INTRODUCTION

Pakistan is an agricultural country having 70% of its population earns their

lively hood through agriculture, due to which they are concentrated in
villages. The total area of Pakistan is 796096 sq. km and a population is about
1.4billion out of total cultivated area 70% is irrigated through canals system
and tube wells while the rest of area is fully dependent on rain falls, about
35% of land is under cultivation. The main crops of the country are
Wheat
Cotton
Sugarcane
Rice
Though Pakistan is an agricultural country yet the average cropping intensity of the
net area shown is much lower as compare to other countries. There are many
reasons and facts behind this lack ness. They are following:
Traditional Methods of Farming
Inadequate Use of Fertilizers
Water logging
Salinity
Deficiency of Facilities
Low Quality Seeds
Lack of Motivation
But the main reason for the low productivity is selection and inadequate use of
fertilizers. It is the most important fact. Having insufficient fertilizer and due to
continuous cultivation of the same area lead us to low productivity of the soil. In
order to support National Economy Govt. of Pakistan had decided to establish an
industrial development corporation.
NFC
Pakistan industrial development corporation decided to improve the standard of
agriculture because of the chronic problems faced by the agricultural sector. So
NFC National Fertilizers Corporation came into being on 1973.
Projects under NFC
NFC has got many projects like
Laylpur chemicals & fertilizers (Faisalabad).
Pak Saudi fertilizer (Mirpur Mathelo)
Pak American Fertilizes (Daud Khel)
NFC Training Centre
Pak Arab Fertilizers (Pvt) LTd (Multan).
Head Office
NFC has its head office located in Lahore. Chairman is its organizational chief &
four general mangers assist him in his organizational set up. Each general manager
is responsible for a separate function, which is:
Planning
Finance
Personal
Commercial
PAK ARAB FERTILIZERS
Pakistan Industrial Development Corporation had established Natural Gas
Fertilizer Factory (NGF) at Multan in 1962 with Ammonia and Nitric Acid
plant of 200 tons each per day with Ammonium Nitrate and Urea as the final
products having daily production of 330 and 180 tons respectively. The plant
was not able to achieve the rated capacity and it was supplemented with an
Ammoniac unit in 1968 with daily production of 60 tons of Ammonia. This
unit was also not able to fulfill the guarantee tests.
Pakistan Industrial Development Corporation engaged services of Ms. Arthur
D. Little Inc. to determine what specific type of plant expansion and
revamping could be carried out at Multan to place the plant on an
economical, sound and competitive basic with respect to other new low cost
large fertilizers projects set up in Pakistan. After detailed investigation and
discussion, it was ultimately decided to expand the fertilizer facilities by using
some of the existing facilities in conjunction with a new Ammonia, Nitro
phosphate (NP) and Calcium Ammonium Nitrate (CAN) plant as well as
additions to the existing off sites and Nitric Acid units so as to achieve a
conservation of resources.
In pursuance of the afore-mentioned decision, Pak Arab Fertilizers Limited (PFL),
a company in public sector was introduced on 15th November, 1973 as a joint
venture between the Pakistan Industrial Development Corporation and Abu Dhabi
National Oil Company with share holding in the capital at 52% and 48%
respectively.
The national fertilizer Corporation of Pakistan is a government undertaking & is
responsible for the installation and efficient operation of the fertilizer plants in the
pubic sector Pak Arab fertilizers incorporated on November 12, 1973 is the largest
fertilizer complex & a living symbol of fraternal relations between pak and
Emirates of Abu Dhabi and the only fertilizer manufacturing facility producing
compound fertilizer in the country with total authorized capital of Rs. 1000
million.
The interests of WPIDC were assumed by NFC as a result of reformation of public
sector in the country. Pakistan with share capital through NFC & Abu Dhabi
previously through ADNOC & now through IPIC has the equity participation in
the ration of 5290 & 4890 respectively with a paid up of capital of Rs. 743.061 m.
Pakarab fertilizers was completed at a cost of Rs. 2279.010 m subsequently
Ammonia urea plant rehabilitation expansion & rationalization of the plants was
initiated and completed in 1986 at a total cost of Rs. 359. 164m with World Bank
10an of vs 24.1 million.

ORGANIZATIONAL STRUCTURE
Pakarab Fertilizers Limited (PFL) is a private limited company having a
Board of Directors comprising of 11 members including the Chairman:
Six Members Representing NFC
Five Members From ADNOC (Abu Dhabi)
The Board of Directors has appointed a full time managing director. The Managing
Director as Chief Executive of the company is responsible for the efficient
management and operation of the plants. There are four general manager assisting
MD. They are:
GM Finance
GM Manufacturing
GM Commercial
GM Audit
Under each general manager, there are two or three senior managers. Under senior
manager, there are manager then assistant managers and finally supervisors. As our
concern is with accounts department only, we will discuss only the concerned
department sketch.
The Managing Director, in accordance with the Memorandum and Articles of
Association, is the Chief Executive of the company and is answerable to the Board
of Directors. The company has two functional offices i.e. the corporate office
presently located at Lahore and manufacturing plant at Multan.
The organizational structure of corporate office is broadly designed into four cells
based on expertise and functions, namely the Personnel Group, headed by
Personnel Manager, the Finance Group, headed by General Manager (Finance), the
Planning Group, headed by General Manager (Planning), and the Secretarial
Group, headed by Secretary.
Besides evolving companys Management policies and procedures, the function of
the corporate office is also to render advisory services to the Manufacturing plant.
The Functional heads in the corporate office report to Managing Director directly.
POILCY DETERMINATION
The policy of Pakarab fertilizers limited is determined by a board consisting of I
directors nominated by the two principal corporate share holders, 5 representing
NFC (Pakistan) & 4 nominated by IPIC (Abu Dhabi) . MD is a chief executive of
the company is assisted by senior general manger & is responsible for efficient
management & operation of the plants / allied services.
After board of directors its managing director under managing director is the
general manager (manufacturing), general manger (finance), secretary of PFL and
general manager audit.
Pakarab Department
Pakarab fertilizers are a project of NFC. It was established in Multan in the year
1978. It is under one control of federal govt and ministry of production and
industries. Nine important departments exist in Pakarab fertilizers.
1. Production division.
2. Technical and planning division.
3. Engineering Division
4. Commercial department
5. Safety operations & environment department.
6. Inspection department
7. P & A / I.R department
8. Medical services department
Accounts division under which there are following department.
SECTI ON TYPES
ACCOUNTS & FI NANCE DEPARTMENT
ACCOUNTS SECTIONS FINANCE SECTIONS
Payroll Book keeping
Inventory Payable
Fixed Assets Sales
Letter of Credit Cash & Bank
Insurance Budget
I NTERMEDI AT
E
PRODUCT
CAPACITY
Before
Expansion
After
Expansion
Ammonia 200 960
Am. Nit. Crystals ----- 610
Nitric Acid 200 1400
FINISHED
PRODUCT
CAPACITY
Before
Expansion
After
Expansion
Urea 180 220
C. Amm. Nitrate 330 1500
Nitro phosphate ---- 1015
Location
Facility location is the process of selecting the geographic site of an organization.
Pakarab fertilizers limited are located near Khanewal road outside Multan.
Khanewal road is a link road to different cities. It is a government owned
organization. Since Government of Pakistan do not want to exploitation of labor
therefore they established this in the area which is considered to be the rural area
for the benefit & improvement of that site as well as it is in the centre of the
country and out side Multan. It has its own railway track for the transmission of
raw materials. As its was the best selection of site the six different plants have been
commissioned.
1. Power plant June 24, 1978
2. Nitric Acid September 11, 1978
3. Ammonia September 27, 1978
4 Urea fertilizer April 1, 1986
5. VAN Fertilizer November 26, 1978
6. NP January 12, 1979
The factory has total area of 171 acres and housing colony consist 130 acres. It
cannot be said as purely a capital intensive or labor intensive as it is Government
organization. The machines are sued for the conversion while labor is used for
handling machines & to carry on a not of jobs.
Dominate factors
1. Favourable Labour Climate
In the area around PFL, a lot of labour is available for factory. Labor is easily
available for shutdowns as well as the routine work.
2. PROXIMITY TO SUPPLIERS & RESOURCES(IN TERMS OF
NATURAL GAS AVAILIBILITY
PFL is locatd at khanewal road out of the city has an access to its Raw material
Natural Gas which he is getting from Sui plant located at Sui through pipe
lines. Basically two raw materials are being utilized).
Rock phosphate
Natural gas
Rock phosphate is coming from Morocco & Jordon through the Railway line
near Pakarab while Sui gas is coming from its plant located at Sui. The top
management is so much satisfied with its location so much so hat if they prefer
to expand their production the area like Pakarab is on top priority. Raw material
like ammonia & Nitric acid is produce by itself. Packing material is also gained
through 36 other industries like Shail Plastics Tulip Lahore, united poly packs.
3. Quality Of Life
There is separate & well established housing colony for people working there.
Employees living in this colony are provided with many facilities like
electricity, Sui gas, local telephones are free. There is a market where all the
basic necessities of life are available. Three bank branches such as MCB, NBP
& HBL are there, for recreational activities. Two clubs are there. One of them is
for the officers and one for the workers. Functions are held on different
occasions. Three schools one is English medium and the other two are of urdu
medium. Employees whose children are studying outside the colony schools
have been provided with the proper transportation system. Employees like
engineers who are working but live out side the colony are given separate
transportation facility. Along with different facilities there is a blood bank,
welfare trust and check posts are there. Two rest house are available for
company.
4. PROXIMITY TO MARKET AND HIGH WAY
PFL is located at the khanewal rod which is a bypass and has close and easy links
with the cities link Lahore, Faisalabad, Sheihupur & Muzaffargarh.
Operations Strategy
PFL Goals
It has been mentioned that PFL is under the control of ministry of production &
industries. It assigns them a one year goal to be achieved. It has set quality
standard also it has fixed demand. What ever is the demand its marketing branch
which is in Lahore deals with it. It is called NFML.
Distribution network:
For commercial affairs & marketing there is a company for NFC in Lahore named
NFML (National Fertilizer Marketing limited). Head office of Pakarab for
commercial dealing is also in Lahore. Import & export dealing office is in Karachi.
MD of the company is responsible for efficient management & operations of the
plants and assisted by three divisional heads.
1. GM (Manufacturing)
2. GM (Finance)
3. GM (Corporation & Commercial Secretary)
The key performance of Pakarab fertilizer is making profits by which we can
measure the success.
While the distinguishing features are the monopoly in producing CAN .in NP they
had the monopoly in past but now it is also produced by FFC.
Major Competitors
Its competitor are Engro and FFC in case of urea production. How CAN & NP
they have gained the monopoly while in urea PFL has also a competitive edge
since it has maintained its standard so far.
Licensing Technology
An organization gains an advantage by out performing competitors in terms of one
or more of capabilities.
1. Cost
2. Quality
3. Time
4. flexibility
1. Cost
It has already been mentioned that CAN have been produced in NFCs only project
Pakarab which has got monopoly in their production. Therefore the CAN cost is
very much high. For its is the only one for its production therefore no compromise
on its cost so far as urea & CAN concerned their prices is less as compared to the
NP. Since for the production of NP (Rock Phosphate) is imported from Jordon,
Morocco. Previously Government was providing subsidy but that was curtailed and
its cost was raised.
2. Quality
They have fixed quality standard they never distract from those standards. NFC is
always recognized by the standard products they are not only conscious about there
quality but also about the social responsibility they have developed a treatment
plant which is known as the Affluent Treatment plant for the neutralization of
waste material.
In addition to this to maintain a consistent quality 8-10 chemists are allocated for
every shift. They check every plant according to its requirement. For example
some plants require to be checked after every hour and some may required to be
checked after every 3-4 hours.
They have written sample composition of different materials at different stages of
production.
3. Time
As it is concerned with the complex chemical project therefore the time
consciousness is always taken into account.
The factory runs for 24 hours a day which is accompanied by a days a week. There
are 365 days in a year out of which 330 days are fixed for the working while 35
days are fixed fro the shut down. Even through it is shut down but most of the
work is done in these 35 days.
Previously shutdown was done in April and may but now it is done in November
and December. Cleanliness of pipes, turbines and machines is done wear & tear
and depreciation is to be recovered. On time delivery is done of the high lighting
feature of Pakarab fertilizer limited. As it is concerned only with the production no
customer contact is there. The responsibility of delivery and distribution goes to
NFML. NFML order the DFL for the delivery of the fertilizer which is taken by
NFML wagons, trucks and pickups. NFML is now directly responsible for the
delivery of the fertilizer if it is excess of order then it is stored in NFML
warehouses.
4. Flexibility
Flexibility is the word which is out of the dictionary of PFL. Their target is to fixed
standard of quality and to achieve the fixed production target. It is difficult of them
to enhance their volume but they have ability to accelerate the rate of production.
Development Speed Of Innovative Product
Fertilizers are the products of Pakarab factory the five important products are
1. Ammonia
2. Nitric acid
3. Nitro phosphate
4. Calcium Ammonium Nitrate
5. Urea
6. Utilities
However Pakarab is not innovative in the sense of introducing ever a new fertilizer
however new machines & technological advancement are adopted no product /
fertilizer has suffered the product life cycle to decline therefore no entrance & exit
strategies were followed.
Positioning Strategies
Pakarab fertilizers limited is a PRODUCT FOCUS organization why because
1. Standardized fertilizers are offered with high volumes.
2. Longer life cycle.
3. An entrance exit strategy favoring a very late exit because fertilizers are
always in use.
4. Consistent / fixed quality
5. Short delivery times.
6. Low cost in care of urea.
Break Even
Pakarab fertilizer has been running in profit since 1986.
It is profit seeking this fact can be depicted in the sense that 6 bonuses are offered
at the end of year along with certain other reinforcements like a pay / remuneration
of two months is given as a reward.

Operations as a competitive weapon
Descriptive Inputs & Outputs
Rock phosphate is the input in NP plant which is daily consumed almost 710 tons
in NP production whereas natural gas has the daily consumption of 58 million
cubic ft.
1. Ammonia
Initially the production was designed to produce 910 metric tons per day. The
capacity was enhanced to 960 1000 metric tons per day with the installation of
organic pure age gas recovery or rehabilitation unit in 1986. The process uses
steam, air & natural gas as raw materials. Ammonia NH
3
consisting of one part of
nitrogen used as an intermediate for the production of all nitrogenous fertilizers.
Natural gas, containing about 88% the hydrogen requirements of ammonia whereas
nitrogen is obtained from air.
2. Urea Plant
Urea plant has designed daily production capacity of 280 metric tons of prilled
urea. Ammonia & carbondioxide are the raw materials for the production of urea.
The prilled urea contains 46% of nitrogen nutrients.
3. Nitric acid plant
Nitric acid, required as an intermediate for the production of nitro phosphate and
calcium ammonium nitrate fertilizer is produced in two plants. Both processes use
ammonia & air as raw material.
4. Calcium Ammonium Nitrate
The plant has daily designed capacity of 1500 metric tons of pilled fertilizer grade
calcium ammonium nitrate CAN containing 26.5% nitrogen nutrient.
5. Nitro Phosphate Plant
The plant produces 1015 metric tons per day of nitro phosphate NP. NP is a
complex fertilizer containing 23% of each of nitrogenous & phosphates P2O5
nutrients. The plant, which is the first complex fertilize plant in Pakistan is based
on carbon process using of phosphate rock, nitric acid and ammonia as raw
materials.
5. Utility & Ancillary Facilities
The complex generates power for its internal requirements through three IMW
turbo generators driven by steam condensing turbines. The steam is generated by
three gas fired boilers each producing 85 metric tons of steam pre hour. These
boilers also provide steam for urea, NP & CAN plants.
Raw water for demineralization unit & other plants is obtained through tube wells,
located within the factory site.
The complex has quality control laboratories, workshops, hospital, canteen, spare
part ware houses and a residential colony.
Gross functional coordination
Degree of productivity
Gross functional coordination is done by the gross functional coordination by the
coordination engineers who coordinates with the other departments.
The degree of productively which is fixed never increased or decreased.
Forecasting
A forecast is the prediction of future events used for planning purpose. Accurate
forecasts allow schedulers it use machine capacity efficiently, reduce production
time end cut inventories.
So for as Pakarab is concerned Pakarab is taking advantage of computer. The
computer was installed in 1986. Before this all the process of central ledger system
cash book system and inventory system was been processed at Pak Saudi firstly in
the system/36 was introduce but due to the verge size handing, the modern system
was introduced which is AS/400.
It is nine time grater in capacity & speed it has provided many facilities in many
facilities in many writing reports.

Now black box system having enhanced memory and speed. 7 days a week
has been installed.
The date received from various departments inter into computer by accounts
department. A very find application is in Inventory indenting and for costing
system .
This system is a part of inventory management system which consists of indenting,
for costing. Demands indent items C this type of indent is raised on demand of
uses. The indent are sends his demand along with complete specifications to stores.
When the specifications are entered into the computer and then a print out of the
indent is sent to the inspection Engineer for further check up of the specification
and then the indent after approval of competent authority is sent to procurement for
purchase of items.
Stock them indents. This type of indent is generated when the stock of certain
items becomes equal to order point. Again specification are entered in the
computer the process continues for two weeks and a print out of demand items is
produce after going to inspection cell, these indents are then sent to procurement
department for insurance purchase order after obtaining quotations.
Nave forecast method is sometimes used and in the same way forecast module is
used.
Material management
Manufacturing strategy
Make to stock. PFL a product focused manufacturing form intend to use a make to
stock strategy in which the PFL hold items in stock for immediate delivery there
lay minimizing delivery time. These strategy is feasible because most product
followed companies like PFL produce high volumes of relatively few standardized
products for which they can make reasonably accurate forecast.
Mass production is used to define company using a make to stock strategy.
Because PFL environment is stable and predictable, PFL has a bureaucratic
organization and workers narrowly repeat defined tasks. Therefore its competitive
priorities are typically consistent quality and law cost.
Department Of MN
Pakarab fertilizer has a material management department which takes core of the
needs of the organization. These items can be of the daily use as well as the items
of higher value such as it can be a pencil or a platinum catalyst. Raw materials,
chemical and catalyst and packing material they are dealt by the department. There
are about 50,000 items which amount to Rs 500 million in value. Senior material
manager is the head of department. Material management is a difficult task so there
are separate departments for purchasing, production control and distribution.
Purchasing:
It is the responsibility of commercial department. Each unit manager of the
department is responsible for this purchasing is the management of acquisition
process, which includes.
1. Supplier Contract.
2. Negotiating contract.
Inventory management section has the important work in MM by acquisition
process.
Recognition of need the department when some material or any needs spare part
raises demand in the shape of indent or purchase request indent.
Purchase request this purchase request contains all the specification of the item,
quantity and desired quality and desired delivery date.
Indenting department gives specifications in purchasing request and then give it to
commercial department.
Supplier selection:
PFL purchasing department through bidding process selects the supplier. Different
suppliers are first asked to submit their quotations. These quotations include their
description about the particular item. Supplier are then asked to attend the bidding
process, supplier is selected. So normally, supplier who has lowest prices of items
is selected.
Buying for buying of raw materials PFL preferred local buying so to cut its cost.
However it imports rock phosphate from morocco and spares from original
manufacturers for critical equipment due to higher creditably two important quality
assurance certificates are given.
1. Quality assurance certificates.
2. Mill test certificate.
Therefore they are bought from foreigners.
Competitive Orientation.
Usually the R-materials are bought by competitive orientation. Bargaining is
always there.
Distribution:
After producing finished goods, PEL sends it to NFML which is the marketing
branch of NFC as soon as possible trucks are waiting out side the factory. So there
is a forward placement in PFL in PFL mostly fertilization bags are distribute
through trucks and trains keeping in view the customer item, So there is a schedule
for delivery product it customer.
Obsolescence and deterioration
Every machine is surliest to deterioration for the compensation of this the
sheet down period is carried out for 35 days it appreciate it again.
Safety stock and anticipation inventory.
Safety stock of different types of inventory including equipment and
Raw material is often considered Rock phosphate has a lead tinme of six months.
Anticipation inventory
Anticipation inventory is made to cope which the inventory is made to cope with
the uneven demand distribution. For there are some crops which are born at a
particular climate.
Material Requirement Planning
The concept of material requirement planning and master production schedule in
PFL is that MPS and MRD gives production control, of purchasing and top
management the information needed to plan & control business operations. It
identifies their detail production and purchasing actions which need to be taken
response to pay to day events. It also tries overall business planning to details
operations through master scheduling function. Their MRD system comprises of
three processes.
1. BOM
2. MPS
3. inventory records
Part Community
The degree to which a component has more than one immediate part. It can be
depicted that in PFL many raw materials like Sui gas, water and rock phosphate is
used in more than one fertilizer.
The objectives of factory behind their MRP is
1. Decrease inventory investment
2. decrease of out stock site for needed equipment
3. Provident of planning priorities based on due dates.
4. Records material based on dependent demand.
Bill Of Material
The main problem occurs in bill of materials. The company want to make CAN
which is his one of the fertilizers now, company makes plan for the manufacturing
of CAN what type of machinery is used.
Now along is the process or each process what is the requirement of the plant.
How many chemicals raw materials are regained for production of certain
amount of CAN.
How much spare parts are needed. In raw materials how many metric feet sui
gas is needed.
How much rock phosphate should be imported.
All the details are made for each product.
Master Production Schedule
One another important requirement in planning is MDS. Through MDs are
indirectly making rough capacity plan. E.g. MPS of urea fertilizer base on targets
& capacity of firm. Firm checks what are true forecasted orders or what are actual
targets given by NFC. What is the time period of their manufacturing process. The
lead time description of each of the finished product is considered.
Inventory Records
Maintaining inventory records is the responsibility of accounts department in
which there is a separate section for inventory management in PFL. They maintain
records of new records scheduled receipts inventory errors, scrap losses, inventory
rejecting shipments & stock returns.
Strategy To Be Used
Level chased or mixed strategy which is to be followed mixed strategy is followed
for this purpose.
Inventory Control System
Periodic review system is used for the raw material.
Capacity
Ammonia 316,800 tons
Nitro Acid 441,600 tons
Nitro phosphate 304,500 tons
Calcium Ammonium Nitrate 450,000 tons
Urea 92, 400 tons
Nutrient capacities are
Nitrogen 229, 539 tons
Phosphate 70, 035 (P
2
O
5
) tons
Intermediate products
Nitric Acid 1380 MTPD
Ammonia 960 1000 MTPD
FUTURE PLANS
The existing Ammonia, NP, and CN / CAN plant of PFL are in operation since
197879. They have already outlived their economic lives and it is difficult to
obtain sustain production / product quality from the existing plants in their present
form at the rated capacities. The rate of production would rather continue to
decrease progressively. The present operation of the plant is expensive because of
increased maintenance cost, higher consumption of raw materials, spare parts,
chemicals and frequent breaks down of pumps / compressors / exchangers etc. The
existing plants also suffer from high-energy consumption.
With the objective of achieving rated production capacities and decreasing the
energy consumption, PFL engaged various international consultants to carry out
through feasibility study of the plants. For the revamping of Ammonia and NPCN
plants, feasibility studies were conducted by M/s. Haldor Topsoe of Denmark, M/s.
UHDE / BASF of W. Germany & M/s JCI of Japan respectively.
Their study reports have been received and critically studied by PFL Management.
The proposals are under active consideration for implication after approval from
Government of Pakistan.