SUPPLY CHAIN MANAGEMENT

REPORT ON NATIONAL FOOD LIMITED

SUBMITTED TO: Ms: HINA A. RAHIMSUBMITTED BY: MONA BAI [3695]

ASMA MEHMOOOD [3563]

ACKNOWLEDGEMENT

We would like to express our sincere Gratitude and thanks to our

respectable teacher Mr. Hanif memon for extending this support and

cooperation in the whole semester and her guidance in the completion

of the report.

Without the Encouragement, Guidance and support of our Teacher the

completion of this report would not have been possible.

Table of Contents

S.No. TitlePage No.

1 Executive Summary

2 Introduction of NFL

3 Industry Profile

4 Founders’ Philosophy

5 Production Facilities

6 Mission Statement

7 Vision Statement

8 Core Values

9 Directors & Management

10 Organization Chart

11 Product Profile

12 Business Vertical

13 SCM / Procurement Mission Statement

14 Logistics Profile

15 Procurement & Production Control

16 Marketing department

17 Finance Department

18 Human Resource Department

19 Risk management

20

21 Total Cost of Ownership

Executive Summary

This report presents detailed information on the Supply Chain Management at National Food Limited. The content provides an introduction to the workings of the company and focuses on the processes followed at the company. Products transacted suppliers, procurement from overseas and local supplies, their qualification criterion, inventory management and distribution network management has also been discussed.

The process starts with sales forecasting which gives an estimate of the sales on monthly basis. Imported material inventory of about 3 months is maintained as safety stock. Some indigents are procured locally as well as packaging material of the product.

Raw material warehouse, they also have a SITE warehouse is the main storage for imported finished products. The customers in south region are supplied from these warehouses. The ware houses are not only located in Karachi but also in Lahore Multan and Islamabad. NFL get raw material by importing by china and Singapore as well as locally. NFL maintains those materials till finished good inventory by keeping safe in ware houses.

There are distributors in the local and international further supply to retailers in their respective areas. Transport operations are managed by the company itself with the help of outsourcing within agreement.

Complete operations are recorded and maintained by the supply chain manager of the company which enhances effective and efficient operations and provides a competitive edge.

The report concludes on the importance of Supply Chain Management in the NFL and the wide ranging benefits of its efficient implementation.

Introduction

National Foods was founded in 1970 and started out as a Spice

company. 3 decades later it has diversified into a versatile Food

Company with over 110 products and 165 and above SKUs (Stock

Keeping Unit) for the domestic market and over 100 different products

for the international markets.

The vision to see National Foods as a professionally managed Human

Resource company, set more then 7 years ago, was realized by

transforming a local company into a very dynamic and progressive

management structure in line with industry practices.

Competent Human Resources from within the company have fuelled

tremendous growth by excelling in Functional Management. Even after

3 decades the company's focal point still remains on Customer's

needs through Product development in line with the changing market

trends.

In this innovative age of ever changing lifestyles, fuelled by the

rampant development of technology; consumers have been compelled

to change their eating habits. National Foods responds to this

challenge of developing innovative food products based on

convenience and fast preparation in line with modern lifestyles and yet

retains traditional values through its impressive collection of food

products.

The brand delivers its ultimate promise by consistently delivering value

to its consumers. National Foods enriches family relationships by

bringing people together for family traditions, feasts, seasonal holidays

and of course - everyday life.

.Some information about National Foods’ offices in Karachi is as

follows:

Registered Office:

12/CL-6 Claremont Road

Civil Lines, P.O. Box 15509

Karachi 75530, PAKISTAN

Tel: +92.21.5662687

Fax: +92.21.5684870

Email: info@nfoods.com

Marketing Department:

219 T-Forum, G-20, Block –9

Clifton, near Agha Super Store

Tel: 92.21.5821243-46

Factory:

F-160, S.I.T.E.

