1

Anum Qasim
Muhammad Abdul Rehman
Syeda Rida Rizvi
Talha Humayun Masud
Zahra Daha

Supply Chain Management

Final Project
April 3, 2014
Mr. Salman Ehsan

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Table of Contents
Introduction..........................................................................................................................4

Vision Statement........................................................................4
Mission Statement......................................................................5

Engro Foods Supply Chain Management Process..............................................................6

Production Process...............................................................................................................7
Chilling and Storage...................................................................7
Milk Processing..........................................................................7

Pasteurization...............................................................................................................7
UHT Treatment............................................................................................................8

Packaging..................................................................................8
Push or Pull strategy..................................................................8
Objective of Supply Chain Management at Engro Foods................9
Supply Chain Strategy at Engro Foods.........................................9

Managing the Supply Chain..............................................................................................10

Supplier-Relationship Management (SRM) at Engro Foods...........10

Drivers of Supply Chain at Engro Foods...........................................................................13

Facilities...................................................................................13

Location of Plants......................................................................................................13
Location of Offices....................................................................................................13
New Processing Plant of Engro.................................................................................13
Sourcing Decisions....................................................................14

Raw Material Procurement........................................................................................14

Raw Material.............................................................................................................15
Sourcing of Packaging Material................................................................................15
Sources of Milk Supply.............................................................................................15
Direct Sources............................................................................................................16
Milk Collection Centre..............................................................................................16
Contractor Based Collection......................................................................................17
Customers Location..................................................................................................17
Inventory Handling at Engro Foods............................................18

Inventory Management at Warehouses:.....................................................................19

Information Sharing at Engro Foods...........................................20

CRM System used at Engro Foods............................................................................21

Logistics & Distribution at Engro Foods:.....................................22
Transportation Handling at EFL..................................................22

Distributors Transportation........................................................................................23
Competitor Analysis Nestle Milk Pak...............................................................................28
Facilities...................................................................................28
Sourcing of Milk........................................................................28
Sourcing of Packaging Material..................................................28
Inventory Handling...................................................................28
Transportation..........................................................................28

Information Handling................................................................29
Pricing.....................................................................................29

Recommendations..............................................................................................................30

Introduction
Engro stands for energy for growth. Engro is one of Pakistans most progressive,
growth oriented organizations. From inception, their legacy is of continuous growth, new
challenges and fulfilled promises. From fertilizers to dairy products, business solutions to
PVC resin, power generation to commodity trade, at Engro their ambition is to become
the premier Pakistani enterprise with a global reach.
Engro Foods Limited was officially launched as a fully owned subsidiary of Engro in
2004. Using dairy as a stepping stone to enter into the food business, the Company has
established state-of-the-art processing units in Sukkur and Sahiwal, along with an ice
cream production facility in Sahiwal.
Top quality brands like Olpers, Olwell, Tarang, and Omore have been successfully
launched under the helm of Companys dairy products. To support these brands and their
highest standards of quality, Engro Foods has invested heavily in milk processing and
milk collection infrastructure.
After the success of the dairy products, to which the customers testify, Engro Foods now
plans to venture beyond the dairy sector. 2011 has also seen the beginning of sales from
its own rice processing plant.
With an acquisition of Al Safa a fast growing and established Halal meat brand Engro
Foods is now venturing into North American market starting from Halal Foods category.
The new organization, Engro Foods Canada Ltd. with a subsidiary Engro Foods USA,
LLC, intends to aggressively grow the business in this market.
With the vision of Elevating Consumer Delight Worldwide, Companys signifcant focus
will be towards the global operations in the years to come.

Vision Statement
Aims at transforming the company within next five years into first a national food
industry giant, then into a regional force and finally into a global player.

