RELATION WITH PEPSI COMPANY

INTERNATIONAL:

Pepsi Company listed in New York Stock Exchange. In Pakistan,

there is 10 units of Pepsi Company. Shamim & Company is franchised by

Pepsi Company on these terms & conditions.

Pepsi Company has got a quality standard and has improved

parameters to maintain and improve quality.

TERTIAN IS FIXED BY PEPSI COMPANY:

Pepsi Company is responsible for advertisement of its product.

PROFIT OF SHAMIM & COMPANY:

HISTORY

Shamim & Company was established in 1967, as prorate limited

company. It started production in 1968. At first it was become by ‘”-up

factory” as “7-up” was its initial product.

Shamim & Company was named after the nephew of ‘Allah Nawaz

Khan Tareen’ the real owner of Company. Currently ‘Alamgir Khan

Tareen’ is its managing Directors Chairman who is the son of Allah Nawaz

Treen.

TERRITORY

Shamim & Company covers the widest territory in Pakistan. It does

not only cover Multan. Division but the areas of Quetta are also included

in its territory.

PRODUCTS

The first product of Shamim & Company was 7-up. But the Company

is producing 4-products:

Pepsi Cola

Mirinda

7-up

Teem

Mirinda green was also it product but it failed to get adequate

response from customers as it was not according to their taste and there

was no proper publicity or advertisement for it.

PRODUCT DESIGNING

All products have been designed by parent company i.e. Pepsi

International. So Shamim & Company is not involved in product designing.

MAIN OPERATION

“Operation is a process that transforms inputs into finished goods

and services”. Shamim and Company has its main operation as:

“To convert empty-returned bottles into filled bottles and to

distribute them to retailers.”

MAIN OBJECTIVES

The two main objectives of Shamim & Company are:

To provide the customers, a quality-products, along with

maximization of profits.

The continuous improvement in quality.

UNIQUE FEATURES OF SHAMIM & COMPANY

The Company has following distinguishing features:

Shamim & Company is the biggest soft-drink manufacturer in

Pakistan.

Shamim & Company covers the largest area/territory among al

Pepsi Company’s franchisees in Pakistan.

Shamim & Company has won quality awards at international level.

DEPARTMENTS:

There are six main departments of Shamim & Company.

Production Department

Finance Department

Sales Department

Shipping Administration

Marketing Department

Personnel

OPERATIONS STRATEGY:

Pepsi Company international and its franchisees basically follow

consumer driven operation strategy i.e. the strategy which focuses at

consumer’s needs & wants.

This strategy begins which “Market analysis”:

MARKET ANALYSIS:

The main consumers of Shamim & Company are:

Youngsters

Middle Social Class

So marketing compaign of Pepsi products focuses on these two

mentioned segments. The direct customers of Company are retailers and

after it consumers are indirect customers.

‘Coca Cola’ Company is the major competitor of Pepsi at world-

level. Similarly in case of Shamim & Company, its major competitor is

“Multan Beverages Company.” Producing the products of Coca-Cola,

Fanta & Sprite.

CORPORATE STRATEGY

GOALS

As earlier discussed, the main objective or goal of Company is to

satisfy the customer’s needs along with maximization of profits.

CORE COMPETENCIES

The core competencies of Shamim & Company are:

Well-trained & experienced workforce.

Systems & Technology.

Financial & market know-how of its managers.

Well supportive facilities.

COMPETITIVE PRIORITIES:

Shamim & Company is producing standardized products. So

Company profits of Shamim & Company are as following:

COST

Due to standardized products, Company has the priority to minimize

the per unit cost & total cost as well.

QUANTITY

Shamim & Company wants to maintain a consistent quality of its

products i.e. the product, which is produced here, must meet the designer

specifications.

TIME

Shamim & Company meets its delivery-time promises i.e. The

Company pays most attention to delivery -on- time to satisfy customers &

retailer’s needs on the time, which they want.

FLEXIBILITY:

Since Shamim & Company does not focus the unique demand of

customers & products are standardized, So Company works for volume

flexibility i.e. Company is able to accelerate or decelerate the rate of

production quickly to handle large fluctuations in demand.

