Supply Chain Management Practices in Dawlance

IN THE NAME OF ALLAH THE

MOST BENEFICIENT, THE MOST
MERCIFUL

Lahore Business School, The University of Lahore – Islamabad Campus 1

 Supply Chain Management Practices in Dawlance

Lahore Business School, The University of Lahore – Islamabad Campus 2

 Supply Chain Management Practices in Dawlance

Lahore Business School, The University of Lahore – Islamabad Campus 3

 Supply Chain Management Practices in Dawlance

Prepared By:

Muhammad Naveed

Bushra Raheem

Mehreen Rizvi

Submitted To:

Mr Amjad Shamim

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TABLE OF CONTANT

Acknowledgement
Executive Summary

Chapter
1. Introduction to Home appliances

1.2 History of home appliances

1.2 Current situation in Pakistan market
1.3 Competitors in home appliances industry

Chapter
2 Introduction to Dawlance

2.1 Dawlance Group

2.2 The vision
2.3 Corporate Responsibilities
2.4 Corporate Belief:
2.5 Business
2.6 Product line of Dawlance
2.7 History of Dawlance

Chapter
3 Market position

3.1 Present market share

3.2 Major market for Dawlance
3.3 Promotion strategy of Dawlance
3.4 Competitive strategy of Dawlance
3.5 Comparison between Dawlance and PEL

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Chapter
4 Major Departments in Dawlance

4.1 Key account management in Dawlance

4.2 Supply chain management in Dawlance

5. Supply chain Operations in Dawlance

5.1 Procurement
5.2 Suppliers
5.3 Manufacturing
5.4 Warehouse
5.5 Distributors
5.6 Transportation
5.7 Retailers
7.8 Customers

Chapter
5 Analysis

6.1 SWOT Analysis

6.2 PEST Analysis

Chapter
7 Suggestions and Recommendations

References

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Acknowledgements
A million thanks to Almighty, without whose support, there is no work. Our greatest
appreciation goes to Finance Manager Mr. Farrukh Dawlance Service center G/7,
Islamabad for his kind help and support. Being very cooperative, He has shared very
useful information about each function of the sc Department in Dawlance.

We would also like to thanks MR.AMJAD SHAMIM , our most respected coordinator
(SCM), who gave us the task and opportunity to explore the SCM of an organization like
Dawlance ,by keeping in mind that practical work is more effective.

We also appreciate our respected teacher Mr. WAHID RASHID. He provided us contacts
in Dawlance and also provide precious guidance about the project.

It is our best effort but we could not explore supply chain properly because its head office
is in Karachi.

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EXECUTIVE SUMMARY

Our premise is that supply chain plays a vital role towards organizational behavior
which directly affects the overall performance of the organization.

The purpose of the project is to prove this statement by showing how proactive
managers and supply chain personnel have the responsibility of continuously
improving contribution between all functions of the supply chain to the organization
while simultaneously maintaining their level of satisfaction and other dependent
variables.

The focus of this research is on the application of Supply Chain Management

practices in Dawlance, its important function including suppliers, manufacturer,
warehouse, distributors, retailers and customers our selected organization is
Dawlance, a market leader in home appliances industry of Pakistan.

Dawlance has established an effective SC department that is maintaining all the

matters regarding SC.
We have tried our best to cover all the aspects related to SCM in this project. For
the purpose, Recommendations about SCM given in the end of this project are
based on our own perceptions

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CHAPTER 1

Introduction to Home appliances

Home appliances are electrical/mechanical appliances which accomplish some household

functions, such as cooking or cleaning. In ………… Appliances may be divided into
categories called "white goods" and "brown goods" in British English. Appliances
may be divided into categories called "small appliances" and "major appliances" in
American English. Brown goods/Small appliances are typically small household
electrical entertainment appliances such as:, CD and DVD players,

1.1.1.1 Appliances

o
o Camcorders
o Still cameras
o Clocks, Alarm clocks
o Video game consoles
o HiFi and home cinema
o Telephones
o Answering machines

1.1.1 White goods/Major appliances comprise major household appliances

and may include:

1.1.2.1 Appliances

o Air conditioner
o Dishwasher

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o Clothes dryer
o Drying cabinet
o Freezer
o Refrigerator
o Kitchen stove
o Water heater
o Washing machine
o Trash compactor
o Microwave oven
o Induction cookers

1.2 History of Home appliances:

The 1950s - A decade of change

After years of rationing and shortages, the 1950s were a period of economic richness,
high employment and great technological development. Many returned servicemen got
married, established homes and raised families. During this period, Australians
enthusiastically adorned their homes with a dazzling range of new domestic appliances.
Hire-purchase schemes allowed people to take products home and pay for them in
installments.

