FINAL PROJECT

Supply Chain Performance Sec A

Submitted by:

Muhammad Farahiel

F2016005115

Abdul Rafay Ikram

F2016005121

Muhammad Shahryar Dreshak

F2016005091

Hafiz Mujahid Ali

F2016005099

Adil Rehman

F2016005086

Maria Mansha

F2016005106

UTS EXPORTS TRADING COMPANY

1- Executive summary:
 Case company in this study is a textile manufacturer UTS exports trading company. UTS
manufactures different types of tents. Our main target are the tents which are used in disasters
because they contribute more than 75% of UTS exports trading company’s annual sales. Their
main customers are NGOs. UTS exports trading company supplies their products all over the
world. We completely analyzed their supply chain. They have 3 production units. There are
around 23 suppliers of UTS exports trading company. Their competitive strategy is low cost
leadership and their supply chain strategy is efficiency. Their cycle time is 10 minutes. UTS
exports trading company lead time that firs 15 days they need for preparation/setup and then they
produce 100 unites per day. If order is of 500 units then their lead time will be 15+5=18 days.
UTS exports trading company’s key suppliers are cloth supplier, key customers are NGOs and
key process is testing. Overall UTS exports trading company’s supply chain performance is
better than its competitors, but their main competitor is Sheikh Noor Din which has a slight edge.
UTS exports trading company has very uncertain demand because it main product is disaster
related. They have maintained good brand image. Main thing to attract their key customers is
low prices because other things are almost same. NGOs give orders to those companies who
offers lowest price. After price brand image and reputation in the market is the most important
thing which include quality, on time deliveries order fill rate and other aspects to satisfy their
customers. UTS exports trading company has achieved strategic fit because their competitive
strategy and all functional strategies fit together to form a coordinated overall strategy. Their
functions in the company have appropriately structured their processes and resources to be able
to execute these strategies. UTS exports trading company’s design of overall supply chain and
the role of each stage is aligned to support their supply chain strategy. Problems face by UTS
exports trading company are that they have to take first 15 days for preparation, they don’t have
experienced and permanent work force, and their production unit remains closed for very longer
time. We gave them solution to reduce these 15 days to at least a week by dealing with
contractors that they will supply labor force within a day or two and by doing regular machine
testing. They can hire few labors who can achieve economies of scale through 1 machine at each
step. It will keep their production unit and machinery running which will reduce testing and
repairing.

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2- Company Introduction

Case company in this study was a textile manufacturer UTS exports trading company. It
was started in 1992. Till now they have three production units. First in Kasur Pakistan, second in
Jabal Ali UAE and third in Sili UAE. They produce tents. They have a huge variety in tents.
They also supply tents to army. In Pakistan they have local suppliers but occasionally they
import supplies from china. They have around 23 suppliers. They serve customers all over the
world. They export their product.
Table 1: Company Information

Market Segment Textile Industry

Manufacturing Facility Local

No. of employees 200 permanent (they hire

contractual labor for production)
No. of Production Units 3

No. of suppliers 23

Annual Turnover PKR 200 million

Geographical Market All over the world

served

3- Supply chain strategy and design

3.1- Competitive Strategy

UTS exports trading company’s competitive strategy is low cost leadership because in
this business competitive advantage is low cost. Main component in quotations, which
companies send to NGOs, is pricing. NGOs first select few companies on the basis of lowest
prices and then from these selected companies NGOs then select the company whose brand
reputation is good. So, to get orders UTS exports trading company has to be leaders in low cost.

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3.2- Supply Chain Strategy

UTS exports trading company’s supply chain strategy is efficiency because they have to
produce on lowest possible cost. To reduce the per unit production cost every process of supply
chain must be efficient. UTS exports trading company has to exploit economies of scale to get
least possible cost per unit.

3.3- Supply Chain Design

3.3.1- Manufacturing

UTS exports trading company manufactures different types of tents for uncertain
conditions like disasters. They also manufacture tents for other purposes like camping, military
purposes, warehouse tents etc. UTS exports trading company main product is tents used by
NGOs for shelter purposes.

3.3.2- Storage

UTS exports trading company has storing capacity of 15000 tents while raw material for
almost 500 tents is always stocked. This storage capacity is only of Kasur Pakistan’s production
and storage unit not of units which are in Jabal Ali UAE and in Sili UAE. We are targeting only
Kasur Pakistan.

