SUBJECT

Production Operation Managment Sir Rana Tanveer M.Zubair Asam

SUBMITTED To : SUBMITTED BY:

M.Com4th Roll No. 11

(Department of Commerce)

MINHAJ UNIVERSITY LAHORE

INTRODUCTION
PAK ELECTRON LTD. was established in 1956 with the technical collaboration of M/S AEG, West Germany. It is the oldest composite electrical equipment-manufacturing unit of Pakistan with the object of initially producing transformers, switchgears and electric motors. In 1962 after conclusion of joint venture agreement with AEG, total shareholding was purchased than by sponsors M/S Malik Brothers Limited. In October 1978, PEL was taken over by SAIGOL GROUP OF COMPANIES, which is the largest and well-know industrial and commercial group in Pakistan. The Saigol Group belongs to the Saigol family that is an old business family and has contributed a lot towards Pakistans industrial and believes in continuous development and growth. The result is a global business activity monitored through the various offices worldwide. Meeting Saigols traditions, since its takeover by the group, PEL is also a Company on the go. The high growth rate proves the complete success of the professional management and provides sufficient confidence to trust in its future development schemes.

PEL SYMBOL OF QUALITY:

The products manufactured by PEL have always been of a high standard and the name PEL is synonymous with QUALITY all over the Pakistan and abroad. In fact PEL has been more than an industrial unit. It has been acting as an institution working for the advancement and development of the electrical engineering know-how and technology in the country. Through its apprenticeship scheme and training programs for the engineers and technicians, it has produced hundreds of skilled workers and technicians who have exhibited high proficiency in their profession, both in and outside of Pakistan. PEL equipment has been used in numerous power projects of National importance within 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, Cardew And Rider, England. Harza Engineering Company, U.S.A. Snam Progetti, Italy. Societe Dumez, France. Miner & Miner International Inc. U.S.A. Ensa, France.

EXPORTING:

It was from the early 1970s that PEL has been exporting its power equipment to the overseas market like Saudi Arabia, Dubai, Abu Dhabi, Qatar, Sri Lanka, Nepal etc. due to its quality. Later on PEL supplied electrical equipment to various other countries in the Middle East, Far East and the other countries of Africa with great success.

DISTRIBUTION TRANSFORMER
PELs first major power product being produced since 1965 is DISTRIBUTION TRANSFORMER, up to 33KV and 5000KVA capacity. These oil-immersed transformers are suitable for both indoor and outdoor installation, being manufactured as per I.E.C. 76, BSS 171 or VDE 0532 standards. Sealed tank designs are available up to 200 KVA, while all larger sizes are conservator type. PEL transformers have been tested in KEMA labs (Holland), against short Circuit Withstand in addition to routine,

Motors
PELs third power product is Single Phase and Three Phase Induction Motors being manufactured in 35 models up to 40 horse power range. PELs totally enclosed fan-cooled motors are suitable for operation under extreme climate conditions. Its robust design and special enclosure offers effective protection against dirt and humidity. These motors are designed and manufactured according to IEC, VDE/BSS Standards. PELs Motors are most suitable for Spinning Mills, Power Looms, Ginning Factories, Oil Expellers, Cement, and Sugar and Chemical Plants, Tube Well etc.

Meters
The fourth Power Product is the tech, high quality Single-Phase watt-hour Meters being produced under license from M/s. A.B.B, Power T&D Company U.S.A. in the range 10-40 Amps and rated 240 Volts. The biggest bottleneck is setting up a facility in Pakistan is the lack of orders, their small national requirement and WAPDAs and KESCs purchases through International.

DEEP FREEZERS:
During the year 1986-87, PEL introduced in the market Chest Type Deep freezers called PEL FREEZE. The units are design to give a highly level of performance during the extreme climatic conditions of Pakistan. Their special features being equipped with total refrigeration systems, hammered aluminum lining and special pressure stabilizers have also made them an immediate success in the market. Production of Deep Freezers in two different colors i.e. white and off-white, and six different models i.e. from 175 liters to 410 liters in Single Door and Twin Door Designs, give the consumer a variety to select from .COMPRESSORS

The product received an instant acceptability from the market. In the beginning PEL anticipated that because of governmental policies. The import of compressors shall be banned and PEL will then be only one company which shall be producing the compressors not only for their own appliances but they shall also be able to sell these compressors to the other companies in the market. But unfortunately this did not happened, instead of increasing the duties over the product the government withdrew the duties in succession. As a result of that PEL was not able to operate the compressor department cost effectively in the long run so in the end of 1998 they closed down this department and started importing the compressors. THE COMPANYS CONSOLIDATIONS PAK ELEKTRON LIMITED the holding company. PEL APPLIANCES LIMITED (PEL) the subsidiary company. PEL DAEWOO ELECTRONICS LIMITED the subsidiary and a joint venture with DAEWOO Electronics Company Limited, Korea.