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During the 1950s, the role of women was generally considered to be that of the
'homemaker'. Bright television and magazine advertisements encouraged women to
stay at home and create a domestic haven for their families using the new appliances
on offer. These devices promised to raise standards of living and release housewives
from the shackles of household chores.

Electric stoves, refrigerators, toasters and kettles revolutionized the kitchen, and
vacuum cleaners and washing machines shaved hours off time spent cleaning.
Women could enjoy more leisure time while still creating a clean, comfortable home
for their families. Many women chose to join the paid workforce, changing the
shape of the labor market forever.

Home appliances also came to symbolize the success and modern outlook of their
owners and were often displayed in the lounge room for visitors to admire.

By the end of the 1950s, many small appliances that were at first considered
luxuries, like kettles and electric mixers, were now considered 'must-have' items.
Other appliances, like washing machines and refrigerators, however, were still
expensive and out of reach for many families.

1960s - Mass production and disposable appliances

In the late 1950s and early 1960s, developments in manufacturing technology led to
a huge increase in mass production. This included the production of electrical
appliances. Coupled with an increasingly prosperous economy, mass production
meant that most appliances became not just affordable, but essential parts of
everyday life.

Manufacturers, however, realized that they were facing a major problem. If they
continued to design high-quality products that lasted decades, then consumers
would have no reason to keep buying their products. Thus, many manufacturers
began to produce lower-quality appliances that were designed to be thrown out and
replaced rather than repaired. This forced people to continually purchase new
appliances.

In order to sell more products, manufacturers also created more diverse, innovative
products that boasted a variety of features. Irons, for example, now came with

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useful improvements like thermostats (a device that regulates temperature) - which

rendered previous models of irons obsolete.

1960s - Design considerations

The aesthetic qualities of domestic appliances became a prime consideration for
consumers in the late 1950s. The appearance of early home appliances bore many
similarities to heavy industrial factory equipment - an attempt by manufacturers to
emphasize the efficiency of their products. Such designs, however, tended to make
appliances look more like hard work than a pleasurable experience.

Many people also liked to display appliances in their lounge rooms as show pieces
rather than hide them away in the kitchen and laundry.

As a result, manufacturers altered the design of home appliances. Rather than

looking like pieces of industrial machinery, appliances became smoother, shinier
and more stylish and available in a variety of colors.

1970s and 1980s

By the 1970s, owning a wide range of home appliances was deemed essential for daily
living.

Microwave ovens did not gain widespread popularity in UK, USA, and Australia until
the early 1980s, although they had been commercially available since the late 1950s.
Microwaves revolutionized food preparation - making it possible to defrost, cook or
reheat food in very little time, and prompting a growth in the consumption of frozen
convenience meals.

Other popular kitchen appliances of the 1980s included food processors and blenders,
which also made cooking quicker and easier.

Energy efficiency

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In the late 1980s and 1990s, developments in home appliances focused on energy
efficiency. Environmental awareness was at an all-time high and studies had found
that home appliances were a major source of electricity consumption and
greenhouse gas emissions.
A company introduced a product labeling program, whereby the energy efficiency
of an appliance was clearly displayed. This encouraged consumers to buy the most
environmentally-friendly option available.

In the 1990s, manufacturers were also subject to stricter environmental regulations.

Appliances like refrigerators were required to become more energy efficient, while
dishwashers and washing machines were designed to reduce water consumption.

