ENGRO CORPORATION THE PARENT COMPANY

Engro is acronym 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. Engro is one of Pakistans most progressive, growth oriented organizations. It oriented in 1957 when Mari gas field was discovered and with the passage of time Engro Corp began to diversify in its products and services. The company was incorporated as Esso Pakistan Fertilizer Company limited in 1965, to resulted in largest foreign investment in the history of Pakistan.
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manufacture and market fertilizers. It boosted towards great achievements and in 1968

Then it was renamed as Exxon Chemicals Pakistan Limited in 1978. Then Exxon divests its equity from fertilizer business globally and was again renamed as Engro Chemicals Pakistan Limited in 1991. In 1997 Engro VoPak terminal limited was established because of a joint venture with Royal Vopak of Netherland for handling bulk liquid chemical storage at port Qasim Karachi and Engro EXIMP is established in 2003 as a wholly own subsidiary of Engro Corp. 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:

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ENGRO FOODS HISTORY

The growth strategy which was adopted by ENGRO Chemical Pakistan limited was diversification they diversify chemicals to food business Engros 40 year old relationship with the farmer also gives Engro food another edge over the competitors Engro Foods (Pvt.) Limited (EFL) has been established in 2005 as part of a diversification process at the Engro Group. The plant located at Sukkur on 23 acre land, has the raw milk reception capability of 300,000 litres per day and UHT milk capacity of 200,000 litres 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 companys 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. Engro Foods will work with the Pakistan Poverty Alleviation Fund and its three partner organizations to help implement sustainable business models that increase farmers profitability and develop a positive social and business climate for growth and expansion of live stock and other forms of value added agriculture.

Aggressive growth in revenue from PKR3.6bin 2007 to PKR 21bin 2010 Current milk processing capacity is 1million LPD. Highest market share of 39% in UHT liquid industry in Nov 2010

EFL operates two dairy processing factories located in Sukkur, and Sahiwal. The companys milk collection network now boasts over 700 village milk collectors and 400 milk collection centres. Covering 2400 villages across Pakistan, the activities of the Company touch the lives of almost 51,000 farmers.

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VISION: "Our vision is to become a fast expanding mega foods company.

MISSION:
Build Branded food business to improve quality of life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stake holders' value.

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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 8. Ethics and integrity 9. Safety, Health and Environment

CORE COMPETENCY OF EFL:

Aggressive style of business: launching more products in short time.

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DEPARTMENTS:

1. Administration
Efficient management of all administrative affairs of Engro Foods (Pvt.) Limited is the job of the Administration department. From legal matters to general day-to-day operations of the office, the Administration department ensures that all affairs run smoothly.

2. Finance and Accounts

The Finance and Accounting departments at Engro Foods are responsible for the total financial management of the different businesses of the company. From the usual accounting statements and sheets to risk and portfolio management, the team ensures that every rupee coming into and out of the Companies' pockets is properly documented and audited.

3. Human Resource
The Human Resource department at Engro Foods (Pvt.) Limited spearheads the recruitment process to ensure that the finest human resource is taken on board at Engro Foods. Resumes of candidates are carefully filed and documented for current or future reference. The department, besides carrying out succession planning, maintains and

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implements HR policies pertaining to employment, retention and superannuation. Assessing training needs of employees and ensuring adequate training is also carried out by the professional HR team at Engro Foods.

4. Marketing
Consisting of leading marketing professionals of the industry, who are graduates of top business schools of Pakistan, the Marketing Department ensures that from product need identification to product development, launch and post-launch, all strategic decisions are made based on authentic information and research. Identifying the target markets, effectively communicating to them and building the image of the brands as well as the Companies, is the job of the professionals running the marketing at Engro Foods.

5. Milk Procurement
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 centres and veterinary doctors providing service to the farmers.

6. 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.

7. Production
Modern technology is part and parcel of Production at Engro Foods. The state-of-the-art plant set up near Sukkhar has a processing capacity of more than 300,000 litres of milk per day, making it one of the largest in the country. Professionally qualified human resource efficiently works night and day to maintain highest hygiene standards.

8. Quality Assurance
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.

9. Supply and Distribution

This department ensures timely and effective distribution of the products to different shops and stores spread all across Pakistan. From transportation management to obtaining route permits and approvals, is done by this department.

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BRANDS OF ENGRO FOODS

The company sells its products under Olpers, Olpers Cream, Tarang, Tarka, Glorious, Omore, Owsum, Olfrute, Tarang Powder, Olwell, and Olpers Lite brand names.

OPLERS (Full cream)

TARANG (Tea Whitener)

OLWELL (0% fat)

OLPERS CREAM

OLPERS LITE

OWSUM (Flavored Milk)

OLFRUTE JUICE

OMOR ICECREAM
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MILK INDUSTRY OVERVIEW

Pakistan is the forth largest milk producing country in the world

Packaged milk industry initiated in 1981- Milkpak

Its first real competition came in the form of Haleeb, which introduced distinctively blue tetra packs to the market in 1986.

