NAME: SOULIHA FAROOQ BAIG

CLASS: BBA -V SEMESTER

SUBJECT: SUPPLY CHAIN MANAGMENT

PRESENTED TO: FAKHR E ALAM

COMPANY:

PRODUCT:

ENGRO FOODS:
Engro foods ltd. company's milk production capacity is 700k litters
per day. Moreover, an investment plan of $ 3.4 billion in Engro Foods
has been approved by the board for: expanding UHT capacity to
900k liter per day, expanding milk powder capacity to 70 kilo per
day, import of 1000 cows and an ice cream plant. 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.

OLPER’S:
Olper’s 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 4000 plus villages & 13000 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.
 OPERATIONAL PROCESS

Raw Material: Olper’s milk is buffalo milk which is been

collected and transported from farms to dairy plants through tanker
that maintain a chilling temperature of 4 – 5 Centigrade.

Stored: When the milk reaches the dairy plants, it is stored in

isolated tanks where it is further 16 processed.

Lab Testing: This milk is then tested in the dairy plants to check
the quality and the milk that’s meets the quality standard is chilled
again, and pumped into the chilling holding tanks.

Filtration: This milk is then cleaned either through centrifuged or

filtration before getting pasteurized followed by
toning/standardization and homogenization.

Ultra-High Temperature: Then milk is been further processed

by passing through ultra-high temperature to remove other
purifications and then passed it for packaging.

Packaging: The final step is to pack the milk in airtight container

packaging to retain its freshness.
 SUPPLY CHAIN MODEL

MILK LAB APPROVED

RECEPTION TESTING
MILK

REJECTION

CHILL AT 4*
CENTIGRADE

CREAM
SEPRATOR

CREAM

HOMOGENIZATION STANDARDIZATION

BALANCE TANK PACKAGING WAREHOUSING

WHOLESALER / DISTRIBUTOR TRANSPORTATION

RETAILER

FINAL CONSUMER
Raw Material Sourcing:
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

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 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. Engro Foods maintains
a full-fledged Milk Collection Department to manage milk collection
through direct sources. The main objective of Milk Collection Centre
is to deal with small quantities of milk provided by the village dairy
farmers.

Contract-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 liters of milk a day from dairy farmers. This
method of contractor-based collection contributes the most to the
overall quantity of milk collection.
Transportation of Raw Milk:
The raw milk is transported from the milk collection center 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 center to the plant varies between 10,000
and 35,000 liters. 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
centers 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.

Logistic & Warehousing:

Integrated Logistics:

Engro Foods Pakistan makes sure that their product namely Olper’s 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. 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 it’s 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. •Ranipur. •Nawab shah. •Dharki. •Dhokri •Rohri and
Sahiwaal.

Outbound Logistics:

On average, every alternate day Olper’s 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. 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 olper’s: Sukkur, Sahiwaal & Rawalpindi.

Distribution Networks:
Olper’s focus on every major city of Pakistan. All the transportation is
outsourced. Olper’s 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 • Rawalpindi. • Peshawar. • Central Zone • Lahore •

Gujranwala • Multan • South Zone • Karachi • Hub • Punjgur •
Nawab shah.
 SUPPLY CHAIN PROCESS

Engro food supply chain strategy is consistent with their supply chain
objective, which in turn is conforming to their mission statement
which is to satisfy customer needs at a comparative cost making
their contributions to the development and growth of
industrialization by becoming the market leader, and achieving
growth in diversity by dominating the food business and Pakistan.

So therefore, their supply chain strategy is offered the best services

at the lowest possible cost. Maintaining lowest cost with the high
level of responsiveness is also the key factor at Engro Foods that give
them competitive advantage over their rivals. To maintain low cost,
there strategies include location of plants near the supply sources
that are not only abundant, but also close to their farmers that
further reduce their transportation cost and risk of deterioration of
milk that result in subsequent losses. Their responsive strategy
includes the use of third party logistic to make sure that all activities
are performed that are important at Engro Foods.

PUSH AND PULL VIEW:

Engro Foods follows push strategy as they make product, which are
standardized and then push them into market. So, its effect is it
necessary for their supply chain to keep much inventory at all levels
to avoid shortage.

Push & Pull Point:

Every supply chain is almost always a combination of both push and
pull, where the interface between the push-based stages & so
Upstream is push based while downstream relies on pull based
systems.
 The warehouse generally holds a
high inventory, and the sales team
RM is procured based on tries to push the products
anticipated customer demand available in the warehouse to the
and pushed for production customers.