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

Engro Foods Supply Chain Management Process

Dairy is one of the growing segment of livestock sub-sector and important component of
Pakistans economy. Pakistan is the fifth largest producer of milk in the world. Milk
production in Pakistan has seen a constant increase during the last two decades and this
has finally translated into a mushrooming of newer entrants into the Milk Processing
industry of this country in the new millennium. Engro Foods is one of the latest dairy
milk processing ventures along with Shakarganj with its Good Milk. Thus the fact that
Engro is a newly established organization in a field where perish ability of milk makes it
imperative for supply chain to be managed.
This organization has carefully planned and executed the supply chain. This is evident
from the fact that the milk processing plants are located in Sukkur and Sahiwal i.e both
the provinces of Pakistan. The dairy farms mostly independently owned have been linked
and are suppliers of Engro that are closely located to ensure the supply of milk on time
without any delay or detriment to the milk.
Supply Chain Network:

The above chart depicts the overall supply chain management process at Engro Foods
(Pvt) Ltd. These activities can be divided into three all encompassing categories as well:

Inbound Logistics: the receiving and warehousing of raw materials and their
distribution to manufacturing as they are required.

Operations: the processes of transforming inputs into finished products and

services.

Outbound Logistics: the warehousing and distribution of finished goods.

Production Process

Chilling and
Storage

Milk Processing
(Pasturization,
Homogenization,
Other Processes)

Packaging

Chilling and Storage

The production process at Engro Foods consists of four steps. Firstly, raw milk is
collected from milk collection centers by tankers and brought to plants for processing. On
arrival, the milk is tested for appearance, smell and temperature, and a sample is taken for
analysis in laboratories. A series of tests are carried out relating to the compositional and
hygienic quality of the milk. Subject to the satisfactory completion of these tests, the milk
in the tanker is then unloaded into a silo. The milk processing factories cool the raw milk
at a temperature of 5C or less into cooling tanks prior to being passed through heat
treatment facilities. The chilling process helps to curb bacterial growth in milk.
Milk Processing
Pasteurization
Next comes the pasteurization stage, which is the process of boiling the milk and then
immediately cooling it to a lower temperature. The milk is pasteurized at 85oC, which
helps to kill 98% of the germs present in the milk. Pasteurization serves as the separation
point of raw milk into different products, which include Tarang, Olpers and Olwell. At
this point the cream and fat are removed from the milk and other special ingredients are
added along with it to the milk as per the requirements of each product. For example,

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Tarang is a high-fat tea whitener and therefore it needs more cream content and different
ingredients as compared to a product like Olwell, which is low fat and requires less
cream. The milk after pasteurization is then standardized as prescribed by the Pakistan
Pure Food Laws at 35% Fats and 8.9% SNF (solid non fats).
UHT Treatment
The pasteurized milk is then passed through the UHT (Ultra Heat Treatment). This is the
most sophisticated and advanced stage in milk processing. In this process the milk passes
through 140 degree centigrade in the first 3 seconds and it is then immediately cooled to
20 degree centigrade in the next 5 seconds, which in turn kills all the bacteria. The UHT
process can be achieved either through indirect or direct heating systems. In the indirect
method the milk is heated by steam passing through stainless steel pipes outside milk
tanks. In the direct method either the steam is directly injected into the milk or the milk is
forced through a fine nozzle into a tank filled with steam. Engro Foods makes use of the
direct system for the UHT process.
Packaging
Following the heat treatment, the milk is cooled in a sterile vacuum chamber. After the
heat treatment the milk is cooled and packed in Tetra Pak cartons as soon as possible to
prevent contamination. The packaging process is also carefully monitored. The packages
undergo stringent controls to check that they are sterilized. The milk is then filled into
the cartons under aseptic conditions. The cartons are filled automatically and
continuously under completely sterile conditions and then heat-sealed
Push or Pull strategy
Engro Foods follows push strategy as they make product, which are standardized and
then push them in to market.

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Objective of Supply Chain Management at Engro Foods
The primary objective of supply chain management at Engro Foods is
Fulfilling customers demands in the optimum way
Thus cost reduction is definitely on top of the priority list for Engro but fulfilling
customers demands is just as important. Thus the goal of these activities is to offer the
customer a level of value that exceeds the cost of the activities, thereby resulting in a
profit margin.
Supply Chain Strategy at Engro Foods
The supply chain strategy is obviously in line with the objective for supply chain
management, which in turn is in line with the overall mission and values of the
organization, all of which have been stated above. So when narrowing down to the
strategy, it is
A give-away between the service factor and low cost
So if we link it to the theoretical concepts that have been taught to us in this Supply
Chain Management course, the basic approach towards a competitive advantage over the
competitors, some established other newer entrants is a combination of low cost and rapid
and flexible response, right now it suffice to state that an example of low cost strategy
through the location of the plants near the abundant sources of supply, farms and farmers
so as to reduce the transportation cost and cost of milk deterioration and subsequent
losses. An example of response would be the use of third party logistics to ensure that
they are responsive enough to meet customer requirements.