COMPANYS MISSION STATEMENT

To grow the size of the organization, develop better business practice and build-up greater resources. To practice actively and consistently in Pakistans economic development. To build up better operating philosophy. To build a better commercial outlook for operating successfully in this competitive environment. To keep pleasant working environment. To always maintain exclusive service standards. To promote professional co-operation. To motivate the employees by making them feel that management cares about them by recognizing their efforts by remuneration or by promotion depending on the individual efficiency and what he deserves. To create feeling of co-operation so that all employees are satisfied.

COMPANYS OBJECTIVES:

The continuous improvement of all products and services through total involvement of employees. The development and strengthening of joint ventures and partnerships with external and internal customers and suppliers. Providing innovative and higher quality products to achieve total customer satisfaction by understanding their requirements and anticipating their future expectations or needs through: Monitoring Annual Targets for quality improvement in all areas and function of the organization. Valuing people by understanding and drawing upon their strengths i.e. abilities and knowledge and make efforts for their training and development. With a dedicated team of professionals the company is striving to improve the quality of life in Pakistan homes through reliable equipment for power distribution and home appliances. The growth in the size of the organization develops better business practices and builds up greater resources. Total Quality Management implementation for getting ISO 9002 for their other products. The aspiration to capture the complete product family of the product.

LOCAL MARKET SITUATION:

INCREASED TAXES
The taxes are increasing as ever, the devaluation of currency has turned the situation into worst. Since most of the items are being imported so its is bearing an ever increasing cost of production. At some stage in 1997 to get rid of the stock the company sell its products at no profit no loss basis.

CHANGING TECHNOLOGY
There are a lot of twists in the market about the technology so even too compete In the market the market the company has to work very hard.

For example:
In case of the appliances ;PEL has introduced several models during the last two years.

In December 1997---------- PEL refrigerator In January 1997---------- PEL ultra In December 1998---------- PEL Crystal

COMPETITIVE PRIORITIES
COST
Low cost

QUALITY:
Consistent quality with high class appliance performance

FLEXIBILITY
A lot of volume, equipment and workforce flexibility is present

LOCATION
PAK ELEKTRON was set up in 1956, at that time the location site was selected outside Lahore City 14km Ferozpur road, Kot Lakhpat Industrial Area. The site for the purposes of the operation was selected by adopting the judgmental method and no sophisticated technique was utilized. The following were the dominant factors, which moved the management to select the site for the facility location.

CAPACITY
Capacity is the maximum rate of output for a facility.

PRODUCTION DEPARTMENT PROCESS

The production department of PEL is manufacturing two finished products.

(1)Refrigerator
The refrigerator, called PEL COOL is specially designed to work most efficiently under the extreme climatic conditions of Pakistan. All the specifications about machinery and product are taken from the Engineering and R & d departments

(2)Compressor
. The production department is also manufacturing the high-tec compressors for refrigerators and deep freezers. It is the first such plant in Pakistan that is manufacturing all types of compressors for refrigerators and for deep-freezers. The Details of the operations and functions of each section is as follows.

1. COMPRESSOR SECTION
Here in this section the compressors of finest quality are manufactured. PEL is the only company to produce all types of compressors. This section is currently manufacturing the compressors for: Refrigerator Deep- freezers The basic feature of the compressor i.e. quality is the result of high-tec or professionalism.

2. DYES & MOLDING SECTION

This sub-section involves the production of the different dyes. The R & Ddepartment develops the design of the different dyes, to be used in the preparation of different plastic parts in the press-shop. It fabricates the dyes and molds them according to their specifications.

3. PRESS- SHOP
When the dyes are handed over to the press-shop, now the production of sheet metal parts starts in press-shop. This section is very important because the parts, to be assembled for refrigerator, are manufactured here.

4. PAINT SECTION
When the different components are prepared by Plastic injection molding and from pressshop, these are sent to the pint section for paint purposes. This refrigerator. Here the control of quality is very important because the components should not have any fade color or any other damage, so the quality control has some standards through which they are checking the paint section the production department. So the operations in paint section mainly consists of: * Washing of Parts. * Paint * Pressure of hot air * Final cleaning and touch in

5. REFRIGERATOR ASSEMBLY LINE

Here in this section the different 313 components are assembled to make a refrigerator. The assembly of the different parts is done by machinery. The main parts, which are involved in a refrigerator, are:

[1] FREEZER:
The freezer, which the production department is currently using, is of two types. * In-house * Imported This section is assembling both types of freezers in the refrigerator and both have the same quality.

