Group Members:

Faheem Riaz

Mehak Durrani

Nael Nasir Chiragh

Sijal Asif Khan

Section N, BBA IV

Presented to:

Ms. Amina Aqil

Supply Chain Management

Lahore School of Economics

Zouq Mills

Contents
Company Introduction .................................................................................................................................. 3
Objectives of the Project ................................................................................ Error! Bookmark not defined.
Brief Introduction of Zouq Mills .................................................................................................................. 3
Products & Categories .................................................................................................................................. 4
Supply Chain of Zouq Mills ......................................................................................................................... 4
Analysis of the Supply Chain of Zouq Mills ................................................................................................ 4
Competitive Strategy ................................................................................................................................ 4
Zouq Mills Supply Strategy and Strategic Fit ............................................................................................... 5
Understanding the customer and supply chain uncertainty .................................................................... 5
Understanding the supply chain capabilities ............................................................................................. 6
Achieving strategic fit ................................................................................................................................... 7
Use of Supply Chain Drivers by Zouq Mills ................................................................................................ 7
Facilities .................................................................................................................................................... 7
Inventory ................................................................................................................................................... 8
Transportation ........................................................................................................................................... 8
Information ............................................................................................................................................... 8
Sourcing .................................................................................................................................................... 9
Pricing ....................................................................................................................................................... 9
Issues in Supply Chain and its consequences ............................................................................................. 10
The threats of competitor ........................................................................................................................ 13
The threat of substitute............................................................................................................................ 13
The bargaining power of customers ........................................................................................................ 14
The bargaining power of suppliers.......................................................................................................... 14
Forecasting .................................................................................................................................................. 14
Comparison with International Companies................................................................................................. 15
Issues and Recommendations ..................................................................................................................... 17
Proposed Solutions and their Tradeoffs .................................................................................................. 17
Conclusion .................................................................................................................................................. 19
Appendix ..................................................................................................................................................... 19

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Zouq Mills

Company Introduction

Introduction of Zouq Mills

The cooking oil industry is one of the largest manufacturing sectors of Pakistan. A large
number of local and multinational organizations comprise this rapidly growing industry. Currently,
160 small and medium-scale vegetable oil and ghee firms are part of the edible oil industry. Some
of the most well-known brand names that are a part of this industry include Shan, Dalda, Habib,
Mezan, Kashmir and Sufi.
Zouq Mills had set up the factory in 2011 by the founder of Zouq Mills, Hafiz Muhammad
Usman Tariq. The gheeintroduced in the market is known as Zouq Banaspati ghee. Zouq Banaspati
ghee is relatively a new product in the industry. It is manufactured by Zouq Mills, a medium-scale
company that engages in the refining and processing of cooking oil and ghee.
The head office of the company is located at Link Road, Lahore. Departments at the head
office include: Accounts, Sales and Owner/director’s office.
The company engages in manufacturing and trading. Currently, the firm’s operations are
carried out on a medium-scale, however, the management plans to achieve intensive expansion
and ultimately become a large-scale operating firm. The production plant is both capital intensive
and labor intensive, providing facilities such as:
 Electric Room: Used to control the operations of various areas. The power of an area is
disconnected if no operations are to take place there.
 Mechanic shop: Repair of machinery takes place here
 Boiler: The boiler is the main hub of energy. There are various sources of energy which
‘feed’ the boiler to produce energy. E.g. coal, wood, corn
The products being sold by Zouq Mills are currently in the introduction stage, since the firm is
relatively new in the market. Zouq cooking oil and Banaspati are being sold in all areas of Punjab,
with a main focus on the rural areas including the following:
 Khanewal, Narewal, Sahiwal, Sargodha, KotMomin, MorGunda, PindiBahauddin, Kasur,
Mian Channu and RenalaKhurd

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In relation to its’ Corporate Social Responsibility, the company funds an Islamic school,
Iqra Madrassah. This provides education to the workers’ children and to the children residing in
the nearby village.

Products & Categories

The company under discussion is named Zouq Mills, Private Limited. The products being sold
under the company are:
 Zouq Banaspati
 Zouq Cooking Oil

Supply Chain of Zouq Mills

The supply chain of Zouq Mills is shown in appendix 1. Zouq Mills imports all its raw
materials from its suppliers in Malaysia, Indonesia and Thailand. They purchase cotton seeds from
cotton factories and metal tins, polythene pouches and packaging cartons from suppliers in
Pakistan. The firm has established good relations with its suppliers who provide them with raw
materials on long term credit. The finished goods are sold in bulk to the wholesalers who then sell
them to the retailers and finally the end consumer purchases the product.

