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SUBMITTED TO: SIR ZAHID RAZAQ

SUBMITTED BY: NILOFER YASMEEN JAHAN JAVERIA NOOR ANAM SHAHID BB-10-28 BB-10-47 BB-10-62 BB-10-66

OPERATIONS MANAGEMENT Report The whole report comprises the practical implementation of different operations management concepts in organization Pak Arab fertilizers.

OPERATIONS MANAGEMENT

Pakarab Fertilizers

Company Overview Pakarab Fertilizers Limited has been manufacturing and marketing "Compound Fertilizers" in Pakistan for the last 38 years Offers products that are safe, consistent in quality and are environment friendly Working towards providing "balanced nutrition" to the crops

Historical Background Pakarab Fertilizers Limited was established in November 15, 1972. A Memorandum of Understanding was concluded between PIDC and ADNOC on March 7, 1973. A participation agreement emerged on November 1, 1973 to establish a joint venture for the expansion and modernization of NGFF at Multan. The Company was incorporated on November 12, 1973 Pakarab Fertilizers Limited was privatized on July 14, 2005 a cost of Rs.14.125 billion Pakarab Fertilizers Limited is located at Khanewal Road, Multan
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Business Activities Company provides fertilizers for all crops and for the correct stage of growth. Offers a wide range of other products that mostly stem from upgraded gas and chemicals coming out of the fertilizer production plants Products and Services

Farme r Suppo rt & Educat ion

Fertilizers Indust rial Solutio ns

Distribution Networks
Vision & Mission Their vision and mission reinforces their position as a driving force in the agricultural sector. Vision: To be a world class manufacturer of fertilizer and ancillary products, with a focus on safety, quality and positive contribution to national economic growth and development. We will care for the environment and the communities we work in while continuing to create shareholders' value. Mission:

To be the preferred fertilizer company for farmers, business associates and suppliers by providing quality products and services.

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To provide employees with an exciting, enabling and supportive environment to excel in, be innovative, entrepreneurial in an ethical and safe working place based on meritocracy and equal opportunity. To be a responsible corporate citizen with a concern for the environment and the communities we deal with.

Production Facility Our highly skilled chemical engineers prepare the best breed of fertilizers. Pakarab is one of Pakistan's foremost chemical companies that process natural minerals and nitrogen into vital products for farmers and industrial customers. The main product is fertilizers, while industrial uses are also an important segment. Ammonia Plant Ammonia plant is where natural gas is reformed to produce Ammonia for the entire complex and Carbon dioxide for the Urea plant.

Nitric Acid Plant The facility has two units (three lines) of Nitric Acid production.

Urea Plant The highest production achieved was 387 MTPD against design of 280 MTPD (38.2% higher).

Nitro Phosphate Plant Our highly skilled chemical engineers prepare the best breed of fertilizers.

CAN Plant Process of the plant is designed by Hoechst whereas detail engineering is done by UHDE Germany.

CO2 Plant The CO2 Recovery Plant is designed to recover the impure, low pressure CO2 gas emitting from the Ammonia Plant.
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Co-generation On 20th July, 2007 Pakarab Fertilizers Limited submitted a plan for Co-generation Power Project.

CDM The CDM at Pakarab Fertilzers Limited is the first of its kind in Pakistan.

Capacities: Ammonia Gas 313500 metric tons Nitric Acid 441600 metric tons CAN 450000 metric tons Urea 2400 metric tons

Raw Material Requirements: Natural Gas 52.5 M.cubic feet (per day) Rock Phosphate 710 tons (per day) Storage capacity: N-P(unbagged) 30000 TONS CAN (unbagged) 27000 TONS Urea (bagged) 12000 tons CAN (bagged) 5000 tons Imported Rock 30000 ton

