May 8, 2012

[SCM REPORT]

Introduction The concept of Tapal came in the year 1947 when the forefather laid the foundation of Tapal Tea as a family concern under the personal supervision of its founder Adam Ali Tapal. The story of Tapal started with the foundation of unique tea blend, which was later named family mixture which became a hot favorite, and eventually a largest selling brand. They moved up the ladder of success by innovating and introducing different tea brands to suit every taste which were sold from its retail outlet in Karachi, Jodia Bazaar. They continue to thrive and grow under the management of Fazullah A. Tapal, Who started tea distribution to retail outlets around the city for the convenience of the people. Innovating its way through its around 60 years of history. Tapal is currently the largest 100% Pakistani owned tea company in the country. It has set new standards for modern tea blending and packing factories, warehouses equipped with state of the art equipment and a team of highly dynamic professionals headed by Aftab Tapal himself owner and CEO of the company, joined Tapal in 1977. Tapal is a premium member of Pakistan Tea Association (PTA).

Brands of Tapal The names of Tapal famous brands are: Tapal Danedar Tapal Danedar Teabags Tapal Family Mixture Tapal Shades of Green Tapal Tezdum Tapal Chenak Tapal Mezban Tapal Gulbahar Tapal Special Tapal Instea Tapal Ice Tea

Tapal Tea success has surprised many. However no magic formula lies behind its growth other than hard work, dedication and of course unique tea blends. As a result, Tapal has won the hearts of countless tea drinkers across the country.

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Tapal Tea deep rooted culture and core values differentiates it from its competitors. It is built on sound principles and practices; not dominated by a group of individuals. Its greatest asset are its people; and the consistency of principle and policy give the direction.

A commitment To Quality "Never compromise on quality" has been the motto at Tapal since the very beginning. This commitment to quality has resulted in a high level of customer satisfaction and brand loyalty. In December 1997, Tapal Tea became the first Pakistani Tea Company to earn the ISO-9001 certification: a symbol of the highest international quality standards. Again in December 2000, Tapal acquired the ISO9001: 2000 certification, making it one of the first few companies in the world to achieve this milestone. In addition to the standard requirements, the ISO9001: 2000 certification system includes requirements for environment improvement, concepts of TQM (continuous improvement) with major emphasis on consumer requirements and satisfaction.

Tapal Quality Policy The Management and the employees of Tapal Tea (Pvt.) Ltd. are committed: To produce products that meet the customer's requirements & expectations. To fulfill the requirements and effectiveness of the quality management system through continual improvements. By constantly reviewing / updating the relevant quality objectives of products & processes. To participate as teams or individually towards the improvement of processes, personnel, environment & ethical values.

Leaders in Innovation Always on the move, Tapal Tea is honored to have taken the lead in a number of areas in the tea industry. Tapal has been: The first to introduce soft packs in the country. The first tea company to introduce metal-free tea bags. The first to develop an entirely new blend and category-Tapal Family Mixture (the mixture of leaf & dust). The first to invent the highly successful brand Danedar Leaf Blend. The first to market Kenya teas in Pakistan. The first tea company to be awarded the ISO 9001/2000 Quality Certification Tapal is also the 1st national tea company to export tea to the UAE, Canada and USA. Tapal has a distribution network spread across Pakistan, from Karachi to Khyber with over

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400 distributors. Extensive training programs are provided for the devoted sales personnel. The popularity of its fine brands is unabated, making it the No 1 national tea company in Pakistan.

Purchasing Decision The supply chain system of Tapal tea is divided into two categories.

1. Tea Supply Chain Department Mr. Mohsin M. Saify is the GM of this department, he is associated with the department as a tea tester. The purchases of raw material(tea) are done by the procurement department. it also include quality control, warehousing and blending of tea. The procurement are done from around 18 to 20 countries worldwide including Indonesia, Rwanda, Kenya, Sri-lanka and green tea from China. Their common tea grades includes: D (Dust) D1 (Dust 1) BOP (Broken Orange Pekoe) BOPF (Broken Orange Pekoe Fennings) PD (Pekoe Dust)

2. Supply Chain Mr. Hussain Mithaiwala is the GM of this department. Except tea all the major and minor purchases are done by this department including engineering item, packing material, general item etc. furthermore this department manage maintenance and repairing of capital equipment. Warehousing, production planning, logistics and transportation also covers by this department. The purchasing of promotional items also the part of supply chain department. Saima Packages, Packages Ltd, Trans Pak and Dexion are one of their major supplier.

Outsource functions The outsource function are divided into three categories.

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1. Warehousing The outsource warehousing done on the need basis and sometime on lack of capacity for which they pays the rent. The labour management in the warehouses is totally outsource to prevent political and union issues. The company that provides these services is named as Al-khair Services, the HRM company.

