EXECUTIVE SUMMARY

The final project is the result of the work done ! oth of the "e" ers and co"piles it to#ether in this for"$ under the title of %&i#her Cost of Milk procure"ent and pro le"s in retainin# the suppliers'( )or writin# this report we ha*e *isited En#ro )oods +i"ited "anufacturin# facilit! in Sahiwal$ and ha*e *isited the suppl! chain "e" ers i'e' the far"ers than the "ilk collection units and lastl! the "anufacturin# plant' The core "ethodolo#! adopted for data collection is ! conductin# inter*iews of the co"pan! representati*es of the desired depart"ent' Visitin# the far"s and "eetin# the suppliers ,far"ers- to #et to know their point of *iew' The co"pan!.s representati*e has shared with us the pro le" of their hi#her cost in the procure"ent process and with the coordination of the co"pan!.s representati*e we ha*e #one throu#h the whole process and ha*e pointed a few loopholes' En#ro has "er#ed their "ilk procure"ent and A#ri Ser*ices depart"ent as a sin#le entit! na"in# it Milk /rocure"ent and A#ri0Ser*ices depart"ent which looks throu#h the processes of "ilk procure"ent$ lo#istics$ A#ri ser*ices and its "arketin#' The pro le"s underl!in# the hi#her cost of procure"ent and supplier retention has een pointed out$ discussed and a proposed solution fro" our side has een #i*en to the co"pan!'

I1TR23UCTI21 A13 4AC56R2U13 2) T&E STU3Y7

En#ro Corp ein# the first /akistani "ultinational co"pan! is at hei#ht of

attraction for a lot of new co"ers in the field due to the en*iron"ent$ e8perience and "ost pro a l! the ta# of the co"pan! ' 3ue to this h!pe when last !ear in the su""er one of the #roup "e" ers workin# on this report$ )aris has heard a out a te"porar! outsourcin# on an ad*ertisin# project of En#ro )oods has 9ualified and ha*e worked under the Assistant Marketin# Mana#er$ Milk /rocure"ent and A#ri0Ser*ices' :hile on the project so"e of the issues ha*e een o ser*ed and discussed etween )aris and his i""ediate co"pan! personnel' :hile on the co"pletion of our de#ree pro#ra" fro" the institute we ha*e to su "it a final project as co"pulsor! so oth the #roup "e" ers workin# on the project ha*e "utuall! dicussed and a#reed upon choosin# En#ro )oods to do our final project' :e presented the project proposal to our super*isor ! #i*in# a rief introduction a out the project and it has een selected' After the proposal ha*e een selected we started our workin# ! *isitin# the processin# plant in Sahiwal' The project is re#ardin# the issues faced ! the co"pna! in the re#ard of the "ilk procure"ent depart"ent and the issues faced ! the suppliers ,far"ers-' Meetin#s and inter*iews are selected as the techni9ue to collect pri"ar! data' Understandin# of the suppliers and their cata#ories is one of the "ajor part and how to "ana#e those cata#ories is the second' The pro le" of the hi#her cost of procure"ent has turned out e ha*in# 9uiet a few loopholes throu#h out the process which are discussed in detail in this report and a proposed solution of the pro le"s is su##ested' The proposed solution is dependin# upon the infor"ation we ha*e collected fro" the co"pan! authoritati*es and suppliers' And it is "ade possi le ! the coordiantion of the oth parties in*ol*ed'

SI61I)ICA1CE 2) T&E STU3Y7

)irst si#nificance of this report for the co"pan! is the identification of the underl!in# factors which are causin# the co"pan! hi#her cost of the raw "ilk procured fro" the suppliers' And secondl! it hi#hli#hts the pro le"s of the suppliers on the co"pan!.s end which will create a etter understandin# for the co"pan! as well as the suppliers' Third and the "ost i"portant perspecri*e of this stud! reflects how to o*erco"e the pro le" of retainin# the current suppliers as well as attractin# the new suppliers' I"portantl!$ this stud! will help the co"pan! to reduce the hi#her cost of procure"ent and can s!nchroni;e it with the forecasted costs' 1ew wa!s of sustainin# the suppliers ! #i*in# the" the pro"ised incenti*es and encoura#in# the" to eco"e the re#istered and offical suppliers' In this wa! attraction for the new suppliers can e "ore encoura#in#'

