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Company Introduction:

The Kohinoor Maple Leaf Group was born from the trifurcation of the Saigol

group of companies and is a reputable and leading manufacturer of textiles and

cement. KMLG comprises of Kohinoor Textile Mills limited (KTML) and Maple

Leaf Cement factory limited (MLCF). Both companies are incorporated in

Pakistan and are listed on three stock exchanges of the country.

Maple Leaf Cement is the third largest cement factory in Pakistan. It was set up

in 1956 as a joint collaboration between the West Pakistan Industrial

Development Corporation and the government of Canada. It is strategically

located at Daudkhel (District Mianwali) in Northern Pakistan, which is an area

rich in raw materials required for the production of cement. Kohinoor acquired

the ownership and management of Maple Leaf Cement under the privatization

policy of the government of Pakistan in 1992. Presently Kohinoor Textile Mills is

the holding company for Maple Leaf cement.

HARD FACTORS

PRODUCT

PRODUCT DIVERSIFICATION

Since Maple Leaf cement is one of the few companies who is producing cement,

there is a diversification in its products to suit the requirements of different

customers

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PRODUCT STANDARDIZATION

Manufacturing

As cement is a standardized product, hence it is possible to reduce

manufacturing costs, as the same procedure is used for the manufacturing the

cement. The company uses the standardized raw materials, machinery and

equipment to manufacture the finished product..

Maintenance

Maintenance carried out simultaneously to ensure that the production is not

hindered. Because of standardization maintenance becomes easier because the

procedure used to control the process is the same as the product is the same.

A continuous check on quality after every step is accomplished in the

manufacturing of cement. Incase there is something wrong with the

composition of cement, the production of that stage is stopped but the rest of

the process can continue up to three days.

This hence minimizes the cost of the company be as production is taking place

24hrs a day

PLANT AND EQUIPMENT

There are three production lines for grey cement with annual clinker capacity of

1.5 million tons. The white cement has three production lines with annual

capacity of 180,000 tons.

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This capacity has increased over a number of years since maple leaf was

established in 1960. However we would like to discuss the recent upgradations.

• In 2000, Maple Leaf Electric Company Ltd. (MLEC) a power generation

unit was merged into the company.

• In 2004, the coal conversion project at new dry process plant was

completed.

• In 2005, dry process plant capacity was increased from 3,300 tpd to

4,000 tpd through de-bottlenecking and up-gradation of equipment and

necessary adjustments in operational parameters.

• In 2006, a project to convert the existing wet process line to a fuel

efficient dry process white cement line commenced its commercial

production.

• Currently, Company has undertaken an expansion project of 6,700 tpd

clinker capacity and is expected to commence its commercial production

as per schedule.

OVER CAPACITY UTILIZATION

In the financial year 2006, the capacity utilization was 93% for grey cement and

48% for white cement

RESEARCH AND DEVELOPMENT AND TECHNOLOGY

Research & development is an integral part of the Company’s policy of

development of new products and improving efficiency of the plant to

reduce cost. Through research and development Maple Leaf Cement

introduced the dry process technology which helped in reducing NO emissions

in the air from 4.5 kg/ ton to 1.5 kg/ton thus considerably lowering the

pollutants in the air and increasing the overall plant capacity.

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Although research doesn’t form an integral part of the plant but we can observe

many strategic developmental programs that have been conducted with many in

the pipeline.

To retain the highest quality standards a laboratory has also been set up at the

site for the testing of raw materials and cement. This also helps Maple Leaf to

comply with national environment control standards.

TECHNOLOGY IMPROVEMENT

The Maple Leaf Cement Factory is completely

automated and the plant installation. The

engineers constantly work to improve the efficiency

and effectiveness of the machinery. The highlighted

techniques included

1. Troubleshooting

2. Continuous improvement under the Kiazen approach

3. ISO specified changes in work procedures and capacity utilization

4. Change in Hierarchy to support production

MATERIALS AND ENERGY

The following raw material is required in the production process

1. Lime stone: This raw material is company owned and is extracted from

the near by mountains of Iskanderabad. Limestone has the highest

composition in the cement product. 75% to 80% of the cement

constitutes of limestone

2. Clay: Clay is another natural resource. This raw material is also

company owned. 15% to 20% of cement composition comprises of clay

3. Iron Ore: Iron Ore is the only resource that is bought from contractors.

Iron Ore is added in small quantities and it helps to strengthen the

cement.

4. Gypsum: Gypsum acts as a retarding agent. It slows down the hardening

process which in turn gives the constructor enough time to use it.

