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Anum QasimMuhammad Abdul RehmanSyeda Rida RizviTalha Humayun MasudZahra Daha

Supply Chain ManagementFinal ProjectApril 3, 2014Mr. Salman Ehsan

Table of ContentsIntroduction4Vision Statement4Mission Statement5Engro Foods Supply Chain Management Process6Production Process7Chilling and Storage7Milk Processing7Pasteurization7UHT Treatment8Packaging8Push or Pull strategy8Objective of Supply Chain Management at Engro Foods9Supply Chain Strategy at Engro Foods9Managing the Supply Chain10Supplier-Relationship Management (SRM) at Engro Foods10Drivers of Supply Chain at Engro Foods13Facilities13Location of Plants13Location of Offices13New Processing Plant of Engro13Sourcing Decisions14Raw Material Procurement14Raw Material15Sourcing of Packaging Material15Sources of Milk Supply15Direct Sources16Milk Collection Centre16Contractor Based Collection17Customers Location17Inventory Handling at Engro Foods18Inventory Management at Warehouses:19Information Sharing at Engro Foods20CRM System used at Engro Foods21Logistics & Distribution at Engro Foods:22Transportation Handling at EFL22Distributors Transportation23Competitor Analysis Nestle Milk Pak28Facilities28Sourcing of Milk28Sourcing of Packaging Material28Inventory Handling28Transportation28Information Handling29Pricing29Recommendations30

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 StatementAims 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.

Mission StatementBuild 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 ProcessDairy is one of the growing segment of livestock sub-sector and important component ofPakistans 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 StorageThe 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 ProcessingPasteurizationNext 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, 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 TreatmentThe 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.PackagingFollowing 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-sealedPush or Pull strategyEngro Foods follows push strategy as they make product, which are standardized and then push them in to market.

Objective of Supply Chain Management at Engro FoodsThe primary objective of supply chain management at Engro Foods is Fulfilling customers demands in the optimum wayThus 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 FoodsThe 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 isA give-away between the service factor and low costSo 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.

Managing the Supply ChainSupply 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 FoodsThere 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 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.

Supply Chain Map of Engro Foods

Drivers of Supply Chain at Engro FoodsFacilitiesLocation 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 GujranwalaThey 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 EngroEngro 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. 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 providesa 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 125m3storage 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.Sourcing DecisionsRaw Material ProcurementRaw 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 MaterialThe various kinds of raw materials required for the milk and cream production at Engro foods include: Raw Milk Packaging materialThe 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 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 CentreEngro 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. 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 LocationThe 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 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 FoodsStock keeping units of Olpers Milk:The company is maintaining four SKUs (stock keeping units) for Olpers in tetra packs that are 1500ml 1000ml 500ml 250mlStock keeping units of Olpers Cream: Litre (250 ml): 27 packs per shrink-wrapped tray

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. 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 goodsNow 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 FoodsEFL ERP SystemECPL 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

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 FoodsPrior 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.

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:

The sales of Engro foods products are divided into : 1. Primary Sales2. Secondary SalesPrimary 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. Transportation Handling at EFLThe raw milk is transported from the milk collection centre to the manufacturing plants viainsulated 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 TransportationOn 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:1. Sukkur 2. Sahiwal 3. Rawalpindi Integrated LogisticsEngro 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. 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 itemNo. Of cartons

1 liter934

250 ml1552

1.5 liter890

500 ml1497

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. 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 shahReverse Logistics Shelf Life of Olpers Milk: 71 daysReturn 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 EFLThe 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.

Competitor Analysis Nestle Milk PakFacilitiesNestle has two milk processing plants which are located at:1. Sheikhupura2. KabirwalaSourcing of Milk1. Direct Sources which includes their own dairy farms2. Indirect Sources which includes milk collection centers which are five hundred in number.Sourcing of Packaging MaterialPackaging material is also outsourced from Tetra Pak.Inventory HandlingNestle 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.TransportationOutbound 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. Transportation is done mainly through trucks warehouses to distributors and pick up vans from there on to retailers. Information HandlingPurchasing 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.PricingCompetitive based pricing is used mostly in order to compete with its competitors.

Recommendations1. 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.