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Nauroz Associates Private Limited Production and Operations Management

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INTRODUCTION

Nauroz Associates Private Limited is located in the Industrial Area of Mumtazabad, Multan. The

company started its working in 1955. Allah Wasaya Textile Mills (ATM) Limited is also located in the


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Industrial Area of Mumtazabad. And ATM is the main competitor of Nauroz Associates Private Limited.

The company deals only in spinning and not in ginning and weaving. Most of the raw material is

purchased from the local market and finished products are also sold in the local market. Nauroz

Associates are the lessee of the Punjnud Textile Mills.

Organizational Chart

Markets

Nauroz Associates Private Limited is selling its finished goods in the local market like Multan. Multan is

the main market in which they sell 80-90% of their products and remaining portion in Faisalabad, Lahore

and Karachi. The company is not yet exporting anything to foreign markets. The main customers in

Multan are

Multan Fabrics

Rainbow industries

Power Production Plant

Company has no power plant of its own, so they purchase the electricity from WAPDA. It has only one

generator, which is capable of producing the electric power in case of load shedding.

Banks


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The company is having its business with the following banks,

PRIME COMMERCIAL BANK

NATIONAL BANK

MUSLIM COMMERCIAL BANK (MCB)

The company pledges its raw material inventory with these banks and the bank pays on behalf of the

company.

Auditors

Last audited in October 2005 .

Ghazi & Company, Chartered Accountants (Tawakkal Autos Plaza near Civil Hospital, Abdali Road

Multan), is their auditor, which make the audit of the company every year.

Machine Types

There are different machines in the factory, which are necessary for the operations. The following are

the main machines and their types:

Blow room


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Card

Draw frame

Simplex

Ring

Match coner

All machines are of Toyota Japan.

Departments in Nauroz Associates

There are six departments in NAUROZ ASSOCIATES PRIVATE LIMITED. These departments perform

different activities. These are the following:

Production Department

Accounts Department

Sales Department

Administration

Finance Department


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Labor Department

But the main departments are only three. These are the first three i.e.


Accounts department

Sales Department


There is a separate production department in Nauroz Associates Private Limited headed by the

production manager. In production department the collaborative orientation of supervisors and

engineers is of great importance because they are continuously involved in meetings and exceeding

quality standards set by the management.

The coordination between different departments of an organization is necessary for the smooth running

of the business and for the fulfillment of customers orders and this phenomenon is very evident in

Nauroz Associates Private Limited.

The production department of Nauroz Associates Private Limited is fully geared to any type of changes

taking place in the environment. This is backed by the good machinery capable of producing finished

according to the demand of customers.

Accounts Department


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This is the most important department of any organization because the record of all the transactions is

maintained here. Different types of statements are prepared to show the inflow and outflow of

resources and these statements have key role in the functioning of the business as these tell the owners

that what they have gained from their business.

Nauroz Associates Private Limited has its own accounts department headed by the Chief Accountant and

is responsible for maintaining all the record of the transactions. The record of shares is also maintained

in this department.

Sales Department

Nauroz Associates Private Limited also has a full-fledged Sales Department and performs the sales

activities of Nauroz Associates Private Limited. Nauroz Associates Private Limited is selling its Yarn to the

domestic market like in Multan, Lahore and Karachi. Multan is a big market for this purpose. There are

some brokers who are the mean of contact between supplier and the buyer. When any weaving mill

needs yarn, they contact the brokers to find the appropriate supplier. These brokers have contacts with

the mills, which are producing yarn, and when they have order to purchase they take samples from

different suppliers and send these samples to the buyer who after examining them order the broker to

purchase on their behalf if the quality is according to their standards.

INTRODUCTION TO YARN

Any sort of thread which is prepared for weaving purpose is named as yarn. There are two main kinds of

yarn. These are as under .

Cotton Yarn

Cotton thread is prepared which is twisted in the form of yarn. This yearn is produced by Spinning Mills.Nauroz Associates (Pvt.) Ltd. manufacture and produce cotton yarn only.

Polyester and Cotton Yarn ( PCY )


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It means that the yarn which is prepared with the combination of polyester and cotton. Nauroz

Associates (Pvt.) Ltd. also deal in PC Yarn.

TYPES OF YARN

There are five types of yarn. These are:

Combed Yarn

Carded Yarn

Double Yarn

Single Yarn

Poly Cotton Yarn

The brief meanings of these types are on the next page.

Combed Yarn

When during spinning the yarn is made fine by combing it, it is called a Combed Yarn. In a combing

process the yarn being manufactured from the ginned Cotton is passed through combs, which makes

the yarn very fine and smooth.

