Supplier Base of Organization

The Supply Chain starts from the point where the Raw-Material order is placed. A.N industry has two sources of supplies. It either purchases the Raw-Material from Pakistan Steel Mills or Import it. Currently A.N industry is importing from Ukraine. The other raw-material suppliers are from South Africa, Russia and Australia. The decision of placing the order depends upon the cost and quality they provide. Both sources provide certain benefits and certain costs to the Industry. Mostly the order is placed to Pakistan Steel Mills as importing put a higher transportation and time cost. The quality of raw-material of Pakistan Steel Mills lag behinds that of imported Raw-Material. There are two types of Raw- Material, one is prime quality and other is secondary. For quality pipe the prime quality is used but that is really costly to the firm.Pakistan Steel Mill is now an Old firm that faces certain Management problem and has outdated machinery. As a result of this it lags behind the imported raw material quality, where the firms are using current technological procedures to achieve it. A.N pipe have witnessed certain problem many times from Karachi Steel Mills., such as hardness of material and also of chemical formation The Pakistan steel mill is providing raw-material to various firms. Due to limited production capacity it cannot fulfill the need of all the manufacturers. As a result the manufacturers have to shift to the option of importing Raw-Material to meet their demand. The raw-material is received in form of Steel coils. The length and width of a coil depends upon the order that is placed. The order is placed to the Supplier based on tons. The method of ordering the stock is Just- In Case. The company forecast their future production on past data. Based on their forecasting result they order the stock. They keep certain amount of Buffer Stock, just to meet any excess or uncertainties in demand. As your forecasting rarely comes closer to your expected demand. The order in case of Pakistan Steel Mill is directly placed to the Mill. In case of importing Raw-Material the procedure is different. First of all a Pro forma is made in which the quality specification, the material requirement and other detail are mentioned. The consumer then contacts an indenter who is the intermediary party. The indenter is the agent of the foreign supplier. He contacts the supplier and place the order based on the requirements specified in Pro forma. The trade payment method used in case of importing is Documentary Credit ( Letter of Credit). This method is beneficial for both the parties. A letter of credit is a mean of paying the exporter in case of importing goods. The parties that are involved consists of Opener or Buyer (the person purchasing the good), Beneficiary or Seller ( the person or the party for which the letter is opened, the one supplying the goods) . These two are the main players in this form. Then there is Opening Bank( which issues the letter), Intermediary Bank ( which makes the payment to the exporter). State Bank of Pakistan decides the percentage of amount to be paid to issuing bank by the importer. The bank gives an undertaking (on behalf of buyer and at the request of applicant) to pay the shipper (beneficiary) the value of the goods shipped if certain documents

are submitted and if the stipulated terms and conditions are strictly complied with. Once the order is shipped the importer pays the indenter or the supplier the amount. The order placed to foreign supplier is shipped to Karachi Port. From the port it is loaded on Trucks is dispatched to Factory in Lahore. Similarly it happens in case of the order place to Karachi Steel mills. It is also transported through Trucks. The material that is received goes through quality check. Firstly there is Physical Test. They try to check whether the material is meeting the specifications mention in the Performa. The main concern is the Hardness of the material. For that Hardness test is conducted. If steel is hard it is difficult to mould and shape it and thus it creates problem for the manufacturer. Mostly the defect is found in few coils and few areas. The manufacturer than do not consider the option of sending it back to the supplier. They either try to reduce the hardness and soften up to the requirement. If they fail to do this then they sell out the material in scrap. Apart from this the company also does chemical analysis to detect the chemical formation to their requirement. The major concern is the Hardness of material and thus the hardness test is the major part of the Quality check. The company does not have any kind of warehouse. The material and the final product is the stored near the assembly line and it causes flow of labor problem and other difficulties in manufacturing.

Out Sourcing: A.N Industry is using the option of Outsourcing in case of Manufacturing and
Transportation of Final Product. The option is being used in case if workload is high on the employees. In time of high work load due to higher demand, firm contract with certain specialized labour to work for them. In the slitting stage of manufacturing the firm employee certain labour to slit the coil and do other manual stuff like welding and reducing. This helps the firm to reduce the burden on the labour and reduce the burnout effect. The tedious work on the employee of the company is reduce and it helps in improving their morale The other benefits includes greater flexibility in staffing, reduce turnaround time. The company is outsourcing in case of transportation as well.. The company has it own trucks but they supply to the customers within Lahore. The company contracts with other transportation facilities to distribute its product to the final consumer. The company also exports the material. Currently it is exporting in Afghanistan and Srilanka. So the company is using different Logistic company for transportation. This benefits company by reducing their cost and focusing on their core competencies rather than shifting their focus. The company in case of transportation is using specialized facility so it helps them in promoting better image to the consumer and gaining competitive advantage.