Haleeb Foods

Supply Chain Management

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Acknowledgement: First of all, we all grateful to Allah Almighty who bestowed His blessings, talent and knowledge upon us to work and complete this project it in the best way we could. We are really thankful to Mr. Kamran Rashid, who gave us the chance to work on this project that provided us the greatest opportunity to increase our knowledge and experience. We would also like to mention the name of two honorable personalities, Ch. Sohail Aslam Chattha, Manager Engineering Services (MCAS) and Muhammad ALI, Supply Chain Manager, Haleeb Foods Limited, who wh o really collaborated with us in the best way and without his corporation; we could never be able to accomplish this project. In the end, we are also very grateful to the Administration of University who provided us the facilities of Information Processing Center and Library from where we can obtain any information we needed to include in this project. Abdullah Farooq Usman Ahmed Zahid Bajwa Zohaib Rauf

University of Management & Technology


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Table of Contents Executive Executive Summary…………….......……………… Summary…………….......……………………………………….…… ……………………….……….….3 ….….3 Dairy Industry Industry of Pakistan........................................................................................ .......5 Haleeb Foods Limited (HFL): Corporate Corporate Introduction................................................6 Products: ...........................................................................................................................7 Supply Chain Department………………………………………………………….…...8 Supply Chain Stages…………………………………………………..………….……..9 Suppliers……………………………………………… Suppliers………………… …………………………………………….………...…… ……………….………...………10 …10 Manufacturer……………………………………………….… Manufacturer…………………… ………………………….…….………………………13 ….………………………13 Distributors……………………………………… Distributors…………………………………………………………………… ………………………………………14 …………14 Retailers……………………………………………… Retailers…………………… ……………………………………………………… ………………………………….15 …….15 Customers……………………………………………… Customers…………………… …………………………………………………….… ………………………….…….15 ….15 Supply Chain Cycle Views……………………………………………………………..16 Procurement Cycle…………………… Cycle………………………………………………… …………………………………………….……16 ……………….……16 Manufacturing Cycle…………………… Cycle……………………………………………… ………………………………………….……16 ……………….……16 Replenishment Cycle…………………… Cycle………………………………………………… ………………………………………….……17 …………….……17 Customer Order Cycle…………………… Cycle………………………………………………… …………………………………………...…17 ……………...…17 Push/Pull Views…………………………………………………………………….…..17 Competitive Strategy……………………………………………………………….….18 Supply Chain Strategy…………………………………………………………….…..18 Supply Chain Driver……………………………………………………………….…..19 Facility……………………………………… Facility………………………………………………………………… ……………………………….………….19 …….………….19 Inventory………………………………………………… Inventory…………………… ………………………………………………….…… …………………….………..21 …..21 Transportation…………………………………………… Transportation………………… ………………………………………………….…… ……………………….…….22 .22 Information…………………………………………… Information………………… …………………………………………………….… ………………………….……..23 …..23 Sourcing…………………………………………………… Sourcing……………………… ………………………………………………….……..27 …………………….……..27 Pricing……………………………………………………………………………..……28 Distribution Network………………………………………………………………….29 Retail Storage with Customer Pickup………………………… Pickup……………………………………….………….29 …………….………….29 Prototype Distribution Network Design of HFL……………………………………….30 HFL……………………………………….30 Missing Gaps and Recommendations for Overcoming…………………….……….34 Bibliography………………………………………………………………….………..36



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Table of Contents Executive Executive Summary…………….......……………… Summary…………….......……………………………………….…… ……………………….……….….3 ….….3 Dairy Industry Industry of Pakistan........................................................................................ .......5 Haleeb Foods Limited (HFL): Corporate Corporate Introduction................................................6 Products: ...........................................................................................................................7 Supply Chain Department………………………………………………………….…...8 Supply Chain Stages…………………………………………………..………….……..9 Suppliers……………………………………………… Suppliers………………… …………………………………………….………...…… ……………….………...………10 …10 Manufacturer……………………………………………….… Manufacturer…………………… ………………………….…….………………………13 ….………………………13 Distributors……………………………………… Distributors…………………………………………………………………… ………………………………………14 …………14 Retailers……………………………………………… Retailers…………………… ……………………………………………………… ………………………………….15 …….15 Customers……………………………………………… Customers…………………… …………………………………………………….… ………………………….…….15 ….15 Supply Chain Cycle Views……………………………………………………………..16 Procurement Cycle…………………… Cycle………………………………………………… …………………………………………….……16 ……………….……16 Manufacturing Cycle…………………… Cycle……………………………………………… ………………………………………….……16 ……………….……16 Replenishment Cycle…………………… Cycle………………………………………………… ………………………………………….……17 …………….……17 Customer Order Cycle…………………… Cycle………………………………………………… …………………………………………...…17 ……………...…17 Push/Pull Views…………………………………………………………………….…..17 Competitive Strategy……………………………………………………………….….18 Supply Chain Strategy…………………………………………………………….…..18 Supply Chain Driver……………………………………………………………….…..19 Facility……………………………………… Facility………………………………………………………………… ……………………………….………….19 …….………….19 Inventory………………………………………………… Inventory…………………… ………………………………………………….…… …………………….………..21 …..21 Transportation…………………………………………… Transportation………………… ………………………………………………….…… ……………………….…….22 .22 Information…………………………………………… Information………………… …………………………………………………….… ………………………….……..23 …..23 Sourcing…………………………………………………… Sourcing……………………… ………………………………………………….……..27 …………………….……..27 Pricing……………………………………………………………………………..……28 Distribution Network………………………………………………………………….29 Retail Storage with Customer Pickup………………………… Pickup……………………………………….………….29 …………….………….29 Prototype Distribution Network Design of HFL……………………………………….30 HFL……………………………………….30 Missing Gaps and Recommendations for Overcoming…………………….……….34 Bibliography………………………………………………………………….………..36



