Pakistan Electron Ltd

8/6/2019 Pakistan Electron Ltd

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PAKISTAN ELECTRON LTD (PEL)

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PAKISTAN ELECTRON LIMITED was established in 1956 with the technical

collaboration of Germany. It is the first composite electrical equipment

manufacturing unit of Pakistan.

In October 1978, the company was taken over by the SAIGOL GROUP,

which is one of the leading industrial groups in Pakistan, having

diversified business activities in the field of:

Textiles

Engineering

Banking and Finance

Fuel and Energy

Trading

Automobiles

On engineering side PEL Group is the flag carrier of the Saigol group.

Here we see in detail about Pakistan electron limited. And will see how

they have organized themselves in a most appropriate business unit in

Pakistan.

The PEL Group consists of following companies



1. PEL (holding company)

2. PEL Appliances ltd.

3. PEL Daewoo electronics ltd.

The products manufactured by PEL always been high standard and the

name PEL is synonymous with QUALITY all over Pakistan.

Since its Inception, the company has been acting as institution working

for advancement and development of engineering know how in Pakistan

.The Company hundreds has produced hundreds of engineer·s skilled

workers and technicians through its apprenticeship schemes & training

programmers.

Keeping Saigol·s traditions since its takeover by the group, PEL has

continuously been adding new products to its range. As a result, the PEL

group has registered a significant increase in its sales volume, during the

last ten years.

THE CHRONOLOGY OF PRODUCT:



Year Product Introduction Technical Collaboration

1956 Distribution Transformers, SwitchGears, Single & Three PhaseInduction Motors

AEG-West Germany

1978 PEL was taken over by SAIGOLGROUP

1981 PEL Window Type Air conditioners General Corporation-Japan

1987 PEL Refrigerators SILTAL SPA-Italy

1987 PEL Deep Freezers NECCHI COMPRESSORIItaly



1993 PEL NECCHI

Fractional Horse PowerCompressors

A.B.B., POWER T & DCompany, USA

1994 PEL Single Phase Watt HourMeters

Daewoo Electronics,Korea

1995 PELDAEWOO Color Television Carrier Corporation,USA

1997 Carrier Window and Split

Type Air conditioners

POWER DIVISION

APPLIANCE DIVISION

POWER DIVISION:-

POWER DISTRIBUTION SYSTEM, ELECTRIC MOTORS, ENERGYMETERS:

PEL·s Power Division manufactures Transformers, Switch Gears, Electric

Motors, Energy Meters, Kiosks, Compact Stations, Shunt Capacitor Banks,

etc. of highest quality and of latest international standards. PEL is one of

the major electrical equipment suppliers to Water and Power

Development Authority (WAPDA) and Karachi Electrical Supply

Corporation (KESC), which are the largest Power companies in Pakistan.

PEL equipment has been used in numerous power projects of National

importance within in Pakistan over the years and PEL has had the

privilege of getting its equipment approved and certified from well-

reputed international consultants such as:



Preece, Car dew and Rider, England.

Harza Engineering Company, USA.

Sam Progetti, Italy.

Societe Dumezm France.

Miner & Miner International Inc. USA.

Ensa, France.

APPLIANCES DIVISION: The Appliances Division was established in 1980-81, when the company

introduced its first consumer product i.e. Window type air-conditioned in

Pakistan. This was followed by Refrigerators and Deep Freezers in the

year 1986-87, Fractional Horse Power Compressors in 1993 and Carrier

Window and Split Air conditioners in 1997.

