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P AKARAB FERTILIZER (PVT .) LTD.

Introduction

TINTRODUCTION TO

ORGANIZATIONhe company was established as a result of protocol concluded and

signed on November 15, 1972 by the two Governments---Pakistan &

Emirate of Abu Dhabi, to establish a joint venture in the field of

Fertilizer Industry for exploitation of Natural Resources available, to

the mutual benefits of the two brotherly Muslim countries,

Consequently, a memorandum of Understanding was concluded

between West Pakistan Industrial Development Corporation of

Pakistan (WPIDC) and Abu Dhabi National Oil Company, Abu Dhabi

(ADNOC) on March 7, 1973 and a participation Agreement emerged

on November 01, 1973 to establish a joint venture for the expansion

and modernization of the company’s predecessor-Natural Gas

QUALITY I S OUR S TRENGTH

1CHAPTER ONE

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Fertilizer Factory, Multan. Thus the Company was incorporated on

November 12, 1973 with total authorized capital of RS. 1000 Million.

Later:

ϖ WPIDC share in the Company was assumed by National

Fertilizer Corporation of Pakistan (NFC) as a result of

reformation of public sector corporations

ϖ ADNOC share in the Company had been assumed by

International Petroleum Investment Company, Abu Dhabi

(IPIC).

Pakistan has equity share capital participation through NFC and Abu

Dhabi through IPIC in the ratio 52% and 48% respectively with a

paid up capital of RS. 743.061 Million.

Pakarab Fertilizers is the largest fertilizer complex in Pakistan and is

the only fertilizer manufacturing facility producing compound

fertilizer Nitrophosphate in the country. Fertilizer production plants

of Pakarab Fertilizers, located about 08 Kilometers from the ancient

city of Multan, were completed in 1978 at a total cost of RS.

2,279.010 Million inclusive of RS. 1,326.000 Million foreign

component.

Ammonia/Urea plants rehabilitation and plants rationalization

program was undertaken with the World Bank Loan of US $ 24.1

Million and completed in 1986 at a total cost of RS. 340.949 Million.

Total Project Cost, as on June 30, 1997 was RS. 3,274.694 Million.

Production capacity of the plants of the Complex is as follows:

FERTILIZERPRODUCTS

NUTRIENTCONTENT

PRODUCTIONCAPACITY

N P205 MTPD


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Nitrophosphate 23.0 23.0 1015

Calcium Ammonium 26.0 - 1500

Urea 46.0 - 280

INTERMEIATEPRODUCTS

PRODUCTION CAPACITY

MTPD

Ammonia 960Urea 1380

Pakarab Fertilizers had substantially contributed to the requirement

of chemical fertilizers since commencement of commercial

production, as can be reviewed from the following production

statistics; for the period 1978-79 to 1999-2000:

Nitrophosphate 5512481 M.TONS

Calcium Ammonium Nitrate 6339532 M.TONS

Urea 1585338 M.TONS

Utilities

Power (27 MW)


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3 Turbo Generators

(9 megawatts each.)

The policy of Pakarab Fertilizers (Private) Limited is determined by a

Board consisting of 09 Directors, nominated by the two principal

corporate share holders, 05 representing NFC (Pakistan) and 04

nominated by IPIC (Abu Dhabi). The Managing Director as Chief

Executive of the Company Mr.Tanveer Butt (chemical engineer)

assisted by 10 Divisional Heads, General Manager Manufacturing

Mr.Mazahir Hussain (chemical engineer), General Manager Finance,

General Manager Technical & Planning Mr.Ghulam Rasool Akhwand,

General Manager Safe Operations & Environment, General Manager

Commercial Mr. Abdul Basit Khan Khakwani, General Manager Audit,

General Manager / Company Secretary, General Manager

Engineering, General Manager Production, Chief Medical Officer is

responsible for efficient management and operation of the Plants.