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Executive Summary: The industry structure packed milk in the category is oligopolistic where there are a few firms (Haleeb, Nestle, Engro, Good milk) producing essentially the same commodity. Pakistan is the fourth largest producer of milk in the world, three-fourth of its total milk is produced in the Punjab province. Haleeb Foods Limited, the largest Dairy Processing company in Pakistan, is the first dairy unit to acquire ISO 9002, HACCP and ISO 14000 certification. Haleeb Foods is committed to satisfy its consumers with wholesome and healthy food products of the highest international standards. The structure of HFL’s Supply Chain shows that there are five support departments for the Supply Chain. These are, 1. Operations 2. Demand Planning 3. Customer Customer Order Services 4. Transportation 5. National Distribution Distribution Centers. The first process in supply chain is supply chain stages. HFL’s supply chain process entails the five basic stages of: 1. Supplier 2. Manu Manufa fact ctur urer er 3. Dist Distri ribu buto torrs 4. Retailers Recently, HFL have 428 Milk Collection Centers in Punjab, where the milk from approximately 200000 dairy forms is collected. These all centers are equipped with plants titled as Chillers where milk is stored for very short time period before the transportation to production facility. Recently, HFL has two production facilities where all processes, from preparation to quality assurance and to packaging, are undertaken employing state-of-the-art technology and equipment. These facilities are situated in the districts of: 1. 62 km km,, Bha Bhaii Pha Pharo roo o 2. Rahi Rahim m Yar Yar Khan Khan HFL have very strong contract based distribution d istribution network in all over the Pakistan with a motive to be very close of its big markets that are Lahore and southern Punjab. HFL’s warehouse structure is divided on the bases of Divisional Categorization, where all big



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divisions like Lahore, Karachi, Rawalpindi, Gujranwala, Faisalabad, Sialkot, Multan, Rahim Yar Khan and Peshawar are covered with 2 distribution center, whereas small divisions are located with single distribution center. HFL delivers its final to products to ultimate customers through an intensive retail store chain both in rural and urban areas of Pakistan. These retail stores include Convenience Stores, which can be found even in each and every Street, as well as big shopping mall chains. Basic target market of HFL is households and families both male and female living in all the rural and urban areas of Pakistan, who wants to get the high quality and standardized packed milk for home consumption purpose. HFL’s concentrates on the enhancement of brand positioning of Haleeb Milk with competitive edge through comparison with rivals, gain outlet leadership in shelf displays of key outlets and develop new potential market for Haleeb Milk. To ensure its prime quality and nutritious products, all manufacturing op erations are performed in-house within the premises of HFL’s facilities only. There are six supply chain drivers that are integrated with the motive to achieve company’s competitive and supply chain strategy in optimal manners. HFL does not carry large amount of inventory in its facilities and warehouses, gets production through varied capacity and entire products are dispatched to market in 7 days. HFL is using only traditional fast moving road transportation modes in all the stages of supply chain process. All the trucks at procurement stage are equipped with essential technology that ensures the safe transfer of milk from PHEs to facilities. HFL’s entire manufacturing process of all products categories is performed in-house facilities under the domain of company’s experts. HFL have segmented its market into four categories of quarter, half litter, 1 liter and 1.5 litters of packaging sizes as far as its UHT processed milk is concerned. All of these four segments are charged with different prices of PKR 16, 32, 57 and 85 respectively. HFL has traditional distribution network of retail stores that is best suited for fast moving consumer goods (FMCG) and for items for which customers value the quick response from manufacturer in the economy like Pakistan.



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Dairy Industry of Pakistan The industry structure packed milk in the category is oligopolistic where there are a few firms (Haleeb, Nestle, Engro, Good milk) producing essentially the same commodity. Pakistan is the fourth largest milk producer in the wo rld. About a third of the total milk produced by the rural families flows out to urban consumers and processing industries. In urban areas milk is available to common consumers in two ways: loose / unprocessed milk and packed/ processed milk. Dairy companies such as Nestle, HFL and Olper’s are the main part of milk marketing structure. All pre-described companies collect raw Milk from the v illages and dairy farms, known as Milk Districts. There ae three types of milk district functions a) self-collection of farmer milk by the milk plants b) Third-party milk collection c) Farmer cooperatives Milk district creates favorable production conditions in the form of modern milk storage facilities, better and dependable transportation networks, regular payment schedules and buyer-side competition. In effect, milk district makes rural production system viable where smallholder dairy producers employ mostly family labor, and rely on roughages, grasses and crop residue as fodder. Pakistan is the fourth largest producer of milk in the world, three-fourth of its total milk is produced in the Punjab province. The features of the dairy industry of Pakistan are the dominance of poor subsistence dairying households w ho keep buffalos and cows in small herd-sizes. Punjab is also home to one of the largest milk district in Asia, which has the unique feature of having 15 private companies competing to collect farmer milk for processing, including global giant Nestlé, Haleeb Foods, and Halla.



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Haleeb Foods Limited (HFL): Corporate Introduction Haleeb Foods Limited, the largest Dairy Processing company in Pakistan, is the first dairy unit to acquire ISO 9002, HACCP and ISO 14000 certification. Haleeb Foods is committed to satisfy its consumers with wholesome and healthy food products of the highest international standards.

History: Haleeb Foods was established in 1986 and its first product was Haleeb milk. Since then, it has continued to provide quality products to its consumers with product and packaging innovations. Other products and their dates of launch are as follows: 1997 1998 1999 2000 2001

Haleeb Asli Desi Ghee Haleeb Cream, Candia Skimz Milk Powder Candia Milk, Candia Skimz Liquid Milk Tropico Juice Drink, Haleeb Dairy Queen Haleeb N'rish Instant Full Cream Milk Powder

2002

Haleeb N'rish Fortified Instant Full Cream Milk Powder Candia Tea Max Dairy Whitener, Haleeb Butter, Haleeb Plain Yogurt,

2003 2004 2005 2006 2007

Haleeb Lassi Drink Haleeb Good Day Pure Juice, Haleeb Fun Day Juice Drink, Candia Candy'Up Flavoured Milk Haleeb Cream With Honey, Haleeb Tea Max with Cardamom, Haleeb Labban, Haleeb Good Day(Mix Fruit, Red Grapes, Mango Pineapple) Haleeb Reshmi Pack, Candia Classic, Skimz Pouch, Tropico Nectar Haleeb Cheddar Cheese

Haleeb Foods is Pakistan’s number 1 and fastest growing packaged Food Company. As of fiscal 2006, its annual turnover is Rs.9 Billion.