Carded Yarn


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Yarn that is not passed through the combing process is called the carded yarn.

Double Yarn

When two fibers or threads of a same count yarn are twisted together to make a single, It is called

double yarn. In it, for a same count, the weight and the thickness of the yarn becomes doubled.

Single Yarn

Simple yarn not joined together of a certain count is called single yarn.

Poly Cotton Yarn (PC)

This type of yarn is used in the manufacturing of cloth. The construction of this type of yarn is given as

percentage of the weights of two types of yarns (Poly, Cotton) as PC (52:48) in which, in the total weight

of yarn 52% polyester and 48% Cotton is used. In the cloth manufacturing 100% Cotton and Polyester

are also used, according to the requirements of the buyers and the quality of the cloth being produced.

COUNT

Count is a scale which is used to measure the thickness of yarn.

Cotton Count

It is the relationship between the length (Yards) and the weight (Lbs). When one pound of Ginned

Cotton is longed to a length of 840 yards it is called Once Count Yarn or One English Count ( Ne ). This

relationship is as under:

1 Lb = 840 yards = 1 count



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Standard Length

Standard length of the Pakistan cotton is 1-1/16. As the count of the yarn increases the thickness of

yarn decreases.

Twist Multiplier TM

The TM is used for weaving and knitting purposes only.

TM for Knitting = 3.87 Soft Yarn

TM for Weaving = 4.35 Hard Yarn

LOCATION

Location is a geographic site of a firms operations and has importance in terms of operating cost, the

prices it charges for goods and services and its ability to compete in the market. Location is important in

two ways:

Location of your factory should be near to your suppliers so that your cost can be reduced and youcan deliver prompt service to your customer.

You should be near to your target market, this means that you are in close proximity to your ultimate

customers to serve them in a better way and increase your profitability.


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Location of Nauroz Associates

Nauroz Associates Private Limited is located in the Industrial Area of Mumtazabad, Multan. And it is

located on the main Vehari Road. Now what are the factors, which were kept in mind when top

management of Nauroz Associates Private Limited was deciding about its location. The most important

factors are:

Labor availability

Availability of raw material

Energy availability

Transportation

Attitude of community

Living conditions of employees

Proximity to customers

Labor Availability

A favorable labor climate may be the most important factor in location decisions for labor-intensive

firms such as textile industry. Effective and efficient labor availability is another important factor in

determining the location, so here ample labor is available for the organization at satisfactory prices. All

types of labor i.e. skilled, semiskilled and unskilled can be easily made available when required.


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Availability of Raw Material

Nauroz Associates Private Limited is located at the start of the Multan city that helps the Nauroz

Associates Private Limited to get the raw material easily and as we all know that Multan is the house of

cotton. Cotton of highest quality is produced in this region, so it is very easy for the organization to get

raw material i.e. cotton, at low price and in abundance whenever it needs. They also fulfill their raw

material requirement from Sadiqabad. There are two seasons of cotton one is called of Sind Season and

other is Punjab Season. They purchase cotton from Multan when Punjab season comes and from

Sadiqabad in case of Sind season.

Energy Availability

Nauroz Associates Private Limited requires a huge amount electric power to run its functions properly.

For this purpose they get electricity from Multan Electric Power Company (MEPCO).

Transportation

The Mill is located at a very good place i.e. at the start of the city, so it is easy to get material from any

transport at any time. It has no problem of congestion and every type of transport can come easily here.

The new bus stand of Multan is near to the mill, so there is no problem of loading and unloading of the

raw as well as finished products.

Attitude of Community

Nauroz Associates Private Limited is located in a well-populated area and the attitude of population is

favorable because the unit is not causing any type of pollutant material, which can harm the

environment. Its production unit is covered so there is no noise coming out of the premises of the

factory and there is no pollution of smoke as well.

Living Conditions of Employees


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Location appeals to potential employees. All facilities are provided in locality and living standards are

much better than the remote areas so workers prefer to work here than any other area. Work

environment is very peaceful, calm and quiet.

Proximity to Customers

The mill is located in the area that is near to the customers; it also works as a store for the local

customers because in case of any emergency the local customer can easily get his order to be filled. All

type of transportation is available to them to deliver the yarn to the customers.