3.3.3- Distribution Sites

UTS exports trading company has three distribution sites. First distribution site is in
Kasur Pakistan. Second distribution site is in Muraqqab UAE. Thid distribution site is in Sheikh
Zayad UAE. We are targeting on the distribution site which is in Kasur Pakistan.

3.3.4- Market Supplied

UTS exports trading company supply their products to different types of NGOs and other
Non-Profit organizations all over the world and Pakistan Army. There main order comes from
other countries not from Pakistan.

3.4- Key Measures

3.4.1- Product Customization

In tents there are variants on the bases of quality of cloth used, color, and size. UTS
exports trading company offers these customizations to their customers. Most important thing in
customization is the cloth used because customer don’t compromise on the quality of cloth
because it is the main component in a tent.

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3.4.2- Number of Units per year

UTS exports trading company produces almost 6000 tents a year which are used by
NGOs in disasters. UTS exports trading company has other tents also but they contribute very
little in their annual production. UTS exports trading company is one of the leading producers on
these tents in Pakistan.

3.4.3- Cycle Time

UTS exports trading company has cycle time of 10 minutes. After every 10 minutes a tent
is ready. This cycle time is for tents which are used by NGOs in disasters. Other tents have
different cycle time. UTS exports trading company has achieved this cycle time by constantly
improving their manufacturing processes.

3.4.4- Lead Time

UTS exports trading company usually takes 11 days to collect raw material for tents then
the manufacture plant makes 100 tents per day.

Basically, the company tells more time to customers then the actual time required for the
completion of the order. So, it helps them to have a little extra time to complete order on time
and hence they avoid delays.

3.5- SIPOC

3.5.1- Key supplier

UTS exports trading company’s key supplier is the cloth supplier because main
component of the tent is cloth. So, quality of the cloth matters, and quality of cloth is in the
hands of cloth supplier.

3.5.2- Key Customer

UTS exports trading company’s key customers are NGOs. Because NGOs have more
than 75% shares in UTS exports trading company’s annual sales.

3.5.3- Key Process

UTS exports trading company’s key process is testing the tents. If tents are not tested
properly and fails to fulfil NGOs needs, then it impacts their brand image which ends up in order
reduction.

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Figure 1: SIPOC Diagram

OUTPUTS CUSTOMERS
SUPPLIERS INPUTS Relief tents NGOs
Canvas Tent Cloth Warehouse Nonprofit
PROCESS
Manufacturers Iron Poles tents Organizations
Iron Supplier
Camping
Tents

Stitching
of Cloth
Collection Testing of
of Raw random Packaging Shipping
material Units

Shaping of
Iron Poles

4- Supply Chain Performance

4.1- Flexibility

UTS exports trading company’s main customers are NGOs. Their demand is not regular.
It is disaster based. Market is very unpredictable. UTS exports trading company always keeps
stock to cope with market changes. Customer needs are almost same because NGOs
requirements are always same because their main target is to give people shelter. NGOs never
give order to a single company because they want very large number of tents on daily bases and
their supply should not be stopped. So, they never trust a single company. Main component to
take the order is price. UTS exports trading company compete with their competitors on price. In
price basically cost is almost same so, they have to compete on profits. One who will anticipate
other’s profit margin in a particular quotation will make a quotation with lesser profit margin.
After price 2nd most important aspect in taking order is brand image or reputation on previous
orders. UTS exports other customers are construction companies and army. These customers
have very less portion in sales in comparison with NGOs.

Variations in demand is compulsory because UTS exports trading company’s main

customers are NGOs and their demand is based on disasters and no one can predict when their
demand is going to increase. Whenever UTS exports trading company send a quotation they

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write that they will start production after 15 days. They have stock of finished goods and raw
material too. These 15 days are to get prepared. They don’t have permanent labor. They have to
hire contractual labor force according to the order. They have to analyze their inventory and they
have to do some working on their inventory because in many cases their inventory is stored from
months. They have to order supplies if required. UTS exports trading company’s main
competitor is Sheikh Noor Din. Difference in both companies is that UTS exports trading
company don’t produce raw material but Sheikh Noor Din produce every single thing on their
own but still UTS exports trading company competes with Sheikh Noor Din on prices and take
the clients.

In manufacturing UTS exports trading company have excess machinery. Whenever they
receive an order in first 15 days they have to prepare their machinery too. They test the desired
number of machinery and then put them in production plant. Main problem in manufacturing is
electricity. When there is a big order then they manufacture on generators and add the cost of
generators while costing but main problem is when they have a relative smaller order and
production on generators will increase their per unit cost so they have to manufacture on
electricity provided by WAPDA which is not predictable because in Kasur load-shedding
schedule is not same. When electricity is not available in smaller order’s production time period
then they have to use generators because they have to deliver on time to NGOs. This increase
their cost which means they have to compromise on profit. Our competitors are almost same, but
our main competitor Sheikh Noor Din have their own electricity, so they have edge in this issue.

