Welcome to the world of Pak Elektron Limited (PEL) !

Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in

Pakistan. It was established in 1956 in technical collaboration with M/s AEG of
Germany. In October 1978, the company was taken over by Saigol Group of
Companies. Since its inception, the company has always been contributing
towards the advancement and development of the engineering sector in
Pakistan by introducing a range of quality electrical equipments and home
appliances and by producing hundreds of engineers, skilled workers and
technicians through its apprenticeship schemes and training programmes.

The company comprises of two divisions:

 Appliances Division
 Power Division
 PAKISTAN ELECTRON LIMITED was established in 1956 with
the technical collaboration of Germany. It is the first composite
electrical equipment manufacturing unit of Pakistan.
 In October 1978, the company was taken over by the SAIGOL
GROUP, which is one of the leading industrial groups in
Pakistan, having diversified business activities in the field of:
  Textiles
  Engineering
  Banking and Finance
  Fuel and Energy
  Trading
  Automobiles
 On engineering side PEL Group is the flag carrier of the Saigol
group.
 Here we see in detail about Pakistan electron limited. And will
see how they have organized themselves in a most appropriate
business unit in Pakistan.

 The PEL Group consists of following companies
 1. PEL (holding company)
 2. PEL Appliances ltd.
 3. PEL Daewoo electronics ltd.
 The products manufactured by PEL always been high standard
and the name PEL is synonymous with QUALITY all over
Pakistan.
 Since its Inception, the company has been acting as institution
working for advancement and development of engineering
know how in Pakistan .The Company hundreds has produced
hundreds of engineer’s skilled workers and technicians through
its apprenticeship schemes & training programmers.
 Keeping Saigol’s traditions since its takeover by the
group, PEL has continuously been adding new products to its
range. As a result, the PEL group has registered a significant
increase in its sales volume, during the last ten years.

THE CHRONOLOGY OF PRODUCT:

 


Year Product Introduction Technical

Collaboration
1956 Distribution Transformers, Switch AEG-West Germany
Gears, Single & Three Phase
Induction Motors
1978 PEL was taken over by SAIGOL
GROUP
1981 PEL Window Type Air conditioners General Corporation-
Japan
1987 PEL Refrigerators SILTAL SPA-Italy
1987 PEL Deep Freezers NECCHI
COMPRESSORI Italy
1993 PEL NECCHI A.B.B., POWER T & D
Company, USA
 Fractional Horse Power
Compressors
1994 PEL Single Phase Watt Hour Meters Daewoo Electronics,
Korea
1995 PELDAEWOO Color Television Carrier Corporation,
USA
1997 Carrier Window and Split

Type Air conditioners


  POWER DIVISION
  APPLIANCE DIVISION

  POWER DIVISION:-
 POWER DISTRIBUTION SYSTEM, ELECTRIC MOTORS,
ENERGY METERS:
 PEL’s Power Division manufactures Transformers, Switch
Gears, Electric Motors, Energy Meters, Kiosks, Compact
Stations, Shunt Capacitor Banks, etc. of highest quality and of
latest international standards. PEL is one of the major
electrical equipment suppliers to Water and Power
Development Authority (WAPDA) and Karachi Electrical Supply
Corporation (KESC), which are the largest Power companies in
Pakistan.
 PEL equipment has been used in numerous power projects of
National importance within in Pakistan over the years and PEL
has had the privilege of getting its equipment approved and
certified from well-reputed international consultants such as:
  Preece, Car dew and Rider, England.
  Harza Engineering Company, USA.
  Sam Progetti, Italy.
  Societe Dumezm France.
   Miner & Miner International Inc. USA.
  Ensa, France.

  APPLIANCES DIVISION:
 The Appliances Division was established in 1980-81, when the
company introduced its first consumer product i.e. Window
type air-conditioned in Pakistan. This was followed by
Refrigerators and Deep Freezers in the year 1986-87,
Fractional Horse Power Compressors in 1993 and Carrier
Window and Split Air conditioners in 1997.