International Certifications : HFL’s products are made with great care, and marked with our quality seal of recognition. HFL is the only dairy company in Pakistan that undertakes 21 careful quality



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control tests on every portion of the milk collected by collection centers. Haleeb Foods is the only food company in Pakistan that has the following international certifications of quality and prestige: •

HACCP (in process controls for safer products)

•

ISO 9002 (better quality for greater customer satisfaction)

•

ISO 14000 (environment-friendly operations)

Products: •

Haleeb Asli Desi Ghee:

Haleeb Asli Desi Ghee is obtained from pure milk through the traditional procedure of heating butter slowly. Haleeb Asli Desi Ghee is free from all artificial ingredients; it has pure and natural taste and is nutritionally preserved. It comes with 1 year shelf life. •

Daizy Butter:

Daizy Butter is the best natural source of Vitamins A & D for everyone, and by far the ideal way of starting yet another busy day. It is rich in its taste and revitalizes your energy for a long tiresome day. •

The Premium Cream:

The premium cream processed hygienically from pure fresh milk, Ha leeb Cream is luxuriously rich in its thickness and nutritional value. It promises the richest assortment of tempting toppings, delicious desserts and creamiest coffee with its unique taste, also great for eating with bread etc. Packed in 6-layered Tetra Pack Brick Aseptic packag ing and has a shelf life of 6 months. •

Daizy Plain Yogurt:

Daizy Plain Yogurt meets the highest quality standards and gives consumers unmatched quality, freshness and taste with every spoonful. Offered in 450g, 200g and 900g packing, with a freshness seal that keeps the product attributes fresh throughout its life. •

Haleeb Liquid Tea Max

In tune with the Haleeb Foods tradition of providing consumers high quality and value added products, Haleeb Tea Max is the ideal choice for all tea and coffee lovers. Tea Max



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is special milk that provides a rich taste in your beverage. It is packed in a 6-layered Tetra Pack Brick Aseptic packaging and has a shelf life of 3 months. •

Haleeb Powder Tea Max:

In tune with the Haleeb Foods tradition of providing consumers high quality and value added products, Haleeb Tea Max is the ideal choice for all tea and coffee lovers. Tea Max is special milk that provides a rich taste in your beverage, carefully packaged in a safe and hygienic pouch. •

Haleeb Cheddar Cheese:

Haleeb Foods makes a new addition, Haleeb Cheddar Cheese, to its healthy and wholesome product range. Discover great taste, premium quality and the power of Vital 3 in every recipe made with Haleeb Cheddar Cheese. Vital 3 is the right combination of calcium, protein and vitamins in Haleeb Cheddar Cheese, which acts as a source to enhance the brainpower, especially for growing children. Haleeb Cheddar Cheese is specially made with Halal ingredients at the state-of-the-art dairy plant conforming to international quality standards. And for the first time in Pakistan, it is also offered in a customized 2 slices pack. The product is sealed and packed in air-tight packaging, which keeps the product fresh and tasty. •

Haleeb Good Day:

Haleeb Good Day offers consumers a range of 100% pure juices, without any added sugar, flavors or preservatives. For consumption absolutely anywhere and anytime, Good Day's four premium juices (apple, red grape, o range, and fruit cocktail) give you the absolute delight in taste, and revitalizes you at the same time. It is packed in a 6-layered Tetra Slim Pack Brick Aseptic packaging with easy opening. •

Haleeb Milk:

Consumers everywhere know that only Haleeb Milk makes the best tea ever because of its thickness. Haleeb is pasteurized, homogenized, and standardized pure UHT milk of the highest standard with 3.5% fats and 8.9% solid non fats. It is Haleeb Foods premier brand, and the choice of quality-conscious consumers who only go for the best. Packed in easy to open, 6-layered Tetra Pak Slim Brick Aseptic packaging, it comes with a 3 months shelf life.



•

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Dairy Queen:

Dairy Queen is standardized and homogenized pure UHT Milk with 3.5% fat and 8.9% solid non fats. At an affordable price it has won the hearts of consumers everywhere. It is available in 6-layered Tetra Pak Fino Packaging, introduced for the first time in Pakistan and has 3 months shelf life. •

Candia Candy Up:

With the backup of Candia, Candy Up has been launched especially for flavored milk drinkers, in chocolate & strawberry flavors to the sheer delight of children. The fact that it comes in a bottle makes up for convenient usage as well. •

Haleeb Skimz Liquid Milk:

Skimz is the only completely fat-free milk with the richness of pure milk. Minus fats, it is an ideal choice for weight-watchers and heart patients. It is also high in calcium content, which prevents osteoporosis. Packed in a 6-layered Tetra Pack Brick Aseptic packaging, it comes with a 3 months shelf life.

Supply Chain Department: The concept of having a Supply Chain Department is a new one in Pakistan HFL has introduced this concept in its company functions since a long. Supply chain department is passing through various stages of completion. Nonetheless, it has started working and performing vital functions for the organization. HFL’s supply chain department performs a range of functions, starting from the procurement of raw milk, fruits and packaging material, the manufacturing process and the distribution of the finished goods to the consumers. Purchase, logistics, production planning are different issues and all of them are performed under the umbrella of HFL’s supply chain department. The structure of HFL’s Supply Chain shows that there are five support departments for the Supply Chain. These are, 1. Operations 2. Demand Planning 3. Customer Order Services 4. Transportation 5. National Distribution Centers.

Supply Chain Stages:



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The first process in supply chain is supply chain stages. HFL’s supply chain process entails the five basic stages of: 5. Supplier 6. Manufacturer 7. Distributors 8. Retailers 9. Customers The process of supply chain stages that is being by milk suppliers both processed like HFL and a traditional milkman can be vaunted with the help of this diagram:



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Brief description of all these stages tailored by HFL Limited in its supply chain is as under. 1.

Suppliers:

HFL have two types of core inputs that are provided by numerous suppliers from all over the Pakistan. These inputs include: •

Milk

•

Fruits

We will describe about the supplying process of both of these inputs one by one.

Milk: First we will describe about the procedure that HFL adopts to get the supply of milk from all over the Punjab. HFL have three types of different of milk suppliers. They are •

Large Farmers like dairy farms

•

Small Farmers

•

Milk Man.

Recently, HFL have 428 Milk Collection Centers in Punjab, where the milk from approximately 200000 dairy forms is collected. These all centers are equipped with plants titled as Chillers where milk is stored for very short time period before the transportation to production facility. First of all, milk is supplied by all three types of suppliers to HFL’s collection centers on daily bases. A dedicated Quality Team carefully examines the milk and immediately stored into a Chiller if it matches the required standard of HFL. There are four types of Chillers as far as their capacities are concerned. These capacities are of 1000, 1500, 1800 and 2300 of litters, which are equipped according to the quantity of milk that is received at particular Milk Collection Center. It is essential to make milk chilled up to 4 degree grade for strengthening its quality life. After that, it is immediately dispatched to the manufacturing plant if it is located at the distance of 3 to 4 hours drive. In case, the production facility has longer distance from Milk Collection Centers, HFL have located 18 bigger plants, known as Plate Heat Exchange rs (PHE) in 18 different



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areas of Punjab. Milk from collection centers is brought to these plants, where it is chilled again through liquid ice in -15 degree grade, then loaded on trucks, sealed by plant manager and transferred to production facility. Plat Heat Exchangers and Chillers are Equipped are equipped in following areas: Serial Number

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Locations

Plate Heat

Chillers

Arifwala Pakpatan Chistian Minchinabad Kabir Wala Dunya Pur Khan Garh Layyah Ghazi Abad Uch Sharif Mian Channu Havali Jhang Shah Jewna Bhowana Farooqa Sahiwal Bhawalnagar

Exchangers 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

43 4 47 29 22 37 12 21 19 24 35 1 33 2 1 1 18 24

According HFL’s management, company’s vender selection and procurement is the most critical stage in entire supply chain management process. For this, HFL have dedicated a procurement team of highly competent and skilled people, which performs four basic functions. These functions are:

1. Agri-services: This team includes veterinary doctors and agriculture specialists, who visits village to village and dairy forms, examines the animals and provide them medical treatment if needed. They also give farmers free suggestions regarding animal husbandry practices, fodder cultivation, veterinary care and breed improvement. This process really helps HFL in selecting the supplier of prime quality milk.