By 2006, dairy milk category growing at 20%

The milk sector shows a market that has homogeneous preferences that is the consumers have similar preferences. They want milk to be white, carefully processed, and good for health and bones. The markets, even urbanized, still have a strong preference towards the doodhwala who in their minds is the source of purest and most fresh milk. Also, price differential between packaged milk and un-processed milk is also a strong influence on their decision.

BRAND NAME
Olpers Milk
Olpers (a derivative of All-Purpose milk) on an impulse from its name gives a feeling of being an imported brand and not
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local one. Thus, consumers may perceive this as a high quality

and premium price brand. The flagship brand of Engro Foods is OLPERs Milk. Launched on March 20, 2006, Olpers milk is EFLs standardized and homogenized pure UHT (Ultra heat treated) milk with 3.5 % fat and 8.9 % solid non-fats.

It is EFLs 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 a 3 months shelf life. Before the inception of the brand Olpers, AC. Neilson carried out a marketing research for Engro Foods to determine the viability of the brand name Olpers and the market readiness through surveys, interviews and focus groups. 1200 names were reviewed and analyzed before Olpers was decided

Features of Product:
OLPER`S milk contains Best bio available proteins Only source of lactose Rich in calcium Phosphorus , potassium Vitamins (which is essential for your health)

Tag Line:
The unique selling proposition (USP) for Olpers is: Subah Bakhair Zindagi, but recently the company changed the USP to: Jo dil khol kay jeetay hain unheen kay liyay hai Olpers. Both the tag lines have a very positive impact on Olpers image because of their drect emotional positioning & relation with its customers.

Shipping Units:
1Litre (1000ml): 12 packs per carton Litre (250 ml): 27 packs per shrink-wrapped tray

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Litre (500 ml): 12 packs per shrink-wrapped tray

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).

Internal competitor Olper`s Milk, Olper`S Cream, Trang, Olwell External competitor Direct Competitors: Nestle, Millac, Haleeb, Nurpur, Nirala. Indirect Competitors: Local Milkman the GAWALA.

PACKED MILK MARKET SHARE:

OLPERS 49% NESTLE 45% OTHERS 9% (Haleeb, Good Milk, Day fresh, Nurpur etc.)

Others 8%

Market Share

Milk Pack 45%

Olper's 49%

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OLPERS SUPPLY CHAIN

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OLPERS SUPPLY CHAIN MANAGEMENT

Supply Chain activities can be divided into three all encompassing categories as well:

i) Primary Activities:
1. Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing, as they are required. 2. Operations: the processes of transforming inputs into finished products and services. 3. Outbound Logistics: the warehousing and distribution of finished goods.

ii) Supporting Activities:

1. INBOUND LOGISTICS
Milk is collected from villages, forms and other local milk men. This milk is sent to plant through own tankers. Some suppliers also collect milk and sent it to plant by their own means. For inbound are logistics used. dedicated long vehicles plant. Inbound logistics

concerns raw milk transportation to the

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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. 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.

2. OPERATIONS
Olpers carries out its operations very carefully in order to maintain its Freshness Adulteration Bacterial content Production is the functional area responsible for turning input into outputs through a series of production processes, and the production manager is responsible for making sure that raw material are provided and made into finished goods effectively. The production manager makes sure that work is carried out smoothly, and must supervise procedures for making work more efficient and more enjoyable. The production department performs many functions like shift in-charge, after taking his control they review the on-going production, how much it is done and how much is needed in order to meet the order. So they keep the process till the orders get completed. packaging equipment along with the quality assurance. They continuously communicate with the employees handling machinery and other

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OLPERS PRODUCTION PROCESS:

Milk Processing
Standardizati on and Toning

Pasteurizati on

Homogeniza tion

UHT Treatment

Packaging

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 C 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 (Solids Not Fat) 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."

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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 C for 3-4 seconds.

6. Packaging
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. EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. . It is in the form of rolled sheets of aseptic packaging arriving at the manufacturing plant directly from the supplier. Tetra Pak is the only option available to Olpers for packaging because it is having monopoly in the packaging sector in Pakistan.

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QUALITY CONTROL SYSYTEM:

It goes without saying that Engro Foods Limited is committed to providing the best quality of products to the consumers at the lowest possible costs. In other words, it is a company that believes in the virtues of cost leadership and its prioritization for quality maintenance that are carried out both before and after the processing of the milk. In Engro Foods Limited following types of quality control system exist to assure the procurement of the best quality raw milk. 1. First System: Engro Foods Limited quality control procedures are introduced right at the point of milk collection that is at the milk collection centres. Lab tests are conducted in order to check the milk. Quality check is carried out right at the time of milk reception at the plant. It is only after the milk clears certain tests that the Quality Control department accepts it and transfers it to the cooling plants. 2. Second System: Quality control experts are involved throughout the production process. After the packaging process is complete, Quality control resurfaces this time not only to ensure that the packages are sterilized but also to ensure that the milk packages are of the prescribed weight. And after a final approval, the milk products are considered fit for delivery and transferred to the warehouse.

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 sigmas 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 the company sustains promise of delivering high quality products and services to our customers on time, every time.

