PROJECT OF SUPPLY CHAIN MANAGEMENT

SAYYED ENGINEERING PRIVATE LIMITED

Introduction:
Objective(s) of the project:
The objective of this project is to outline the overall flaws in the Supply Chain of
Sayyed Engineering Private Limited and suggest the ways in which these
flaws can be over come and the supply chain can be improved.
Company introduction:
Sayyed engineering ltd was the first to manufacture the ballpoint pens in South
Asia in an era when such high quality precise engineering, involved in the
production of tips of ball point pens, was considered to be possible only in the
advanced countries. Since its foundation in1967, the company has sustained its
devotion to high quality and innovative products. Apart from Pakistan, it has also
been exporting its quality products to many countries, including UAE, Jordan,
Iraq, Egypt, Madagascar, Holland, Morocco, and Saudi Arabia.
Product lines:
The Company basically deals in following product lines:
Stick Pens
Retractable Pens
Gel and Roller Pens
Fine Liners
Fountain Pens
Liquid Ink Pens
Fibber Tip Pens
Markers
Pencils
Sharpeners
Quality Certifications:
Best machines and raw material from Germany, Switzerland, and Japan are
used to injection mould the ballpoint pens and produce the refills.
Comprehensive quality control systems have been established, which have
earned the ISO 9002 certification to the company.
Production facilities:
The company has three production facilities located at
1. Gujranwala,
2. Sargodha
3. Bhai Pheru
Regional offices:
The regional offices of the company are located in
1. Lahore
2. Rawalpindi
3. Karachi
4. Overseas office at Jebel Ali, UAE.
Many other offices working under the three regional offices in Pakistan, which are
striving day and night for customer satisfaction, quality improvement, innovation
and capturing new markets for the company.
Introduction of Problem Area:
The supply chain of Sayyed Engineering Limited is centralized, and there
is a lack of coordination between strategic and operational level
Lack of appropriate vendor database system
No opportunities for potential new vendors
Lack of company owned transportation and reliance on Transportation
Company
Lack of companys warehouse and stores
Lack of distribution network and agencies
Lack of coordination between different departments
Lack of training and skills in employees to properly manage the ERP
system installed by the company
Problem Background:
The problems stated above basically originate due to autocratic style of strategic
level management, their risk-averse attitude and lack of coordination among the
departments. Management has stuck itself with its traditional old strategies,
suppliers and systems, and is reluctant to seek the new possible horizons.
Company does not give chance to new local suppliers, who even offer raw
material at lower rate, just due to the reason that they do not want to compromise
on quality.
To enjoy the advantages of tax savings given by the government in industrial
zones like the other companies in the Industry, company has formed its
production facilities in industrial areas. But this has increased the transportation
expenses between regional offices and production facilities.
Logistics is the back-bone of any Supply Chain. Company is hesitant to invest in
buying its own vehicles and waste time and money on their management and
maintenance. Looking at the Pakistans rising fuel prices, it is very clear that the
freight charged by the transporters must be very high and company still has to
pay it.
Due to its cost saving attitude, management has not rented or bought any ware-
house, due to which it does not has any place to store its inventory and keeps it
in its head-office till delivery. Now-a-days market believes in swift orders and
supplies, and to meet this requirement stock need to be kept in a warehouse.
Company has always believed in hiring professional and skilled staff, but is
unaware of the fact that every person needs to be updated through continuous
professional development and training.
Problem Analysis:
During a meeting with company manager, he told that the ultimate users of
budgets and systems were given least importance during their formulation. He
told that higher management only believes in giving fix targets but do not look at
the volatile economy of Pakistan.
As per the information provided by him, it is very clear that many of their targets
become unrealistic at some time during the year, which not only de-motivates the
operational level managers but also the sales and marketing staff. Top
management is very less aware of the limitations and problems faced by the
operational core when they do not give them chance to be a part of decision
making process because at the end they are the ones to achieve the targets and
plans.
Further when he was asked about the logistics system of the company, he told
that company is totally reliant on external transporters and has no vehicle of its
own.
As per his comments and looking at the remote locations and distances between
the production facilities and regional offices, it is visible that how the
transportation and freight expenses would be a burden on the cash flows and
profitability of the company. Also, in-case of any strike by transporters or further
rise in fuel prices (as is the current trend in economy), the logistics system of
company may collapse.
It was found out that company is totally reliant on foreign suppliers for raw
materials, and least interested in looking for potential local suppliers, to maintain
the quality of products and also to maintain the ISO 9002 certifications. This
results in high cost of raw materials, leading to high cost of production. Due to
foreign transactions, the exchange rate fluctuations also highly affect the
budgeted costs.
During a search about supply chain system of the company on the internet, it
was found that the company does not have its own warehouse to store the
inventory. This is a great issue, still un-addressed by the management. Finished
goods are kept in head office till delivery, due to absence of ware house.
Company has no inventory kept to meet any immediate orders, due to which
many possible customers are lost. Also it causes high pressure on production
department for quick production, and haste may cause many quality flaws in
products.
When company manager was asked about the distribution network of the
company, it was deduced that, goods are transported to distributors, who transfer
them to the retailers and stationary shops who sell them to consumers. Another
track is that some big organization buys directly from company. So they are
highly reliant on external distributors for their distribution and do not have their
own distribution agency which leads to a fear that the distributors may switch to a
competitors at any time, rendering the distribution system totally failed. This
failure will lead to loss of customers and goodwill of the company.
Another problem realised when observing the information system of company
was the lack of co-ordination between production, procurement and marketing
and sales department. Company has installed ORACLE ERP SYSTEM, but the
employees, lack proper skills to run the system. Some are techno-phobic and
some do not understand how to operate such a complex system. This problem is
basically due to lack of training sessions held in the company. Due to this, I.T
department is always busy in troubleshooting the ERP related issues, and has no
attention towards the latest market trend of E-Commerce, through which they can
make their company global. There are many potential foreign customers who not
bother about the companys products because they cannot buy them online.
Recommendations:
The above stated problems can be resolved by first of all changing the overall
management system of the company from autocratic to democratic.
The company manager of each department must be present at the meetings
where decisions are taken and must be given a chance to give his opinion to
make the targets achievable and practicable.
This way top management would also be aware of the problems in operational
level, and also the market conditions at grass root level.
Company must develop its logistics department, and invest in some own
vehicles, so that their reliance on external transporters may be reduced and also
company may have a choice in using own vehicles or transporters, what so ever
is more beneficial.
Company must upgrade its vendor database, and give a chance to potential local
buyers as well.
This may result in reduction in cost prices, and improved profit margins.
Company must ask for proposals and quotations, and include the shortlisted
candidates (whose quality they find acceptable) in their system.
This would not only be beneficial for the company but also they can give benefit
to overall economy of the country.
Company must arrange for a warehouse near its production facilities, so that
finished goods are not needed to be stored in head office, also some extra
inventory may be maintained in-case of an emergency order, or rise in overall
demand of products. This will lead to customer satisfaction.
Company must invest on continuous professional development of the employees,
through time to time seminars, workshops, etc so that employees may be able to
cope with the changing business environment.
Company must reduce reliance on external distributors and move towards
organic diversification, and give its agencies to people so that they may have a
direct communication with customers.
Although E-commerce requires a very major investment, but it may lead to many
times increase in customer base. This practice is being adopted by many
companies, resulting in highly favourable results.
Company must also use electronic media for advertisement and marketing of
products.