 TYPE OF PRODUCT:
  Window-Type Air conditioners “PEL”
  Window-Type Air conditioners “Carrier”
  Split-Type Air conditioners “Carrier
  ”Refrigerators (Direct Cool)
  Deep freezers
  Color Televisions
  compressors (Fractional Horse Power)

CORPORATE STRATEGY:


 Mission STATEMENT:
 “TO produce quality product at a affordable prices for
and to ensure the profitability of the company.”
 objectives:
  To increase sales
  To increase profitability
  Introduction of new designs and foreign collaboration(joint
ventures)
  Environmental scanning
 PEL has ensured the environmental scanning through
researchers regarding attributes and future needs of
customer .they take assistance of Aftab Associates for this
purpose. They also take assistance from their sales force
and the dealers of PEL the different areas of Pakistan. They
find out the latest opportunities which are prevailing in the
market .The executives of the company also keep a close
look on the changes in the environment.
 Core Competencies:-
 Core competencies are the organizational unique resources
and strengths that management considers while formulating
strategy.
 In pel they have different core competencies which the have

identified after a long business activities and due to

comparison with the competitors. In air conditioner they
have an advantage over its competitors due to its
performance and the quality. They consider it as their major
advantage over their competitors. Pel is the first local
manufacturer of air conditioner in pakistan. It has joint
venture with carrier in manufacturing air conditioners.
 Workforce:-
 In Pel they have skilled labor force for their top and middle
level management while in the lower level they employ
trained as well as fresh employees. The employees are
given mostly on the job training. They have maintained at
present skilled labors which is their core competency.
 Facilities:-
 PEL has well located facilities for offices, stores and
plants. In their offices air conditioners are provided to all staffs
for their working. They have well groomed warehouses and
proper network of distribution in the whole Pakistan.
 They have also given the facility of mess to the
employees during the working time for lunch.
 Systems and Technology:
 PEL has the state of the art technology. They have
made joint ventures with the foreign companies like:
 NECCHI COPRESSORI of Italy to assemble compressors for
refrigerator and deep freezers,
 HITACHI CORPORATION of Japan for the production of
vacuum circuit breaker for its switchgear,
 DAEWOO ELECTRONICS COMPANY KOREA for
the manufacture of color television sets.
 In this way they are trying to provide the best possible
technology to the customers towards the implementations of
TQM.
 Market Analysis:-
 It divides firm’s customers into market segments
and then identifies need of each market segment.
 In PEL they conduct market analysis through different research
agencies e.g. Aftab Associates. In addition to research
agencies they also conduct research through sales force and
through their dealers which are in direct contact with the
customers. Through after sale service they come to know about
the customer’s latest trends and the customer’s existing
choices which are passed to planning department and while
planning they keep in view their customers’ choices and
attitudes in designing the plans for the next year.
 Market Segmentation:-
 In PEL for different products they have different
market segments. E.g. for refrigerator they have segment from
 lower class to upper upper-class and for air conditioner they
have segmented from middle upper class to upper class while
for split air conditioner they have made segment for only upper
class. While in their target market they target only to the
household wives because the family has to make the decision
of these products and they influence their choice while making
purchases of these products.

 Competitive Priorities
 A firm gains an advantage with its operating system
by outperforming competitors in one or more of these
capabilities. These are eight possible competitive priorities for
operations which fall into four groups.
  Cost
  Quality
  Time
  Flexibility
 A firm may organize itself into one or more
operating systems each designed to support a particular set of
competitive priorities for a particular set of products.
 Cost:
 Lowering prices can increase demand for products
but it also reduces profit margin if the product cannot be
produced at lower cost. To compete on cost, operations
manager must address labor, material, scrap, overheads and
other costs to design a system that lowers the cost per unit of
the product. Often lowering costs requires additional
investment in automated facilities and equipment.
 In off season PEL lowers the cost of refrigerator to
improve the profit margin for the year and to consume the
 quantity produced which in the stores before the onset of next
season.
 Quality:-
 PEL has maintained the consistent quality as per
ensured in ISO90002.in addition to the consistent quality for
the standardized products PEL also produces the customized
products for individual customers but they are of the view that
the ordered quantity must ensure their profitability. It means
that the ordered quantity must be large enough to recover their
cost and their profit margin. Currently they are producing deep
freezers for WALLS.
 Time:-
 In PEL the products are made available to the
dealers on time normally throughout the Pakistan. The orders
are fulfilled at the required time. The new products features
are added each year as a result of direct contact with the
customers and new changes in the design and color are made
in their annual production plan.
 Flexibility:-
 In PEL there is volume flexibility up to their
maximum capacity. Customization is there in PEL and they are
currently producing only deep freezer for WALLS.