The basic purpose is to support the Pak. Economy through

fertilizers. Profit maximization is not there. To make Pakistan self

sufficient in the fertilizers. Therefore its whole production fulfills the

local requirements of fertilizers but it also has surplus urea, which

are exports globally. In Nitrophosphate and Calcium Ammonium

Nitrate it has monopoly. PAK. ARAB FERTILIZERS Limited is the

pioneer, it is servicing as nursery for Technicians and Engineers.


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ORGANIZATIONSTRATEGY

STRATEGIC

CHOICES

Corporate strategy provides an overall direction that serves as

framework for carrying out all the organizations function corporate

strategy determines the long term goals and the possible means

through which these goods are going to be achieved.

Since it is composed of organization mission statement, managing

changes in the law and having distinctive competencies.


2

CHAPTER TWO

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Mission of the organization

DISTINCTIVE COMPETENCIESISTINCTIVE COMPETENCIES

The distinctive competencies of the org. are those, which the

management considered to be unique and giving strength to the

organization.

The distinctive competencies of the PAKARAB FERTILIZERS are:

1. Work force flexibility system.

2. Monopoly in CAN and NP.

Competitive Priorities

Competitive Priorities are the organization priorities or dimensions

of competition, which translate, market needs into operations terms.

A firm gains an advantage by performing a one or more of thefollowing priorities.

τ Cost

τ Quality

τ Time

τ Flexibility

The priorities of the org. are

ϖ Cost

ϖ Time

ϖ Quality


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They said that we have contracted our suppliers on the best terms

and cost is in our limits and since capacity is fixed and we have to

produce the fixed quantities and so we also deliver the products in

time to our distributions. So we focus on time delivery.

As for as quality is concerned, we are producing consistent quality

product these quality standards are fixed. Since it is a product focus

organization so we have to remain in a the available constraints of

capacity & we produce fixed quantities with consistent quality so

these are our priorities.

Positioning Strategy

Based on competitive priorities for its products the organization

selects a positioning strategy, which determines how the operations

system is organized. In this organization the system is organized

around a product focus strategy.

Now I can link the firm’s positioning strategy with its competitive

priorities.

Since it is a “product focus” organization so it

τ Produces more standardized products, with

high volumes.

τ Longer life cycle

τ Consistent quality

τ More emphasis on low cost

τ Short delivery times.


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Location

LLOCATIONocation of either service organization as manufacturing org.

depends upon many factors. All these factors influence the profits of

the org.

There are some factors, which are very sensitive, and manager

always takes great care while taking decision of facility location

because if any one of such factors is not met it will effect the

performance of the org.

Similarly when we asked various questions about locating this org.

in this particular place then they told us that Pakarab Fertilizers

(Private) Limited is an industry in the public sector.


3

CHAPTER THREE

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They said that these decisions are more political and many factors

count, these areas which are publicly stable are more beneficial for

such type of industries.

Other dominating factors they considered were

1. FAVORABLE LABOR CLIMATE. FAVORABLE LABOR CLIMATE

They said that in Multan there is abundant availability of labor,

which we can hire at any time at normal wage rates.

2. PROXIMITY TO MARKET. PROXIMITY TO MARKET

Multan is a central place they considered it and therefore they

supply from here to all other parts of the country easily.

3. PROXIMITY TO RESOURCES. PROXIMITY TO RESOURCES

As for as proximity to resources is concerned they replied that Sui

gas is our main ingredient and we have a compressor station of

natural gas in Multan so it was better to locate the facility here

4. INFRASTRUCTURE. INFRASTRUCTURE

As for as infrastructure is concerned it is available accordingly here,

we can easily supply our products from here and raw material and

other needed products easily come in time due to wide net work of

roads.

5. UTILITIES. UTILITIES

As for as other utilities are concerned including water, electricity.

They are also abundantly available.

6. PROXIMITY TO SUPPLIERS. PROXIMITY TO SUPPLIERS

It is locate in an indictive area closeness to market is there, we can

easily contract with suppliers, so therefore out bound transportation

costs are less.


