Home Appliances - Gujranwala

CLUSTER PROFILE

ELECTRICAL HOME APPLIANCES GUJRANWALA

Turn Potential into Profit

Small & Medium Enterprise Development Authority Ministry of Industries, Production & Special Initiatives Government of Pakistan 8th Floor, LDA Plaza, Egerton Road Lahore Tel: 92-42-111-111-456 Fax: 92-42-6304926-27, Email: http://www.smeda.org.pk

By: Muhammad Asim Malik (Regional Business Coordinator, Gujranwala)

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Cluster Development Program

Electrical Home Appliances, Gujranwala Cluster Profile

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Table of Contents 1 Description of the Cluster ........................................................................................ 3

1.1 History & background of cluster......................................................................... 3 1.2 Description of Products....................................................................................... 3 1.3 Core Cluster Actors............................................................................................. 3

1.3.1 Assemblers: ................................................................................................. 4 1.3.2 Vendors/Manufacturers: ............................................................................. 4 1.3.3 Raw Material Suppliers: ............................................................................. 4

1.4 Geographical Location........................................................................................ 4 1.5 Current Cluster Scenario..................................................................................... 4

2 Analysis of Business Operations .............................................................................. 5 2.1 Production Operations ........................................................................................ 5

2.1.1 Raw Material: ............................................................................................. 5 2.1.2 Casting:....................................................................................................... 5 2.1.3 Fabrication: ................................................................................................ 5 2.1.4 Machining/ Assembling / Welding / Fitting: ............................................... 5 2.1.5 Testing, Repairing and Packing: ................................................................ 6 2.1.6 Process Flow Chart of Electrical Home Appliances .................................. 6

2.2 Raw Materials Availability ................................................................................. 7 2.3 Quality Assurance............................................................................................... 7 2.4 Technology Status............................................................................................... 7 2.5 Marketing & Sales .............................................................................................. 7 2.6 Financing............................................................................................................. 8 2.7 Human Resources ............................................................................................... 8

3 Institutional Setup..................................................................................................... 8 3.1 Government & Semi-government Organizations ............................................... 8 3.2 Local Bodies/Chambers/Association .................................................................. 8 3.3 Fan Development Institute.................................................................................. 9

4 SWOT Analysis ......................................................................................................... 9 4.1 Strengths ............................................................................................................. 9 4.2 Weaknesses ......................................................................................................... 9 4.3 Opportunities....................................................................................................... 9 4.4 Threats............................................................................................................... 10

5 Business Potential: .................................................................................................. 10



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1 Description of the Cluster

1.1 History & background of cluster Today Gujranwala and Gujrat regions are prominent manufacturing hubs of household electrical appliances. This Industry initially originated from the fan industry that existed at a small scale level in Gujrat before the partition. However after the partition, the fan industry experienced growth. Since Gujranwala was already famous for the production of iron, steel and other metal products, so the appliances manufacturing became a major business in the regions of Gujranwala and Gujrat.

There are approximately five hundred electrical home appliances manufacturing units in Gujrat & Gujranwala and a few other cities. With an exception of few, majority falls into the category of cottage industry. Sub contracting is quite common a common feature among these units. The small scale units are the actual back bone of this industry as they provide employment to a large number of people and collectively account for more than 90 percent of the domestic market.

The skilled workers of Gujrat-Gujranwala have made the country absolutely self-sufficient in the industrial field of home appliances manufacturing, by experimenting with every diverse aspect, and therefore, these made in Gujrat-Gujranwala are not even a bit less than the cosmopolitan standard.

1.2 Description of Products

The main products of the domestic electrical goods produced in the cluster are: Fan (all types), Washing Machine, Spin Dryer, Room Air Cooler, Stabilizer, Tube Light Fitting, Electric Heater, Electric Geyser, and Electric Oven. Fan and washing machines are the two major products of this cluster. The major raw materials include iron/ steel, electric steel sheet, copper, aluminum, brass and plastic. The latest trend is towards the manufacturing of plastic household appliances products.

1.3 Core Cluster Actors

Total market size of Gujranwala Electrical Home Appliances is as follows:

Gujranwala Electrical Home Appliances

No. of Units Investment (000 Rs.)

Employment Products Capacity

153 277216 1499 Electric Fans/Coolers 4,220,975 Nos

94 205684 982 Washing machines 438,400 Nos

24 87551 396 i)Electric Goods ii) HT/LT Panel iii)Switches, starters iv) Electric Tubes

i)264 Lac ii)400 Nos iii) 5,000 iv)70 TH Nos

Source: Directory of Industries 2006, Directorate of Industries



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1.3.1 Assemblers: Assemblers are the principle actors in the cluster, as they are specialized in assembling. They use the parts manufactured by the vender as per the product requirements/specifications. One assembler is usually working with several venders using the components manufactured by the vendors and/or the imported parts/ intermediary goods, to build up the finish product. The parts undergo inspection at the time of receiving in Raw Material Store and then are issued for further process. Assemblers from other cities also purchase components from Gujranwala wholesale market and assemble appliances at their own units.

