MIDAS SAFETY

Procurement and Inventory Management

Group Members:
Hassan Mehmood
Muhammad Ahsan
Zeeshan Raja
Introduction:
MIDAS SAFETY MIDAS SAFETY is part of a large international group, Midas Safety Solutions. Their factories are
located in Pakistan, Sri Lanka, India and Bangladesh with distribution offices in Dubai and Sales and
Marketing offices in Canada. They are the 4th largest exporter of safety gloves globally with markets in the USA
and Europe. Midas Safety represents a group of factories which are vertically integrated to control our use of
natural resources like cotton and natural rubber. MIDAS Safety has its production facilities in Karachi (SGL FB
Area and SGL Knitting Unit) and Faisalabad (SGL Gloves Unit and SGL Spinning Unit), whereas, Beltexco
Limited and MIDAS CLOTHING LIMITED are located in the Karachi Export Processing Zone.“

Midas Safety is ISO-9001 (Quality), ISO-14001 (Environment Management System) certified. In addition to this,
it has also achieved a number of awards for its business operations and social responsibility initiatives. This
report also reflects the actions that are being taken by the company to maintain these certifications and to find
out whether the company is actually meeting up with the requirements of these certifications and awards.
List of Companies:
Mission/Vision:
MISSION STATEMENT:

We are Work Wear Clothing Manufacturer, focused on providing consistent quality and superior services
through operational excellence & a highly motivated competent team. We act with integrity, uphold
meritocracy, ensure social & environmental compliance and exhibit care for all stakeholders.

VISION:

To be one of the leading manufacturers of Work Wear Clothing, renowned for exceeding customer
expectations.
Organization Chart Procurement
Procurement Process

The company’s procurement functions are distributed into 2 divisions;

1) Personal Protection Equipment and Fire Consumable/Equipment. This is further divided into;
- Imports
- Local procurement

2) Industrial division

Midas Safety follows a Hybrid Model for procurement. All procurement that is done from its principals is
Centralized and is conducted by the head office, but all local procurement (for example in case of fulfilling
shortages) is Decentralized and is done locally.
Quality

Quality is a core value at Midas Safety organization. This uncompromising principle is owned by everyone in
their organization, and forms the foundation of all their work, they are known to their quality of their
products.

When it comes to all type of safety they are the one who is leading this market with their quality products.

Forecasting

The requirements for products offered by Midas Safety, arise from the customers’ demand and are subsequently
initiated by the sales division. The fast moving items are based on Make to Stock, while the other items are based
on a make to order system.

In order to forecast the material that would be required, and plan for reordering, Midas Safety uses historical data
of the last one year to be effective and efficient in its reordering process and more weightage is provided to the
latest data for greater accuracy. While forecasting for the material using historical data, the data is not filtered for
promotional sales as Midas Safety has not had any promotional sales.
The sales team provides a forecast for the product as a 6 months rolling forecast. Hence the reordering of material
is based on both, historical data and the forecast provided by sales.

Midas Safety recently also implemented the Sales and Operations Planning (S&OP) Process. The prime agenda of
the S&OP process is to align the 3 core departments, Supply Chain, Sales and Finance, when planning inventory.

This is achieved by:

1) Sharing previous month’s actual sales along with the planned sales
2) Discussing areas of variation
3) The sales team provides a 6 month rolling forecast based on customer demand
4) Compiling of the data to arrive at an inventory ordering plan for items not available in stock

The regular attendees are;

- The Regional Sales Managers
- Head of Supply chain
- Head of Finance
Sourcing:

The first thing that Midas Safety has to decide is whether to procure items locally or import them.
The factors considered to make this decision are:

- Cost
- Lead time
- MOQs
- Brand specifications
- Quality
- Availability
Supplier Selection:
Midas Safety searches for new suppliers through the Internet or other references. The suppliers are then
contacted via email or phone and a query is forwarded for the item of interest with all specifications and details
(in other cases, options which the supplier is offering can be requested). The suppliers respond with the complete
details of the items they can provide along with the requested prices, lead time, payment terms, quality standards
and MOQs.

A comparative analysis is done to short list the suppliers and a request for sample is issued. Once the samples are
approved, a supplier is selected on the basis of information it has provided a final meeting is then called to
discuss all the factors mentioned and negotiate the best possible terms.

Midas Safety has an approved Vendor/ Supplier List for the sourcing of its products. 90% of the items procured
are sourced from key principle companies.

For local procurements, Midas does not have an official vendors list but the purchasing is mostly done from
vendors which have a good performance history.
Negotiations:

Where multiple vendors exist for one product, the decision is based on a comparative summary prepared for a
review of the prices and payment terms. The price negotiation with vendors varies from supplier to supplier and
item to item. Repeat orders are not renegotiated unless there is a target price involved or the quantity is
significant.

