Supply Chain Management System

Report on

Shan Foods Private Limited

Inventory Management Department

Submitted by:

Omair Hamid Bukhari

Muhammad Junaid (1156)

Tahseef-ul-Haq

Submitted To:

Sir Sohail Majeed

Program:

Master in Business Administration (weekend) Program

Iqra University North Nazimabad Campus

1

Acknowledgement

All praises and thanks are for Almighty Allah Who is the

source of all knowledge and wisdom endowed to

humankind and to the humanity as a whole. They would

particularly like to thank our course facilitator Mr. Sohail

Majeed for many insights that he provided throughout this

course. His guidance and support proved to be useful tool

in making the repot a quality one.

The encouragement and assistance of our parents and

friends provided us a great deal of wisdom towards the

completion of this report.

Thank you.

2

Executive Summary

This report is on the inventory management department of the Shan Foods Private

Limited based on the detail interview with Mr. Kashif Ali (Assistant Manager

Packaging Buying).

Shan Foods Private Limited was established in 1981 as a home based industry selling

recipe mix and with in no time it get a huge success and now it is a leading Spice

Manufacturer in Pakistan. Company is also slowly and gradually expanding their

operation through out the globe.

In this report we identified how Shan food Pvt Ltd is managing their inventory in order to

get maximum availability in the market whenever customer demand. As Shan Foods have

a large number of SKUs so it is a big challenge of Shan Foods to manage their inventory

and fulfill the demand of their customer on time.

With state of the art integrated supply chain department Shan Foods Pvt Ltd is sustaining

their position in the market with providing availability of their every SKU in the market.

Shan Food is mainly managing two types of inventories that are finished goods inventory

and Packaging inventory for that separate MRP is identified for both of them.

Shan Foods is effectively managing their inventory and they have removed all the barrios

and problems by effectively planning their inventories in order to reduce their inventory

cost.

3

Contents

INTRODUCTION...............................................................................................................6

About Shan Foods:..........................................................................................................6

Shan Foods Vision and Mission......................................................................................7

Core Values.....................................................................................................................7

Impeccable Integrity....................................................................................................8

Caring For Community................................................................................................8

Working with Passion..................................................................................................8

Commitment and the Drive To go Extra Mile.............................................................8

Delighting Consumers.................................................................................................8

Celebrating Success.....................................................................................................8

Shariah Compliance.....................................................................................................8

INVENTORY MANAGEMENT SYSTEM.......................................................................9

Importance of Inventory Management System:............................................................10

SHAN FOODS INVENTORY MANAGEMENT SYSTEM...........................................11

How Shan Foods Manage Their Inventory:...................................................................11

Finish good inventory................................................................................................11

Packaging Inventory..................................................................................................12

Stock Keeping Units (SKUs) Of Shan Foods................................................................12

Tools through Which Shan Foods Manage Their Inventory:........................................13

Managing Fluctuation in Demand:................................................................................13

KPIs (Key Performance Indicator) For Evaluating Inventory.......................................13

CHALLENGES FACE IN INVENTORY MANAGEMENT..........................................14

Countering To the Challenges.......................................................................................14

Conclusion.........................................................................................................................16

4

APPENDIX........................................................................................................................17

Questionnaire...................................................................................................................1

7

INTRODUCTION

This report pertains to Warehouse & Inventory Management which is the part of Supply Chain management. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..(Supply chain k advantage aur thori si tareef ker dey aur humara main topic bta de k warehousing hai, Samjha Kamine).

Introduction of Shan Foods:

Shan Foods was initially launched as a small house based business who started selling

recipe mix mostly to friends and family; then gradually the demand for their products

increased and it crossed the Rs. 3 Billion mark with their product division channels

across the world in more than 45 countries. Shan Foods has always followed a very

straight forward approach to limit themselves within the spice business and avoid going

in to any other fileds. Shan Foods is acutely embeded with South East Asian

Communities living in different parts of the world like Europe, US and Australia be

participating in different events time to time.

The company started to expand at a remarkable growth rate since 1981 when the Chief

Executive Officer of Shan Foods (Pvt.) Ltd. Mr Sikander Sultan made his way to success

by mastering the spice business. It was his devotion and commitment that a company that

started from just a room got an immense growth and today Shan Foods is considered a

powerful brand with its existence in more than 45 countries of the world and comes

among the most reputed brands in food industry.

5

Today after setting their name as a reputed food company whose products are cherished

across the world, they are now planning to expand their product lines in order to enjoy

the benefits of growth opportunities; as Shan Foods is continuously introducing new

products that are specifically according to the new requirements and needs of their

consumers.

