INTRODUCTION Pakistan is an agricultural country having 70% of
its population earns their lively hood through agriculture, due to
which they are concentrated in villages. The total area of Pakistan
is 796096 sq. km and a population is about 1.4billion out of total
cultivated area 70% is irrigated through canals system and tube
wells while the rest of area is fully dependent on rain falls,
about 35% of land is under cultivation. The main crops of the
country are Wheat Cotton Sugarcane RiceThough Pakistan is an
agricultural country yet the average cropping intensity of the net
area shown is much lower as compare to other countries. There are
many reasons and facts behind this lack ness. They are following:
Traditional Methods of Farming Inadequate Use of Fertilizers Water
logging Salinity Deficiency of Facilities Low Quality Seeds Lack of
Motivation But the main reason for the low productivity is
selection and inadequate use of fertilizers. It is the most
important fact. Having insufficient fertilizer and due to
continuous cultivation of the same area lead us to low productivity
of the soil. In order to support National Economy Govt. of Pakistan
had decided to establish an industrial development
corporation.NFCPakistan industrial development corporation decided
to improve the standard of agriculture because of the chronic
problems faced by the agricultural sector. So NFC National
Fertilizers Corporation came into being on 1973. Projects under
NFCNFC has got many projects like Laylpur chemicals &
fertilizers (Faisalabad). Pak Saudi fertilizer (Mirpur Mathelo) Pak
American Fertilizes (Daud Khel) NFC Training Centre Pak Arab
Fertilizers (Pvt) LTd (Multan). Head Office NFC has its head office
located in Lahore. Chairman is its organizational chief & four
general mangers assist him in his organizational set up. Each
general manager is responsible for a separate function, which is:
Planning Finance Personal Commercial PAK ARAB FERTILIZERSPakistan
Industrial Development Corporation had established Natural Gas
Fertilizer Factory (NGF) at Multan in 1962 with Ammonia and Nitric
Acid plant of 200 tons each per day with Ammonium Nitrate and Urea
as the final products having daily production of 330 and 180 tons
respectively. The plant was not able to achieve the rated capacity
and it was supplemented with an Ammoniac unit in 1968 with daily
production of 60 tons of Ammonia. This unit was also not able to
fulfill the guarantee tests. Pakistan Industrial Development
Corporation engaged services of Ms. Arthur D. Little Inc. to
determine what specific type of plant expansion and revamping could
be carried out at Multan to place the plant on an economical, sound
and competitive basic with respect to other new low cost large
fertilizers projects set up in Pakistan. After detailed
investigation and discussion, it was ultimately decided to expand
the fertilizer facilities by using some of the existing facilities
in conjunction with a new Ammonia, Nitro phosphate (NP) and Calcium
Ammonium Nitrate (CAN) plant as well as additions to the existing
off sites and Nitric Acid units so as to achieve a conservation of
resources.In pursuance of the afore-mentioned decision, Pak Arab
Fertilizers Limited (PFL), a company in public sector was
introduced on 15th November, 1973 as a joint venture between the
Pakistan Industrial Development Corporation and Abu Dhabi National
Oil Company with share holding in the capital at 52% and 48%
respectively.The national fertilizer Corporation of Pakistan is a
government undertaking & is responsible for the installation
and efficient operation of the fertilizer plants in the pubic
sector Pak Arab fertilizers incorporated on November 12, 1973 is
the largest fertilizer complex & a living symbol of fraternal
relations between pak and Emirates of Abu Dhabi and the only
fertilizer manufacturing facility producing compound fertilizer in
the country with total authorized capital of Rs. 1000 million.The
interests of WPIDC were assumed by NFC as a result of reformation
of public sector in the country. Pakistan with share capital
through NFC & Abu Dhabi previously through ADNOC & now
through IPIC has the equity participation in the ration of 5290
& 4890 respectively with a paid up of capital of Rs. 743.061
m.Pakarab fertilizers was completed at a cost of Rs. 2279.010 m
subsequently Ammonia urea plant rehabilitation expansion &
rationalization of the plants was initiated and completed in 1986
at a total cost of Rs. 359. 164m with World Bank 10an of vs 24.1
million.