2. Engineering: University of Management & Technology


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This is a team of engineers which fixates plants, chillers in the selected areas for Milk Collection Centers. They also execute daily affairs regarding the maintenance and repair of plants and machinery in collection centers and PHEs. 3. Operations : This team oversees the daily operations at collection centers and PHEs. It also coordinates the activities of agri- services and engineering teams.

4. Quality: This team examines the quality of supplied milk at all collection centers to ensure that only standardized and nutritious milk is being supplied. HFL has a strict quality policy regarding intake of raw milk. At every PHE meticulous quality tests are conducted to ensure that only fresh milk of the prime quality is accepted at the plant premises. The internationally recognized tests are used to check for: •

Adulteration

•

Microbiological contamination

•

Adequacy of nutritional contents

Fruits: The process of getting the supply of fruits is quite different than milk as it is influenced entirely by seasonal factors. Basically HFL is offering three juices flavors that include: •

Orange

•

Mango

•

Grapes

For these different types of fruits, HFL’s chosen areas are Sargodha, Multan and Chaman for Citrus, Mangoes and Grapes respectively. For the purpose of getting supply of these fruits, a manager of visits in the determined areas and collects the samples from different farmers, which are dispatched to head office later on for the approval. After the approval is received, a team sets up a camp in a central town of city and offers auctions among the farmers whom samples are approved by quality management. The lowest offer is accepted and purchased. If the required quantity



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of fruits is not fulfilled, team manager persuades other farmers to sell their stock at preset lowest price. Another most important supplier HFL is Tetra Pack, which provides the company packing material that is necessary to maintain the quality and standard of its milk, creams and juices for an appropriate time period.

2. Manufacturer: Recently, HFL has two production facilities where all processes, from preparation to quality assurance and to packaging, are undertaken employing state-of-the-art technology and equipment. These facilities are situated in the districts of: 3. 62 km, Bhai Pharoo 4. Rahim Yar Khan Due to insufficient financial position and comparatively lower demand than past, only the facility of Bhai Pharoo is open, which is not being fully utilized too. These both facilities can produce 1.4 to 1.5 million litters of milk on daily basis if fully utilized. HFL’s production process is categorized into four stages that are performed in different sections. First stage commences when a team of quality control management receives the trucks arrived from PHEs. After their approval, milk is passed to Standardize and Pasteurize Department. In Pasteurizing process, total quantity of milk is divided an d sent to different assembly lines according to planned target for the production of different dairy items like UHT milk, creams, powder milk, yogurt and tea mix. Whereas in Standardization process, different ingredients are added into milk, which are essential to produce quality, prime and nutritious milk according to “Recommended Dietary Allowances” (RDA).

A 250 ML glass of Haleeb Milk contains the following percentage of different ingredients: Carbohydrates Protein

4% 17%

Fat

14%

Vitamin A

8%

Calcium

28%



Phosphorus

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32%

After Standardize and Pasteurize, milk is passed to Ultra Heated Technology (UHT) function, where it is heated in the temperature of 90 to 110 degrees. This process increases the shelf life of milk up to 90 days without any lose in quality, standard and taste. In the last stage of production process, milk an d other products are packed in different sizes of packs and stored in facility’s warehouse for a particular time period that should not exceed from one week, as targeted by HFL. 3.

Distributors:

HFL have very strong contract based distribution network in all over the Pakistan with a motive to be very close of its big markets that are Lahore and southern Punjab. HFL’s warehouse structure is divided on the bases of Divisional Categorization, where all big divisions like Lahore, Karachi, Rawalpindi, Gujranwala, Faisalabad, Sialkot, Multan, Rahim Yar Khan and Peshawar are covered with 2 distribution center, whereas small divisions are located with single distribution center. Capacity of all the warehouses varied in between 500000 to 1000000 litters of milk and juice. Decision regarding the capacity is depended on the market demand and delivery lot to each warehouse. All the warehouses and transportations are controlled by third p arties, which are acquired by HFL on rent.

4.

Retailers:

HFL delivers its final to products to ultimate customers through an intensive retail store chain both in rural and urban areas of Pakistan. These retail stores include Convenience Stores, which can be found even in each and every Street, as well as big shopping mall chains like Makro, Metro and Hyperstar in metropolitan areas of country. All of HFL’s goods are placed in shelves for customer pick-up.



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HFL pays Slot-n-Fee to acquire shelf space in big shopping malls and the owners of convenience stores are offered discounts, schemes an d gifts to build and retain healthy relationship for long span of time. HFL’s marketing teams are obliged to visit all markets on regular basis and explore demand and people’s purchasing habits. Sales staff, in the response of that reports, directs the distribution center’s manager about how much, which type and in which sizes of HFL’s brands will be allocated in each market. 5.

Customers:

The most important stage of any supply chain management process is its customers, for which all pre-described stages integrate with each other to get the optimal results that are necessary in fulfilling customer’s needs. Basic target market of HFL is households and families both male and female living in all the rural and urban areas of Pakistan, who wants to get the high quality and standardized packed milk for home consumption purpose. For this purpose, HFL offer its milk, cream and juices in different sizes and prices, resulted people from all classes and income backgrounds can acquire HFL’s products. HFL’s basic aim is to serve the people from all status through prime quality products. HFL has very strong market as far as its business to b usiness customers who include restaurants, hotels, Ice Cream Manufacturers and sweet/milk shops are concerned. Besides this all, HFL also launched a toll free tele phone number for its customers to receive valuable suggestions and comments regarding quality, taste and variety of products form its customers. Customers can access to company through its Care Line 0800-13500 at any time.

