SHAN FOODS

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 ACKNOWLEDGEMENT

Interdependence is a higher value than independence.

This work is a synergistic product of many minds. First of all we are greatly honored by
the blessings of Allah Subhanahu W’aTa’alah, without HIS blessings, we would never
be able to conduct and accomplish the task.

Secondly, it is our privilege and honor to express our deep gratitude to our facilitator Mr.
Shaikh Abdul Qadir for his valuable guidance in “Production and Operation
Management” course owing to his immense expertise and related experience in the
practical field. We all are grateful to him for assigning this project report, which has
further helped us in evaluating many interrelated dimensions of management field.

We believe that this report meets his predetermined standards and expectations.

Table of contents

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 S.N TOPIC PAGE

1. INTRODUCTION OF SPICE FOOD INDUSTRY IN PAKISTAN 04

2. INTRODUCTION OF SHAN FOODS 08

3. VISSION &MISSION STATEMENT 10

4. CORE VALUES& HIERARCY 11

5. STATISTICAL PROCESS CONTROL

5. SUPPLY CHAIN SYSTEM 12

6. PLANNING OF SHAN FOODS 14

7. INPUT 15

8. OUTPUT 21

9. PRODUCTION PROCESS 22

10. BREAK EVEN DATA 26

11. COST VOLUME PROFIT ANALYSIS 27

12. APPLICATION OF TQM 29

13. INVENTORY MANAGEMENT SYSTEM 30

14. FIFO SYSTEM 31

15. RECOMMENDATIONS 32

16. CONCLUSION 33

17. REFERENCES 34

INTRODUCTION OF FOOD SPICES INDUSTRY IN PAKISTAN

Pakistani Food is famous for its taste around the world, due to the addition of special spices,
which enhance the taste of food mostly making it spicy. The Food Industry all over the world
represents a small niche, named as spices. Spices now-a-days have a lot of importance due to
changes in the trends. People around the world and especially in Pakistan prefer more spicy
Foods.

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The Spices not just only make the food spicy but it also takes the food cuisine to a new level.
According to Gilani Research Foundation as shown in Figure 8 below, 27% people living in
Pakistan prefer eating spicy foods, 23% people prefer eating non-spicy foods and remaining 50%
people of Pakistan were neutral on this matter.

Figure-Preference of Food Taste

Spices all over the world are made through a wide range of plants; these plants include herbs,
spices seeds, dehydrated vegetables and spice blends. According to an American Research
Institute related to Spices, it quoted that “Spices are considered as dry plants which are now-a-
days used mostly for the seasoning purpose”.

Countries Production of spices

(Tones)
India 1,051,000
Bangladesh 128,517
Turkey 107,000
China 81,600
Pakistan 53,647
Nepal 20,400
Colombia 14,900
Iran 11,500

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 Burkina Fasko 5,800
Sri Lanka 5,200

In Pakistan spices are used for enlightening the taste of traditional cuisine. The Food spices
industry of Pakistan is categorized in two dimensions, branded and non-branded industry.
Branded Spice Industry means that industry in which the spices sold are branded and they do
come under a company or a brand, whereas unbranded spice industry means the industry in
which the spices are openly sold in packets, there is no name means no affiliation or no
recognition.

In Pakistan, According to Small and Medium Enterprise Development Authority (SMEDA)

currently there are 8,500 spices and salt grinding units that are working. The figure of 8,500 have
grown over years, in 2010 the unit’s operating in Pakistan were almost 7,000.

Out of 8,500 units, 55% spices and salt grinding units are operating in rural areas of Pakistan
whereas the rest 45% of belong to the urban areas. Interestingly, as the technology is being
modernized around the world and in Pakistan, like newly equipped operating units are being
imported from the world. It is helping the Spices Industry towards growth and even the trend
which was first towards the rural areas is shifting towards urban areas.

