“Supply Chain Management” Report on Engro Foods

Prepaared and Presented by:

HasnatAfridi L1F16MBAM0207
Sidra Ashraf L1F16MBAM0219
Aqsa Adnan L1F16MBAM0253
Waqas Mehmood L1F16MBAM0130
Ali Asghar L1F16MBAM0165

Submission Date: 21/06/18

Submitted to : Prof. UmairNajam
Introduction
Engro Foods is one of the leading growing company that has a good-reputed name in Pakistan
with a vision to meet the needs of the locals by providing them with products that are in
compliance with global standards. Exceedingly dedicated to provide millions of consumers
across Pakistan with the best brand experience, the product portfolio of Engro Foods includes
some of the country's most demanding and top selling products which include Olper's Milk,
Tarang, Olper's Lite, Dairy Omung, Omore, and Olper's Lassi.
The company believes that no matter what product they provide, their methods remain largely
the same as they continuously endeavor to keep their revolutionary products ahead of their
guiding philosophy and customer contentment at the heart of all their functioning strategies. And
this is the reason that helped them to become as the Pakistan’s leading Food Company providing
high quality products filled with local flavors but with a global vision.
Milk Supply in Pakistan
Three milk supply seasons are mostly observed in Pakistan, which are as follows:
(1) Flush Season: This season mostly occurs between 1st January to 25th April. The supply
of milk during this season is the highest and milk is produced in maximum quantities
throughout the country.
(2) Lean Season: This season usually occurs between mid of April to end of June. There is a
shortage of milk during this period because of the natural reproduction cycle of animals, high
temperature in the environment, and less availability of green fodder which reduces the
production of milk all over the country.
(3) Semi-Flush Season: The occurrence of this season is usually observed between 1st August
to 31st December and the production of milk is around 70% to 80% in Pakistan during this
season.
Engro Foods’ Supply Chain Management - Identification and Evaluation of Current Model

The diagram shown above describes the supply chain structure of Engro Foods and the activities
depicted can be described into following three categories:
(1) Inbound Logistics: This process involves the receiving of raw materials and storing
them at warehouse where they are distributed to the manufacturing plants when they are
required.
(2) Operations: This process involves the transformation of inputs into finished products.

(3) Outbound Logistics: In this process the finished products are distributed from the
manufacturing plants and warehouses to the distributors and retailers to reach the final
customers.
Purpose of Supply Chain at Engro Foods
According to Zunair , who is the current supply chain Planning manager at Engro Foods ,the
objective of supply chain management at Engro Foods is to “provide the customer with the
products they need as quickly as possible while keeping the costs of the overall supply chain at
minimum.” He emphasizes cost reduction as their most important priority but he also argued that
satisfying customer’s needs are just as important. According to him, their aim is to provide
customer with value that surpass their costs, leading into high profit margins.
Supply Chain Strategy of Engro Foods
Engro Foods supply chain strategy is consistent with their supply chain objective, which in turn
is conforming to their mission statement which is “to satisfy customers’ needs at a competitive
cost, making their contributions to thedevelopment and growth of industrialization by becoming
the market leader, and achieving growth in diversity by dominating the food business in
Pakistan.”
So therefore their supply chain strategy is “to offer the best service at the lowest possible cost.”
Maintaining low cost with a high level of responsiveness is also the key factor at Engro Foods
that give them the competitive advantage over their rivals. To maintain low costs, their 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
results in subsequent losses. Their responsive strategies include the use of third party logistics to
make sure that all activities that are important at Engro Foods are supported by their:
 Infrastructure; which includes the structure of their organization, systems of control,
culture of the company, etc.
 Human Resource Management; which include recruitment, hiring, training, developing
and compensating employees.
 Development in Technology; which includes all those technologies that help them to
support their activities that creates value for the customers
Procurement of Raw Materials
For any success in the supply chain, raw materials play a crucial role because it is one of the
most basic and initial activities for which careful consideration is needed. If any flaw occurs in
this activity relating to procurement and quality of raw materials, the whole supply chain surplus
is compromised. Building and maintaining long-term relationship with suppliers is needed and
Engro Foods is effectively doing this job that enables the company to efficiently produce
anmarket a range of good quality dairy in Pakistan, where each year a large amount of this
commodity is wasted because of poor infrastructure of farm-to-market. Engro Foods require
various types of raw materials for milk and cream production, which includes raw milk,
ingredients such as fats and SNF, as well as packaging materials.
Raw Milk
One of the core raw materials of Engro Foods, which is further processed in the manufacturing
plants of Sukkur and Sahiwal is raw milk because most of their products are dairy based.
Different dairy farms all over the country provide this raw milk, which is mostly obtained from
buffalo milk. Moreover, Sindh and Punjab are the main regions where these dairy farms are
located to supply this raw milk.
Other Ingredients
At Engro Foods, there are different ingredients which are added at various stages in the
production process and the quantities of these ingredients are depended on the products’ recipes
being manufactured. These ingredients mostly includes SNF (solids-not-fats) and fats that are
adjusted in order to achieve the desired levels. For example, Olper’s Milk needed 3.5% of fat. On
the other hand, tea whitener like Tarang Milk which has more cream need 7% of fat, so
therefore, more quantity of fat is required in the milk during the production process to make
Tarang. Moreover, depending on the milk quality, SNF is also maintained which is usually at
8.9% for Olper’s milk and this is also adjusted during the production process. Olper’s Lite,
which is another product of Engro Foods, is a low fat and high calcium milk, which is made for
the people who are very health conscious, requires a high level of calcium that is modified in the
production process.
Packaging Material
Tetra Pak Ltd provides the packaging material to Engro Foods for their products. This aseptic
packaging usually arrives directly from the suppliers in the form of rolled sheets in
manufacturing plants. Before filling the milk, which is ultra-high heated, this aseptic packaging
is sterilized, resulting in a brick of 6-layered aseptic Tetra Pack packaging, having a shelf life of
3 months.