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7. PROXIMITY TO PARENT COMPANY. PROXIMITY TO PARENT COMPANY

FACILITIESACILITIES

As for as proximity to parent company’s facilities is concerned, they

said we have to send reports and take orders from NFC, so we can

do it from here.

8. SOCIAL FACILITIES AVAILABILITY. SOCIAL FACILITIES AVAILABILITY

They said that for our work force we have to see other social factors

including the proper education centers for their children, hospitals,

parks for recreation of children, security facilities, housing &

transportation facilities and they said we met all these requirements

here so we considered this best for setting up such a huge project.

So briefly they said that in all these factors they emphasized on

cost, time, flexibility, quality and at what place now we are working,

we are meeting all our requirements relating to cost, time and

flexibility.


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OperationsDepartment

“OPERATION

DEPARTMENT”

There is a separate operation dept. in the factory called production

dept. It is controlled by production manager. It is merely a

production unit, which is centrally inter-linked with all other depts.

including finance, marketing, human resource etc. In the plant fixed

capacity is utilized to get the described production targets.

There is no flexibility & no adaptability, production manager has a

proper control and decides about all the matters selected to this

department for the availability of inputs i.e. raw material efficient

working of the operations is necessary, so therefore manager

forecasts at what time this particular material should be available

and in which quantity so that there comes no hurdle in the process.


4

CHAPTER FOUR

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Since this department has link with other department to make its

functions reliable.

PAFL is basically a production plant and no marketing is concerned

with it, for Sales NFC has its own sales units. So production dept. is

the main department controls the functions related to production

what to purchase, how much to produce and what quantity is

required and when is required. So it is the backbone of the

organization.

DEMAND FORECASTINGPAFL is a product focus organization with limited capacity and

produce remaining in their constraints. As for as demand forecasting

is concerned ministry of food & crop estimates the demand. Then it

gives the annual targets to the NFC, PAK. American Fertilizers & Pak.

Saudi Fertilizers.

NFC again determines its annual production targets for FFC and

PAFL so in PAFL they themselves do not forecast rather they are

given fixed annual production targets which they have to meet.

They told that demand shows fluctuations very rarely. Nearly every

year the targets are usually the same.

PURCHASE PROCESS

Purchase process involves

ϖ Acquisition process

ϖ Suppliers selection

ϖ Contracting


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1. ACQUISITION PROCESS. ACQUISITION PROCESS

Production dept. informs the purchasing dept. about the required

material through a purchase requisition showing type of material

quality, quantity, delivery date. Now purchase dept. is responsible

to provide the material at required time.

2. SUPPLIER SELECTION. SUPPLIER SELECTION

Suppliers are selected through bidding process. Suppliers who are

interested are offered to give quotations and on the bases of this,

they are analyzed commercially & technically. To see which supplier

can met which requirement. Company announces a bidding date. A

comparative statement is made, then it is financially worked out in

terms of low cost and which are is lowest is awarded by a letter of

contract, usually it is short term bidding for certain Chemicals &

spare parts. After the approval of ministry & Govt. LIC is opened by

PAFL. For the major raw materials, they have long term contracts,

for Sui gas the contract was made in 1974 and now it was revised

similarly for Rock Phosphate which is imported from Jordan &

Morocco They have long term contracts for its on time delivery.

They also have contract with National Shipping Corporation.


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AGGREGATE

PLANNING

TAGGREGATE PLANNING

he aggregate plan of PAFL is called the production plan. Generally it

deals with inventory holding, production rate and work force

planning.

This aggregate plan links the strategic goals & objectives with

production plan for individual products and specific components of

these products. In aggregate plan they see what to produce, how

much demand is there, how to produce, for all these problems

holding cost and set up cost is adjusted so that total cost could be

minimized. For this purpose it is decided that what capacity plant

will operate.

i-e on


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CHAPTER FIVE

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ϖ Maximum capacity level

ϖ Minimum capacity level

ϖ Normal operating capacity

After deciding capacity level i-e normal operating capacity level.

