Syed.jabbar_shah@ymail.com

1. Shan
Foods
May 29
2014
Project based on supply chain (Procurement) of Shan Foods. SYED JABBAR ALI SHAH

2. Executive Summary
This report is on the Production department of the Shan Foods Private Limited
based on the interview with SYED ZIA UR RHEMAN (Manager Buying Supply
chain).
Shan Foods Private Limited was established in 1981 as a home based industry
selling recipe mix and with in no time it get a huge success and now it is a leading
Spice Manufacturer in Pakistan. Company is also slowly and gradually expanding
their operation throughout the globe.
In this report we identified how Shan food Pvt Ltd is managing their inventory in
order to get maximum availability in the market whenever customer demand. As
Shan Foods have a large number of SKUs so it is a big challenge of Shan Foods to
manage their inventory and fulfill the demand of their customer on time.
With state of the art integrated supply chain department Shan Foods Pvt Ltd is
sustaining their position in the market with providing availability of their every
SKU in the market. Shan Food is mainly managing two types of inventories that
are finished goods inventory and Packaging inventory for that separate MRP is
identified for both of them.
Shan Foods is effectively managing their inventory and they have removed all the
barrios and problems by effectively planning their inventories in order to reduce
their inventory cost.

3. Introduction
Shan Foods (Pvt) Ltd is a rapidly growing food company with presence in over 50
countries.
Strengthening their departments with candidates having extra ordinary
positive energy, obtain and edge in technology, and determined in execution,
with a passion for excellence.
History
Shan Foods started from a single small room some twenty five years ago.
Management decided to launch its very own brand and start a full-scale
manufacturing unit to cater to the taste of the local public.
Shan is one of the largest exporters of premium quality packaged spices, recipe
mixes, pickles and desserts with products adding taste and flavours
Vision
To be a global leader in food products and socially responsible company that
attains its quality standards so that Shan stands for tradition, trust and good
taste.
Mission
• To continuously develop and produce quality products.
• To be a consumer oriented company with keen insigne of food product.
• To obtain optimum result and retain highest quality standard through
efficient and motivation human resource.
SHAN FOOD COMPETITIVE EDGE
Shan Food always has an aggressive strategy.
Strategy implemented by Shan is Think Globally and Act Locally. Whereby Shan is
capturing middle class who can’t afford restaurant or prefer to eat home.
Shan tends to place the brand internationally by getting all international
certification and winning award.

4. Products of Shan foods
• Biryani products
• Authentic curries
• Stir fried food
• Lavish fried food
• Chat Masala
• Sumptuous BBQ
• Pickle product
• Deserts
• Plain spices
Supply chain process
• A company becomes stronger when its supply chain is well equipped to
meet every challenge.
• Supply chain team of Shan foods ensure that goods or shipment reach
their destination well in time.
Plan
• The planning process of Shan foods is depending on S&OP.
• The planning purpose of Shan foods is to achieved the target of R=R.
• Shan foods believed that planning should be right and in efficient manner.
Source
• The main objective of Shan foods sourcing department is to work with
quality suppliers.
• The department diligently pick and select the best quality spices.
• Company pays extra attention in obtaining raw Material.

5. Make
• The make process of SCOR model is referred to the production or
manufacturing facilities.
• Shan foods are dedicated to ensure the consistency of product by using
well equipped production techniques.
Deliver
• The supply chain team ensure that the goods or shipments reach their
destinations well in time to match market trends and customer demand.
Distributors
Country No of
distributors
Pakistan 450
America 12
South Africa 01
Saudi Arabia 01
United kingdom 04
Warehouses
The ware house of Shan foods is located at the following areas:
• Karachi
• Rawalpindi
• Hyderabad
• Lahore

6. Buy
• In this last step, the product is delivering to the customer through
different distribution channels.
• Shan Foods always satisfy their customers by providing them high quality
products always on time.
Technology
• They have employed ERP & SAP system to improve efficiency & to achieve
their vision.
• The two most advanced technologies are fleet control system & V-Lock.
Fleet on control system
It’s a system that allows the tracking of those vehicles which are currently on
the road
ADVANTAGES
• Real time vehicle monitoring.
• Control over the work of various sensors in a vehicle.
• Cost reduction
• Profit maximization.
• Vehicle operational safety improvement.
V-LOCK
• The company uses the technology in packaging to keep the spices safe
from bacteria and moisture.