The success of Shan Foods and be summarized by describing its quality to continuously

identify and react to its customers’ trending needs through their well established R&Ds,

QAs and ideal manufacturing facility.

If anyone wants to have an example of a prosperous Shariah Compliant Business, then

Shan Foods can be one of the perfect examples.

In this industry, the Labor Strength is more than thousand employees, who are well aware to

vision of Company & focus on Quality Standard regarding SOPs, The aim of Shan Foods (Pvt.)

Ltd is to be familiar as the world’s no 1 reliable leader in quality, taste.

Vision of Shan Foods:

Shan, a responsible corporate citizen, adhering to its core values, trusted globally for

providing great tasting consistent quality food products.

Mission of Shan Foods

They are determined to reach every kitchen by diversifying into growing food categories

through innovative, healthy & safe products for the ultimate delight of our consumers.

They will enhance shareholders value through sustainable growth, develop strategic

relationship with our business partners and ensure safe work environment for our

employees.

6

Core Values

Core values has been dominate with the beginning of Shan foods, which helps to made

culture & describe the personality of Shan Foods, which is focusing the groundwork on

which its employees performance & make decision.

Shan’s success is based on a dedicated team of professionals who collectively embrace a

unique combination of the following strong core values:

Overviews on Planning of Shan Foods:

Planning is help to make success & achieve goals of every organization to compete its

competitor, without planning nothing could be done efficiently, the planning of Shan

Foods is based on the forecasting & average sales, they do planning on below mentioned

functions to meet their target.

Planning of Demand

Planning of Raw Material

Planning of Production

Planning of Warehouse

Planning of Inventory

Planning of Distribution

Planning of Return

Overview on Source

Overview on Make

7

Manufacturing is done by monthly forecasting on the behalf of market research &

working on push system by 15 days inventory stock. They have capacity to increase their

production due to increase unpredictable demand, & they different production plan to

fulfill seasonal requirement of demand, like Ramadan, Eid etc.

Push System:

Shan foods is being followed make to Stock (push system), according the demand

forecast & planning.

WAREHOSE OF SHAN FOODS

Warehouse is a commercial building which is used for storage of inventories. They have in-house warehouse due to reduce damage percentage of finished goods. As we know, foods item should be keep in well temperature due hygiene purpose due to save the health of humanity.

They have more than 150 vendors to supply the goods in market as well, all finished goods are placed in proper shelf to maintain SKUs, & they have much place to future expansion according projection base quantity or market demand with the help average monthly sales report.

Benefits of In-house Warehouse:

It will reduce the damage cost of merchandise, Reduce the transportation cost Strong check & balance on inventory

Security System of Warehouse:

Shan Foods (Pvt.) Ltd. Also using the close circuit cameras at each entrance & exit points of warehouse to ensure workers will not be stole or misuse of product. If somebody try to do such type of things so management punished him to learn lesson for others.

INVENTORY MANAGEMENT SYSTEM

Inventory management based on forecasting that was given by Marketing & Sales

department. On the basis of required demand, design Master Production Schedule (MPS,

8

is a plan for individual commodities to produce in each time period such as production,

staffing, inventory, etc. It is usually linked to manufacturing where the plan indicates

when and how much of each product will be demanded), also remember the MPS safety

covers are incorporate for meeting uncertainties, in order to achieve the following

objectives:

To maintain efficiency of operations.

To meet variation in product demand.

To allow flexibility in production scheduling.

To provide a safeguard for variation in raw material delivery time.

To take advantage of economic purchase order size.

In-transit inventory.

In-transit lead time.

Also continuous review the following system

Reorder point system and fixed order quantity system.

For independent demand items.

Tracks inventory position.

Includes scheduled receipts, on-hand inventory, and back orders (an un filled

customer order or demand against an item, whose current stock level is

insufficient to satisfy demand)

For each of the preceding reasons, be aware that inventory is costly and large amounts are

generally undesirable. Long cycle times are caused by large amounts of inventory and are

undesirable and also increase the following inventory relative cost as well as a major

cause to decrease profitability and competitiveness:

Holding / carrying cost.

Setup / production change cost.

Ordering cost.

Shortage cost.

9

According to inventory policy at Shan Foods, 15 days stock covers are kept for

Finished Goods, Packaging Materials covers are depend on the lead time of each

component like Hard Packs, Laminated rolls etc. These packaging accessories are

managed by procurement department according to BOM, & fulfill the requirement of

Purchase Order.

Importance of Inventory Management System

Inventory management department is not important only in Shan Foods but in every

manufacturing industry, it plays a very vital role in making the healthy profitable by

efficient processes & timely decisions.