Plants at Engro Foods

Plants of Engro Foods are located at Sukkur and Sahiwal. Plant located in Sukkur is situated on a
23 acre land, which has the capability to store 300,000 liters of raw milk per day and 200,000
liters per day of processed milk capacity of Ultra-high temperature. Moreover, it is an efficient
production plant, which is capable of producing only 3 products and this plant was built at a cost
of Rs. 1 billion, employing around 750 people. The Sahiwal plant which is more flexible with the
capability of producing 10 products at a time was built by GEA TDS (one of the world’s
prominent suppliers of process technology for pumpable foods) at an investment of over 3
million euros for Engro Foods and it is one of the biggest milk processing plant established in
Pakistan in the Sahiwal region. This plant has the capability to supply around 250,000 liters of
low fat milk per day to Sahiwal region, which can approximately fill the demand of around 1
million, and around 10 million demands of Tarang which is a tea whitener. For the local farmers,
this plant also serves as an outlet of processing, who are involved in rearing dairy herds of cows
as well as buffalos, particularly in the small sized farms. This plant employs more than 200
people and has the raw milk storage capacity of up to 40,000 liter per hour of both buffalo (80%)
and cow (20%) which is provided by local farmers, and the milk is refrigerated for storage at a
temperature of around 15˚C to 4˚C in the two 125m3 storing tanks. The process at the plant is
able topasteurize milk to 85˚C at the rate of 25,000 liter per hour and includes an adjustment of
SNF; milk skimming and clarification; butter oil, cream and milk standardization; dosing of
butter oil; a revamped homogenizer; as well as degassing. The milk which is pasteurized is
stored in 5 different tanks, each having a storage capacity of around 75m3. Pasteurization of
cream is done at a temperature of 95˚C separately with a rate of around 3,500 liter per hour.
Ultra-high temperature equipment at the plant, with refrigerating capability and the ability to
provide heating indirectly through heat exchangers, can manage around 21,000 liter per hour.
The system of CIP installed in the plant manages the entire process from the delivery trucks to
the filling machines. Moreover, two tanks located on the site, each with a storage capacity of
15m3 are dedicated to store the caustic and acidic concentrates. Programmable Logic Controllers
(PLCs) provided by Allen Bradley are responsible for controlling this whole process.
Milk Supply Sources
Raw milk supply at Engro Foods (i.e. the way in which the milk is collected) can be categorized
into:
(1) Direct Sourcing
(2) Contract Based Collection

