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mirza osama

on 17 August 2014

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Transcript of LUCKY CEMENT

Requirement of Cement
a. Imported Coal including Afghani Coal
b. Local Coal
Limestone Dust
The purchasing of raw materials, tools and equipment etc has been managed by the Head Office, located in Mohammad Ali society
that ensures the smooth functioning of each department throughout the year. The Head Office of Lucky Cement deals with the two plants; the first one is called Karachi Plant, located at Karachi highway whereas the second one called PEZU Plant which is located at Khyber Pakhtunkhuwa to meet the demand and supply of Southern and Northern region respectively.
The company does its purchasing in a bulk quantity so as to meet its customer’s demand in the Local and International markets as well on time. The demand for cement never stays constant; it keeps on fluctuating with the increasing number of customers. The company does its planning on a quarterly basis in order to timely manage the demand of its customers.
Important Products
Purchasing is a part of Supply Chain Management and has a very important role in it because without this Supply Chain would not exist. Purchasing is the initial stage in Supply Chain Process thus acts like a pillar of Supply Chain Management therefore it needs to be carefully managed because any laxity in purchasing would directly affect the supply and demand of any company as a whole.
Being the largest manufacturer and leading exporter of Pakistan’s cement, Lucky Cement knows the importance of purchasing in running the business. Since the existence of a company, Lucky Cement has managed its supply chain operations so beautifully that it has been able to expand its business all over the world so far despite of all the difficulties it has faced over a period of time.

Lucky Cement Limited (LCL) is Pakistan’s largest producer and leading exporter of quality cement with the production capacity of 7.75 million tons per annum. The company is listed on Karachi, Lahore, Islamabad and London Stock Exchanges.
Over the years, the Company has grown substantially and is expanding its business operations with production facilities at strategic locations in Karachi to cater to the Southern regions, Pezu and Khyber Pakhtunkhwa to furnish the Northern areas of the country. Lucky Cement is Pakistan’s first company to export sizeable quantities of loose cement being the only cement manufacturer to have its own loading and storage terminal at Karachi Port
There are two main products which are responsible to produce heat energy for Lucky Cement are; coal and shredded tyres. The company uses coal and shredded tyres in larger quantity to generate heat radiation to manufacture the cement.
Previously they use furnace oil to generate heat radiation for the cement to be produced but after the prices of furnace oil goes up, they have started using coal and shredded tyres for the same purpose which is available to them in cheaper prices but the most cost effective is the shredded tyres for Lucky Cement
Management of Inventory
To manage its inventory in an efficient and effective manner, Lucky Cement has installed an ERP system which is highly integrated with each of its department. With the installation of ERP, it has become much easier to control not only the supply and demand of a company but it has also accelerated the company’s performance, thereby enabling quicker decision making almost in all of its business operations
Over the years, Lucky Cement has increased its export in almost all regions of the world and has currently entered into Joint Ventures in cement plants in DR Congo, Africa and Iraq thus expanding its business year by year, covering a wider network of customers at one time. To overcome this Lucky Cement has increased its capacity, man power and purchasing line over the number of years in order to satisfy the current and future demands of its customers. The Lucky Cement currently has 45 employees working in the purchasing department; each one is very self dedicated and promising employee of an organization, contributing a major part of the growth and success of the company. Because it is the believe of Lucky Cement that it is not a Marketing Era but a Supply Chain Era.
LUCKY uses coal of different regions/countries e.g South Africa, Indonesia, Afghanistan as well as local coal. Our total consumption is about 40,000-45,000 MT per month.
Present requirement is about 10,000–15,000 MT per month.
Acceptable Specifications of Gypsum
Purity - 80 – 95 %
SO3 - > 37.2 %
Moisture - < 5 %
Size - < 300mm
Present consumption is about 10,000 MT to 15,000 MT per month.

Acceptable Specifications of Laterite.

Fe2O3 - > 25% rejection below 25 %
Al2O3 - < 10% rejection above 12 %
Moisture - < 6 %
Size - < 300mm
Present consumption is about 120,000–130,000MT per month.

Acceptable Specifications of LSD

CaO - > 46%
Silica - < 8%
MgO - < 1.3%
Moisture - < 6%
Supplier's Information
Lucky cement 70% of the supplier comes from china; the main reason is that of their price are low as compare to other country suppliers.
South Africa
Africa is the main supplier of Coal.
The second supplier of Coal after South Africa
Most of the machines that lucky cement uses come from the company named Caterpillar Inc which is known for their manufacturing in machines and engines which is located in USA.
The only supplier for Ammonium nitrate, which has been banned from government of Pakistan but lucky cement has the license to use ammonium nitrate, now since Netherlands is the only supplier for ammonium nitrate, so lucky cement makes long term relationship with this supplier by visiting their offices, giving them big consignment orders, and providing higher prices if needed, just to make sure that the supplier stays connected with the lucky cement.
Supplier of shredded tires mostly
Saudi Arabia
From here lucky cement gets they packaging bags for exporting their products.
LC Document
Purchasing Process
Need Recognition
Lucky cement has two plants PEZU plant and KP (Karachi Plant). First these plants or end-user (Departments) recognize any need of supplies. When departments recognize the needs such as Mechanical, Instrumentation, Waste Heat and Recovery, Power Generation, Electrical and Electronics etc. They estimate how much they need and when it is needed for use. Every department is doing forecasting and planning throughout the year. They also consider about its quality, quantity, delivery time and all the technical specifications of the good which they need.
After the need reorganization, they inform their respective department head (HOD) about the need of purchase. Department head at plant informs head office about the indent details specification. Indent letter get signed from department head at Plant and after approval of indent department head forwards indent to head office for further processing of order.
Indent Detail
Indent is a letter in which following details are mentioned

• Indent #
• Indent date
• Item description
• Last purchase
• Quantity
• Supplier quote #
Request for Quotation
After requisition, Plant informs purchasing department about the supplies which they need including all the technical details about the goods and its specifications.After the searching process they make the list of suppliers for the required goods and request them to send their quotations by sending all the details about the goods. Once the supplier is finalized. Company prepares comparative statement. Head office request for quotation from supplier on different Incoterms such as:
1) FOB (Freight on Board).
2) CIF (Cost, Insurance and Freight)
3) FCA (Free Carrier)
4) CPT( Carriage Paid to)
5) CNF (Cost and Freight)
6) Ex-Works
Comparative Statement
Head offices prepare comparative statement which shows detail of item price of each supplier, previous history and delivery time. Comparative statement just like cost statement of each supplier. At the bottom of the comparative statement shows remarks of end-user about the preference of supplier. Once the supplier is finalized on end-user comments. Company issue purchase order.
Purchase Order
This is internal document of the company. Purchase order shows detail of the supplier name, item details, Purchase order no., Amount and date. The purpose of purchase order no. is for ERP and for controlling.
Import Documents:
For Telegraphic Transfer (TT) Lucky Cement issue advance payment to the supplier. As per State Bank of Pakistan circular advance payment should not be exceed USD: 10,000/-

Lucky Cement also opens Letter of Credit (LC) in favor of beneficiary. LC is just like an agreement between supplier and applicant about the terms and condition of the item. There are two modes of Letter of Credit.

Payment will be done against the documents to the bank.

Payment will be done after 30 or 60 days etc. to the bank.
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