Bagging Facilities: 4500 tons per day Organizational Structure: Professional management and team work has been the key to our success. The key management is directly responsible for managing the day-to-day operations (and profitability) of Pakarab Fertilizers Limited include the following: The board of directors has appointed a full time chairman and a managing director, who invested with adequate powers to manage the day to day affairs of the company on sound commercial lines. The Managing Director as Chief Executive is assisted by divisional heads i.e. General
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Manager (Mfg.), General Manager (Finance), and General Manager corporate &commercial (Company Secretary) and General Manager (Engineering). The Managing Director administers and is responsible for the efficient management and working of Plants .There are four major Divisions Manufacturing Division Internal Audit Division Finance Division Corporate Affairs & Commercial Division

Under these divisions following departments are currently working Manufacturing Division: Safe Operation & Environment Department Production (Plant and their relative storage areas) Materials Department Inspection Cell Technical & Planning Department Personnel & Industrial Relation Department Security Department General Administration Department Procurement / commercial Department

Finance Division: Management system Department Education Department Finance Department Accounts Department

Internal Audit and commercial divisions are not further divided into sections or departments.

(Flow chart) Use ERP system for inventory.

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Benefits of inventory system Provides clear view into inventory costs and turnover. Eliminate manual inventory management processes and improve vendor satisfaction with a seamless procure-to-pay process Control multi mode inventory operations. Reduce inventory levels.

Operations Strategy Operation strategy specifies how operation can help in implementing corporate strategy. Continuous cross-functional interaction must occur in implementing operation strategy. Operation strategy does not define the specific processes to be used or the specific resources to

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organization; rather it identifies the nature of the operation that is required to accomplish the goals of the organization. There are two types of operating strategy. Process focused strategy Product focused strategy Operation strategy in PAKARAB is product focused. It is producing standardized products. In this strategy, equipment and work force are organized around the product. This strategy fits high volume production of products. Based on the positioning strategy, there are three manufacturing strategies: Make to stock Make to assemble Make to order 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 somake to stock' is feasible.

Processes

INPUTS: Materials:

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For production of NP Rock Phosphate is imported from Canada, Jordan and Morocco .It comes first through by air in Karachi then from Karachi (through rail) to Peran Ghaib and then to Multan Pakarab (through rail). Natural Gas, for the production AmmoniaNH3 comes direct from Sui-Northern pipeline. Average monthly Sui gas bill of Pakarab is around 30 million PKR. There is normally a contract with suppliers of 5 years or 10 years. Its units of measurement are per 1000 Cubic meter and it is used in millions of cubic meter in production plants. Workforce: In very start of Pakarab establishment people were given training but now there is a basic Qualification standard. IT Institute gives the diplomas to new trainees. But now Pakarab has very skilled and well trained labor they have skilled labor especially in plants such as Urea, Ammonia, NP and CAN and they dont have good skills in instrumentation as when the people gain good training and experience they quit the organization for better emolument. In Pakarab 3 shifts work at a time 1 shift = 8hours Total shifts = 3/day 1 shift is always at rest to be called in emergency Total Labor force = 1200 Pakarab follows level-work force strategy i.e. there is no hiring or firing, employee have stable career but there is no subcontracting but there is over time incase if a worker, is on leave then one has to replace him. Executives: 151 Office workers: 181 Daily Wages workers: 4140 Managers: Managerial positions are from 180-200. Land: Total area of factory is 172 acres. Total area housing colony is 130 Acres. Equipment and Facilities: 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. Project Management

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Pakarab uses matrix approach to handle the project i.e. people are designated for a specific project from the department and this structure allows each functional area to maintaincontrol over who works on a project. Planning Projects: Pakarab has a sound work breakdown structure which also includes delegation of tasks and activities. For this purpose they use Critical Path Method. To minimize the cost-schedule they need more manpower but it could be space consuming due to confined space so they use the slack time to complete the project. Analyzing the cost-time tradeoffs they combine activities i.e. activities are done in parallel direction so that minimum time is consumed and cost can be saved. Conditions or requirements for the next activity are maintained before the next activity starts. There are two techniques used in Pakarab for budget evaluation; Through Capital Expenditure Budget (CEB) i.e. asset acquisition etc and Revenue technique i.e. improvement or replacement of an existing asset etc. Moreover, a chemical budget is also a technique used for the raw materials. They forecast this budget through past experiences.

