Final Ms Report

8/6/2019 Final Ms Report

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Management Science

Report on Transportation Model of Engro Foods, Olpers Milk

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Management Sciences

Transportation ModelOlpers Milk

This Report is a collective work of

M. Sufiyan Shabbir Amal Hammadi (14616)

Asma SalamM. Tariq Raheem

Syed Tanveer Hussain

Submitted to:Mr. Tufail Ahmed Sheikh

Dated: May 07, 2011

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Mr. Tufail Ahmed Sheikh

Professor, Management Sciences,

Iqra University, Main Campus,

Karachi

Sir,

As part of our Management Science course, me and my group members

M. Sufiyan Shabbir, Amal Hammadi, Asma Salam, Tariq Raheem have made this report

complying with all instructions given to us with hard work and extreme dedication. As

instructed, we have studied the Transportation model of Olpers Milk to identify the

suitable transportation model, which sets the benchmark for all milk producers, and this

report focuses on all aspects of it completely and very thoroughly, as you will find out as

you progress further.

Hoping our dedicated work is appreciated.

Thanking you,

Syed Tanveer Hussain - 16074

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Acknowledgements

Firstly we would thank Allah for giving us the opportunity and the resources to be able todo something productive with our lives. Without His blessings we would not have been

able to come as far as we have.

Then our sincere thanks to Mr. Tufail Shiekh for helping us throughout this report. His

guidelines have been very useful for us in preparing this report. He helped us find new

ways of being innovative and creative.

This report would not have been possible without this cooperation and continuous

direction. We would also like to thank Mr. Shoaib Qureshi, Supply chain Training

Manager at ENGRO Foods who spare sometime for us so that we could conduct the

interviews with him. It is true that his responses in the interview have been very helpful.

Last but not the least we would like to thank our families for their incessant support and

approval.

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Engro Foods History

Engro Foods (Pvt.) Limited (EFL) has been established in 2005 as part of adiversification process at the Engro Group. The plant located at Sukkur on 23 acre land,

has the raw milk reception capability of 300,000 liters per day and UHT milk capacity of

200,000 liters per day. The plant has been established at a cost of Rs. 1 billion, which

provides direct employment to 750 people.

Engro Foods has entered the Food business through milk processing and sale with the

companys vision to pursue growth opportunities based on country fundamentals and

own strength. It also positions the company to leverage its corporate social

responsibility initiatives and work closely with rural communities to promote integratedfarming and livestock development. This effort is expected to play a pivotal role in

poverty alleviation and improving livelihoods of the poor in the milk collection areas.

Vision

"Our vision is to become a fast expanding mega Foods Company. To achieve our vision,

the company will initially focus on dairy by investing a substantial amount in plant, milk

collection capability and marketing. We are making concrete efforts to expand in and

beyond Pakistan; through strategic international alliances, to eventually become global."

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Core Values

1. Leadership

2. Innovation

3. Diversity and International focus4. Quality and continuous Improvement

5. Individual growth and development

6.Enthusiastic pursuit of profit

7. Ethics and integrity

8. Safeties, Health and Environment

Milking the Market:

In the recent few months, it seemed that everywhere one looked, there was either a

billboard, a TVC or a radio jingle promoting a brand of milk whether it was Haleeb,

Nurpur, Pakola, Nirala, or, recently, Olpers. But perhaps this isnt surprising after all.

Pakistan, according to recent statistics, is the third largest milk producing country in the

world (32 billion liters per year from 50

million animals, with urban consumption at nearly seven billion liters). However, despite

this high ranking, packaged milk, even according to the most optimistic estimates, has amere four percent penetration. No wonder then that processed milk companies (PLMCs)

have been rather aggressive in their advertising and marketing endeavors in an

attempt to increase the penetration.

Industry experts believe that the current economic turnaround has contributed to the

growth in the PLM sector, resulting in increased consumer purchasing power. Another

reason for growth is a growing awareness pertaining to health and hygiene; this factor,

coupled with increasing dissatisfaction with loose milk, has also contributed to growth in

this sector.