CAPACITY



 In PEL appliances division there is capacity of
150,000 refrigerators per year. This year they are planning to
increase their capacity from 150,000 to 200,000 refrigerators
 for the next year at same location. They are increasing the
capacity of the existing plant.
 Utilization:
 Currently PEL appliance division is working at 75% utilization
rate. Its average out put rate is 350refrigerators per day and its
maximum daily capacity is 450 refrigerators per day. So,
 Utilization = avg. output rate / maximum capacity
 =350 / 450 x 100 = 75%
 In PEL when the production department issues his requirement
for the production of the next period then the planning
department has to see the within the constraints that what
amount of quantity can be purchased. The major emphasis is
given on the bottleneck material to be procured first so that
operations are not ceased due to their deficiency. E.g.
compressor is the one the bottleneck for the appliance division
in Lahore factory.



LOCATION

 PEL was established in

1956 on its present location. At the time of its location here
were no proper methods were followed before installation how
ever following factors were given importance while locating the
facility:
  At that time this area was very favorable for cheap and
productive labor
  At that time this area was tax-free because the govt. wanted
to encourage industries in this area
  Also at that time there were cheaper construction costs
 

SUPPLY CHAIN MANAGEMENT

 Being outside from the city.

 Supply chain management has strategic implications because
the supply system can be used to achieve important
competitive priorities .It also involves the coordination of key
functions in the logistics.