7. Value added
• Recipe of different dishes.
• Widely available almost.
• Adapting and implementing latest technologies to offer a variety of foods
products.
• Maintaining quality and safety standards all time.
Just in time
Just in time (JIT) is a production strategy that strives to improve a business' return
on investment by reducing in-process inventory and associated carrying costs.
Such as the presence or absence of a part on a shelf. Implemented correctly, JIT
focuses on continuous improvement and can improve a manufacturing
organization's return on investment, quality, and efficiency. To achieve
continuous improvement key areas of focus could be flow, employee involvement
and quality.
Material requirements planning (MRP)
Material requirements planning (MRP) is a production planning and inventory
control system used to manage manufacturing processes. Most MRP systems are
software-based, while it is possible to conduct MRP by hand as well.
Letter of credit
A letter of credit is a document issued by a financial institution, or a similar party,
assuring payment to a seller of goods and/or services provided certain documents
have been presented to the bank. These are documents that prove that the seller
has performed the duties under an underlying contract (e.g., sale of goods
contract) and the goods (or services) have been supplied as agreed.

8. WAREHOSE OF SHAN FOODS
Warehouse is a commercial building which is used for storage of inventories. They
have in-house warehouse due to reduce damage percentage of finished goods.
As we know, foods item should be keep in well temperature due hygiene purpose
due to save the health of humanity.
They have more than 150 vendors to supply the goods in market as well, all
finished goods are placed in proper shelf to maintain SKUs, & they have much
place to future expansion according projection base quantity or market demand
with the help average monthly sales report.
Benefits of In-house Warehouse:
 It will reduce the damage cost of merchandise,
 Reduce the transportation cost
 Strong check & balance on inventory
Security System of Warehouse:
Shan Foods (Pvt.) Ltd. Also using the close circuit cameras at each entrance & exit
points of warehouse to ensure workers will not be stole or misuse of product. If
somebody try to do such type of things so management punished him to learn
lesson for others.
INVENTORY MANAGEMENT SYSTEM
Inventory management based on forecasting that was given by Marketing & Sales
department. On the basis of required demand, design Master Production
Schedule; also remember the MPS safety covers are incorporate for meeting
uncertainties, in order to achieve the following objectives:
 To maintain efficiency of operations.
 To meet variation in product demand.

9.  To allow flexibility in production scheduling.
 To provide a safeguard for variation in raw material delivery time.
 To take advantage of economic purchase order size.
 In-transit inventory.
 In-transit lead time.
Also continuous review the following system
 Reorder point system and fixed order quantity system.
 For independent demand items.
 Tracks inventory position.
 Includes scheduled receipts, on-hand inventory, and back orders (an un
filled customer order or demand against an item, whose current stock level
is insufficient to satisfy demand)
For each of the preceding reasons, be aware that inventory is costly and large
amounts are generally undesirable. Long cycle times are caused by large amounts
of inventory and are undesirable and also increase the following inventory relative
cost as well as a major cause to decrease profitability and competitiveness:
 Holding / carrying cost.
 Setup / production change cost.
 Ordering cost.
 Shortage cost.
According to inventory policy at Shan Foods, 15 days stock covers are kept
for Finished Goods, Packaging Materials covers are depend on the lead time of
each component like Hard Packs, Laminated rolls etc. These packaging
accessories are managed by procurement department according to BOM, & fulfill
the requirement of Purchase Order.