TYPE OF PRODUCT:

Window-Type Air conditioners ´PELµ

Window-Type Air conditioners ´Carrierµ

Split-Type Air conditioners ´Carrier

µRefrigerators (Direct Cool)

Deep freezers

Color Televisions

compressors (Fractional Horse Power)



CORPOR ATE STR ATEGY:

Mission STATEMENT:

³TO produce quality product at a affordable prices for and to ensure the profitability

of the company.´

objectives:

Ú To increase sales

Ú To increase profitability

Ú Introduction of new designs and foreign collaboration(jointventures)

Ú Environmental scanning

PEL has ensured the environmental scanning through researchers regarding attributes and

future needs of customer .they take assistance of Aftab Associates for this purpose. They

also take assistance from their sales force and the dealers of PEL the different areas of

Pakistan. They find out the latest opportunities which are prevailing in the market .The

executives of the company also keep a close look on the changes in the environment.

Core Competencies:-

Core competencies are the organizational unique resources and strengthsthat management considers while formulating strategy.

In pel they have different core competencies which the have identified

after a long business activities and due to comparison with the

competitors. In air conditioner they have an advantage over its competitors

due to its performance and the quality. They consider it as their major

advantage over their competitors. Pel is the first local manufacturer of air



condition er in pak istan . It has joint ventur e with carri er in manufacturing

air condition ers .

Workforce:-

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

Facilities:-

PEL has well located facilities for offices, stores and

plants. In their offices air conditioners are provided to all staffs for their

working. They have well groomed warehouses and proper network of

distribution in the whole Pakistan.

They have also given the facility of mess to the employees

during the working time for lunch.

Systems and Technology:

PEL has the state of the art technology. They have made

joint ventures with the foreign companies like:

NECCHI COPRESSOR I of Italy to assemble compressors for refrigerator

and deep freezers,

HITACHI CORPORATION of Japan for the production of vacuum circuit

breaker for its switchgear,



D AEWOO ELECTRONICS COMPANY KOREA for the

manufacture of color television sets.

In this way they are trying to provide the best possible technology

to the customers towards the implementations of TQM.

Market Analysis:-

It divides firm·s customers into market segments and then

identifies need of each market segment.

In PEL they conduct market analysis through different research agenciese.g. Aftab Associates. In addition to research agencies they also conduct

research through sales force and through their dealers which are in direct

contact with the customers. Through after sale service they come to

know about the customer·s latest trends and the customer·s existing

choices which are passed to planning department and while planning they

keep in view their customers· choices and attitudes in designing the plans

for the next year.

Market Segmentation:-

In PEL for different products they have different market

segments. E.g. for refrigerator they have segment from lower class to

upper upper-class and for air conditioner they have segmented from

middle upper class to upper class while for split air conditioner they have

made segment for only upper class. While in their target market they

target only to the household wives because the family has to make the



decision of these products and they influence their choice while making

purchases of these products.

Competitive Priorities

A firm gains an advantage with its operating system by

outperforming competitors in one or more of these capabilities. These

are eight possible competitive priorities for operations which fall into

four groups.

á Cost

á Quality

á Time

á Flexibility

A firm may organize itself into one or more operating

systems each designed to support a particular set of competitive

priorities for a particular set of products.

áCost:

Lowering prices can increase demand for products but it

also reduces profit margin if the product cannot be produced at lower

cost. To compete on cost, operations manager must address labor,

material, scrap, overheads and other costs to design a system that lowers

the cost per unit of the product. Often lowering costs requires additional

investment in automated facilities and equipment.



In off season PEL lowers the cost of refrigerator to

improve the profit margin for the year and to consume the quantity

produced which in the stores before the onset of next season.

Quality:-

PEL has maintained the consistent quality as per ensured

in ISO90002.in addition to the consistent quality for the standardized

products PEL also produces the customized products for individual

customers but they are of the view that the ordered quantity must ensure

their profitability. It means that the ordered quantity must be largeenough to recover their cost and their profit margin. Currently they are

producing deep freezers for WALLS.

Time:-

In PEL the products are made available to the dealers on

time normally throughout the Pakistan. The orders are fulfilled at the

required time. The new products features are added each year as a result

of direct contact with the customers and new changes in the design and

color are made in their annual production plan.

Flexibility:-

In PEL there is volume flexibility up to their maximum

capacity. Customization is there in PEL and they are currently producing

only deep freezer for WALLS.