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Quality Standards That Are Followed In Engro Foods:

In Engro Foods more than 10 standards are being used for the quality control and quality assurance of every products quality. Some of them are as follows:

BRC (British Retail Consortium) HALAL SQF 2000 (Safe Quality Food) IFS (International Featured Standards) ISO 22000 ISO14000 ISO9000 ISO 18001

3. OUTBOUND LOGISTICS
For the sake of transportation of the finished goods right from the Engro Foods maintained warehouses that are situated right next to the f acility uptil the distributors, a fleet of trucks is maintained by Engro Foods themselves while part of the transportation has also been outsourced, employing a tactic known as third party logistics. The third party logistics for Engro Foods is Naulakha Transport Agency. On average, every alternate day Olpers Milk truck arrives at each warehouse from the 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 to distributors. logistics concerns finished milk movement from manufacturing plant to the warehouse &

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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 Mari pur 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 equbitor 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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ORDERING PROCESS
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 material handling very efficiently with the help of latest equipment for raw material as well as for finished goods. They use specialized milk tanks as mentioned above for the inbound of raw milk & for finished goods they use proper palletization and then to place these pallets they use fork lifters to put the pallets in the right place in the warehouse which is cross docked.

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DISTRIBUTION NETWORKS

PLANT-1

WARE HOUSE-1

KARACHI

WARE HOUSE-2

HYDERABAD

PRIMARY ACTIVITIES

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PLANT-2

WARE HOUSE-3

SUKKAR

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According to Mr. Ali Akbar, Director Marketing EFL, In order to succeed, you should ALWAYS capitalize on your STRENGHTS and NEVER on your COMPETITORS WEAKNESS!

Sales The sales of Engro foods products are divided into : 1. Primary Sales 2. Secondary Sales Primary Sales refers to the sales of the batches of products by the manufacturer to the distributors. Secondary Sales refers to the sales by the distributors to the retailers from where the goods are eventually sold to the ultimate consumer. So Engro Foods is following the traditional channel of distribution that involves some intermediaries between the transfers from producer to the consumer.

Manufacturer (Engro Foods)

Distributors

Retailers

Final Consumer

Engro Foods has almost 200 distrbutors all over Pakistan. Some of the distributors deal with larger areas and larger orders while others are the smaller ones. For the larger orders, the finished goods are transported directly to the distributors agreed upon point of delivery while for the smaller distributors, goods are also being delivered and deposited in warehousing facilities maintained by Engro Foods in some important locations all over Pakistan, and it is from there that the smaller orders for the distributors are processed and either delivered or picked by the distributors themselves.

Selection criteria of Olpers for Distributors Selection :

Financial Strength of Distributor Efficient Infrastructure Logistic Fleet Efficient and Trained Sales Force Market Knowledge The use of new Technology (IT) Past Experience of Distributor

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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, then it is drained. They have a normal losses rate of 0.40 % due to defected Milk.

SUPPORT ACTIVITIES
The following support activities are an important part of the value chain of Olpers.

General Administration
The top management at Olpers is committed in their works and they know the importance of coordination and interaction of different departments in order to achieve better results. Weekly meetings are held between different departments in order to solve problems as well as to make accurate decisions so that resources are not desecrated.

Human Resource Management

The workforce of Olpers is very efficient and innovative and they are team oriented. The job descriptions of the working teams are quite flexible and get enough scope to show their personal and collective skills and efficiencies. Engros is labor and human resource is at the top among all the workforces of Pakistan. This is because of their efficient HR practices, the most remarkable of which are the recruitment, hiring, job placement and performance appraisal. The performance appraisal system of Engro has been declared to be the best in employee needs any leave due to some reason they have to manage other person should be

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Pakistan. The employees are working properly according to company policy and if the

present there in the absence of that particular person, and the production run smoothly and effectively.

Technology development
Olpers makes sure that the technology used is always up-to-date. They have a team consisting of continuously developing new ideas and implementing them into the operations. They have very heavy machinery and unique plants which are used for Pasteurizing, purifying and preserving the milk. The tankers used for transfer of milk from one place to another are also well protected against heat, light and bacteria. Olpers mostly uses imported plants and equipments which they bring in the name of Engro chemicals and foods. The laboratories of Opers are well equipped with all the physical and chemical tests for assuring the milk quality. The research and development department of Olpers is very efficient and has always an eye on the emerging market opportunities.

Procurement
Milk is collected from the agricultural or the dairy farmers. Olpers has a strict and stringent quality policy regarding intake of raw milk. At every reception house quality tests are conducted to ensure that only fresh milk of the highest quality is accepted at the plant premises. The internationally recognized tests are used to check for milks Adulteration, Microbiological contamination Adequacy of nutritional contents. The following tests are performed in the reception lab: Tests for detecting Taste Color Smell

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 Temperature Clots on boiling PH test Fat test Iodine value

TOTAL SUPPLY CHAIN COST 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:

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.

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RECOMMENDATIONS
We are recommending following important factors which we felt missing in their supply chain: 1. 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. 2. 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.

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