PAKISTAN ELECTRON LIMITEDwas established in 1956 with the technical collaboration ofGermany.

It is the first composite electrical equipment manufacturing unit of Pakistan. In October 1978, the company was taken over by the SAIGOL GROUP, which is one of the leading industrial groups in Pakistan, having diversified business activities in the field of: Textiles Engineering Banking and Finance Fuel and Energy Trading Automobiles On engineering side PEL Group is the flag carrier of the Saigol group. Here we see in detail about Pakistan electron limited. And will see how they have organized themselves in a most appropriate business unit inPakistan. The PEL Group consists of following companies 1. PEL (holding company) 2. PEL Appliances ltd. 3. PEL Daewoo electronics ltd. The products manufactured by PEL always been high standard and the name PEL is synonymous with QUALITY all over Pakistan. Since its Inception, the company has been acting as institution working for advancement and development of engineering know how in Pakistan .The Company hundreds has produced hundreds of engineers skilled workers and technicians through its apprenticeship schemes & training programmers. Keeping Saigols traditions since its takeover by the group, PEL has continuously been adding new products to its range. As a result, the PEL

group has registered a significant increase in its sales volume, during the last ten years.

Year

Product Introduction

Technical

Collaboration
1956 1978 1981 1987 1987 1993 Distribution Transformers, Switch Gears, Single & Three Phase Induction Motors PEL was taken over by SAIGOL GROUP PEL Window Type Air conditioners PEL Refrigerators PEL Deep Freezers PEL NECCHI Fractional Horse Power Compressors PEL Single Phase Watt Hour Meters PELDAEWOO Color Television Carrier Window and Split Type Air conditioners AEG-West Germany

General CorporationJapan SILTAL SPA-Italy NECCHI COMPRESSORIItaly A.B.B., POWER T & D Company, USA Daewoo Electronics,Korea Carrier Corporation,USA

1994 1995 1997

POWER DIVISION APPLIANCE DIVISION

POWER DIVISION:POWER DISTRIBUTION SYSTEM, ELECTRIC MOTORS, ENERGY METERS: PELs Power Division manufactures Transformers, Switch Gears, Electric Motors, Energy Meters, Kiosks, Compact Stations, Shunt Capacitor Banks, etc. of highest quality and of latest international standards. PEL is one of the major electrical equipment suppliers to Water and Power Development

Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest Power companies in Pakistan. PEL equipment has been used in numerous power projects of National importance within in Pakistan over the years and PEL has had the privilege of getting its equipment approved and certified from well-reputed international consultants such as: Preece, Car dew and Rider, England. Harza Engineering Company, USA. Sam Progetti, Italy. Societe Dumezm France. Miner & Miner International Inc. USA. Ensa, France. APPLIANCES

DIVISION:

The Appliances Division was established in 1980-81, when the company introduced its first consumer product i.e. Window type air-conditioned inPakistan. This was followed by Refrigerators and Deep Freezers in the year 1986-87, Fractional Horse Power Compressors in 1993 and Carrier Window and Split Air conditioners in 1997.

TYPE OF PRODUCT:
Window-Type Air conditioners PEL Window-Type Air conditioners Carrier Split-Type Air conditioners Carrier Refrigerators (Direct Cool) Deep freezers Color Televisions compressors (Fractional Horse Power)

Mission STATEMENT: TO produce quality product at a affordable prices for and to ensure the profitability of the company. objectives:

To increase sales To increase profitability Introduction of new designs and foreign collaboration(joint ventures) Environmental scanning
PEL has ensured the environmental scanning through researchers regarding attributes and future needs of customer .they take assistance of Aftab Associates for this purpose. They also take assistance from their sales force and the dealers of PEL the different areas of Pakistan. They find out the latest opportunities which are prevailing in the market .The executives of the company also keep a close look on the changes in the environment.

Core Competencies:Core competencies are the organizational unique resources and strengths that management considers while formulating strategy. In pel they have different core competencies which the have identified after a long business activities and due to comparison with the competitors. In air conditioner they have an advantage over its competitors due to its performance and the quality. They consider it as their major advantage over their competitors. Pel is the first local manufacturer of air

conditioner in pakistan. It has joint venture with carrier in manufacturing air conditioners.