ORGANIZATIONAL STRUCTUREPakarab Fertilizers Limited (PFL) is a
private limited company having a Board of Directors comprising of
11 members including the Chairman: Six Members Representing NFC
Five Members From ADNOC (Abu Dhabi)The Board of Directors has
appointed a full time managing director. The Managing Director as
Chief Executive of the company is responsible for the efficient
management and operation of the plants. There are four general
manager assisting MD. They are: GM Finance GM Manufacturing GM
Commercial GM AuditUnder each general manager, there are two or
three senior managers. Under senior manager, there are manager then
assistant managers and finally supervisors. As our concern is with
accounts department only, we will discuss only the concerned
department sketch.The Managing Director, in accordance with the
Memorandum and Articles of Association, is the Chief Executive of
the company and is answerable to the Board of Directors. The
company has two functional offices i.e. the corporate office
presently located at Lahore and manufacturing plant at Multan.The
organizational structure of corporate office is broadly designed
into four cells based on expertise and functions, namely the
Personnel Group, headed by Personnel Manager, the Finance Group,
headed by General Manager (Finance), the Planning Group, headed by
General Manager (Planning), and the Secretarial Group, headed by
Secretary.Besides evolving companys Management policies and
procedures, the function of the corporate office is also to render
advisory services to the Manufacturing plant. The Functional heads
in the corporate office report to Managing Director directly.POILCY
DETERMINATIONThe policy of Pakarab fertilizers limited is
determined by a board consisting of I directors nominated by the
two principal corporate share holders, 5 representing NFC
(Pakistan) & 4 nominated by IPIC (Abu Dhabi) . MD is a chief
executive of the company is assisted by senior general manger &
is responsible for efficient management & operation of the
plants / allied services. After board of directors its managing
director under managing director is the general manager
(manufacturing), general manger (finance), secretary of PFL and
general manager audit. Pakarab Department Pakarab fertilizers are a
project of NFC. It was established in Multan in the year 1978. It
is under one control of federal govt and ministry of production and
industries. Nine important departments exist in Pakarab
fertilizers.1. Production division. 2. Technical and planning
division. 3. Engineering Division 4. Commercial department 5.
Safety operations & environment department. 6. Inspection
department 7. P & A / I.R department 8. Medical services
department Accounts division under which there are following
department. SECTION TYPESACCOUNTS & FINANCE DEPARTMENT
ACCOUNTS SECTIONS FINANCE SECTIONS
PayrollBook keeping
InventoryPayable
Fixed Assets Sales
Letter of Credit Cash & Bank
InsuranceBudget
INTERMEDIATE PRODUCTCAPACITY
BeforeExpansionAfterExpansion
Ammonia 200960
Am. Nit. Crystals-----610
Nitric Acid2001400
FINISHED PRODUCTCAPACITY
BeforeExpansionAfterExpansion
Urea180220
C. Amm. Nitrate3301500
Nitro phosphate----1015
Location Facility location is the process of selecting the
geographic site of an organization. Pakarab fertilizers limited are
located near Khanewal road outside Multan. Khanewal road is a link
road to different cities. It is a government owned organization.
Since Government of Pakistan do not want to exploitation of labor
therefore they established this in the area which is considered to
be the rural area for the benefit & improvement of that site as
well as it is in the centre of the country and out side Multan. It
has its own railway track for the transmission of raw materials. As
its was the best selection of site the six different plants have
been commissioned.1.Power plant June 24, 19782.Nitric Acid
September 11, 19783.Ammonia September 27, 19784Urea fertilizer
April 1, 19865.VAN Fertilizer November 26, 19786.NPJanuary 12,
1979The factory has total area of 171 acres and housing colony
consist 130 acres. It cannot be said as purely a capital intensive
or labor intensive as it is Government organization. The machines
are sued for the conversion while labor is used for handling
machines & to carry on a not of jobs. Dominate factors 1.