CAPACITY



In PEL appliances division there is capacity of 150,000

refrigerators per year. This year they are planning to increase their

capacity from 150,000 to 200,000 refrigerators for the next year at same

location. They are increasing the capacity of the existing plant.

Utilization:

Currently PEL appliance division is working at 75% utilization rate. Its

average out put rate is 350refrigerators per day and its maximum daily

capacity is 450 refrigerators per day. So,

Utilization = avg. output rate / maximum capacity

=350 / 450 x 100 = 75%

In PEL when the production department issues his requirement for the

production of the next period then the planning department has to see

the within the constraints that what amount of quantity can be

purchased. The major emphasis is given on the bottleneck material to be

procured first so that operations are not ceased due to their deficiency.

E.g. compressor is the one the bottleneck for the appliance division in

Lahore factory.

LOCATION



PEL was established in 1956 on its presentlocation. At the time of its location here were no proper methods were

followed before installation how ever following factors were givenimportance while locating the facility:

" At that time this area was very favorable for cheap and productive

labor

" At that time this area was tax-free because the govt. wanted to

encourage industries in this area

" Also at that time there were cheaper construction costs

"

SUPPLY CHAIN MANAGEMENT

Being outside from the city.

Supply chain management has strategic implications because the supply

system can be used to achieve important competitive priorities .It also

involves the coordination of key functions in the logistics.

Material Management:- Material management is concerned with decisions about

purchasing materials and services, inventories, production levels staffing



patterns, schedules and distribution. Decisions in these areas affect the

entire organization either directly or indirectly.

Organizational Structure:- PEL has segmented structure in which there are different

departments for purchasing, production control and distribution in which

all the heads report to a third person namely the general manager of

company and the GM reports to the managing director of the company.

Importance of material management:-

Material management is important because whole

organization depends on the material and secondly it is short range so it

desires more of the attention of the management of PEL

1. central role of PEL:-

As the PEL is a manufacturing organization so they need

the raw material for the purpose of the production from the country as

well as foreign countries. This material takes round about 70%of the

resources of the organization.

2 . Import of inventory on profitability:-

The other reason is the impact of it on the profitability of

the organization. As you keep more inventories you will be leading much

more cost of holding.

Functions of material management:-



Planning and procurement

The planning department get date and plans from sales

and production department make plan for each item and they give it to

vendor.

They coordinate planning with sales and production plan is made annually

which is further divided into quarterly and monthly.

This department also keep up dating cost material and makes budget for

the department. At this plan purchase order is made. This PO is supplied

to each vendor with term and conditions.

The following charts are made maintained and made,

1- When material arrives it is taken to material store.

2- A local purchase Chelan is made.

3- GRN i.e. good receipt note is issued when the material is transferred

to the store.

4- 3:1 rejection level is beard.

Purchasing:-

Purchasing is the acquisition process which includes the

activities such as which supplier to be selected, how the negotiations are

made and whether to buy locally or from the foreign.

1. R ecognizing a need:-



By need we mean the order for the purchase of the items

for the production is given by the production department in the PEL.

2. SELECTION

OF

SUPPLIER

:-

The supplier is selected by the PEL on the following things

or points.

Financial background.

Machine capacity.

Lead-time.

Cost.

The supplier is meting these conditions then they will selected only twosuppliers are selected for each item.

3. PLACING OF A N ORDER :-

The order after selecting the vendor is made. The order is given by

providing the desired specifications of the organization.

4. TR ACK ING OF A N ORDER :-

They to see that whether it is time to reorder or not that whetherthe order is coming or meat use daily meeting. If not coming they changethe vendor.

SUPPLIER SELECTION

The supplier selection is very important for the company, because ifthey face any difficulty, they face difficulties. Senior processing officerand senior buying officer. They are responsible for the quality, lead-timeand price. Than they also test the material that whether it is of samequality which they company desires then these information collected by



them are given to the assessment team they assess the capabilities thatwhether it suit to them or not.