Workforce:-

In Pel they have skilled labor force for their top and middle level management while in the lower level they employ trained as well as fresh employees. The employees are given mostly on the job training. They have maintained at present skilled labors which is their core competency.

Facilities:PEL has well located facilities for offices, stores and plants. In their offices air conditioners are provided to all staffs for their working. They have well groomed warehouses and proper network of distribution in the wholePakistan. They have also given the facility of mess to the employees during the working time for lunch.

Systems and Technology:

PEL has the state of the art technology. They have made joint ventures with the foreign companies like: NECCHI COPRESSORI of Italy to assemble compressors for refrigerator and deep freezers, HITACHI CORPORATION of Japan for the production of vacuum circuit breaker for its switchgear, DAEWOO ELECTRONICS COMPANY KOREA for the manufacture of color television sets. In this way they are trying to provide the best possible technology to the customers towards the implementations of TQM.

Market Analysis:It divides firms customers into market segments and then identifies need of each market segment. In PEL they conduct market analysis through different research agencies e.g. Aftab Associates. In addition to research agencies they also conduct research through sales force and through their dealers which are in direct contact with the customers. Through after sale service they come to know about the

customers latest trends and the customers existing choices which are passed to planning department and while planning they keep in view their customers choices and attitudes in designing the plans for the next year.

Market Segmentation:In PEL for different products they have different market segments. E.g. for refrigerator they have segment from lower class to upper upper-class and for air conditioner they have segmented from middle upper class to upper class while for split air conditioner they have made segment for only upper class. While in their target market they target only to the household wives because the family has to make the decision of these products and they influence their choice while making purchases of these products.

Competitive Priorities
A firm gains an advantage with its operating system by outperforming competitors in one or more of these capabilities. These are eight possible competitive priorities for operations which fall into four groups. Cost Quality Time Flexibility A firm may organize itself into one or more operating systems each designed to support a particular set of competitive priorities for a particular set of products.

Cost:
Lowering prices can increase demand for products but it also reduces profit margin if the product cannot be produced at lower cost. To compete on cost, operations manager must address labor, material, scrap, overheads and other costs to design a system that lowers the cost per unit of the product. Often

lowering costs requires additional investment in automated facilities and equipment. In off season PEL lowers the cost of refrigerator to improve the profit margin for the year and to consume the quantity produced which in the stores before the onset of next season.

Quality:PEL has maintained the consistent quality as per ensured in ISO90002.in addition to the consistent quality for the standardized products PEL also produces the customized products for individual customers but they are of the view that the ordered quantity must ensure their profitability. It means that the ordered quantity must be large enough to recover their cost and their profit margin. Currently they are producing deep freezers for WALLS.

Time:In PEL the products are made available to the dealers on time normally throughout the Pakistan. The orders are fulfilled at the required time. The new products features are added each year as a result of direct contact with the customers and new changes in the design and color are made in their annual production plan.

Flexibility:In PEL there is volume flexibility up to their maximum capacity. Customization is there in PEL and they are currently producing only deep freezer for WALLS.

In PEL appliances division there is capacity of 150,000 refrigerators per year. This year they are planning to increase their capacity from 150,000 to 200,000 refrigerators for the next year at same location. They are increasing the capacity of the existing plant.

Utilization:
Currently PEL appliance division is working at 75% utilization rate. Its average out put rate is 350refrigerators per day and its maximum daily capacity is 450 refrigerators per day. So, Utilization = avg. output rate / maximum capacity =350 / 450 x 100 = 75% In PEL when the production department issues his requirement for the production of the next period then the planning department has to see the within the constraints that what amount of quantity can be purchased. The major emphasis is given on the bottleneck material to be procured first so that operations are not ceased due to their deficiency. E.g. compressor is the one the bottleneck for the appliance division in Lahore factory.

PEL was established in 1956 on its present location. At the time of its location here were no proper methods were followed before installation how ever following factors were given importance while locating the facility: At that time this area was very favorable for cheap and productive labor At that time this area was tax-free because the govt. wanted to encourage industries in this area Also at that time there were cheaper construction costs

Being outside from the city.