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Managing the Supply Chain

Supply chain management (SCM) is a broadened management focus that considers the
combined impact of all those involved in the production of goods and services, from
suppliers to manufacturers to wholesalers to retailers to final consumers and beyond to
disposal and recycling.
Supplier-Relationship Management (SRM) at Engro Foods
There are various methods that can be used to achieve the goals of supply chain
management. Engro Foods believes in making its suppliers partners in the firms strategy
to be able to satisfy an ever-changing market place. It believes in forming long-term
partnering relationships with its suppliers rather than engaging in price wars and
procuring raw materials on a short-term basis. It endeavors to achieve its goals by
strengthening relationships within the links of the chain.
Engro Foods procures fresh milk from both informal and formal sources. The informal
sources include traditional milk collectors, small, medium, and large-scale dodhis. The
formal sources include third-party milk collectors who not only supply milk to Engro
Foods but also to various industry players including Haleeb Foods and Nestle. This
results in cutthroat competition amongst the major players to obtain adequate quantity of
milk to meet the projected level of sales.
Companies engage in different competitive practices, like price wars, especially when
demand for milk and milk products are high, usually during the summer season. During
the summer season, demand for milk exceeds the supply so companies foresee great
opportunity to increase their sales and profitability given that they are able to acquire
enough supply of milk to meet the forecasted demand. Since supply of milk is limited
contractors prefer to sell to those companies who not only offer the best price but who
also treat them as an integral part of the supply chain.
Engro Foods reinforces its strategy of forming long-term relationships with its suppliers
by winning their trust and loyalty. It does so by helping its farmers when they are going

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through a difficult time i.e. during the flush season. In the flush season farmers have an
excessive supply of milk whereas the demand for milk is low. It usually happens during
the winter season when supply of milk tends to exceed the demand. Since fresh milk is a
highly perishable item it demands prompt and efficient collection from milk producers
for use by consumers and manufacturers of milk products. Therefore are increasingly
concerned about their milk supply.
Engro Foods relieves the farmers by purchasing milk from them when no other company
is willing to do so. Since processed milk has a shelf life of three months Engro Foods
processes the raw milk and stores it in buffer tanks for later use. Another strategy
employed by the company to reduce the imbalance between demand and supply and
make effective use of this milk is to convert it in powdered form. Powder milk has a shelf
life of 2 years so they can store it for a longer time period this way. When demand for
milk tends to increase in the market they utilize the powdered milk by dissolving it and
converting it back to its liquid form.
This builds a mutual relationship of trust and loyalty between the milk farmers and Engro
Foods since this strategy is beneficial to the farmer since it creates a steady channel for
their excessive supply of milk in the flush season. This approach has proven favorable for
Engro Foods as well, since the farmers have now become loyal to their company and is
willing to supply them at the best possible price.

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Supply Chain Map of Engro Foods

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Drivers of Supply Chain at Engro Foods

Facilities
Location of Plants
The dairy processing plant is situated at Sukkur & Sahiwaal.

The office of Engro foods is situated in Sukkur.

Location of Offices
The head office of Engro Foods is located near Sea View, Karachi.

There regional head offices are in:

Karachi located in Business Avenue Shahrah e - Faisal

Lahore

Multan

Rawalpindi

Peshawar

Gujranwala

They believe that their recent successes will take them to their goal that is To be one of
the biggest players in the food business by dominating the food business.
New Processing Plant of Engro
Engro has started a Euro 3 million milk processing plant for Engro Foods in Pakistan. It
is one of the biggest plants of its kind in Pakistan and the first ever in the Sahiwal region.
The commissioning of the plant was completed in just 2 months and operation started by
end December 2007.