FLOW STRATEGY:

There are three possible flow strategies, which is organization can

adopt.

FLEXIBLE FLOW STRATEGY

Under this strategy, employee & equipment are organized around

“process”. This strategy is for low-volume or customized products.

LINE FLOW STRATEGY

Under this strategy equipment & employee are organized around the

“product or service”. This strategy is for high volume or standardized

products.

INTERMEDIATE FLOW STRATEGY.

The strategy is mixture of above both strategies but with some

dominant flows. Product or service volumes are relatively high and system

is capable of handling several customer orders at a time.

FLOW STRATEGY IN SHAMIM & COMPANY:

Shamim & Company work with “Line flow strategy” where people

equipment are organized around the product as product is standardized &

high-volume production is there.

STRATEGIES BASED ON FLOWS:

There are 3 strategies based on three flow strategies.

MAKE-TO-ORDER STRATEGY

It’s for line-flow strategy & high volume production.

ASSEMBLE –TO- ORDER STRATEGY

It’s for intermediate flow strategy. The components exist in

organization but they are assembled on order.

MAKE-TO-ORDER STRATEGY:

It’s for flexible-flow strategy & customized product or services.

APPLICATION ON SHAMIM & COMPANY:

Shamim & Company works under “make-to-stock” strategy as it

holds items in stock for immediate delivery, thereby minimizing customer

delivery times. This strategy causes the competitive priorities of low cost &

consistent quality for the Company.

DECISION-MAKING:

In Shamim & Company major decisions e.g. about product

development or product design or advertisement etc. are made by its

franchiser Pepsi Company like decision for launching Mirinda Green, was

made by Pepsi Company.

The manager of Shamim & Company while making decisions about

itself, different techniques like break-even analysis & other softwares.

Normally the departments make independents. Decisions, but for

some main issue or major problem, all departments leads jointly make

decisions.

PROCESS:

In Shamim & Company resources are organized around product as

Company adopts fine-flow strategy. Company can change production

according to demand fluctuations.

Process is same for all products i.e. Pepsi Cola, 7-up, Mirinda &

Teem. No pant is fixed for a certain product ‘Pepsi Cola’ has largest

production as it has highest demand among all products.

PRODUCT SWITCH OVER:

On the same plant, which switching over to another product (e.g.,

from Pepsi Cola to 7-up) the plant washing detergent washes called

“TSP”.

PROCESS STAGES:

1ST STAGE (GETTING TREATED WATER):

‘Lime’, Farris Sulphate (for iron) & chlorine are added to raw/hard

water & it goes in “chemical tank” where carbonate and bi-carbonate

settle down, & we get treated/soft water.

2ND STAGE (PREPARATION OF SIMPLE SYRUP):

Simple “Syrup” is made by mixing up sugar into water after

pasteurization of water at “80˚ C”. After ‘stay’ for a time period, this

simple syrup is filtered & then cooled down at “19˚ C”. Water is

heated/boiled & avoids germs-growth at normal temperature like “32˚ C to

35˚ C”

3RD STAGE (PREPARATION OF FINISH SYRUP):

Now this simple syrup goes into “syrup storage tanks”.

‘Concentrate’ & flavor are added to simple syrup & it is called “finish

syrup”.

4TH STAGE (WASHING EMPTY RETURNED BOTTLES):

Empty returned bottles pass through steam under “57˚ C to 77˚ C”,

then these are cooled down. This process-step takes 45 minutes. Now

bottles are washed by “Caustic-Soda”. ‘TSP’ and water. Now a light-test

is conducted for these treated bottles, where the bottles pass through a

light.

5TH STAGE (FILLING SECTION):

Now syrup & treated water come to “Carbo Cooler” in which NH3

(Ammonia) chips, are used for cooling purpose. ‘Co2’ gas also comes in

Carbo Cooler. After a flow-mix in Carbo Cooler, the resultant drink comes

into filler where empty washed bottles are filled.