The Spices Industry of Pakistan not only contributes towards the local market but it also
contributes towards Pakistan Economy in the form of Imports and Exports. Even though spices
are considered as a small portion of imports and exports but the numbers are increasing as years
are passing. According to State Bank of Pakistan, following are the figures of Import and Export

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of Spices shown in table;

Figure- Spices Imports and Exports

According to Small and Medium Enterprises Development Authority (SMEDA), statistics

related to Branded Spices Industry and Non-Branded Spices Industry is shown in table 2;

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Pakistan’s Branded and Packed Industry currently holds 45% of Spice Industry, of this 45% the
major portion is achieved through the urban areas. Urban areas where people prefer more
towards the buying of packed spices rather than loose spices.
In the Branded industry there are some major players which are recognized by the market, they
are;
National Foods

Shan Foods

Mehran Foods
Along with them there are even other players which are considered as second priority by the
people of Pakistan, the players are;

Chef’s Pride

Habib Foods

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Zaiqa Foods

Ahmed Foods
The above mentioned names are those names which may be found in the market most often.
Moving towards their prices the branded spices are expensive than the loose spices, they are 30%
more expensive.
The Market shares of these major players in Pakistan Branded Industry of Spices are shown
below in Table ;

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INTRODUCTION OF SHAN FOODS

Shan Foods was initially launched as a small house based business that started sellingrecipe mix
mostly to friends and family. Then gradually the demand for their productsincreased and it
crossed the Rs. 3 Billion mark with their product division channelsacross the world in more than
45 countries. Shan Foods has always followed a verystraight forward approach to limit
themselves within the spice business and avoid goingin to any other fields. Shan Foods is acutely
embedded with South East AsianCommunities living in different parts of the world like Europe,
US and Australia andparticipating in different events time to time.The company started to
expand at a remarkable growth rate since 1981 when the ChiefExecutive Officer of Shan Foods
(Pvt.) Ltd. Mr Sikander Sultan made his way to successby mastering the spice business. It was
his devotion and commitment that a company thatstarted from just a room got an immense
growth and today Shan Foods is considered apowerful brand with its existence in more than 45
countries of the world and comesamong the most reputed brands in food industry.

Today after setting their name as a reputed food company whose products are cherishedacross
the world, they are now planning to expand their product lines in order to enjoythe benefits of
growth opportunities; as Shan Foods is continuously introducing newproducts that are
specifically according to the new requirements and needs of theirconsumers.

The success of Shan Foods can be summarized by describing its quality to continuouslyidentify
and react to its customers’ trending needs through their well-established R&Ds,QAs and ideal
manufacturing facility.

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If anyone wants to have an example of a prosperous Shariah Compliant Business, thenShan
Foods can be one of the perfect examples.In this industry, the Labor Strength is more than
thousand employees, who are well aware tovision of Company & focus on Quality Standard
regarding SOPs, The aim of Shan Foods (Pvt.)Ltd is to be familiar as the world’s no 1 reliable
leader in quality &taste.Shan Food Industries as it comes under the Branded Spices Industry it
currently hold 40% share right after the Market leader National Foods as shown in Figure below;

SHAN FOOD COMPETITIVE EDGE

Shan Food Industries during these 34 years have achieved many awards which have increased
their brand reputation, this was all due to the quality taste which they have provided and are still
providing within Pakistan and outside Pakistan. Some of the major achievements of Shan Food
Industries are;

2003-2004: Exports Performance Award, KCCI

2003-2004: Best Export Performance Award, FPCCI

2004-2005: Best Merit Performance Award, FPCCI

2004-2005: Best Export Performance Award, FPCCI

2005-2006: Best Export Performance Award. FPCCI

2008-2009: Best Export Performance Award, FPCCI

2010-2011: The Superior Taste Award, iTQi

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VISION STATEMENT

To be a global leader in food products and socially responsible company that attains its quality
standards so that Shan stands for tradition, trust and good taste.

MISSION STATEMENT

To continuously develop and produce quality products that meet the customers and markets
demands, compatible with applicable regulatory requirements.

To be a consumer oriented company with keen insigne of food products ensuring quality panty
consistency and authentic taste to operate with state of the art technology to obtain optimum
results and retain highest quality standard thrived efficient and motivation human resource and
inculcate in them a sense of participation and proved for personal goals and development.

When Mr. Sikandar Sultan, the owner of Shan Foods started off the operations, there was not any
other company that produced spices. As a result of this the company did not face any
competition and even to date they enjoy benefits of being the first movers in the industry.
Sultan's strategy was simply to produce and distribute because of lack of competition and
demand for the product back then as the culture that prevailed in the country was more of the fact
that spices were prepared within households.

