AGTL Slides Updates 2

SUPPLY CHAIN MANAGEMENT OF AL-GHAZI TRACTORS LIMITED (AGTL)DERA GHAZI KHAN

Presented by: BZU D.G.Khan, Pakistan

INTRODUCTION OF AGTL AGTL is recognized for the “best corporate

performance”. Al-ghazi Tractors limited was incorporated on1. June 26, 1983 at Lahore.2. started operations in September 1, 1983. 3. started its production at D.G.Khan auxiliary plant in

February 20, 1985.4. privatized on December 9, 1991 and taken over by

a foreign investor Al-Futtaim of Dubai.5. market leader of tractors for the years 1994, 1995

and 1996 by the Karachi Stock Exchange.

VISION STATEMENT“ To make AGTL a symbol of success” This sets the directions for each

employee to achieve the company’s mission.

Mission Statement“ our enduring competitive edge is the

quality of our tractors”

ORGANIZATIONAL STRUCTUREThe organizational structure of Al-Ghazi

Tractors limited is split into 5 functional areas;

Personnel and administration Finance Material management Plant and production Marketing

SUPPLY CHAIN

A supply chain is a system of1. organizations2. people3. technology 4. activities 5. information and6. resources involved in moving a product or

service from supplier to customer.

SUPPLY CHAIN MANAGEMENT Supply chain management (SCM) improves the

ways of finding the raw components company needs to make product or service and deliver it to customers.

Supplier Manufacturer Distributor Retailer Customer

UpstreamDownstream

A. SUPPLY CHAIN PLANNING Starts with forecast of demand for

the coming year. Forecasting at Al-Ghazi Tractors Ltd is

done before 6 months. Head Office, Karachi, sends production

schedule to the factory according to the number of bookings.

B. OTHER SCM COMPONENTS

SUPPLY CHAIN STRATEGY

Efficiency AGTL has focus on cost reduction,

achieved cost efficiency by1. using slow and inexpensive modes of

transportation 2. economies of scale in production3. About 98 % of tractors are sold

through Agriculture development Bank of Pakistan

SUPPLY CHAIN STRATEGY

Responsiveness AGTL tends to transfer the

responsiveness to the dealer and distributor, allowing them to face the demand uncertainty.

This in return allows the manufacturer to be more efficient.

KEY DRIVERS OF SUPPLY CHAIN

Competitive Strategy

Supply Chain Strategy

Efficiency Responsiveness

Facilities Inventory Transportation

Information

Supply chain structure

Cross Functional Drivers

Sourcing Pricing

Logistical Drivers

SUPPLY CHAIN DRIVERS IN AGTLFramework for Structuring Drivers:

Competitive strategy

Supply chain strategy

Inventory Facility Information

ADBP

Responsiveness

Dealers Network

Efficiency

AGTLSupply Chain Structures

Supply Chain Drivers

1….FACILITIES Facility means location which involves

the commitment of resources to long range plans.

Locations take on even greater significance because of

1. basic strategy for assessing markets2. impact on revenue, cost and service

level to customers and clients

LOCATION OF AL-GHAZI TRACTORS LTD The location of Al-Ghazi Tractors Ltd. is

about 12 kilometers on main Sakhi Sarwar Road from Dera Ghazi khan in the South Punjab. Plant is located at about 30 acres.

AGTL select D.G.Khan because Govt. gave option to AGTL to select either D.G.Khan or Khushab.

FACTORS OF SELECTING D.G.KHAN LOCATION

TAX FREE ZONE FAVORABLE LABOR CLIMATE TAXES AND REAL ESTATE COSTS CONSTRUCTION COST PROXIMITY TO MARKETS AVAILABILITY OF UTILITIES

AGTL manufactured 115 tractors/8 hours shift

The plant is capable of providing +30,000 tractors per annum in single shift.

350,000 tractors manufactured by AGTL.

In year 1999-2000 , the firm produced 18000+ tractors utilizing over time to meet the orders because avg capacity is 15,000.

METRICS OF FACILITY(A) CAPACITY

CAPACITY Al-Ghazi Tractors limited is 1. Using effective capacity2. The plant operates on high efficiency.

(B)PRODUCTION

The avg. production level is 15,000 tractors. Al-Ghazi Tractors Limited is now having

50% market share. No.of employees 388 employess Production=205 employees28 managers24 Executive153 others

(C) PRODUCT VARIETY

Tractors Implements e.g Cultivators,Disc

Harrow.Rotavator Generators Mechanized farming e.g Irrigation soln.