[2] BODY
The body of the refrigerator is also in house manufactured. Press shop, produces the plastic body and the plastic injection molding section is producing the upper body or steel body.

[3] COMPRESSOR
Compressor is the dynamic part of the refrigerator, which actually worked in a refrigerator. Al other parts in a refrigerator are static ones.

[4] EVAPORATOR
This is the part, which has the function of absorbing the heat from the compressor and from all other parts.

[5] CONDENSOR

Now when the evaporator absorbed the head, now the condenser works as a ejector of heat from the refrigerator.

[6] DOORS
The doors of the refrigerator are also in-house manufactured.

REFRIGERATOR ASSEMBLY LINE:

When all the components are transferred to the refrigerator assembly line, the assembly of the parts is done by Assembly line. This section has further seven sub-sections. Thermo Forming Section Pre-Assembly Section (a) Pre Assembly Section (b) Foaming Section Assembly Line Section Door Assembly Final Line Section Final Inspection Section Packing Section The process design in the assembly line of refrigerator consists of the following operations.

FORCASTING
DEMAND FORECASTING
A forecast is the prediction of future events used for the planning purposes. PEL is also using this technique for the purpose of the getting the idea of the demand. The basic demand of power division is coming from the KESC and from eight divisions of WAPDA. They are the major customers of the company. The other customers of the company are those industries, which have their own power plants.

FORECASTING TECHNIQUES
There the three forecasting techniques are available for the purpose of the forecasting of the demand, which are as under. Judgmental Method. Causal Method. Time Series Method. The usage of these techniques depends upon the availability of the data about the past. PEL is the company on go.FORECASTING AT PEL The forecasting technique, which is being followed by PEL is the qualitative technique.

JUDGEMENTAL METHOS
The main reason for the selection of this method of the forecasting is that they do not have the data for the past. The following are the methods, which they are utilizing for the purpose of the demand estimation under the Judgmental Method.

NAIVE METHOD
This is the simplest method of the forecasting. PEL gets their demand forecast by this method with it. They see the previous years demand coming from the WAPDA, KESC and the other new companies. Then if any change is coming in their demand that is also being incorporated by them. The demand from the new industries is taken from the sanctioning of the loans by the financial institutions.

MATERIAL MANAGEMENT
MATERIAL MANAGEMENT
Material management is concerned about short range decisions about supplies, inventories, production level, staffing patterns, schedules and distribution.

Decisions in these areas affect the whole of the organization, Either directly or indirectly.

IMPORTANCE OF THE MATERIALS MANAGEMENT

Because the whole of the organization depends upon the materials so it is very important. The other reason behind it is that if of short range so it desires more of the attention of the management. It is important for the PEL also.

FUNCTIONS OF THE MATERIAL MANAGEMENT.

The Planning and Procurement Department in the PEL are performing the functions relating to the materials.

PURCHASING
They have already made the Annual Production Plan through the analysis now the people concerned with the purchasing make decision about the inventory; they make planning about the following heads. Imports Local buying In house material

IMPORTS
The company imports 60% of the material. Purchase department is responsible about this section & analyzing the bill of quality (BOQ). The engineering department specifies the per unit quality in BOQ. In this way they get the idea about the inventory needed for the next year production. They give the specification and get the reasonable supplies. Then import in charge checks the supplier on the major factor of price. The purchase department of the PEL is responsible to maintain the one-month inventory of imported material to meet the unfair circumstances.

LOCAL BUYING
Local buying is also very important for the power division. Local buying is also based upon the Bill of quantity (BOQ).

For the local buying two categories are very important for the company and company should handle these two categories in their best way. Suppliers Vendors

Suppliers
Purchasing is like the beat of the heart for organization in the supplier market place, continuously seeking better buys and new material from supplier for the selection of supplies they care about three things price, quality & delivery. Supplier provides readymade material.

Vendors
Vendors are also supplier but when they are under the ISO 9000 then they become vendors. Vendors make the material according to the instructions of the company. The company must inform the vendors 20 to 25 days before the requirement. Local inventory is stock for at least 3 months in the store dept. because of the products seasonal demand.

SUPPLIER SELECTION
For the success of the company supplier or vendor are biggest contributor. The PEL is very conscious about their supplier. To evaluate the supplier PEL maintain a separate section of vendor assessment engineering dept. Is working Then PEL asked the selected supplier to submit their samples. If their samples are according to the specification of the company then they will be selected and place the purchase order. Then after that this material is also inspected by quality control department if it is rejected then it will sent towards the vendor. The company has maximum 3 & minimum 2 suppliers for each material while having prepared each suppliers history. The supplier which has a good past performance will get the existing order, company makes the list of their supplier & check their performance on each month and give rating to them excellent, marginal and poor

Contracting
PEL makes a purchase order and place this purchase order for one year and with the monthly prescription so in this way the annual contract of the company makes the contracting condition quite easy and predictable but for the new supplier they give specification.

