1Blue Band Margarine Logistics System Analysis Unilever Pakistan Unilever Pakistan is one of the leading companies in fast moving consumer goods in Pakistan. It is known as one of the giants in the consumer goods industry as it is the market leaders in almost all of the products that they are involved in. It has a very huge setup all over Pakistan covering almost each and every retail outlet. Unilever has seven factories in Pakistan. Namely; 1. 2. 3. 4. 5. 6. 7. Karachi Factory (Dalda, Blue Band) Karachi Tea Factory (Shershah) Rahim yaar Khan (Surf Excel, Lifebuoy) Fateh Ali Chemicals (Surf Excel) Khanewal Tea Factory (Brooke Bond Supreme) Walls Ice Cream Rafhan Best Foods The first five factories are controlled and managed by the hierarchy of management similar for all five factories that will be discussed further on but the other two factories (i.e. Walls and Rafhan) has a different hierarchy. We have selected one of the products from the Unilever brands to study on its supply chain management which is Blue Band Margarine. Its market is growing and there is a very high future potential of around 70,000 Tons annually in the Pakistani Market and as we have selected Blue Band so our focus in this report will be on the management of the five main factories of Unilever and then we will be looking at the various supply chain management’s activities for Blue Band. 2 We start with the organizational chart, then the Blue Band’s introduction, then purchasing, manufacturing, warehousing, distribution activities will be looked at but the topic that we have selected for this report will be the of logistics in the various supply chain activities. Unilever’s Organizational Chart CHAIRMAN Musharraf HAI 1. Director CNCD Ali-usSajjad Khan 2. Director HPC Tom Darlow 3. Director Beverages Rizwan Bashir 4. Director Ice Cream Noman Sherazi 5. Director Personel Pervaiz Hasan Khan 6. Director Commercial Rob Zoon 1. Director Customer and Channel Development 1. Director Customer and Channel Development Ali-us-Sajjad Khan General Sales Manager Bakhtiyar Toor Trade Marketing Manager Out of Home Manager Asif Iqbal Buying / Planner Manager Multan Channel Manager Category Manager 2. Islamabad. Lahore. Director Household Product Category 2. Director Household Product Category Tom Darlow Commercial Manager Marketing Manager Brand Manager SUNSILK Brand Manager SURF Brand Manager Spreads Brand Manager LUX Brand Manager Wheel / Vim Brand Manager Lifebuoy Brand Manger Fair and Lovely Brand Manager Ponds (Khurram Kureshi) (Amir Paracha) (Ozman Jaffery) (Saba Saleem) (Mohammad Ali) (Ali Mustansir) (Narmeen Khan) Assistant Brand Manager SUNSILK Assistant Brand Manager SURF Assistant Brand Manager Spreads Assistant Brand Manager LUX Assistant Brand Manager Wheel / Vim Assistant Brand Manager Lifebuoy Assistant Brand Manager Fair & Lovely Assistant Brand Manager Ponds .3 Merchandising Manager 4 Regional Manager Karachi. Director Beverages Rizwan Basheer Commercial Manager Marketing Manager Naveed Asghar Brand Manager Lipton Brand Manager Supreme Brand Manager Kenya (Haseeb-ur-Rehman) (Qashif Affendi) (Sameen) Assistant Brand Manager Lipton (Kiran Pervaiz) Assistant Brand Manager Supreme (Rahat Junejo) Assistant Brand Manager Kenya (Aamir Ali) . Director Beverages 3.4 3. Director Ice cream 4.5 4. Director Ice cream Noman Sherazi Marketing Manager 5. Director Personnel 5. Every director is responsible for the departments under him. it manages the channel structure and the out . beverage. One for customer and channel development. ice cream. The consumer and channel development department is responsible for the buying of raw materials. it starts from the chairman “Musharraf Hai” and under her there are six main directors. Director Personnel Pervaiz Hasan Khan Margery Rehman Sana Mehfooz Shoaib Baig Unilever has a very large organizational structure. then Household product category. commercial and personnel. brook bond supreme and Kenya Tea. Introduction to Blue Band Blue Band Margarine has been in use for a long time in every home in Europe and USA but in Pakistan it was launched by Unilever in year 1985. In order to keep the product in the right shape and bacteria free. Blue Band is one of the specialized products of Unilever Pakistan. it has different brand manager and assistant brand manager for all the different products. The beverages departments looks after the Lipton. It was launched on 1985. it requires controlled temperature of minimum four to . Even though Pakistan consumers response to it has been encouraging as more and more families have switched over from pure butter to Blue Band but the company is confronted with a few problem related to storage and logistics. Then there is an other director which is for ice cream and then the personnel director who is responsible for the human resource management and also for the supply chain activities. Blue band has been in the market for very long time but there had been many problems related to logistic and Storage. canteens etc.6 of home manager is responsible for the tea distribution at hotels. The household category is