NISHAT GROUP

Nishat has grown from a cotton export house into the premier business group of Pakistan
with 5 listed companies, concentrating on 4 core businesses; Textiles, Cement, Banking
and Power Generation. Today, Nishat is considered to be at par with multinationals
operating locally in terms of its quality products and management skills.

• Annual turnover 17 billion Rupees

• 14 Billion from textiles
• Earn foreign exchange US $ 236 million
• Taxes and levi of 2,080 million Rupees annually

Nishat Mills Limited

• Flagship Company established in 1951
• Most Modern, Biggest Composite unit of Pakistan
• Professional and Client Oriented Marketing
• Green Company
• ISO 9001 and IKO-TEX100 Certified
• SA 8000 Certification currently in process

NML today has 173,000 spindles, 284 Sulzer shuttle-less looms and 244 TSUDAKOMA
air jet looms. NML also has the most modern textile-processing unit, 2 stitching units and
Power Generating plant with a capacity of 33.6 MW. NML total export for the year 2000
was Rs. 9.1 billion (US$ 143 million). Due to the application of prudent management
policies, consolidation of operations, a strong balance sheet and an effective marketing
strategy, this trend is expected to continue in the years to come. The Company's
production facilities comprise spinning, weaving, processing, stitching and power
generation.
Process of Nishat textile material requirement planning:

Nishat textile completes its material management planning in three major phases. The
description of these phases is given bellow.

Phase 1:

It consist all the elements necessary for order taking of raw material to managing
inventory. These elements are as under

 Knowledge about product for manufacturing

 Customer requirement and specifications

 Stock verification

 Supplier evaluation

• Number of suppliers available

• Low price

• Quality meeting standards

• Lead time

• Foreign purchase

 Supplier selection ( for raw material)

 Quality of material (meeting the standard quality)

 Purchasing strategies

 Contract management

 Codification

Detail:
In the aspects of these elements, first of all Nishat textile Ltd. Pakistan ensure the
knowledge about the product which they manufacture in order to complete customer
demand regarding the product specifications and requirements. When marketing
department receive the order from the customer then Nishat textile Ltd. Pakistan verify
the existing stock of raw materials which can be used for this order manufacturing.

The verification of the stock complete in three tasks which are

1. Store Officer generates a report of material available in the store to the

Commercial Department.

2. Commercial Department then calculates the total amount of material more

required to fulfill customer order.

3. Order is then placed to the selected supplier.

In the evaluation of supplier all number of suppliers are listed and asked them about the
sample for the material with the existing price and delivery time. Supplier is selected on
the basis of competitive dimensions basis (Low cost, Lead time, Flexibility, Speed of
delivery and Quality standards). Once supplier is selected then sample is checked
completely for retain order and relationship is built with supplier for more orders and
contracts. There are three major purchasing strategies are used for payment of material to
the supplier depend upon the nature and relationship of the supplier which are as under:

1. Advance Cash

2. One month credit purchase

3. Payment approvals

Also purchasing strategies consists of all the policies for delivery of material by supplier,
weather it will in installments or in one time delivery. With this policy JIT (Just in time)
is also ensured to complete the customer order in time. Every element in the material
received by the supplier is characterized by specific codes (Codification) by the IT
department. On the basis of these codes all inventory and further purchase order is placed
to the supplies.

Visual evidence of material codes:

Note: Each Code consist specification of product, size, supplier identity, colors, design
etc.

Phase 2:
This phase consist of all the elements related to receiving orders from the suppliers and
managing inventory. These elements are as under

 Generation of GEN and GRN

 Materials audit

• Check quality and quantity

  Functions of receipt department

 Computer and materials management

 Inventory control

• Seasonal inventory

• Short time inventory

• Need based inventory

• Common stock inventory

 Human aspects of materials management

 Storage of excess material

Details:
When material is reached at gate of company, then GEN (gate entry number) and GRN
(goods receipt note) is generated by security officer. GRN has a complete lead time
especially in credit purchase, cutting is allowed in GRN but it could not be reissued.
After the checking by security officer at the gate the material is forward to external audit
company named SML Associates. SML associates check the quantity of materials
received from the supplier, and prepare the report of received material. Quality of the
material in analyzed by 3rd party which is totally independent department in the company.
The sample of actual product which is ordered to supplier obtains from the Commercial
department which submits purchase order decisions.
After checking the quantity of the material by SML associates, copy of delivery Challan
is posted to receipt room and along with receiving receipt of material is send back to
supplier. Delivery Challan shows the actual quantity of received material. When receipt
room receives the delivery Challan, it generates the Goods and Inspection Note under
purchase system.

Nishat textile Ltd. Pakistan use oracle data based system for material management. In
past they were using FOXPRO software for 7-8 years and advanced their IT system to
Oracle software. By using this software all information of the material received in the
company is managed by using specified and unique codes of each item which tells all
information and knowledge about the specification of that item.

The specification of each code consist of

• Demand number

• Previous history

• Cost (Current and previous )

• Quantity (remarks)

• Quality parameters

Inventory is controlled by making sub stores and different categories. For example thread
and cotton is stored in different sub stores and random codes define the category of each
thread. Short time inventory based on customer and stored for short time period or quick
materials for manufacturing. Seasonal Inventory consists machinery parts, office
supplies, wires and pipes. Need Based inventory consists of machine maintenance
equipment e.g. Oil, Grease, Belts and bolts etc. Common stock inventory is limited by
1.5million rupees as per company policy for sub stock of actual stock e.g. Ribbons,
buttons, dori and threads.
Phase 3:
This phase consist all the elements related to need of materials for manufacturing process
and meeting orders.

 Material rejection

 Aging of material

 Issuance management

 Warehousing cost

 Claims management

 Communication and material management

 Professional ethics

 Public relations

 Buy vendor relation

 Packaging

 Transportation

 Customer feedback

Details:
Material control functions is not end with the control of the material, the part of
material which is not matched with the purchase order or standard quality is then shifted
toward the rejection area. If the material is not completes all the elements necessary for
the manufacturing then it is returned back to supplier. In the inventory of the material the
age of each element is kept in touch and two type of methods used for the issue of aging
which are:

LIFO (Late in first out) method

FIFO (First in first out) method

Issuance management tells all the information that when the product should make and
material is needed for manufacturing. Issuance department issues material according to
the need which can be partially or all material fully issued at one time depend upon the
work in the stitching and processing departments and floor incharge is responsible for
performing these activities. If the material became late due to any reason towards the
supplier end the Floor incharge can issue all material from the receipt room to start the
work at the floor with his responsibility. If material is not meeting the quality standards,
then store incharge generate a report to the Commercial department for the rejection of
the material.

Materials