Karachi, PAKISTAN

Tel: +92.21.2577707

Fax: +92.21.2572217

Email: info@nfoods.com

BOARD OF DIRECTORS

MR. A. MAJEED Chairman

MR. ABRAR HASAN Managing Director/Chief Executive

MR. WAQAR HASAN Director

MR. KHAWAR BUTT Director

MR. ZAHID MAJEED Director

MR. EBRAHIM QASSIM Director

MS. JAMILA WAQAR Director

MR. FIRASAT ALI Director (N.I.T. Nominee)

MR. HABIB A. ISMAIL Company Secretary

VISION AND MISSION OF THE COMPANY

To be a

Food Company by the year 2020.

“In the convenience food segment by launching products and services

in the domestic and international markets to enhance lifestyle and

create value for our customers through management excellence at all

levels.”

SUPPLY CHAIN MISSION

“To efficiently create relationship with suppliers, and distributors, so

that product is produced and distributed at the right quantities, to the

right locations, and at the right time, in order to minimize system wide

costs while satisfying customer.”

LOGISTICS MISSION

“Aim by moving the material needed by production into the company

and moving finished goods to the customer at right time with lowest

cost.”

PROCUREMENT MISSION

Low production costs Fast and on-time deliveries

High quality products and services

Flexibility

FOUNDRS’ PHILOSOPHY

This was long before the phrase’ corporate Mission’ had even been invented.However, our philosophy remains unchanged over

time.

National foods must focus on customer’s needs and serve them with

quality products at affordable prices at their doorsteps.

Our products must be pure confirming to international standards.

Our research must produce continuously new adventurous products

scientifically tested, hygienically produced in safe and attractive

packages.

We must create an environment in our offices and factories where

talents are groomed and have opportunity to advance in their careers.

We must prove to be recognized as good corporate citizens support

good cause-charity and bear fair share of taxes.

Through building a reliable brand, National Food Limited must get itself

recognized as leader in Pakistan and abroad.

With the help of Almighty God company can achieve its targets in

years to come.

Statement expounded in 1972.

ORGANIZATION STRUCTURE OF NATIONAL FOOD LIMITED

C.E.O

NATIONAL FOOD LIMITED PRODUCT LINE

SBUs

Food! What we eat defines our personality, shapes our way of living

and chalks out our physical appearances.

National Foods is one such company, dedicated to improving lives

through providing healthy, innovative foods items that excel in quality

and provide value for money. With a range of over 110 products in 12

major categories, we are one of the largest food companies in the

business.

Food for all occasions … We provide you with all you will ever need,

whenever you need it and in whatever form you need it. We put you

first! Enjoy our product range

Industry profile

National food Limited is leader in ketchup categories, with having more than 23% market share. Shezan has a market share of 17%, shangrilla has a market share of 16% and Mitchell’s have a market share of 10%

Ketchup categories

Made from the finest tomatoes, National Ketchups and sauces cater to every

taste. From the hot and tangy to the sweet, National Foods offers a ketchup

for every dish and occasion. Use them as dips for your munchies, dressing

for your salads, accompaniments for the main course or even as marinades

for your recipes. National Foods sauces can do it all.

Products

A) Chilli Garlic Sauce B) Hot & Spicy Ketchup

C) Imli Chutney Sauce D) Meethi Ketchup

Tomato KetchupDescription Enjoy the tangy flavour of Pakistan’s best tomatoes in National’s Tomato Ketchup.Tamtamata maza for the whole family (1 kg. Family Pack)Tamtamata maza in a sahoolat pack (100g. Sachet) Serving Size 20 person ( 1 tablespoon per person).

Ingredients Tomatoes, Sugar, Salt, Modified Food Starch, Blend of Spice Extracts, Vinegar, Stabilizer (E415),Preservative (E202) & permitted food color (E129) Nutritional Facts Pack Size: 16 gmServings per container: 20, 50Nutrition FactsTotal Calories: 20Calories from Fat: 0Total Fat: 0 g, % Daily Value: 0%Saturated Fat: 0 g, % Daily Value: 0%Cholesterol: 0 mg, % Daily Value: 0%Sodium: 200 mg, % Daily Value: 8.0%Total Carbohydrates: 4.5 g, % Daily Value: 1.5%Sugar: 3.5g Protien: 0gVitamin A: 0%Vitamin C: 0%Calcium: 0%Iron: 0%Not a significant source of Saturated Fat, Protein, Cholest.,Calcium & Iron.Percent Daily Values based on a 2,000 calories diet. Your daily values may be higher or lower depending on your calories needs.