Assessing Risks: Pakarab also has an effective risk management plan. They have spare inventory of spare parts in stock for critical machines without which the project can be delayed for may be a long time. 1 shift is always there for backup. For new technology inducement they move phase by phase instead of changing it all of the sudden. Experience is also crucial for handling the hurdles. The engineers there are qualified and knowledgeable to handle those hurdles. Thats why training and development is of foremost importance in Pakarab.

Monitoring and Controlling Projects: A team and hierarchy is responsible for any problem occurrence in Pakarab. Shift engineer is immediate responsible to assess the activities and to monitor if the project is going the way it is supposed to be. Shift manager must have a complete knowledge to protect from any damage. Frontline people should be knowledgeable and the backup may be consulted otherwise any related person can be called immediately to solve the problem. Operation head accountability and responsibility: In case of any damage, the operations head is held accountable immediately and the reason of damage is concluded e.g. lack of knowledge or experience or due to the negligence. Also it is investigated if there was any procedure already made to stop the damage. Shift manager: if the damage has occurred due to the mistake of shift engineer than he is accountable.
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Process Strategy At the same time there are many processes going in Pakarab. But mainly it focuses on production process. During these processes every plant is a customer to of other plant so it is an ongoing process. Any delay in process will lead to overall delay in production process. Emergency handling is also the part of their process strategy. Emergencies may include gas leakage, blast, etc. To avoid these problems, there is proper training of fresh engineers through exercises and practical so that they have a complete knowledge of plant and can handle any emergency. Following are the flow diagrams which is the basic part of the training, Process Flow Diagram (PFD): It gives the geographic knowledge of the plants e.g. equipment, piping and connectivity etc. Process Instrumentation Diagram (PID): This shows the minor details of instrumentation of plant.

Production Process: 1- Nitro Phosphate Fertilizers (NP): Phosphate Rock imported from Jordan and Morocco and Nitric Acid produced within Pakarab Fertilizers are the basic raw materials for NP Fertilizer manufacture Phosphate rock containing 74% Tricalcium Phosphate is digested with Nitric Acid in dissolving reactors. Phosphate Liquor obtained mainly contains phosphoric acid, calcium nitrate and excess nitric acid. As high amount of calcium nitrate in liquor is not required, 75% of same is eliminated by cooling to0 degree Celsius in crystallizers and subsequent centrifuges and filters are converted to Ammonium Nitrate and Calcium Carbonate at calcium Nitrate conversion plant. NP Liquor from filter is mixed with Ammonium Nitrate solution, neutralized with Ammonia, concentrated in evaporators and is prilled. 2- Calcium Ammonium Nitrate Fertilizers (CAN): Ammonia vapors from NP plant are neutralized with Nitric Acid in reactor to form90% Ammonium Nitrate Solution. Calcium Nitrate melt from Nitro-phosphate plant is transformed to Ammonium Nitrate and precipitated Calcium Carbonate, the two reaction products separated through vacuum filtration. Ammonium Nitrate Liquor is then concentrated to 99.5% in falling film evaporators in Ammonium Nitrate Conversion plant. Calcium ammonium nitrate slurry so produced is then prilled and coated with suitable coating agent to avoid caking of the product. 3- Urea Fertilizers: Ammonia and Carbon Dioxide from Ammonia plant are compressed and fed to Urea Reactors at about 150 Kg/Cm2, forming 50% Urea and balance Ammonium Carbonate which is later decomposed in series of decomposers yielding 70%Urea Liquor which is then concentrated in evaporators and then fed to prilling tower for prilled Urea.