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The plant supplies the region around Sahiwal with 250,000 liters of low fat milk a
day, thats 1 million servings, and 10 million servings of Tarang (tea whitener).

The plant provides a processing outlet for the local farmers who rear dairy herds
of cows and, especially in the smaller farms, buffalo.

The Engro plant also contributes to the local economy by employing some 200
people throughout the factory.

Raw milk reception handles up to 40,000 lit/hr of both cow (20%) and buffalo
(80%) milk from the surrounding regions farmers cooling it from approximately
15C to 4C for storage in the two 125m3 storage tanks.

The process can pasteurize milk to 85C at the rate of 25,000 lit/hr and includes
milk clarification and skimming; standardization for milk, cream, SNF and butter
oil; butter oil dosing; a refurbished homogenizer; and degassing.

Sukkur:
The logistics usually take one day to arrive at olpers warehouses in Karachi from their
manufacturing factory at sukkur.
Sahiwaal:
This manufacturing plant covers whole of the central Punjab.
Rawalpindi:
It is a satellite warehouse with a covered area of 30000 sq ft that is on rental basis and it
costs 600,000/month. Its responsibility includes fulfilling the orders of the northern
region.

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Sourcing Decisions
Raw Material Procurement
Raw material procurement plays the most integral part in the success of any supply chain.
The reason being, that it is the elementary level activity and if there are flaws in it, the
quality of the raw materials obtained is at stake. At the same time Engro Foods also
establishes and maintain long term relationship with their suppliers. This way Engro
Foods is playing an important role to produce and market a range of high quality dairy in
a country where a huge quantity of this commodity is wasted each year due to an
inefficient farm-to-market infrastructure.
Raw Material
The various kinds of raw materials required for the milk and cream production at Engro
foods include:

Raw Milk

Packaging material

The raw milk, which is then further processed in the manufacturing plants at Sahiwal and
Sukkur is the core raw material at Engro Foods because their product portfolio
encompasses all dairy based products. The raw milk that is mainly the buffalo milk is
obtained from the various dairy farms across the country with most of these dairy farms
being located in Sindh and Punjab region.
Sourcing of Packaging Material
The packaging material used by Engro Foods is supplied from Tetra Pak Ltd. It is in the
form of rolled sheets of aseptic packaging arriving at the manufacturing plant directly
from the supplier. The aseptic packages are sterilised prior to filling of UHT (Ultra Heat

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Treated) milk, resulting in a 6-layered Tetra Pak Brick Aseptic packaging, with a 3
months shelf life.
Sources of Milk Supply
At Engro Foods the supply of raw milk,that is the way milk collection is done can be
divided into:

Direct Sources

Contactor based collection

Direct Sources
The method of milk collection through direct sources can be defined as milk collection
done through various dairy farmers residing in different villages. Villagers are
responsible for collecting milk from their respective area and deliver milk every morning
and evening to the Milk Collection Centre. The volume of milk supplied by the dairy
farmers varies immensely depending on both the size of the area covered by the dairy
farm and the availability of milk.
Milk Collection Centre
Engro Foods maintains a fully fledged Milk Collection Department to manage
milk collection through direct sources. It started off with hundred Milk Collection
Centers in March 2006 and now it has over five hundred and fifty Milk Collection
Centers operating across the country. Today, Engro Foods can be regarded as having one
of the largest milk collection networks in the country that is unmatched in size,
productivity and efficiency to meet the self-imposed commitment to quality. The vast
network comprises of village milk centers that are equipped with chillers to preserve the
quality prior to long hauls to the factories served by specially designed tankers.