Available in:Tomato Ketchup (300 gm.)Tomato Ketchup (800 gm.)Tomato Ketchup (3500 gm.)Tomato Ketchup (1800)Tomato Ketchup (1800 gm.)Tomato Ketchup (1 kg. Family Pack)Tomato Ketchup (100g. Sachet)Tomato Ketchup (500g. Pack)Ingredients

Hot & Spicy KetchupDescription For those who like their ketchup with a zing, National Hot and Spicy is the perfect answer.

Serving Size 20 person (1 tablespoon per person).

Ingredients Tomatoes, Sugar, Salt, Modified Food Starch, Red chilli, Vinegar, Stabilizer (E415), Preservative (E202) & Permitted food color (E129), Blend of spice extracts.

Nutritional Facts Pack Size: 16 gmServings per container: 20, 50

Nutrition Facts

Total Calories: 20Calories from Fat: 0Total Fat: 0 g, % Daily Value: 0%Saturated Fat: 0 g, % Daily Value: 0%Cholesterol: 0 mg, % Daily Value: 0%Sodium: 200 mg, % Daily Value: 8.0%Total Carbohydrates: 4.5 g, % Daily Value: 1.5%Sugar: 3.5g Protien: 0gVitamin A: 0%Vitamin C: 0%Calcium: 0%Iron: 0 %Not a significant source of Saturated Fat, Protein, Cholest., Calcium & Iron.Percent Daily Values based on a 2,000 calories diet. Your daily values may be higher or lower depending on your calories needs.

Available in:Hot & Spicy Ketchup (11 gm.)Hot & Spicy Ketchup (300 gm.)Hot & Spicy Ketchup (800 gm.)CHILLI Garlic SauceDescription This hot and tangy sauce is the perfect accompaniment for snacks as well as the main course. Serving Size 20 person ( 1 tablespoon per person). Ingredients Tomatoes, Sugar, Salt, Modified Food Starch, Garlic, Red Chilli, Blend of Spice Extracts, Vinegar,stabilizer(E415),preservative (E202) & permitted food color (E129). Nutritional Facts

Pack Size: 16 gmServings per container: 20, 50Nutrition FactsTotal Calories: 20Calories from Fat: 0Total Fat: 0 g, % Daily Value: 0 %Saturated Fat: 0 g, % Daily Value: 0 %Cholesterol: 0 mg, % Daily Value: 0 %Sodium: 200 mg, % Daily Value: 8.0 %Total Carbohydrates: 4.5 g, % Daily Value: 1.5%Sugar: 3.5g Protien: 0gVitamin A: 0%Vitamin C: 0%Calcium: 0%Iron: 0%Not a significant source of Saturated Fat, Protein, Cholestrol,Calcium & Iron.Percent Daily Values based on a 2,000 calories diet. Your daily values may be higher or lower depending on your calories needs. Available in:Chilli Garlic Sauce (300 gm.)Chilli Garlic Sauce (800 gm.)

Imli Chutney Sauce

Directions Home made tamarind dips are a mainstay of every Pakistani meal. Now National has bottled this flavour for everyone around the world.

Ingredients Fresh Tamarind (Imli), Sugar, Salt,Ginger, Spices, Acetic Acid (E260), Citric Acid (E330), Stabilizer (E415) & permitted food color (155).

Nutritional Facts Pack Size: 16 gm

Servings per container: 20

Nutrition Facts

Total Calories: 8Calories from Fat: 0Total Fat: 0 g, % Daily Value: 0%Saturated Fat: 0 g, % Daily Value: 0%Cholesterol: 0 mg, % Daily Value: 0%Sodium: 40 mg, % Daily Value: 1.66%Total Carbohydrates: 2.0 g, % Daily Value: 0.7%Sugar: 1.6g Protien: 0gVitamin A: 0%Vitamin C: 0%Calcium: 0 %Iron: 0%Not a significant source of Saturated Fat, Protein, Cholest.,Vit. C, Vit. A, Calcium & Iron.Percent Daily Values based on a 2,000 calories diet calories diet. Your daily values may be higher or lower depending on your calories needs

Available in:

Imli Chutney Sauce (325)

Meethi Ketchup

Directions The ketchup with a sweeter taste, National Meethi Ketchup is immensely popular with kids.