Analysis of the Supply Chain of Zouq Mills

Competitive Strategy
A strategy relative to its competitors, in which set of customer needs are met through
products and services. Zouq Mills aims to be efficient by providing products with reasonable
quality and at low prices because the customer of Zouq Mills place emphasis on these two factors.
The competitive strategy revolves low prices and quality and this is done by remaining efficient.

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Zouq Mills Supply Strategy and Strategic Fit

Supply strategy includes design decision regarding inventory, operations, facility and the
flows of the information within and outside of the organization. The decision of Zouq Mills to
build factory near Raiwind road, using distributors to supply the product and in house production
are part of the supply chain strategy. In strategic fit there must be consistency between the
customer priorities that are known through competitive strategy and supply chain capabilities that
are known through supply chain strategy. The important part here is strategic fit which is explained
below.

Understanding the customer and supply chain uncertainty

Customer segment of Zouq Mills is actually looking for low prices in oil and ghee.
Customers of Zouq Mills are actually aiming to get reasonable quality in exchange of reasonable
prices as compared to other superior leading brands in the market. This is why the customers are
willing to spend time to get it. The demand of the customers, of oil or ghee, varies because of the
following factors:

Quantity of product needed in each lot: 25 tons of raw oil is taken into account for the
production. Batch production is done and limited stock is kept in warehouse section of the same
facility. If there is any urgent order for oil or for ghee they are not able to cater to it because
production is done 5 times in a month and all the lot is sent to the distributors based on the placed
order. As they are running an efficient plant that is why they often fail to cater to large or sudden
orders.

Response time that customers are willing to tolerate: The final customers are willing to wait
for the product, as they are getting price and quality of their choice along with even smaller
packaging that other companies are not offering. But the distributors who have to forward and
meet the orders of the retailers have a low response time because if we are unable to cater to their
order then the retailers refer to other distributors.

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Variety of the products needed: A single type of oil and ghee is offered to the customers but in
different sizes. This consumers of Zouq Mills prefer this flexibility that they have the ease of
buying the ghee or oil in small and economical packages as per their requirement. But the company
does not offer different variants as doing this would increase the responsiveness and the costs as
well and Zouq Mills is currently operating to be cost efficient.

Service level required: No service level is expected by the customers as they buy from retailers
directly.

Price of the product: Here consumers are price sensitive and are looking for low prices. This is
why reasonable rates are provided to the customers i.e. Rs. 250 for 1 liter can of ghee.

Rate of innovation: The target segment of Zouq Mills is very less sensitive to any kind of
innovation in the oil and ghee sector. If Zouq tries to add innovation to its operations then it can
add the option of catering to a different segment by adding new variants which would add to the
responsiveness but at a cost.

Implied demand uncertainty is low in this area because the firm is supplying the same product
in the market and is not catering to any special orders. Supply uncertainty like implied demand
uncertainty is low. The product is not innovative currently and the product production and demand
is fixed for now. Its delivery schedules are fixed, resulting in low supply chain uncertainty.

Understanding the supply chain capabilities

After understanding what type of uncertainty is faced by Zouq Mills, we now look at
whether the supply chain of Zouq Mills is efficient or responsive. The foreign suppliers of Zouq
Mills have the capacity to meet the wide range of demands, handle supply uncertainty and handle
large variety as per the level of ingredients. But the shorter lead time cannot be facilitated as the
orders need to be imported and that is time consuming and adds to uncertainty. But the local
suppliers of Zouq Mills can meet short lead times, respond to wide ranges and have large variety
of products, as we provide the different packaging sizes, but we do not have the capability of

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observing the supply uncertainty. Thus, it can be concluded that both type of suppliers do possess
responsiveness but it is not very high.

Appendix 2 in appendix shows where Zouq Mills lie. Apparently Zouq Mills has opted to stay as
a low cost firm.

Achieving strategic fit

The third step in this process is to achieve the strategic fit. If the implied uncertainty is low
then supply chain should be efficient and if the implied uncertainty is high then supply chain should
be responsive. In case of Zouq Mills supply chain is efficient because the implied uncertainty is
low. As shown in appendix 3, Zouq Mills lie in the bottom of zone of strategic fit. The demand for
the products is certain and the company is efficient. If Zouq Mills is able to generate high levels
of performance than it can move towards the zone of strategic fit. The appropriate way to do so is
by taking advantage of the responsiveness that the supply chain of Zouq Mills has.