Supply Chain Cycle Views: The pre-described five stages of HFL’s supply chain stages are integrated into following four cycles, in which an exchange of information, products and funds occurs between the buyers and sellers of each cycle. These cycles include: •

Procurement Cycle



•

Manufacturing Cycle

•

Replenishment Cycle

•

Customer Order Cycle

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Brief description of the procedures in which all these cycles are performed by HFL is as under. •

Procurement Cycle:

Procurement Cycle occurs between suppliers of milk or fruits and H FL itself. HFL have established a Planning and Forecasting Department where the demand of each market is estimated on weekly basis. These targets are disseminated to all functions within the company. Procurement Department, in the response of that plan, sets out its targets of milk collection. For this purpose, staff of each Milk Collection Centers goes to farmers and dairy farms and tells them about the quantity of milk that will be needed during next seven days. These teams also explore the availability of milk and prepare a feasible report whether the targets will be achieved or not. Their reports are mailed to Head Office, where the planning about alternative sources is done, if any shortage from supply side exists. HFL has a policy to receive milk on daily basis and make the payment just after the supply. Since milk is collected after watchful scrutiny, hence any quality lose is not imposed on suppliers and considered as company’s liability, this results in no return to and refund from farmers to HFL. •

Manufacturing Cycle:

This cycle happens between HFL and its dedicated distributors. First, distributor tells HFL’s head office about total capacity and the number of products he will need to meet market demand. These orders are responded how and when the products will be delivered to distributors. Payment is made by distributors as scheduled. In case of any defect, items are returned to HFL with refunded sum of money.

•

Replenishment Cycle:

In this cycle, HFL’s products are delivered to con venience stores and shopping malls from distributors on weekly and bi-weekly basis, according to quan tity sold by them. For this purpose, active sales teams go shop to shop and receive orders from shopkeepers. On



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next day, distributors deliver goods to them. Payment and repayment is always made on the spot in case any defected items are returned. •

Customer Order Cycle:

Last stage of supply chain cycles is customer orders, when HFL’s customers purchase desired products from retails stores. Customers are educated about the availability, variety and price of HFL’s products through intensive media campaigns in which both indoor and outdoor advertising sources are used. In case of any genuine complaint from customer about the quality or taste of products, they are replaced immediately.

Push/Pull Views: The concept of Push or Pull view in supply chain tells weather the demand is initiated by the anticipation and forecasting or from a direct order of customer. Recently, Haleeb Food is following both of these views simultaneously. •

Push View:

HFL has a very strong Planning & Forecasting Department, which is responsible to estimate the demand for its products in the anticipation of customer order. This process is conducted on weekly basis in which material requirement, capacity and other factors related to production are figured out. This policy is adopted to fulfill the demands of retail customers. •

Pull View:

HFL has also targeted businesses like Restaurants, Ice Cream manufacturer, Milk/Sweet Shops and Hotels from where a constant demand is initiated and fulfilled continuously. For this purpose, HFL produces all goods to fulfill a specific order on weekly, bi-monthly and monthly basis.

Competitive Strategy: The essence of any supply chain management process is to define company’s competitive strategy with the intention to perform differently than rival. A successful competitive strategy goes a long way in achieving sustainable competitive advantage for a business.



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HFL Limited is facing very tough and nerve breaking rivalry with its two major competitors, which are Nestle, Olper’s and some small manufacturer like Nurpur, Good Milk and an emerging pasteurized milk manufacturer, Gourmet only in Lahore region. These companies can be resembled with each other very closely regarding production technology, taste, quality, standardizations and packaging sizes of their dairy products. HFL’s concentrates on the enhancement of brand positioning of Haleeb Milk with competitive edge through comparison with rivals, gain outlet leadership in shelf displays of key outlets and develop new potential market for Haleeb Milk. Besides, HFL’s another competitive strategy is to cover all the rural and backwards areas of Pakistan where both giants, Nestle, Olper’s and rest of competitors couldn’t reach. Haleeb Food also focuses on providing its customer prime quality food products through numerous segments to gain maximum market share. For this purpose, a brand of Dairy Queen is launched for low class customers. Besides, Haleeb Food endeavors to personify by showing a true Pakistani culture through its advertisements, product’s names and images. This strategy is adopted to exploit the market with a message that HFL always respect our values, traditions and rituals, which differentiate HFL from multinational player, Nestle.

Supply Chain Strategy: Haleeb Food is tailoring very responsive supply chain strategy regarding the procurement of milk and its delivering to market within the theoretical cycle time of 2 days. HFL is dealing in food items that are highly perishable and vulnerable, which need very sophisticated technological equipment and fast moving transportation modes to carry from manufacturer to customers. To ensure its prime quality and nutritious products, all manufacturing operations are performed in-house within the premises of HFL’s facilities only. Haleeb Food is also focusing on economies of scale policy to achieve supply chain efficiency. Motive behind this strategy is to achieve maximum output through utilized capacity that will help the company in achieving cost reduction phenomenon.



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Hence we can conclude that Haleeb Food Limited is following both responsive and efficiency strategy side by side in manufacturing and delivering of its products to response market demand in effective and lucrative manners.

Supply Chain Driver: There are six supply chain drivers that are integrated with the motive to achieve company’s competitive and supply chain strategy in optimal manners. These supply chain drivers include: 1) Facility 2) Inventory 3) Transportation 4) Information 5) Sourcing 6) Pricing First three drivers of facility, inventory and transportation are logistical drivers, whereas rests of three are known as cross-functional drivers. These six drivers play a vital role in HFL’s supply chain process in order to achieve both efficiency and responsiveness in fulfilling the market demand. The brief description regarding theses drivers as tailored Haleeb Food is as under.

1. Facility Role in Supply Chain: HFL have two facilities where all the products that include milk, cream, powder milk, yogurt, tea mix and juices are assembled, fabricated and stored. These facilities are located in the districts of Bhai Pharoo and Rahim Yar Khan. Bahi Pharoo’s facility began operations in 1986 w ith the production of UHT milk, cream and yogurt. While reorganizing and reinforcing the existing brands, new production lines were installed like juices, Desi ghee, powder milk and Dairy Queen. Rahim Yar Khan’s facility commenced in 2005 when HFL’s daily demand fetched to1.2 million litters per day. Recently, this facility is not being operated due to low market demand.



21

These both facilities are located near to HFL’s big markets and its collections centers, which really enable the company to get and make the supply of prime quality material.

Role in Competitive Strategy: Both of HFL’s facilities are equipped with advanced imported plants, which enable the company to vary its production capacities according to market demand. Due to this capability, achievement of economies of scales is not a hurdle. Besides, HFL’s intensive distribution network delivers the products to distant areas where Haleeb Food plans to create a market.