5. Furnace oil: It is used mainly for power generation.

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With the increase of furnace oil prices the company adopted coal as a more cost

efficient and environmentally friendly fuel for kiln firing. Today the management

is exploring possibilities of alternative and cheaper fuel such as waste firing.

The process (discussed later) is such that it ensures that excess stock isn’t left

and on the other hand enough stock is present so that the production process

is not hindered.

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SOFT FACTORS

People

The company takes its people as one of its most valuable assets they view their

human resource as a competitive advantage therefore they ensure that their

employees only those people that are self motivated and professionally qualified.

They also take into consideration that their business goals are realized through

such diverse work force providing equal opportunities without any

discrimination on the basis of cast, creed, sex and religion

WORK METHODS

PROCESS

Raw Materials

There are basically three main raw materials that are used for the production of

cement. In addition to that, a small proportion of other additives such as silica

are also added.

1. Limestone 80%

2. Clay 20%

3. Iron ore

Lime stone and clay are extracted from the same place. Iron ore is bought from

a contractor near Kalabagh.

Stage 2

The raw materials are feeded in separate “crushers” that break them into

smaller pieces. After that they are stored in separate piles.

STORAGE AREA

It is a stacker that provides immediate storage. In case there is a problem with

the crusher, the stock present can be utilized immediately to provide enough

amounts to be used for three days.

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Stage 3

From the stacker the components are mixed and made into an ultra fine powder

in the grinder. A weighing scale is maintained to check that the appropriate

composition of the materials is maintained and the right quantity is added.

Again the mixture is stored in a Consistent flow Silo.

It is to be noted that until now only a physical change has taken place. The next

step would involve a chemical change.

Stage 4

The mixture is then added into a KILN. This is a rotating machine that heats

the mixture up to 1300*C where it is converted into a compound as a chemical

reaction takes place. This compound is the cement produced in molten form. As

it moves onwards an air cooler is present that cools the cement and converts it

into small stones known as CLINKER. This is the intermediate product that is

formed. After that the clinker is stacked in piles.

Step 5

The clinker is then added into a grinder. At this stage another element known

as Gypsum is added. The composition of the cement is 95% and that of gypsum

is 5 %. The gypsum acts as a retarding agent. Cement on its own when kept in

contact with water hardens very fast. It ensures rapid setting but gives cement

the time to harden

In the grinder the cement is crushed into a powder form.

This stage is very critical in the cement production process because of the fact

that if something goes wrong with the composition, the quality of the cement

gets affected and the whole costs that are incurred to produce the cement is

wasted. Because of that the quality check at this stage is the maximum and

continuous.

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EXTERNAL FACTORS

ECONOMIC FACTORS

Market for Cement in Pakistan exists in two main dimensions:

1. product type

2. And geographic area.

Product type:

Since cement is a specialized product, requiring sophisticated infrastructure

and production location. So, most of the cement industries in Pakistan are

located near/within mountainous regions that are rich in clay, iron and mineral

capacity.

Structure of Cement industry in Pakistan is as such that there is not much

substitutability to buyers. Which shows that the Cross elasticity of demand is

negligible.

Geographical Area:

The other factor i.e. geographic location also

doesn’t affects a lot considering the flexibility of

demand. Example can be taken from the fact

that if DG cement in DG KHAN raises its price

and MAPLE LEAF CEMENT in DaudKhel will

raise its price to match DG cement’s. This is

due to cartel of all of the cement manufacturers in Pakistan. Thus the customer

has no choice at all to switch between two brands of cement.

As the cement market is moving from a virtual 'sellers' market' to an over-

supply situation, it is expected that when prices stagnate and profitability

becomes a function of volume and economies of scale, location advantage and

proximity to markets will become extremely important factors.

At present the freight charges are a massive 20% of the retail prices. The plants

located very close to each other and tapping the same market will have to

expand their markets which will increase their freight expenses.

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Dandot, Pioneer, Maple Leaf and Garibwal are all located within a radius of

100 kilometers and are selling bulk of their production in the same areas and

will thus face serious competition from each other.

POLICIES AND REGULATIONS

The policy of the Government is to keep a balance between rapid economic

development, on the one hand, and social justice and consumer’s protection, on

the other. There is a traditional conflict between these two aims. It is, therefore,

necessary to regulate trade, commerce or industry in the interest of free

competition therein.

The Ordinance was promulgated to provide for measures against un-due

concentration of economic power, growth of un-reasonable monopoly power and

un-reasonably restrictive trade practices. Thus cement industry too is

monitored and answerable to rules and regulations developed by the monopoly

control authority of Pakistan.