a very important department the famous products of Unilever comes under this department. The blue band requires a control environment in the process of storage and transportations. the supply chain department is discussed in more detail after the introduction of Blue Band and finally the director commercial. it will be discussed. this department also manages the supply chain of Blue Band and will be discussed after the overall supply chain department. manufacturing. Problems Now before going into the details of the various activities. The main competitors of Blue Band is Nestle (Nurpur). Until 2000.7 maximum twelve degree Centigrade otherwise product will melt. purchasing. The target market for Blue Band is Middle and Lower class.e. Some of the main problems were: • Chilling Facilities • Storage Facilities • Movement from Karachi • Major Sales from Karachi Chilling Facilities . The product testing was also done to see the consumers response towards Blue Band. we will discuss the problems that Blue Band faced before the development of supply chain department at Unilever. warehousing and distribution. Blue Band is now targeting the Adult Male Consumers also as it is a very big market. it was tested at some canteen by asking the canteen to use Blue Band with the sandwiches and give it to the people who come for eating and get their response. i. For this purpose. Blue Band was targeting mothers only with the tag line of “For Mothers who Care”. it was also endorsed by some doctors. Furthermore. It is priced lesser than it’s competitor. lose its shape and flavor / nourishing quality. 000 rupees and then it was tested at a storage. it cost for 3. There were two depots one each at Karachi and Lahore. due to the very hot temperature the unit stopped working. As the experiment was proved to be successful so they decided to buy new chilling units. Sukkar. So. when he got the responsibility of Blue Band. So. Utechtich bottles were also purchased from Portugal. he wanted to experiment the chilling unit before making the overall investment. Utechtich keeps margarine cool at -17 to -18 degree centigrade for 7 to 8 hours in case of electric failure. who is the project manager of Blue Band Margarine. After the development of supply chain management. Storage Facilities Blue Band also faced difficulty due to the lack of storage facilities before the supply chain department. Blue Band requires the temperature of 4 to 12 degrees else it may become soft and may cause Microbiological Contamination to the product. 8 cartons of Blue Band was kept at fiber glass crude boxes at the temperature of 5 degree freezing point. usually it is used for ice cream storage to control the temperature. Rawalpindi. Peshawar and other close cities. Islamabad. which also worked. a container was purchased from Gadani from the ship breaking unit. Later on it was again purchased from the ship breaking unit and was placed at other depots. Before the development of Supply chain management. Aamir Ishaque. In Lahore. the chilling unit cost for 20. Mr.000 for the electricity bill and was efficiently storing 10 tons capacity. So there was problem to supply to Multan.8 As mentioned earlier. during summers. Unilever didn’t have proper chilling facilities at the factory and at the distributors. it also has a chilling . After a month. They decided to develop a depot at Turnol which is 20 km away from Islamabad. During the period of experiment. 9 unit. The growth rate of Blue Band was 9% in the year 2002 and 2003 and now Karachi contribute to 75% of the total sales. The supply chain department realized the potential of the market which was estimated to be 70. was given the responsibility to supply the product to the depots with the proper chilling transportation facility. One more depot will be developed at Multan from there it can be supplied within Multan and it can cover the Central Punjab can it can be supplied till Sukkar. So the efforts were made on the Punjab side like the depots were established and the product was supplied through proper facility and in the result last year total sales of Blue Band was 1800 Tons out of which 150 Tons were from the expansions. a third party. Blue Band could be supplied to Islamabad. Movement from Karachi The chilling units were made available at the depots but still the major problem was to supply Blue Band from Karachi to the depots at Punjab with the proper chilling as it was not kept cold during the transportation. Rawalpindi and Peshawar. Major Sales from Karachi In the year 2000. Now these four depots cover all over Paksitan except Quetta. . Saqib Bros. Blue Band had a sales of around 80% from Karachi only and the rest of the areas including Punjab was not contribution much to the sales. Now from there.000 tons annually. It shows the increase in sales from the other cities also . So. a logistics company was hired for this purpose. Faryana Assistant Manager Mr. Rubbani and there is a customer service department that makes sure about the customer satisfaction through the sales department through the various depots i. Finally.10 Supply Chain Management