CORE VALUES

Core values has been dominate with the beginning of Shan foods, which helps to madeculture &
describe the personality of Shan Foods, which is focusing the groundwork onwhich its
employees performance & make decision.Shan’s success is based on a dedicated team of
professionals who collectively embrace aunique combination of the following strong core values.

ORGANIZATIONAL HIERARCHY OF SHAN FOOD INDUSTRIES

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 STATISTICAL PROCESS CONTROL

CONTROL CHART:

1. Variables Control Charts

 These charts are applied to data that follow a continuous distribution.
2. Attributes Control Charts
 These charts are applied to data that follow a discrete distribution.

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Popularity of control charts

 Control charts are a proven technique for improving productivity.

 Control charts are effective in defect prevention.
 Control charts prevent unnecessary process adjustment.
 Control charts provide diagnostic information.
 Control charts provide information about process capability.

Analysis of Patterns on Control Charts:

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 a) Variability with the cyclic pattern
b) Variability with the cyclic pattern eliminated

R - CHART

P - CHART

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FISHBONE DIAGRAM

A fishbone diagram, also called a cause and effect diagram or Ishikawa diagram, is

a visualization tool for categorizing the potential causes of a problem in order to
identify its root causes.

Purpose of a Fishbone Diagram

The purpose of the Fishbone Diagram is to help teams categorize the many
potential causes of problems or issues in an orderly way. It also helps in
determining root causes. Essentially, this analysis breaks the “whole” into “parts.”
Fishbone Diagrams are helpful in clearly breaking down the relationship between a
topic and all of the possible factors that are related to it. When used as a Cause-
and-Effect Diagram, a Fishbone Diagram can represent the amount of influence of
each cause.

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Pareto analysis I

Pareto analysis II

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SUPPLY CHAIN PROCESS:

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 A company becomes stronger when its supply chain is well equipped to meet every
challenge.

• Supply chain team of Shan foods ensure that goods or shipment reach their destination
well in time.

PLAN:

 The planning process of Shanfoods is depending on S&OP.

 The planning purpose of Shan foods is to achieved the target of R=R.
 Shan foods believed that planning should be right and in efficient manner.

SOURCE:

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  The main objective of Shan foods sourcingdepartment is to workwith quality
suppliers.
 The department diligently pick and select the best quality spices.
 Company pays extra attention in obtaining rawmaterial.

MAKE:

 The make process of SCOR model is referred to the production ormanufacturing

facilities.

 Shan foods are dedicated to ensure the consistency of product by using well equipped
production techniques.

DELIVER:

• The supply chain team ensure that the goods orshipments reach their destinations well in
time to match market trends and customer demand.

BUY:

• In this last step, the product is delivered to the customer through different distribution
channels.

• Shan Foods always satisfy their customers by providing them high quality products
always on time.

PLANNING OF SHAN FOODS

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Planning helps to make success & achieve goals of every organization to compete itscompetitor,
without planning nothing could be done efficiently, the planning of ShanFoods is based on the
forecasting & average sales, they do planning on below mentioned functions to meet their target.

 Planning of Demand
 Planning of Raw Material
 Planning of Production
 Planning of Warehouse
 Planning of Inventory
 Planning of Distribution
 Planning of Return

PROCESS MANAGEMENT

WAREHOSE OF SHAN FOODS:

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Warehouse is a commercial building which is used for storage of inventories.

They have in-housewarehouse due to reduce damage percentage of finished goods. As we know,
foods item shouldbe keep in well temperature due to hygiene purpose due to save the health of
humanity.

They have more than 150 vendors to supply the goods in market as well, all finished goods
areplaced in proper shelf to maintain SKUs, & they have much place to future expansion
accordingprojection base quantity or market demand with the help average monthly sales report.

The ware house of Shanfoods is located at the following areas:

• Karachi

• Rawalpindi

• Hyderabad

• Lahore

• Multan

BENEFITS OF IN-HOUSE WAREHOUSE:

 It will reduce the damage cost of merchandise

 Reduce the transportation cost
 Strong check & balance on inventory

INPUT

1. RAW MATERIAL REQUIREMENT

Two main input materials are required for the production on a regular basis.
 One is the wholespices or grinded spices for processing and
 Mixing and the packing material for making products.
As per production plan these two materials are crucial to the operation of the spices.