The government is considering allowing further concessions and additional

incentives for cement export, with a view to increase overall export volume.

These measures will immensely help in promoting and protecting high

investments made in cement sector in recent years.

In the wake of its huge surplus production as a result of massive capacity

expansion undertaken it rather seems imperative for Pakistani cement industry,

on one hand, to sustain existing export markets and, on the other, explore new

markets.

Export opportunities:

The demand of Pakistani cement is expected to continue to grow at the rate of

20 per cent for about four years to come. It may then follow traditional growth

rate of seven per cent per year. Announcement of major dams will dramatically

increase this demand.

Deregulation after accession of Pakistan to WTO is expected to open the window

of competition from cheaper markets. There may be no tariff after this

deregulation on import of cement allowing its entry into Pakistan from cheaper

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market at lower rate. Cement from cheaper markets may also block Pakistan’s

export of cement to its neighboring countries.

Global market has vigorously taken up the advantage of economy of scales and

multinational giants now control more than 40 per cent of world production—

(China not included). The recent acquisition of Chakwal Cement by an Egyptian

giant, Orascom may be a beginning of such an entry in Pakistan by

multinationals.

New avenues for export of cement are opening up for the indigenous industry as

Sri Lanka has recently shown interest to import 30,000 tons cement from

Pakistan every month. If the industry is able for avail the opportunity offered, it

may secure a significant share of Sri Lanka market by supplying 360,000 tons

of cement annually.

Restriction of Exports:

Restriction of export of cement is deterring the

full potential of this sector. Keeping in view the

huge cement production capacity coming online

in the next financial year, it is hoped that the

government will reconsider its cement policy on an urgent basis and prevent the

industry from going into a crisis owing to over supply.

NATURAL RESOURSES

Manpower

The direct labor that works on one shift is on average 70. There are about three

shifts in a day. The labors are provided accommodation in the same place.

Land

The land that has the factory and used for accommodation is owned by the

company. There is enough space to accommodate new plants if the need arises.

Energy

Initially the company was relying on WAPDA for power supply but now the

company has its own electricity generation plant that provides upto 50% of the

total requirements. The services of the plant owned by the company is

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especially utilized during peak hours when the electricity from WAPDA is

expensive

PERIODIC INVENTORY SYSTEM

This method is adopted by the company. As the ore from wh

Total raw materials ordered per day 16,478tons (constant demand)

Safety stock=3 days= 3* 10,700 tons=49,434

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PRODUCTIVITY MEASUREMENT TOOLS

Primary profitability ratios

COMPANY PERFORMANCE APPRAISAL

i) Primary Profitability ratios

a) Net Profit / Net Sales

2005 727,450 0.1695

4,290,734

2006 1,059,240 0.1855

5,709,792

b) Cost of Goods Sold / Net Sales

2005 2,962,802 0.6905

4,290,734

2006 3,561,212 0.6237

5,709,792

c) Operating Expenses / Net Sales

2005 112,974 2.63%

4,290,734

2006 199,459 3.49%

5,709,792

d) Interest Expense* / Net Sales

2005 199,779 4.66%

4,290,734

2006 331,545 5.81%

5,709,792

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*Interest Expense includes Interest on

Long-Term Loans, Redeemable Capital

and

Short-Term Capital

ii) Secondary Profitability ratios

a) Total Asset Turnover

Net Sales / Total Assets

2005 4,290,734 41.14%

10,428,973

2006 5,709,792 30.38%

18,793,412

b) Inventory Turnover

Net Sales / Total Inventory

2005 4,290,734 23.42

183,217

2006 5,709,792 28.41

200,946

c) Fixed Asset Turnover

Net Sales / Fixed Assets

2005 4,290,734 50.70%

8,462,382

2006 5,709,792 35.49%

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16,088,505

d) Accounts Receivable Turnover

Net Sales / Accounts Receivable*

2005 4,290,734 33.14

129,490

2006 5,709,792 12.09

472,168

*Accounts Receivables include

Loans and Advances, Trade debt

and other Receivables

Primary Productivity ratios

Labor Productivity

a) Value Added* / Salaries and Wages

2005 780,710 27.04

28,872

2006 1,140,675 27.07

42,136

b) Value Added* / Total work hrs

2005 780,710 98.57

7,920

2006 1,140,675 144.02

7,920

Capital Productivity

c) Value Added* / Tangible Assets

2005 780,710 7.49%

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10,428,973

2006 1,140,675 6.07%

18,793,412

d) Value Added* / Fixed Assets

2005 780,710 7.49%

10,428,973

2006 1,140,675 6.07%

18,793,412

e) Value Added* / Fixed Assets

2005 780,710 9.20%

8,488,914

2006 1,140,675 7.07%

16,128,950

f) Value Added* / machinery and

Equipment

2005 780,710 0.1

8,130,867

2006 1,140,675 0.12

9,830,820

*Value Added includes Profit, labor cost,

salary cost and selling and

administrative expenses

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Secondary productivity ratios