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The main objective of Milk Collection Centre is to deal with small quantities of
milk provided by the village dairy farmers. On one hand, it has proved a regular source of
income for farmers through an assured and growing income resulting from the sale of
their milk, and on the other, it has enabled Engro Foods to collect better quality milk in
the quantities it needs. At the Milk Collection Centre a trained milk collection agent who
tests and records every supply for quality and fat content collects the milk and rejects the
milk that does not conform to their quality standards.
Contractor Based Collection
The contractor based milk collection involves collecting milk from approved suppliers
who are aware of the quality standards adopted by the firm. The contractors are
responsible for milk collection from a large area and can bring about ten thousand liters
of milk a day from dairy farms. This method of contractor based collection contributes
the most to the overall quantity of milk collection.
Once this milk is tested for the protein, lactose and butterfat content it is sent to the
chiller containers that protect milk from air, light and heat. This milk is then transported
to the plant. These chiller containers are aseptically cleaned before milk is stored in them.
Customers Location
The Engro Foods Company sells its products operations to distributors, fountain
wholesalers and retailers. These then distribute to retail outlets, milk bar and corner
stores, restaurants, petrol/ gas stations, entertainment venues and news agents. Its dairy
products cover almost 98% of the retail outlets all over Pakistan as Engro Food
wholesaler/distributors, retail/corner stores, departmental store and finally to the
consumer. Engro Food doesnt not distribute its products directly to their customers
rather intermediaries like distributors agents, wholesalers and retailers are usually

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involved. These dairy products are made available in all the major retail outlets of the 5
important cities they operate in.
These major retail outlets include large markets like Metro, Makro, Jalal Sons, Al-Fateh,
HKB and Hyperstar. It is also distributed to the retailers of small departmental stores like
COSCO, Best Price, Harrold Super and CSD. Some convenient stores and Gas
Marts/kiosks also carry their dairy products. These convenient stores include the utility
stores and the corner shops (khokas) located at the corner of a street or near the
residential block. The Gas/petrol Marts located in different stations like Shell, Caltex and
PSO has also connections with Engro Food distributors or wholesalers. Engro Food dairy
products are distributed among different retail outlets in important cities like Lahore,
Karachi, Islamabad, Multan and Rawalpindi as well as all over Pakistan and finally
reaches its end customers.

Inventory Handling at Engro Foods

Stock keeping units of Olpers Milk:
The company is maintaining four SKUs (stock keeping units) for Olpers in tetra packs
that are

1500ml

1000ml

500ml

250ml

Stock keeping units of Olpers Cream:

Litre (250 ml): 27 packs per shrink-wrapped tray

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Stock keeping units of Olwell:

1 Litre (1000 ml ) : 12 packs per carton

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

Engro Foods Inventory Turnover

On every 26th day of month inventory at EFL gets replenish.

Order Fulfillment Rate:

At EFL its 86-87 % for Olpers.

Lead-time of Olpers:
Lead-time with regards to:

Procurement of milk varies in between 4 days to even months.

Order placement to order fulfillment: 12-18 hrs

Safety Stock

For olpers hardly 6-7 days safety stock is kept because of its low shelf life. Time
to time forecasting is done in short intervals to meet the level of demand.

Inventory Management at Warehouses:

The company has three warehouses out of which two are located within the production
plant i.e. in Sukkur & Sahiwal 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.

Sahiwal warehouse having a capacity of 4 million liters with a daily average

dispatch of 400,000 liters & having a pallet capacity of 5000.

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They are having a cross dock warehousing system. At Mari pur and it is being
operated by the transporters

The temperature of the warehouse is maintained at 25-28 degrees in order to keep

milk in its fresh condition.

Because of its perishable nature they are using the FIFO inventory system.

There is a climate control system in there warehouses as the temperature of

Sukkur & Sahiwal shoots up to 45 degrees in summers.

They are maintaining 6-7 days safety stock.

Storage of finished goods

Now that the Engro foods products have been produced and have assumed the form of
finished goods, the next step involves the immediate transfer of the products to the
warehousing facility maintained right next to each of the production plants.