Use of Supply Chain Drivers by Zouq Mills

In order to be able to determine that whether Zouq Ghee Mill is working towards efficiency or
responsiveness we can ponder on its use of the six drivers:

Facilities
Role: When elaborating the facility then it can be said that it is efficient as it is dedicated,
instead of being flexible. This means that the factory is aimed to produce Ghee and Oil only. Apart
from this, the factory can also be described to be product focused as its providing a single type of
product although multiple functions and processes are used to formulate one type of product. Apart
from this the factory of Zouq Mills is also used for storage purpose until the order for the inventory
arrives.
The facility of Zouq Mills is located at the Raiwind Road. Zouq Mills have centralized the
factory at the expense of being away from our customers. Thus, this elaborates on our aim of being
efficient rather responsive. The proximity to labor force, lower cost of facility and availability of
the infrastructure are the added reasons for this choice of location.
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Capacity: The factory of Zouq Mills is not operating at excess capacity. We have the capacity to
operate by processing a lot size of 25 tons at a time.
Tradeoff: The Company has clearly opted for an efficiency in exchange of responsiveness which
is why we have one facility performing all the functions for one type of the product.

Inventory
Components: Since Zouq Mills opts for batch production thus the cycle inventory comprises
of the batch which is placed in production and this lot is of 25 tons. But the factory produces 125
tons in a month which means that the cycle that the company’s inventory completes are 5. The
company deals in bulks that results in the economies of scale in production and as well as
transportation. The company does not hold any seasonal inventory. The safety inventory that
Zouq Mills holds is in the form of the final packaged products. This safety inventory is held to
cater the uncertainty which amounts to be of 50-75 kgs of Ghee and Oil both.
Tradeoff: The operations of Zouq Mills show that the product availability is limited which yet
again expresses the fact that the factory is operating and working for efficiency by only making
some stock available to meet the uncertain demand.

Transportation
Components: The imports from Malaysia, Indonesia and Thailand are shipped to Karachi from
where they are transported via trucks to the factory. The local suppliers also send the other
necessary material via trucks. Thus, the major mode of transport is trucks. But the highways are
used to build the network amongst the desired destinations whether it involves the inbound or
outbound logistics.
Tradeoff: In the case of transportation Zouq Ghee Mill is opting for efficiency again as it is
compromising on the speed. But the channel and mode that has been opted for is best suited to the
situation for bulky deliveries.

Information
Components: The processes are part of the Push phase in the supply chain. The production
process is planned by the managers of the company and the orders for raw material are placed
accordingly. Zouq Mills does not wait for the pulls signals to be transmitted so that we could
process the raw material and turn it into Ghee and Oil. But there is a lack of information sharing
between the suppliers and the company itself. The suppliers hold themselves responsible for only

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delivering the order on time as there is limited association between them and the firm. The
company also fails to make use of the sales and operations planning where the marketing
department needs to communicate the plan to the supply chain which should guide them with the
appropriate feedback of the cost associated with the fulfilling of the plan.
Tradeoff: A network that is built to be able to be capable to share information proves to be an asset
for the company which could aim towards tapping benefits of efficiency as well as responsiveness
in an enhanced way. Zouq Mills currently is not making a valid use out of the information driver.

Sourcing
Components: Zouq Mills performs all the functions in house starting from the production to
the packaging of the Ghee and Oil. Since the company is a recent one we tend to limit our relations
with few suppliers as it is easy to maintain relationships. The supplier selection criterion revolves
around the quality, on-time performance, minimum replenishment lead time and bulk discounts.
This is why the suppliers of Zouq Mills are required to offer assurance that we would work to
minimize any delays or disruptions that might be possible which would eventually end up in Zouq
Mills facing the backlogs and the eventual loss of sales as well as the goodwill.
Tradeoff: The Company in this case is relying on the supplier i.e. it is depending on the suppliers
to absorb the uncertainty.