1990s - Environmentalism and the era of improvement

Many of the home appliances used in the 1990s were essentially the same ones used in

the 1950s, albeit with minor improvements and added features. Some brand new

appliances were also available - consumers could choose from an incredible array of

machines that would make cappuccinos, bake bread, churn homemade ice cream and

even blow the leaves off their driveways. Advances in home appliance technology led to

the introduction of different plastics and other new materials. Thermoplastics increased

strength and durability and other plastics reduced the weight of appliances, which in turn

lowered transport costs. A 'noise-free' dishwasher was released in the early 1990s and

manufacturers developed quieter motors and new, sturdier types of metal and glass.

Environmental impact of home appliances in the 1990s

Constant modification meant that home appliances in the 1990s quickly became
outdated. The design of most appliances also made them difficult and expensive to
repair and many devices were often discarded after a short period of time. Large
numbers of old home appliances began to pile up in landfill areas.

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Throughout the 1990s, concerns were raised about the environmental consequences
of dumping home appliances in landfill. Many appliances, especially older ones,
contained toxic substances like lead, chlorofluorocarbons (CFCs), oil and grease.
These substances could leach into soil and water and have serious health and
environmental effects.

Disused appliances also began to use up valuable landfill areas in densely populated
regions, where landfill space was fast becoming a scarce resource.

As a result, the use of high energy-consuming appliances and the large-scale

dumping of home appliances in landfill areas became less socially acceptable
towards the end of the 1990s. People were encouraged to think carefully about the
level of waste they were contributing to landfill and to consider their energy use in
the home when buying and maintaining appliances.

Social impact of home appliances in the 1990s

Time savers or time suckers?

When launched in the 1950s, home appliances were hailed as the key to relieving
women from hours spent on household tasks. By the 1990s, the responsibility of
performing most household chores still primarily fell on women, but research found
that domestic appliances may not have actually saved women a great deal of time at
all.

This peculiarity may be explained by the fact that as consumption increased

throughout the decades, the quantity of household chores also increased. Washing
machines, for example, may have reduced the time it took to wash clothes, but the
amount of clothes people owned in the 1990s had dramatically increased. Also,
home appliances may have made Australians more efficient, but the general level of
home cleanliness that was considered acceptable had also risen.

Fancier kitchens, fewer home-cooked meals

Despite owning more appliances, people in the 1990s spent less time preparing meals
than in the past.

In the 1940s, British spent around six hours per day purchasing and preparing food.
By the 1970s, this had dropped to two hours. By the end of the 1990s, many people
ate a large proportion of take-away or supermarket convenience meals, and spent
just 30 minutes in the kitchen each day.

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1.3 Current Situation of Home Appliance Market in Pakistan

According to the report by Daily Times (www.dailytimes.com.pk), the business

environment is highly favorable for investment in home appliance industry of Pakistan.

Therefore home appliance industry is getting attention of foreign investors as well.

China’s home appliance

Giant Haier has established the industrial zone in Punjab, Pakistan which is its second

overseas manufacturing base after United States. This is joint venture in home appliance

industry between Government of China and the private sector of Pakistan. It is very large

and growing business sector in Pakistan. In Pakistani home appliance market, there are

two types of companies involved in appliance business those are local and imported

manufacturers and marketers. They are engaged in both aspects of marketing that is

business-to-business marketing (B2B) and business-to-consumer (B2C) marketing. In

business-to-business, the manufacturers sell their products to retailers those are known as

dealers. Dealers are responsible for retail selling to the end users. A few of the companies

also have their own retail outlets also. Since last few years the manufacturers are facing a

competitive and challenging situation in business-to-business relationships due to

following reasons.

There are three factors to take into account for home appliance industry in Pakistan.

Firstly, the challenging situation has been created by dealers whose profits have been

reduced due to certain policies adopted by manufacturers in the last few years. So they

are looking forward to new manufacturers entering in the industry. More profits and

better services are also being Included in their demands.

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Secondly, the new entrants in the manufacturing industry including manufacturers and

importers, either they are local or foreign investors have challenged the domination of

existing manufacturers and importers.

Thirdly, due to the expansion in market size horizontally and vertically, competitive

situation has been increased among manufacturers within the industry.

Currently there is a decline in the manufacturing industry in Pakistan and especially in

the home appliances and freezing unit industry but from last six to seven years industry

growth rate is almost ten to eleven percent. There are many factors behind it like political

uncertainty, economic crush which came worldwide and energy problem in Pakistan, but

now the situation is very much under control.