Direct Sourcing
The milk collection method using direct sourcing can be defined as collecting milk from various
farmers of dairy who are situated in different villages. These villagers usually known as
“Dhodies” are responsible for milk collection from their respective areas and delivers milk to the
milk collection centers every morning and evening. The quantity of milk provided by these dairy
farmers varies substantiallydepending on both the milk availability which could be as minimum
as 2 liters per day at times and the size of the areas that are covered by these dairy farmers.
Engro Foods usually prefer direct sourcing because it mitigates the risk of milk adulteration by
dairy farmers. One reason of this can be the ease with which this method makes it easy for Engro
Foods to detect adulteration in a low volume of milk as compared to the high volume that the
other method provide. However, the overall milk quantity collected using this method is very
limited.
Milk Collection Centers
To manage milk collection using direct sourcing, full-fledged department of milk collection is
maintained by Engro Foods. Engro Foods had 100 milk collection centers in 2006, but today it
has more than 550 milk collection centers operating in different areas of the country. Engro
Foods have one of the largest network of milk collection centers in Pakistan that cannot be
matched in size, efficiency and productivity to meet their self-imposed commitment to the
quality. This huge network comprises of milk centers in villages that are installed with chillers to
preserve the quality of the milk before they are transported to the factories through specialized
tankers. The main goal of these milk collection centers is to manage the small volumes of milk
delivered by the dairy farmers from the village. It has not only benefitted these small farmers by
providing them with a regular source of income through the sales of their milk, but it has also
helped Engro Foods to obtain good quality milk in the needed quantities. Milk collection agents
are used in these centers who are responsible for recording and testing the quality and fat content
of every supplied milk and rejects the milk that is either not up to their standards of quality or
adulterated.
Contractor Based Collection
Milk collection from contractors involves obtaining milk supplies from approved suppliers who
are aware of the standards of quality used by Engro Foods. These contractors are responsible for
obtaining milk from large areas and they are able to provide around 10,000 liters per day from
dairy farmers. Contractor based collection method provides the most milk volumes in the overall
milk collection quantity. However, the risk of adulteration is high in this method because it is
more difficult to detect adulteration when the volume of milk is large. After testing for lactose,
butterfat and protein content, the milk in this method is stored in chiller containers in order to
protect it from heat, light and air. The milk is then delivered to the production plants and before
storing the milk in the chiller containers, these containers are also aseptically cleaned.
Raw Milk Transportation
Insulated tankers are used to transport raw milk from collection centers to production plants.
These tankers usually maintain milk temperature of around 4 °C. Insulation of these tankers is
usually done to prevent milk from freezing in the winter or getting hot in the summer. These
trucks have reflecting surface that also protects the raw milk from infrared rays and minimize the
degree of heat on these tanks. During the transportation of the milk in these tanks over long
distances to the manufacturing sites, the cool temperature of these tanks also helps to prevent the
production of bacteria in the milk. The capacities of these tankers for storing milk during
transportation from milk collection centers to production plants, varies from 10,000 to 35,000
liters. Engro Foods transportation fleet is partly owned and partly rented from third party
logistics. Furthermore, the routes to transport the milk from collection centers to plants at Sukkur
and Sahiwal are carefully designedin order to prevent overlapping of routes that otherwise would
cause the transportation cost to increase. In order to avoid the loss of quality in the milk, it is
usually transported between 4 to 6 hours.
Supply Chain Structure at Engro Foods

Engro Foods Efficient Department of Milk Procurement

Engro Foods milk procurement department contains procurement managers who are highly paid
and supported by a qualified and experienced team of zonal managers, controller of milk
collection or area executive, mobile testers, supervisors of milk collection, peons, drivers, etc.
Moreover, a separate wing of accounts is also made to provide support to the procurement staff.
This department contains the highest number of staff because procurement of milk is not an easy
job which can be done solely. Quality, Quantity, Man Power, Competition andCost are the five
pillars of this department. Department of milk procurement at Engro Foods continuously strives
to provide value-added service to all the producers of milk, making sure that good quality milk is
produced and also ensures that sufficient quantity of raw milk is always provided to the company
to fulfill its needs, by using effective strategies, project systems, policies and processes. Engro
Foods milk procurement staff is responsible for managing a number of responsibilities associated
with milk procurement. Some of them are:
Making sure that milk suppliers are given their payments accurately and promptly.
 Procuring raw milk from the suppliers or producers and delivering them to the plants
efficiently and effectively.
 Identifying new areas in different locations to develop clean milk routes successfully.
 Establishing bulk coolers in different areas.
 Improving milk yield.
 Improving hygiene practices during milk procurement and production at all levels.
 Providing advance trainings to truck drivers so that they are able to handle large quantity
of milk in situations of emergency.
 Providing trainings to field staff for managing clients and handling of sample.