Supply chain management has strategic implications because the supply system can be used to achieve important competitive priorities .It also involves the coordination of key functions in the logistics.

Material Management:Material management is concerned with decisions about purchasing materials and services, inventories, production levels staffing patterns, schedules and distribution. Decisions in these areas affect the entire organization either directly or indirectly.

Organizational Structure:PEL has segmented structure in which there are different departments for purchasing, production control and distribution in which all the heads report to a third person namely the general manager of company and the GM reports to the managing director of the company.

Importance of material management:Material management is important because whole organization depends on the material and secondly it is short range so it desires more of the attention of the management of PEL

1. central role of PEL:As the PEL is a manufacturing organization so they need the raw material for the purpose of the production from the country as well as foreign countries. This material takes round about 70%of the resources of the organization.

2. Import of inventory on profitability:-

The other reason is the impact of it on the profitability of the organization. As you keep more inventories you will be leading much more cost of holding.

Functions of material management:Planning and procurement

The planning department get date and plans from sales and production department make plan for each item and they give it to vendor. They coordinate planning with sales and production plan is made annually which is further divided into quarterly and monthly. This department also keep up dating cost material and makes budget for the department. At this plan purchase order is made. This PO is supplied to each vendor with term and conditions. The following charts are made maintained and made, 1- When material arrives it is taken to material store. 2- A local purchase Chelan is made. 3- GRN i.e. good receipt note is issued when the material is transferred to the store. 4- 3:1 rejection level is beard.

Purchasing:Purchasing is the acquisition process which includes the activities such as which supplier to be selected, how the negotiations are made and whether to buy locally or from the foreign.

1. Recognizing a need:By need we mean the order for the purchase of the items for the production is given by the production department in the PEL.

2. SELECTION OF SUPPLIER:The supplier is selected by the PEL on the following things or points.

 Financial background. Machine capacity. Lead-time. Cost. The supplier is meting these conditions then they will selected only two suppliers are selected for each item.

3. PLACING OF AN ORDER:The order after selecting the vendor is made. The order is given by providing the desired specifications of the organization.

4. TRACKING OF AN ORDER:They to see that whether it is time to reorder or not that whether the order is coming or meat use daily meeting. If not coming they change the vendor.

SUPPLIER SELECTION
The supplier selection is very important for the company, because if they face any difficulty, they face difficulties. Senior processing officer and senior buying officer. They are responsible for the quality, lead-time and price. Than they also test the material that whether it is of same quality which they company desires then these information collected by them are given to the assessment team they assess the capabilities that whether it suit to them or not. Then in the last step for the supplier selection they give order of the 1000 to 1200 units as a trial beat. After this assessment they will select the supplier.

SUPPLIER RELATIONS:The type of relation maintained with supplier can effect the quality, timeliness and price of the product. PEL have the cooperative relations with the supplier. Because they have to get huge amount of the material from them. The suppliers also assist them to how to use the material.

CONTRACTING:Purchasing must decide how to contract for each of the thousand of the items that most firms buy. The PEL is following the strategy of buying the material as is the lot and with the prices whatever the option giving the fewer prices they set it. In the low price they see that whether it meets the standard for the production or not. In PEL raw material is purchased from three main sources, i.e., Imported material Local material

Imported material:PEL import their raw material from Japan ,Italy ,Brazil, Taiwan, America etc. from the abroad shipment reach the Karachi airport in 22 to 25 days and it takes about a week to transport the goods from Karachi to Lahorethrough air. The goods are bonded when they arrive from abroad. Only material which is required for the next month that is ex-bonded from the govt. warehouse? The govt. charges 1% as service charges for bonding the goods. For the foreign purchases the company has to the LC for the purpose of payment. They have to open LC one month before the supplier delivers the goods to the shipment and the shipments take about one month to reach to Karachi.

Local material:1. They purchase the local material on net cash. It includes the patrol, surf and the things like that. 2. Vendor zed parts These are the raw materials, which are used for the supporting material. These include raw materials like hinge, lock. Freezer ceiling box, thermostat box, packing material etc. 3. Local PEL

In the present factory of PEL the raw material is produced for the PAL i.e. Pak Electron appliance limited. This material is used only for the PAL. Before issuing the purchase order the material is checked in the line, store and the material lying in the bond. After estimating that quantity PO is issued. After inspecting the material in these three places before issuing the order short material list is prepared and accordingly the mix of purchasing quantity is prepared by the planning department for the purpose of procurement of material.