Capital Productivity

a) Value Added* / Accounts Receivables

2005 780,710 6.03

129,490

2006 1,140,675 2.42

472,168

b) Value Added* / Cash

2005 780,710 2.11

369,802

2006 1,140,675 11.3

100,938

c) Value Added* / Inventory

2005 780,710 4.26

183,217

2006 1,140,675 5.68

200,946

d) Value Added* / Quarry Equipment

2005 780,710 20.65

37,801

2006 1,140,675 7.36

155,001

Labor Productivity

a) By type of worker = Value Added* / Number of

direct workers

2005 780,710 11.27

69,300

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2006 1,140,675 16.46

69,300

b) By shift = Value Added* / Number hrs worked

on first shift

2005 780,710 2,365.79

330

Value Added* per shift 2,366 788.6

3

70 workers per shift 789 98.58

8

2006 1,140,675 3,456.59

330

Value Added* per shift 3,457 1,152.20

3

70 workers per shift 1,152 144.03

8

Analysis of Profitability ratios

The operating expense to sales ratio has increased from the year 2005-2006.

This is because of the donations that were made for the earthquake relief funds

The ratio of interest expense to sales has also increased. The long term and

short term finances for Maple leaf cement increased to finance tge expansion

project of 6700 tpd clinker capacity

Account receivable turnover has decreased because of the increase in advances

given to the employees, executives and suppliers.

Analysis of productivity ratios

The labor productivity with respect to salaries and wages has remained same

during year 2005 and 2006 with not a significant change. But it has

considerably increased with respect to total hours worked in year 2006 due to

the improvement in plant efficiency and induction of a new 6700 ton capacity

holding plant.

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The capital productivity w.r.t tangible assets have decreased in year 2006 due

the overhead costs incurred for the induction of new plant. But it is believed

that from this year onwards i.e. 2007 the company will see a considerable

growth in this aspect as well.

The capital productivity w.r.t Cash, Inventory has increased in year 2006 from

2.11 to 11.3 for Cash, 4.26 to 5.68 for Inventory showing the potential

implementation of newer standards for better conduction of its processes and

terms of trade.

Labor productivity with respect to direct labor has increased from 11.27 to

16.47 owing to the better and efficient techniques being implemented that have

been brought forward with the induction of new plant. Similarly the

productivity with respect to each shift has also increased in year 2006 owing to

the same mentioned reasons.

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EMPLOYEE BENEFITS AND COMPENSATIONS

Employee quality and satisfaction:

Maple Leaf is a private organization and therefore the employee pays aren’t

regulated by any government stipulations. There aren’t specified strategies or

labor laws that protect the labor wages at the factory. However Maple Leaf

considers employee satisfaction as a major contributor to their success in the

market and therefore has undertaken extensive planning to ensure the

employed labor force is happy with there remuneration packages. The general

employee salary and benefit package includes

• Basic Salary

• Remote area allowance

• Bonuses

• House allowance

• Free medical benefits

• Subsidized utility bills

• Education allowance for employee children who are over 15, currently it

is Rupees 100/month however it is subjected to revision shortly.

Although the basic salary figure for factory workers has remain un-disclosed

after the factory visit but the management confirmed that is was slightly above

the industrial average which in turn also helped to reduce the turnover since

most workers were aware of the fact that their salaries alone were better than

those offered by industrial competitors.

Bonuses

Bonuses to the factory workers are given on the basis of their performance on

ground i.e. the factory floor operations. According to specified standards the

plant should be run for 330 days at maximum. If the employee/labor force is

able to do that they get a bonus which is equal to their two salaries. The bonus

is a group incentive since it is not paid to individuals but rather to all

employees if collectively they are successful in running the factory for 330 days

a year.

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EMPLOYEE PROMOTION

Another major incentive for working at Maple Leaf Cement Factory Ltd includes

the fact that promotions are very speedy in the organization, they are based on

employee competency which means it is performance based rather than the

number of years the employee has worked in the organization. This serves as a

major incentive for the young employees who enter into the organization since

they work hard to get to better positions in the firm quickly to get better

salaries, benefits and authority.