Pricing
Components: Zouq Mills offers quantity discounts to its wholesalers because it aims to target
the economies of scale. As it is cheaper to deliver a truckload to one location as compared to four
different locations. Zouq Mills also makes sure that these quantity discounts are of the right amount
and does not generate the bull whip effect as a result of the misinterpretation of the demand levels.
Zouq Ghee Mill is a new entrant as compared to already existing brands which is why it practices
everyday low pricing strategy. Zouq Mills offers menu pricing since it offers different packages
of oil and ghee in order to cater to the varying demand levels. These different packages require
different pricings as well. For instance, our packaging includes 250gms pack, 500gms pack, 1kg
pack and 5kg can.
Tradeoff: Everyday low pricing facilitates the stable demand that allows efficiency in the supply
chain in the exchange of making higher profits comparatively by charging high-low pricing.

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Thus, it can be concluded that Zouq Mills is making use of its drivers to generate efficiency
and be able to reap the benefits of economies of scale by forgoing the benefits of responsiveness.

Issues in Supply Chain and its consequences

Upon analyzing the supply chain the following issues were identified and so were the
associated problems with it:

1. Centralized location: Zouq Mills has centralized the factory at the expense of being away from
their customers.
Consequences:
 Centralization causes delay in the delivery of products because of transportation time as compared
to the instant delivery.
 Besides if Zouq Ghee Mill pays for the delivery of the order then this adds to the cost of carriage
for the company.

2. Limited capacity: The factory of Zouq Mills is not operating at excess capacity.
Consequences:
 With the increase in demand firm cannot increase the production however this can be increased
but it requires additional cost for fixed investment. This results in loss of sales.
 The turned down orders tend to tarnish the probable word of mouth which otherwise could have
been positive.
 Emits a non-corporate and unwilling commitment signals to the customers, in this case the
wholesalers.
 Better discounts and long-term relationships will be drawn by other companies that will exhibit
the ability to be responsive as per the demand of the situation.

3. Less stock to cater to uncertain demand

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Batch production is done and limited stock is kept in warehouse section of the same facility. If we
do get any urgent order for oil or for ghee that we only have the limited facility to fulfill the order
up to what we have stocked.
Consequences:
 Having low stock could leave you unable to cope with unexpected increases in demand and
therefore lose customers.
 If deliveries are delayed the business may run out of stock and have to halt production, which can
lead to workers and machinery not being used.
Our operations are not based on forecasts currently, majorly because we are in the initial years of
the setup. This is why we often fail to cater to large or sudden orders that might spring up.

4. Lack of aggregation with suppliers: There is lack of information sharing between the suppliers
and the company itself and the company also fails to make use of the sales and operations planning
with the suppliers.
Consequences:
 Lack of information sharing can lead to various conflicts. The suppliers may not be aware of the
activities that the company is performing because of which the activities of firms may vary with
that of the company. This will lead to problem in meeting the demand of the end customers.
 This will also lead to higher costs as the suppliers may also have to perform activities again because
of lack of communication.
 The suppliers might feel unrelated which is why the main aim may no longer be to maximize the
overall supply chain profitability. Rather it would shift to individual profits at each stage.
 Besides the suppliers could be of any use, i.e. we might be willing to partner or get associated, our
input or the incentive of taking part in Zouq Mills operations could be fruitful.

5. Limited suppliers: We have limited suppliers as according to them having few suppliers is enough
for them.
Consequences:
 The existing suppliers can increase their prices as there are limited suppliers of Zouq Mills and
switching will be difficult.
 Not using an increasing number of sources gradually increases the risk of supply disruption.

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 Access to fewer suppliers provides access to less technologies and innovations.

6. Sensitive to innovation: Zouq Mills not adapting to the changing technology and innovation to
stay competitive right now.
Consequences:
 Zouq Mills is losing on the other potential segments which otherwise it could attract to maximize
its sales as well as the profits.

Industrial analysis

Pakistan being predominantly an agrarian economy was once self-sufficient in production