PURCHASING

Purchasing is the management of the acquisition process, which includes deciding:

Which suppliers to use

Negotiating contracts and deciding

Whether to buy locally

Purchase Process Of Nauroz Associates

The purchase process of Nauroz Associates Private Limited is not so much complex rather it is quite

simple. The purchase is made around whole the year, but to meet any emergency demand they

maintain a safety stock about 30-40% of the whole year requirement, and the remaining 60-70% for


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normal demand they purchase cotton continuously as per requirement. They purchase for safety stock

during the cotton season (November to February), because at that time fresh cotton is available and the

prices are also low because of the abundance of cotton. They ask for the samples from different

suppliers. Then there is complex analysis of those samples on the basis of following factors:

Short & long fibers

Strength of the fiber

The sample for checking is taken from each lot of 100 bales. If the quality of the sample is according to

the requirements then that supplier is selected for the purchase of raw material.

Nauroz Associates Private Limited doesnt make long-term contracts with suppliers because they want

to reduce the cost, so the supplier who is giving the low cost and high quality is selected, which may

differ from time to time. At the time of every purchase the process of checking the quality is repeated

and the best one is selected. Here are two factors that we have to consider:

Requirement of the mill

Price of purchased material

Requirements

The daily requirement of the Mill is about 40 bales of cotton. The bales for the safety stock are

purchased at the start of the season. And it is purchased from Sadiqabad because the quality of it veryhigh.

Prices


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The prices of cotton vary during the year. When it is in abundance, the prices are comparatively low and

the directors are eager to purchase more and more cotton because of less price. The situation can be

reversed when cotton is scarce due to some reasons, then prices are very high and the company doesnt

purchase in large quantity. It all depends upon the directors that what decision they make during the

particular season. In this year the Company is purchasing the cotton at round about Rs. 3050/= per

mound. (37.324 kgs)

Payment to Supplier

Payment is made after the inventory is received and it is in the form of cross check. Also it depends on

the terms and conditions between the supplier and directors that in what way they make payment.

These terms and conditions are set after the laboratory checks the quality of the raw material.

CAPACITY

Capacity is the maximum rate of out put for a facility. The facility can be a workstation or an entire

organization. The operations manager must provide the capacity to meet current and future demand;

otherwise, the organization will miss opportunities for growth and profit. There are two types of

capacity.

Peak Capacity

Effective Capacity

Peak Capacity

The maximum output that a process or facility can achieve under ideal conditions is called peak capacity.

Effective Capacity


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The maximum output that a process can economically sustain under normal conditions is called

effective capacity.

The peak capacity cannot be achieved because the circumstances or conditions are never ideal so

companies want to operate at normal capacity.

Capacity Utilization

Capacity planning requires knowledge of current capacity and its utilization. Utilization is expressed as a

percentage:

Utilization = (Average output rate/Maximum capacity) 100 %

Capacity of Nauroz Associates

Nauroz Associates Private Limited is using about 94% capacity because the total number of spindles are

12,400 and the running spindles are 11,600, remaining is the capacity cushion, which is for the purpose

of protection in the period of excessive demand.

The daily output of the company is round about 10,000 pounds of yarn on average. Capacity in terms of

bags per day is about 100 bags and the weight of each bag is 45kg net.

They manufacture their products in two shapes one is bags and other is Bales.

There are 40 cones in a bag and each cone weighs 2.5 pounds so a bag is of 100 pounds.


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Where as the weight of each Bale is about 400 pounds and it contain thread in the shape of bundles of

10 pounds each.

FORECASTING

Forecasting is the art and science of predicting future events used for the planning purposes.

It involves taking historical data and projecting them into the future with the help of some mathematical

techniques and experiences. There are many arts of forecasting which predicts the future events on

many basis. It can be predicted theoretically or mathematically. Forecasting can be for short term,medium term or long term.

Forecasting Techniques

There are three forecasting techniques used generally for the purpose of forecasting of demand which

are as follows:

(1) Qualitative Techniques

Sales force estimates

Executive opinion

Market research

Delphi method.


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(2) Quantitative Techniques

Regression Analysis

Correction Analysis

(3) Time Series Method

Nave Method

Simple Moving Average

Weighted Moving Average

Exponential Smoothing

Forecasting in Nauroz Associates

There is no special method of forecasting in Nauroz Associates Private Limited. They have to make

forecasting at the time of purchase of raw material. Forecasting all the times depend upon the Time

Series method and in Time Series method they are using Nave forecasting method. In nave forecasting

the demand for the next period equals to the demand for current period. Forecasting is always the job

of the Manager and operation manager assists the manager about the decision of purchase.