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4- Ammonia: Natural Gas, containing 92% methane and higher hydrocarbons is the basic raw material for Ammonia manufacture. This feedstock is purified in Desulfurization section, after which it is mixed with steam and cracked into stages in presence of Nickel catalyst. Air is added at the inlet to second stage to provide the required amount of Nitrogen, for the production of Ammonia. Carbon Monoxide is converted into Carbon dioxide and Hydrogen in Shift converters. Carbon dioxide is removed by washing with hot Potassium Carbonate solution and CO2 is recovered from Potassium Carbonate solution by reducing pressure and heat. CO2 thus obtained, becomes available for the production of Urea Fertilizer and consumption at Calcium Nitrate conversion plant. Residual Carbon Oxides, being poisonous for Ammonia synthesis catalyst are eliminated by conversion to methane in methanator. Purified synthesis gas is compressed and fed to Ammonia converters. Synthesized Ammonia is recovered by Chilling in Refrigeration section. 5- Nitric Acid: The plant comprise of three steams, the new two are capable of each producing600 and third old steam is capable of producing 180 metric tons per day of Nitric Acid. Ammonia is vaporized, mixed with air and the mixed steam is passes over platinum catalyst gauzes in converters at 900 degree Celsius forming Nitric Oxide and Nitrogen Dioxide converted steam is cooled by steam generation and cooling water, and then fed to absorption columns wherein water absorbs Nitrogen Dioxide, forming Nitric Acid (60% concentrated). Forecasting System: System is used to classify the items on the inventory list on the consumption and current stock basis into A, B and C categories. Also the system forecast the new order point and order quantity after reviewing the order points of all the items on inventory list: based on the lead time and purchase period. Capacity Cushion: = {100% capacity} {Utilization rate} = Normally zero Because plant utilizes its 100% peak capacity. Bottleneck: No such bottleneck is there. Facility is utilizing its 100% capacity. Supplier Relationship Process: Pakarab being a sizeable fertilizer-manufacturing unit having 45,000 items on its inventory list established the department for maintaining four major procurements to keep the operations of the
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organization running without any break. The purpose of any purchase is to have the goods at right time, right price and right quality. So factors involved in any purchase are 1: Quality 2: Quantity 3: Time 4: Price Safety Stock: Safety stock is kept for all items keeping in view: Chances of stock out Importance of the item Lead time Consumption pattern

Buffer Stock: In Pakarab buffer stock for intermediate product is also maintained for smooth running of operations-For example: Buffer stock of NH3 is maintained To avoid any disturbance in the production of Urea. Sometimes Ammonia produced is not entirely utilized So it is stored there in capacity of storing 5000 tons of NH3 in Pakarab. Min buffer level for foreign item is 40 weeks Min buffer level for a local item is 12 weeks.

Lead Time: For items procured within country lead-time is 3 months for manufacturing items. For readymade items lead-time is 15 days. The lead time may vary subject to the nature of the item e.g for goods procured from foreign country, lead time is six months. Daily Movement Report: As online system is adopted so an daily basis a daily movement report (DMR) is prepared showing the items description and code which are issued and received by the department Sale of mid products:

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Commercial department is also indulged in the sale of mid products (A-N Crystal NH3and CO2 gas). Nitric acid is sold only to special customers sale is made on advanced payments by the customers the customers deposit cash / DD in the finance dept. on showing the slip filling report is made and is send to the sale section of finance dept to make invoice so as to have gate pass. Management Policy Management policy means how the managers have established the atmosphere in the organization. How the subordinates are working in the office. In Pakarab Fertilizers, the management style is the mixture of different styles. On one side we can see the Management by Objectives that the all work is done with the consent of workers. Al the targets and achievements during the year are set with the collaboration of the staff members and workers, while on the other hands' we see that the system is centralized. All the decisions are made at the top levels. If we look towards the relationships between the management and workers we find them informal up to some extent both the managers and workers work with very close to each other. The relationships are free and frank. Each of them can express his interests and can discuss his problems with each other and the other realizes them. The disputes are settled with the mutual understandings and dealings. As said earlier that there is centralization in Pakarab Fertilizers. The policies are made at the top level of the management. Higher management also makes all future decisions. No doubt. The policies are imposed in the organization but the resistance against the policies is very low. The reason is that when the policies are framed at the top level, all paper work is completed. All those who will be affected by the policy are contacted and their opinion is received end then the policy is made on the basis of these opinions. That's why, the resistance is very Low. The workers and staff members honor all the policies. SWOT Analysis Strengths: Broad range of main and mid products Central location of plant Broad production range Monopoly in Calcium Ammonium Nitrate & Nitro Phosphate production Support from Ministry Experience in production and marketing of product