of edible oil and vegetable ghee, but that glory is long gone as depicted. The wedge between
escalating edible oil demand and local production started to appear in 1969-1970 and since then,
domestic production has been unable to match its pace of growth with that of demand. One basic
reason for this steep rise in edible oil consumption is a consistently high population growth rate
(2.5% in 20010-12) which boosts edible oil demand at an even greater rate due to the demand
multiplier effect .Monthly average per capita consumption of edible oil was between 1.3 to 1.5kg
in 2010, which is likely to have increased four years down the lane in 2010. Edible oil being a
necessity as opposed to being a luxury has inelastic demand and in 2008-10 the domestic
production of edible oil was recorded at 620,000 tonnes which was only 36.5% of total
consumption and hence the remaining 1,080,000 tonnes (63.5% of total consumption) had to be
imported In2007-08, local production was recorded at 833,000 tonnes representing a share of
27.2% of total demand which was 3,062,500 tonnes. This represents a decline in domestic
production (as a proportion of total demand) of 9.3% over the 4 year period. As total demand in
2009 was 2,846,000 tonnes, the difference between total demand and domestic production had to
be compensated by importing 2,229,500 tonnes of edible oil (72.8% of total demand). The import
bill of Pakistan increased from the yearly total of Rs.33 billion in 2004-05 to Rs.84 billion for the9
month period between July 2013 and March 2014. During last two decades, Edible oil imports
have shown a 14.5% annual increment and their share of Pakistan’s total imports has risen
from3.1% in 2011-12 to 4.2% in 2013-14. Apart from rising consumption of edible oil subjected
to high population growth rate, lack of awareness amongst farmers, ignorance of policy makers

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regarding oilseed crops, technological deficiency in oilseed production and smuggling of edible
oil to neighbouring countries (notably Afghanistan) serve as major deterrents to significant growth
in domestic production of edible oil and vegetable ghee. Climatically, environment of Pakistan is
believed to be conducive to cultivation of cottonseeds, sunflower seeds, canola seed and other
edible seeds crops. Pakistan, instead of incurring a sizable import expense every year for import
of palm oil seeds and other oilseeds which it is deficient in producing must rather consider a more
viable and cost effective policy of relying on its indigenous varieties of oilseeds ranging from
cottonseed crop (constitutes up to 50-60% of total domestic production) to others such as
sunflower, olive, rapeseed etc. Also canola cultivation can be done successfully in Pakistan and it
can further strengthen the growth of domestic oilseed production.

The threats of competitor

In Pakistan there are approximately 155units involved in solvent extraction and processing
of edible oil and vegetable ghee with an installment capacity of 303 million tonnes annually. Out
of these 155 units are involved in solvent extraction and the remaining 105 units are involved in
processing of edible oil and vegetable ghee.

The main competitor for Zauq Company are Dalda and Planta, Seasons canola, Kashmir
Vanaspati, sultan Vanaspati, Shan, Habib and Sufi.

The threat of substitute

Malaysian palm oil and imported canola oil have established themselves only until recently
as potent threats to the vegetable ghee dominated sector. Increasingly awareness in the society
regarding adoption of a healthy lifestyle and cutting back consumption of fat diet have given strong
signals of changing customer preference. The substitutes for ghee are olive oil, fat free oil and
butter. People may go for organic ghee (Desi ghee) made at their homes.

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The bargaining power of customers

In Pakistan, most of the edible oil and ghee is purchased by households, food processors,
restaurants and hotels for frying and baking needs. During 2012-14, edible oil consumption for
eating purpose in Pakistan was 2.750 million tonnes.

Vegetable ghee fall in the category of necessities and hence their demand is inelastic and
the customers are left with a little bargaining power. Preference of cartelization in this industry is
also one major reason for suppliers to assert themselves on customers and hence earn handsome
profits. Due to this government is imposing heavy taxes on this industry.

The bargaining power of suppliers

Around 30% of the total oilseeds used in raw material for production of edible oil and ghee
and home-grown whereas the remaining 70%is imported. Out of the domestic proportion of raw
material of oilseeds, cottonseed and accounts for around 75% of the total.

Cultivation area of oilseed crops fell consistently since 1960. Oil crops have suffered from
different kind of disincentives. The farmers doesn’t get adequate support price for oilseeds and get
limited funds. Major losses are incurred after completion of harvesting due to the improper market
infrastructure. And top that, the powerful group of oil producers further reduces the bargaining
power of suppliers by dictating it terms.