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 2. TECHNOLOGY/PROCESS OPTIONS

The main cost components in an account of plant and machinery while setting up a spices
businessare the grinding and packing machines while, for the drying purpose, sun-drying
procedure isgenerally followed which is however inexpensive and compatible with the weather
conditions ofPakistan. Both brand new and reconditioned machines are available in the market.
Howeverconsidering the cost viability of the business most of the existing businesses operate on
locallymanufactured machines. Grinding process is generally performed on stone mills generic to
allkinds of small or large scale setups.
What makes a difference is the use of packaging machines.
Big market players use plastic or aluminum pillow packs placed in hard paper box.
Pillowpacking machinery is easily available in the market at a reasonable price whereas, paper
box packaging technology is only used by the companies generating substantial revenue
throughexports. This machine is also expensive (about Rs.10 million).

• They have employed ERP& SAP system to improve efficiency & to achieve their
vision.
• The two most advancedtechnologies are fleet control system & V-Lock.

V-LOCK SYSTEM:
• The company uses the technology in packaging to keep the spices safe from bacteria
andmoisture.
• The products of Shan Foods are then preserved as thejust perfect blend through V-Lock
packing technologyto ensure lasting freshnessand taste.

CONTROL FLEET SYSTEM:

It is a system that allows the tracking of those vehicles which are currently on the road.
And its advantages are:

• Real time vehicle monitoring.

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 • Control over the work of various sensors in a vehicle.
• Cost reduction
• Profit maximization.
• Vehicle operational safety improvement.

MERITS & DEMERITS OF A PARTICULAR TECHNOLOGY:

Although new machines are the best option for starting a business but, cost constraints
makereconditioned/locally manufactured machines a viable solution. If properly handled
andmaintained on a regular basis reconditioned/locally manufactured machines can give
qualityoutput for a longer period of time.

3. MACHINERY REQUIREMENT
For the purpose of this study we are assuming that good locally manufactured machinery
costingaround Rs. 475,000 will be able to give the desired quality of output. The production
capacity ofthe machine would depend on the amount of business expected to be generated.
The cost implications would depend on the capacity of the machine. For this pre-feasibility
thelocally manufactured grinding machine with a grinding capacity of 400 k.g. pr hour,
whereas,packaging machine is assume to have a capacity of producing 1800 packets per hour.
Thiscapacity seems reasonable for the initial years which could be expanded in future as
businessvolume and brand awareness is established.

MACHINERY DESCRIPTION:
Spice processing and packaging unit typically comprise on two separate sub-units
supportinggrinding and packaging process separately. Following table presents machinery
details:

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MACHINE MAINTENANCE:
Maintenance of machine is essential to ensure consistency of quality and quality control.
Thispre-feasibility takes into account the necessary maintenance required to operate a machine
over aperiod of 10 years. It is anticipated that the machine would require a recurring
annualmaintenance costing around 2.5 to 5% of the total cost machinery cost. Machinery
suppliersprovide life time free service of packaging machinery.

PRODUCT/PROJECT STANDARDS AND COMPLIANCE ISSUES:

The government has laid down certain regulations for food products which include registrationof
the product(s) with Pakistan Standard Quality Control Authority (PSQCA) and carrying asafety
logo on the package. Failure to do so is punishable by fine and imprisonment.

MACHINE BRANDS & SUPPLIERS

For the purpose of this study we have proposed to use local machinery and pillow packing.
During the study we have contacted following pillow packing machinery manufacturer
whereas,grinding mills manufacturers are located at Pan Mandi Karachi and easily accessible.

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Most of thelocal and even the export oriented business i.e. National and Shan are also using
locallymanufactured machinery due to its reliability.

4. LAND & BUILDING REQUIREMENT

The workspace required to setup the assumed Spice processing unit is a 400 square yardscovered
area, which will serve for the office, storage godown and spice processing andpackaging. It is
normally available in Rs. 50,000 to 75,000 on rent in a medium cost industriallocation i.e.
Landhi Industrial area, F.B. Industrial area Karachi or North Karachi Industrial areaetc.