6TH STAGE:

Now bottles come to “Crowner” where these are crowned then

bottles pass through a light test to have a check for overfilled, underfilled

or any deficiency.

7TH STAGE:

After passing through “printer”, the “casing” of bottles is made, &

at last shipping hand over is there.

LOCATION:

Shamim & Company is situated near MDA (Multan Development

Authority), on the road leading to Nishtar Hospital i.e. District Gaol road.

Selection of Location:

The major factor was proximity to markets in selection of location.

LOCATION ANALYSIS:

The location described above is favorable for Shamim & Company

due to following factors:

MARKET RELATED FACTOR:

Shamim & Company has proximity to its major market i.e. Multan

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CAPACITY:

Capacity is the max. Rate of output for a facility. The facility can be

a workstation or an entire organization.

HOW SHAMIM & COMPANY PLANS ITS CAPACITY:

In Shamim & Company, capacity planing is based upon demand

analysis & demand forecasts.

Normally “Sales department”, analysis demand & forecasts the

demand. Then facts and figures about demand are delivered to “General

Manager Technical”, who plans capacity.

PLANTS:

There are 4th manufacturing plants, which are imported by from

Germany, and these plants are used according to season.

So their usage very from 4th plants to 1-palnt.

CAPACITY INFORMATION:

Avg. output rate =15000, cases per day per plant.

Here 1 day =24 hours and 1case = 24 bottles.

Maximum or peak capacity =20,000, cases per day per plant.

Effective capacity = 15,000 cases per day per plant.

Utilization (peak) = per plant.

Utilization (effective) = per plant.

Capacity cushion =100% Utilization (peak).

=100% - 75% = 25% per plant.

Capacity cashion is large one, which costs money, but Company is

able to meet any feature demand.

EXPANSION IN CAPACITY:

In start, there was only 1-manual plant having capacity of 2000-

cases per day. But now due to:

Increase in market size (population)

Increase in demand,

There are 4-plants in Shamim & Company in just 33-years.

These 4-plants are automatic coitn effective capacity of 15000-cases

per plant per day.

STRATEGY:

Shamim & Company follows “Expansionist strategy” as it uses

frequent and large jumps in capacity.

ECONOMIES OF LARGE CAPACITY:

Shamim & Company large capacity enjoying following economies of

scale:

Reduced costs of purchased material by having discounts on

heavy/large purchases.

When output rate increases utilization rate also increase and per

unit cost decreases in large capacities because fixed costs are spread over

more units.

In large capacity, Company gets more experienced workforce so

productivity is increased & so cost is reduced.

DISECONOMIES OF LARGE CAPACITY:

Shamim & Company also faces following diseconomies of scale

(large capacity).

It’s difficult to manage large capacity.

It required more capacity.

Forecast for demand is less accurate.

SIMULATION ANALYSIS:

In the process “Simulation”, we use a ‘model’ to reproduce the

behavior of system & to find solution of a complex problem. This model

consists of different variables or alternatives.

Shamim & Company has a “Research dept.” which works with

“Simulation Analysis”. There are MIS-people to handle simulation system.

LAYOUTS:

Layout is physical arrangement of economic activity centers within a

facility. An economic activity centre can be anything that consumers space.

In other works “Layout is physical arrangement of people,

equipment or activities”.

APPLICATION IN SHAMIM & COMPANY:

Shamim & Company works with “Product Layout” type, as

resources are arranged around the product’s route. Computer application

is also there in making layouts.

SOME LAYOUT, IN SHAMIM & COMPANY:

Some main layouts in Shamim & Company are following:

Layout of plants.

Layouts of Equipment.