Components of Facility Decisions: •

Role:

There are two basic roles that are performed at HFL’s facilities, production and storage. At production facilities, Haleeb Food focuses on flexible capacity utilization to match production with fluctuated demand. Each facility is equipped with six large manufacturing plants, which are utilized according to fluctuated market demand. Haleeb Food has divided each production task in parts where different assembly lines and section perform specific functions. Besides, HFL’s each product or brand has specific manufacturing and storage sections within a same facility, where all the functions of a product are kept separate from other products. •

Location:

Haleeb Food is adopting the centralized strategy as far as its production facility is concerned, where two facilities cover big areas of Pakistan. But for distribution and warehouse network, company has a decentralized structure with minimum two warehouses at big divisional level. Similarly, Haleeb Food has large and intensive milk collection center network, with 428 centers in Punjab to get the supply of fresh milk on daily basis. Decisions regarding opening a new facility are entirely depended upon the microeconomic situation of that particular area, availability of all necessary utilities, basic infrastructure like roads and availability of skilled labor force. •

Capacity:



22

HFL’s both plants have the capability to produ ce approximately 1.5 million litters of milk per day. Haleeb Food was enjoying the daily demand up to 1.2 million litters of milk per day in the fiscal year of 2005-06, which was rapidly increasing day by day. At that time, both of facilities were fully utilized to match the supply with de mand. But due to very serious and critical complaints regarding the quality of milk, HFL’s demand has declined in between 4 to 5 million litters of milk per day, hence HFL is operating through the facility of Bhai Pharo with the capacity of 7 million litters of milk per day. HFL is also focusing on low excess capacity because of perishable and vulnerable products. Besides, company uses varied utilized capacity to match supply with fluctuated demand. 2.

Inventory:

Role in Supply Chain: HFL does not carry large amount of inventory in its facilities and warehouses, gets production through varied capacity and entire products are dispatched to market in 7 days. While production of dairy items and juices, no inventory of raw material is kept, milk and fruits are transferred to production facilities just after the arrival at plants. Similarly, when the fabrication begins, it is not stopped at any cost until the last step of packaging is performed; hence no work in process inventory is maintained. Only the finished goods inventory is held at plant’s warehouses that too for very short time period.

Role in Competitive Strategy: HFL’s inventory control strategy enables the company to gain efficiency since minimum inventory is held. This strategy also helps Haleeb Food in demonstrating a low cost producer where the advantage of cost reduction methodologies is transferred customers.

Components of Inventory Decisions: •

Cycle Inventory:



23

HFL always use cycle inventory strategy during procurement and manufacturing cycles. The average size of lot that is transferred from PHE is about 20000 litters of milk in a single truck lot. Meanwhile, HFL prefers to utilize economies of scale policy in transportation phase. A truck is always loaded according to its maximum capacity in each lot. Besides, company gets milk and fruits in a large order rather than frequent or small orders, which ultimately reduce time, ordering and transportation cost. •

Safety Inventory :

HFL is not following any strategy of safety inventory with the motive to cope with uncertain demand in future. HFL’s procurement and production process enables the company to response any uncertain demand within the time span of 3 to 4 days in any region of Pakistan. •

Seasonal Inventory:

HFL don’t keep any inventory of milk that can be influenced by any seasonal factor. HFL has its own strategy regarding the supply and production of dairy products, known as “Lien and Flush”, means more in winter and less in summer. But company has to keep the inventory of fruits pulp.

3. Transportation Role in Supply Chain: HFL is using only traditional fast moving road transportation modes in all the stages of supply chain process. All the trucks at procurement stage are equipped with essential technology that ensures the safe transfer of milk from PHEs to facilities. This mode is adopted to achieve efficiency while reducing transportation costs in the movement of products in all stages without any lose in qu ality and standards of products.

Role in Competitive Strategy: HFL Limited is emphasizing on both responsiveness and efficiency in transportation of goods with an objective to carry final products to customers within the targeted cycle time of 2 days by incurring as minimum cost as possible.

Components of Transportation Decisions: •

Transportation Network:



24

HFL Limited is using road transportation network where its products are carried to retail customers through number of intermediaries. At each intermediary, products are brought from one place to another by using different types and sizes of vehicles. On other hand, milk and other products are delivered to HFL’s business customers directly from production facility according to their specific order. Routs for transportation are determined by the company, where bigger trucks with the multiple capacities of 12000, 16000 and 20000 litters of milk are used in procurement stages, while comparatively smaller trucks, vehicles and pickups deliver the products to distributors and retailers. •

Transportation Modes:

Depending upon the economy, infrastructure and its business model, HFL’s items are moved from one place to another within the boundary of Pakistan through the mode of roads only since company has a sufficient shelf life of 90 days in which products maintain their standards. This mode also creates the flexibility in carrying the products to the number of locations by changing their routs and enables the company to pour into new markets without incurring any special costs.

4. Information Role in Supply Chain: HFL has designated an active Forecasting and Planning Department, which explores the customer’s purchasing patrons and behaviors in each market and prepares a feasible demand sheet on weekly basis. This report helps Procurement Department in assigning targets to all Milk Collection Centers, routs through which a milk should be carried to PHEs and then to production facility in Bhai Pharo. HFL also ensures the complete and accurate information of trucks during their journey towards the facility, in case of any accident or unfavorable circumstances, alternative sources are drastically used to avoid any kind of lose. HFL Limited also developed an Operations Team, which keeps up-to-date record of inventory and new orders and shares with Head Office on daily basis.

Role in Competitive Strategy:



25

HFL Limited has accessed to all necessary information technological tools like mobile phones, internet, faxes, Enterprise Resource Planning and Supply Chain Management Software to keep the full information regarding supplier’s and PHE’s capacity, total production per day, delivery to warehouses an d sales per day. This all information really enables the company to be responsive and fulfill any uncertain demand within the time span of 3 to 4 days.

Components of Information Decisions: •

Push Versus Pull:

HFL’s Forecasting and Planning Team estimates demand of all kind of products on weekly basis by adopting all operational tools like material requirement planning and master production plan. These techniques are adopted to produce the goods by following push view of supply chain process, in which anticipated demand within a week is considered to meet. Besides, HFL’s business to business customers give direct and specific orders containing the types, sizes and features of products. These orders are fulfilled through separate material and production planning through Pull View of supply chain. •

Aggregate Planning and Forecasting:

Forecasting and Planning Team is also responsible to prepare a feasible aggregate plan of 12 months which is deliberately shares with all the concerned stakeholders of HFL, which make them know about company’s future demands and the material requirements to fulfill that demand in optimal and economic way. This plan determines the costs of labor, inven tory, backlog orders, any hiring or firing in all Milk Collection Centers, PHEs and Production Facilities to cope with fluctuated demand.