They prepare yearly production plan approved by ministry of

production & industries. After yearly planning, they plan for raw

material, for this purpose bidding is done, then convert yearly plan

into monthly, then daily & then hourly for utilities, plant wear & tear,

inventory holding planning is also done which comes under

aggregate planning.

Work force planning is also carried out, that is, what schedule of

work force will be better, either these will be work on the bases of

shifts or not and whether the overtime or under time will be applied,

how much leaves will be given to the workers during the work etc.

Thus their aggregate planning basically production plan covers the

all aspects related to production directly an indirectly.


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INVENTORY

MANAGEMENT

INVENTORY MANAGEMET

AFL maintain high inventory lines both in raw materials &

finished goods since fertilizers have seasonal demand.

During production season the demand is more than the

production so safety stock is kept. So pressures for keeping

inventory in PAFL are:

Pϖ On time & fast delivery.

ϖ Customer satisfactions.

ϖ Labor & equipment utilization.

ϖ Reducing transportation cost.


6

CHAPTER SIX

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Inventory Management

System

There is a computerized inventory management system. Since

thousands of items are held in inventory. Some are of high

monetary value and some are low monetary value. So ABC analysis

system & management is used. Based on consumption, lead time

and safety stock requirement. They have divided items into

following three categories.

1. General routine items.

2. On demand items.

3. Direct change items.

These items are placed in inventory stores and warehouses. There is

a special inventory department, which keeps an inventory in each

stage.

INVENTORY TYPES

1. RAW MATERIAL. RAW MATERIAL

Raw material inventory includes majority Rock phosphate, which is

imported, and usually 3 months safety stock is kept of Rock

phosphate.

2. SUI GAS. SUI GAS

Sui has continuos supply and with out the natural gas the

production may be delayed and so this is very important.


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3. FINISHED GOODS INVENTORY. FINISHED GOODS INVENTORY

In finished goods inventory various forms of fertilizers include like

Kissan Urea, Nitro Phosphate, and Calcium Ammonium Nitrate.

Inventory Placement

For lubricant & chemicals the inventory is placed in drums.

While other items including spare parts, general supply items,

stationery, cement etc., inventory is kept in stores. Where further

shelves bins and every shelf or location is numbered for easiness.

For better facilitation they use EOQ and safety stock. Since already I

have told computerized inventory management system assisted by

AS 400 is used. In the system there is proper coding of every

material, so proper information about inventory is available. Moving

Average method is used to calculate inventory system provides

indents about inventory level and this indent goes to commercial

dept., manager say the dept. observes and gives replacement order

with all specifications, your safety stock calculation in hand & fast

rule is applied just judgmental method is used, stock items have

continuos review.


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QUALITYCONTROL

FQUALITY CONTROL

or quality control PAFL has its own technical divisions. It is facilitated

with modern computerized equipment. Some laboratories at site

and some are away from the pressure. These are managed by

technical division who is under the control of technical engineer,

which is also assisted by the other technical shift engineers.

Quality is managed at various stages. First step, they take for

meeting quality is controlling quality at source. It means that raw

material is properly inspected for raw material specific standards,

which always met the fixed criteria.

For Rock phosphate they have international contracts with different

companies, through Govt. of Pak. And among the contract every

specification was mentioned and now it is not Material of other

requirements are inspected at the gate and if there is any thing

wrong material is returned to the supplier.


7

CHAPTER SEVEN

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For Sui-gas inspection, they have fixed analysis in the pipelines,

since it is in continuos supply, so in built process sophisticated

quality criteria are there for meeting high quality.

Stage Wise Analysis

When material is put into process, it is inspected continuously at

every stages by on line quality control system. Many seasons are in

the machinery fixed which shows the quality if any deviations

occurs, it immediately comes into the notice of the control room in

change. Then accordingly specific measures are taken by control

section so from raw material to finished goods. There are strict

quality measures in use.