Purchase Order:
The purchase Order is raised by the Purchase Officer in the system. All Purchase orders that are under
Rs.100,000 are approved by the Manager of Operations, while the POs that are above Rs.100,000 are approved
by the General Manager

Expediting:

Midas Safety emphasizes on the establishment of a criteria to determine when Purchase Order’s
acknowledgment is required. Midas encourages and persuades its vendors to acknowledge the delivery of
purchase order.
Receipt & Inspection

Since 90% of the items which Safe Solutions is dealing in, is from its key principle companies these items require
minimum checking as the quality is generally very consistent. Once the goods reach the warehouse, the
warehouse in-charge only makes sure that the quantity is as per requirement and the item code and description of
the received goods match.

In case of local purchasing, the quality is maintained by following these steps;

1) Items are only bought from approved vendors or authorized distributors.

2) The product specifications are clearly defined to the vendor when placing each order and the same is checked by the
procurement manager when the goods arrive.
3) The vendors are kept limited in number which helps keep the quality to be consistent and makes monitoring easier.
4) Approved samples from the vendors are maintained for references in case of problems.
Inventory Management:

Inventory turnover is calculated using the following formula to check out the return of holding the inventory as
assets:

Inventory T.O = Cost of goods sold

Average Inv.

Days of inventory = Average Inventory x 365

Cost of goods sold

Average Inventory Level:

The inventory average level in Midas is calculated by the following formula:

Average inventory = (Beginning inv. + Ending inv.) / 2

EOQ (Estimated Order Quantity) Model and Its Metrics

Reorder Point:
They use the reorder point methodology in a way that if the stock level reaches the point which is equal to “the
average daily sale x lead time in days + safety stock”, the reordering is processed.

Lead Time:
The company uses the lead time concept to calculate the reordering point.

Safety Stocks:
Midas considers it to be extremely important to have a sufficient safety stock level. Safety stock is also then used
to calculate the reordering point.

Annual Holding and Order processing cost:

Presently the company does not use the EOQ model to calculate how much inventory to order and when to order.
They have a manual system to check when to order and how much to order. But they believe it to be extremely
important to implement the EOQ system in the near future.
Methodology of Holding Safety Stock:
The safety stock is held by estimating a number between the highest sales and average sales in a month. This
however is not a set methodology for all items and much of the inventory is arranged on a MTO basis.

Stock Holding Policy:

There is no standard stock holding policy implemented in Midas. The stock quantity held is based on the
following factors:
• Average sales per month + monthly forecast
• Lead time of the items

Inventory Control Analysis:

Midas is executing the FSN (Fast, Slow, and Nonmoving) analysis for now only. However, they are categorized as
FMSN (Fast, Medium, Slow, and Nonmoving) items which have yearly sale of:

• 0 to 5% yearly sales are categorized as nonmoving products.

• 5 to 15% yearly sales are categorized as slow moving products
• 15 to 80% yearly sales are categorized as medium moving products
• 80 to 100% yearly sales are categorized as fast moving products
Vendor Management:

Midas Safety is committed to work with its suppliers to maintain excellent standards of product quality and safety. It
expects from its vendors to adhere to its standards and prescribed practices for establishing, maintaining and
continually improving an effective quality control and meeting consumer safety requirements. The company’s
supply chain encompasses the planning and management of all activities related to sourcing, procurement,
warehousing, conversion and logistics management in the most cost effective way.

The company maintains a collaborative relationship with its suppliers and regularly interacts with them to ensure
quality and timely delivery of all required parts and components.

Relationship with the Vendors

In order to develop better relationships with its vendors, the company frequent meetups are done with the client to
ensure strong relations with the vendor and better relationships with principle suppliers to strengthen ties.

In order to evaluate suppliers, the company does not have a formal system or a scorecard in place. It does however
judge them on their performance history.
Recommendations:

• Realigning the roles and responsibilities to have a leaner structure in order to cut cost and increase efficiency.
Responsibilities divided by key operational activities:
• Planning
• Procurement (PPE, Industrial)
• Costing
• Warehousing/Logistics/Quality
• A more focused ordering process keeping the forecast and sales history in mind. (Aligned with S&OP and Project
Destination.)
• Clearly defining the product line. Narrowing down the SKUs to match the core business scope.
• Implementation of ERP (Inventory Management system) OR, Analyze the feasibility of 3PL
• Implementation and training of SAP system
• Supplier development and vendor management process implementation for Local procurement.
• A transparent/accurate, costing mechanism to identify key areas of improvement in order to maximize
profitability.