Prototype Aggregate Plan for HFL” University of Management & Technology


26

In this section, we are preparing a model aggregfte plan for HFL for the year of 2007. Demand for HFL’s milk during next 12 months is as under:

Month

Litters/ Month

Jan Feb March April May June July August September October November December

4257354 4426968 6119834 5067840 3880053 2968800 3068535 4218573 5340420 6187879 6607860 7234315

Other information regarding essentials factor’s cost is guiven below. Working Hours Working days time req(sec) Current workers opp Inventory

8 26 15 150 500000

Information of total cost incurred by one worker is as under: Regular labor cost Overtime Inventory Cost Material total production of a worker per month

6656 34*Ot 1*I 33*P

49920

HFL assumes that there will not be any hiring, firing and subcontracting during entire time period. Any fluctuation in demand will be handled through overtime and backlog. Company also assumes that there should be 500000 litters of milk in inventory at the end of year.



27

Optimal solution provided by solver program is as under: Periods 0 1 2 3 4 5 6

Workforce

Overtime

Hired

Laid off

Inventory

production

Stockout

Subcontract

Wt

Ot

Ht

Lt

It

Pt

St

Ct

Demand

95 95 95 95 95 95 95

0 0 0 0 0 0 0

0 0 0 0 0 0 0

0 0 0 0 0 0 0

500000 985046 1377434 0 0 536907 2310507

0 4742400 4819356 4742400 4742400 4742400 4742400

0 0 0 0 325440 0 0

0 0 0 0 0 0 0

7 8

95 95

0 0

0 0

0 0

3984372 4508199

4742400 4742400

0 0

0 0

9 10

95 95

0 0

0 0

0 0

3910179 2464700

4742400 4742400

0 0

0 0

11

95

0

0

0

599240

4742400

0

12

95

0

0

0

500000

4742400

0 239267 4

4257354 4426968 6119834 5067840 3880053 2968800 3068535 4218573 5340420 6187879 6607860

0

7234315

Inventory 0 0 0 0 0 0 0 0 0 0 0

Overtime -5700 -5700 -5700 -5700 -5700 -5700 -5700 -5700 -5700 -5700 -5700

Constraints

1 2 3 4 5 6 7 8 9 10 11

0 0 0 0 0 0 0 0 0 0 0

productio n 0 76956 0 0 0 0 0 0 0 0 0

12

0

0

0

-5700

6656

0

0

34

1

0

2

33

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

Overtime 0 0 0 0 0 0 0 0 0

Inventory 985046 1377434 0 0 536907 2310507 3984372 4508199 3910179

Subcontract 0 0 0 0 0 0 0 0 0

Stockout 0 0 0 650880 0 0 0 0 0

Meterial 156499202 159038740 156499204 156499207 156499202 156499202 156499202 156499202 156499202

0 0 478534 9

156499202 156499202

Period

Workforce

Costs Period 1 2 3 4 5 6 7 8 9

Reg.Time 632320 632320 632320 632320 632320 632320 632320 632320 632320

Hiring

Lay off

10 11

632320 632320

0 0

0 0

0 0

2464700 599240

0 0

12

632320

0

0

0

500000

0


156499202


28

Total cost: 1914730620

5.

Sourcing:

Role in Supply Chain: HFL’s entire manufacturing process of all products categories is performed in-house facilities under the domain of company’s experts, since HFL is committed to provide prime quality goods to its customers. Besides, HFL have a portfolio of suppliers regarding all the fundamental inputs of milk, fruits and technology. Company believes in long term and strong relationship with all of its suppliers by demonstrating mutual respect, reliability, coordination and consultation. HFL have a careful process as far as the selection of its supplier is concerned. For this purpose, company’s agri-services teams visit all the rural areas and securitized a ll the factors that are essential to perform prior to obtaining the superior quality inputs.

Role in Competitive Strategy: HFL’s basic objective is to achieve efficiency in its operations, for which company is relying both on in-house and outsourced sources that will ensure the delivery of prime quality products to market.

Components of Sourcing Decisions: •

In-House or Outsource:

Haleeb Food has acquired both of in-house and outsourced options with the motive of no compromise on quality and standards. Except of HFL’s manufacturing operations, all other activities in supply chain like transportation, distribution, suppliers and retailing are performed by third parties. •

Supplier Selection:

HFL have more than 200000 suppliers of milk and fruits from all over the Punjab who are feeding company with all vital inputs on daily basis. HFL’s supplier selection procedure is very strict and standardized, for which company’s Procurement Department is responsible. These suppliers are selected through both negotiation and auction. 6.

Pricing:



29

Role in Supply Chain:

HFL have segmented its market into four categories of quarter, half litter, 1 liter and 1.5 litters of packaging sizes as far as its UHT processed milk is concerned. All of these four segments are charged with different prices of PKR 16, 32, 57 and 85 respectively. Customers demand high quality, packed items with all nutritious ingredients that should be available in mid range prices. HFL offer discounts especially on 1 litter packs in the month Ramzan and on other rituals to match supply and demand. Role in Competitive Strategy:

HFL focus on the stable demand throughout the year that is estimated by company’s Planning and Forecasting Department in advance. Thus HFL believes in charging stable prices that is induced by solid rivalry in market. Since milk is consumed on daily basis, customers always enforce HFL to adopt high responsiveness, which will result in providing fresh and healthy milk.

Components of Pricing Decisions: •

Pricing and Economies of Scale:

HFL’s always endeavors to achieve economies o f scale by utilizing as maximum capacity of a facility as possible, which helps the company in matching prices with company’s rivals. HFL always wishes to transfer the benefits of low cost incurring through economies of scale to its customers instead of kee ping high margins. Besides economies of scale in production operations, HFL HFL uses the full capacity of its vehicles at each stage of supply chain to reduce transportation costs. HFL also offer quantity discounts to all stakeholders like distributors, retailers and customers. For instance, a customer pays lesser price for each pack of milk or juices on the purchases a full carton than who buys it partially.