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Forecasting is about,

How much orders will come in future

What quantity will be coming from these orders

What will be the specification in that requirement

So, on the basis of this forecasting they purchase their raw material. If there is excessive demand than

forecasted and the raw material in the stock is finished then they make production by purchasing that

much of raw material that is needed to satisfy that excessive demand. They wait for the cotton season

to purchase raw material to store for the next period.

Inventory Management

Inventory is the stock of items held to meet the future demand. Being the process focus firm, NaurozAssociates Private Limited pays a special attention to the inventory management.

The inventory of Nauroz Associates Private Limited mainly consists of raw material i.e. cotton bales and

in the form of work in process. They also maintain finished goods inventory to meet the emergency

demand of the customers. Therefore, types of inventory are:

Raw Material Inventory

Work in process

Finished goods inventory


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Raw Material Inventory

The inventory management is not so difficult. Cotton for the purpose of safety stock is purchased and is

hypothecated by prime bank .

It means that inventory belongs to Prime Bank. A man from Prime Bank is always present at the

warehouse where the inventory is placed and that person is called godown keeper. When there is

need for cotton in factory, they ask to that person to give the material of their requirement.

The basic purpose of keeping the raw material inventory is:

To meet the demand of individual customer and the market as a whole.

To make efficient delivery possible

To provide a hedge against the demand

For the smooth running of the companys operations

Grading of Raw Material

The raw material is placed grade wise on the basis of quality. There are different grades of cotton e.g.

A+, A, A-, B+, B, B-, C+, C, C-, D+, D, D- etc. Nauroz Associates Private Limited is currently operating in A

and some times B+ also. There is manual checking of raw material and after that raw material is placed

under one of these categories.


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Work in Process Inventory

As there are different machines in different departments and these machines have some part of raw

material that is called work in process inventory. Nauroz Associates Private Limited always has about

35,000-40,000 kg of cotton in process to meet the requirement of 11,600 spindles.

Safety Stock

Nauroz Associates Private Limited also maintains safety stock to meet any emergency demand and

safety stock is about 40% of whole year requirement of raw material.

Inventory Review

The inventory review is made continuously.

Spare Parts Inventory

The spare parts inventory consists of many items which are useful for the machinery in case of any

machine breakdown. Major part of this inventory consists of:

Ball bearings

Belts

Bushes

Methods of Inventory Management


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Inventory management involves the following three methods:

FIFO

LIFO

WEIGHTED AVERAGE

NAUROZ ASSOCIATES are using weighted average method for recording there inventory.

PRODUCTION PROCESS

There is a separate production department in Nauroz Associates Private Limited headed by the

production manager. In production department the collaborative orientation of supervisors and

engineers is of great importance because they are continuously involved in meetings and exceeding

quality standards set by the management.

The production department of Nauroz Associates Private Limited consists of following stages.

Process Of Production


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Blow Room

First of all, when the production department receives the green signal for starting production then the

raw material is issued to the blow room, which comprises of different machines that converts raw

cotton from bales to rolled Laps and the impurities are also removed from raw cotton in this

department.

Carding Section

This is the second stage or second section of production. In this section Lap sheet is converted to Sliver

and remaining impurities & trash are removed. In this process short fibers are also extracted. The sliver

is then transferred to drawing section.

Drawing Section

In this section drawing, parallelization and mixing of fibers are done. Blending of different fibers e.g.

polyester and cotton is also done in this department.

Simplex Section

In this section material from previous department is converted to Roving.

Ring Section

In this section Roving is converted to yarn, which is rolled on plastic pipe called bobbin.

Cone Winding Section


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In this section yarn on small bobbins is rolled on large bobbins called Cone, which can be sold in the

market. The yarn faults are also removed in this section.

Packing

In this section the yarn is packed for delivery in large bags each 100 pounds in weight and these bags are

sold to customers.

Doubling

After winding, according to the demand of the customers, the doubling process is done.

Twisting

After doubling, the yarn is the paired yarn is twisted in twisting process.


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QUALITY CONTROL

For a company to survive and measure its market share, maintaining quality is as essential as blood in

the human body. The company, which maintains quality, has edge against those, which dont pay great

attention on quality. Whether it is a manufacturing firm or a service organization, they have to take care

of quality if they want to remain in the competitive market.

Nauroz Associates Private Limited pays a lot of attention on quality because it has maintained its image

as a qualitative organization. Quality is checked at every section and if it is found according to the

standards then the next process starts otherwise first of all that fault is removed and then the material is

sent to the next department. Quality check is important for the company as it allows the company to

avoid process repetition so it saves Time, material, labor and customer dissatisfaction that can result in

loss of market.