System of Quality Control

In order to purchase the best quality of raw milk, Engro Foods quality assurance system is
divided into two parts. The first part consists of procurement department who is responsible
for purchasing raw milk of good quality. The second part of this system contains quality
assurance department who is responsible to provide all the necessary support to procurement
department so that they are able to purchase high quality raw milk. Within the quality
assurance department, experienced food technologists make sure that high quality parameters
are followed during all production processes and that the final product reach the customer as
per promise.
Olper’s Milk
Olper’s milk was introduced in the markets on 20th march, 2006 which is Engro Foods’
flagship brand, having the fat content of 3.5%, 8.9% of SNF and is Engro Foods’
homogenized, standardized and pure ultra-heat treated milk. It is obtained from more than
3000 villages and collected by more than 10,000 farmers. Olper’s milk is mostly preferred by
those consumers who are very quality conscious. This premier brand of Engro Foods is
available in easy to open red packaging, made from the brick of 6 layered aseptic Tetra Pack,
having a shelf life of around 71 days. There are 3 stock keeping units of Olper’s milk, which
are maintained by the company in the Tetra Packs and these are 250ml, 500ml, and 1000ml.
Olper’s milk order fulfillment rate is around 86% to 87%. Lead time of Olper’s with regard
to procurement of milk varies between 5 to 8 days. Whereas, the lead time between order
placement and order fulfillment varies between 12 to 18 hours. Moreover, as Olper’s milk
has low shelf life, safety stock of Olper’s milk is only kept for 6 to 7 days. To meet the
demand levels of Olper’s milk, forecasting is usually done in short intervals. Furthermore,
variations in demand for Olper’s milk are commonly observed in the months of Ramzan,
Moharram and during Eid days.
Production Process of Olper’s Milk
Cow and buffalo milk is collected and transported from farms to dairy plants through tankers
that maintain a chilling temperature of around 4 to 5 ºC. When this milk reaches the dairy
plants, it is stored in isolated tanks where it is furtherprocessed. This milk is then tested in the
dairy plants to check the quality and the milk that meets the quality standards is chilled again,
and pumped into the chilled holding tanks. The milk is then cleaned either through
centrifuged or filtration before getting pasteurized followed by toning/standardization and
homogenization. Then this milk is again transferred into another holding tank where it is
again further processed. This further processing might involve UHT (ultra-high temperature)
and aseptic drying or filling in order to make dried milk.
Inventory Turnover at Engro Foods
Engro Foods inventory is replenished on every 26th day of the month.
Warehousing and Logistics at Engro Foods
No matter where the customer is within Pakistan, Engro Foods make sure that their product
Olper’s milk is available at every store. To make this happen, Engro Foods integrate all its
processes, from the farm to the markets and the company make sure that its product is
available in the right quantity, at the right time, and on the right place. Engro Foods has
outsourced all its logistic network and commonly relies on 3PLS.
They have outsourced all their non-core activities, such as transportation, which is mostly
rented depending on the quantity of milk which they want to transport, in order to minimize
their costs. Even though all transportation of their product is outsourced but they have their
own distribution network.
Inbound Logistics
Long dedicated vehicles are used for inbound logistics to transport raw milk from farms to
plants. Raw milk is collected and transported from farms to 40 milk collection centers of
Olper’s milk, located in various areas of the villages where the quality of the milk is also
checked. If the raw milk passes the quality test, it is stored until it reaches 9,000 liter capacity
at each collection center, from then it istransported to the plants through specialized
dedicated vehicles for production. When these vehicles reach the plants, again, the quality is
checked before processing the raw milk in the plants for production. This raw milk is mostly
collected from various cities of Punjab and Sindh, which include Lakhi, Rani Pur, Ahmed
Pur East, Dharki, Nawab Shah, Dhokri, Rohri and Sahiwal.
Outbound Logistics
Olper’s Milk truck usually arrives at every alternate day on average, at each warehouse from
Sahiwal and Sukkur plants and then it is distributed in the same quantity to the distributors all
across Pakistan. Trucks are mostly used for outbound logistics. Engro Foods have 80 percent
dedicated fleets and 20 percent open trucking which covers most of the Pakistan’s northern
areas. In outbound logistics, finished milk is transported from plants to the warehouses and
distributors. Engro Foods have 3 warehouses for Olper’s milk, which are located at Sukkur,
Rawalpindi and Sahiwal. Warehouse in Sukkur is located close to the manufacturing plant,
and covers whole southern areas i.e. Sindh and Baluchistan.
Moreover, Olper’s milk takes one day to reach Karachi from Sukkur. Warehouse in Sahiwal
is also located near to its manufacturing plant and it covers the whole central areas of
Pakistan. Engro Foods has rented Rawalpindi warehouse which is also a satellite warehouse,
having a covered area of 30 thousand square feet. 600,000 rent is given per month by Engro
Foods for this warehouse. Moreover, this warehouse is responsible for fulfilling the orders
coming from northern areas.