MET&232+26Y7
This stud! is co"piled on an unstructured approach< it applies reasonin# and use of words to #et the "eanin# and the feelin# which descri es the situation on hand' The research "ethod adopted for this stud! is inter*iewin# which lies under the cate#or! of Sur*e! Research' It in*esti#ates the opinions of people and interaction etween the"' Inter*iews of the followin# personnel of the co"pan! will e enou#h to #et "uch of relia le data i'e' Marketin# Mana#er of M/AS$ &ead of the lo#istics depart"ent and secondl! the suppliers of "ilk that are the far"ers associated with the suppl! chain of the co"pan!' 2pen ended 9uestions will e asked to the authorities that can help us to scenario' Justification: The first reason for choosin# this "ethod is that it results in i""ediate attention$ solution and application of the solution of the pro le"' The second reason for selectin# inter*iew as "ethodolo#! is to #et "ore fle8i le and understanda le answers fro" the "ana#e"ent a out this particular potential pro le"' In addition to that the inter*iewin# techni9ue will pro*ide us to take a etter insi#ht of the co"pan!.s strate#! and culture re#ardin# the pro le" handlin#' Choosin# an! other data collection techni9ue would e of no use as we are not addressin# to the pro le" of the whole or#ani;ation' Another reason ehind usin# the "ethodolo#! is to de*elop a etter understandin# of the pro le" for us and also for the understandin# how senior "ana#e"ent responds to it' Mainl! inter*iews of the respecti*e personnel fro" the concerned depart"ents are re9uired so in that case no other "ethod can e effecti*e enou#h' It.s a stud! su##estin# a proposed solution for the current pro le" of the co"pan! at hand$ which cate#ori;e it as an applied research stud!' etter understand the co"plete

I1TR23UCTI21 2) E16R2 )223S7

En#ro )oods +i"ited is a su sidiar! of En#ro Che"ical /akistan +td$ which is one of the "ost reputed enterprises in /akistan with "ore than => !ears of di*ersified usiness operations in the areas of fertili;er and che"icals' En#ro )oods started its usiness operations in March ?>>@ and with the usiness' An e8citin# new

successful launch of 2lpers Milk$ Taran#$ 2lwell and 2lpers crea"$ it has esta lished itself as a "ajor pla!ers in the foods *enture is the di*ersification of dair! portfolio into ice crea"' :ith the e*er e8pandin# "ilk collection network and processin# facilities$ the Suppl! Chain has #eared the" for the #rowin# sales of their products' En#ro )oods$ a wholl! owned su sidiar! had its first full !ear of operations in ?>>A' The co"pan! continued e8pandin# with additions to rand portfolio$ "ilk productions and distri ution capacities' PORTFOLIO: 2lpers Milk 2lpers Crea" Taran# 2lwell 2"ore

/R24+EM STATEME1T7
%&i#her cost of "ilk procure"ent and pro le"s in retainin# the suppliers'( Explanation: En#ro food is /akistan.s first "ultinational corporation$ well known for its products in dair! and foods industr! locall! and ha*in# a head to head co"petition with the e8istin# International co"petitors as well as the local' The pro le" that we ha*e identified if left unsorted will e of #reat loss for the co"pan!' En#ro hit the foods industr! in ?>>@$ efore that the ke! pla!er of the industr! 1estle has de"olished the e8istin# local co"panies like &alee ' En#ro )oods is in direct co"petition with 1estle now' 1estle in the last few decades has de*eloped a *er! stron# suppl! chain network with the suppliers ! #i*in# the" a reasona le profit "ar#in' So it has #ra ed the lo!alt! of suppliers' +ocatin# the processin# plant in the hu of the dair! and a#ricultural area En#ro has de*eloped their repute so enor"ousl!' The re#ion Central /unja "ainl! Sahiwal and the near ! cities and *illa#es are "ost rich in the e8istence of raw "aterial i'e' 9ualit! "ilk #ained fro" the fa"ous reed of far"in# ani"al B.1eeli 4ar'.. En#ro has de*eloped a suppl! chain network in the re#ion and located their "ilk collection centers side ! side 1estle ut onl! in a few "ajor areas' 4ut due to the e8istin# repute and positionin# 1estle is enjo!in# hi#her profits than En#ro' 2ne reason is that En#ro is not !et a le to enhance the a"ount of "ilk collection centers in all possi le locations with 1estle'