1.3.2 Vendors/Manufacturers:

The industry is highly vender based. There is not any single unit in Gujranwala in which all the parts are manufactured and assembled in-house. Each vender is usually specialized in manufacturing one part. Some home based manufacturing is also present, mostly in the form of people winding motors in their homes and supplying to the market. Vendors are not only supplying parts to assemblers but also to the wholesale market. This segment of the cluster is very important, as most of the manufacturing activity is actually performed by the vendors.

1.3.3 Raw Material Suppliers:

A large number of material suppliers are present in different areas of Gujranwala. Majority of them are located in Javaid sheet market, Sheikhopura road, Gondlanwala road, Kharadanwala bazaar and Nomania road etc. Some materials like evaporator, condenser and compressor for air conditioner and some parts ball bearing etc used in washing machines, room air cooler and fans are being imported from different countries (mainly China). In Kharadanwala bazaar a large number of router stator, winding paper, winding like coils and wire are also available.

Metal/Metal sheets used in this process are made by metal waste that is imported from different countries. Gujranwala, Lahore and Karachi are the main metal markets.

1.4 Geographical Location

Electrical Home Appliances are manufactured in many areas of Gujranwala and Gujrat. The cluster is approachable by roads and railway facilities.

1.5 Current Cluster Scenario

The Electrical Home Appliances Industry still mainly exists at the level of SMEs, with exception of few firms which have experienced extraordinary growth. This sector is still not an organized sector. There is no exact figure available about total number of units, installed capacity and operational capacity.



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The industry is not only fulfilling the domestic needs but is also exporting electrical home appliances on a small scale. There is large export potential in Middle East, Africa and Cetral Asia. The main reason for not achieving the significant break through in export by this industry is uncompetitive cost structure of domestic products due to ever increasing utilities prices coupled with the high tariff being charged on imported materials. Small units are also facing problems of unavailablity of capital and lack of modern manufacturing machines and techniques.

2 Analysis of Business Operations

2.1 Production Operations

Production process depends upon the type of desired product. The manufacturing of Electrical Home Appliances is mainly based on casting and fabrication processes. Production process is explained as follows:

2.1.1 Raw Material:

Raw materials for the body component include metal waste, metal sheets and plastic. As per the requirement the collected raw materials/waste is melted in furnaces.

2.1.2 Casting:

Casting is the shaping of metal by melting and pouring the molten metal into a mold. Most castings, especially large ones, are made in sand molds. Sand is mixed with a binder and is pressed in a wooden pattern that leaves a cavity in the sand as per the pattern of the particular product in question. The molten metal is poured into the prepared moulds which are left for cooling before the castings are taken out of the molds. Permanent metal molds are used to make many small and simple parts.

2.1.3 Fabrication:

The fabrication process includes molding of a metallic sheet into formation of a certain shape. As per the requirement of the specific part it is either casted or fabricated.

2.1.4 Machining/ Assembling / Welding / Fitting:

After the casting the parts are taken to the machining section for their further refinement. After the machining the parts are ready to be assembled. In The parts are assembled and tack welded into place to get the desired product then re-checked for accuracy.



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2.1.5 Testing, Repairing and Packing:

This is the last process of production. Finished products are determined according to stipulated standards to sort out products that can be approved for packaging. The un-passed parts are sent back for repairs and re-firing. The products are carefully packed and then send to customers.

2.1.6 Process Flow Chart of Electrical Home Appliances

Fabrication Casting

Winding

Machining

Assembling

Raw Material

Rejection/ Repairing

Testing

Welding / Fitting

Painting

Packaging

Storage & Shipping



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2.2 Raw Materials Availability

The raw materials required for manufacturing electrical home appliances include metal sheets, aluminum, winding papers, wires, router stator, different chemicals and spare parts etc. These raw materials are easily available in the market.

Aluminum which is one of the main raw materials is imported from various countries in the form of aluminum waste. The waste is melted and is reshaped into aluminum sheets of different gauges to be used per the specification of the product. However there is no assurance of quality as there is no material analysis or testing undertaken to ensure quality.

Different chemicals, soda, salts and acids are required for electroplating and polishing purpose. These chemicals can be easily obtained from the local market. Spare parts are also easily available in the market and are generally imported from China.

The finished products are sold under various brand names; the stickers of which are easily available in the market. Usually these brand names are similar to some famous brands.