Warehouses
As already mentioned above, Engro Foods has 3 warehouses from which 2 of them (i.e.
Sahiwal and Sukkur) are located near to their plants and 1 of them, which is located in
Rawalpindi, is the central warehouse which is used on rent by thecompany. Capacity of
Sukkur warehouse is 1.6 million liters, having an average dispatch of 350,000 liters on daily
basis, with 2,000 pallet capacity. Capacity of Sahiwal warehouse is 4 million liters and on
average, it daily dispatches 400,000 liters, with 5000 pallet capacity. Both of these
warehouses have a cross docking system at Maripur and all transporters handles and operates
this system themselves. In these warehouses, stacks of cartons are palletized and capacity of
each pallet is 800 liters. Then forklifts are used to deliver these pallets on the assigned docks.
To keep milk in good and fresh condition, each warehouse’s temperature is maintained at 25
to 28 degrees. Moreover, the company is using the FIFO inventory system because of the
product’s perishable nature. There is also a system of climate control in the warehouses
because during summer, Sahiwal and Sukkur temperature shoots up to 45 degrees. These
warehouses also maintains 6 to 7 days safety stock. After the milk is packaged, it is stored in
an incubator in the warehouse for 3 more days before transporting it through the trucks, in
order to ensure that the milk’s quality is conforming to the required standards.
Order Processing and Material Handling
Suggested order list (SOL) initiates the ordering process at the warehouses which is triggered
through the system and it is done to determine what items to order, how much quantity to
reorder, as well as future forecast of demand. Whereas, in order to minimize the rate of losses
and damages, material handling is also done properly at Engro Foods. Through using the
latest equipment for both finished goods and raw materials, Engro Foods manages materials
related to Olper’s milk very efficiently. As mentioned above, Engro Foods uses specialized
milk tankers for inbound transportation of raw milk, and they properly palletize their finished
goods, then use fork lifters to deliver the pallets in the right place in the warehouses which
are then cross docked.
Distribution Network at Engro Foods
Engro Foods have around 400 distributors for Olper’s milk that are situated in every major
city in the country. Moreover, all transportation for Olper’s milk is outsourced. In Pakistan,
the distribution network for Olper’s milk is divided into 3 geographical zones, which are
further divided into regional offices for sales.

At Engro Foods, distributors for Olper’s milk has been selected based on their financial
strength, infrastructure efficiency, logistic fleet, trained and efficient sales force, past
experience, knowledge about the market and their use of technology. Moreover, there is a
fixed percentage of markup for all distributors which is around 4% as Engro Foods does not
negotiate on prices for Olper’s milk with distributors. After discussing the requirements of
the market, monthly targets for sales are made for each distributor. Furthermore, in order to
convince the retailer to buy in bulk quantities from distributors, retailers are usually taken
into confidence by product’s quality, features and brand name rather than using the
distributor’s goodwill and credibility to convince the retailer to buy. Then after this, the
reputation of the distributor plays the role of value addition in the whole transaction. Another
responsibility of distributors is to provide customers’ feedback to the Olper’s team for further
planning. Regarding the purchase orderprocess for Olper’s milk, distributors are the buyers
who initiate this process by submitting their payments in advance to Engro Foods and then
they provide the purchase order to the department of sales of Engro Foods through email
whenever they are low on stock. After properly processing these emails in the form of
purchase orders, they are sent to the department of finance for invoicing purposes. Moreover,
dispatching of the desired goods from plants/warehouses to the customers (i.e. distributors) is
also a responsibility of the sales department. As the distribution of the goods to the retailers
who are then responsible for selling the products to final customers is not directly managed
by Engro Foods but rather being controlled/handled by their 400 distributors to whom they
supply their inventory, difficulty in exercising supervision and control on the overall
distribution activities might occur. And this can make it more difficult to obtain accurate
information regarding sales, timely delivery, proper storage and appropriate procedures for
marketing. However, Mr. Nasar Ali insisted that even though this responsibility is not
directly under Engro Foods, but feedback is still collected and proper contact and
coordination with all distributors is also maintained as much as possible.

