 CAPACITOR 50UF make? Part#?
10-74010136-01-000-000 SAFETY SHOES make? Size?
10-17000142-01-000-000 NUT 8MM material?
10-71010065-01-000-000 ELFY (20 ML) ml is wrong?
10-70010083-01-000-000 REGISTER no. of pages? Printed?
10-32000050-01-000-000 MAGIC EPOXY STEEL pack size?
10-20000394-01-000-000 PNEUMATIC CYLINDER DW-M 25-50  PART #10509780 part# do not match with actual item at mill
10-71010064-01-000-000 WASTE CLOTH WHITE size?
10-14000323-01-000-000 TEE 2" specificaiton?
10-75010180-01-000-000 ENAMEL PAINT  NIGHT MAGIC COLOUR  PRODUCT CODE 4703 3.64 LTR Color code is for oil matt and description is for
oil paint and make not mentioned
Proposed solution
Parameters: Machine Information
• Checklist for item
1 Item Nature* 1 Machine Manufacturer
specifications 2 Prefix* 2 Machine Name
3 Item Status* 3 Machine Model No
• Without complete 4 Major Category* 4 Machine Year of Manufacture
5 Minor Category* 5 Machine Origin
specifications, PR should not 6 Item Description
be approved. 7 Brand / Make
8 Model Number Planning Information
• Let’s agree! 9 Part Number
10 Unit of measurement* 1 Min Quantity
11 Material 2 Max Quantity
12 Size 3 Safety Stock
13 Dimension 4 Lead Time
14 Weight
15 Country of Origin Legacy Data

Agreed
16 Color
17 Microns / Mesh Size 1 Legacy Item Code
18 Additional Details (if any) 2 Legacy Item Description
19 Attachment (Sample Picture)
20 Packing Size (Pcs / pack)
21 Assigned to / Location*
Form
Item master data cleansing
• There are more than 57,000 active items available in current
item master related to Material Procurement.
• Total no. of distinct items that are used in local PRs are
approx. 7,500 annually.

Recommendations:
1. To transform New item code opening process. (For new items)
2. To inactivate unnecessary or duplicate item codes that are not
used for long time. (For approx. 50,000 items)
3. To update specifications in existing item codes. (For approx. 7,500
items)
Item code opening process
Section: 5
Current (As-Is) item opening process
• Emails the request for opening
End-user
new item code

• Opens item codes in

Manager AP Item Master Module
and informs end-user
once code is opened
Gaps and issues in current process
1. Absence of work-flow. Request for opening new item codes is sent via
email
2. Current process does not mandate end-user to take Technical review
and prior approval from his Manager before raising request for new
item code
3. Often incomplete information is mentioned in the code opening
request
4. Request for new item codes is not shared on the required Excel format
5. End-user often does not check for existing item codes before raising
the new item request resulting in duplication of item codes
Proposed (To-Be) item opening process
• Raise request for opening new item code
End-user through new item code opening form available
in Oracle Apex (to be developed by IT)

• Check for completion of specs

Store • Approve / reject the request

• Counter check for completion of specs

Technical Ops. / duplication
• Approve / reject the request

• Final Approval
Procurement
• Once the request is
approved, system will
automatically generate the
new item code
Proposed solution
Parameters: Machine Information
• Checklist for item
1 Item Nature* 1 Machine Manufacturer
specifications 2 Prefix* 2 Machine Name
3 Item Status* 3 Machine Model No
• Without complete 4 Major Category* 4 Machine Year of Manufacture
5 Minor Category* 5 Machine Origin
specifications, PR should not 6 Item Description
be approved. 7 Brand / Make
8 Model Number Planning Information
• Let’s agree! 9 Part Number
10 Unit of measurement* 1 Min Quantity
11 Material 2 Max Quantity
12 Size 3 Safety Stock
13 Dimension 4 Lead Time
14 Weight
15 Country of Origin Legacy Data

Agreed
16 Color
17 Microns / Mesh Size 1 Legacy Item Code
18 Additional Details (if any) 2 Legacy Item Description
19 Attachment (Sample Picture)
20 Packing Size (Pcs / pack)
21 Assigned to / Location*
Form
Process Limitations
Section: 6
Problem statement
1. Currently PR process is lengthy and not as per industry best
practice.
2. There are multiple end users within different departments who
raise PR for same items.
3. Volumes get divided and workload increases.
Problem statement - Continued
Current PR workflow

Assc. Mgr.
Maintenance VP Tech Ops

Assc. Mgr
VP mill
Store

Manager Head of Admin

inventory (mill)

Purchase Requisition (PR)

Proposed solution
As per our Oracle FDD and industry best practice, demand
process should be two (2) stage:
Stage-1: IR
• End user should raise Internal Request to store.
• Store should have min max inventory based on lead time, avg.
monthly consumption, stock in hand, issuance pattern and forecast
(budget, history and periodic / preventive maintenance schedule and
EOQ)
Stage-2: PR
• Store should consolidate items from different units and make
category wise PRs.
Proposed changes - continued
Proposed IR & PR workflow
Assc. Mgr Store

Assc. Mgr.
Maintenance
Manager
VP Tech Ops
inventory

Mill manager
Head of Admin
VP mill
(mill)

Internal Request (IR)

Purchase Requisition (PR)
Min max planning to avoid
stock-out
Section: 7
Problem statement
1.Lack of inventory planning
2.Non availability of safety stocks
3.Resulting in emergencies and breakdown
Recommendation - Min-max planning in
Oracle
Item Attributes
Basic Working Formulas:
Quantity on hand
Open supply quantity (On order)
Open demand quantity Quantity on Hand + On Order - Open Demand = Total Available
Inventory planning method
Min-max minimum quantity
Min-max maximum quantity If Total Available < Minimum Quantity, suggest a new order
Fixed Lot Size Multiplier (optional)
Lead time (days)
Order Quantity = Maximum Quantity - Total Available

Oracle reference Excel

Min-Max Planning – Way forward (steps)

1. Form Min-Max Planning committee

2. Shortlist categories / items for working
3. Establish min and max stock levels
4. Set frequency of min-max planning report
5. Raise PR accordingly
GRN and inspection
Section: 8
Problem statement
1. Absence of inspection protocols
a) Timelines not defined for receiving and inspection
b) Absence of inspection process (sample size, agreed standards)

2. Absence of rejection protocols

a) Reason of rejection is generic
b) No consent taken from buyer / supplier before return
c) Items lost during in-transit of return
d) Repeated rejection due to unclear reason of rejection / actual
requirement
Rejection issues

Recommendations:
1. PR should not be approved
without item’s complete
specifications.
2. Item code specifications checklist
should be followed in PRs.
3. Procurement should be informed
at the time of inspection in case
of rejection.
Proposed - Inspection protocols
1. Item’s category wise inspection protocols should be
defined.
2. Agreed timeline to be defined for rejection or acceptance
after goods arrival.
3. Reason of rejection should be specific and agreed with
buyer and supplier before return.
4. Procurement should be part of GRN process flow in case of
rejection.
THE END