5. HUMAN RESOURCE REQUIREMENT

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Spices processing industry is considered to be a labor intensive industry where most of
thefunctions are preformed manually. For the proposed setup 18 persons can handle the
operationsof the spices processing and packaging. The business unit will work on one shift basis.
Semi-skilled staff is sufficient to look after all the processing operations, while one trained
staffwill be required for operating packing machine. Such staff is available in the local market.
Totalestimated manpower required for the business operations along with their respective
salaries isgiven in the table below.

GENERAL MANAGEMENT / ADMINISTRATIVE & SELLING STAFF:

1.The owneris required to manage the following jobs:

 Overall business operations including general administration.

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  Procurement of new orders
 Distribution
 Customer handling
 Product quality
 Ensuring adequate cash flow to meet working capital requirements etc.

2.Machines Operatorsare required to operate the packing machine. They are also
responsiblefor machine’s timely maintenance, oiling, etc.

3.Quality Assurance OfficerThe person will be responsible for the quality check of the
rawmaterial and finished products according to the industry standards.

4. Sales Coordinatorsare responsible for day to day coordination with distribution

andproduction operations and coordination with the distributor. They are also responsible tocarry
out field surveys and ensuring product availability in the immediate market.
5. Admin. / Accounts Officeris mainly responsible for carrying out day to day
administrativeactivities of the overall business including facilitation provided to the owner as and
whenrequired.

OUTPUT:

FINISHED GOODS

According to inventory policy at Shan Foods, 15 days stock covers are kept for Finished
Goods.The efficient inventory management is when the demand is fulfilled as per the customer
required quantities and timelines, at Shan Foods the inventory is kept according to the sales
requirement.

 Biryani products
 Authentic curries

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  Stir fried food
 Lavish fried food
 Chat Masala
 Sumptuous BBQ
 Pickle product
 Deserts

PRODUCTION PROCESS:

Production Process of Spices Industries Spices are not produced as easy as it looks, the complete
process goes through very complex phases. One thing important to be considered before going
towards the process is that spices which have been planted must not be harvested before their
maturity time, maturity time is known as the time when plant of spice is ready to be harvested.

A typical setup for packaged spices goes through three main stages end up with storage.
Theprocess is very simple which starts from the procurement of whole spices sent to the
grindingprocess where mixing is also carried out. Mixed spices are stored in tanks or large sized
tumblersfrom where it is shifted to the packaging machines to be converted into desired packet
sizes. Insmall setups (with 500 kg/day) pre-grinded spices are also used, whereas, in large
scaleproduction generally manufacturing setups use their own grinding facility, however, during
Eid,Ramazan and Moharram grinded spices are also used due to increased demand.

PRODUCTION PROCESS OF SPICE INDUSTRY IS:

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 1) CLEANING
The first step is to clean the harvested plants and this process is known as cleaning. In cleaning
process, farmers carefully clean the plants from particles like dust, insects and stones. Farmers
either clean them manually or through machinery. In manual cleaning the other method is to
clean planted spices by dipping them into water for 2 to 3 hours. In this method one thing must
be considered that water must be changed every time to prevent recontamination. Using
machinery is not even a bad idea but sometimes the plants harvested are not cleaned properly due
to which mostly manual cleaning is preferred.

2) FINISH DRYING
Generally dried spices are used which need to be further checkedwhether humidity hasinfluenced
the quality. A finish drying maybe needed if material is not completely dried. Various types
ofdryers are used for processing spices, ranging from simplesun drying to gas or kerosene-fired
dryers.
Once the harvested spices are cleaned properly the next phase which has the same amount
ofimportance like cleaning is called as drying. The Harvested plants or spices when cleaned they
are left to be dried either in the open air or machineries are used to dry them. Drying the crops
has so much importance that if they are not dried properly it may result in loss, the harvest plant
may be sold at 50% less than its original value. Harvested Spices if dried properly may lead
towards much better taste. Drying the spices gets different when the season is dry and once the

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season is wet. In dry season as the amount of moisture is less the crops are dried under sun,
whereas when the season is wet the plants are dried using artificial dryers.

