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Olpers Milk
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Olpers Milk
ACKNOWLEDGMENT
We would like to thank our respected teacher Mr. Zaheer Ahmed who has given us this opportunity to explore our skills and made a report on Olpers distribution channel. He has given us thorough knowledge and provides deep understanding about distribution network and because of that we are able to complete this report. We would also like to thank Mr. S. Intkhab Ali (Key Account manager) in Engro Foods who has given us all required information and he is been very kind to us all the time when ever we knocked his door we found it open to help us in completing this report.
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Olpers Milk
Contents
Chapters Company Profile Vision, Mission, Goals/ Objectives, Location of plant Organizational Chart Supply chain Structure Milk Industry Profile How Industry Works Market Share Olpers Supply Chain Integrated Logistic17-18 Ware Housing20-21 Distribution Net Work22-23 Reverse Logistic Packaging Gap Analysis Efficiency Template 29 Channel Flows Recommendation Page 5 6 7 8 9 10-11 12 15 16
25 26 28 30 31
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Olpers Milk
Company Profile
Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The company was incorporated in 1965. Engro accomplished significant progress not only in its base urea fertilizer business but also in diversification projects. Urea production was increased from an annual capacity of 270,000 tons in 1991 to 850,000 tons in 2001. Further expansion plans are being developed to de bottleneck plant capacity to 1.2 million tons in stages. In addition, Engro has over thirty years of experience of fertilizer marketing in Pakistan with an elaborate dealer network. Engro Foods Limited is subsidiary of Engro Chemical Pvt. Ltd. which is one of the most reputed enterprises in Pakistan with more than 40 years of diversified business operations in the areas of fertilizer and chemicals. Engro Foods started its business operations in March 2006 and with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established itself as a major player in the foods business. Engro Foods has already set up two processing plants at Sukkur and Sahiwal. With the ever expanding milk collection network and processing facilities, the Supply Chain has geared us for the growing sales of our products. Engro has started milk processing facility to produce and market branded UHT milk, cream and other milk products. The plant is located in Sukkur, it started there operations in March 2006. Engro procure raw milk supplies from Sindh and lower Punjab. They introduced their milk product with the name of Olpers in March 2006.
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Vision
Our vision is to be the premier Pakistani enterprise with a global reach, passionately pursuing value creation for all stake holders.
We believe our success depends on our customers. Thus, our primary value is fulfillment of our customer's needs. Our manner of achieving this success is to include value for money.
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Location of Plant
y y The dairy processing plant is situated at Rohri & Sahiwaal The office of Engro foods is situated in Sukkur.
Location of Offices
y y The head office of Engro Foods is located at 3rd floor of Carlton Hotel & Club. There regional head offices are in : o Karachi located in Business Avenue Shahrah e - Faisal o Lahore o Multan o Rawalpindi o Peshawar
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o Gujranwala
They believe that there recent successes will take them to there goal which is To be one of the biggest players in the food business by dominating the food business, and to achieve this they will settle for nothing less than the cream.
Organization Chart
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Planning
Purchasing
Warehousing
Logistics
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Pakistan is the worlds fifth largest producer of milk but even then it has to import powder milk to meet the domestic needs. About 30,000 tons of milk powder is imported from Poland and other European countries to meet the country requirements. The Government is spending huge amount of foreign exchange amounting to about Rs. 807 million every year on the import of milk and dairy products. Some milk processing firms produce milk powder locally but most of that is used for reconstitution in seasons of scarcity. About 80 percent of the milk, especially in and around big cities is used for milk tea. In cities, milk is largely consumed for tea whitening (2.3 billion liters), drinking (2.3 billion
liters), and desserts etc (2.2 billion liters).
There is a great need to enhance yield per animal and this should be through the improvement in the genetic potential of local breeds and production of high quality fodder and feed. Milk output should not be sought through increase in animal numbers. Scarcity of feed, and its high cost is a major limiting factor in urban dairying. At present there is insufficient quantity as well as quality of fodder, so animals are underfed, weak, thin, and consequently produce less milk and meat.
With large numbers of farmers getting into commercial dairying and forage production, middlemen have emerged who have contracted hundreds of small farmers in remote villages and towns of difficult accessibility. The middlemen visit households on motorcycles and purchase milk early in the morning at much lower prices than in city markets. They have contracts with urban hotels and households to deliver milk to them. Due to high prices in the big towns, milk is transported on the roof of buses from hundreds of kilometers. Payment is usually monthly. Poor farmers with 2-3 buffaloes and cows usually find their animal feed and meet some of the important domestic needs from milk money. These small dairymen are happy to earn sufficient profit to meet their family needs of milk and animal feed from the sale of the milk and still save reasonable amounts.
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Packed milk and milk products are sold throughout the country in big, medium and even small towns. Hence there is a tremendous need for high quality and cheap fodder to get maximum value from stock kept in villages, towns and stall fed in the peri-urban and urban areas.
The major milk companies purchase milk from association members at suitably sited milk collection centers for different villages. Milk is purchased according to its fat content. Improved forage seed, livestock health care and breed improvement facilities through artificial insemination are provided to members at subsidized rates.
Over all consumption of milk per day is 4 Lakh liters in Karachi only
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Hence, in many instances, farmers in the Urban Milk Marketing Chain integrate production and marketing functions in their operations, and instead of relying on a middleman, the milk is directly sold by the farmer. Figure below depicts the pre-urban marketing chain.