2. Equipment Maintenance The outsource of equipment maintenance is done on the yearly contract basis. Monthly equipment checkups that are conducted by the company that is providing these services.

3. Transportation/Logistics The transportation/ Logistics fuction in Tapal Tea is totally outsource. The company that are associated are NTN and Rana Shouqat in Karachi. Expect from these Tapal do not outsource anything else.

Transactional and Alliance The supply chain of Tapal tea is transactional base except they have build alliances with Kenya as they purchase 70% of material (tea) and they have now build alliances with small logistic companies for the road mapping delivery perspective.

Role of Power According to Tapal the buyer and supplier is a relation in which sometimes buyer held captive and sometime supplier held captive. For instance, few months back due to domestic crisis in Kenya Tapal did their major raw material purchases from Srilanka due to the fulfillment of their production on temporary basis and when situation get settled Tapal started to purchase from Kenya at the same scale.

Alliance in Difficult Conditions

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They manage alliance through compromise and negotiation in unbearable situation. For instance, few months back when the crisis held in Kenya they purchase raw tea from Srilanka to fulfill their requirements but they did not built the alliance with these buyers because it would be the win lose relation and they would not be able to extract much out of them.

ISO 9001 and 14001 According to Mr. Shakeel Armaan Zaidi FG south at Tapal "ISO is a certification in which what you document must be happening in your organization". Tapal Tea, as a highly professional and leading Pakistani company, is constantly striving to improve quality in all its functions. They are using TIMS(Tapal Integrated Management System) In this regard, the company has started a program of integrating the functions together into one system. This system aims to bring together ISO 9001:2008 - Quality Management System, ISO 22000 - Food Safety Systems, OHSAS 18001 - Occupational Health & Safety System, ISO 14001 - Environment Management Systems, and ISO 20000 Information Security System apart from other internal systems in all departments. As part of this process, The Management and the Employees of Tapal Tea (Private) Limited is committed to: 1. Satisfy our stakeholders and be a benchmark for Quality, Creativity and Ethical values in our business. 2. Achieve leadership in all categories of our core business and diversify in areas which complement the core business. 3. Provide products and services that meet customers requirements, expectations and agreements relating to all aspects of Tapal Integrated Management System. 4. Continually improve the effectiveness and performance of the Quality, Health, Safety, Environment, Food Safety and IS Management system. 5. Prevention of injury and ill health by continuously identifying hazards and reducing risks to people, facility and business. 6. Ensuring that the Tapal processes and products are environment friendly and do not contribute to polluting the environments in any manner. 7. Adhere to all applicable legal, statutory and other requirements that relate to Tapal products, services, environments, health and safety. 8. Constantly define & update measurable Quality, Health, Safety, Environment, Food Safety and Information Technology Service Management improvement objectives for Tapal products, services, processes and system.

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9. Establish effective arrangements for communicating with all stake holders throughout the food supply chain regarding all applicable aspects of Tapal Integrated Management System. They also conclude an example that in summer season due to high atmospheric temperature of 40 to 50 degree centigrade. The labour that are working at the dock for the loading in container. The temperature in the container reaches at about 70 degree inside. For the above situation they have two strategies to handle the situation. The first is labour team rotation and the second one is to load the container at the night shift for the health safety.

Purchasing Order and Bidding According to Mr. Shakeel Armaan Zaidi, for the capital equipment they have bidding process. in purchase order if they have to purchase. like they have to purchase as equipment. they firstly take in their CAPEX(capital expenditure).they make it budget from their department and get the approval from their department. For instance if they want to purchase an equipment after a six month. so after 6 month they raise a PR (Purchase requisition). they initiate the PR that goes to the his boss and that PR go throughout the department to GM, then GM forward that PR to finance department. The GM finance then forward the PR to cost and budget analyst. the budget analyst then decide if it is a budget item or not. if the equipment is budgeted then they do the vendor assessment through the vendor approved list and all those suppliers that falls in this category on the basis of their market worth, where they are working and what is their reputation in market get enlisted through bidding and finally they issue the purchase order to the most appropriate supplier.

Procurement and Leasing new and used Equipment They usually procure new equipment on full payments not on leasing. Except if there is a situation that they are facing any technological changes then they purchase used equipment on the basis of need.

Managing inventory and warehousing In warehousing and inventory management there are three processes.

1.Receiving

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The product that issue from the production department go through the physical count. Different quantities have different parameters that can be gauge and received in inventory system by the supply chain department.

2. Storage In storage process there is lot and locator system, identification and traceability on which the FIFO is monitor. They have racking system with rack number allotted. For instance if received the request from the sales department they have to send the specific product to the distributor from the pallet location that can be find easily with the code assigned that can be entered in the system. so that the exact location of the product can be find easily.