Then in the last step for the supplier selection they give order of the 1000to 1200 units as a trial beat. After this assessment they will select thesupplier.

SUPPLIER R ELATIONS:-

The type of relation maintained with supplier can effect

the quality, timeliness and price of the product. PEL have the

cooperative relations with the supplier. Because they have to get huge

amount of the material from them. The suppliers also assist them to how

to use the material.

CONTR ACTING:-

Purchasing must decide how to contract for each of the

thousand of the items that most firms buy. The PEL is following the

strategy of buying the material as is the lot and with the prices whatever

the option giving the fewer prices they set it. In the low price they see

that whether it meets the standard for the production or not.

In PEL raw material is purchased from three main sources, i.e.,

Imported material

Local material

Imported material:-

PEL import their raw material from Japan ,Italy ,Brazil,

Taiwan, America etc. from the abroad shipment reach the Karachi airport



in 22 to 25 days and it takes about a week to transport the goods from

Karachi to Lahore through air. The goods are bonded when they arrive

from abroad.

Only material which is required for the next month that is ex-bonded

from the govt. warehouse? The govt. charges 1% as service charges for

bonding the goods. For the foreign purchases the company has to the LC

for the purpose of payment. They have to open LC one month before the

supplier delivers the goods to the shipment and the shipments take about

one month to reach to Karachi.

Local material:-

1. They purchase the local material on net cash. It includes the patrol,

surf and the things like that.

2. Vendor zed parts

These are the raw materials, which are used for the

supporting material. These include raw materials like hinge, lock. Freezer

ceiling box, thermostat box, packing material etc.

3. Local PEL

In the present factory of PEL the raw material is produced

for the PAL i.e. Pak Electron appliance limited. This material is used only

for the PAL.

Before issuing the purchase order the material is checked in theline, store and the material lying in the bond. After estimating that



quantity PO is issued. After inspecting the material in these three placesbefore issuing the order short material list is prepared and accordinglythe mix of purchasing quantity is prepared by the planning departmentfor the purpose of procurement of material.

Distribution:- Distribution is the management of the flow of the

materials from the management to the customer and from warehouse to

materials, invoicing the storage and placement of the products.

PLACEME NT OF THE INVE NTORY:-

PEL is following the linkage for the purpose of the

placement of their inventory. Because it is not the customer product.

They kept it in the company. Because this company is not maintaining an

inventory for finished products. In it management of the PEL provides the

daily report what amount is needed audit.

TR A NSPOR TATION MODE:-

PEL is mostly using the road as the transportation mode.

They if are supplying their products inter city then the trucks are used.

But if they are sending it to outstation then they use large trucks to send

them at the price. The reason for their selection of this mode is that they

have to send it to the place where rail not goes or they have to supply to

the destination of the user or customer.

FORECASTING



In PEL forecasting is done annually and the plans are made for the whole

year while there is flexibility in the annual plan and due to existing

trends changes are made monthly and quarterly in the annual plan.

Pattern of demand:-

In PEL the pattern of demand is continuous generally and

the production is carried out during the whole year. From March to

August their production is on the peak while after august there is off

season. However in that season the production gets slow a bit than the

season. For the Air-conditioner there is change in demand during the off

season. So for the air conditioner the demand is seasonal while for

refrigerator the demand is almost continuous.

FORCASTING METHODS

Judgement Methods:-

In PEL the forecast is done through the demand prescribed

by the sales force and the dealers.

While the meeting of the executives is held quarterly for

purpose of discussing the changing demands and forecasting for the next

period.



Marketing research is also conducted for the purpose of forecasting

demands. This task of market research is given to the specialized and

professional company like Aftab Associates.

Casual Methods:-

Obviously the economic conditions and the competitors

actions are also considered while forecasting is done by the executives in

their monthly and quarterly meetings. While reacting to the change in the

demand pattern they need three months before forecasting to react to

that change due to the constraints of the availability of the raw

materials.