Department of Unilever Supply Chain Director Pervaiz Hasan Khan Manager Customer Service Department Mr. Lahore. Syed Aamir Ishaque who is also responsible for the improvements that has .e. Under him there is a Business Unit Head edibles and the Blue Band Brand and Project Manager. under him there is a Manager Customer Service Department and the Factory Manager Ms. Multan and Islambad. Rubbani Factory Manager Ms. Faryana. Pervaiz Hassan Khan. she is responsible for the supply chain of all the factories and there is an Assistant Customer Service Manager under Mr. the director commercial is shown below. Mohabbat Ali Customer Service Department All Factories The supply chain department at Unilever is headed by the one of the directors. Karachi. The supply chain management of Blue Band is been taken care of by the project manager Mr. Rob Zoon. who is. Supply Chain Management Department of Blue Band 6. Syed Aamir Ishaque Sales Department Karachi Lahore Islamabad Multan 4 Assistant Depot Manager 4 Assistant Depot Manager 4 Assistant Depot Manager 4 Assistant Depot Manager 2 Junior Manager 2 Junior Manager 2 Junior Manager 2 Junior Manager . Ashar Shami Project Manager Mr. Director Commercial Rob Zoon Business Unit Head Edibles Ms. Uzma Aslam Blue Band Brand Manager Mr.11 taken place in the facilities and distribution of Blue Band. But the project manager (Syed Aamir Ishaque) told us that it costs 50% higher to get the packaging from Packages. . The steps involved in purchasing and manufacturing are also shown. The Packaging could also be purchased from Packages Ltd. The other material that is required is flavors and milk powder that is purchased locally. oil that is purchased from Malaysia and also from the Local R.12 Inbound Logistics System In the Inbound Logistics.B. where Dalda is also manufactured. the tubs are Microbiologically free. All the materials and packaging are received at the Shershah Factory. Quality Control Unilever has a lab for quality assurance. As Unilever also do the manufacturing of Blue Band in Pakistan. oil providers.B.D.D. where first the quality of raw materials are checked and also after the manufacturing all the batch is tested that goes to the depot. It is kept at the lab for 15 days to make sure there is no bacterial growth. we will discuss the raw materials and packaging that is purchased and then received at the factory and then the quality inspection is done. The wrappers and Tubs are purchased from Italy and Morocco respectively. the plant at the hub river road. Incoming Vehicles and Receiving The main raw materials that is required for the production of Blue Band is R. and after that it is kept for 15 days in the lab and finally the finished product is stored at the chilling unit at the factory from there it goes to the depots and it can rest to around a month at the depots. the person responsible for the procurement is called ‘Planner’. His main area of responsibility includes. The comparison of price is done by first converting the quoted foreign currency price into Pak Rupee at the current / six month conversion rate fixed by state Bank . The suppliers are asked to quote for raw materials. give shipping time etc.13 Inventory Unilever has a First in First Out (FIFO) inventory system for Blue Band. However. he is also holding the joint responsibility of procurement of the raw material with the buying department. refined and deodorized at the tanks. the quarterly planning for the Blue Band Margarine production. where it is stored and bleached. the manufacturing is given in detail below. where it is kept in the storage tanks and from there the required quantity is brought to the factory. First the raw material is received at Port. The annual planning is also done but the decision to purchase is based on the quantity that was sold in the last quarter. Purchasing The procedure of purchasing chemicals. and based on competitive price the order is placed on the lowest bidders. Procurement In Unilever Spreads business. wrappers is the same as that of any other goods. too much rain. this variant has been the pioneer and leader of Unilever margarines business in Pakistan. About its conducted: composition. disturbances. purchasing of oil is a little different in that: (1) (2) (3) (4) The Oils are commodities Their prices fluctuates many time during one single day owing to fears of war. the following steps are Margarine is manufactured from raw edible / Vegetable oil. In fact. brand name of (table) margarine sold throughout the world by Unilever Pakistan manufactures about 20 variants of margarine to cater for the industrial requirements of Bakeries. . Manufacturing ‘Blue Band’ is the manufactured and Unilever. Hotels etc and the Blue Band is especially for the table grade of margarine for domestic consumption. too little rains Crops failure news or rumor of short size of crop Availability or non availability of ships. all above factors are kept in mind before deciding to select an opportune time to enter market and make purchase. Therefore. strikes.14 and printed newspapers 3 times a week. The rest 20% cost is