Inspection warehouse inspects the quality of finished goods

inventory and the delivery is made. For this purpose random

sampling is done, standard is that out of hundred bags less than two

may be defective but if it is two or more than two then it will be

rejected.

If product is not meeting the requirement it is recycled and

reproduced.


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WORKFORCE

MANAGEMENT

HUMAN RESOURCE

MANAGEMENT

To manage the work force is a crucial task in order to make the

smooth running of the business. Company said that their better

management departmentalization is necessary so that every

department incharge can here a good control on the employees. All

the general manager of manufacturing.

In the factory 1500 permanent & 500 casual a daily labor is there. In

order to decrease the turn over of the labor they have provided the

good working conditions so that they can be satisfied with their

work, so company has benefited them with many facilities. Which

are enriching their physical mental & psychological abilities.


8

Chapter eight

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Good Salaries

Company says that the body also pays to employees as much

satisfactory salary, and they are allowed to have one leave if they

wish, if worker do not take leave it is accumulated in the leave bank.

Social Facilities

Workers are also provided with best

ϖ Medical facilities

ϖ Educational facilities

ϖ Recreational facilities

ϖ Communicational facilities

ϖ Housing facilities

FOR MEDICAL AIDOR MEDICAL AID

They have in their previous a medical center where free check ups

and medicines are provided. Since in the factory, dangerous

fertilizers are made so people are instructed strictly to be careful

about safety and if any mis-happening occurred then immediate

medical aid is provided.

EDUCATIONAL FACILITYDUCATIONAL FACILITY

In order to provide the better education to the children of the

workers. They have manage their own transport facilities for their

worker’s children so that they can get the desire education

therefore many students go to schools, colleges and university by

utilizing the transport facility provided by the company.


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RECREATIONAL FACILITIESECREATIONAL FACILITIES

For recreational purposes, the parties and informal functions are

arrange so that workers can feel relax and can talk on each & every

topic freely.

COMMUNICATION FACILITYOMMUNICATION FACILITY

For interdepartmental communication both formal, and informal

communication is there. Means interdepartmental level open

communication is used. Company has its own telephone exchange.

TRAININGRAINING

Training is a very important point of the organization operations.

Inside the factory there is a technical training center for the workers

to enhance their abilities. It is modern computerized equipment to

provide the best knowledge with respect to the current

requirements. Short training courses are there. Job turn over is also

there too more the personal more effective and experienced. To

broaden their views, if some specific training is required and not

possible here. Thus they send the workers on the behalf to foreign

technical Institutes. So therefore employees turnover is very low.

PROMOTIONROMOTION

For promotion employees have to want promotion is usually are the

bases of seniority and very good performance.

HIRINGIRING

For hiring employees, no informal method is practical here, personal

influence is more considered and when new ideas are required they

hire people from outside.


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PROFIT SHARINGROFIT SHARING

Workers are also share profits by taking shares. The actually the

bonus is given to employees and in the shares.


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Project & Planning

PROJECT AND PLANNING

Project is defined as the set of interrelated activities to accomplish

some specific task and which has some specific start and ending.

TYPES OF THE PROJECTSPakarab has divided the project into different categories like:

1. DEVELOPMENT PROJECTS:. DEVELOPMENT PROJECTS:

These projects are the main projects, which are considered big and

large. It is believed that these projects will have the great effect on

the production of the organization. The example of that kind of the

project is the development of the NITRO PHOSPHATE (NP) PLANT.

This plant was established in September 1979.

Process of managing these projects are very similar to any

organization. First consideration is that who will initiate the request

of the development projects. So it is usually comes from the top.

However the project department is only administer them or make

feasibility of the project. When the development project is finalized


9CHAPTER NINE

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then the project-planning department first makes a team. This team

consists of different person from different departments. These team

member have a diversified knowledge of different fields and so it

help them to get a real process of engineering which is literally

called the process of concurrent engineering. After developing that

team the project planning department come under the line authority

of that team. Now team makes the control of on word activities

however that department is still not losing its worth because it is the

only way by which they can control the project activities. At the

moment the Pakarab is not operating not only a single project,

which they name as development project.