Time Series Method :-

Simple moving average method

In PEL simple moving average is used to forecast for the

next period. Usually the data of the past five years is used to estimate

the next year demand and also the trend is incorporated in the forecast.

INVENTORY MANAGEMENT

Inventory is a stock of anything held to meet the future demand.



The PEL is being influenced by the fast production so the

inventory will be kept more by them, but if the production of the

company is slow then it will have a little inventory.

ECONOMIC ORDERING QUANTITY:-

They are utilizing the E.O.Q. for the purpose of the

ordering the material. Because it set off the effect of the futures that

influence them for the high and low inventories. The order is make after

keeping into mind the maximum and minimum required with is in days for

this organization. They keep maximum 15 days and they take minimum 10

days.

For the purpose of making he order they have selected

the two vendors. If one is not meeting the needs then they can order to

the other. Making the inventories coming under the PEL are the raw

material and components used for the purpose of operating.

They are using the computerized methods for the purpose of

measurement of the inventory. They utilize the monitoring

charts as all for the purpose of looking that material has arrived

and whose maintaining. This activity is performed at every

month.

REORDER CALCULATION:-

As the organization is preparing the quarterly charts for

monitoring. So they have a clear eye on it. Then if it is showing that the



order level is going below the required level than they will make the

order to the supplier so this is the way to reorder.

INVENT ORY CONT ROL SYST EM:-

The EOQ formula can give us amount to b ordered to the

supplier. Then next step is that when to reorder for the purpose of the

production if the inventory goes below the limit.

METHOD FOLLOWED BY PEL:-

PEL is using the periodic review system. They have makethe review charts for the quarters and they basically take into this and

after three months they see that whether the inventory is with in the

limits or not.

TYPE OF INVENTORY

Cycle INVENT ORY:-

The cycle inventory is ordered for the 30 days.

Safety stock:-

The safety stock is maintained for the seven days on the monthly

production plan.

Anticipation stock:-

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



Aggregate plan is a statement of a company·s production rates, workforce

levels and inventory holdings based on estimates of customer·s

requirements and capacity limitations. This statement is time-phased

meaning that the plan is projected for several time periods (such as

months) into future.

Production Plan:-

In PEL the production is made for one year. Sales

department estimates the forecast for the next period .These forecasts

are handed over to the planning department who makes the production

plan accordingly keeping in view the estimates of sales department. Then

the production department makes the production schedules and then this

demand goes to the purchasing department who is held responsible for

making the annual purchases on the schedules suggested by the planning

department.

In PEL specified inspectors are held responsible for the quality during the

production process. They inspect the work in process products and every

inspector prepares individual report and signs at the end of report.

In case of raw materials the inspectors check the

materials on the basis of sampling and if the samples are considered not

satisfactory up to standard then the vendor has to ask replace the itemswhich are defective. When material is sent to the store then the

storekeeper checks its quality and then the good receipt note is issued

which ensures that the material is according to the standard and

according to the prescribed quality.



When the goods are produced then they are sent to the

quality department where the inspectors check the items individually and

after checking their performance every inspector signs on the back of the

refrigerator. When the sales man goes to the customer if the products

gets out of order (within the specified period of the after sales

service),then sign of individual is seen on the back and in this way it is

easy to find who has made mistake during quality inspection. Due to

these measures taken by the management there is very little chance that

the items would be defective.

QUALITY POLICY:-

Pak Electron Limited is dedicated to the continuous

improvement of all products and services through total involvement of all

employees. We are committed to the development and strengthening of

partnerships with our external and internal customers and suppliers. We

will continuously strive to provide innovative and higher quality products

and services to achieve total customer satisfaction by understanding their

requirement and anticipating their future expectations or needs.