Favourable Labour Climate In the area around PFL, a lot of labour
is available for factory. Labor is easily available for shutdowns
as well as the routine work. 2. PROXIMITY TO SUPPLIERS &
RESOURCES(IN TERMS OF NATURAL GAS AVAILIBILITY PFL is locatd at
khanewal road out of the city has an access to its Raw material
Natural Gas which he is getting from Sui plant located at Sui
through pipe lines. Basically two raw materials are being
utilized). Rock phosphate Natural gas Rock phosphate is coming from
Morocco & Jordon through the Railway line near Pakarab while
Sui gas is coming from its plant located at Sui. The top management
is so much satisfied with its location so much so hat if they
prefer to expand their production the area like Pakarab is on top
priority. Raw material like ammonia & Nitric acid is produce by
itself. Packing material is also gained through 36 other industries
like Shail Plastics Tulip Lahore, united poly packs. 3. Quality Of
Life There is separate & well established housing colony for
people working there. Employees living in this colony are provided
with many facilities like electricity, Sui gas, local telephones
are free. There is a market where all the basic necessities of life
are available. Three bank branches such as MCB, NBP & HBL are
there, for recreational activities. Two clubs are there. One of
them is for the officers and one for the workers. Functions are
held on different occasions. Three schools one is English medium
and the other two are of urdu medium. Employees whose children are
studying outside the colony schools have been provided with the
proper transportation system. Employees like engineers who are
working but live out side the colony are given separate
transportation facility. Along with different facilities there is a
blood bank, welfare trust and check posts are there. Two rest house
are available for company. 4. PROXIMITY TO MARKET AND HIGH WAY PFL
is located at the khanewal rod which is a bypass and has close and
easy links with the cities link Lahore, Faisalabad, Sheihupur &
Muzaffargarh. Operations Strategy PFL GoalsIt has been mentioned
that PFL is under the control of ministry of production &
industries. It assigns them a one year goal to be achieved. It has
set quality standard also it has fixed demand. What ever is the
demand its marketing branch which is in Lahore deals with it. It is
called NFML. Distribution network:For commercial affairs &
marketing there is a company for NFC in Lahore named NFML (National
Fertilizer Marketing limited). Head office of Pakarab for
commercial dealing is also in Lahore. Import & export dealing
office is in Karachi. MD of the company is responsible for
efficient management & operations of the plants and assisted by
three divisional heads. 1. GM (Manufacturing)2. GM (Finance)3. GM
(Corporation & Commercial Secretary) The key performance of
Pakarab fertilizer is making profits by which we can measure the
success.While the distinguishing features are the monopoly in
producing CAN .in NP they had the monopoly in past but now it is
also produced by FFC.Major Competitors Its competitor are Engro and
FFC in case of urea production. How CAN & NP they have gained
the monopoly while in urea PFL has also a competitive edge since it
has maintained its standard so far. Licensing Technology An
organization gains an advantage by out performing competitors in
terms of one or more of capabilities. 1. Cost 2. Quality 3. Time 4.
flexibility 1. Cost It has already been mentioned that CAN have
been produced in NFCs only project Pakarab which has got monopoly
in their production. Therefore the CAN cost is very much high. For
its is the only one for its production therefore no compromise on
its cost so far as urea & CAN concerned their prices is less as
compared to the NP. Since for the production of NP (Rock Phosphate)
is imported from Jordon, Morocco. Previously Government was
providing subsidy but that was curtailed and its cost was raised.2.