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Consumer Rs. 55
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Olper's 23%
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Integrated Logistics
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Engro Foods Pakistan makes sure that their product namely Olpers 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.
Inbound Logistics
y 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 located in different villages where some quality checks are its
conducted to ensure the milk quality, if upto 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
y y y y y y y
Lakhi. Ahmed pur east. Rani pur. Nawab shah. Dharki. Dhokri Rohri and Sahiwaal.
OUTBOUND LOGISTICS
On average, every alternate day Olpers Milk truck arrives at each ware house 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 logistics concerns finished milk movement from manufacturing plant to the warehouse & to distributors. There are 3 warehouses of olpers: 1 2 3 Sukkur (Mother ware house) Sahiwaal (Mother ware house) Rawalpindi(Central ware house)
Sukkur:
Adjacent to the manufacturing plant which covers whole of the south i.e. Sindh & Balouchistan The logistics usually take 1 day to arrive at olpers warehouses in Karachi from their manufacturing factory at Sukkur.
Sahiwaal:
Adjacent to the manufacturing plant which covers whole of the of the central
Rawalpindi:
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It is a satellite warehouse with a covered area of 30,000 sq ft which is on rental basis & it costs 600,000/month. Its responsibility includes to fulfill the orders of the northern region In addition to Karachi: The transportation of finished goods from Sukkur to Karachi is done through a dedicated truck which can easily carry a 50 feet container, which is done by Naulakha Transport agency. There responsibility is to pick the goods from Sukkur and deliver it to Karachi warehouse and On average there are 15 round trips in a month.
From Karachi warehouse it is delivered to the respective distributors according to there required orders in terms of quantities and size of packets, it is done through dedicated fleets which is on a monthly rental basis.
The cost of downward logistics (Sukkur) for the company is cheaper in comparison to the upward logistics (Karachi). Since open trucks return empty once the product reaches the Karachi warehouse.
Warehousing
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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.
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.
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There is a climate control system in there warehouses as the temperature of Sukkur & Sahiwaal shoots up to 45 degrees in summers.
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.
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
y Olpers focusing on every major cities of Pakistan.
According to the distribution, Pakistan is divided into three geographical zones and then in further Regional Sales Offices.
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Distributors in Karachi
Olpers have seven distributors in Karachi which are as follows. y y y y y y y Aftab traders covers Defense & Clifton SAS distributors covers Johar, Malir, Landhi & Korangi Pacific distributors covers Ghulshan & Bhadurabad, Tariq road S.I traders covers covers Garden & Old Karachi Tawakal Distributors P.E.C.H.S & Sadar S.Care traders covers New Karachi & North Karachi M & Sons covers Nazimabad & OrangiTown
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Receiving of Material
The following documents are used when Olpers is received by the distributors. The transportation of material is affected under the delivery challan.
Copies Original
Colors White
Purpose
Duplicate
Yellow
Payment Advice
Carrier
Triplicate Quadruplicate
Green Blue
Purchase Orders
Purchase order is an instrument given by the buyer to the seller mentioning the specification of goods, quantity & price in order to get the timely delivery of the goods from the customer.
In the case of Olpers the distributor is the buyer who first submits the payment in advance and then gives the purchase order to the sales department via e-mail whenever he is low on inventory. These e-mails are then processed in the form of a proper purchase order, which is then send to the finance department for invoicing purpose. Whereas sales department is also responsible for the dispatch of the desired goods by the customer.
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Reverse Logistics
Shelf Life of Olpers Milk
Olpers Milk has 71 days of shelf life.
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, than it is drained.
Packaging
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Engro Foods is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products.
As far as milk is concern packaging is very important, it is perishable item which requires special packaging to preserve it for few months. To meet this objective
Olpers delivers fresh milk to its customer via using tetra Pak, without sacrificing in health measures.
Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity.
Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation.
Avoid the use of substances that can adversely impact the environment during packaging production and disposal.
Decrease packaging waste at all stages in the supply chain, including package manufacturing, utilization and disposal.
Increase the use of recycled materials wherever possible, and increase the recyclables and compatibility of packages with existing waste management schemes.
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Packaging materials are Stored in a dry place away from manufacturing areas and it is used in a clean and sanitary manner which is non toxic
Packaging is carried out in away that avoids contamination of processed products. And also protects the product against contamination until the product reaches the consumer.
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GAP ANALYSIS
SOURCES OF GAPS TYPES OF GAPS CLOSING GAPS
Environmental Bounds:
Milk Ordinance 1963 Infrastructure , as transportation between different units is highly costly (in terms of time, and cost of movement)
Demand-Side Gaps:
SOS < SOD SOS > SOD Which SO(s) ? Less spatial convenience for customers
Demand
Managerial Bounds:
Constraint of capacity being not matched with required demand. Less experience of engro in terms of FMCG.
Supply-Side Gaps:
Logistics cost Warehousin g Cost
Supply-Sid
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Efficiency Template
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Channel Flows
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Recommendation:
We are recommending following two important factors which we felt missing in their supply chain 1. To build a regional ware house in Karachi that fulfills there supply side gap. 2. They need to have their own Dairy Farm so that they can meet the increasing demand as their market share is growing by 12% annually.
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