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However, in order to make a noticeable increase in penetration, many challenges and

Perceptions still have to be overcome by the PLMCs. The least important one, perhaps, is

tradition. Milk, even amongst the most urbanized consumers, is synonymous with the

early arrival of the doodhwala (milkman) at their home on his trusty bicycle (now

replaced by a motorbike), reinforcing the impression that the milk is fresh, natural andstraight from the cow. And it is this perception that only loose milk is fresh, and therefore

healthy and preservative-free, that has to be over come, if increased penetration is to

occur at a substantial rate.

Another hurdle in converting loose milk users to processed liquid milk is price. In

Punjab, because most dairy farms are based there, loose milk is cheap at approximately

Rs 24 per liter, while processed milk is priced at approximately Rs 38 per liter. In Sindh,

however, the price differential between loose (Rs 28) and processed milk (Rs 38) is onlyRs 10. Though hurdles such as consumer perceptions and price differentials have still to

be overcome, the processed liquid milk market looks set to grow. There is a whole world

out there to be converted, and it is a huge opportunity for PLMCs. If the economy

remains stable for the next five years, penetration will increase at an amazing rate.

Olpers Milk

Launched on March 20, 2006, Olpers milk is EFLs standardized and homogenized pure

UHT (Ultra heat treated) milk with 3.5 % fat and 8.9 % solid non-fats. It is EFLs

premier brand, and the choice of quality-conscious consumers who only go for the best. It

is available in easy-to-open, 6-layered Tetra Pak Brick Aseptic red packaging and comes

with a 3 months shelf life.

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Shipping Units:

1Litre (1000ml): 12 packs per carton

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

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

PRICE (milk)

SUPPLY CHAIN MANAGEMENT AT ENGRO FOODS

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..

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Size (ml)

Olper s

Nestle Milkpak Haleeb

Haleeb Dairy Queen

1000 38 38 38 32

500 22 22 22 18

250 12 12 12 10


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Objective of Supply Chain Management at Engro Foods

As per the Supply Chain Development manager at Engro Foods Mr. Umair Nagi, the primary objective of supply chain management at Engro Foods is

Fulfilling our customers demands in the optimum way

And as he himself pointed this out, it can be stated that optimization is the key word.Thus costreduction is definitely on top of the priority list for Engro but fulfillingcustomers demands isjust as important. Thus the goal of these activities is to offer thecustomer a level of value thatexceeds 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 theorganization, all of which have been stated above. So when narrowing down to thestrategy, Mr. Shoaib said that it is:

A give-away between the service factor and low cost

Olpers Milk Placement & Distribution

According to Mr. Abdullah, Planning and Distribution Manager EFL, In order to

succeed, you should ALWAYS capitalize on your STRENGHTS and NEVER on your

COMPETITORS WEAKNESS!

Engro Foods did exactly that. They used their decades of PR with farmers and used it to

provide world-class supply-chain management for delivering the ultimate quality milk in

Pakistan. Having kicked off simultaneously in 20 cities across Pakistan, the launch has

been ambitious and currently Olpers is available in 80 cities across Pakistan. It reflects

the companys intention to become a big player in the industry, both on a national and

international level.

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Engro Foods Limited has its own dales and distribution network. EFL has divided

Pakistan into five regions for milk distribution namely: Karachi, Lahore, Islamabad,

Peshawar and Multan. Due to an appealing color scheme, which stands out in the clutter

and thanks to the EFLs strong relationship building and special discounts to retail

outlets, Olpers has gained a proper shelf placement in the presence of competitors like Nestle and Haleeb.