2. CONSTRUCTION PROJECTS:2. CONSTRUCTION PROJECTS:

This kind of the project is not so much big and large nor they are so

much capital intensive. These projects do not effect the production

of the organization. These kind of the projects are usually for the

well being of the employees of the organization. One example of these kinds of projects is the project of the construction of school,

which had recently completed. Another example of these projects is

the installation of new generator on the staff colony.

3. MAINTENANCE PROJECTS:. MAINTENANCE PROJECTS:

As long as the maintenance projects are concerned it is for the

maintenance of the existing installed machinery and equipment.

These projects also called the Engineering projects. These projects

are continuous in nature and the project planning department it self

take care of these projects. These projects are not that much capital

intensive as compare to the development and construction projects.

However these project increase the life and efficiency of the

machinery. The example of these kinds of the projects is the annual

shut down of the plant for the maintenance purpose. As it is a


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continuous process so they know the time of its start and finish. So

usually they start planning of these project 8 months before the

maintenance starts. During these time period they schedule the

labor, get the required and expected material from the supplier

through the procurement department.

TOOLS FOR MANAGING

THE PROJECTS BY

PAKARAB:

It is very much necessary for any big organization to have certain

tool and machinery for managing these kinds of project. Tool may

be of any kind like pert chart, Gantt chart or some sort of the

computer software, which may make-work easy for them. The

method used by them is following as told by the Senior Project

Planner:

1. Pert Chart

2. Gannt Chart

3. Time chart

4. Resource chart

maintenance activities, assessment of the required resources like

consumable material, special equipment and special services. Uring

this course of period. Planning Department is responsible for

contacting the outside agencies for getting the required material,

equipment and services and at the same time to coordinate with

the all concerned sections within the Pakarab like process,

Commercial, Stores, Accounts and Finance. Planning Department


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also arranges for the special visits of foreign equipment for the

inspection of critical rotary equipment like Compressors and

Turbines.

MAJOR PROJECT IN RECENT

YEARS:

Erection and installation of Rotary Drum Filter at NP Plant.

Replacement of new Urea Stripper at Urea Plant.

Replacement of 02 Nos. Heat Exchangers; 121-C & 123-C at

Ammonia Plant. Replacement of Boiler Feed Water Tanks at Utility

and Nitric Acid Plants.

Modification in Water Disposal System.

Execution of Water Management Project.

Replacement of Cooler Condenser at Nitric Acid Plant.

Replacement of Buffer Tank at NP Plant.


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FINDINGS &

SUGGESTIONS

FINDINGS & FUTURE

TARGETS

P

AK. ARAB FERTILIZERS (Pvt. Ltd.) is a product focus organization

having monopoly in CAP & NP its major fertilizers. It is enriching Pak.

By helping Agriculture Industry.

There is proper inventory management and production department

is working consistently meeting the targets. Employees are

benefited with monetary as well social benefits. There is very well

sophisticated quality control system to maintain consistent quality.

So overall org. performance is very good and on the bases of its

present performance it has set marvelous future targets.

Future Targets


CHAPTER ten

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1. Zero offspent production

2. 100% Safe processing or 100% Environmental

safety

3. 330 days plant will be in operation.


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TIntroduction TO ORGANIZATION ....................................................1

C Strategic Choices..........................................................................5

..........................................................................................................8

LLOCATION.........................................................................................8

T“Operation Department”................................................................11

Demand Forecasting...................................................................12

Purchase Process.............................................................................12

TAggregate Planning........................................................................15

Inventory Managemet......................................................................17

FQuality Control............................................................................20

THuman Resource Management......................................................22

PROJECT AND PLANNING..................................................................26

Findings & Future Targets................................................................30

o.m.pak arab 333

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