In supplier performance UTS exports trading company only faces issues in color of the
cloth which they use. It is not a simple issue as it seems. When UTS exports trading company
color the cloth, it has to be exactly same but due to poor supplies many times color is slightly
different. So, UTS exports trading company don’t send these tents together because if they will
send tents with 2 color shades in same shipments then their international customers (NGOs)
rejects their batch due to quality clearance issue. So, they ship same color products in one
shipment and then other on other shipment. By dosing this no one notices the slight color
difference and their products passes the quality check. UTS exports trading company’s other
competitors also do the same thing while shipping. Their main competitor Sheikh Noor Din
doesn’t face this problem because they produce everything on their own, so their quality is
almost same, and their color is almost same in every batch. This is not their competitive
advantage because UTS exports trading company have overcame this issue by managing our
deliveries.

UTS exports trading company almost every time has international order, so they have to
deliver it across borders. They outsource their deliveries. For ships they have two companies
Active Frate International and Noor International. Sometimes on emergency basis they have to
use Air Frate. Main problem in delivery is not on these companies’ side it is on UTS exports
trading company’s side. UTS exports trading company has to deliver their products to the port in
time to get it delivered to their desired location in time. Due to some issue i.e. strikes, roadblock,

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emergency holidays, and sometimes political interference UTS exports trading company is not
able to deliver their products to the port in time. UTS exports trading company has overcame this
issue by keeping their products available on ports or in UAE every time. Whenever their
shipment gets rejected or customers don’t like their shipment, they don’t return it to Pakistan.
They will store it on the ports, or they will send it to their UAE’s plants if some working is
required. In these situations which causes late deliveries UTS exports trading company uses
stock available on ports or in UAE’s plants.

4.2- Recourses

UTS exports trading company manufactures tents. They manufacture in batches, but they
still told us the cost of single tent which is their most selling product. Single tent costs them
$1230. It includes everything including labor cost, maintenance cost, and rework cost. Labor cost
per tent is Rs.4500. Total 9 workers work on a single tent (not at the same time) and each gets
Rs.500 per tent. UTS exports trading company’s most costs are in USD, so they have calculated
their total manufacturing cost in USD. In comparison to UTS exports trading company’s other
competitors their cost is almost same but when compared to their major competitor Sheikh Noor
Din their cost is a little bit high because they don’t produce everything but still UTS exports
trading company has managed to compete by keeping good brand image and reducing their profit
margins.

UTS exports trading company stores inventory. They have their own production plants
and warehouses in Pakistan and UAE too. They had never calculated holding cost because they
don’t have to pay rents to store anything. They do not use electricity or any other resource to
store, they only have to keep inventory in storage and lock the doors. Costs like employees’
salary who are there for security is added to employees’ salary section and other small expenses
are added in miscellaneous expenses section. Basically, this is their inefficiency and majority
companies in this business do the same. UTS exports trading company is not doing any effort to
record the holding cost or to reduce the holding cost.

UTS exports trading company distribution cost is according to the wait not according to
the number of items. As mentioned, before they have to export their products so, they use sea
and air for their distribution. Sea is cheaper than air. When UTS exports trading company send
their products through ships then it costs them $2 per kg. When UTS exports trading company
send their products through air then it costs them $3 per kg. These costs are not only costs, they
have added their profit also because their orders are based on lower process. So, in quotation
they lower their profit margin, but they cover it by adding their profit in these costs.

Whenever there are orders, and everyone is working UTS exports trading company is
better is sales than most of their competitors. They were 3 rd in Pakistan when earthquake came in
2005. They were also 3rd in Pakistan when the disaster in Panama few years back arrived and
when disaster in Japan arrived, they were also 3rd and that time.

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 UTS exports trading company return on investment is very high. They earn Rs.51 on
every Rs.100 investment. So, their return on investment is 51%. Then have relatively high return
on investment than other competitors but Sheikh Noor Din which is their main competitor has
higher return on investment. UTS exports trading company has a lot of difficulties in competing
with sheikh Noor Din because UTS exports trading company doesn’t produce everything they
purchases the raw material, but Sheikh Noor din produces everything.