Quality They have fixed quality standard they never distract from
those standards. NFC is always recognized by the standard products
they are not only conscious about there quality but also about the
social responsibility they have developed a treatment plant which
is known as the Affluent Treatment plant for the neutralization of
waste material. In addition to this to maintain a consistent
quality 8-10 chemists are allocated for every shift. They check
every plant according to its requirement. For example some plants
require to be checked after every hour and some may required to be
checked after every 3-4 hours.They have written sample composition
of different materials at different stages of production.3. Time As
it is concerned with the complex chemical project therefore the
time consciousness is always taken into account.The factory runs
for 24 hours a day which is accompanied by a days a week. There are
365 days in a year out of which 330 days are fixed for the working
while 35 days are fixed fro the shut down. Even through it is shut
down but most of the work is done in these 35 days. Previously
shutdown was done in April and may but now it is done in November
and December. Cleanliness of pipes, turbines and machines is done
wear & tear and depreciation is to be recovered. On time
delivery is done of the high lighting feature of Pakarab fertilizer
limited. As it is concerned only with the production no customer
contact is there. The responsibility of delivery and distribution
goes to NFML. NFML order the DFL for the delivery of the fertilizer
which is taken by NFML wagons, trucks and pickups. NFML is now
directly responsible for the delivery of the fertilizer if it is
excess of order then it is stored in NFML warehouses. 4.
Flexibility Flexibility is the word which is out of the dictionary
of PFL. Their target is to fixed standard of quality and to achieve
the fixed production target. It is difficult of them to enhance
their volume but they have ability to accelerate the rate of
production. Development Speed Of Innovative Product Fertilizers are
the products of Pakarab factory the five important products are 1.
Ammonia 2. Nitric acid 3. Nitro phosphate 4. Calcium Ammonium
Nitrate 5. Urea 6. Utilities However Pakarab is not innovative in
the sense of introducing ever a new fertilizer however new machines
& technological advancement are adopted no product / fertilizer
has suffered the product life cycle to decline therefore no
entrance & exit strategies were followed. Positioning
Strategies Pakarab fertilizers limited is a PRODUCT FOCUS
organization why because1. Standardized fertilizers are offered
with high volumes. 2. Longer life cycle. 3. An entrance exit
strategy favoring a very late exit because fertilizers are always
in use. 4. Consistent / fixed quality 5. Short delivery times. 6.
Low cost in care of urea. Break Even Pakarab fertilizer has been
running in profit since 1986.It is profit seeking this fact can be
depicted in the sense that 6 bonuses are offered at the end of year
along with certain other reinforcements like a pay / remuneration
of two months is given as a reward.
Operations as a competitive weapon Descriptive Inputs &
OutputsRock phosphate is the input in NP plant which is daily
consumed almost 710 tons in NP production whereas natural gas has
the daily consumption of 58 million cubic ft. 1. Ammonia Initially
the production was designed to produce 910 metric tons per day. The
capacity was enhanced to 960 1000 metric tons per day with the
installation of organic pure age gas recovery or rehabilitation
unit in 1986. The process uses steam, air & natural gas as raw
materials. Ammonia NH3 consisting of one part of nitrogen used as
an intermediate for the production of all nitrogenous
fertilizers.Natural gas, containing about 88% the hydrogen
requirements of ammonia whereas nitrogen is obtained from air. 2.
Urea PlantUrea plant has designed daily production capacity of 280
metric tons of prilled urea. Ammonia & carbondioxide are the
raw materials for the production of urea. The prilled urea contains
46% of nitrogen nutrients. 3. Nitric acid plant Nitric acid,
required as an intermediate for the production of nitro phosphate
and calcium ammonium nitrate fertilizer is produced in two plants.
Both processes use ammonia & air as raw material. 4. Calcium
Ammonium Nitrate The plant has daily designed capacity of 1500
metric tons of pilled fertilizer grade calcium ammonium nitrate CAN
containing 26.5% nitrogen nutrient. 5. Nitro Phosphate Plant The
plant produces 1015 metric tons per day of nitro phosphate NP. NP
is a complex fertilizer containing 23% of each of nitrogenous &
phosphates P2O5 nutrients. The plant, which is the first complex
fertilize plant in Pakistan is based on carbon process using of
phosphate rock, nitric acid and ammonia as raw materials. 5.
Utility & Ancillary Facilities The complex generates power for
its internal requirements through three IMW turbo generators driven
by steam condensing turbines. The steam is generated by three gas
fired boilers each producing 85 metric tons of steam pre hour.