 Material Management:-
 Material management is concerned with decisions
about purchasing materials and services, inventories,
production levels staffing patterns, schedules and distribution.
Decisions in these areas affect the entire organization either
directly or indirectly.
 Organizational Structure:-
 PEL has segmented structure in which there are different
departments for purchasing, production control and
distribution in which all the heads report to a third person
namely the general manager of company and the GM reports
to the managing director of the company.
 Importance of material management:-
 Material management is important because whole
organization depends on the material and secondly it is short
range so it desires more of the attention of the management of
PEL
 1. central role of PEL:-
 As the PEL is a manufacturing organization so they
need the raw material for the purpose of the production from
the country as well as foreign countries. This material takes
round about 70%of the resources of the organization.
 2. Import of inventory on profitability:-
 The other reason is the impact of it on the
profitability of the organization. As you keep more inventories
you will be leading much more cost of holding.
 Functions of material management:-
 Planning and procurement
 The planning department get date and plans from
sales and production department make plan for each item and
they give it to vendor.
 They coordinate planning with sales and production plan is
made annually which is further divided into quarterly and
monthly.
 This department also keep up dating cost material and makes
budget for the department. At this plan purchase order is
made. This PO is supplied to each vendor with term and
conditions.
 The following charts are made maintained and made,
 1- When material arrives it is taken to material store.
 2- A local purchase Chelan is made.
 3- GRN i.e. good receipt note is issued when the material is
transferred to the store.
 4- 3:1 rejection level is beard.
 Purchasing:-
 Purchasing is the acquisition process which includes
the activities such as which supplier to be selected, how the
 negotiations are made and whether to buy locally or from the
foreign.
 1. Recognizing a need:-
 By need we mean the order for the purchase of the
items for the production is given by the production department
in the PEL.
 2. SELECTION OF SUPPLIER:-
 The supplier is selected by the PEL on the following
things or points.
  Financial background.
  Machine capacity.
  Lead-time.
  Cost.
 The supplier is meting these conditions then they will selected
only two suppliers are selected for each item.
 3. PLACING OF AN ORDER:-
 The order after selecting the vendor is made. The order is
given by providing the desired specifications of the
organization.
 4. TRACKING OF AN ORDER:-
 They to see that whether it is time to reorder or not that
whether the order is coming or meat use daily meeting. If not
coming they change the vendor.
 SUPPLIER SELECTION
 The supplier selection is very important for the company,
because if they face any difficulty, they face difficulties. Senior
processing officer and senior buying officer. They are
responsible for the quality, lead-time and price. Than they also
test the material that whether it is of same quality which they
company desires then these information collected by them are
given to the assessment team they assess the capabilities that
whether it suit to them or not.
 Then in the last step for the supplier selection they give order
of the 1000 to 1200 units as a trial beat. After this assessment
they will select the supplier.
 SUPPLIER RELATIONS:-
 The type of relation maintained with supplier can
effect the quality, timeliness and price of the product. PEL have
the cooperative relations with the supplier. Because they have
to get huge amount of the material from them. The suppliers
also assist them to how to use the material.
 CONTRACTING:-
 Purchasing must decide how to contract for each of
the thousand of the items that most firms buy. The PEL is
following the strategy of buying the material as is the lot and
with the prices whatever the option giving the fewer prices they
set it. In the low price they see that whether it meets the
standard for the production or not.
 In PEL raw material is purchased from three main sources, i.e.,
  Imported material
  Local material
 Imported material:-
 PEL import their raw material from Japan ,Italy
,Brazil, Taiwan, America etc. from the abroad shipment reach
the Karachi airport in 22 to 25 days and it takes about a week
to transport the goods from Karachi to Lahore through air. The
goods are bonded when they arrive from abroad.
 Only material which is required for the next month that is ex-
bonded from the govt. warehouse? The govt. charges 1% as
service charges for bonding the goods. For the foreign
purchases the company has to the LC for the purpose of
payment. They have to open LC one month before the supplier
 delivers the goods to the shipment and the shipments take
about one month to reach to Karachi.
 Local material:-
 1. They purchase the local material on net cash. It includes the
patrol, surf and the things like that.
 2. Vendor zed parts
 These are the raw materials, which are used for the
supporting material. These include raw materials like hinge,
lock. Freezer ceiling box, thermostat box, packing material etc.
 3. Local PEL
 In the present factory of PEL the raw material is
produced for the PAL i.e. Pak Electron appliance limited. This
material is used only for the PAL.
 Before issuing the purchase order the material is
checked in the line, store and the material lying in the bond.
After estimating that quantity PO is issued. After inspecting the
material in these three places before issuing the order short
material list is prepared and accordingly the mix of purchasing
quantity is prepared by the planning department for the
purpose of procurement of material.
 Distribution:-
 Distribution is the management of the flow of the
materials from the management to the customer and from
warehouse to materials, invoicing the storage and placement
of the products.
 PLACEMENT OF THE INVENTORY:-
 PEL is following the linkage for the purpose of the
placement of their inventory. Because it is not the customer
product. They kept it in the company. Because this company is
not maintaining an inventory for finished products. In it
 management of the PEL provides the daily report what amount
is needed audit.
 TRANSPORTATION MODE:-
 PEL is mostly using the road as the transportation
mode. They if are supplying their products inter city then the
trucks are used. But if they are sending it to outstation then
they use large trucks to send them at the price. The reason for
their selection of this mode is that they have to send it to the
place where rail not goes or they have to supply to the
destination of the user or customer.


FORECASTING



 In PEL forecasting is done annually and the plans are made for
the whole year while there is flexibility in the annual plan and
due to existing trends changes are made monthly and quarterly
in the annual plan.
 Pattern of demand:-
 In PEL the pattern of demand is continuous
generally and the production is carried out during the whole
year. From March to August their production is on the peak
while after august there is off season. However in that season
the production gets slow a bit than the season. For the Air-
conditioner there is change in demand during the off season.
 So for the air conditioner the demand is seasonal while for
refrigerator the demand is almost continuous.

FORCASTING METHODS



 Judgement Methods:-
 In PEL the forecast is done through the demand
prescribed by the sales force and the dealers.
 While the meeting of the executives is held quarterly
for purpose of discussing the changing demands and
forecasting for the next period.