3. Delivery/Issuance Finally product is issued and delivered to the distributor after stock list.

Mode of Transportation There are four mode of transportation in Tapal Tea. By Air By Road By Train By Sea

Safety, Quality and Timely Deliveries The safety, quality and timely deliveries are measured by KPI(Key Performance Integrators) through top management on the basis of Sales Order Fill-Rates. For instance Sales Order Fill-Rates report shows the data from July till now that that the delivery are 79% on time and 29% late. In march they get the order from Karachi of 492 carton (31 tons) 26% late and 74% timely. They have designed a benchmark for safety, quality and timely deliveries.

Most Interesting Event

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Few years back they purchased racking system for Raiwind warehouse, town in the Punjab province of Pakistan. They purchased the system from their Malaysian based supplier named Dexion. They installed selective pallet racking system FIFO base. When the installation process complete and checked, the person in charge at raiwind warehouse was switch to some other company. So the management decided to rotate the person in charge in packing facility to the raiwind warehouse for temporary basis. They person that was assigned to that warehouse has no technical knowledge about the racking system and warehousing. In this case what he did was, he initiate an email to the GM that the racking system is collapsing, getting tilt and there is barrier in it getting bend. The GM was also newly assign to supply chain from R&D department, he also did not had the proper technical knowledge about the racking system. When he saw the email he was get really upset to saw the collapsing of that heavy investment. Basically, That project was belong to Mr. Shakeel Armaan Zaidi FG south. The correspondence went through 40 email, the tension was that high. According to Mr. Shakeel "never bypass anyone in the corporate environment, this is unethical". When FG south came to know the situation, he called the subordinate that report the GM and scold him for what he did. After that the GM called FG south to check the problem. Mr. Shakeel try to convinced GM that this is not possible as they purchased the system from Dexion and they are the well known and reliable company. Mr. Shakeel called the subordinate to took the picture of those bands and send him by email. When he received the snaps he did not find any defect in the racking system, the bends were really minor. He informed GM about the pictures. GM ordered Mr. Shakeel to pack your bags and go to raiwind to double check the situation. When he reached raiwind, he did not find anything unusual as those bends were normal. He informed GM again. GM advise him to extend his visit until he reach there too. Upon his reach the GM also call maintenance personal to check out the level of the racking system. The maintenance firm told the GM after checking that there is a minor defect. After knowing that GM get really upset and email Dexion about the situation. When Dexion came to know that, they sent their maintenance team to handle the situation as Dexion never face this problem before. The maintenance team deport their office (Dexion) that the installation is correct. The GM decided not to pay Dexion for the racking system as their racking system was faulty and they were not accepting it. The relation between Dexion and Tapal were close to abandoned. According to Mr. Shakeel things were different, he found the problem that might be the floor is uneven and not in alignment and what GM saw visually is not the main problem. Usually, the racking system is not in rigid form, there is a little bit of elasticity present in the that system and this is a good thing. GM thought that there is a deflection in the system and he was forcing the Dexion to change that system and said that it is hazard, it could fall on the workers working in the warehouse. The load bearing capacity of racking systems are defined. Tapal have the racking system of load bearing capacity to 500kg or 1000kg. So, the situation was that when you put 500kg on 500kg load bearing racking system results shows elasticity that is normal. The confusion was that GM was unable to understand the situation because of he did not had the technical

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knowledge. The Dexion was trying to convince technically to the non technical person. When supply chain department put the same weight on other racking systems, they face the same situation. Finally Tapal held the meeting with Dexion to remove the misunderstanding that newly assigned supply chain GM had and to strengthen the relation with Dexion again.

Business Process Model

Sales and demand forcast

Karachi and Raiwind

Logistics

Supply Chain

Final Product taken to the dockyard

Order Team

Master Production Schedule

Production Plan

Distribution Team

Customer

Bill of Material

Master Required Plan

Distributor

Retailer

Recommendation As far as we know that the Tapal Pvt. ltd is one of the top five FMCG company in Pakistan with the strong supply chain network and we did not find any short coming in their supply chain system.

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Conclusion

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The testimony of their quality has made Tapal Tea Pvt. Ltd the first tea company in Pakistan to earn the ISO-9001: 2000 Quality Certification, the symbol of supreme quality standards. Pioneer of the Danedar category in Pakistan, Tapal Danedar remains a firm favorite around the country with its rich golden color and a strong refreshing taste. Founded by Adam Ali Tapal, the company first started marketing a number of quality blends to Pakistani consumer market through continuous innovation and research and development they gain a big share of Pakistani market. They still are growing and hope to be a leader in a market in coming years.

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