Information Sharing at Engro Foods

EFL ERP System
ECPL has its own dedicated Network of Intranet with a backbone of Internet & PTCL
Fiber lines. Through this sophisticated & widespread intranet, All Business functions of
E.F.L are integrated with each other like;

Production

Logistic

Accounts & finance

Marketing

Sales

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This Widespread intranet is also offering a platform for developing and deploying critical
business applications to support business operations and management decision making
across the Internet worked enterprise. Many customers application has been developed at
ECPL, which helps in

Order Processing

Inventory Control

Sale management & reporting

executive information system

These applications are designed to interface with, and access, existing company database
and legacy system. This software for such uses has been then installed on intranet web
Servers.
Employees at regional offices including Head office can access and run applications
using web browsers from anywhere on the network whenever needed.
CRM System used at Engro Foods
Prior to the start of 2009, Engro Foods was relying on Microsoft Excel spreadsheets to
record and manage customer information. While this was acceptable when the company
was first launched, it proved untenable when the business began expanding. But due to
business has grown more than 10 times in the past three years they have stated using
Oracle CRM system.

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The Oracle CRM system has enabled Engro Foods to dispense with spreadsheets to
record and track information. Customer data is now entered and stored in a central
database, eliminating the need for repetitive manual entry and ensuring the accuracy
and currency of information. The system also provides a single, complete customer
history, where previously transaction and personal details were dispersed over
multiple spreadsheets.

With Oracle looking after the system for them, the chances of errors are less and if
any issues do come up, they know they can be resolved quickly, as they expand the
use of the solution, they know they can count on Oracle to guide them through the
process.

Logistics & Distribution at Engro Foods:

Manufacturer
(Engro
Foods)

Distributors

Retailers

Final
Consumer

The sales of Engro foods products are divided into :

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

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Transportation Handling at EFL
The raw milk is transported from the milk collection centre to the manufacturing plants
via
insulated tankers. The insulated tankers maintain the temperature of milk around four
degrees Celsius. The reason why the tankers are insulated is to prevent the milk from
getting hot in the summer or freeze in the winter. The reflecting surface of the trucks also
provides protection against infrared rays and reduces the degree of heat on the tank. Also
the cool temperature stops the production of bacteria while the milk is transported over
long hauls to the manufacturing site. Normally the capacity of the regular tankers used
for the transportation of milk from the milk collection center to the plant varies between
10,000 and 35,000 liters.
The transportation fleet at Engro Foods is partly owned and partly contracted that is they
make use of third party logistics. Moreover, the transportation routes from milk collection
centers to the manufacturing sites at Sahiwal and Sukkur are designed in a way to avoid
overlapping of routes which otherwise would add up to the increased cost of
transportation. The raw milk is normally transported between four to six hours to avoid
loss of quality.
Distributors Transportation
On average, every alternate day Olper Milk truck arrives at each warehouse from the
Sukkur and Sahiwal factories and is distributed in the same amount to the distributors all
over Pakistan. For outbound logistics trucks are used. They have 80% dedicated fleets &
20% open trucking especially for the northern areas of Pakistan. Outbound logistics
concerned finished milk movement from manufacturing plant to the warehouse and to
distributors. There are 3 warehouses of Olpers:

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1. Sukkur
2. Sahiwal
3. Rawalpindi
Integrated Logistics
Engro Foods Pakistan makes sure that their product namely Olpers is available, no matter
where you are in Pakistan. They 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.
Logistics network is thus completely outsourced. EFL do have their own distribution
network but transportation services are all outsourced.
Inbound Logistics

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 40
in total & are located in different villages where some quality checks are conducted
to ensure the milk quality, if its up to the mark than it is stored, till it reaches the
9,000 liter capacity which is than collected by dedicated specialized vehicles to
transport it to the plant for production.

Once the vehicle reaches the plant premises, once again a quality check is repeated
before emptying the container.

Milk Collection from Various Cities of Sindh & Punjab

Lakhi.
Ahmed pur east.
Rani pur.

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Nawab shah.
Dharki.
Dhokri
Rohri and Sahiwaal.
Outbound Logistics:
On average, every alternate day Olpers Milk truck arrives at each ware house from
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:
Sukkur (Mother ware house)
Sahiwaal (Mother ware house)
Rawalpindi (Central ware house)
Capacity Of 50 feet Truck:
Size of item
1 liter
250 ml
1.5 liter
500 ml

No. Of cartons
934
1552
890
1497

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.

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Distribution Networks

Olpers focusing on every major cities of Pakistan.

The distribution is outsourced.