Reverse Logistics and Olper’s Milk Return Policy

In case of any defect, Engro Foods have an efficient return policy for Olper’s milk. A certain
batch number is given to every item or carton and if any defect is detected in these items or
cartons (which is usually in very small quantity) then the batch of that particular carton or
item is noted before disposing it off. However, if there is a large defect, then the same
delivery truck who delivers the order to the distributor is responsible to take back the whole
batch back to the plants. Once this large defected milk quantity is returned to the plants or
warehouses, it is thendrained. However, the rate of normal losses at Engro Foods due to
defected milk is very small which is around 0.04% per year.
Packaging
Engro Foods always try to minimize the negative externalities or effect of their activities on
environment without endangering the safety, quality and acceptance of their products by
customers. Engro Foods’ entire dairy product packaging is dependent on Tetra Pack. Engro
Foods have only Tetra Pack available for the packaging of its products, including Olper’s
milk as Tetra Pack is having a monopoly in Pakistan in the packaging sector. Proper
packaging of milk is very important as it is a perishable item that needs to be preserved for
few months. In order to meet this goal, Engro Foods deliver fresh Olper’s milk to its
customers through using Tetra Pack without compromising in health measures.
The following are some objectives Engro Foods have in mind regarding Olper’s milk
packaging:
 Maintaining Pack integrity while attaining the lowest possible volume and weight of
packages.
 Identifying and taking into account new processes and packaging materials that helps
the company to minimize the impact of unnecessary transportation on the
environment.
  Avoiding the use of those substances during production, packaging and disposal that
might have the potential to adversely affect the environment.
 Minimizing wastage of packaging at every stage of the supply chain which includes,
manufacturing of package, utilization as well as disposal.
 Increasing the use of materials that can be recycled easily, wherever possible, and
increasing the compatibility of packages and recyclables with their existing schemes
of waste management.
 Storing packaging materials in a dry place which are located far away from the areas
of manufacturing and using them in a clean and sanitary way which is nontoxic.
 Processed products’ packaging is done in a way to avoid risk of contamination and
also protecting them from contamination until they reaches to the final customers
safely.

Information Technology Applications at Engro Foods

Engro uses its own dedicated intranet network provided with a backbone of PTCL fiber lines and
internet. By using this widespread and sophisticated network, Engro Foods has well integrated
all its business functions like production, accounts and finance, logistics, sales and marketing.
This has also helped the company by providing them the opportunity to develop and utilize
critical business applications to support operations of the business and aid in decision making in
the management all across the internet worked enterprise. Engro Foods is using both new and
existing modules and applications to manage their various activities such as:
 Order processing
 Manufacturing and Inventory Control for which they are using ERP provided by SAP
 Sales reporting and management (Orange IT solutions)
 Executive Information System.
These applications and modules are designed to access and interface with Engro Foods’ existing
legacy system and database. Moreover, these software applications are installed on the
company’s intranet web servers where employees, both at regional and head offices can access
and run them through using web browsers whenever they need from anywhere on the network.

Customer Relationship Management

Engro Foods provide on demand CRM solutions to its more than 60,000 strong customer base
and also keeps the record of its every customer. It is important for Engro Foods to keep on their
toes as they’re running a commodity business. And to do that, Engro Foods run its reports in
Oracle CRM system to track both their loyal customers and those customers that are also buying
products from their rivals. Through this system, they try to find out the reasons why their
customers are switching their demands to their rivals’ products and then they work to win these
customers back. And this is something which they cannot do using simple spreadsheets. They
believe that by identifying and acting on this type of information beforehand provides them with
a competitive advantage.
Before 2009, Engro Foods was using Microsoft Excel spreadsheets to manage and record the
information of their customers. This was helpful for the company when it was launched,
however, when the company began to expand its operations, this system proved untenable.
Today, through using their current Oracle CRM system, Engro Foods has grown substantially
which is more than 10 times in the past 3 years. The company is able to dispense with
spreadsheets to track and record information by using this Oracle CRM system. Through this
system, all the customer data are now entered and stored more easily in the database, without the
need of repetitivemanual entry and this system also helps to ensure the accuracy of information.
With old system all the personal details and previous transaction record of each customer were
stored over multiple spreadsheets, making the handling of information very tedious and difficult.
But today, the new system provides single record and complete history of each customer, making
handling of information easier. This system has also allowed the company to record and track
every single piece of information regarding their customers, such as, their anniversaries and
birthdays which has further helped the company to interact with their customers at those
important times which are meaningful to them. Through using this system, the company has been
able to build strong relationships with those customers that are most important to them. By using
Oracle to manage their systems, the risks of errors has been much reduced. But if any problem
still occurs, the company knows that it can be resolved quickly.