Weaknesses: Urea made by Pakarab is of more powdered form as compared to the urea made by FFC Obsolete plant with high operating cost Govt. compellations especially for the pricing policy Monetary sensitiveness to foreign exchange exposure

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Dependence on imported feed stock suppliers and special repair/maintenance facilities Environmental problem & proximity to urban area Limitation in achieving CAN plant design capacity Too much centralization effects timely decision making Unsatisfactory Product quality of urea No proper sales promotion Placement and number of warehouses Lack of long term planning, decisions are made keeping in view the short-term benefits Lack of financial budgets for implementation at decisions. Too much cost consciousness that affects the long run impact and profits.

Opportunities: Improvement in product quality Expansion of plants to meet the demand more efficiently Proper sales promotion Proper placement or warehouses Delegation of authority so that decisions can be made at the spot without any delay Long term profits or benefits should be preferred over short-term profits Quality should be improved gradually with the results and trends in market

Threats: Low product quality of competitive product (urea) is a major threat Major competitors are FFC, ENGRO CHEMICALS and DHC In market the 50-kg bag of Pakarab is sold at RS.330 while ENGRO and DHC at RS.360sell that bag but even they are more effective. PFL is giving almost negligible incentives to the customers while FFC and ENGRO are running efficient promotional schemes to attract the customer. PFL is also lagging behind in providing the product at the right time and place Customer has to wait 3 to 4 days to load be second truck while at the warehouses of FFC and ENGRO-CHEMICAL customer immediately get the product- So the placement of warehouses is a threat. NEML has 6 warehouses in Multan region while FEC has 16 warehouses in that region. The packaging of FFC is also better than Pakarab. Imported fertilizers are also a threat to Local Industry selling at RS.310 in the market for a 50kg bag.

Conclusion and Recommendations Pakarab has excessive staff than required. Moreover there is uneven distribution at place where one man can do the job three people are working there. And at some places a job
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of three persons is done by one man. The uneven distribution results in de-motivation of the employees and gradually his interest in his work decreases that effects the efficiency. In order to Increase the efficiency of worker, job should be assigned to its caliber to develop his interest in work that increase the output and decrease the overall cost of organization. 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. There are very few programs for career development of the employees. People working in one section or department from years are still with the same knowledge and style of doing job. There should be proper career planning of employee that not only sharpens the skills of the employee & improve the efficiency but also results in better and improved output for the organization. Some employees are working in the same department or section since they are appointed. Employees should be transferred within departments so there is job variety that develops their interests, update their information and versatility in their performance. Too much centralization is there in the organization. Managers at low level are not authorized to make decisions even about minor things, they have to consult top management and give justification on small matters. Involvement of top management and reaching at the final decisions is time consuming and sometimes results in heavy losses. Also man at low level with responsibility and no decision making power gradually loses interest in his job and is de-motivated that effects his performance. So there should be delegation of authority up to certain extent that enables manager to take timely decisions at the spot with confidence. When they take decisions they feel themselves more involved and responsible for the job and in turn their efficiency increases. Due to high rate of unemployment in the country workers join those jobs which are against their interest and not according to their calibers. So proper analysis should be done and explore those employee which can do better what they are currently doing in the organization. There is no strict means to force employees to take safety measures and show safety rules. Management should take necessary action in implementing the safety rules in the organization.

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