Description Pack Size: 16 gmServings per container: 20Total Calories: 20Calories from Fat: 0Total Fat: 0 g, % Daily Value: 0%Saturated Fat: 0 g, % Daily Value: 0%Cholesterol: 0 mg, % Daily Value: 0%

Sodium: 200 mg, Daily Value: 8.0% Total Carbohydrates: 4.5 g, % Daily Value: 1.5%.Sugar: 3.5 g Protien: 0 gVitamin A: 0 %Vitamin C: 0 %Calcium: 0 %Iron: 0 %Percent Daily Values based on a 2,000 calories diet. Your daily values may be higher or lower depending on your calory needs.

Serving Size 20 persons ( 1 tablespoon per person).

Ingredients Tomatoes, Sugar, Salt, Modified Food Starch, Blend of Spice Extracts, Vinegar, Stabilizer (E415), Preservative (E202) & Permitted Food Color (E129)

 Available in:Meethi Ketchup (300 gm.)

NATIONAL FOOD KETCHUP’S VALUE DELIVERY NETWORK

Retailer

Distributors

Ware houses

Manufacturing

SSUPPLIER [CHINA]Tomato Paste

SUPPLIER [LOCAL]Salt

Storing after production

Storage room for paste within factory

Customers

Storage room for paste within factory

SUPPLIER [LOCAL]Chilli

Karachi.

Islamabad

Lahore

Customer

Multan

Karachi?

Islamabad

Lahore

Multan

SUPPLIER [LOCAL]Labels

SUPPLIER [LOCAL]Garlic, imli, sugar

SUPPLIER [preservative chemical]

SUPPLIER [LOCAL]Bottles cap

SUPPLIER [LOCAL]Bottles

NATIONAL FOOD LIMITED SUPPLY CHAIN AND LOGISTICS FLOW CHART

STOCK RECEIVED

FROM PRODUCTION

FINISHED GOODS STORE

ORDER PROCES

ORDERS RECEIVE FROM CUSTOMERS

AS PER AGREEMENT

CAPABILITY CHECK

ORDERS FEED INTO SYSTEM

YES NO INFORM CUSTOMER

DISPATCH LIST/D.C

LOGISTICS

DIRECT DELIVERY OR DISPATCH TO

CUSTOMER

STOCK TRNSFER TO DIFFERENT WARE HOUSES

DELIVERY OR DISPATCH TO

CUTOMER

RECEIVE TR/CHALLENGE [LOGISTICS/WH

FINANCE ISSUES INVOICES

SEND TO CUSTOMER

RAW MATERIAL CLASSIFICATION

1. Imported Raw Material [tomato paste]: In which they import

raw material from China directly in bulk quantity .the lead time is 60

days.

2. Imported Food preservatives chemical from Singapore.

Food preservatives and chemical for ketchup is imported from

Singapore lead time is 45 days

3. Garam masala is imported from India via Dubai lead time is 30 days

4. Locally Raw Material Procured [salt, chili, bottles & caps,

plastic containers and labels]: these all materials National Food

Limited locally procure bottles from Balochistan from Hataar.

5. Garlic, imli and sugar are purchased locally. last year sugar was

imported from Dubai at price of 27 per kg . when price of sugar locally

was very high.

Material storage:

Material like tomato paste, NFL just store within factory having

separate store for the temperature purpose NFL keep cold at 5

centigrade and its shelf life is 1 year.

Other local material like chili, salt, bottles they just keep in one store

room because NFL said that there is not such a need to keep at cold

storage or to maintain any temperature.

Demand of ketchup

Bull Whip Effect:

Usually demand increase in Ramadan or seasonal wise. Otherwise NFL

has a normal process in sense of orders. While asking about bull whip

effect NFL said In case any fluctuations occur then the stocks are

adjusted according to the demand and then manufactured to finished

goods. NFL does not face any difficulty while producing more than

normal because NFL manufactures ketchups with under utilization

capacity.