RAW MATERIAL FINISHED CUSTOMER

PRODUCTION
GOODS

Production is done based on The customer decides what needs &

available RM and FG is fished buys only that which leads to in most
to warehouse. cases with a high level of non-
moving inventory in the warehouse.

STAGE 1: Forecasts the number of units required for production.

Stage 2: Then manufacturing firm allocates the resources for the

Production of milk & cream which are estimated.

Stage 3: After that, the distributor of the Olper’s product places order
to manufacturing firm for the units to be distributed.

Stage 4: The retailers of the Olper’s product analyze the past sales
data to forecast sales.
CYCLE VIEW:

PROCUREMENT CYCLE:

Supplier (farmers) provide the raw material Milk. Olper’s make

contract with farmer for milk collection. Farmers signed the contract
& provide daily basis milk supply and if the milk is found below the
level of quality, then it is not been used for the process.

MANUFACTURING CYCLE:

The Olper’s started processing the milk, distributors also place

monthly order as per requirements. They started packing daily
threshold orders to fulfill requirements. Then, it is been transported to
all distributors & wholesalers.
REPLENISHMENT CYCLE:

The distributor of Olper’s started supplying the milk & cream. The
retailers of Olper’s products place an order for fulfillment of
inventory based on customer demand. The expiry date of product
was been maintain to provide quality product.

CUSTOMER ORDER CYCLE:

The retailers of Olper’s started selling breads. The customer places

an order of Olper’s via online platform and refer shipping method.
The retailers of Olper’s acknowledge the order by sending
confirmation email. The retailer processes the order of Olper’s milk
by referred shipping method. The customer receives the required
quantity of Olper’s milk. If quality problems are found, then Olper’s
may be returned to the retailer’s shop.
1) INTERNAL SUPPLY CHAIN MANAGEMENT (ISCM):
Strategic Planning: Their supply chain strategy is offered the best
services at the lowest possible cost. To maintain low cost, there
strategies include location of plants near the supply sources that are
not only abundant, but also close to their farmers that further
reduce their transportation cost and risk of deterioration of milk that
result in subsequent losses.

Demand Planning: While demand reduces during the winters and

increases during the summer. 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. The demand for Olper’s milk reduces in winters and
increases in summers. Furthermore, its demand also increases when
Ramadan arrives because people use milk to make different juices
or simply for drinking it in sehri and Aftari.

Supply Planning: Olper’s 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.
2) SUPPLIER RELATIONSHIP MANAGEMENT (SRM):
Design Collaboration: Olper’s suppliers are responsible for 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
liters of milk a day from dairy farmers.

Sourcing: 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.

Negotiation: Olper’s negotiate with suppliers in a large margin

because of their plant location which is near to the farms.

Buying: Olper’s buy the raw material in a large quantity on contract

basis.

Supply collaborator: Olper’s ensure good relationship with suppliers to

get timely & safe delivery.

3) CUSTOMER RELATIONSHIP MANAGEMENT (CRM):

Marketing Management: Olper’s use different marketing strategies like

advertisement, encouraging female hard work on adds (occasional
basis) to promote sales, olper’s give many scholarship and welfare
things in ruler areas for promotion etc.

Sales Management: By ensuring smooth & timely supply of product in

every corner of the country, maintaining quality & hygiene
standards which increase olper’s sales day by day.

Call / Service Centre Management: Olper’s Service Centre team ensure to

get feedback & suggestion of customer on daily basis to maintain
and improve product quality & customer satisfaction.
SUPPLY CHAIN STRUCTURE:

Drivers allow a supply Chain to increase THROUGHPUT while

simultaneously reducing cost. THROUGHPUT is the number of goods
& services produces by any seller within a given period of time
THROUGHPUT PLANT CYCLE TIME

SUPPLY CHAIN DRIVERS

I. Facilities / Physical location ( Where ? )
II. Inventory/ Assets ( RM, WIP, FG )
III. Transportation
IV. Information/ Data (Data concerned about rest of the drivers)
V. Sourcing (Who is the supplier?)
VI. Pricing (The only element that generates revenue)
 FACILITIES
Role (Product Focus):
The Production facilities of Olper’s is dedicated. It is on large # of
facilities, function focus, flexible. Facilities perform their function as
intended, Excess Capacity is Responsive & Costly.

Location: The dairy processing plant is situated at Rohri &

Sahiwaal & now in Punjab as well. The head office of Engro Foods is
located near Sea View Marine Drive, Block 4, Clifton Karachi,
Pakistan. It is centralized to gain economies of scale. It has one or
two manufacturing firms in many cities of Pakistan. It delivers its
product by using distribution centers or its personal vehicles.