IN PURSUING THIS POLICY WE WILL :-

Have annual targets for quality improvements in all areas

Create a culture of customer focus striving to become the lowestcost producer through agreed annual cost reduction programmed.



Value people by understanding and drawing upon their strengthsi.e. abilities and knowledge and make efforts for their training anddevelopment.

Management.

ISO stands for international organizations for standardizations.

ISO 9000 is a set of standards governing of a quality

program. Companies become certified by proving to a qualified external

examiner that they have compiled with all the requirements .Once

certified, companies have been certified and to what level. Compliance

with ISO 9000 standards says nothing about the actual quality of a

product. Rather, it indicates to customers that companies can provide

documentation to support whatever claims they make about quality.

� ISO 9000

� ISO9001

� ISO 9002

� ISO9003

� ISO 9003

� ISO 9004

Actually ISO 9000 is an overview document.

PEL is ISO 9002 certified and they have made a teamwhich not only trains their employs but also their vendors·employs.In thisway the chances of rejecting the suppliers are reduced and the supplier·scost does not go up due to the rejection of material.

R easons For acquiring ISO 9000:-



� To achieve customer·s satisfaction

� Competing against foreign competitor in the local market.

� Adds a positive image to the company and improve its goodwill.

� It is perceived commitment to quality

� Because the slogan of the PEL is to ´the quality conscious

peopleµ so it ensures their commitment towards improved

quality for the customers.

In case of raw materials the inspectors check the materials on the basis

of sampling and if the samples are considered not satisfactory up to

standard then the vendor has to ask replace the items which are

defective. When material is sent to the store then the storekeeper checks

its quality and then the good receipt note is issued which ensures that the

material is according to the standard and according to the prescribed

quality.

When the goods are produced then they are sent to the

quality department where the inspectors check the items individually and

after checking their performance every inspector signs on the back of the

refrigerator. When the sales man goes to the customer if the products

gets out of order (within the specified period of the after sales

service),then sign of individual is seen on the back and in this way it is

easy to find who has made mistake during quality inspection. Due to

these measures taken by the management there is very little chance that

the items would be defective.



CONCLUSION:-

If we conclude this report of operations management, we come

to know the f ollowing relevant points which need the attention of the

management of the company while perf orming the f unctions of the

operation.

NO PROPER INVENTORY:-

The organization does not have proper inventory planning

by the management due to which heavy amount of the money is being put

by the company in the inventory.

PEL has the strength also that it has a good repute for the

company as being the quality conscious company. It has own experts for

the purpose of the control of the quality or products. Due to the good

sight selection the company has more access to the whole of the markets

of the country. The company also has well established system of the

distribution of the company although it is not the integrated one but it is

working smoothly.

JUDGMENTAL METHODS:-

The management of this company does not use the sophisticated

technique while making or performing the function of the demand

forecasting by the company. They rely more on the judgmental methods

for the purpose of the projection by the company about their sales.



SUGGESTIONS:-

The following are the suggestions by me after visiting the

company.

PROPER INVENTORY LEVEL:-

The company should also make some of the methods for

the purpose of the keeping the inventory at the optimal level. Proper

planning of the material can decrease the amount of the investment in

the inventories by the company.

USE SOPHISTICATED TECHNIQUES OF FORECASTING:-

The company is an excellent company and it has good image in the mindof the consumers. But they are not applying the statistical tools for thepurpose of the forecast of sales which eventually results into having the

excessive amounts of inventory by the company. Causal and the timeseries methods are the good estimate provider about the forecasting andif the management adopted these forecasting techniques no doubt theywill be benefiting the company a lot.

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

STATISTICS FOR MANAGEMENT BY LEVIN.

For f orecasting.

OPERATIONAL MANAGEMENT BY LEE.J.KRAJEWSKI & RITZMAN

QUALITY MANAGEMENT BY DAVIT .L.GEOTECH



And some other person from whom I get information are,

Some my senior colleagues.

In Pel I have consult with the following persons

Documents

Pakistan Electron Ltd