Milk Processing Plant: (Sources)

Sukkhar S1Sahiwal S2

DestinationsEngro Foods Ltd has divided Pakistan into five regions for milk distribution namely:

Karachi D1Lahore D2Islamabad D3Peshawar D4Multan. D5

Warehouses:The two main Warehouses:

Karachi- Pot QasimLahore- Gulberg

Other Warehouses includes: Which are use to collect expired milk and to transport theMilk for UHT treatment. Which includes third party logistics.

o Landhio Muridkayo

Joher Towno MCHSo Faisal Towno Khayaban-e-Amino Muslim Towno Khiyaban-e-Rahato Wihario Nazimabad

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o Rawalpindi

Warehouses

Warehouse is under the supply chain department. All the products after packing are

transferred to the warehouse from they are loaded on the vehicles and transported to the

market. It purposes is to generate.

1.Daily stock report2. Release report3. Order sheet4. Loading slip.5. Dispatch report

Supply and Distribution

This department ensures timely and effective distribution of the products to different

shops and stores spread all across Pakistan. From transportation management to obtaining

route permits and approvals, is done by this department.

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Graphical Method

(S) Source 1: (Sukkar) 300,000-liters/day capabilities(S) Source 2: (Sahiwal) 350,000-liters/day capabilities

Are in Million/Liters

Are in Rs. Million/Liters

Are in Million/LitersBreakup (Example)

Sukkar to Port Qasim: 60 feet container- Rs 0.1 million liter, transportation cost 18 per liter 0.1*18=1.8 million

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Sahiwal(2)

Sukkar(1)

350,000-liters/daycapability

300,000-liters/daycapability

(S)

(S)

PortQasim-Khi

(3)

Gulberg-

Lhr (4)0.35 MLiters

0.3 MLiters

Karachi(5)

Lahore(6)

Islamabad

(7)

Peshawar (8)

Multan.

(9)

1.8

3

1.5

3.2

0.2

0.17

0.095

1.8

3

3.1

0. 2

0 . 0

5

0 . 0

3 1.5

0. 1 0 .1

2 0.121.9

2.3

1.5

0.065

0 .0 6 5

0 .0 6 5

QUANTITY

COST

DEMAND


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Sukkar to Gulberg: 60 feet container- Rs 0.1 million liter transportation cost 30 per liter 0.1*25=3 million

Shipping Units:

1Litre (1000ml): 12 packs per cartonLitre (500 ml): 12 packs per shrink-wrapped trayLitre (250 ml): 27 packs per shrink-wrapped tray

DATA :

2 sources2 warehouses5 destinations

Over all 2 sources 7 destinations so

7x2 =14 variables7+2 = 9 constraints

Objective function:

1.8x13 +3x14+3.2x23+1.5x24+1.8x35+3x36+3.1x39+1.5x46+1.9x47+2.3x48+1.5x49

Supply (Sources)

x13+x14=0.3

x23+x24= 0.35

Constraints of Destination

Warehouse

x13+x23 = x35+x36+x39

x14+x24 = x46+x47+x48+x49

Demand

x35 = 0.2x36 + x46 = 0.17

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x47 = 0.12x48 = 0.065x39 + x49 = 0.095

Interpretations of the solution

Optimized cost is 2.32 million and the units transferred from Sukkar to Karachi is 0.2millions and units transferred from Sahiwal to Lahore is 0.1 million which equals theactual demand.

The function will be1.8*0.2+3*0.1+3.2*0+1.5*0.35+1.8*0.2+3*0+3.1*0+1.5*0.17+1.9*0.12+2.3*0.065+1.5*0.095=2.32

Sukkar plant to Port Qasim Karachi 0.2 million liters

Sukkar plant to Gulberg Lahore 0.1 million liters

Sahiwal to Gulberg Lahore is 0.35 million liters

Karachi Port Qasim Warehouse to various retailers of Karachi is 0.2 million liters

Gulberg Lahore Warehouse to various retailers of Lahore is 0.17 million liters

Gulberg Lahore Warehouse to Islamabad is 0.12 million liters

Gulberg Lahore Warehouse to Peshawar is 0.065 million liters

Gulberg Lahore Warehouse to Multan is 0.095 liters

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APPENDIX(QM SOLUTION)

Linear Programming Result

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Solution List

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Ranging

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Dual

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Documents

Final Ms Report