1.4 Competitors in Home appliances:

1.4.1 Direct Competitors:

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o Dawlance (local)
o PEL (local)
o LG (Korea)
o Haier (china and Pakistan private sector)
o Waves (local)

1.4.2 Indirect Competitors:

o Singer (local)
o Samsung

Chapter # 2

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INTRODUCTION TO DAWLANCE:

Dawlance is a brand name of group of companies which was established in 1980

with a name United Refrigeration Industries Limited.

2.1 Dawlance Group:

Name of Company: Nature of Business:

UNITED REFRIGERATION Manufacturer of Dawlance

INDUSTRIES LTD. Brand Refrigerators

DAWLANCE (PVT.) LTD. Manufacturer of Dawlance

Brand Deep Freezers &
Washing Machines

UNITED SALES (PVT.) LTD. Hire Purchase Business of

Domestic Appliances.

Retail Store Network with the

DAWLANCE MARKETING (PVT.) brand name of "Electric city"
LTD.

DAWLANCE ELECTRONICS (PVT.) Marketing and Distribution

LTD. of OEM products

2.2 THE VISION:

"We are committed. Above everything else, Dawlance places its top priority on the
satisfaction of human beings the satisfaction of its customers, partners and
employees. All our policies and approach towards work revolve around our
corporate belief."

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2.3 Corporate Responsibilities:

o Advancing the standard of living in Pakistan by manufacturing reliable and

affordable electrical products.
o
Implementation of first class production engineering.

o Development of our employee not only for the firm's benefit but to contribute
to each employee personal growth.

o Major contributor in restoring Pakistani status and prestige.

o To reinforce value like harmony, solidarity, discipline and dedication

2.4 Corporate Belief:

o Individual must be respected.

o The customer must be given the best possible products and services.

o Excellence and superior performance must be pursued.

2.5 Business

Manufacturing and marketing of Home appliances

2.6 Product Line:

(a). Refrigeration

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2.6 Product Line:

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2.7 History of Dawlance:

Established 1980

Refrigerator Production 1981

Deep Freezer Production 1988

1992
Deep Freezer Manufacturing Unit
1992
Launched RAC and No-Frost Ref.

Launched WM and MWO 1995

1996
Production of No-Frost Refrigerator
1996
Production of Aero-Design Series

Production of Up-Right Freezer 1997

ISO 9001 Certification 1999

2000
Production of Washing Machine

ISO 14000 Certification 2001

USL Shops 2001

Electric city # 1 2001

Signature series USL Shops 2002

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2.8 Corporate Structure:

All departments of the company are linked with Head Office.
Offices of National Managers are situated in Karachi.

Dawlance Centre: 7/4, Civil Lines-

Head Office 9,
Dr. Zia-uddin Ahmed Road,
Karachi

Managing Director Mr. Bashir Dawood

Employees Management 600

Worker 900
Total 1500

Supply Chain Head Raja Adeel Khalid

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Chapter # 3

Market Position

Leader in household appliances in Pakistan

Largest Company engaged in appliances business

3.1 Present Market Share of Dawlance product is:

o Refrigerators 65%
o Washing Machines 35%
o Microwave Oven 40%
o Chest Freezers 45%
o Air Conditioners 15%

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3.2 Major Market of Dawlance:

In Pakistan Dawlance has maximum market share and it is the leader in home
appliances industry in Pakistan.
Middle East is also a big market for the

3.3 Promotion strategies of Dawlance:

3.3.1 Push Strategy:

It is promotion program primarily aimed at dealers in which company focuses to sell the

product. In past Dawlance used this strategy and gave more and more incentives to

dealers to increase sales.

3.3.2 Pull Strategy:

It is another strategy aimed at final customer. Now a day’s Dawlance is using Pull

strategy by improving product quality. For Example: Dawlance is using DANFOSS

compressor in its appliances. Dawlance spend its 3% of sales on promotion.

3.4 Competitive Strategy:

According to AUTHER D. LITTLE a company will occupy one of the following

competitive strategy. For example, Dominant, Strong, Favorable, Tenable, Weak, Non-

viable. Dawlance is a market leader in Home appliances industry in Pakistan and it

occupy Dominant class.