Manufacturing layout.Office layout.Retail layout.Distribution & warehouse layouts.Forecasting:Patterns o Demand:

Demand for products of Shamim & Company follows “Seasonal Pattern” i.e. repeatable pattern of increases or decreases in demand, depending on the time of season.Factors affecting demand:External factors:Now-a-days, the biggest facotr affecting demand of products (of Shamim & Company) is the “Competitor’s action” & frankly speaking the action/policies of Coca Cola Company e.g. there effective advertising companies etc. Govt.’s rule & regulations about taxes & prices also influence the demand by affecting the price of products.Internal factors:3-main internal factors affecting demand are:Price.Advertisement.Distribution.Design of Forecasting System:1. Deciding what to forecast:Level of aggregation:In Shamim & Company forecast in made about all four products separately.Units of Management:Forecasting is made in terms of “Cases” where 1 case = 24 bottlesType of Forecasting Technique:In Shamim & Company forecasting is made for “ short-term period” i.e. for a quarter (3-monts).In Shamim & Company, the base for forecasting is “precious data about sales”, which is provided by sales department. After analyzing the data, the forecast is made. Executive Opinion is also used in forecasting i.e. Opinions, experience & technical knowledge of related managers. So forecasting in Shamim & Company is a blend of analysis of data & executive opinion.

Supply Chain Management:Supply-chain management aims at synchronization of a firm’s activities/ functions and those of its suppliers to match the flow of materials, service and information with customer demand.Application of Shamim & Company:

STRUCTURE:

The structure of Shamim & Company is more inclined towards

“segmented structure” as most of the decisions are made independently by

all the departments & only in case of “targeting” (demand etc.) there are

joint decisions.

SUPPLY CHAIN:

SUPPLIES OF RAW MATERIAL

Shamim & Company has independent supply-Chain entities i.e.

All dept. normally make independence decisions.

Customers & suppliers are not involved in decision-making.

MODE OF PLACING ORDER:

“Telephone” is used about in all case, to place order for acquisition

of raw material.

SUPPLIER SELECTION:

The first priority is given to “Quality” while selecting suppliers, by

Shamim & Company. Price is considered after quality & delivery time at

last.

SUPPLIER RELATION:

Shamim & Company its suppliers have “cooperative orientation”

b/w them. Its main reason may be that Shamim & Company does not focus

on price mainly but quality & Shamim & Company in only biggest

customers of its suppliers normally.

SOLE SOURCING:

Sole sourcing is not there in Shamim & Company, as Company does

not placc orders to only one supplier for a particular item.

DISTRIBUTION:

PLACEMENT OF FINISHING GOODS INVENTORY:

Shamim & Company is involved in “forward placement” of finished

goods inventory, i.e. its rocates the stocks closer to customers.

Advantages from “ forward placement” gets following advantages.

Reduction in transportation cost

Fast delivery times

TANSPORTATION MODE

Roads are the biggest/ main transportation mode in distribution ofr

shamim & co.

Trucks are normally used for distribution. So distribution is very

flexible due to use of light way-transportation.

SCHEDULING, ROUTING & CARRIER- SELECTION.

The area / territory of shamim & co is divided into many

sectors/regions. For every region, there is RSM i.e. regional sale manager,

who is involved in scheduling/ routing & carrier selection decision making

by survey of outlets.

INVENTORY MEASURERS.

Shamim & co normally measurer inventory in terms of “ weeks of

supply”.

Where weeks of supply =

Inventory Management in Shamim & Company:

Shamim & Company has pressures for low-cnrentory because:

Shamim & Company wants to provide fresh products to its

customers.

Holding cost of imentory is high.

High cnventory causes high tax also.

TYPES OF INVENTORY IN SHAMIM & COMPANY:

cycle- inventory.

Anticipation inventory but at very minimal level as products are not

stored for a long-time period.

SAFETY STOCK AT MINIMAL LEVEL.

Pipe-line inventory is also there which is dependant upon supplier’s

rlability & lead-time pipe line cnventory/Buffer Stock = dh

Where d = demand during unit of lead time.

H = length of lead during time.

Supplies are distant normally, so Company has to maintain a

considerable amount of Buffer-Stock.

INVENTORY REDUCTION TACTICS:

Cycle inventory is going to be reduced by increasing repeatabling.

Shamim & Company always tries to make good forecasts about

about demand is supplier’s-delays to reduce safety stock.

Suppliers of Shamim & Company are not habitual of delaying in

case of Shamim & Company, as Company can’t afford any delay.