10. Importance of Inventory Management System
Inventory management department is not important only in Shan Foods but in
every manufacturing industry, it plays a very vital role in making the healthy
profitable by efficient processes & timely decisions.
Reality is that if you don't have control of your inventory management, you will be
unable to determine that you should have how much inventories on hand to
handle the needs of your customers. Even worse than that you will not have
enough raw material or inventories on hand to produce the products then, how
do you meet the needs of your customers.
It is important to keep in mind there are several different functions of inventory
management such as: raw material inventory keep on hand for production; work
in progress inventory which includes any of the goods that are in the production
process and finished goods inventory or the products that are ready to ship to
customers.
Without inventory management it would be difficult for any company to maintain
control and be able to handle the needs of their customers. It should be known to
the company where your inventory is and where it's going to fulfill the need of
customer. Unless you can meet the needs of your customers you will soon lose
the market share and enables the competitors to grab your market share.
Inventory management has always been important to sustain the growth and not
ignore the importance of inventory management in every aspect.

11. SHAN FOODS INVENTORY MANAGEMENT SYSTEM
Shan Foods inventory management department is efficiently practicing and
managing their inventory in order to maintain their position and availability of
their stock in the market. Their Planning department leads the whole and supply
chain in Shan Foods like other leading organizations, Procurement, logistics
distribution/customer services, materials management are under the dominancy
of planning department.
How Shan Foods Manage Their Inventory
In Shan Foods there are two types of inventory being managed.
 Raw Material Inventory
 Packaging Inventory
 Finish good Inventory
Raw Material Inventory
They have 15 days stock to fulfill the requirement. According to inventory policy at
Shan Foods, 15 days stock covers are kept for Finished Goods. The efficient
inventory management is when the demand is fulfilled as per the customer
required quantities and timelines.
Ordering Process of Raw Material:
In Shan Foods Raw material procured on the basis of Yearly Sales Report, Monthly
Sales report excluding seasonal quantity or occasional quantity requirement.

12. Finish good inventory
Finished goods inventory is managed through forecast which is given by Marketing and
Sales Department, on the basis of required numbers master production schedule (MPS) is
identified, in MPS safety covers are incorporate for meeting uncertainties, According to
inventory policy at Shan Foods, 15 days stock covers are kept for Finished Goods. The
efficient inventory management is when the demand is fulfilled as per the customer
required quantities and timelines, at Shan Foods the inventory is kept according to the sales
requirement with safety covers of each SKUs, safety covers are reviewed on the basis of
peek and lean seasons to prevent inventory obsoleteness
Packaging Inventory
Packaging Materials and there inventory is managed through Forecast which is given by
Marketing and Sales department on the basis of that MPS is identified, this MPS identify the
requirement of packaging through Bill of Material then MRP (Material Requirement
Planning) created then Shan Foods order their different supplier for different material
accordingly an then packaging material is manufactured and stocked. Its safety covers are
dependent on the lead time of each component like Hard Packs, Laminated rolls etc.
First in First out System (FIFO)
Shan Food (Pvt.) Ltd. Using the first in first out system, they manage their inventory by the
placement of items in shelf. Firstly they dispatched the older item rather than the new item
due to save the product expired. FIFO system also reduces the damage the packaging of
each item & also save the cost as well.
Counter Cycle Method
Shan Foods (Pvt.) Ltd also using following counter cycle method to manage & check &
balance the finished goods inventory.