When we asked about the rate of internal recruitment, the DGM Works

responded by saying that employees are recruited on the bases of their

competency and ability to perform the specified job tasks. Preference is given to

hiring internal workers for better positions since this serves to motivate

employees at Maple Leaf however incase the recruiters to do not find a suitable

candidate they select employees from the external potential employee pool. He

also highlighted a new trend in the organization of hiring foreign experience and

qualified individuals because it is believed that new and creative ideas can be

brought into the organization

There is a vast pool of potential employees therefore there is never a shortage of

employees, one can also find a replacement at Maple this is because either

lower level workers are promoted upwards provided they are capable otherwise

there is a vast pool to choose from externally.

EMPOWERMENT

Maple leaf has centralized operations, major decision making power lies in the

hand of the central head quarters however delegation of authority has been

done in such a way that the senior management has enough power to direct

employees without informing the top management at the central office so as to

avoid operation hindrance only .

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Bargaining with management

When we asked the management whether the employees were able to bargain

their way out with the management regarding the benefits and salaries, Mr.

Amir Feroze DGM Works, stated that the terms, conditions of working and the

benefits offered to the employee are stated in the employment contract. If any

bargaining has to take place, it takes place before signing the employee

contract. However once the employee has signed the contract he is legally

obliged to follow its terms.

Labor Union

Maple Leaf Cement Factory Ltd has a labor union however the labor union is

very organized and is overlooked by the general management. When we asked

about agency conflicts that existed between the management and the floor

labor, we were told that the owners of the factory are very concerned about both

the parties and invest a certain proportion of their time listening to both in

order to ensure minimum problems at the factory. Conflicts are rare since the

labor union head is allowed to visit the general manager directly to resolve

issues.

Informal coalitions

The group then moved on to discuss informal coalitions in the organization, Mr.

Amir Feroze refused to acknowledge any in the organization while stating that

such coalitions were only found in government organizations. He said that they

believe in team work where everyone in the factory belongs to the same team.

Employees are regularly appraised in order to ensure there quality. Only one

sort of appraisal is done where the employees direct superior ranks his

performance. Employee to employee appraisals is discouraged since they

encourage conflicts in organization

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TOTAL QUALITY MANAGEMENT

When we asked the management how do they manage to retain the quality of

employees and hence the quality of the products, the management respondent

said they have quality circles all across the factory who aims to solve regular

problems in the production process. The suggestions of the quality circles are

bought in front of the top management at the Monthly Review Meeting (MRM)

and the best solutions are adopted

Maple has a functioning ISO Department inside the factory. The ISO

Department conducts regular audits to see the effectiveness of the employees

and the operations undertaken by them.

Key performance indicators

The management also has Key Performance Indicators regarding daily

productions, employee hours and energy capacity utilization.

The indicators include

International Standards:

They also follow the ISO9002-9 certification to ensure maximum quality in the

factory processes. They are following standards which are as such:

1. PS (Pakistani Standards)

2. BS (British Standards)

3. ASTM ( American Society for Testing & Materials)

4. ISO ( International Organization for Standards)

The British Standards that are being followed by Maple Leaf Cement are BS-

8110 & BS-5750.

Quality Control Approaches for improving product quality

1. PQ Teams: PQ teams exist at every level of the hierarchy

2. TQM

3. Zero Defect product

4. Productivity Maintenance Department

5. Quality assurance Department

6. Preventative measure and maintenance team

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The success of any organization and its ability to outshine competitors depend

on the right mix of quality and quantity. According the management the quality

of cement at Maple Leaf is much higher than the required Pakistani standards.

The quality of the cement is kept at par with international standards since

Maple Leaf Cement Factory Ltd is importing a large chunk of their production to

foreign countries such as India and China. Furthermore quality retention is

very important because there is intense competition in the local market. There

major competitors include Pak Cement, DG Cement and the Mansha Group.

Furthermore there are 12 new cement industry projects in the pipeline such as

Kohat Cement.

Feedback and suggestions

They are suggestion boxes placed all across the factory so that workers can

drop their suggestions. The box is opened separately by the ISO Department

every month. The suggestions that are adopted are referred to as winning

suggestions and a reward is given to the employee who has made the

suggestion.

EMPLOYEE TRAINING

Management training takes place regularly at the head cities from where the

technical operations are controlled. The head cities include Lahore and

Islamabad. Training is also conducted abroad mostly in Denmark since most of

the industries machinery has been imported from Denmark. Technical

collaboration for skill development programs are also being conducted in

Germany, Sweden, Turkey and Egypt.