Forecasting

Forecasting is the art and science of predicting the future demand for a product. It is usually
stated as a quantity (or value) over a specific time period. Hence, demand forecasting primarily deals
with analyzing historical data, generating statistical forecast for old and new products and
collaborating the data with suppliers and internal mangers. There are a number of inputs into a
forecast, such as: historical data, market trends, marketing data and sales force feedback. It is used
in supply chain design, planning as well as in operations. Due to the huge influx of inventory for
Zouq, it is essential to integrate complex forecasting tools and methods to match it with the level
of sales. First of all, Zouq aggregates demand near the suppliers’ end which increase the overall

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accuracy of forecasts as well as allow to gain advantage of economies of scale when purchasing
raw materials. Furthermore, Zouq uses Universal Product Bar Codes where warehouse level
information is immediately collected and analyzed. The data helps the warehouse manager to
determine which products are selling and at what quantity and sizes. Accordingly, the warehouse
manager places orders to the manufacturing division. They then build the Retail Link Database
System that supports inventory management. Through SAP and Oracle modules, network analysts
can access the Real Link database and also share the information with supplier in real time to
better forecast and anticipate demand. Hence, by using an efficient Collaborative Planning,
Forecasting and Replenishment (CPFR) scheme; the suppliers and manufacturers (Zouq) within
the supply chain synchronize their demand estimations. Zouq has also networked with its suppliers
to adopt the Vendor Managed Inventory (VMI) where suppliers become responsible for managing
the products in Zouq’s warehouses. The suppliers deliver the items directly to the concerned
warehouse for further processing at Zouq Mills.

Zouq relies on methods like the Trend Analysis for forecasting of existing products in the
market. Trend analysis is an aspect of technical analysis that tries to predict the future movement
of a stock based on past data. Trend analysis is based on the idea that what has happened in the
past gives an idea of what will happen in the future. However as the company is fairly new and
there is lack of fully sufficient historical data, Zouq also carries out forecasting for new products
through a mix of qualitative and quantitative methods incorporating customer/market research,
jury of executive opinion, sales force composite, moving average and looks-like analysis. Finally,
forecasting is integrated into Sales and Operations Planning (S&OP) that brings together
executives from key areas of the company to ultimately agree on a single forecast number and
execution plan which drives both the demand and supply sides of the enterprise.

Comparison with International Companies

When considering the company’s position at a global level its core product ‘Zouq
Banaspati’ has major rivals located in India and Bangladesh since banaspati is mainly used in the
preparation of cuisines in the sub-continent. Amul from India is a major rival since it tops the list
of all ghee brands in India. Since Amul came into being, it has retained its manufacturing in the

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home country which helps it produce at a low cost margin and earn the perks of backward
integration. Amul also attains immense control over the suppliers and manufacturing process
because of keeping their operations in India. In contrast Zouq imports oil from Malaysia and
Thailand which makes it more expensive at the cost price and allows limited control over what is
being supplied. Zouq can similarly opt for local supplier too or backward integrate with them to
achieve the same benefits as their products can be easily produced in a cost-effective manner in an
agricultural based economy like Pakistan. This would aid in the facilitation drive of its supply
chain and improve the product flow for Zouq.

Nestle Everyday Premium Ghee is a key player in the global ghee market through a shared
quality with Zouq. It not only positions itself as a premium ghee but also provides a diverse range
extracted from different options such as clarified butter, cow and buffalo milk. This can be a good
sign for this company to invest in product diversification to allow more options for markets with
different preferences. Along with this diverse product range, Nestle also holds a large amount of
safety inventory to counter sudden demand shifts hence it never fails to meet consumer orders and
always maintains a certain shelf-space in stores. Zouq must also implement improved safety stock
keeping practices to tackle its problems of meeting demand which also tarnish their brand image
in this case. In addition to this, Nestle also has a well-integrated information management system
that is updated with the current trends and makes use of effective forecasting methods based on
information amalgamated from all divisions. Such a push is also required in the case of Zouq that
faces highly uncoordinated planning that could also have disastrous results in the future hence they
should similarly make use of such a management system that allows them to increase efficiency
(as per their aim) and also improve accuracy in data to aid its information flows.

Ancient Organics Ghee is another international company that operates in India and Bangladesh
both. This company produces its inventory on an order basis mainly and ships the product to any
location through an affiliation with a logistics company that instantly carries out the task of
transportation through its trucks and bike riders. Such an affiliation benefits Ancient Organics as
the model of their business will find it heavily costly to deliver on the basis of every order. Zouq
can also take an example of this and initiate a negotiated contract with any popular departmental
store chain in Pakistan to stock their products at a regular basis so they can reach out to the
consumers more conveniently and improve its supply chain drive of transportation. Ancient

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Organics also import some of their raw materials but these are transported through air cargo that
is the fastest mode of transportation and helps maintain a specific lead time for the firm. Zouq may
find this more expensive compared to the current set up but it is also compromising on its lead
time through this which can be curbed by implementing a faster transportation medium with
greater bulk orders to counter increasing competition.