DEPARTMENT WISE PROCESS OF NATIONAL FOODS

There are seven major departments in National Foods:

Human Resource Management

Procurement/supply chain management

Store Department and Production Department

Finance

Research and development

Marketing

HUMAN RESOURCE DEPARTMENT

HR activities involve:

Personal activities of employees & workers

Hiring [hiring of employees on the bases of skills like

supervisors are permanent and skilled employees. Un-skilled and

semi skilled are on the temporary bases NFL hire them.

Training and development [(sales development) as national

food giving training to the farmers who supplies chili, because of

avoiding dust].

Skill development program [The adult literacy program

carried out by National Foods’ Pakistan is unique in the sense

that this is the only company in Pakistan that is working for it

illiterate workers. The idea of this program carries is to provide

basic education to each and every employee of the company.

Annual evaluation system (Through policy documentation

service manuals)

MARKETING DEPARTMENT

The marketing department serves as a backbone in the corporation

and hence the role of it is supposed to be the most important. The

market department in any organization is responsible for the

marketing of the company’s product and to make efforts to build

company’s image in the market or with the customers.

The National foods Pakistan has maintained a separate marketing

department that is responsible for marketing the various products

produce by the company. The activities of marketing department start

with the need identification of customers in the market. They along

with the help of finance department personals develop forecasted

sales of the products offered by the company, the forecasted figures

are than handed over to the procurement department for the purchase

of raw materials.

The company is involved in the indirect sales activities; there is always

a middle-man involved in the company and retailers.

Supply Chain Management

PROCUREMENT DEPARTMENT

The purpose of procurement department is to arrange the purchases

for the respective departments. Procurement is somewhat different

from purchasing department. Purchasing is solely related to the

purchasing of the different products but it would not link to the other

departments. In the process of the procurement the department

searches the product best suitable and gives it to the department

needing the product.

The procurement department of National Foods is quite good and well

maintained. It included 4 key personals involved. Although there are

many a people involved in procurement but these 4 are main. The

procurement department follows a special pattern or process for the

procurement of the products. Sometimes procurement is done on the

routine basis and sometimes or the others it is on daily or sudden on

time basis. For the routine basis large items procurement is made on

the following patterns:

1. FORECAST

Each and every department is liable to tell the procurement

department according to their estimate. Different departments make

forecast on annual basis and give the request to the procurement

department. Then these forecasts are kept in records and cumulate

with all other department forecasts.

2. PLANNING PURCHASING REQUEST

After all the forecasts have been cumulated, a purchase requisition has

been prepared. This requisition is the cumulative of all the products.

3. PROCUREMENT DEPARTMENT

When all these things have been completed, the procurement

department comes in scene and search for the available product

ranges with specification. At times for larger orders, it also asks for

bids. The procurement department then analysis all the bids. NFL

negotiates with competitive rates of three or four suppliers of the

specific products, where they got lower cost with good quality.

3. PURCHASE ORDER

After the final analysis the purchase order has been made to the name

of the supplier or bidder. And then the product or the material has

finally been acquired.

As National Foods is concerned mostly with the agricultural products

because all the products made use crops as raw material. Mostly the

raw material is seasonal. At times some crops grow and some would

not. So it is the liability of the procurement department to maintain the

stream of the raw material. So for seasonal products, National food

purchased 30 lack tons of mangoes and 1800 lacks tons of carrot it

acquired raw material early and makes it safe with frozen refrigerators.

An example would be the case of tomato paste, which is mostly

imported from abroad [China]. The procurement department usually

purchases stocks and it is also evident that before purchasing the

quality has been checked according to the specific measures set

before.

The company is very strict towards the supplier side. This is because of

the regular check on the quality and maintains the standards of ISO

9002. For the fulfillment of this specific purpose, company is

maintaining an evaluation form to check the supplier. The purpose of

the evaluation is:

AS TO CHECK THE SUPPLIER

The supplier fills it and the supplier has to write down the names of

those companies to which it is presently supplying. If the supplier is

supplying the raw material to well renowned credibility that it is a good

one.