KAIZEN APPROACH IN MAPLE LEAF:

Kaizen means “continuous improvement". Kaizen strategy calls for never-ending

efforts for improvement involving everyone in the organization – managers and

workers alike. Our visit to Maple Leaf Cement Factory made it evidently clear

that the management of Maple Leaf strives hard to incorporate the principles of

continuous improvement continuously. But before we take a look at Kaizen

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incorporation at Maple Leaf, let us first see how Kaizen relates to management

at the factory.

Kaizen and Management

Our study at the Sikandarabad-Mianwali factory enabled us to analyze that

management at Maple Leaf has two major components:

1. maintenance

2. Improvement.

The objective of the maintenance function is to maintain current

technological, managerial, and operating standards. The improvement

function is aimed at improving current standards.

Under the maintenance function, the management must first establish

policies, rules, directives and standard operating procedures (SOPs) and then

work towards ensuring that everybody follows SOP. The latter is achieved

through a combination of discipline and human resource development

measures. Although the management at Maple Leaf can be considered up to

date with their management practices especially when compared with the

industry however they have developed a strict norm of working. There are

numerous rules, policies, procedures and safety precaution to abide by which

have been developed bearing in the mind the interest of the factory and even

more the interest of the workers/ employees. In order to ensure that work

process and procedures are well maintained and adhered too, the

management under takes regularly training of the employees to ensure they

are up to date with the standards that are to kept to at the factory,

furthermore the middle and top level management often visits the factory floor

to ensure work process are smooth. In order to motivate individuals to follow

rules and procedure they are often offered rewards which are both monitory

and non monitory in their nature and examples include bonuses, promotions

and awards such as ‘’employee of the month’’

Under the improvement function, management works continuously towards

revising the current standards, once they have been mastered, and

establishing higher ones. Improvement can be broken down between

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innovation and Kaizen. Innovation involves a drastic improvement in the

existing process and requires large investments. Kaizen signifies small

improvements as a result of coordinated continuous efforts by all employees.

Maple leaf has a limited amount of innovation in work processes because the

entire factory is dependant on heavy use of machinery and automation which

is very costly and can not be replaced every year therefore most improvement

at Maple Leaf comes from the Kaizen approach where employees, technical

staff and management constantly ponder over ways to increase the efficiency,

effectiveness and hence the productivity of the machinery.

Kaizen must operate with three principles in place:

• Process-Oriented Thinking over Result-Oriented Thinking

• Systemic thinking (i.e. big picture, not solely the narrow view)

• Non-judgmental, non-blaming (because blaming is wasteful) nature of

all employees

Let us examine the principles incorporation into the system at Maple Leaf

Cement Factory

Kaizen concentrates at improving the process rather than at achieving certain

results. Such managerial attitudes and process thinking make a major

difference in how an organization masters change and achieves improvements.

There are obvious targets set for the factory to achieve at the end of the month

however the management is very flexible to allow changes in the process which

may make effect target fulfillment but leads to over all operational efficiency

improvement. For example the management has the capacity to undertake

production every day of the year, however the machines are given a certain rest

period to avoid excessive deprecation at the cost of increasing output and hence

profitability of the firm.

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Systematic thinking is very important for the success of any business venture,

it allows the management to undertake strategic management, prepare them

selves for the worst case scenarios etc. We can see elements of systematic

thinking in the work processes at Maple Leaf. The fact that all process are

integrated and kept separate at the same time is fascinating. This allows

continuous production however incase of a problem with a particular step of

production the remaining factory work remains unhindered since the

management keeps 3days of work in process inventory.

The non judgmental and non blaming attitude Is very important since it helps

employees in giving suggestions without the fear of being held responsible.

Bright developments in any firm can be attributed to new ideas, suggestions

and critical comments however there is a high probability that not all the ideas

will be extremely efficient but to be non judgmental attitudes about those who

give the ideas instigates a creative process. For example Maple Leaf has

suggestion boxes placed all along the factory floor, that allows all employees to

drop their suggestions in the box, the box is opened by the ISO department and

the best suggestions are rewarded and the remaining not accounted for.

Quick and Easy Kaizen

The management at Maple Leaf is also incorporating the idea of Quick and Easy

Kaizen .Quick and easy Kaizen is aimed at increasing productivity, quality, and

worker satisfaction, all from a very grassroots level. Every company employee is

encouraged to come up with ideas – however small – that could improve his/her

particular job activity, job environment or any company process for that matter.