Distribution Network:



30

HFL has traditional distribution network of retail stores that is best suited for fast moving consumer goods (FMCG) and for items for which customers value the quick response from manufacturer in the economy like Pakistan. In this distribution structure, products are delivered to customer location like convenience stores and shopping malls, from where customers pick up HFL’s products. All the p roducts have to flow through intermediate’s location like distributor’s warehouse and retail stores before the delivery to final customers. Brief description of HFL’s distribution network structure to move the products from customers is as under. •

Retail Storage with Customer Pickup:

In this network design, all the products of HFL are carried and stored in local retail store’s shelves, where customers walk-in and pick the desired products of HFL. An intensive and saturated stop to stop convenience stores network in Pakistan enables the company to decrease its response time. Low storage capacity at stores and inexpensive transportation mode are the obstacles for HFL to deliver large variety of products to these stores through single lot. This intensive retail store network also helps HFL to know about the customer experience and feedback regarding the availability and quality of company’s products with the help of sales staff, who visits these stores on weekly basis. HFL can also enjoy the highest time to market for its new products, which can be carried through current transportation modes and placed in company’s existing shelf space at retail stores, without paying any additional Slot-n-Fee. This retail store network also makes the order visibility very clear and convenient for the customers due to physical interaction with shopkeeper during pickup from stores. HFL can also handle the returns form customers in case of any complaint by allowing the shopkeeper to replace defected goods at the spot. This traditional distribution network of retail stores with customer pickup yields numerous advantages for HFL. This lowers the d elivery cost and provides faster response to market needs than any other distribution setup in the country like Pakistan.

Prototype Distribution Network Design of HFL:



31

Here we designed a distribution network model for HFL regarding opening some new Distribution Centers in Lahore to be more close to its major markets. We assumed that HFL is willing to decentralize its distribution setup with a motive to be more responsive in providing fresh dairy products on daily basis. We selected five potential regions of Raiwand, Johar Town, Faisal Town, Allama Iqbal Town and Band Road that will all the markets within these regions. Basic information of all necessary factors related to costs of distribution centers is shown in following two tables. Variable, Fixed costs and Capacities of each Distribution Center:

Variable cost/unit

Location

Fixed Cost

Capacity

Raiwand

PKR 0.65

PKR 125,000.00

500,000

Johar Town

PKR 0.65

PKR 200,000.00

500,000

Faisal Town

PKR 0.65

PKR 175,000.00

500,000

A.I.T

PKR 0.65

PKR 225,000.00

500,000

Band Road

PKR 0.65

PKR 150,000.00

500,000

Transportation Cost to all Markets and total Estimated demand:

Location Raiwand Johar Town Faisal Town A.I.T Band Road Demand

Raiwand Johar Town Faisal Town A.I.T Band Road PKR 0.50 PKR 1.00 PKR 1.25 PKR 2.00 PKR 2.50 PKR 0.75 PKR 0.25 PKR 1.00 PKR 1.75 PKR 2.00 PKR 1.00 PKR 0.80 PKR 0.50 PKR 1.50 PKR 1.75 PKR 2.00 PKR 1.80 PKR 1.75 PKR 1.00 PKR 1.25 PKR 2.50 PKR 2.00 PKR 2.00 PKR 1.50 PKR 1.00 65000 1250000 115000 150000 100000

HFL’s Planning and Forecasting Department also estimates that inventory cost is PKR 0.50/unit.

The next step is to set up some constraints for running this problem through Linear Programming Model in excel. These constraints are as under:



32

•

Demand of each market must be fulfilled

•

There should not be access capacity in any distribution center.

•

Either distribution center should be opened in each location or not.

•

Quantity supplied to each market should not be zero.

After adding these constraints in solver model, optimal obtained results for HFL regarding the places in which distribution centers will be opened, quantity supplied by opened distribution centers to one or more markets and total cost incurred by HFL are as under. Transportation, variable and Inventory cost per unit Location Raiwand Johar Town Faisal Town A.I.T Band Road Demand

Location Raiwand Johar Town Faisal Town A.I.T Band Road Location Raiwand Johar Town Faisal Town A.I.T Band Road

Unmet Demand Location

Raiwand 1.65

Johar Town 2.15

Faisal Town 2.40

A.I.T 21.80

1.90

1.40

2.15

2.15 3.15

1.95 2.95

3.65

3.15

65000 1250000 Demand Region, Production Allocation

Band Road 3.65

Capacity 500,000

Fixed Cost 125,000.00

2.90

3.15

500,000

200,000.00

1.65 2.90

2.65 2.15

2.90 2.40

500,000 500,000

175,000.00 225,000.00

3.15

2.65 15000 0

2.15

500,000

150,000.00

115000

100000 Dist,center

0

Band Road 34771

Open/Close 1

Raiwand 0

Johar Town 465229

Faisal Town 0

A.I.T

0

500000

0

0

0

1

0 65000 0 Excess Capacity

284771 0 0

115000 0 0

100229 49771 0

0 65229 0

1 1 0

0 0 0 320000 0

Raiwand

Johar

Faisal

A.I.T

Band



33

Town 0

Town 0

Road 0

0

0

Objective Function Min Cost

PKR 4,031,124

These results show that HFL should open four distribution centers in the regions of Raiwand, Johar Town, Faisal Town and Allama Iqbal Town, which will serve the demand of all five markets in optimal way. Total cost that HFL has to sustain is PKR. 4031124 that is relatively very high. Here HFL has to trade off in efficiency and responsiveness if it wants to deliver goods to markets within the targeted cycle time of two days, which is not possible without sustaining high costs.



34

Missing Gaps and Recommendations for Overcoming: After exploring the entire Supply Chain Management process of Haleeb Foods Limited, there are some aspects in which HFL lacks and some recommendation in achieving competitive strategy in lucrative manners. •

HFL was market leader of dairy industry for many years prior to 2007 with approximately 60% market share. Besides, HFL filled its pockets with the revenue of PKR 9 billion in the year of 2006. To meet its rapidly growing demand, HFL began to collect milk from distant areas without fixating Chillers that is essentially required to maintain quality of raw milk. This strategy really devastated HFL and company faced complaints from customers on regular basis. At the end of year 2007-08, HFL’s market share declined to about 4 % to 5% only. Now company is striving to regain its market share. Recently. HFL ha s 428 and Milk Collection Centers and 18 PHEs with the storage capacity of 400000 litters of milk per day and are unable to collect required milk if demand rises to 800000 litters. For this reason, HFL needs to increase the numbers of Milk Collection Centers and PHEs to 550 and 40 respectively. This can be accomplished within the time frame of 1 year easily.

•

Instead of relying on third parties in procurement level, HFL sho uld concentrate on importing its own cows and buffalos and setup their own dairy farms in its facilities. As this process will be commenced from scratch, it will take minimum 2 years in implementing.

•

HFL should focus on decentralizing its distribution network to be more responsive in fulfilling market demand. HFL should open minimum 5 small warehouses in big divisions for being close to its major markets.

•

HFL should provide company’s sponsored refrigerators and chillers to retailers for placing HFL’s goods. This effective merchandising strategy will attract customers and build HFL’s lucrative image.



•

35

HFL should also focus on supplying its milk in different pack sizes to customer’s doorstep through company’s own vehicles, as Nestle is supplying its water brand “Pure Life”. This strategy will be very successful in the urban areas of country


Haleeb Foods

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