MODELS

480’s 640 640’s Ghazi NH 55-56 NH 60-56

PRODUCTION DATAYears Model

480-SModel 640

1993-94 3686 1861

1994-95 4400 2015

1995-96 4415 2202

1996-97 3841 1098

1997-98 5375 913

1998-99 10012 2188

1999-2000 16366 2059

2…INVENTORY MANAGEMENT IN AGTL

Order paid by ADBP

Forecast made by sales department

Production plan made by production department

Purchasing plan made by purchasing department

TYPES OF INVENTORY MANAGEMENT The inventory can be divided into two

broad categories. Raw Material Inventory. Finished Goods Inventory.

RAW MATERIAL Two broad categories come under the raw

material:a). IMPORTED MATERIAL:1. gear cases and2. Engine and the critical items from Italy,

Turkey. Percentage for imported material Model 480-S is 15% Model 640 is 24%

RAW MATERIALb). LOCAL MATERIAL: AGTL is having 359 vendors from all

over the Pakistan. No of workshops is 2000 No of parts dealers is 48

REORDER POINT Reorder point Whenever the material falls below 200

engines of the tractors, fax is sent to Head Office for more raw material.

LEAD TIME Lead-time is the time required for

receiving goods from the suppliers.

LEAD TIME Lead time for two types of suppliers.a). Local suppliers: Vendors from Lahore area have lead-time

of 10 days. Vendors from Karachi area have lead-time

of 30 days.b). Foreign suppliers: Lead-times for foreign vendors from Italy

and Turkey have usually 6 months.

METHODS FOR INVENTORY MANAGEMENT AT AGTL

ABC PLAN FOR INVENTORY AGTL uses ABC, system that is the process

of dividing items into three classes according to their Rs. Value and usage.

Category A: It includes the following items 1). Engine of tractor 2). Gear box of tractors 3). Imported items

METHODS FOR INVENTORY MANAGEMENT AT AGTL

Category B: It includes the following items 1). Items used in transmission 2). Nozzles 3). Tires Category C: It includes items, which are prepared

by local vendors.

INFORMATION Good information on supply and

demand can help improve product availability while decreasing inventories.

a). Information from customers: AGTL adopts Pull Strategy. To ensure

this,1. the firm maintains a documented

system to ensure the appropriate review of the customer’s orders.

INFORMATION FLOWAGTL

ADBP

Customer

Customer

Customer

Head Office, Karachi

Dealers

network

Over the

counter

DISTRIBUTION FUNCTION The distribution function is the part of the marketing

department and its activities are as follows:1-BOOKING OF TRACTORS:

There are two types of tractors bookings 1. against ADBP loans and 2. cash bookings

Registered with the company either by customers over the counter or through dealership network.

3. 90% booking’s are being entertained through dealers.

DISTRIBUTION FUNCTION

2-DELIVERY OF TRACTORS: Delivery scheduled is circulated to the

dealers by the way of intimation letters to customers.

DISTRIBUTION FUNCTION3-HANDLING OF PAYMENT: Cash basis: On cash basis then it is immediately delivered

to the customers. Loan order: For loan order, documents are passed on to

the payment handling section where the sets of documents are submitted to ADBP, bank drafts for its encashment in accordance with prevalent Agriculture Bank procedures.

DISTRIBUTION FUNCTION4-SERVICE FUNCTION: The function of this department is to 1. Provide after sales service2. perform cost savings functions

DISTRIBUTION FUNCTION

5-PARTS FUNCTIONS: The aim and objective of Parts

Department is to 1. ensure availability of all necessary imported and local parts.

DEALERS NETWORK

KARACHI GILGIT

Dealers Network from Karachi to Gilgit

ADBP

98%

Sales

throu

g

h ADBP

98% Sales through ADBP

SWOT ANALYSISRISKS

Presently bank loaning for tractors has been suspended.

Inconsistent government policies.

Sharp increases in costs of inputs;

withdrawal of all subsidies on the directives of IMF especially on electricity, gas etc

imposition of General Sales Tax on tractors

OPPORTUNITIES Smart irrigation

solutions through Drip Irrigation systems

Incentive schemes for tractor are likely sssssto be re-launched.

THANKS