4.3- Output

Order fill rate of UTS exports trading company is almost 100% because they always give
right quantity to right customer on right time with right documentation. They have maintained
such high order fill rate by getting first 15 days for preparation and this is their necessity to keep
this rate because their order is based on low prices then good brand image. So, to keep good
brand image they have to maintain high order fill rate. Almost every competitor has higher order
fill rate than 90%.

In UTS exports trading company it is very rare to deliver late because their customers are
mostly NGOs. NGOs order when there is a disaster. So, in these conditions they cannot
compromise on time because it is morally wrong, and it will hurt your brand image too. In
starting UTS exports trading company faced issues in delivery on time because of roadblocks,
strikes or other political interference but then UTS exports trading company stat keeping their
finished products on ports and in UAE’s plants which helped them maintaining on time
deliveries and their brand image.

UTS exports trading company takes first 15 days for preparation which is also mentioned
in their quotations. After 15 days every day UTS exports trading company will deliver 100 tents.
So, if UTS exports trading company has an order on 1000 tents then they will complete this order
in 25 days.

UTS exports trading company tries to keep less customer response time. They receive
order through emails. They try to reply as soon as possible. On an average UTS exports trading
company gets 2-3 days to response to a customer’s demand. They take 2-3 days to access their
current inventory and to prepare quotations.

UTS exports trading company uses certified shipping companies so shipping error is
nearly zero. Now it basically depends upon customer. If customer is very quality sensitive, then
UTS exports trading company recommends their customers to take insurance. UTS exports
trading company will charge for that insurance and then they have to be careful in shipping
because if tents are in contact of water then it will affect its quality. UTS exports trading
company pays more to shipment companies for insurance deliveries to take extra care.

Customers email UTS exports trading company if they don’t like the product or product
is missing something. UTS exports trading company simply asks to return it and send another

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batch. The returned order is kept on the ports or if some working required then it is sent to their
UAE’s plants for emergency order fulfilment.

5- Strategic Fit

5.1- Customer and Supply Chain Uncertainties

5.1.1- Demand Uncertainties

Demand is uncertain for UTS exports trading company because its demand is disaster
based and no one knows when disaster will come. Still with highly uncertain demand UTS
exports trading company has managed to keep almost same response time, service level, quantity
of product in each lot and especially pricing which matters the most to retain the customer.

5.1.2- Supply Uncertainties

Supply uncertainties are very low in UTS exports trading company. Their processes
never breakdown. They have predictable and bigger yields. They seldom face quality issues.
They have stable supply process which have helped them to limit supply uncertainties.

5.2- Supply Chain Capabilities

UTS exports trading company has efficient supply chain because in this business most
important competitive edge is that you are providing minimum price possible. To offer low price
first you have to manufacture at lowest cost possible. UTS exports trading company had
achieved this. They have low cost of production, but they have never compromised on quality
because it hurts their brand image which directly has an impact on order frequency from an
NGO. Their supply chain is very much capable of producing at low cost and their supply chain
processes are stable, so they almost every time fulfill their commitments.

5.3- Achieved Strategic Fit

UTS exports trading company has ensured the degree of supply chain responsiveness is
consistent with implied uncertainty. They have maintained consistent strategies in all functions
that support competitive strategy.

UTS exports trading company has achieved strategic fit because their competitive
strategy and all functional strategies fit together to form a coordinated overall strategy. Their
functions in the company have appropriately structured their processes and resources to be able
to execute these strategies. UTS exports trading company’s design of overall supply chain and
the role of each stage is aligned to support their supply chain strategy.

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6- Recommendations

6.1- Problem Identification

Main challenge faced by UTS exports trading company is making quotations. Whenever
there is demand it the market and NGOs ask different companies for prices of their products then
every company prepare their quotations and send it to NGOs. From these quotations NGOs
selects 3 to 4 companies to fulfill their demand. NGOs decides on the basis of lowest prices.

UTS exports trading company has a good brand image in the market. NGOs asks for
quotations only companies who have good brand image. So, getting in line to take orders from
NGOs is not a problem for UTS exports trading company because they have a good brand image.
Second thing NGOs wants is low prices. This is also not an issue for UTS exports trading
company because they have managed to give their products on relatively lower costs from their
competitors and get bigger orders from NGOs. Third thing NGOs wants quicker deliveries. This
is the point in which UTS exports trading company can improve.