Reality is that if you don't have control of your inventory management, you will be

unable to determine that you should have how much inventories on hand to handle the

needs of your customers. Even worse than that you will not have enough raw material or

inventories on hand to produce the products then, how do you meet the needs of your

customers.

It is important to keep in mind there are several different functions of inventory

management such as: raw material inventory keep on hand for production; work in

progress inventory which includes any of the goods that are in the production process and

finished goods inventory or the products that are ready to ship to customers. 

Without inventory management it would be difficult for any company to maintain control

and be able to handle the needs of their customers. It should be known to the company

where your inventory is and where it's going to fulfill the need of customer. Unless you

can meet the needs of your customers you will soon lose the market share and enables the

competitors to grab your market share. 

Inventory management has always been important to sustain the growth and not ignore

the importance of inventory management in every aspect. 

10

SHAN FOODS INVENTORY MANAGEMENT SYSTEM

Shan Foods inventory management department is efficiently practicing and managing

their inventory in order to maintain their position and availability of their stock in the

market. Their Planning department leads the whole and supply chain in Shan Foods like

other leading organizations, Procurement, logistics distribution/customer services,

materials management are under the dominancy of planning department.

How Shan Foods Manage Their Inventory

In Shan Foods there are two types of inventory being managed.

Raw Material Inventory

Packaging Inventory

Finish good Inventory

Raw Material Inventory

They have 15 days stock to fulfill the requirement. According to inventory policy at Shan Foods, 15 days stock covers are kept for Finished Goods. The efficient inventory management is when the demand is fulfilled as per the customer required quantities and timelines.

Ordering Process of Raw Material:

In Shan Foods Raw material procured on the basis of Yearly Sales Report, Monthly Sales report excluding seasonal quantity or occasional quantity requirement.

11

Finish good inventory

Finished goods inventory is managed through forecast which is given by Marketing and

Sales Department, on the basis of required numbers master production schedule

(MPS) is identified, in MPS safety covers are incorporate for meeting uncertainties,

According to inventory policy at Shan Foods, 15 days stock covers are kept for Finished

Goods. The efficient inventory management is when the demand is fulfilled as per the

customer required quantities and timelines, at Shan Foods the inventory is kept

according to the sales requirement with safety covers of each SKUs, safety covers are

reviewed on the basis of peek and lean seasons to prevent inventory obsoleteness

Packaging Inventory

Packaging Materials and there inventory is managed through Forecast which is given by

Marketing and Sales department on the basis of that MPS is identified, this MPS identify

the requirement of packaging through Bill of Material then MRP (Material

Requirement Planning) created then Shan Foods order their different supplier for

different material accordingly an then packaging material is manufactured and stocked.

Its safety covers are dependent on the lead time of each component like Hard Packs,

Laminated rolls etc.

First in First out System (FIFO).

Shan Food (Pvt.) Ltd. Using the first in first out system, they manage their inventory by

the placement of items in shelf. Firstly they dispatched the older item rather than the new

item due to save the product expired. FIFO system also reduce the damage the packaging

of each item & also save the cost as well.

Counter Cycle Method:

Shan Foods (Pvt.) Ltd also using following counter cycle method to manage & check &

balance the finished goods inventory.

12

Physical Count:

The management staff of warehouse perform the physically count of each SKUs on

monthly base.

Electronic Count:

They also use the electronic count by System (Oracle) & generate the reconciliation

report by weekly basis. It will make working more efficiently & provide actual figure of

flow of SKUs.

Stock Keeping Units (SKUs) Of Shan Foods

Shan Foods have very diversified product line due to which they have very large number of SKUs which are mention as below

Spices more than 100 SKU’s

Desserts more than 25 SKU’s

Pickle 25 SKU’s

Paste 3 SKU’s

Chutneys 6 SKU’s u’s

Recently launched successfully SHOOP Noodles.

It is very difficult for the company to maintain the demand and supply of very large

number of SKUS. With the help of state of the art planning department Shan Foods is

efficiently managing their inventory of each SKUs on the basis of their demands. For

example they have massive demand of their chat Masala in the month of Ramadan so

they efficiently plan their production and inventory management in order to fulfill the

demand of the market for that SKUS. Moreover they plan their production and managed

the inventory of each SKU according to the market demand. Shan Foods maintain their

SKU’s by monthly, fortnightly, annually internal & external audits.

Tools through Which Shan Foods Manage Their Inventory:

13

Following are the tools through which Shan Foods is managing their inventory

Annual Operation Plan (AOP).

Monthly Forecast.

MRP.

Safety Covers.