Distribution:Distribution is the management of the flow of the materials from the management to the customer and from warehouse to materials, invoicing the storage and placement of the products.

PLACEMENT OF THE INVENTORY:PEL is following the linkage for the purpose of the placement of their inventory. Because it is not the customer product. They kept it in the company. Because this company is not maintaining an inventory for finished products. In it management of the PEL provides the daily report what amount is needed audit.

TRANSPORTATION MODE:PEL is mostly using the road as the transportation mode. They if are supplying their products inter city then the trucks are used. But if they are sending it to outstation then they use large trucks to send them at the price. The reason for their selection of this mode is that they have to send it to the place where rail not goes or they have to supply to the destination of the user or customer.

In PEL forecasting is done annually and the plans are made for the whole year while there is flexibility in the annual plan and due to existing trends changes are made monthly and quarterly in the annual plan.

Pattern of demand:In PEL the pattern of demand is continuous generally and the production is carried out during the whole year. From March to August their production is on the peak while after august there is off season. However in that season the production gets slow a bit than the season. For the Air-conditioner there is change in demand during the off season. So for the air conditioner the demand is seasonal while for refrigerator the demand is almost continuous.

Judgement Methods:In PEL the forecast is done through the demand prescribed by the sales force and the dealers. While the meeting of the executives is held quarterly for purpose of discussing the changing demands and forecasting for the next period. Marketing research is also conducted for the purpose of forecasting demands. This task of market research is given to the specialized and professional company like Aftab Associates.

Casual Methods:Obviously the economic conditions and the competitors actions are also considered while forecasting is done by the executives in their monthly and quarterly meetings. While reacting to the change in the demand pattern they need three months before forecasting to react to that change due to the constraints of the availability of the raw materials.

Time Series Method :-

Simple moving average method

In PEL simple moving average is used to forecast for the next period. Usually the data of the past five years is used to estimate the next year demand and also the trend is incorporated in the forecast.

Inventory is a stock of anything held to meet the future demand. The PEL is being influenced by the fast production so the inventory will be kept more by them, but if the production of the company is slow then it will have a little inventory.

ECONOMIC ORDERING QUANTITY:They are utilizing the E.O.Q. for the purpose of the ordering the material.Because it set off the effect of the futures that influence them for the high and low inventories. The order is make after keeping into mind the maximum and minimum required with is in days for this organization.They keep maximum 15 days and they take minimum 10 days. For the purpose of making he order they have selected the two vendors. If one is not meeting the needs then they can order to the other. Making the inventories coming under the PEL are the raw material and components used for the purpose of operating.

They are using the computerized methods for the purpose of measurement of the inventory. They utilize the monitoring charts as

all for the purpose of looking that material has arrived and whose maintaining. This activity is performed at every month. REORDER CALCULATION:As the organization is preparing the quarterly charts for monitoring. So they have a clear eye on it. Then if it is showing that the order level is going below the required level than they will make the order to the supplier so this is the way to reorder.

INVENTORY CONTROL SYSTEM:The EOQ formula can give us amount to b ordered to the supplier. Then next step is that when to reorder for the purpose of the production if the inventory goes below the limit.

METHOD FOLLOWED BY PEL:PEL is using the periodic review system. They have make the review charts for the quarters and they basically take into this and after three months they see that whether the inventory is with in the limits or not.

TYPE OF INVENTORY
Cycle INVENTORY:The cycle inventory is ordered for the 30 days.

Safety stock:The safety stock is maintained for the seven days on the monthly production plan.

Anticipation stock:In the season the anticipated stock is maintained and more stock is maintained for the manufacturing in case of air conditioner

Aggregate plan is a statement of a companys production rates, workforce levels and inventory holdings based on estimates of customers requirements and capacity limitations. This statement is time-phased meaning that the plan is projected for several time periods (such as months) into future.