13. Physical Count:
The management staff of warehouse perform the physically count of each SKUs on monthly
base.
Electronic Count:
They also use the electronic count by System (Oracle) & generate the reconciliation report
by weekly basis. It will make working more efficiently & provide actual figure of flow of SKUs.
Stock Keeping Units (SKUs) Of Shan Foods
Shan Foods have very diversified product line due to which they have very large
number of SKUs which are mention as below
 Spices more than 100 SKU’s
 Desserts more than 25 SKU’s
 Pickle 25 SKU’s
 Paste 3 SKU’s
 Chutneys 6 SKU’s u’s
 Recently launched successfully SHOOP Noodles.
It is very difficult for the company to maintain the demand and supply of very
large number of SKUS. With the help of state of the art planning department Shan
Foods is efficiently managing their inventory of each SKUs on the basis of their
demands. For example they have massive demand of their chat Masala in the
month of Ramadan so they efficiently plan their production and inventory
management in order to fulfill the demand of the market for that SKUS. Moreover
they plan their production and managed the inventory of each SKU according to
the market demand. Shan Foods maintain their SKU’s by monthly, fortnightly,
annually internal & external audits.

14. Tools through Which Shan Foods Manage Their Inventory
Following are the tools through which Shan Foods is managing their inventory
 Annual Operation Plan (AOP).
 Monthly Forecast.
 MRP.
 Safety Covers.
Managing Fluctuation in Demand
Shan Foods is effectively managing the fluctuation in demand of their SKUs.
Different occasions and seasons are kept in planning to meet the demand
variation:
 Eid occasions are especially for spices, Chaat Masala, Desserts, and Pickles
etc.
 Muharram-ul-Haram for Haleem Range.
 Oriental Range for winter.
KPIs (Key Performance Indicator) For Evaluating Inventory
Shan Foods is evaluating their inventory management on the basis of following
KPIs
 Number of days in inventory.
 Inventory Cost.
 Inventory Availability.
 Inventory Scoring recently implemented for Packaging Materials
Inventory.

15. CHALLENGES FACE IN INVENTORY MANAGEMENT
Following are the challenges faced by Shan Foods regarding inventory
management.
 As Shan Foods have very large number of SKUs for that inventory of
packaging material, work in progress inventory and finished goods
inventory are managed separately which is a big issue for Shan Foods.
 Inventory managed cost are very high for Shan Foods Pvt Ltd
 Due to managing huge inventory there large amount of capital got tight
up..
Countering To the Challenges
Inventory management is a critical and complex process which has a very huge
effect on organization if it is not effectively managed. It would be a huge cost
bear by the company if there are any loop holes in inventory management which
effect the whole organization and can yield in loss of sales and loss of customer
for lifetime
Shan Foods Pvt Ltd is effectively managing their inventory in order to have 100
percent availability in the market when needed.
It is the policy of the company to manage 15 days buffer stock (safety stock) in
order to tackle demand fluctuation. Moreover company annually, monthly and
fortnightly monitor the inventory position and planned their production accordingly. This
frequent monitoring reduces the cost of inventory managed. Customer order filling rate is
important tool Shan food is using to monitor their inventory.
Inventory management is according to their demand in market and proper precaution is
followed in order to effectively meet demand fluctuation. They also monitor their inventory
position on regular basis in order to eliminate any short fall in inventory.

16. R e c o m m e n d a t i o n
• Apart from everything, one of the growing sector in food industry is the
frozen foods, though a new field for Shan foods but with the current
performance in spices and the quality it maintains, Shan has strong
chances in making its mark in the frozen food category as well.
C o n c l u s i o n
• Convenience, environmental concern, increasing acceptance of food as
having therapeutic value are some of the dimensions, organization needs
to study and develop new users for their spices
• Inventory management is very important for every organization as it has a
direct impact on overall revenue of the company. There are examples
where companies are shut down or liquidate because of poor inventory
management. A huge amount cost bear by the company if their inventory
is not properly managed because if the inventory got short it creates
availability issue which yield in loss of sale as well as loss of customer for
life time.
• Shan Foods is effectively managing their inventory by the help of
integrated supply chain department. Their planning department is
effectively planning their inventory of every SKU in order to eliminate their
short fall in inventory and have 100 percent availability in the market when
needed.
• The company is effectively managing the demand fluctuation by proper
planning and proper safety covers. Inventory management is a very critical
process for Shan Foods and they monitor it on regular basis and planned
their management accordingly.