CERTIFICATION OF QUALITY

As National Foods main emphasis is on quality that is why it is highly

concentrating on the factor that its supplier should be ISO certified.

Because if the raw material would not be of the premium quality, the

product cannot be as good, to obtain the standards of quality.

ENVIRONMENT AND ATMOSPHERE

The supplier‘s business environment is also checked by National Foods.

Whether the supplier is in political habit or not. If this would be the

case supplier will be rejected, as it cannot fulfill the raw material

request any time or the flow of raw material cannot be steady.

SOUNDNESS OF THE PARTY

The supplier should be sound means that it should have a good

credibility and ability to meet large raw material requirements. If the

supplier is not good enough to give credit or it cannot handle large

contracts due to the unavailability of working capital, it will again be a

hassle for the company that is the reason that soundness is necessary.

“EVALUATION FORM”

For the smooth running of the procurement department, firstly

everything to be purchased is budgeted. Every department makes it

own budget to set the completion of its requirement. These

requirements are then sent to the procurement department. The

procurement department then makes connect with the finance

department for the approval of the necessary amount required. The

finance department approves the required amount and the

procurement takes place.

STORE DEPARTMENT & PRODUCTION DEPARTMENT

The purpose of the store department is to maintain the stores of the

company’s raw material. On receiving the purchase order the store

department prepared the necessary space and atmospheric conditions

and safety request for the material. On the receiving of the material

the store department makes a MRR (Material Receiving Report).

These bills and report are then given to the production department for

the issue of material for production. Store department issues the

necessary material to the procurement department and the production

department processes the material for the finished goods. In the mean

time the store department reduces the inventory for the raw material

to wip account. When the production department finished the process,

the finished goods moved to the store department and the store

department added the inventory as finished goods produced. When

this finished goods moved out of the store, a delivery chalan has been

made and invoice for the transportation issued. Then finally the

finished goods produced were gone to the distributors for selling

purposes.

OPERATIONS

The duty of the finance department is to get the stream of depreciation

on each and every thing. Normally the depreciation charged on the

plant and machinery is 10% of the book value and on the motor vehicle

it is 20%.

As far as tax is concerned the company has to bear taxes on its

distributors and the products. As far as distributors are concerned the

company has registered and non-registered distributors. For its

registered distributors the company has to pay 15% duty and for non-

registered distributors the amount of the duty is 16.5%. Moreover the

burden of tax never ends up here. It has to give taxes on all the

material imported from abroad. The tax is known as import tax.

The stream of taxes is also depending upon from product to product

basis. Such as the application of the sales tax is highly dependent on

the product. Pickle has some other tax basis and the ketchup and

sauces have others.

Ware house

National Foods have decentralized system, there are four ware houses:

1. Karachi2. Lahore3. Multan4. Islamabad

Inventory system in ware houses, normally NFL use FIFO system for regular materials and LIFO system for seasonal material e.g. mangoes, carrot and chili to maintain standard.

NFL uses bin card system to identify material for requisitions.

Lead time of paste from chine takes 45-60 days.

NFL takes 3 months inventory of paste and 1 month of packing material.

LOGISTICS

INBOUND LOGISTICS

End of page

Customers

Retailer

Receiving and Inspection

Finished goods Warehouse

Outbound logistic and Warehousing

DistributorsKarachi?

Islamabad

Lahore

Multan

Total Cost of Ownership

The total cost of ownership consists of three parts:

1. Pre transaction components:

To identify need of the raw material

Formation of Milk Collection Centers

Induction of farmers / supplier in company’s internal network

Training of farmer / suppliers for milk quality & handling.

2. Transaction Components

Pricing

Order placement / Production

Quality Control / Inspection

Delivery and distribution to the retailers

Invoicing

Payments to the suppliers

3. Post-transactional components:

Shipment Delays

Satisfaction of the customers, company’s staff and all

stakeholders

After sale service cost.

Future goals and objective of national foods:

Reduction of finished goods inventory from 21 days to 25 days.

Measuring tools:

“To review stocks tools positions on last day of each month and

finally at the end of the year”.

“To review daily +sales shortage reports and to compile on

monthly and than end of the year”.

Target day to achieve these all objectives is 6-30-2007.