Supply Chain Cost Reduction Opportunities for Engro Foods

Up till now the first part of our report, which was to identify and evaluate the current supply
chain model of Engro Foods, has been covered. Now the second part of this report, which is to
recommend any cost reduction opportunities for Engro Foods has been provided in this section.
Even though Engro Foods’ current supply chain structure is very effective, but as per our
observation, there are three main weaknesses in this model that can increase costs for Engro
Foods and these weaknesses are discussed below.
Weaknesses
 The most important weakness that Engro Foods is currently facing and that usually
increases costs for them is their reliance on Tetra Pack for the packaging of their entire
dairy product. Because Tetra Pak is having a monopoly in Pakistan in the packaging
sector, it is the only option available for Engro Foods for the packaging of their Olper’s
milk. This increases the cost for Engro Foods if Tetra Pack charges high prices for them,
which also increases Engro Foods’ production costs.

 Another problem which the company might face is related to their farmers who usually
have insufficient knowledge and lack of awareness about the ways to increase/optimize
the milk which is extracted from their animals. These small farmers also lack the
knowledge on how to take care of their animals properly. This might lead to poor quality
of milk, decreasing the productivity and also leading to smaller quantities of milk
production, which can eventually increase the costs for the company.

 Lastly, poor infrastructure is another issue which can increase costs for Engro Foods. The
company owns 2 plants that are situated in the interior areas of Sindh and Punjab and the
raw milk, which is purchased from the villages, whether located in adjacent or far flung
areas, mostly lack proper highways and roads which can cause difficulty for the company
to transport milk easily and in shorter time. This can also increase chances of delays that
can disturb the whole production process.

Recommendations

 As the high cost of packaging is the main problem for Engro Foods because of their
reliance on Tetra Pack, so we recommend that Engro Foods should build their own
packaging system. They can use their Research and Development (R&D) department to
make their own packaging system by investing some funds in its development or they can
even outsource its development, if the cost of outsourcing is cheaper than building the
packaging system in-house.
 To deal with the second problem related to lack of knowledge among farmers, we
recommend that Engro Foods should increase awareness among its farmers by providing
them proper training and education so that these farmers are able to optimize the milk
extraction from their animals. Moreover, Engro Foods should also organize different
vaccination programs to make the livestock of these farmers resistant from various
diseases.

 As a sort of contingency plan, Engro Foods usually overcome the problem of delays
caused by poor road infrastructure by storing powdered milk in the premises at all times.
However, to deal with the third problem, we recommend that Engro Foods should
negotiate and discuss this problem with the government so that the government helps
them by building proper roads and highways to facilitate the transportation of the milk.
 Although the government has made many highways and roads in various areas of Punjab
and Sindh, but many interior areas of Pakistan are still lacking proper roads, highways
and energy system which might increase the problems for the company. So the
government should invest more in these neglected areas.
Conclusion
Even though Engro has made its place in the dairy and food segment since 2006, but today their
business holds a significant market share and is still experiencing substantial growth. In this
small amount of time, Engro Foods is already on the right path to capture its goal of becoming
one of the largest companies in the Pakistani food industry.
References
Ali, N. (2017, July). Supply Chain Structure at Engro Foods. (H. Elahi, A. Amad, & I. Pechuho,
Interviewers)
Ali, N., Ateeq, R., Akhtar, M., & Akhtar, S. (2008). Supply Chain Management Final Report on
Engro Foods. BahauddinZakariya University, Business Administration, Dera Ghazi Khan.
Engro Foods. (n.d.). Retrieved July 2017, from Engro Foods: http://www.engrofoods.com
Fakhar, H., & Walker, G. (2006, June). The White Revolution - DoodhDariya. White Paper on
Pakistan’s Dairy Sector. Lahore, Punjab, Pakistan: Pakistan Dairy Development Company.