Secondl!$ En#ro has to attract "ore of the potential far"ers to join the network as well as the! should e "oti*ated to enhance their current setup of dair! far"in# and ha*e to eco"e a co""ercial dair! far"er' Thirdl!$ En#ro is pro*idin# "ore enefits and co"pensation in ter"s of re#ular *eterinar! ser*ices and far" "aintenance for the far"ers skippin# "ost of the profit "ar#in$ at the ti"e which is "ore appreciated ! the suppliers' 3ue to which En#ro is een una le to "aintain the suppliers as well as lacks in #ra in# "uch attention of the new suppliers'

MI+5 /R2CUREME1T7
1estle and En#ro are the two ke! pla!ers of dair! products in /akistan' 1estle has een operatin# in the countr! fro" a couple of decades and ha*e de*eloped a *er! stron# and effecti*e operational network' The core product and the raw "aterial in dair! product is o *iousl! "ilk and Central /unja is the richest in this resource' The "ost understanda le reason for nestle upon cuttin# their operational cost is the suppl! chain network and their relations with the suppliers' There are a few areas in the re#ion where En#ro and 1estle are in direct co"petition for "ilk procure"ent' If 1estle is purchasin# e8pensi*e raw "aterial fro" two areas where En#ro is also operatin# and purchasin# it cheaper fro" fi*e other areas where En#ro is not !et operatin# 1estle still can enjo! hi#her profit and this cost reduction can enhance their a ilit! to ear the e8pense of the two areas' And this is the onl! reason that 1estle is a le to attract the suppliers ecause En#ro is still workin# on the network e8pansion pro#ra"'

Understanding the suppliers: 3ue to the operations of En#ro in the field of fertili;ers$ En#ro has created a #ood reputation in the e!es of the far"ers' The lon# ter" relationship of the far"ers with En#ro Che"ical has paid well for En#ro )oods$ which without an! effort has resulted that the far"ers were willin# to eco"e the supplier of "ilk for En#ro )oods' The #oodwill thus created ! the parent co"pan! has een pro*en an added ad*anta#e for En#ro )oods' The plannin# and polic! depart"ent of En#ro has presented a plan re#ardin# the cate#ori;ation of the suppliers which will help in reducin# the cost of "ilk

procure"ent as well as #i*e a etter in si#ht to understand the pro le" at the asic le*el' The cate#ori;ation of the suppliers is as follows7 3irect )ar"er /otential )ar"er Co""ercial 3air! )ar"er

Direct Farmer: A far"er ha*in# onl! ?$ C ani"als in the cattle and is willin# to eco"e the supplier$ the! ha*e cate#ori;ed it as the direct far"er' And he does not ha*e enou#h resources to enhance the nu" er of ani"als in the cattle' &e is offered a fi8ed a"ount of profit on per liter that he pro*ides to En#ro' Progressi e Farmer: A pro#ressi*e far"er is one who has a s"all nu" er of ani"als in the cattle which he is just usin# for his personal consu"ption e8pandin# his cattle and is willin# to ut has the interest in eco"e the supplier of En#ro' The

pro#ressi*e far"er can e pro*ided with the technical and "edical assistance ! En#ro for a etter setup and an additional "ar#in on per of liter "ilk is #i*en to hi" e8cept the ser*ices' !ommercial Dair" Farmers: Co""ercial dair! far"ers are the one who alread! ha*e a dair! far" and the! are usin# it as their source of inco"e and ha*e contract with the co"panies like En#ro and 1estle' The! also ha*e the resources to deli*er the "ilk to the

co"pan! on their own ut in the a o*e two t!pe of suppliers. direct far"ers and potential far"er the co"pan! itself has to collect the "ilk for" their far"s' This is the reason due to which the co"pan! prefers to ha*e "ore C3).s then the others ecause the! reduce the co"pan!.s cost of "ilk procure"ent' C3).s are the "ajor suppliers who want to enhance the production of the "ilk and are willin# to adopt the new techni9ues and technolo#! and are enhancin# their setup.s and are "o*in# toward "echanical far"in# in the area' !urrent Procurement #trateg": The strate#ic "ana#e"ent has announced a plan to the procure"ent depart"ent re#ardin# the percenta#es of the total 9uantit! of "ilk procured and it is to collect D>E of the "ilk to e procured fro" the co""ercial dair! far"ers and ?DE each fro" the direct far"ers and potential far"ers'