The employees are also encouraged to implement their ideas as small changes

can be done by the worker him or herself with very little investment of time.

The management believes that Quick and Easy Kaizen helps eliminate or

reduce wastes, promotes personal growth of employees and the company,

provides guidance for employees, and serves as a barometer of leadership. Each

kaizen may be small, but the cumulative effect is tremendous.

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The quick and easy kaizen process works as follows:

Important Strategies that aid Kaizen system at Maple Leaf cement factory

Employee Empowerment: the Suggestion System

The suggestion system is an integral part of an established management system

that aims at involving employees in Kaizen. The number of worker's suggestions

is regarded as an important criterion in reviewing the performance of the

worker's supervisor and the manager of the supervisor.

- 28 -

COMPETITIVE ANALYSIS:

Herfindahl IndexHerfindahl IndexHerfindahl IndexHerfindahl Index

It is a measure of the size of firms in relationship to the industry and an indicator of the

amount of competition among them.

In Pakistan there are 27 cement manufacturers that are playing a vital role in the build up of

country’s economy and contribution towards growth and prosperity. For the calculation of

Herfindahl index we have chosen 5 dominant industries of Pakistan, on the basis of their

production capacity. The market share of these firms is as follows:

• Askari cement (NZP) 7.6%

• DG cement 9.8%

• Lucky cement 12.7%

• Maple leaf 7.1%

• Pioneer cement 5.5%

Where si is the market share of firm i in the market and n is the number of firms.

(0.127^2)+ (0.098^2) + (0.076^2) + (0.071^2) + (0.055^2) = 0.395

Since the Hirfindahl index is

above the standard set of (0.18)

for an unequally distributed

market share industry. This

indicates that there is a high

concentration in the cement

industry.

Market share

Askari cement

(NZP)

DG cement

Lucky cement

Maple leaf

Pioneer

cement

Others

- 29 -

Lerners Index:Lerners Index:Lerners Index:Lerners Index:

Average industry price of cement bag/50Kg = Rs.235

Average industry cost of cement bag/50Kg = Rs.192.5

L = (P-C)/P

Where L is the Lerners index and is also = H/EoP for the whole industry.

Now L = (235-192.5)/235

= 0.181

And

Elasticity of Price = .395/.181

= 2.18

- 30 -

CONCLUSION:

In our conclusion the importance of productivity is imminent and is the need

of the hour. Real gains in productivity are important then simply measuring

success in meeting objectives. Improvements in productivity have a significant

impact on lives whether the change occurs at the national level, within the

given industry or a company or even at the individual level.

Changes in productivity within an industry or at the company level are closely

related to success and survival. The profit margins realized by an industry or a

specific company are related to its ability to make productivity gains ahead of

the competition. Industries where competition helps to propel improvement

often experience greater growth. Companies that fail to keep in pace will fail.

In either case, all stakeholders are directly impacted.

Now keeping in view the analysis of Maple Leaf with respect to its productivity

of labor, capital and growth, we have concluded that the current expansion of

its capacity and induction of newer plant with capacity of 6700tons might

have caused short term costs. But in due course of time it would provide

higher returns in the form of sales and revenue earned.

Secondly, the current management is actively resorting to international set of

quality standards so that to meet the upcoming competition with regards to

WTO. So the productivity and efficiency with regards to effectiveness of the

plant is satisfactory.

- 31 -

LITERATURE REVIEW:

Raw Data

1. Weight of a cement bag= 50kg

2. Cost incurred per bad= Rupees 150

3. Price in the market is subjected to demand and is generally above and

around Rupees 250.

4. Capacity of plant 1= 4000 tons/day

5. Capacity of plant 2= 6700tons/day

6. Plant 1 is operating at full capacity

7. Plant 2 is due to operate by the end of this year

8. Total number of operating days=330 days

9. Storage Capacity 30000 tons

10. Two plant producing cement and 1 packaging plant

ISO:

ISO 9000 includes the following standards:

• ISO 9000:2000, Quality management systems - Fundamentals

and vocabulary. Covers the basics of what quality management

systems are and also contains the core language of the ISO 9000

series of standards.

• ISO 9001:2000 Quality management systems - Requirements is

intended for use in any organization which designs, develops,

manufactures, installs and/or services any product or provides any

form of service. It provides a number of requirements which an

organization needs to fulfill if it is to achieve customer satisfaction

through consistent products and services which meet customer

expectations. This is the only implementation for which third-party

auditors may grant certifications.