3) GRINDING AND MIXING

Spices are grinded and mixed using stone mill. Grinding is the third process which comes after
cleaning & drying. Once grading is done and spices are categorized they move towards grinding.
Grinding means to crush spices or plants into small particles. Grinding is either done manually or
by machineries which are being used. The interesting fact is that grinding depends on market
requirements; if the market wants spices in dried form then no grinding is done. The setup where
machineries are used for grinding require a huge place where there is proper room for ventilation
to avoid spices from getting wet.
4) PACKING
Grinded spices are packed into desired sizes using automaticpackaging machines.
Once everything is done, next process is to pack spices either in the raw form or in powder form.
Packaging of spices is not easy as it looks, it requires proper attention. Mainly three aspects are
considered while packing spices, they are;
Type of Spice
Humidity of Storage
Raw Form or Powder
Every spice has its own kind of nature and taste, so for maintaining their taste it must be
determined that which will be packed in which kind of box or packet. Not only the type but
humidity of storage is also considered, more the humidity more it will affect the taste of spices.
So during the phase of packing much more importance is required.

5) STORAGE
Finished packets are cartooned and stored in warehouse.
Spices (in the whole form) are stored in the go-down in 25 and 50 k.g. bags i.e. Chili, coriander
etc.

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 6) DISTRIBUTION
The spices whether in raw form or powder form once packed they need to be distributed to fulfill
the needs of market. Spices are either directly made available in market by local suppliers or
either indirectly through renowned suppliers.

PROJECT LIFECYCLE

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BREAK EVEN ANALYSIS:

COST VOLUME PROFIT ANALYSIS (RATIO ANALYSIS)

 CURRENT RATIO:

Current assets/ Current liabilities: 3,114,550/ 3,654,457 = 0.851597242121519

 INVENTORY TURN-OVER:

Sales/ Inventory of finished goods: 26,744,359/ 2,551,752 = 10.48078300712608

 FIXED ASSET TURNOVER:

Sales/ Fixed Assets: (26,744,359/ 3,947,210) * 100 = 67.8%

 ANNUAL REVENUE:
3.3 billion
 ANNUAL FIXED COST:
120,000,000
 ANNUAL VARIABLE COST:
300,000,000
 TOTAL ANNUAL COST:
420,000,000
 PROFIT MARGIN:
10-15 %

Breakeven Revenue = Annual Fixed Cost

C/S Ratio
= 120,000,000
0.86
= 138947368.4
CONTRIBUTION RATIO (C) = ANNUAL SALES - VARIABLE COST

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FINANCIAL ASPECT OF SHAN FOODS:

% age of increase/ decrease of

2012-2011
Profit Before Tax 175%

G.P 35%

Sales 41%

Trade Debts 30%

Fixed Assets 5%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

FINANCIAL INDICATORS:

o Current Ratio : 1.2

o EPS : Rs. 5.85
o Return on Asset ` : 3.8 %
o Return on SHE : 11.1 %
o Rate of G.P : 21.5 %

COST VOLUME PROFIT ANALYSIS

The values are based on best of estimate deduced after discussion with Shan Foods brand
manager.
C/S ratio is annual revenue minus the annual variable cost divided by annual revenue.
Since there was no disclosed stats for the annual units sold so the cost volume and profit analysis
had to be taken out from the annual revenue generated. According to this ratio the company to
achieve breakeven must sell products of around 140 million rupees.

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THE WORLD OF SHAN FOODS

The world of Shan Foods comprises 14 departments all together:

1) Supply Chain
2) Information Technology
3) MIS
4) Procurement
5) Engineering & Services
6) Production
7) Communication
8) Human Resource
9) Export
10) Import
11) Quality Control
12) Research & Development
13) Sales
14) Marketing

APPLICATION OF TQM

 SHAN FOODS focuses on the Return of Investment of every activity they do. From
human resource planning to sifting through raw material to delivering marketable goods.
 Their strategy is to focus on quality at every step. The Quality Control (QC) department
ensures that the ingredients are the very best, chosen from a variety of crop yields and
that the process brings out the right taste in each spice.
 The end result is a packaged Fast-Moving- Consumer-Good that has become a household
name in Pakistan.

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JUST IN TIME

It’s basically a concept of TQM (Total Quality Management. Just in time Just in time (JIT) is a
production strategy that strives to improve a business' return on investment by reducing in-
process inventory and associated carrying costs. Such as the presence or absence of a part on a
shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a
manufacturing organization's return on investment, quality, and efficiency. To achieve
continuous improvement key areas of focus could be flow, employee involvement and quality.

INVENTORY MANAGEMENT SYSTEM

Inventory management based on forecasting that was given by Marketing &In-transit lead time.

