Supply Chain Management

Final Project Report

Submitted By:
Danish Iqbal (

Haseeb Ahmed (58214)

Muhammad Sohail (58893)

Table of Contents

Shan Foods Company Profile ........................................................................................................................ 3

Vision and Mission of the company .............................................................................................................. 4
Shan foods value delivery network............................................................................................................... 5
National food limited supply chain and logistics flow chart ......................................................................... 6
Raw material classification ........................................................................................................................... 7
Supply Chain Management ........................................................................................................................... 8
Procurement department ............................................................................................................................. 8
Forecast......................................................................................................................................................... 8
Planning purchasing request......................................................................................................................... 8
Purchase order .............................................................................................................................................. 8
Supplier Evaluation ....................................................................................................................................... 9
Production department .............................................................................................................................. 10
Ware house ................................................................................................................................................. 10
Logistics ....................................................................................................................................................... 11
Total Cost of Ownership ............................................................................................................................. 12
Shan Foods Company Profile

The journey of Shan’s remarkable success starts from 1981 when the dream of one man
became a reality! A visionary entrepreneur, an avowed humanist and a committed
philanthropist, Mr. Sikander Sultan, Chairman, Shan Foods (Pvt.) Ltd, helped pave the way to
success by pioneering in the spice business with a single room operation.

Initially, recipe mixes were only shared within the broader family but in a very short span of
time they gained popularity and orders started pouring in from friends, acquaintances and
general consumers. Overtime, the company prospered and Mr. Sultan decided to launch his
very own brand, “SHAN” and since then there has been no turning back!

Today, Shan is a powerful global brand that has presence in over 65 countries across 5
continents.

Philosophy

Shan Foods innovates with delicacies of the sub-continent to give a bite of happiness every day.
As the pioneer in spice mixes, Shan Foods ensure that their products are not just convenient
and easy to prepare but also deliver on the flavor, traditional taste and aroma that their
consumers love and cherish.

People at Shan Foods work tirelessly to bring the best food solutions to their valued consumers
– looking internally and externally for new ideas, trends and improvements to deliver a superior
product experience.

Certifications

The International Organization for Standardization (ISO) is a global entity that classifies and
regulates international standards between countries to enable international trade. We have
successfully achieved numerous certifications and registrations for its continual improvement
which are as follows:
1. ISO 9001:2008 - Quality Management system
2. FSSC 22000 - Food Safety System Certification
3. BRC Global Standard For Food Safety - British Retail Consortium Issue – 7
4. SANHA Halal Certification - South African National Halal Authority
5. JAKIM Halal Certification - Jabatan Kemajuan Islam Malaysia
6. PSQCA product certifications - All mandatory food products
7. WWF Green Office Certification - Bringing Positive Change
 8. SADEX - Supplier Ethical Data Exchange
9. FDA – Facility Registration

Vision and Mission of the company

Establish Shan as the leading culinary brand, offering authentic traditional recipes & home food
solutions, with relentless focus on excellence in all we do, ensuring a wholesome experience for
our consumers around the world.

Supply chain mission

“To efficiently create relationship with suppliers, and distributors, so that product is produced
and distributed at the right quantities, to the right locations, and at the right time, in order to
minimize system wide costs while satisfying customer.”

Logistics mission

“Aim by moving the material needed by production into the company and moving finished
goods to the customer at right time with lowest cost.”

Procurement mission

 Low production costs

 Fast and on-time deliveries
 High quality products and services
 Flexibility
Shan foods value delivery network
National food limited supply chain and logistics flow chart
Raw material classification
 Imported Raw Material [paste]: In which they import raw material from China directly
in bulk quantity. The lead time is 60 days.

 Imported Food preservatives chemical from Singapor: Food preservatives and chemical
for ketchup is imported from Singapore lead time is 45 days

 Garam masala is imported from India via Dubai lead time is 30 days

 Locally Raw Material Procured [salt, chili, bottles & caps, plastic containers and labels]:
these all materials Shan Food Limited locally procure bottles from Balochistan from
Hataar.

 Garlic, Imli and sugar are purchased locally. Last year sugar was imported from Dubai at
price of 27 per kg, when price of sugar locally was very high.

Material storage
Material like paste, Shan Foods just store within factory having separate store for the
temperature purpose Shan Foods keep cold at 5 centigrade and its shelf life is 1 year.

Other local material like chili, salt, bottles they just keep in one store room because Shan Foods
said that there is not such a need to keep at cold storage or to maintain any temperature.

Bull Whip Effect

Usually demand increase in Ramadan or seasonal wise. Otherwise Shan Foods has a normal
process in sense of orders. While asking about bull whip effect, Shan Foods said In case any
fluctuations occur then the stocks are adjusted according to the demand and then
manufactured to finished goods. Shan Foods does not face any difficulty while producing more
than normal because Shan Foods manufactures paste with underutilization capacity.