These boilers also provide steam for urea, NP & CAN plants. Raw
water for demineralization unit & other plants is obtained
through tube wells, located within the factory site. The complex
has quality control laboratories, workshops, hospital, canteen,
spare part ware houses and a residential colony. Gross functional
coordination Degree of productivity Gross functional coordination
is done by the gross functional coordination by the coordination
engineers who coordinates with the other departments. The degree of
productively which is fixed never increased or decreased.
ForecastingA forecast is the prediction of future events used for
planning purpose. Accurate forecasts allow schedulers it use
machine capacity efficiently, reduce production time end cut
inventories.So for as Pakarab is concerned Pakarab is taking
advantage of computer. The computer was installed in 1986. Before
this all the process of central ledger system cash book system and
inventory system was been processed at Pak Saudi firstly in the
system/36 was introduce but due to the verge size handing, the
modern system was introduced which is AS/400.It is nine time grater
in capacity & speed it has provided many facilities in many
facilities in many writing reports. Now black box system having
enhanced memory and speed. 7 days a week has been installed.The
date received from various departments inter into computer by
accounts department. A very find application is in Inventory
indenting and for costing system . This system is a part of
inventory management system which consists of indenting, for
costing. Demands indent items this type of indent is raised on
demand of uses. The indent are sends his demand along with complete
specifications to stores. When the specifications are entered into
the computer and then a print out of the indent is sent to the
inspection Engineer for further check up of the specification and
then the indent after approval of competent authority is sent to
procurement for purchase of items. Stock them indents. This type of
indent is generated when the stock of certain items becomes equal
to order point. Again specification are entered in the computer the
process continues for two weeks and a print out of demand items is
produce after going to inspection cell, these indents are then sent
to procurement department for insurance purchase order after
obtaining quotations.Nave forecast method is sometimes used and in
the same way forecast module is used. Material management
Manufacturing strategyMake to stock. PFL a product focused
manufacturing form intend to use a make to stock strategy in which
the PFL hold items in stock for immediate delivery there lay
minimizing delivery time. These strategy is feasible because most
product followed companies like PFL produce high volumes of
relatively few standardized products for which they can make
reasonably accurate forecast. Mass production is used to define
company using a make to stock strategy. Because PFL environment is
stable and predictable, PFL has a bureaucratic organization and
workers narrowly repeat defined tasks. Therefore its competitive
priorities are typically consistent quality and law cost.
Department Of MNPakarab fertilizer has a material management
department which takes core of the needs of the organization. These
items can be of the daily use as well as the items of higher value
such as it can be a pencil or a platinum catalyst. Raw materials,
chemical and catalyst and packing material they are dealt by the
department. There are about 50,000 items which amount to Rs 500
million in value. Senior material manager is the head of
department. Material management is a difficult task so there are
separate departments for purchasing, production control and
distribution.Purchasing:It is the responsibility of commercial
department. Each unit manager of the department is responsible for
this purchasing is the management of acquisition process, which
includes. 1. Supplier Contract.2. Negotiating contract.Inventory
management section has the important work in MM by acquisition
process.Recognition of need the department when some material or
any needs spare part raises demand in the shape of indent or
purchase request indent. Purchase request this purchase request
contains all the specification of the item, quantity and desired
quality and desired delivery date.Indenting department gives
specifications in purchasing request and then give it to commercial
department. Supplier selection: PFL purchasing department through
bidding process selects the supplier. Different suppliers are first
asked to submit their quotations. These quotations include their
description about the particular item. Supplier are then asked to
attend the bidding process, supplier is selected. So normally,
supplier who has lowest prices of items is selected. Buying for
buying of raw materials PFL preferred local buying so to cut its
cost. However it imports rock phosphate from morocco and spares
from original manufacturers for critical equipment due to higher
creditably two important quality assurance certificates are given.