10

REAS21S )2R &I6&ER C2ST7

The first loophole in the whole "ana#e"ent is that co"pan!.s own personnel are not workin# for it the! are workin# for their own interests' The! are not focusin# on the policies to e practiced properl! and the! are o li#in# their own friends and relations' The! are doin# their own after "ath of the whole situation and the first identified reason is that the co"pan!.s polic! is to collect D>E "ilk fro" the C3)s ut in realit! onl! ?>E "ilk is collected fro" the"' It directl! enhances the cost of the co"pan! and is #i*in# "ore enefit to the suppliers of their own contacts' Second pro le" of hi#her cost is the una*aila ilit! of the collection centers in the potential areas where 1estle is operatin# ut En#ro has een una le to operate !et' The reasons e8plained a o*e #enerates the third pro le" for the co"pan! that is of retainin# the suppliers and reduced attraction for the suppliers$ it is a#ainst En#ro' En#ro is the new entrant in the industr! ut has esta lished its i"a#e and position *er! stron#l! a#ainst 1estle ut the co"pan! deepl! felt the need of understandin# the pro le" on their end ecause the Moto of the co"pan! is %Ener#! to 6row( and if the! are not willin# to o*erco"e the pro le"s so the "eanin# of their *er! e8istence di"inishes' The strate#ic "ana#e"ent has forecasted the e8pected costs of the operations ut the! are "uch hi#her in realit!' This pro le" has alar"ed the "ana#e"ent for re e*aluatin# their strate#ies'

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S:2T A1A+YSIS Stren#ths

Relati e histor" $ith Farmers: En#ro has een in the usiness of fertili;ers firstl! and En#ro )oods is the di*ersified e8pansion of the parent co"pan! so the relati*e histor! of the parent or#ani;ation with far"ers has added an ad*anta#e for En#ro )oods' Procurement Units: The procure"ent network can e de*eloped throu#h etter channels on the asis of the of its lon# ter" relationship with distri utors in the a#riculture sector' O er$helming Response of the customers: The 9ualit! control "easures and use of lastest technolo#! has deli#hted the custo"ers and the trust nased on the 9ualit! products has a led En#ro to cross F'= illion sales fi#ure' #trong consumer % product research: En#ro )oods has done a stron# research ased on consu"er prefrences and acepti ilit! of a new "ilk rand in the current "arket' /roduct research has ena led the" to e"ar#e as a ke! pla!er in the #lo al "arket' )or this research En#ro has hired the est professionals in the research field'

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Latest Technolog": E)+ onl!$ has the third0#eneration U&T "ilk plant in the countr!' E)+ plant is the onl! plant in /akistan that uses 4actofu#e technolo#! to *irtuall! eli"inate acteria and ensure pre"iu" 9ualit! and h!#iene'

#ucessful related di ersifications: The inte#rated "anufacturin$ distri ution and warehousin# facilities has ena led the co"pan! to sucessfull! di*ersif! in dair! products and set up a unit of processin# "ilk into ice crea" under the rand na"e 2"ore'

:eaknesses
!ompromise on the &ualit" of mil': En#ro )oods does not own an! dair! far" and ha*e to depend upon the far"ers and #awalas which so"eti"es is of low 9ualit! and i"pure' Pac'aging: The dependence of En#ro )oods for packa#in# on Tetra /ack for its dair! products as well as the juices is a factor for hi#her cost of "anufacturin#'

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2pportunities
Trend to$ard Processed Li&uid (il': In lar#e cities as well s"aller ones there is the increasin# trend toward the consu"ption of the processed li9uid "ilk' The "ain factor is the low 9ualit! of the "ilk pro*ided ! the local dair! far"ers' )$areness: 6rowin# dissatisfaction with loose "ilk and increasin# awareness a out health and h!#iene issues ha*e led to increased processed "ilk consu"ption' *ualit" (il' Resource: 1eeli 4ar a fa"ous reed of the far"in# ani"al "akes Sahiwal the richest in its a*aila ilit! and which #i*es an opportunit! to En#ro )oods to enhance the 9ualit! of the "ilk deli*ered to its custo"ers resultin# in hi#her satisfaction'