ADVANTAGE:
• Proximity to suppliers.
• Low wage rate.
• Availability of labor.

Plant of Olper’s in Sahiwal

Capacity: Olper’s has a limited number of products and it

manages the inventory by analyzing the demand for particular area
because it can eliminate any SBU or lesser the quantity of less
demanded product. So, it has little excess capacity to be efficient &
no amount of milk was been wasted as it is a dairy product and it is
been rotten in a limited threshold time.

ADVANTAGE:
• Little excess capacity.
• Adjust capacity using accurate demand forecasting.

Over-all trade off:

Components Efficiency Responsiveness
Role Priority
Location Priority
Capacity Priority
 INVENTORY

Role:
Form: 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.
Location: Location of plant is near to farmers as to save
transportation cost & being much more resistant in means of
deterioration of milk over time.
Quantity: Engro Foods use to converts the excess supply into
powdered milk to maintain balance between supply & demand, It
also reduce the chances of excess milk
deterioration over time as compared to
liquefied milk.
Over all, these inventory management
strategies give the level of
responsiveness in lowest possible cost.

Components of Inventory:
Cycle Inventory: It works on cost of
ordering more frequently.
Safety Inventory: It works on costs of
losing sales owing to not having enough
inventory.
Seasonal Inventory: It works on cost of
having a more flexible production rate.

Over-all trade off:

Components Efficiency Responsiveness
Cycle Inventory Priority
Safety Inventory Priority
Seasonal Inventory Priority
 TRANSPORTATION

Role:
Direct or with Intermediate Consolidation point: The transportation
fleet at Engro is partly owned and partly contracted that is they
make use of third-party logistics.
Location & Routes: The transportation
routes from milk collection centers to the
manufacturing sites at Sahiwal and
Sukkur are designed in a way to avoid
overlapping of routes which reduced
cost of transportation.
Modes: The raw milk is normally
transported by truck between four to six
hours to avoid loss of quality.

Components of Transportation:
Choice of Transportation: The insulated
tankers maintain the temperature of milk
around four degrees Celsius. The reason
tankers are insulated is to prevent the
milk getting hot in the summer or freeze
in the winter. The reflecting surface of
the trucks provides protection against
infrared rays and reduces the heat in
tank. Also, the cool temperature stops
the production of bacteria while the milk
is transported over long hauls to the
manufacturing site.

Over-all trade off:

Components Efficiency Responsiveness
Transportation Network Priority
Transportation Mode Priority
 INFORMATION
Role:
Olper’s uses a real time inventory management system and
transportation management system to monitor the delivery trucks. It
will increase responsiveness while reducing costs. It uses
technologies to real time visibility into inventory levels, production
status and shipment tracking. It only shares necessary information
across the departments.

Components of Information:
Push versus Pull: It utilizes push view.
Coordination and information
sharing: It integrates its ERP system
with suppliers and distributors.
Sales & Operation Planning: It utilizes
Sales and operations planning to
align production and inventory plans
with anticipated demand.
Technologies: It uses ERP, EDI & SCM software.

Over-all trade off:

RESPONSIVENESS EFFICIENCY

SIMPLE Least and Short Low Cost

PRIORITY
Responsive

COMPLEX Maximum and Lengthy High Cost

Detailed
 SOURCING
Role:
The milk collection was done by two division, most of the milk was
been fulfilled by the contract-based supplier which was well known
with the quality standards. They contribute the most to the quantity
of milk collection. The direct sources of milk by their dairy farms are
most preferred one by Engro because of low probability of
adulteration of milk by dairy farmers, but the quantity of milk
collected through this is not sufficient.

Components of Sourcing:
Inhouse or Outsource: Both
methods were used.
Supplier Selection: It evaluates
potential suppliers based on
factors like quality, price and
reliability.
Procurement: It set up
procurement for contract-based
supplier to ensure supply chain
surplus.

Over-all trade off:

Components Value and Efficiency

Inhouse or outsource

Supplier Selection

Procurement
 PRICING
Role:
Price of Olper’s is according to their sizes, the greater the size the
greater price will be. The price of every pack is been designed by
overviewing the competitors set price and market. It utilizes pricing
strategy to improve efficiency and the price slightly vary from
competitors and gradually increase it.

Components of Pricing:
Pricing & Economies of Scale: It gains economies of scale by
increasing product on volumes.
Everyday Low Pricing or High-low pricing: It utilizes high-low pricing.
Fixed pricing versus menu pricing: It utilizes menu pricing.

Over-all trade off:

Components Firm’s Profit

Pricing & Economies of Scale

High Low Pricing

Menu Pricing