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3.5 Comparison between Dawlance and PEL:

The comparison has been made with PEL because Dawlance is market leader and PEL is
challenger.

3.5.1 Innovation:

Dawlance has high innovative process. PEL has also high innovative process but it is
not as Dawlance has.

3.5.2 MARKET LEADER:

Dawlance is market leader and PEL is challenger.

3.5.3 PRODUCT RANGE:

Dawlance has 20 to 24 products in the market which doing very good business and
PEL has 15 products in the market with good market reputation.

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Chapter # 4

Major Departments in Dawlance:

o Human Resource
o Finance
o Accounts
o Marketing
o Administration
o Supply Chain Management
o KAM (key account management)

4.1 Key Account Management Practices:

( we are discussing it here because it is new concept and effective for supply chain)

Last year the Dawlance Company has introduced KAM program named “key
account management scheme” in the market place. All other actors in home
appliance market are still lagging behind and using traditional sales approaches.

To survive in the dynamic marketplaces, companies need to develop the strategies

that can stay alive in the changing marketplace. They must develop relationships
with suppliers and distributors, investors, customers and other key companies and
people in the market.

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4.1.1 Benefits of Key Account Management

Suppliers and customers Benefits

o Protect existing volume base

o Better service
o Realize incremental volume
o Faster communication
o Increase account penetration
o Better decisions
o Increase market penetration
o Easy access to supplier
o Gain operational efficiencies
o Better supplier knowledge
o Gain competitive knowledge
o Greater trust
o Product development ideas
o Continuity

4.1.2 Frameworks for KAM Practices

o Informal capabilities
o Hidden discounts
o Service level
o Priority in
o complaints
o Price polls
o Credits days
o limits

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4.1.3 Selecting suitable strategies

For the key accounts

o Collaboration
o Negotiation
o Administration
o Accommodation
o Submission
o Domination

4.1.4 Analyzing key accounts

o Buying behavior
o Information exchange
o Buying frequency
o Complaints
o Switching costs

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Chapter# 3

SUPPLY CHAIN OPERATIONS IN DAWLANCE

Dawlance has separate department for Supply Chain Activities. It is responsible for
the procurement, warehousing, distribution, transportation etc.

5.1 Types of Material Purchased by The Dawlance:

5.1.1 IMPORTS

o Insulation Chemicals
o Crystal sheets
o Depoxy
o Epoxy
o Compressor
o Copper pipe
o Thermostat
o Monogram
o Bulb
o

5.1.2 LOCAL PURCHASES:

o Gas kits
o Tape Consumable Plastic sheets
o Handle
o Knobs
o Wheel
o Wracks etc

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5.2 SUPPLIERS:

Dawlance have both national and international suppliers.

From national suppliers Dawlance purchase chemicals, plastic, copper, but from
international usually purchase electric items and mostly these are finished goods at
their level like motors, compressor, etc

Dawlance has a list of its suppliers, which is selected after fully information. If
anyone supplier is unable to provide quality of material, timely delivery that vendor
disqualify for the next procurement. No tender call for the procurement Dawlance
itself approach up to the suppliers.
Dawlance import AC and Microwave as finish good just give its brand name
(monogram), but other household items manufactured by Dawlance itself

5.2.1 Name of Suppliers:

5.2.1.1 National:

o NORANI Traders Karachi

o KAGHAN Traders Karachi
o Ali Ahmed traders Islamabad

5.2.1.2 International (from the origin of):

o China
o Japan
o USA
o Germany
o Italy

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5.3 MANUFACTURING:

Production Location of Dawlance is in Karachi and Hyderabad. Dawlance

manufacture refrigerator, Deep freezers, washing machine, TV.

Dawlance purchase raw material and manufacture boxes, doors, used in the
refrigerators, washing machine.

Due to lake of technology in Pakistan home Appliances Industry Import Microwave

and AC. Dawlance also import both AC and Microwave.

5.4 WAREHOUSE:

Dawlance possess very effective logistics system with 16 big warehouses all over the
country for the prompt (responsive) execution of sales invoices. Hence Dawlance
products are available almost in all the cities and small towns as well. For cost
saving Dawlance shift its warehouse from Islamabad and Peshawar to WAHCANT.