Department wise process of Shan foods

There are seven major departments in Shan Foods:

 Human Resource Management

 Procurement/supply chain management
 Store Department and Production Department
 Finance
 Research and development
 Marketing
Supply Chain Management

Procurement department

The procurement department of Shan Foods is quite good and well maintained. It included 4
key personals involved. Although there are many a people involved in procurement but these 4
are main. The procurement department follows a special pattern or process for the
procurement of the products. Sometimes procurement is done on the routine basis and
sometimes or the others it is on daily or sudden on time basis. For the routine basis large items
procurement is made on the following patterns:

Forecast
Each and every department is liable to tell the procurement department according to their
estimate. Different departments make forecast on annual basis and give the request to the
procurement department. Then these forecasts are kept in records and cumulate with all other
department forecasts.

Planning purchasing request

After all the forecasts have been cumulated, a purchase requisition has been prepared. This
requisition is the cumulative of all the products.

Procurement department
When all these things have been completed, the procurement department comes in scene and
search for the available product ranges with specification. At times for larger orders, it also asks
for bids. The procurement department then analyzes all the bids. Shan Foods negotiates with
competitive rates of three or four suppliers of the specific products, where they got lower cost
with good quality.

Purchase order
After the final analysis the purchase order has been made to the name of the supplier or bidder
and then the product or the material has finally been acquired.

As Shan Foods is mostly concerned with the agricultural products because all the products
made use crops as raw material. Mostly the raw material is seasonal. At times some crops grow
and some would not. So it is the liability of the procurement department to maintain the
stream of the raw material. So for seasonal products, Shan Foods purchased 30 lack tons of
mangoes and 1800 lacks tons of carrot it acquired raw material early and makes it safe with
frozen refrigerators. An example would be the case of paste, which is mostly imported from
abroad [China]. The procurement department usually purchases stocks and it is also evident
that before purchasing the quality has been checked according to the specific measures set
before.
Supplier Evaluation

The company is very strict towards the supplier side. This is because of the regular check on the
quality and maintains the standards of ISO 9002. For the fulfillment of this specific purpose,
company is maintaining an evaluation form to check the supplier. The purpose of the evaluation
is as to check the supplier.

The supplier fills it and the supplier has to write down the names of those companies to which
it is presently supplying. If the supplier is supplying the raw material to well renowned
credibility that it is a good one.

Certification of quality

As Shan Foods main emphasis is on quality that is why it is highly concentrating on the factor
that its supplier should be ISO certified. If the raw material would not be of the premium
quality, the product cannot be as good, to obtain the standards of quality.

Environment and atmosphere

The supplier‘s business environment is also checked by Shan Foods, whether the supplier is in
political habit or not. If this would be the case supplier will be rejected, as it cannot fulfill the
raw material request any time or the flow of raw material cannot be steady.

Soundness of the party

The supplier should be sound means that it should have a good credibility and ability to meet
large raw material requirements. If the supplier is not good enough to give credit or it cannot
handle large contracts due to the unavailability of working capital, it will again be a hassle for
the company that is the reason that soundness is necessary.

Evaluation form

For the smooth running of the procurement department, firstly everything to be purchased is
budgeted. Every department makes its own budget to set the completion of its requirement.
These requirements are then sent to the procurement department. The procurement
department then makes connect with the finance department for the approval of the necessary
amount required. The finance department approves the required amount and the procurement
takes place.
Production department

On receiving the purchase order:

 the store department prepared the necessary space
 atmospheric conditions
 safety request for the material.

On the receiving of the material:

 the store department makes a MRR (Material Receiving Report).

These bills and report are then given to the production department for the issue of material for
production. Store department issues the necessary material to the procurement department
and the production department processes the material for the finished goods.

In the meantime the store department reduces the inventory for the raw material to WIP
account. When the production department finished the process, the finished goods moved to
the store department and the store department added the inventory as finished goods
produced. When this finished goods moved out of the store, a delivery chalan has been made
and invoice for the transportation issued. Then finally the finished goods produced were gone
to the distributors for selling purposes.

Ware house

Shan Foods have decentralized system, there are four ware houses:

1. Karachi
2. Lahore
3. Multan
4. Islamabad

Inventory system in ware houses, normally Shan Foods use FIFO system for regular materials
and LIFO system for seasonal material e.g. mangoes, carrot and chili to maintain standard.

Shan Foods uses bin card system to identify material for requisitions. Lead time of paste from
chine takes 45-60 days.

Shan Foods takes 3 months inventory of paste and 1 month of packing material.
Logistics
Total Cost of Ownership

The total cost of ownership consists of three parts:

1. Pre transaction components:

 To identify need of the raw material

 Formation of Collection Centers
 Induction of farmers / supplier in company’s internal network
 Training of farmer / suppliers for quality & handling.

2. Transaction Components

 Pricing
 Order placement / Production
 Quality Control / Inspection
 Delivery and distribution to the retailers
 Invoicing
 Payments to the suppliers

3. Post-transactional components:

 Shipment Delays
 Satisfaction of the customers, company’s staff and all stakeholders
 After sale service cost.