STORE DEPARTMENT
In PEL there is two types of store. Engineering store Chemical store Imported products or material come by letter of credits (l.c.s) Local Material or Products come by P.O. When P.O. comes to store and material is receive by the store then they issue the G.R.N. document against the P.O. and make an entry of material.

INVENTORY

INVENTORY MANAGEMENT
Inventory is a stock of anything held to meet the future demand of organization. For an organization Inventory Management is very important process. PEL is in a seasonal business since the demand season for their product is from April to September. PEL management estimates the demand very carefully and tries to avoid the pilling of the inventory. Production of PEL jump in Feb. to April and they need more Inventories in this season. To keep the overhead charges low PEL has a small no of permanent workers which -work through out the year. However to meet the demand of the peak season the management hire the workers at the temporary basis just before the start of the season.

INVENTORY SYSTEM IN PEL

PEL are using the periodic review system. They make the review charts on quarter basis and after three months they see that whether the inventory is with in the limits or not. But they told that there are limited number of suppliers & company is having a very strong relationship with them thats why the lead time is just in HOURS therefore the system they are using is very near to JIT system.

MATERIAL REQUIREMENT PLANNING

As such company does not prepare any formal material requirement plan. Reason for not preparing the plan is that the operations of the company are simple. In the Appliance division, major operations involve the assembling of parts. When the benefits of the MRP are compared against the cost and time for preparing the MRP, it is believed that the operations are too simple to use any such plan. However it doesnt means that no planning is done for the raw material and components material planning is done for the items that have no independent demand. It is based on the following; three inputs, which the company is using. .

FLOW OF ACTIVITES
The flow of activities with respect to M.R.P. in the company. ASP is prepared first followed by the production plan prepared by the Production Dept. From here plan goes to the P & P. Dept. In case if marketing Dept. suggests some changes in the design and specification of the product, the requirements are mentioned to the Research and Development Dept. which then work on the projects. Dept. identifies the items required and their quantity for single product. From here the report goes to the P &P Dept., which after consulting Production Dept. place orders.

QUALITY CONTROL
the process of quality ISO has defined their quality standards. These standards are checked at every stage in PEL. In PEL standards of quality in manuals indicating critical quality standards.

Quality department
Its hierarchy of the quality control department is as follows:

RAW MATERIAL INSPECTION

It means that they select the sample by way of diversifying the area. If the 2 units of the sample are rejected then the whole lot will be rejected and if the lot is rejected then they

call back the vendors and vendor check that lot again. If the lot is very much needed by the production department then they place a written request. The 100% inspection is done on it. In this case, they call the vendors or their inspectors and they check it on 100% basis. On the other hand if the lot is accepted then it is remarked as GRL (good received lot) and sent to the store. While four copies of GRL are made and sent to the following four departments: Purchase department Quality control department To store For computer entry

EXTERNAL & INTERNAL AUDIT

First of all internal audit is done once in a year. This is a sort of inter departmental audit. If there is any mistake then corrective form are present for them. They will check all the things, would make remarks about mistakes and the corrective action for these mistakes. If they got the certificate then after six (6) months the ISO-9000 auditors do external audit.

QUALITY CONTROL
PEL has also got certification for its two products. They have got this certification from the Swedish firm and consultants SGS. They have got the 9002, which cover the area from the production to after sale services. The following are the products for which have gotten 9000 certification.

ENERGY METERS
For the instrument transformers & refrigerator they are trying to get it.

QUALITY POLICY
The continuous improvement of all services through total Involvement of all employees. The developing and the strengthening of partnership with external and internal customers and suppliers.

Providing innovative and higher quality products and services to achieve total customer satisfaction by understanding their requirements and anticipating their future expectations or needs.

Training Programme
They have also trained their quality inspectors. They have a program to train the quality inspector and classes are also held. But they have no proper academy. Different organizations send their employees, which trained them. ISO 9000 Why ISO is Required FOR PEL Quality management system given by ISO 9000 acts as a support to achieve customer satisfaction benefits of ISO 9000. PEL competing against foreign competitor in the local market. Raise company image. A step toward total quality management. Perceived commitment to quality. PEL need it because we promote the slogan The quality conscious company. More united workforce through total employee participation.

CONCLUSION & SUGGESTIONS

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

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 of products. Due to the good sight selection for the purpose of the power division 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 being provided by me after visiting of 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.