5.4.1 Inventory Management:

Dawlance manufacture only in Karachi Hyderabad which shows it is using

Centralized inventory policy it is cost reducing for the company.
For the uncertainty company keep some extra inventory as a backup as in case of
the murder of Benazir Bhutto.
It is named as Emergency Stock for the company.

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5.5 DISTRIBUTERS, DEALERS AND OPERATIONAL CENTERS

Dawlance is using out source for the transportation of the goods from factory to the
warehouse and from warehouse to the retail store on the in house source.

o There are 800 dealers in the country that is 80% of the total national dealers.

o There are 16 operational centers (Branches) to operate this large dealer

network all over the country.

5.5.1 Consideration for Allotment of dealership:

o Financial background
o Location of outlet
o Experience and knowledge of dealer
o Dealers attitude
o Good will

5.6 Transportation:

Dawlance uses out sources from factory to warehouse for product transportation
and from warehouse Dawlance have its own vehicles.
From Karachi to all over the country by truck which are provided by the good
transportation companies.

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5.7 RETAILERS:

Dawlance has exclusive retailers and individual show rooms which are 800 in nearly
all parts of the country with the service center.

Retailer must purchase Rs: 20,000,000 at first on cash company gives benefits to
those retailers who sale products in short time. After first purchase company gives
material on 15% credit.

5.8 CUSTOMERS:

Dawlance manufacture products for everyone,

Up to Middle, Upper Class of Pakistan.

For rapid delivery Dawlance established a huge network of warehouses and retail
stores in all over the country.

5.8.1 AFTER SALE SERVICES

The service centers are present where company dealers exist. There are 20
company’s own service centers and 40 contract workshops in remote areas to
provide timely and effective customer service.

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Chapter # 6
ANALYSIS

6.1SWOT ANALYSIS:

6.1.1 Strengths:

o Strong brand equity

o Market leader in Home appliances industry
o Quality of product
o Large dealers network
o Warehouses covering all areas
o KAM practices

6.1.2 Weaknesses :

o Focusing only on Refrigerators

o Short product line

6.1.3 Opportunities:

o Decentralized production which can save cost of transportation and storage.

o Product line expansion.
o Get technology for the production of AC and Microwave which is still not
available in Pakistan.
o Export can be increased

6.1.4 Threats:
o Cheap product of china
o Energy crises in Pakistan

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6.2 PEST ANALYSIS:

6.2.1 Political Environment:

o There is uncertain political environment in Pakistan due to this uncertain

political condition foreign investors are not interested in Pakistani market.
o There is no check and balance by Govt. on importers any dealer can import
anything.
o 15% subsidy is given by china to exporters there is no such thing in Pakistan

6.2.2 Economic Environment:

o There is a great boost in construction sector in Pakistan so large demand of

home appliances is present
o Per capita income in Pakistan has increased so demand of home appliances is
also increased.
o Literacy rate is also increased up to 54%
o Cost of production and import is very high.

6.2.3 Social Environment:

o People become more price conscious.

o People like energy savers like splits

o In country like Pakistan the use of AC is huge because of the large summer
season of 8 months. Upper and middle class use AC.

o Companies are becoming more social responsible as they have introduced

Antibacterial and anti dust filters.

6.2.4 Technological Environment:

o Product innovation increases the competition and decreases the product life
cycle.

o In AC technology is getting change day by day

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Chapter # 7

Suggestions and Recommendations:

Dawlance is A market leader in Pakistan home appliances industry having

maximum market share. Now Dawlance should become strong innovator get
technology for the production of AC and Microwave oven in Pakistan.
Dawlance should increase its production capacity by having new factory in Punjab
which will be cost saving from storage and transportation from Karachi to Lahore,
Islamabad.
Dawlance should increase market share in Air Conditioner market now Pakistan is
a big market for AC usage.

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References:

www.dawlance.com.pk
www.answer.com
www.scribd.com
Mr. Farrukh
Branch Manager Dawlance Service Center G-7 Islamabad
Cell # 03335360987

Lahore Business School, The University of Lahore – Islamabad Campus 41

 Supply Chain Management Practices in Dawlance

Lahore Business School, The University of Lahore – Islamabad Campus 42