2.3 Quality Assurance

Neither material analysis nor mechanical testing of appliances is carried out. Variation in quality is a consistent feature. Firstly after receiving the parts from the vendor the assembler check it as per the given specification. The passed parts are issued to the process. At every level of work in process, the relevant foremen are responsible for the quality; they check the quality on behalf of their department. After completion of the product different type of in-house tests are conducted for own quality assurance purposes as well as for meeting the buyers requirement i.e. watts, ampere, voltage test, RPM (Revolution per minute), Temperature rise test. Facility of labs is also available in this cluster for quality tests.

2.4 Technology Status

The involvement of technology in manufacturing process or for that matter in any process is minimal. Most of the units are at micro level about 10 12 % can qualify as proper units. There is lack of use of modern manufacturing machines and techniques. Due to these issues small units are closing down. However the large size manufacturing units are filling this gap.

2.5 Marketing & Sales

Manufacturers have developed contacts with the distributors in all over the country and place their product on the market through these outlets.



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The distribution channel moves goods from producer to consumer.

Distributor Retailer

Small manufacturers and venders usually supply their products to the wholesalers and retailers of other cities. Sales agents are also working in this sector. They book orders from other cities and supply the required quantity after purchasing from small manufacturers. Some manufacturers also have their own retail stores for distribution of their products.

2.6 Financing

Almost all the registered commercial and industrial development banks of Pakistan have their branches in the cluster and are providing the financing at competitive rates. But most of stakeholders depend on their own financial equity based resources. It is also observed that the entrepreneurs normally prefer obtaining loan through the informal sources. Due to unawareness, ineffective information flow and paper work these entrepreneurs are reluctant to go to the financial institutions.

2.7 Human Resources

Human resource is present in abundance and skills are traditionally inherited. The owner usually deals with management issues and marketing related activities. Most of the labor is semi skilled and are trained on job. There is no specialized marketing or accounts department. They facilitate their sales only on the basis of personal contacts and no proper accounts are maintained therefore certain problems related to tax return, monitoring and evaluation are faced. Only primary or intermediate level employees are handling accounts.

3 Institutional Setup

3.1 Government & Semi-government Organizations

SMEDA, PSIC, EPB are three organizations which are providing facilitation to this cluster at the government level. SMEDA has a regional business centre in Gujranwala which provides various services; training services, marketing advice, technical advice, legal services, match-making and other business development services. TDA also has a regional office in Satellite town, Gujranwala and provides facilitation in areas of participation in international trade fairs, exhibitions and trade delegations.

3.2 Local Bodies/Chambers/Association

Pakistan Electric Fans Manufacturers Association (PEFMA) was registered 15 years back. The central office is in Gujrat. The association is further divided in two regions

Producer Wholesaler Consumer



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Gujrat and Gujranwala. The association facilitates the fans cluster in mostly regulation related problems such as SUI Gas, WAPDA, GCCI related issues and also provides the sales tax form filling services.

Gujranwala chamber of commerce & industry (GCCI) established in 1978, has more than 5650 members. GCCI provides various services to this cluster such as arranging of Made in Gujranwala Industrial Exhibition for the promotion of local brands, trade delegations, research & development and information dissemination.

3.3 Fan Development Institute Fan development institute situated Goraloi, G.T. Road Gujrat. Facilitating this sector as follows:

Providing facilities of material testing. Providing technical/skill development training to existing manpower as well as

to new entrants in the field of fan industry. Catering to the training needs of adjoining areas both at supervisory level and

workers levels. Also provides technical support in production management, material control,

management and marketing.

4 SWOT Analysis

4.1 Strengths Abundance of cheap labor Simple management structure. Extensive supplier industry Strong linkages with other key regional clusters Entrepreneurial culture directed towards exports.

4.2 Weaknesses Inconsistent raw material prices. Low framework for IP management in Cluster. High utilities cost (gas & electricity) which resulted in high production cost Large unorganized vender base Low R&D for product innovation Lack of quality controls Use of traditional techniques and technology Preference of informal credit No proper accounts maintenance. Lack of marketing skills

4.3 Opportunities Rising local and international demand of electrical home appliances Support of institutional infrastructure Large export potential in electrical home appliances in Middle East, Africa and

Central Asia. Exploit local expertise in related sectors, clusters technologies.



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4.4 Threats Low priced import from china Changing consumer preferences Large surplus capacities in the international market. Increasing regulatory pressures

5 Business Potential:

Improvement in living standards is generating the high demand of electrical home appliances both at national and international level. The vender development program can help to standardize and quality and create more business opportunities in the area.

There is large export potential in electrical home appliances. The exports trend in the past two decades has been insignificant volume-wise, the capability of the sector for export exist keeping in mind the technology & know-how available with the manufacturers.

Home Appliances - Gujranwala

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