Threats
!ompetition: 1estle is the ke! co"petitor of En#ro in the dair! products' The "ain reason for 1estle to ac9uire "ore attention is the lon# period of ti"e< 1estle has spent in ser*in# the dair! industr!' 1estle has set a standard in the "inds of the custo"ers in ter"s of 9ualit!' Recessionar" period in +usiness c"cle: 3ue to the hi#her inflation rate and the decreasin# purchasin# power of the custo"er in /akistan has affected al"ost e*er! operational usiness'

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C21C+USI21S7
Concludin#$ on the past perfor"ance and the achie*e"ents of En#ro )oods in the recent !ears pro*e that the pro le"s faced ! the co"pan! can e re*i*ed ! just a little "ore attention' 4ased on the facts e8tracted fro" the S:2T anal!sis En#ro can use its stron# relationship with the suppliers$ the use of latest technolo#! to deli*er a 9ualit! products and it can use the o*erwhel"in# response of the custo"ers to take out the threats to it' And in contrast to weaknesses of En#ro$ the! can e con*erted in wa! that it can o*erco"e the threats' The pro le"s identified can e of #reat deal to En#ro if not addressed properl!' And the strate#ic "ana#e"ent needs to re0e*aluate its current strate#ies at the "o"ent' The pro le" of hi#her cost is "akin# En#ro to lack ehind 1estle in the efficienc! of its operational cost' And hence it is otherin# the suppliers as well in retention' The dair! usiness is co"pletel! dependent on the suppliers ecause no co"pan! !et has such a lar#e ackward inte#ration network$ so the issues with the suppliers should e resol*ed on hi#hest priorit!' :e ha*e reco""ended so"e

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proposed solutions ased on our understandin# of the pro le" to its est e8tent and practicalit!'

S2+UTI21S A13 REC2MME13ATI21S7

The first reco""ended solution for the pro le" of the percenta#e distri ution of the "ilk 9uantit! is to re#ister all the e8istin# suppliers under the cate#ories of the suppliers e8plained earlier and then to assi#n the new reco""ended percenta#e i'e' F>E fro" the C3)s' The step to reduce the percenta#e of C3)s will reduce the cost of the co"pan! and let it eco"e a le to attract the new suppliers ! #i*in# the" "ore profit "ar#ins that are cut off fro" the cate#or! of C3)' In this conte8t the co"pan! will pro*ide etter chance for the direct far"ers and especiall! the potential far"ers to #et in the re#istered list of the suppliers and #et "ore of the co"pan!.s "ar#in and other incenti*es in the for" of ser*ices pro*ided for the de*elop"ent of their far"s' Second reco""endation for the co"pan!.s pro le" is of short network approach in the potential areas' It is su##ested to the co"pan! to e head to head with 1estle in placin# their collection units' )urther understandin# of this su##estion

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can e understood on the asis of these fi#ures< currentl! in Sahiwal and the surroundin# areas 1estle has D> "ilk collection units ut En#ro onl! has ?> "ilk collection units$ so there are C> potential positions in which En#ro is lackin# to co"pete and 1estle is a le to cut its cost' In a roader conte8t$ in /unja 1estle ha*e =G> "ilk collection units whereas En#ro is ha*in# =D> "ilk collection units$ F? potential areas are left in co""on ! oth the co"panies' So En#ro should fill up the #ap of C> "ilk collection units as of 1estle and an additional F? units in those areas where 1estle is also not procurin#' This network e8pansion pro#ra" will not onl! help En#ro to reduce its cost a#ainst 1estle ut will help in reducin# it further'

RE)ERE1CES7

Dr, )shraf Marketin# Mana#er$ Milk /rocure"ent and A#ri Ser*ices'

(, Fahad -ia Assistant Marketin# Mana#er$ Milk /rocure"ent and A#ri Ser*ices' Mo ile nu" er7 >C>=???>==> E0Mail I37 f;wasee"Hen#rofoods'co"

+inks7

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www'en#rofoods'co" http7IIwww'en#rofoods'co"Iourco"pan!'ht"l http7IIwww'en#rofoods'co"Iour rands'ht"l

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