Production Plan:In PEL the production is made for one year. Sales department estimates the forecast for the next period .These forecasts are handed over to the planning department who makes the production plan accordingly keeping in view the estimates of sales department. Then the production department makes the production schedules and then this demand goes to the purchasing department who is held responsible for making the annual purchases on the schedules suggested by the planning department. In PEL specified inspectors are held responsible for the quality during the production process. They inspect the work in process products and every inspector prepares individual report and signs at the end of report. In case of raw materials the inspectors check the materials on the basis of sampling and if the samples are considered not satisfactory up to standard then the vendor has to ask replace the items which are defective. When material is sent to the store then the storekeeper checks its quality and then the good receipt note is issued which ensures that the material is according to the standard and according to the prescribed quality. When the goods are produced then they are sent to the quality department where the inspectors check the items individually and after checking their performance every inspector signs on the back of the refrigerator. When the sales man goes to the customer if the products gets out of order (within the specified period of the after sales service),then sign of individual is seen on the back and in this way it is easy to find who has made mistake during quality inspection. Due to these measures taken by the management there is very little chance that the items would be defective.

QUALITY POLICY:-

Pak Electron Limited is dedicated to the continuous improvement of all products and services through total involvement of all employees. We are committed to the development and strengthening of partnerships with our external and internal customers and suppliers. We will continuously strive to provide innovative and higher quality products and services to achieve total customer satisfaction by understanding their requirement and anticipating their future expectations or needs.

IN PURSUING THIS POLICY WE WILL : Have annual targets for quality improvements in all areas Create a culture of customer focus striving to become the lowest cost producer through agreed annual cost reduction programmed. Value people by understanding and drawing upon their strengths i.e. abilities and knowledge and make efforts for their training and development.

Management.
ISO stands for international organizations for standardizations. ISO 9000 is a set of standards governing of a quality program. Companies become certified by proving to a qualified external examiner that they have compiled with all the requirements .Once certified, companies have been certified and to what level. Compliance with ISO 9000 standards says nothing about the actual quality of a product. Rather, it indicates to customers that companies can provide documentation to support whatever claims they make about quality. ISO 9000 ISO9001 ISO 9002

 ISO9003 ISO 9003

ISO

9004

Actually ISO 9000 is an overview document. PEL is ISO 9002 certified and they have made a team which not only trains their employs but also their vendorsemploys.In this way the chances of rejecting the suppliers are reduced and the suppliers cost does not go up due to the rejection of material.

Reasons For acquiring ISO 9000: To achieve customers satisfaction Competing against foreign competitor in the local market. Adds a positive image to the company and improve its goodwill. It is perceived commitment to quality Because the slogan of the PEL is to the quality conscious people so it ensures their commitment towards improved quality for the customers. In case of raw materials the inspectors check the materials on the basis of sampling and if the samples are considered not satisfactory up to standard then the vendor has to ask replace the items which are defective. When material is sent to the store then the storekeeper checks its quality and then the good receipt note is issued which ensures that the material is according to the standard and according to the prescribed quality. When the goods are produced then they are sent to the quality department where the inspectors check the items individually and after checking their performance every inspector signs on the back of the refrigerator. When the sales man goes to the customer if the products gets out of order (within the specified period of the after sales service),then sign of individual is seen on the back and in this way it is easy to find who has made mistake during quality inspection. Due to these measures taken by the management there is very little chance that the items would be defective.

CONCLUSION:If we conclude this report of operations management, we come to know the following relevant points which need the attention of the management of the company while performing the functions of the operation.

NO PROPER INVENTORY:The organization does not have proper inventory planning by the management due to which heavy amount of the money is being put by the company in the inventory. PEL has the strength also that it has a good repute for the company as being the quality conscious company. It has own experts for the purpose of the control of the quality or products. Due to the good sight selection the company has more access to the whole of the markets of the country. The company also has well established system of the distribution of the company although it is not the integrated one but it is working smoothly.

JUDGMENTAL METHODS:The management of this company does not use the sophisticated technique while making or performing the function of the demand forecasting by the

company. They rely more on the judgmental methods for the purpose of the projection by the company about their sales.

SUGGESTIONS:The following are the suggestions by me after visiting the company.