UTS exports trading company mentions in their quotation that first 15 days are for
preparation and after 15 days they will deliver 100 tents per day. NGOs’ demand is disaster
based and when there is a disaster there are lives on risk and there are many homeless people.
NGOs serves these homeless people and one thing they do is provide them shelter. To provide
them shelter NGOs order these tents. So, NGOs wants quick responsive deliveries but if UTS
exports trading company goes for responsiveness it will increase their cost and they will not get
orders and if they stick with efficiency then they cannot deliver quicker.

Another problem faced by UTS exports trading company is that they don’t have
permanent labor force. They hire contractual labor on the basis of demand. It also effects their
manufacturing time because in first 15 days, which are for preparation, one task is to collect
labor. They get the desired amount of labors from contractors, but the problem is that every time
the labor is different, so every time labor is unknown to their setup and production style. Labor is
inexperienced and needs time to adapt UTS exports trading company’s way of working.

UTS exports trading company demand is very unpredictable. As mentioned above that
their demand is disaster related and no one knows when there will be a disaster and when it will
generate their demand. A problem faced by UTS exports trading company is that their
production remains closed for very long periods sometimes till 9 months and even a whole year.

UTS exports trading company is facing above mentioned problems. UTS exports trading
company has improved their processes but still, even you are the best in your field, there is a
room for improvements. UTS exports trading company needs to improve in these parts and it
will help them to make even stronger brand image and to get more orders.

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6.2- Solutions

First issue faced by UTS exports trading company is that NGOs wants responsive
deliveries and they give orders to the lowest cost. If UTS exports trading company goes for
responsiveness, then their cost will increase and if UTS exports trading company sticks with
efficiency they cannot improve their delivery time and it will be a constraint in attracting NGOs
and getting orders.

100 tents every day is not a bad delivery schedule, but main issue is first 15 days which
UTS exports trading company takes for preparation. In these 15 days UTS exports trading
company gather the required numbers of contractual labor from contractors, UTS exports trading
company test their machinery. Testing is required when every order received because there is
huge gaps between two orders and there could be some working issues with machinery in this
time period. In this 15 days UTS exports trading company also plans the manufacturing schedule
on the basis of load shedding schedules because manufacturing on generators increase their
manufacturing costs.

UTS exports trading company has to reduce these 15 days to 3 to 4 days or at least a
week. It will increase their responsiveness. If they reduce this time to 1 week then till the 16th day
they have been delivered 900 tents. In current situation on the 16th day UTS exports trading
company deliver first 100 tents. If they reduce this time period to 4 days, then they will be able
to deliver 1200 tents till the 16th day. In current situation they are delivering 100 tents till the 16th
day. If UTS exports trading company manage to reduce these 15 days to 3 days, then they are
going to deliver 1300 tents in first 16 days. In current situation they are delivering 100 tents in
first 16 days.

UTS exports trading company can reduce these 15 days by dealing with good contractors
who can supply the labor force the next day or 2 days after UTS exports trading company
demands for labor. They can pretest their machinery. They can have tests on regular basis like
after every 2 months they will turn their machinery on and test. It will increase their cost a little
bit, but it will control their repairing costs because when machine is working or even tested
regularly then there are less chances to get machinery out of order. It will increase UTS exports
trading company’s responsiveness which will lead to more orders and more orders means more
profit and we are sure through our calculations that this profit will be more valuable than the cost
on regular testing.

UTS exports trading company facing a problem that they don’t have permanent labor
force. They every time gets different labors who are not familiar with UTS exports trading
company. These labors take some time to adapt to UTS exports trading company’s working
style. So, UTS exports trading company can hire permanent labor.

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 Hiring permanent labor sounds expensive. UTS exports trading company have storage
capacity in Kasur’s production center pf 15000 tents. There is no fixed cost or holding cost for
stocking these 15000 tents. In current situation this place is not in use. They only use this place
when production is in process. When production is closed this place is empty. They require 4
labors for each tent and 1 machine for each section. Many of there tasks are done by hands. UTS
exports trading company can hire few labors which will run their production cycle and produce
15000 units in a very longer time period. UTS exports trading company can calculate that how
much units will they produce will result in profit, i..e it will recover the running costs of
machinery. After these calculations they can plan their production let says once a week or twice
a week.

It will help UTS exports trading company to get a stock of 10000-15000 units when they
will receive an order. It will increase their responsiveness which will help them to take more
orders. It will help UTS exports trading company to achieve responsiveness by remaining
efficient. It will keep their machinery working because they can replace machines after some
time to test every machine. Their production plant will run throughout the year which will help
them to utilize their empty spaces in storage.

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