Issues and Recommendations

Viewing the above issues and their fatal consequences being faced by the Zouq Mills the
following solutions can be proposed:

Proposed Solutions and their Tradeoffs

1. Problem: Centralized Location
Solution: Follow decentralized Location or build a separate decentralized location such as
incorporate a warehouse in the city area closer to the wholesalers.
 Proximity to the consumers which will give an edge to Zouq Mills for the selection process opted
by the wholesalers.
 It allows the company to become responsive and enjoy its benefits such as immediate reaction to
the client’s demand.
Trade-off: Business owners of Zouq Mills need to consider the increase in the cash outflow
whether we buy the facility or rent it.
2. Problem: Limited Capacity
Solution: The firm should increase the processing capacity
 It would allow the company to be responsive by timely delivery.
 In order to meet the demand of the production line it is essential to produce according to the order
placed and also by forecasting the changes and allowing the facility to be able to cater to possible
demand uncertainties.
 It will increase the overall efficiency and effectiveness of the firm as compared to the competitors.
 Relationship with suppliers and customers could be maintained as both the parties cooperate on
mutual terms such as on the issues of urgency.
Trade-off: increase the production capacity by installing more machinery to facilitate the demand.
This increases cost and thus elaborates that efficiency is on the stake.

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3. Problem: Less stock to cater to uncertain demand.

Solution: Increase the stock held by the company.
 This will increase the safety inventory which will allow Zouq Mills to meet the uncertainty in the
demand posed by the wholesalers.
 It will also allow the company to be able to reduce the fatal effect that could be on the customers
if the suppliers of Zouq Mills experience any possible disruption or delay in the raw material or
other supplies.
Trade-off: Increased costs that would decrease the cost efficiency and along with it the advantages
of being efficient.
4. Problem: Lack of aggregation with suppliers.
Solution: Follow aggregation with suppliers.
 It will help to build strong relationships with suppliers that can result and trade discounts and
longer credit periods offered to Zouq Mills.
 Better communication and handling of work, efficient techniques for meeting the demand. New
ideas for incorporating new products in order to target newer segments to increase the sales and
the surplus of the supply chain as well.
 Suppliers are the strength of supply chain and this strength helps to stay competitive as compared
to the competitors.
Trade-off: More information sharing may result in risk of takeover as well as the competitors
taking advantage of it.
5. Problem: Limited Suppliers
Solution: Access to number of suppliers who can fulfill Zouq Mills’demand.
 If more number of suppliers will be ready to provide us, we will have variety in services and raw
materials.
 Zouq Mills will have a bargaining power as more number of suppliers will eventually give them
discounts in order to be their suppliers.
 More quality, technological updates could be made in the production line as suppliers will strive
for being up to date in their techniques so that they could be hired.
Tradeoff: They would be divided in various suppliers and might be unable to develop close
relations and long-term relations with few suppliers. The attention of the company will stay
divided.

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6. Problem: Sensitive to innovation.

Solution: Zouq Mills should incorporate innovation and technological techniques in the
production process.
 This will help in increasing quality and sustaining in the market to earn substantial profits.
Trade-off: Increase in the cost of implementing as well as training the employees.

Conclusion
The competitors of Zouq Mills, such as Sufi Banaspati are using high end technology and
are closely associated with their suppliers. This aids them and gives them the competitive edge. In
order to be able to stay competitive Zouq Mills needs to expand the nature of its operations. Firstly,
it needs to offer additional variety such as by reducing the fats or adding minerals. This would help
them target newer potential market. Secondly, we have the ingredients such as castic soda and
others to produce the by-products such as the detergent soaps which it should opt to produce. This
will turn their facility into a multi-product one. And this would be one of the initial steps that we
take towards responsiveness.

Appendix
Appendix 1

Manufacturing firm Distribution Areas

Suppliers of Raw  Receiving  Khanewal

Materials  Weighing  Narewal
 Unloading  Sahiwal
 Thailand  Oil refining  Sargodha
 Malaysia  Oil processing  Kot Momin
 Indonesia  Quality testing  Mor Gunda
 Inventory  Pindi Bahauddin
management  Kasur
 Storage  Mian Channu
 Warehousing  Renala Khurd
 Packaging

Wholesalers

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Retailers
Zouq Mills

Appendix 2

Appendix 3

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