PROPER INVENTORY LEVEL:The company should also make some of the methods for the purpose of the keeping the inventory at the optimal level. Proper planning of the material can decrease the amount of the investment in the inventories by the company. USE SOPHISTICATED TECHNIQUES OF FORECASTING:The company is an excellent company and it has good image in the mind of the consumers. But they are not applying the statistical tools for the purpose of the forecast of sales which eventually results into having the excessive amounts of inventory by the company. Causal and the time series methods are the good estimate provider about the forecasting and if the management adopted these forecasting techniques no doubt they will be benefiting the company a lot.

In making of this report I have consult the following sources,

STATISTICS FOR MANAGEMENT BY LEVIN. For forecasting. OPERATIONAL MANAGEMENT BY LEE.J.KRAJEWSKI & RITZMAN QUALITY MANAGEMENT BY DAVIT .L.GEOTECH

And some other person from whom I get information are, Some my senior colleagues. In Pel I have consult with the following persons.

PROCESS OF ELIMINATING LOSSES (PEL) IN OPERATIONS The PEL comprises all costs incurred by not doing the right things right, the first time and every time. It is said that manufacturing operations commonly have a cost of poor quality at around 20-25% of the turnover and in the case of service Organizations the cost could be as high as 35-40%. We say that the prevention costs are good costs, and cannot be included under PEL, as these are investments that prevent occurrences of fault. The next costs are appraisal costs. They constitute the cost incurred to segregate the good product and the bad product, e.g. costs related to inspection and segregation. Companies which claim to have internalized the Total Quality Management (TQM) culture as many companies in Japan have done, consider appraisal costs as not necessary, if the process is under control. Hence, these are additional costs that can be avoided, so they form a part of PEL. This may be very easily said, but in reality inspection is still very much a part of the system of management. The ISO series has a special clause on segregation, to ensure that the customers do not get a faulty product. So while we would like to reach the ideal situation, of doing away with inspection, the road to this end result is a very long way off for companies operating in our cultures. When we are talking about documentation of PEL, and strategizing for the ELQC manual, which forms a basis for a large number of improvement activities ( through PEL), we are really going to focus on what are known as the field failure costs. The field failure costs are further segregated into internal field failure and external field failure costs. These contribute to almost 60-70% of the PEL for an organization. The internal field failures are defined as costs incurred as a result of errors in products and services, which are detected before the output reaches the customer. In other words, it is the costs that the company bears in rectifying an error, before the product or services are accepted by the customer. These costs are incurred because everyone did not do the job right the first time. It includes such areas as in process scrap and rework, retyping letters or resending a fax or e-mail, all kinds of trouble shooting and repairing, down grading of products due to non-conformance to original specifications, holding additional inventory and so on. Almost every manager/ officer / supervisor in the company will be able to identify areas, within their own work area, where redoing, or not doing the job correctly the first time resulted in PEL. The external field failure represents those costs which are incurred because the external customer is supplied with an unacceptable product or service. It is the cost incurred by the company in the market place, because your system did not detect all errors before the product or service was delivered to the user. These include costs incurred in product liability suits, complaint handling, warranty administration, customer incurred costs, customer dissatisfaction costs, and the most important, loss of reputation for the company which may sometimes result in closure of operations. These are bad costs which no company can afford. Managers and officers involved in commercial operations such as marketing, market research, finance, stores, purchase and anybody who is remotely connected with commercial operations, can generate PEL cases which have resulted in losses to the company. Many organizations are still very weak in this area

and the exercise of going through a data based documentation of PEL, will help the companies keep in closer touch with the customer. The question is that , while we are aware of these costs, how is it that companies going in for TQM implementation have not tried to document these costs on a companywide basis, to create a platform where implementation becomes meaningful. The process is not as simple as simply collecting PEL cases. It involves a change of mindset within the company, where you actively promote problem generation as a meaningful activity. The PEL cases are compiled into the form of a manual and various cross functional teams connected with functions mentioned in the PEL work on finding out a solution to eliminate the causes of the loss. Then the PEL is treated as complete. A number of such PEL when solved over a period of time until no further PEL remains then the company is said to have implemented TQM.

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