• ISO 9004:2000 Quality management systems - Guidelines for

performance improvements. Covers continual improvement. This

gives you advice on what you could do to enhance a mature system.

- 32 -

This standard very specifically states that it is not intended as a guide

to implementation.

British standards:

BSI British Standards is a division of BSI Group which also includes BSI

Management Systems, a management systems registrar and BSI Product

Services, a testing organization. British Standards is incorporated under a

Royal Charter and is formally designated as the National Standards Body (NSB)

for the UK.

Where BS-5750 is similar to those of ISO9000 family i.e. are related to the

quality of management. Where, BS-8110 is related to British Standard for the

design and construction of reinforced and pre-stressed concrete structures. It is

based on limit state design principles. Although used for most civil engineering

and building structures, bridges and water-retaining structures are covered by

separate standards (BS 5400 and BS 8007).

ASTM (American society for testing and materials):

The standards produced by ASTM International fall into four categories:

• The Standard Specification, that defines the requirements to be

satisfied by subject of the standard.

• The Standard Test Method that defines the way a test is performed.

The result of the test may be used to assess compliance with a

Specification.

• The Standard Practice that defines a sequence of operations that,

unlike a test, does not produce a result.

• The Terminology Standard, that provides agreed definitions of terms

used in the other standards.

The quality of the standard test methods is such that they are frequently used

world-wide, even in places where ASTM specifications are not used

- 33 -

COMPANY PERFORMANCE APPRAISAL (CPA)

Primary Profitability Ratios

a) Net Profit Net Sales

b) Cost Of Goods Sold

Net Sales

c) Operating Expenses Net Sales

d) Interest Expense Net Sales

Secondary Profitability Ratios

a) Total Assets Turnover = Net Sales Total Assets

b) Accounts Receivable Turnover = Net Sales Total Inventory

c) Fixed Assets Turnover = Net Sales Fixed Assets

d) Inventory Turnover = Net Sales Total Inventory

Primary Productivity Ratios

Labor Productivity

a) Value Added Salaries and Wages

b) Value Added Total Work hrs worked

Capital Productivity

c) Value Added

Tangible Assets

- 34 -

Compute & determine trends of return on assets

Is trend increasing

Solve for primary profitability ratios

Solve for secondary profitability ratios

A

No

Step 2

Step 3(i)

Step

3(ii)

Step 1

Step 3

Step 4

B Yes Is growth rate increasing?

Step 5

No

Yes

Step 6 Solve for primary pro-tivity ratios

Step

6(i)

Solve for secondary pro-tivity ratios

Step

6(ii)

d) Value Added

Fixed Assets

e) Value Added Machinery and Equipment

Secondary Productivity Ratios

Capital Productivity

a) Value Added

Accounts Receivables

b) Value Added

Cash

c) Value Added

Inventory

d) Value Added

Quarry Equipment

Labor productivity ratios

a)By type of worker = Value added/ no. of direct workers

b) By shift= Value added/ no. of workers on one shift

Steps in CPA:

- 35 -

MODEL OF ENTERPRISE PRODUCTIVITY FACTORS (as included in report)

Kaizen:

1.

Enterprise

Productivity

factors

Internal

factors

External

factors

Hard factors Soft factors Structural

adjustments

Natural

resources

Government &

infrastructure

Product

Plant and

Equipment

Technology

Materials &

Energy

People

Work Methods

Management

Styles

Economic

Manpower

Land

Energy

Raw materials

Public

Enterprises

Infrastructure

Policies and

Strategy

- 36 -

2.

- 37 -

APPENDIX: NET REFFERENCES:

� www.en.wikipedia.org/wiki/Productivity

� www.bls.gov/lpc

� www.accel-team.com/productivity/productivity_01_what.html

� www.productivity.com

� www.oecd.org/topicstatsportal/0,3398,en_2825_30453906_1_1_1_1_1,00.html

� www.researchandmarkets.com/reportinfo.asp?report_id=202293

� www.wisegeek.com/what-is-kaizen.htm

� www.finance.isixsigma.com/library/content/c050601a.asp

BOOKS:

� Technology and Productivity: The Korean Way of Learning and Catching Up - Page 1 by Youngil Lim.

� Innovation and the Productivity Crisis - Page 1

by Martin Neil Baily, Alok K. Chakrabarti

� The Mining Industries, 1899-1939: A Study of Output, Employment, and Productivity - Page 301 by Harold Barger, Sam H. Schurr

� Progress in Cement and Concrete - Page 99

by S. N. Ghosh

CONTACTS: