Professional Documents
Culture Documents
ON
Submitted to:
Dr. Hayat M Awan
Submitted By:
Iqra Khan
MB-08-12
( 31-12-2009)
PREFACE
In this report I have presented various operations of PFL. I have looked into
every detail of PFL operations as far as I could find out by visiting Pakarab and
meeting its executive. I have covered all the topics of operations management in this
report as taught by my respected teacher
Dr. Hayat M. Awan
For the sake of information I met,
1) Mr. Ejaz Hussain Khan Senior Production
Manager
For the cost information purposes I analyzed the financial Report of 2006-7.
I may have made some mistakes in this report but I tried to scan out all possible
errors from my side..In case of any deficiency or error, I ask apologies .
Thank you.
Regards,
Iqra Khan
CONTENTS
My report is covering the following subjects:-
1) Introduction Fatima group
2) Introduction Pakarab
3) Production facilities
4) Products of Pakarab
5) Organization setup of Pakarab
6) Corporate strategy
7) Operations Strategy
8) Inputs of Pakarab
9) Process analysis
10) Capacity of Pakarab
11) Locations
12) Forecasting of Production
13) Process strategy
14) Total Quality Management TQM
15) Inventory management
16) Sales & Operations Planning
17) Resource Planning
18) CDM Project
19) EMS
20) OHSAS
21) New Projects
22) Future Plans
23) Findings and suggestions
24) Contact Info
PROFILE HISTORY
VISION STATEMENT
Our philosophy is to deal honestly and fairly with our customers by providing the best products
and services to merit and earn their trust, and to deal fairly with our business associates. We
HISTORY PAKARAB
A treaty was signed between Pakistan Industrial Development Corporation (now NFC) and
ADNOC (Abu Dhabi National Oil Company) on March 7, 1973 and an agreement was made on 1st
November l973, to establish a new company named PAKARAB FERTILIZERS (Pvt.) LTD. in the
public sector, as a joint venture for the expansion and modification of the old National Gas
Fertilizers. Pakarab Fertilizers Limited was established as protocol concluded and signed on the
15th November 1972 by the Federal Government to further strengthen and develop internal ties
between Islamic Republic of Pakistan and the State of Abu-Dhabi to cooperate in the fields of
Petroleum industries and National resources for the mutual benefits. The company was
incorporated on 12 November 1973 with total authorized capital of Rs 1000 Million with a paid up
capital of Rs.743.061 Million. The project was completed at a total cost of RS 2511.44 Million
with a foreign exchange of Rs.1292.25 Million .It is the largest project of its type in the country.
PRIVATIZATION OF PAKARAB
On July 14, 2005 Pakarab Fertilizer was privatized at a cost of Rs14.125 billion under
privatization policy of Government of Pakistan, acquired by Reliance Exports (Private) Limited
under the umbrella of Fatima Group and Arif Habib Group. The company has provided
employment opportunities to more than 2000 persons, which also includes indirect employment
with contractors. In addition to above, establishment of this fertilizer complex has resulted in
economic activity in terms of fertilizers and other factory related trading / supplies.
QUALITY POLICY
Pakarab Fertilizers Limited is committed to produce quality products conforming product
specifications. We dedicate ourselves for continual improvement in product quality, productivity
and profitability through teamwork, motivation, safe operation, training and feedback to earn
customer satisfaction and confidence
ISO CERTIFICATION
Maintenance Manager
Mr. Muhammad Tariq Javed
PAKARAB MARKETING
PRODUCTS OF PAKARAB
NITROPHOS
It is unique combination of phosphoric and nitrogen, having balance proportion of nitrogen (N)
and phosphorus (P). It provides synergetic effect in terms of efficiency. It is only compound N & P
contains nitrate type of nitrogen. It is unique in shape and no body can adulterate it with any other
material. It is equally good for application at the time of sowing or after sowing. It is the best
source of early stage nutrient supplement in case of vegetables and transplanted crops. Its
chemically reaction is acidic having pH 3.5. This gives an edge over other basal fertilizers.
Pakistan’s most of soils are alkaline in reaction and its acidic reaction makes it more favorable to
plant to recover nutrient from soils. It is equally good for manual or mechanical application. It has
good storage capacity.
In-House Products
Ammonia
PRODUCTION FACILITIES
CALCIUM AMMONIUM NITRATE (CAN) PLANT
Designed capacity of this plant is 1500 M. Tons per day Calcium Ammonium Nitrate having 26%
Nitrogen contents and 1-2 % Potassium Sulphate as additional nutrient to stabilize the prills & fulfill the soil
requirement. It is manufactured by mixing 75% molten Ammonium Nitrate and 25 % Calcium Carbonate in
the mixing tank at 170 C. 550-700 M. Tons per day Ammonium Nitrate is produced directly by reacting
Ammonia gas and 60% Nitric acid in the Neutralization Reactor. 1050 M. Tons per day Ammonium Nitrate is
produced in the CN Section by reacting Calcium Nitrate solution with Ammonia and Carbon dioxide gases in
the CN Reactors. 600 M. Tons per day Calcium Carbonate is also produced in the same CN Reactors.
Calcium Ammonium Nitrate is hygroscopic by nature and absorbs moisture from the atmosphere therefore it
can be used in the soil with out sufficient water. It contains 13% Nitrate Nitrogen which supplies nutrients
immediately to the plants and rest 13% Ammonium Nitrogen gives food slowly till ripe up of the crop.
Process of the plant is designed by Hoescht whereas detail engineering is done by UHDE Germany. This
plant is in production since 1979.
UREA PLANT
A new Urea unit of 280 MTPD capacity commenced production in April, 1986 based on
Snamprogetti design. Old Urea unit, Evaporation unit and Prilling Tower were retained. The new plant has
330 operating days/annum. Urea unit is a trouble free unit. It has the highest production efficiency. The
highest production achieved was 387 MTPD against design of 280 MTPD (38.2% higher). Last year a
production capacity of 101,754 MT of Urea as compared to design of 92,420 MT/annum and was 10.12%
higher in spite of gas load shedding (+ 13,619 M. Tons).
AMMONIA PLANT
Based on Kellogg process, steam reforming of the natural gas, the plant commenced production in
November 1978. The plant had capacity of 910 MTPD, which was enhanced by 50 MTPD through addition
of Purge Gas Recovery Unit in April, 1986. The plant is designed to operate 330-days per annum (initially
320-days/ annum prior to capacity increase. Present energy consumption at the plant is 9.6 G.Cal /MT of
Ammonia (excluding non-productive gas), which was 9.464 G.Cal /MT of Ammonia during guarantee period
UTILITIES PLANTS
The Utilities Plant supply's the following utilities required by the production plants of Pakarab.
Steam by BORSIG boilers three with a capacity of 85 t/hr each and produces 40 bar steam at 395
Celsius.
Electric power by three turbo generators of BBC with a normal capacity of 7.6 MW/hr each and
produces 6KV electric supply.
De mineralized water by three trains of 120 m3/hr flow and quality of <10 PPB silica water.
Raw water by deep wells as no surface water is available.
Cooling water by three cooling towers with total capacity of 38000 m3/hr for total cooling water
need of the complex.
Instrument Air and Plant Air by four air compressors.
Nitrogen by cryogenic Nitrogen Making Plant made in China with a Capacity of 720 m3/hr and
Nitrogen gas purity of 3 ppm Oxygen.
Effluent treatment, Chromate Removal and Disposal
ORGANIZATIONAL SETUP
Salient Features of Pakarab:
Loan Financing :
IBRD =Rs.602.532 m
ADB = Rs.267.300 m
OPEC = Rs.108.900 m
Citibank =Rs.49.5 m
In 1986 the rehabilitation/ Expansion and rationalization of Ammonia / Urea Plant was
initiated and completed at total cost of (Rs.359.164 m) with World Bank loan of U.S. $ 42.1m
DEPARTMENTALIZATION IN PAKARAB
There are four major Divisions
•Manufacturing Division
•Internal Audit Division
•Accounts Division
•Corporate Affairs & Commercial Division
Manufacturing division
1. Production Divisions
2. Technical and planning Division
3. Engineering Division
4. Commercial department
5. Inspection department
6. Safety operation and environment department
7. P & A / IR department.
8. Security and Gen. Admin department
9. Medical Services department
Accounts division
1. Finance
2. Book Keeping Section
3. Budget Section
4. Payroll Section
5. Payable Section
6. Inventory Costing Section
Production Division:
Each plant is headed by unit Manager, further assisted by Deputy Unit Managers and Shift
Engineers.
Production department always works with cross functioning with other department e.g. in
making Urea In Urea plant, if any raw material or spare part for machines are required, they raise
purchase request which is sent to store section. If that thing is not available in store, it is sent to
commercial department which perform the function of purchasing. So, inventory management
must have to determine the inventory level whenever any inventory is removed from to store. It
must have to keep the record for all departments. Must know which inventory is taken by which
department. So that is must sent to the inventory section of the Accounts department. So that cost
is calculated by Accounts departments.
Other functioning departments of PFL are engineering and Technical which work
ultimately for the production of fertilizer. Engineering and Technical departments are the roots of
this factory.
All the departments work in close coordination to achieve optimum production.
Various division mentioned above have following departments
1. workshop and garage
2. Project planning
3. Material department
4. Electrical department
5. Instrument department
6. Civil department
7. Field Maintenance West / East
8. Compressors and turbines
9. Industrial & Relation / Personnel
10. Security
11. Inspection
12. Internal Audit and Management systems department.
13. Safety operation and environment department.
There is a Training center for new entrants.
Due to departmentalization every individual is responsible to his unit Manager wile Unit Manager
to General Manager and who is ultimate responsible to CEO who is all in all of the organization.
SERVICE OR MANUFACTURING:
Organization is both Labor and Capital intensive because, huge equipment are their in PFL
and a large number of work force is required to run those plants and equipment.
CORPORATE STRATEGY
COMPETITIVE PRIORITIES
Competitive priorities of Pakarab are:
1) Cost:
Pakarab has monopoly in CAN and NP, fertilizer, which is their Distinctive Competency.
In Urea there are competitors e.g. Engro and Fauji Fertilizer. So 92400 MT Urea is sold per annum
along with NP and CAN.
No other fertilizer Co. has facility to produce CAN and NP. As for the production of NP
“Rock Phosphate” is imported from Canada, Jordan, and Morocco. So it is very costly. There was a
subsidy for NP, but now Govt. of Pakistan has finished this subsidy so the cost of fertilizer has
been increased.
2. Quality:
Pakarab have fixed Quality standards to achieve (international standards)
3. Time:
Their plants work 24 hours a day, 7 days a week and total working days for a year are
330 days. Remaining 35 days are for maintenance of wear and tear of plants. This is called
shut down period.
There is delivery of products as soon as they are prepared. They deliver their products
on time delivery , customers do not face any back order or organization does not face any
stock problem. They have raw material in stores.
4. Flexibility:
There is no volume flexibility as there is fixed production, fixed capacity of plant and
fixed standards are there. It is difficult for them to enhance their volume but they can
accelerate the rate of production by increasing the amount of phosphate in Nitro-Phosphate
and hence result in Urea Nitrogenous compound. It thus increases their production as they
have exceeded their target production in 1996 which was 831,523 million tons.
Pakarab is utilizing its 100 percent capacity even in Urea there is over utilization.
OPERATIONS STRATEGY
Operation strategy in PAKARAB is product focused
Its entrance is early while there are no rear chances of its Exit from Market.
As it is producing CAN & NP which are 3, 4 plants in the world and which is very essential
fertilizer, so a PFL has monopoly in the country.
MAKE–TO–STOCK STRATEGY:
Product focus manufacturing firms follow 'make to stock' strategy in which firms hold items in stock for
immediate delivery. This strategy is feasible because most product focus firms produce high volumes of
products. Operation strategy for PAKARAB is product focused so based on this strategy make to stock
strategy is adopted. There is mass production in this organization so 'make to stock' is feasible.
INPUTS OF OPERATIONS
(1) MATERIALS:-
1) N + H 2 NH 3 (Ammonia)
Main product
2) CO 2 + NH 3 Urea
In very start of Pakarab establishment people were given training but now there is a basic
Qualification standard.
Basic Equipment is turbine and compressors along with a number of complex and expensive
equipment. One of top management says if they want to expand their facility, or their area of
production they will select same type of area in which PFL is currently located because of
dominant location factors discussed later in the report.
PROCESS ANALYSIS
Process Descriptions:
Output
Productivity changes = . = 100%
Input
I.e. production of Pakarab is 100% efficient Labor.
O utput
Productivity = = More than 90%.
Personsor Hour W orked
NP:
N : 22 + 1 %
P2O5 : 20 + 1 %
Moisture : < 0.7 %
CAN:
N : 26 + 0.5 %
CN : < 1.1 %
Moisture : < 0.8 %
Urea:
N : 46 min. %
Biuret : < 1.2 %
The point where there is no profit and no loss, there production manager told me that they
achieve Breakeven point in March because in month of December, there is increase in expenditure
as a slurry accumulates in plants due to Rock Phosphate impurities which creates wear and tear in
plants. So plants are repaired and cleaned and hence there is a shut down period. Due to break in
production, Break even point is reached in March
Taxes:
1-Government imposes taxes on fertilizers.
2- Taxes are also imposed on raw material and natural gas i.e. 50% general sales tax. All
equipment if Pakarab are insured.
CAPACITY IN PAKRAB
There are six plants PFL:
1 – Ammonia plant.
2 – Nitric Acid plant.
3 – NP plant.
4- CAN plant.
5 – Urea plant.
6 – Utilities.
DESIGN CAPACITY:
Peak capacity of plants is as follows:
CAPACITY CUSHION:
= {100% capacity} – {Utilization rate}
= Normally zero
Because plant utilizes its 100% peak capacity.
There is not such bottle neck operation that has lowest effective capacity. In facility thus limits
system’s out put.
ENERGY UTILITIES:
Power = 18 to 27 MW
(3 turbo generators 9 MW each)
And through operations and chemical transformations the output is generated.
FERTILIZERS:
NUTRIENTS CAPACITIES:
Nitrogenous = 222,681 (N) tons
Phosphate = 70,035 (P2O5) tons
LOCATIONS
While locating the geographic site for a facility, i.e. Geographic dispersion of operations, a lot
of factors are considered. The dominant factors which are considered while selecting a site for
Pakarab are:
1. Favorable labor climate
2. Proximity to target market (Agriculture Area)
3. Quality of life
4. Proximity to suppliers and resources (availability of raw material)
5. Proximity to parent company’s facilities.
6. Links to other parts of the country
a. In the area around PFL, a lot of skilled labor is available for factory. Labor is
easily available for both routine work and shut down period. PFL is located at by-pass and
has close and easy links with the Sheikhupura, MuzaffarGarh. So people from different
area come here.
2) QUALITY OF LIFE:
a. Employees are given good Quality of life, suitable working environment and
bonuses and incentives are gives when employee achieve the difficult targets or exceed from
target production.
There is a separate well-established housing colony for people working here.
Employees living in this colony are provided with many facilities electricity and local
telephone calls are free for them. In addition there is a market in which all the basic
necessities are provided. Three banks i.e. branches of MCB, NBP, HBL are working here.
Three mosques are also there for them plus two clubs are there for their recreational
activities. One is “Officer’s Clubs other is for workers. Many functions are held on
different occasions picnic party is one of them. Parks are also here. One English medium
and two Urdu medium schools are there.
Efficient transportation system is there for the children of employees, who study in city
Schools out side the Colony.
For the shift engineers and employees who came from out side a separate transportation
system is there for their Convenience. Two medical centres are there, one for ladies other
for gents; Welfare Trust for poor employees is there. Two rest houses are there for
Company and Different Check Posts are there in the Colony.
. FORECASTING OF PRODUCTION
Demand in country is very high but they determine demand with respect to internal factor
i.e. capacity of plants available.
A very fine software application is in “INVENTORY INDENTING AND FORECASTING
SYSTEM”
This system is a part of inventory management system which consists of the following
parts
1. Indenting
2. Forecasting
INDENTING
Demand Item Indents:
This type of indent is raised on demand of user. The indentor sends his demand along with
complete specifications to stores, where the specification are entered into the computer and then a
print out of the indent is sent to the Inspection Engineer for further check up of specification and
then the indent after approval of competent authority is sent to procurement for purchase of items.
This type of indent is generated when the stock of certain item becomes equal to order
point. Again specifications are entered in the computer. The process continues for 2 weeks and a
print out of demanded items is produced. After going to Inspection cell, these indents are then
sent to procurement department for issuance of purchase order after obtaining quotations etc.
FORECASTING :
A causal method” of forecasting is following in which historical data of past year production is
reviewed and new target of production is thus forecasted.
Actually Ministry of food and agriculture forecasts all of the demand of the country for
fertilizer. They gave these targets then to deferent companies to fulfill. NFC for Pakarab receives
these targets and then distributes it to its units according to their capacities.
P RO C E S S ST R A T E G Y
PRODUCT-PROCESS MATRIX
Pakarab has continuous flow, standardized and high volume producing processes
RESOURCE FLEXIBILITY
Although they follow level strategy of work force i.e. no hiring & firing is at about the
flexibility of organization we know there is no flexibility in equipment machines and plants while
there is a lot of flexibility in work force. Work force of Pakarab is highly flexible. Because of job
rotation, they are skilled in their job. They are capable of doing many tasks. They are also
transferred form one company to other company e.g. Engineers of Pakarab are transferred to Pak-
American which is in Daud Khel and also transferred to Mirpur Mathelo. Similarly, people from
Pak-Saudi, Pak-American also came here as a trainee or as job rotators.
CAPITAL INTENSITY
Pakarab is highly capital intensive firm having fixed automation.
T O T A L QU A L I T Y M A N A GE M E N T ( T Q M )
“TQM” is adopted in organization in order to get competitive edge over competitor for
quality. In PFL, as they have competing edge in CAN and NP over other fertilizer companies such
as Pak-Saudi, Pak-China, Pak-American, Fauji Fertilizer Engro chemicals, so they have to
maintain their high quality standards.
Therefore, they have separate department in Pakarab who have continuous check over
quality of product. There is a technical division for it. Technical division have laboratories on
sites as well as separate from plant where the laboratory engineers checks the quality of product
which are “in process” and also finished goods are inspected continuously in laboratories.
Samples are taken from the work-in-process are then checked. It should be noted that sampling is
done for chemicals. While for solid materials there is physical checking of inventory. Shift
engineers and laboratory engineers are working in quality control department. Then all the items
products which are not in match with quality standard are recycled.
Standards are maintained at fix level. They inspect the goods when they receive from
suppliers in the factory.
During production process in each plant, interpreters are there which continuously check
the standard of products. Inspection is also done when the finished goods are prepared.
In laboratory normally for different products different sample size are taken to analyze the
quality of product. E.g. 2 hour sample for a product is taken to measure quality in Laboratory
under the observation of senior in charge.
I N V EN T OR Y M A N A G E M E N T
STORAGE OF RAW MATERIAL:
SAFETY STOCK for Rock Phosphate is maintained for 3 months, and then order is given to
foreign suppliers by NFML according to the consumption pattern of PEL. Rock-phosphate is
stored here in large quantity chemicals used in production are also stored in large vessels and
drums in the factory. As far as Natural gas is concerned, no storage is there, it is coming
continuously from Sui plant through pipe lines.
CYCLIC INVENTORY is maintained for packing material i.e. bags, liner, threads-demand for
6 months is determined safety stock of 1 month is maintained and local suppliers are selected for
this purpose.
ABC ANALYSIS
Class A:
Class B:
The items having stock value from Rs. 25000 to 100,000 come in this class.
Class C:
The item having stock value below Rs. 25000 come under this class. Quality wise they are 80%
but value wise they are 10%.
Since the Lead Time for manufacturing items = 40 weeks as they are imported from foreign
country. Only 10 weeks is the lead time for local items as they are readily available.
For ABC classification, initially a Bin Card System was used but now along with it a modified
system is also used by inventory management department.
PEL uses Average Method to Value Inventory. I.e. initial value + new purchases, is divided
by total number of transactions of new purchases and initial values.
Cycle – Service lever = 95%
I.e. they are only 4-5% stock out.
Q System i.e. continuous review is used for spare parts and equipment.
While periodic review is used for raw material because there is a lots of Inventory which
can not be reviewed again and again for replenishment purpose.
S A L E S & OP E R A T I O N S P L A N N I N G
REACTIVE ALTERNATIVE :
Reactive Alternative is followed i.e. to meet demand they adjust work force, or over time.
PLANNING STRATEGY :
Work force level utilization strategy is used where overtime, under time and vacation scheduling is
used for doing operations in coincidence with demand
RESOURCE PLANNING
BILL OF MATERIALS
The main problems occurs in bill of materials, Suppose company want to make CAN which is
his one of the fertilizer now, company makes plan for the manufacturing of CAN. What type if
machinery is used? How long is the process or each process what is the requirement of the plant.
How many chemicals, raw materials are required for production of certain amount of CAN. How
much spare parts are needed:-In Raw Materials, how many cubic feet of Sui Gas is needed. How
much Rock phosphate should be imported? All the details are made for each product.
One another important requirement in planning is MPS. Through MPS, they are indirectly
making rough capacity plans. MPS of Urea fertilizer is based on targets and capacity of the firm.
Firm checks what are the forecasted order or what are actual targets given by NFC. What is the
INVENTORY RECORDS
They maintain perpetual inventory record daily movement report. DMR is prepared which
shows issued, stock balance, spare part inventory record, general store inventory and different raw
material inventory.
Maintaining inventory records is the responsibility of accounts department in which there
is a separate section or "Inventory Management” in PFL. They maintain records of new orders
scheduled receipts inventory errors, scrap losses, canceling inventory rejecting shipments and
stock return. It on the cost basis checks all inventory level and then gives to management. When
forecast is made for inventory in PFL in inventory section it comes into Budget section where
Budget is allocated for inventory.
CDM PROJECT
Clean Development Mechanism (CDM) is the first project of this kind in
Pakistan, being commissioned at Pakarab Fertilizers Pvt. Limited, Multan. Basic aim
of this project is the abatement of N2O and NOX emissions from the stack gases of
HNO3 plant. The reduction of Green House Effect of these gases shows our
commitment towards a cleaner environment.
NEW PROJECTS
The company has decided to install a new state of the art Co-generation plant to improve plant
efficiencies & reduction in operating costs for this mega project, a turnkey contract is awarded to
Turbomach, Switzerland. Revamp of existing new Cooling Tower with assistance of Italian
consultants is planned to meet the operational requirements of the complex. New standby filter
drum is being installed at NP plant to improve product quality & plant efficiency.
FUTURE PLANS
De-bottlenecking of Ammonia plant
UNNECESSARY DOCUMENTATION
In the company there is an unnecessary emphasis on documentation. In transactions
a lengthy procedure of paper work is involved that decreases the efficiency and results in wastage of
time. It is also observed that in some cases the same record is maintained by more than one department.
CENTRALIZATION
CONTACT INFO
HEAD OFFICE
PLANT SITE
MARKETING OFFICE