Managing Fluctuation in Demand:

Shan Foods is effectively Managing the fluctuation in demand of their SKUs. Different

occasions and seasons are kept in planning to meet the demand variation:

Eid occasions are especially for spices, Chaat Masala, Desserts, and Pickles etc.

Muharram-ul-Haram for Haleem Range.

Oriental Range for winter.

KPIs (Key Performance Indicator) For Evaluating Inventory

Shan Foods is evaluating their inventory management on the basis of following KPIs

Number of days in inventory.

Inventory Cost.

Inventory Availability.

Inventory Scoring recently implemented for Packaging Materials Inventory.

CHALLENGES FACE IN INVENTORY MANAGEMENT

Following are the challenges faced by Shan Foods regarding inventory management.

As Shan Foods have very large number of SKUs for that inventory of packaging

material, work in progress inventory and finished goods inventory are managed

separately which is a big issue for Shan Foods.

Inventory managed cost are very high for Shan Foods Pvt Ltd

Due to managing huge inventory there large amount of capital got tight up.

14

Shan Foods also faces space or warehousing infrastructure constraints due to

increasing in product line and product diversification.

Countering To the Challenges

Inventory management is a critical and complex process which has a very huge effect on

organization if it is not effectively managed. It would be a huge cost bear by the company

if there are any loop holes in inventory management which effect the whole organization

and can yield in loss of sales and loss of customer for lifetime

Shan Foods Pvt Ltd is effectively managing their inventory in order to have 100 percent

availability in the market when needed.

Their planning department effectively planned the inventory of each SKUs and their

finished good as well as their packaging inventory through out the year in order get

maximum edge in the market. As they effectively managed their inventory their capital is

utilized in an effective way.

It is the policy of the company to manage 15 days buffer stock (safety stock) in order to

tackle demand fluctuation. Moreover company annually, monthly and fortnightly monitor

the inventory position and planned their production accordingly. This frequent

monitoring reduces the cost of inventory managed. Customer order filling rate is

important tool Shan food is using to monitor their inventory.

Shan Foods was facing the issue space and warehouses where they stocked their

inventory but with the help of proper planning and rental warehouses they are now

effectively managing their spacing and warehousing issues in cost efficient way. More

over they reduces the inventory of their SKUs which have less demand due to which they

safe space for the high demand SKUs. Moreover proper planning of each SkU’s

production and inventory management is according to their demand in market and proper

precaution is followed in order to effectively meet demand fluctuation. They also monitor

their inventory position on regular basis in order to eliminate any short fall in inventory.

15

Overview on Return

It is the very important & last step regarding the score of supply chain, after the delivery

of finished goods, Sometime the products are not up to the mark or have some different

issues due to which vendor send the product back, the ratio of return little bit high in all

product of Shan Foods.

Causes of Return:

Most common: Expiry Date

Damage products during the logistics activity.

And some others causes should be take a part of return, like production issues, wrong

delivery, wrong quantity delivered, wrong challan #.

CONCLUSION

Inventory management is very important for every organization as it has a direct impact

on overall revenue of the company. There are examples where companies are shut down

or liquidate because of poor inventory management. A huge amount cost bear by the

company if their inventory is not properly managed because if the inventory got short it

creates availability issue which yield in loss of sale as well as loss of customer for life

time.

Shan Foods is effectively managing their inventory by the help of integrated supply chain

department. Their planning department is effectively planning their inventory of every

SKU in order to eliminate their short fall in inventory and have 100 percent availability in

the market when needed.

The company is effectively managing the demand fluctuation by proper planning and

proper safety covers. Inventory management is a very critical process for Shan Foods and

they monitor it on regular basis and planned their management accordingly.

16

APPENDIX

Questionnaire:

Q1: How Shan Foods inventory management department is working? Please give us an overview of the department?

Q2: Why do you think this department is important for Shan Foods?

Q3. How Shan food is managing their inventory?

Q4: What are the key tools through which Shan Foods manage their inventory?

Q5: What are the basic ware house and inventory management issues which shan food faces?

Q6: How you resolve these warehouse and inventory management issues?

Q7: What other issues you face regarding your inventory and what steps you take to resolve it?

Q8. How many SKUs Shan food altogether have?

Q9: How you track, check and balance of these SKUs?

Q10: What are the key factors on which Shan Foods forecast the fluctuation in demand?

Q11: How you manage the fluctuation in demand?

Q12: How you evaluate the performance of inventory management?

Q13: What are the KPIs on which you evaluate your inventory managements?

Q14: According to you what would be the impact on overall performance of the company if this department have some loop holes?

17