1. Quality assurance certificates. 2. Mill test certificate.
Therefore they are bought from foreigners.Competitive
Orientation.Usually the R-materials are bought by competitive
orientation. Bargaining is always there.Distribution: After
producing finished goods, PEL sends it to NFML which is the
marketing branch of NFC as soon as possible trucks are waiting out
side the factory. So there is a forward placement in PFL in PFL
mostly fertilization bags are distribute through trucks and trains
keeping in view the customer item, So there is a schedule for
delivery product it customer.Obsolescence and deteriorationEvery
machine is surliest to deterioration for the compensation of this
the sheet down period is carried out for 35 days it appreciate it
again.Safety stock and anticipation inventory.Safety stock of
different types of inventory including equipment and Raw material
is often considered Rock phosphate has a lead tinme of six months.
Anticipation inventory Anticipation inventory is made to cope which
the inventory is made to cope with the uneven demand distribution.
For there are some crops which are born at a particular climate.
Material Requirement Planning The concept of material requirement
planning and master production schedule in PFL is that MPS and MRD
gives production control, of purchasing and top management the
information needed to plan & control business operations. It
identifies their detail production and purchasing actions which
need to be taken response to pay to day events. It also tries
overall business planning to details operations through master
scheduling function. Their MRD system comprises of three processes.
1. BOM2. MPS 3. inventory recordsPart Community The degree to which
a component has more than one immediate part. It can be depicted
that in PFL many raw materials like Sui gas, water and rock
phosphate is used in more than one fertilizer. The objectives of
factory behind their MRP is1. Decrease inventory investment 2.
decrease of out stock site for needed equipment3. Provident of
planning priorities based on due dates. 4. Records material based
on dependent demand. Bill Of Material The main problem occurs in
bill of materials. The company want to make CAN which is his one of
the fertilizers now, company makes plan for the manufacturing of
CAN what type of machinery is used. Now along is the process or
each process what is the requirement of the plant. How many
chemicals raw materials are regained for production of certain
amount of CAN. How much spare parts are needed. In raw materials
how many metric feet sui gas is needed. How much rock phosphate
should be imported. All the details are made for each product.
Master Production Schedule One another important requirement in
planning is MDS. Through MDs are indirectly making rough capacity
plan. E.g. MPS of urea fertilizer base on targets & capacity of
firm. Firm checks what are true forecasted orders or what are
actual targets given by NFC. What is the time period of their
manufacturing process. The lead time description of each of the
finished product is considered. Inventory Records Maintaining
inventory records is the responsibility of accounts department in
which there is a separate section for inventory management in PFL.
They maintain records of new records scheduled receipts inventory
errors, scrap losses, inventory rejecting shipments & stock
returns.Strategy To Be Used Level chased or mixed strategy which is
to be followed mixed strategy is followed for this purpose.
Inventory Control System Periodic review system is used for the raw
material.Capacity Ammonia 316,800 tonsNitro Acid 441,600 tons Nitro
phosphate 304,500 tonsCalcium Ammonium Nitrate 450,000 tons Urea
92, 400 tonsNutrient capacities are Nitrogen 229, 539 tons
Phosphate 70, 035 (P2O5) tonsIntermediate products Nitric Acid 1380
MTPDAmmonia 960 1000 MTPDFUTURE PLANSThe existing Ammonia, NP, and
CN / CAN plant of PFL are in operation since 197879. They have
already outlived their economic lives and it is difficult to obtain
sustain production / product quality from the existing plants in
their present form at the rated capacities. The rate of production
would rather continue to decrease progressively. The present
operation of the plant is expensive because of increased
maintenance cost, higher consumption of raw materials, spare parts,
chemicals and frequent breaks down of pumps / compressors /
exchangers etc. The existing plants also suffer from high-energy
consumption.With the objective of achieving rated production
capacities and decreasing the energy consumption, PFL engaged
various international consultants to carry out through feasibility
study of the plants. For the revamping of Ammonia and NPCN plants,
feasibility studies were conducted by M/s. Haldor Topsoe of
Denmark, M/s. UHDE / BASF of W. Germany & M/s JCI of Japan
respectively. Their study reports have been received and critically
studied by PFL Management. The proposals are under active
consideration for implication after approval from Government of
Pakistan.