for: Process chemicals Ghee or butter flavors and aroma Alum Foil Wrappers Distribution Cost The technical process of manufacturing Blue Band is as under: Tank 1 STEP 1: Raw Vegetable Oil is treated by steam coils built in the tank and agitated or stirred to mix it thoroughly. are turned in soap stock. STEP 3: Stirring is stopped and Oil is allowed to settle in the tank. (a) Cotton Seed Oil (b) Soybean Oil (c) Corn Oil (d) Sunflower Oil (e) Palm Oil etc The proportion of the oils in the blend depend on their cost effectiveness which mean the less expensive oil has greater incorporation than the more expensive oil. Unilever use blend of raw soft and hard vegetable oils. the FFA (Free Fatty Acid) contents harmful for human consumption. STEP 4: Soap Stock mixed with hot water is drained out through the tap of tank and collected . STEP 2: 1% Caustic Soda solution is added. . Vegetable Oil are more than 80% cost of Blue Band. that is. Water evaporates in 10 – 15 days leaving Soap Stock in trays.trays. Oil is stirred due to chemical reaction.15 In order to keep the cost low. the soft / liquid refined oil develops the solidification. Bleaching Earth reduces the dark color of oil to pale yellow / transparent. and taken out by Oil is now technically called as “Hydrogenate Vegetable Oil” which then becomes base of Margarine. Bleached and Deodorized.2 here the oil is DEODORIZED which means the odor / bad smell of oil is sucked / taken out by Vacuum. The resultant Oil is now Refined. Here. STEP 8: The RBD (Cotton Oil / Soybean Oil / Corn Oil / Sunflower Oil / Palm Oil etc) is enriched by adding: (a) (b) (c) Vitamin A & D Aroma + Flavor Milk Powder STEP 9: RBD oil base is transferred to cooling room to transform it into Margarine STEP 10: The RBD oil base is then packed on to jointed aluminum foil Margarine Wrappers (either locally manufactured by Packages or imported from Germany / Sweden / France. STEP 6: Spent earth is received passing the through filter cloth.16 STEP 5: Bleaching Earth is added in tank and again oil is stirred. Tank 2 STEP 7: Oil is then transferred to (empty) tank No. As a result of chemical action. Outbound Logistic System . that is RBD for short. hydrogen Gas is passed into tank. It is sent through Saqib Bros. There are total of 9 distributors in Karachi and for every distributor it has a different plan. In Karachi. it is supplied to various distributors location. managed and operated very efficiently. it is generated through the (DBR) Data Based Replenishment. After the manufacturing the Finished product can rest at the factory for around 15 days and then it’s being transported to its required location. Lahore and Islamabad.17 Finished Product and Logistics The Karachi Factory has a production capacity of 2400 Tons annually for Blue Band. As the transportation was mentioned earlier as one of the major problems regarding the risk of Microbiological Contamination and the proper chilling facilities were required. the product can remain safe for certain period of time but the supply chain management at Unilever is also looking to avoid even this nominal difference in chilling of Blue Band. Saqib Bros. the vans with which they supply doesn’t have a chilling facility but as it supply within the city. for logistics of General Trade.g. in a temperature controlled vans. Order Processing It is a very important function for any organization but at Unilever it is planned. it will be discussed in detail in the Distribution Resource Planning. The distributors get the stock from them and store it in a chilling facility and from there it rests for around 15 days and they supply it to the retailers. At the trade level (retailers) it is kept at the freezers and there it can rest for 3 months. Logistic business is being given to third parties e. The normal procedure is that the company sends a plan on a weekly basis to the distributor of the dispatch that will be received by the . Now the other cities where it is required to be distributed like Multan. For it’s all products Unilever manages the safety stock of 9 days and the normal stock of 6 days that makes it the total of 15 days but for Blue Band the total days for keeping the stock is 9 days. However. the operational issues are begin handled by CSD which stands for Customer Services Department. Person responsible for the warehousing is called Assistant Depot Manager (ADMs). Distribution The division which is handling the affairs of distributors is called “CNCD” which is acronym for Customer & Channel Development. The director for CNCD or sales is “Ali-us-Sajjad Khan” and the person heading the Customer Service Department is Mr. Chilling Facility at Distributor The chilling facility problem was also at the distributors. there are a number of warehouses. Burhanuddin.18 distributor in different quantities of all the different categories of product and if the distributor doesn’t want any of the quantity or any of the product then he cancels the order of that product and it is sent to the factory which dispatches the demanded product on the right quantity to the mentioned distributors. Warehousing At Unilevers. . the normal air conditioner has a minimum temperature of 18 degrees and Blue Band is required to be kept at 4 to 12 degrees. They are responsible for ensuring the supplies according to sales requirement. S & Defence) (Shahrah-e-Faisal) (Gushan & Gulistan-e-Jauhar) (Golimar & Site) (North Nazimabad & North Karachi) (North Nazimabad & North Karachi) (F.C. .E. 4. A third party is involved through which the chilling unit setup is being made. These 9 distributors are: 1. 