 In-transit inventory to take advantage of economic purchase order size.

 To provide a safeguard for variation in raw material delivery time.
 To allow flexibility in production scheduling.
 To meet variation in product demand.
 To maintain efficiency of operations.
 Salesdepartment.

Includes scheduled receipts, on-hand inventory, and back orders (an unfilledcustomer order or
demand against an item, whose current stock level isinsufficient to satisfy demand)For each of
the preceding reasons, be aware that inventory is costly and large amounts aregenerally

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undesirable. Long cycle times are caused by large amounts of inventory and areundesirable and
also increase the following inventory relative cost as well as a majorcause to decrease
profitability and competitiveness.

SHAN FOODS INVENTORY MANAGEMENT SYSTEM

Shan Foods inventory management department is efficiently practicing and managingtheir

inventory in order to maintain their position and availability of their stock in themarket. Their
Planning department leads the whole and supply chain in Shan Foods likeother leading
organizations, Procurement, logistics distribution/customer services,materials management are
under the dominancy of planning department.

How Shan Foods Manage Their Inventory?

In Shan Foods there are three types of inventory being managed.

 Raw Material Inventory

 Packaging Inventory
 Finish good Inventory

1) RAW MATERIAL INVENTORY

They have 15 days stock to fulfill the requirement. According to inventory policy at Shanfoods,
15 days stock covers are kept for Finished Goods. The efficient inventorymanagement is when
the demand is fulfilled as per the customer required quantities andtimelines.

2) PACKAGING INVENTORY

Packaging Materials and there inventory is managed through Forecast which is given by
Marketing and Sales department on the basis of that MPS is identified, this MPS identify the
requirement of packaging through Bill of Material then MRP (Material Requirement Planning)
created then Shan Foods order their different supplier for different material accordingly an then
packaging material is manufactured and stocked .Its safety covers are dependent on the lead time
of each component like Hard Packs, Laminated rolls etc.

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 3) FINISH GOODS INVENTORY

The efficient inventory management is when the demand is fulfilled as per thecustomer required
quantities and timelines, at Shan Foods the inventory is keptaccording to the sales requirement
with safety covers of each SKUs, safety covers arereviewed on the basis of peek and lean
seasons to prevent inventory obsoleteness.

FIRST IN FIRST OUT SYSTEM (FIFO)

Shan Food (Pvt.) Ltd. using the first in first out system, they manage their inventory bythe
placement of items in shelf. Firstly they dispatched the older item rather than the newitem due to
save the product expired. FIFO system also reduces the damage the packagingof each item &
also save the cost as well.

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RECOMMENDATIONS:

Apart from everything, one of the growing sector in food industry is the frozen foods, though a
new field for Shan foods but with the current performance in spices and the quality it maintains,

Shan has strong chances in making its mark in the frozen food category as well.

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CONCLUSION

Convenience, environmental concern, increasing acceptance of food as having therapeutic value

are some of the dimensions, organization needs to study and develop new users for their spices.

Inventory management is very important for every organization as it has a direct impacton
overall revenue of the company. There are examples where companies are shut downor liquidate
because of poor inventory management.

A huge amount cost bear by thecompany if their inventory is not properly managed because if
the inventory got short itcreates availability issue which yield in loss of sale as well as loss of
customer for lifetime.

Shan Foods is effectively managing their inventory by the help of integrated supply
chaindepartment. Their planning department is effectively planning their inventory of everySKU
in order to eliminate their short fall in inventory and have 100 percent availability inthe market
when needed.The company is effectively managing the demand fluctuation by proper planning
andproper safety covers. Inventory management is a very critical process for Shan Foods andthey
monitor it on regular basis and planned their management accordingly.

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REFERENCES

1. https://en.wikipedia.org/wiki/Shan_Food_Industries
2. http://pakbiz.com/profile/Shan-Foods/
3. https://www.ukessays.com/essays/marketing/shan-foods-company-overview-and-
analysis-marketing-
4. http://www.amis.pk/files/PrefeasibilityStudies/SMEDA%20Spices%20Processing,
%20Packing%20&%20
5. http://www.slideshare.net/abinaushahi/strategic-analysis-of-shan-food-industries
6. http://aurora.dawn.com/news/1140905

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