 Marketing research is also conducted for the purpose of
forecasting demands. This task of market research is given to
the specialized and professional company like Aftab
Associates.
 Casual Methods:-
 Obviously the economic conditions and the
competitors actions are also considered while forecasting is
done by the executives in their monthly and quarterly
meetings. While reacting to the change in the demand pattern
they need three months before forecasting to react to that
change due to the constraints of the availability of the raw
materials.
 Time Series Method :-
 Simple moving average method
 In PEL simple moving average is used to forecast for
the next period. Usually the data of the past five years is used
 to estimate the next year demand and also the trend is
incorporated in the forecast.


INVENTORY MANAGEMENT


 Inventory is a stock of anything held to meet the future
demand.
 The PEL is being influenced by the fast production so
the inventory will be kept more by them, but if the production
of the company is slow then it will have a little inventory.

 ECONOMIC ORDERING
QUANTITY:-
 They are utilizing the E.O.Q. for the purpose of the
ordering the material. Because it set off the effect of the
futures that influence them for the high and low inventories.
The order is make after keeping into mind the maximum and
minimum required with is in days for this organization. They
keep maximum 15 days and they take minimum 10 days.
 For the purpose of making he order they have
selected the two vendors. If one is not meeting the needs then
they can order to the other. Making the inventories coming
under the PEL are the raw material and components used for
the purpose of operating.
 They are using the computerized methods for the
purpose of measurement of the inventory. They utilize
 the monitoring charts as all for the purpose of looking
that material has arrived and whose maintaining. This
activity is performed at every month.
 REORDER CALCULATION:-
 As the organization is preparing the quarterly charts
for monitoring. So they have a clear eye on it. Then if it is
showing that the order level is going below the required level
than they will make the order to the supplier so this is the way
to reorder.

 INVENTORY CONTROL SYSTEM:-

 The EOQ formula can give us amount to b ordered to
the supplier. Then next step is that when to reorder for the
purpose of the production if the inventory goes below the limit.

 METHOD FOLLOWED BY PEL:-

 PEL is using the periodic review system. They have
make the review charts for the quarters and they basically take
into this and after three months they see that whether the
inventory is with in the limits or not.

 TYPE OF INVENTORY

 Cycle INVENTORY:-
 The cycle inventory is ordered for the 30 days.

 Safety stock:-
 The safety stock is maintained for the seven days on the
monthly production plan.

 Anticipation stock:-
 In the season the anticipated stock is maintained and
more stock is maintained for the manufacturing in case of air
conditioner
 Aggregate plan is a statement of a company’s production
rates, workforce levels and inventory holdings based on
estimates of customer’s requirements and capacity limitations.
This statement is time-phased meaning that the
plan is projected for several time periods (such as months) into
future.
 Production Plan:-
 In PEL the production is made for one year. Sales
department estimates the forecast for the next period .These
forecasts are handed over to the planning department who
makes the production plan accordingly keeping in view the
estimates of sales department. Then the production
department makes the production schedules and then this
demand goes to the purchasing department who is held
responsible for making the annual purchases on the schedules
suggested by the planning department.
 In PEL specified inspectors are held responsible for the quality
during the production process. They inspect the work in
process products and every inspector prepares individual report
and signs at the end of report.
 In case of raw materials the inspectors check the
materials on the basis of sampling and if the samples are
considered not satisfactory up to standard then the vendor has
to ask replace the items which are defective. When material is
sent to the store then the storekeeper checks its quality and
then the good receipt note is issued which ensures that the
material is according to the standard and according to the
prescribed quality.
 When the goods are produced then they are sent to
the quality department where the inspectors check the items
individually and after checking their performance every
inspector signs on the back of the refrigerator. When the sales
man goes to the customer if the products gets out of order
(within the specified period of the after sales service),then sign
of individual is seen on the back and in this way it is easy to
find who has made mistake during quality inspection. Due to
these measures taken by the management there is very little
chance that the items would be defective.

 QUALITY POLICY:-
 Pak Electron Limited is dedicated to the continuous
improvement of all products and services through total
involvement of all employees. We are committed to the
development and strengthening of partnerships with our
external and internal customers and suppliers. We will
continuously strive to provide innovative and higher quality
products and services to achieve total customer satisfaction by
understanding their requirement and anticipating their future
expectations or needs.