7. These 9 distributors cover all over Karachi as the Unilever Products can also be seen at almost every outlet.19 The investment was made with the distributors of around 250. it is “KOLDKRAFT”. The distribution process is managed so well that the damage or returns is only 0. 9.17% on Blue Band. 2. Distribution Network Unilever has total of 550 distributors all over Pakistan and in Karachi it has 9 distributors.000 to place a chilling unit where the Blue Band could be kept and it costs around 3. which may be sent back if it was kept for more than 3 months at retailer. 5.000 per month for the electricity bill and it can store up to 3 – 5 tons of stock. 6. Area) (Korangi) Saaya. Gizri and Traders Inn are the old distributors of Unilever and serving them from a long time and APEX and Mehtab are the new ones. Saaya Gizri MPD APCO APEX Channel Irfan Traders Traders Inn Mehtab (Jodia Bazar) (P. 3. who is given the contract to setup a chilling unit at a storage. 8.H. All of the distributors hold the stocks for all the products of Unilever so Blue Band is also kept at all 9 distributors in Karachi. B. the company has a cheque book of the distributors signed by them after the order the company fill the amount in the cheque and send it to the bank and the amount is transferred to the company’s account and then the products are send to the distributors. Unilever works on a cash basis with distributor.com . it is a printed format advise that has the details (product category. the distributors are given the login and password. One is kept at the distributor. only the distributors can log on into this web site and can place their order through it. The distributors sells the product on the cash to the retailers but they give credit to certain extent only to them whom they are sure about the recovery of the money. one is sent to the CSD (Customer Services Department) and one at the factory. freight) of the product that is sent to the distributor.20 Distribution Advise The distribution advise is the dispatch advise. total price. The distributor receives this advise and signs it. Distributor’s Sales The distributor sells the Blue Band through his vans to the retailers.leverlink. Distributor’s web site Unilever is also managing an e-commerce website for its distributors. quantity. The web site address of Unilever for all of its products to the distributors is www. size. price. The company works on a cash basis and also ask its distributors not to give credit in the market. his agent also signs it and then it is signed by the Assistant depot Manager (ADP) at the distributor in the context that the distributor has received the products and then three copies of this advise are made. the distributor’s location. This is managed by a software known as “Ultra”. Head Quarter at Avari Towers. This holds the information about their every distributor. The order is automatically placed through this software and the distributor gets the copy of this which if accepted Blue Band will be send to the distributor and if they cancel the order or some quantity of it the rest of the products will be send. investment. Ultra Ultra is the software used by Unilever to generate their sales report and place the order which once sent can be seen from anywhere by just logging into the site. the family. Furthermore. products dealing in etc. The order placed is recorded at the software and anyone from the branch. vans.21 Distribution Resources Planning A very important aspect in the efficiency of the distribution system of Unilever is DBR (Demand Based Replenishment). The chairman and all other senior managers have access to it and they can track the performance of any distributor out of their 550 distributors of any city and any area. The overall process is that when the order is placed the TSO (training sales officer) feeds the information in his / her PDA system which goes to the branch and from the branch it is sent automatically to the head office through their IT system. Before this facility when the sales report was needed the latest that could be seen was two weeks old and now the sales report can be generated at any point of . Factory and all the managers can see it from anywhere by just logging into the site of Unilever. the distributor’s personal information can also be recorded in this. coverage. sales. other sources of income etc. or one of the distributors sales. This gives a lot of opportunity to review the performance quickly and set targets on the daily basis.22 time which will show the current sales that has been made and this can be seen as overall sales or Karachi total sales. .