INVENTORY CONTROL SYSTEM:

Shamim & Company was “periodic pervious System” i.e. P-system

for inventory management. So inventory is reviewed normally on weekly

basis. Some time daily revieres are also mede. Each month the store

prepares “Monthly consumer ption reports.

REORDER PT:

For two main items reorder Pts. Are as following:

‘Sugar’ is reordered when it is left for only 100-batched.

“Concentrate” is ordered for ‘2’ a ‘3’ times a year.

INVENTORY RECORD ACCURACY:

Store managers is responsible for inventory record accuracy. He

personally revieuer inventory on daily basis & some times. Production also

reviews inventory even on daily basis.

REPLENISHMENT:

For some items e.g. concentrate, flavor etc., Shamim & Company

experiences instantaneous replenishment & for some items, e.g. sugar etc.

co. experiences non-instantaneous replenishment i.e. Company receives

orders in installments.

QUANTITY DISCOUNTS:

Company buys bulk-quantities, so it enjoys quantity discounts also,

by which cost is reduced & profit margin less and price becomes creative.

AGGREGATE PLANNING:

“ Aggregate plan is a statement of production rates, work-force

levels and inventory holdings on estimates of customer requirements &

capacity limitations.”

Since Shamim & Company is a manufacturing co., so it’s aggregate

plan is also called “ production plan.”

Unit of plan:- Aggregate plan is expressed in terms of “no. of

cases.” Which are also called SKU (stock keeping units). K& 1 case = 24

bottles

PLANNING HORIZON:

Aggregate plan is mostly prepared for a period of one year, but

sometimes, it is also prepared for 3-4 years.

STRATEGY FOR AGGREGATE PLANNING:-

Shamim & co. follows “ chase-strategy” as it follows demand-

pattern-Demand for chamim & co.’s products is seasonal.

So due to “seasnality” fo demand & chasing ofdemand, the co;

adopts following alternativdes.

REACTUVE ALTERNATIVES

The reactive alternatives are the actions that are taken to cope with

demand requirement.

WORK FORCE ADJUSTMENT:

Company has 2-types of employees:

Employees at permanent basis.

Employees at contract basis

The employees at contract basis are hired & fired in peak & slack

seasons respectively.

WORK-FORCE UTILIZATION:

OVERTIME:

Normally there is not the tendency of over-time in Shamim & Co. as

management thinks that productivity of workers is reduced during over-

time.

UNDER TIME:

The permanent workers are also paid, the under time but the

workers on contract-basis are paid on the basis of working hours so under

time is not paid to them.

VACATION SCHEDULE:

Shamim & Company gives incentives for vacations in slack-season.

Vacations are given on the basis of labor-laws in Pakistan.

Company does not adopt aggressive alternatives, as co has not

complementary products creative pricing.

LINEAR PROGRAMMING:

Linear programming is not normally applied in Shamim & co. or if it

is applied, than at a very minimal level.

Objective Functions :

Maximize

pi = price per case

xi = No. of cases

i = 4-products of Pepsi, Mirinda, 7-up, Team

Constraints are in terms of budgeted resources & capacities.

MATERIAL REQUIREMENT PLANNING (MRP):

Material requirement planning system enables business to reduce

inventory levels, utilize labour and facilities batter and improved customer-

service.

IN PUTS TO MRP:

BILL OF MATERIAL (BOM):

‘BOM’ is a record of all the components of an item, the parent

component relationship and usage quantities derived from engineering &

process designs.

The simple ‘BOM’ for Shamim & Company’s product is as

following.

End item = 1-case of bottle

Purchased items = raw material cases

Intermediate items = Bottles, Syrup

Sub-assemblies = Bottles, Syrup

INVENTORY RECORDS:

In inventory records, Shamim & Company, uses to order after

variable periods of time and of variable quantities, depending upon:

Item with highs load time is “Sugar”

Item with lowest load time is “ Co2

MASTER PRODUCT SCHEDULE (MPS):

MPS, details about production of end times items within specified

period of time.

In Shamim & Company, MPSs are prepared normally on weekly

basis.