Laboratory

Nauroz Associates Private Limited has its own quality control department in the form of a laboratory,

which is responsible for checking quality after every process. The samples from every department are

sent to the laboratory and these samples are then checked. If the quality is found correct, then the

material is allowed to the next process.

Stages of Quality Control


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After the material is issued to the production department, quality checks are effectively maintained at

each and every step of operation. Quality may get out of control because of the following reasons

Fault of machine

Fault of worker

So, it is necessary to check quality so that if there is any fault, it can be removed.

Final Quality Checks

Final checking of the finished goods is necessary because if has any type of fault, and it is sold without

checking the quality then company can loose its market image. It is for this reason that quality of the

final product (Yarn) is checked with great attention.

Weight Checking

The finished product (yarn) at last stage, checked for weights that should be according to the standards

i.e. 100 pound per bag. If the weight of any bag is less than this standard weight, it is not sold until

weight is correct.

Shade Checking

Before packing the cones for sale, these cones of Yarn are checked in Ultraviolet Rays for correct shade.

If the shade is according to the standards then these cones are sent to the store room, otherwise sent

back. Nauroz Associates Private Limited has a separate section for checking the shades of these cones. It

is a dark room with tubes of Ultraviolet Rays. The cones are set at the racks and these racks are sent to

that room, for shade checking.


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Aggregate Planning

Aggregate plan is a statement of its production rate, workforce level, and inventory holdings based on

the estimations of customers requirements and capacity limitations.


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We may say that it is concerned with quality and timing of production for intermediate future by

adjustments of inputs.

In puts for Aggregate Planning

The adjustments involve the following.

Production Rate

It involves

Over time

Under time

Sub contracting.

Adjustments In work force

It involves

Hiring of workers

Firing of workers

Inventory Level Adjustments


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It involves

Anticipation inventory.

Aggregate Planning Policies

There are basically two policies aggregate planning.

(1) Reactive Policy

It means one has to follow the demand pattern by adjusting all three factors or any one of these factors

which are as follows.

Production Rate

Work Force Level

Inventory level

Under reactive policy there are two sub categories.

(a) Chase Policy

In chase policy Demand is followed by adjusting production rate. No inventory is kept which avoids

holding costs.


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(b) Level Policy

In level Policy demand is followed through inventory level while keeping production rate constant.

When demand is high. It is met from inventory. And when demand is low, it serves in piling up of

inventory.

(2) Aggressive Policy

In aggressive policy demand is created adjusted according to the capacity of facility. It is done through

Marketing Mix

Promotional Mix

Aggregate Planning in Nauroz Associates

Nauroz Associates Private Limited is a process focus organization and it responds to the customers

orders. They make planning based on the previous cycle. They are operating according to the Make to

order strategy.

Competitive Priorities

Competitive priorities are the companys unique characteristics that lead to success of the company.

Every organization has some competitive priorities, which shows the progress of the company. Nauroz

Associates Private Limited is operating according to the following competitive priorities:

Low cost


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On time delivery

Consistent quality

Planning

Manager with the help of different managers makes planning for different purposes.

Planning Of Workers

It includes the planning of officers, supervisors and workers. Planning of officers is dependent upon the

owners that how much they need and according to the need this staff is recruited and the duties are

assigned on the basis of their skills.

A supervisor who is responsible for every thing happening in the department heads every department.

Workers are allocated according to the machines and workload.

Production Planning

Production manager on the following basis does production planning:

Requirement of the market

Availability of raw material

Prices of raw material


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Prices of end product

Aggregate planning is made considering the following factors

Cost of production of new order

Time to complete

Profit earning

EVALUATION AND PERFORMANCE

OF

NAUROZ ASSOCIATESPRIVATE LIMITED

By studying the organization I come to the result that Nauroz Associates Private Limited is the company,

which is performing according to the standards set by the managing directors. It is producing the

finished goods in a qualitative form and meeting the requirements of its customers. It has many satisfied

customers, which can guarantee its continued performance. In spite of the fact that it is located in theresidential area, but it is not disturbing the domestic life because its plants are covered and any type of

noise is not coming out of the premises of the factory. As a result the behavior of the community is

favorable towards the company.


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The company was operated for three shifts daily and the period of one shift is eight hours. For its

workers, it gives them many facilities like high salaries, bonuses, and compensation for any loss and

many more. So all types of staff are quite satisfied which is also a plus point for the company.

Nauroz Associates Private Limited was operated to produce cotton-blended yarn throughout the year.

The market for the yarn remained favorable during the year.

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