 IN PURSUING THIS POLICY WE

WILL :-
  Have annual targets for quality improvements in all areas
  Create a culture of customer focus striving to become the
lowest cost producer through agreed annual cost reduction
programmed.
  Value people by understanding and drawing upon their
strengths i.e. abilities and knowledge and make efforts for
their training and development.
 Management.
 ISO stands for international organizations for standardizations.
 ISO 9000 is a set of standards governing of a quality
program. Companies become certified by proving to a qualified
external examiner that they have compiled with all the
requirements .Once certified, companies have been certified
and to what level. Compliance with ISO 9000 standards says
nothing about the actual quality of a product. Rather, it
indicates to customers that companies can provide
documentation to support whatever claims they make about
quality.
  ISO 9000
  ISO9001
  ISO 9002
  ISO9003
  ISO 9003
  ISO 9004
 Actually ISO 9000 is an overview document.
 PEL is ISO 9002 certified and they have made a
team which not only trains their employs but also their
vendors’employs.In this way the chances of rejecting the
suppliers are reduced and the supplier’s cost does not go up
due to the rejection of material.
 Reasons For acquiring ISO 9000:-
  To achieve customer’s satisfaction
  Competing against foreign competitor in the local market.
  Adds a positive image to the company and improve its
goodwill.
  It is perceived commitment to quality
  Because the slogan of the PEL is to “the quality conscious
people” so it ensures their commitment towards improved
quality for the customers.
 In case of raw materials the inspectors check the materials on
the basis of sampling and if the samples are considered not
satisfactory up to standard then the vendor has to ask replace
the items which are defective. When material is sent to the
store then the storekeeper checks its quality and then the good
receipt note is issued which ensures that the material is
according to the standard and according to the prescribed
quality.
 When the goods are produced then they are sent to
the quality department where the inspectors check the items
individually and after checking their performance every
inspector signs on the back of the refrigerator. When the sales
man goes to the customer if the products gets out of order
(within the specified period of the after sales service),then sign
of individual is seen on the back and in this way it is easy to
find who has made mistake during quality inspection. Due to
these measures taken by the management there is very little
chance that the items would be defective.

 CONCLUSION:-
 If we conclude this report of operations management, we
come to know the following relevant points which need the
attention of the management of the company while performing
the functions of the operation.

 NO PROPER INVENTORY:-
 The organization does not have proper inventory
planning by the management due to which heavy amount of
the money is being put by the company in the inventory.
 PEL has the strength also that it has a good repute
for the company as being the quality conscious company. It
has own experts for the purpose of the control of the quality or
products. Due to the good sight selection the company has
more access to the whole of the markets of the country. The
company also has well established system of the distribution
of the company although it is not the integrated one but it is
working smoothly.

 JUDGMENTAL METHODS:-
 The management of this company does not use the
sophisticated technique while making or performing the
function of the demand forecasting by the company. They rely
more on the judgmental methods for the purpose of the
projection by the company about their sales.

 SUGGESTIONS:-
 The following are the suggestions by me after
visiting the company.

 PROPER INVENTORY LEVEL:-

 The company should also make some of the
methods for the purpose of the keeping the inventory at the
optimal level. Proper planning of the material can decrease the
amount of the investment in the inventories by the company.
 USE SOPHISTICATED TECHNIQUES OF
FORECASTING:-

 The company is an excellent company and it has good image in
the mind of the consumers. But they are not applying the
statistical tools for the purpose of the forecast of sales which
eventually results into having the excessive amounts of
inventory by the company. Causal and the time series methods
are the good estimate provider about the forecasting and if the
management adopted these forecasting techniques no doubt
they will be benefiting the company a lot.
 In making of this report I have consult the following
sources,
 STATISTICS FOR MANAGEMENT BY LEVIN.
 For forecasting.
 OPERATIONAL MANAGEMENT BY LEE.J.KRAJEWSKI &
RITZMAN
 QUALITY MANAGEMENT BY DAVIT .L.GEOTECH
 And some other person from whom I get information
are,
 Some my senior colleagues.
 In Pel I have consult with the following persons