Olpers have 200 distributors all over Pakistan.

According to the distribution, Pakistan is divided into three geographical zones and then
in further Regional Sales Offices.

North Zone

Rawalpindi.

Peshawar

Central Zone

Lahore

Gujranwala

Multan

South Zone

Karachi

Hub

Punjgur

Nawab shah

Reverse Logistics
Shelf Life of Olpers Milk:

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71 days

Return Policy of Olpers Milk:

Olpers Milk has an efficient return policy for inventory in case of any defect.

Every carton and item has assigned a certain batch number.

If any defect has found in item or carton (in small quantity) then the batch
number of that item or carton is noted and disposes the defected item right
on there and if it is large number than it will taken back by the same
delivery truck who dispatches the orders to the distributors.

Once the large number of defected milk is back to the company, than it is
drained

They have a normal losses rate of 0.40 % due to defected Milk.

Pricing Methods/Pricing Strategies at EFL

The Engro foods Olpers are sold in retail stores, convenient stores, Departmental outlets
etc. The pricing methods/strategies are set by those the company sells to. Convenient
stores, Departmental outlets usually sell Olpers at a fixed price according pack sizes.
However, retail outlet uses pricing methods and pricing strategies when selling Engro
foods Olpers.
Pricing Methods:
Competition-based pricing is used by Engro foods. Olpers is usually priced below,
above or equal to its competitors' prices.
Discount price is offered for Olpers and often offered mark down during sale periods
and special occasions like Ramadan to generate sales and increase profits. EFL is
pursuing the competitive pricing strategy for its products.

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Competitor Analysis Nestle Milk Pak

Facilities
Nestle has two milk processing plants which are located at:
1. Sheikhupura
2. Kabirwala

Sourcing of Milk
1. Direct Sources which includes their own dairy farms
2. Indirect Sources which includes milk collection centers which are five hundred in
number.

Sourcing of Packaging Material

Packaging material is also outsourced from Tetra Pak.

Inventory Handling
Nestle follows cycle inventory system. Inventory is also stored at warehouses at
Kabirwala and Sheikhupura and one centralized warehouse at Karachi. Because of its
perishable nature, the inventory management of Nestle Milk is done on the FIFO (First in
first out) basis.

Transportation
Outbound logistics are covered through transporting huge cartons of Milk Pak from
Nestle factories in Sheikhupura and Kabir Wala to their warehouses and then the
distributors delivering the products to wholesalers and retailers respectively.

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Transportation is done mainly through trucks warehouses to distributors and pick up vans
from there on to retailers.

Information Handling
Purchasing task is greatly facilitated by standard IS/IT infrastructure, common business
applications and best practices, Visibility of standardized, real-time purchasing
data/information permit aggregated spend category analysis. This helps them identify
opportunities and define more effective purchasing strategies with the objective of
achieving lower total cost.

Pricing
Competitive based pricing is used mostly in order to compete with its competitors.

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Recommendations
1. To build a regional ware house in Karachi that fulfills there supply side gap & to
reduce upward logistics cost.
2. EFL is not having its own dairy farms; it largely collects loose milk from farmers
& gawalas through its 40 milk collection centers, which sometimes is of low
quality and impure because they add vegetable oil to milk to get higher prices.
EFL needs to have their own Dairy Farm so that they can meet the increasing
demand as their market share is growing by 12% annually & to have quality milk
procurement as well.
3. EFL is dependent upon Tetra Pak for the packaging of its entire dairy products.
Tetra Pak is the only option available to Olpers for packaging because it is having
monopoly in the packaging sector in Pakistan. Due to this reason, Tetra Pak can
charge them higher and it could increase the production costs so they need to
invest their funds for having their own packaging system.
4. They should expand their brand portfolio by investing in yogurt market as their
competitors are enjoying it just because of low competition their otherwise Milk
pack has its brand name in drinking milk market only. So its an opportunity for
them to grab & enjoy the flavor.
5. Supply chain should be more responsive in the northern region keeping in view
the shelf life and setting up more distribution points in the remote parts of the
northern region and to reduce the supply side gap and to resolve the issue of
expired products.