Punjab Oil Mills
History
Punjab Oil Mills Limited (POML) was founded in 1983 as a manufacturer of Banaspati and
Cooking Oil. Production facilities were established in Islamabad and its production started in
1984.
The increasing investment in technology and machinery for manufacturing new product oils has greatly provided product quality, reduced costs and expand our production capabilities. Apart from Banaspati and Cooking 0il products, they are producing specialty fats targeted to the baking and food processing industries. R&D process is striving to come up with new products, as part of their "Transfat Free Initiative", they already switched to a Transfat Free formula on for Banaspati targeted to household consumers, providing Transfat Free solutions to other customers as well.

Introduction
Punjab Oil Mills Limited is a manufacturer of oil and soaps, based in Islamabad Pakistan. The produce and market an extensive range of cooking and baking mediums and other specialty fats under the flagship brand names of Zaiqa and Canolive.
“We are an ISO 9001 & FSSC 22000 certified company and take pride in making products that consistently exceed customer expectations”.
According to Punjab Oil Mills, As a result the Zaiqa and Canolive brands enjoy a valuable brand franchise today and are synonymous with uncompromising quality and constant innovation.
Edible items are not the only products being made by Punjab Oils, but they also deal in soap known by the name of “Raja”. All the products are prepared under the supervision of professionals to ensure the highest quality standards.

Hierarchy
The current hierarchy for Punjab Oil Mills is illustrated as below

chairman/
Director

Audit
Comittee

Employees

Certified
Director

Human
Resource

Employees

Board

Mission and Vision Statement
To achieve excellence in the development, production, and marketing of edible oils & fats and soap products in order to maximize customer satisfaction, achieve high levels of growth, minimize costs and maximize profits; resulting in a secure and rewarding investment to our shareholders and investors.
POML seeks to combine innovation and creativity with diligent resource and risk management to consistently create value for all its stakeholders and play a meaningful and sustainable role in the economic and social development of the Country.
POML has no wish to influence people in their personal beliefs but specifically disassociates itself from any activity that challenges our commitment to cultural diversity and equal opportunity. To establish POML as a growing and diversified food and consumer goods company that consistently exceeds customer expectations by delivering the highest standards in product development, production, distribution and marketing, while maximizing shareholder value by efficient allocation of the Company’s resources.
Below shown are a few very popular products of Punjab Oil Mills;

“Canolive is a Canola-Olive-Sunflower balanced oil that combines the best qualities of the three healthiest oils known to mankind; to bring you a balanced cooking oil that will look after you and your family’s health in the years to come.” “Ella Sunflower Cooking Oil is prepared from carefully selected 100% pure sunflower seeds and is ideal for general purpose cooking. As it is an extra-refined and winterized oil, Ella can also be used for making salad dressings, mayonnaise and other products requiring refrigeration.”

“A premium quality general purpose cooking oil made from a blend of 100% pure and carefully selected Canola, Soybean and Sunflower oils. Zaiqa
Cooking oil is ideal for household use including deep frying and general everyday cooking. “

King Cooking Oil is economical, general purpose cooking oil that combines quality with savings. This product is lower in price and distribute nationwide

Zaiqa Banaspati is the company oldest and best selling product. It is a high quality cooking medium made from
100% pure, carefully selected vegetable based oils such as Palm Oil and its fractions, Soybean Oil, Cottonseed Oil and Sunflower Oil.

Procurement
Procedure
Punjab oil mills maintains relations with various suppliers, national and international, depending on the category of raw materials, that is, machinery, raw oil, other technical equipment and so on. Various suppliers are located in Malaysia, USA and Germany while the rest of them are in Pakistan. Orders are made online where bidding is done between various suppliers and order is placed over web.
Contracts are made over standard order payment terms in which the raw materials are insured and subject to inspection when received by the firm. Other than that the letter of credit prepared and delivery till the port is accounted at the supplier’s expense. After that, the order is delivered till the firm at the firm’s own expense.
Inventory is ordered according to customer’s demand and safety stock is ordered respectively.
If the material and inventory is still in stock, then the average level of safety stock is not ordered as per the normal ordering procedure. For some material inventory for which the demands are high, the order is in high volumes and within 15-10 days. Another reason for keeping the safety stocks at high volumes is that because of the growing concerns over tax regulations along with political and governmental stability.
At certain instances, when material stocks are to be purchased from new suppliers in the market or new entrants are to be identified, advertisements are placed on international forums and various websites from where they qualify various steps to enter into their preferred supplier list.
Raw material inventory when arrives at the site, is transported to the lab for inspection and then stored in warehouses to be used later.
Reordering points for different material goods
For goods such as tin packs and other packaging materials, most of the suppliers are located in the USA. Products are of high quality with least rates. And since the firm follows a long term relation with its suppliers by enhancing their performance and sharing with the checklist of requirements and material goods that the firm needs, Punjab Oil Mills and the suppliers are both able to extract maximum benefits out of the long term contracts.
As the material goods, packaging goods and other ingredient components get specific and essential to the firm, they are chosen only after evaluating the supplier company based on its past records and performance in the market. For suppliers that are performing well in the market, the company manages to compromise over the rates and purchase the goods for higher prices. Whereas if the component is not as core to the firm and there are a lot of suppliers in the market, then the firm may bid only and not compromise over the rates.

Products and material goods are bought in bulks so that safety stocks are kept intact at all times to avoid any losses in terms of production and manufacture, since then market value of the company may get affected. Imports and the tin packs that are bought locally in weights, such that they are purchased in bulks of 12-14 kilograms and 16-18 kilograms, depending on the contract and need of the packaging material. If the safety stock is enough to be maintained for the next period, then the weight of the material goods is kept very low such as 2-4 kilograms.
For spare parts of machinery, a local agent is hired for that particular supply company who is responsible to deal with any repair and maintenance as per the contract between the two companies, the supplier and Punjab oil Mills. For instance, the conveyer belts, filter and many other technical components of machines may need repair and maintenance every after 2-3 year period. Hence they are repaired through that local agent of the supplier company on the expense of the supplier company. In the meantime certain training is also given to employees for how to use a certain machine and a technical education for each specific machine is given to them as well which may also enable engineers to sort out faults and discrepancies before contacting the supplier for repair and maintenance.
Punjab oil Mills’ core element, vitamin E is bought internationally from Germany where there is only one supplier all over the Europe. This component is poured into every oil or ghee that the firm manufactures.

Types of Procurement
Direct and Indirect Procurement
Direct procurement refers to goods and components that are part of or used in the manufacturing of the organization's products and or services, and are directly relatable with the product of finished goods. This act is done to reduce the cost for acquiring the raw materials and supplies that are core to the business; hence such procurement would involve selecting out of a pool having the least cost. For instance, in Canola oil, direct procurement is Oil and tin. This means that both Raw material as well as packaging material is considered to be direct procurement materials.
Indirect procurement refers to categories of goods and services that are supporting the organization's business processes. It is the act of purchasing services or supplies required to keep the day to day business alive. For instance, things such as repairing equipment, buying office supplies or acquiring services for daily operations would refer to indirect procurement.
Capital and Operational Budgeting
The operational budget covers day-to-day expenses. In Punjab Oil Mils, this includes wages, utilities and purchases of items that are intended to last less than a year. The operational budget refers to how much cash is needed to take in each month to cover the expenses, such as

bills, supplies etc. the capital budgeting in Punjab Oil Mills would involve expenses such as vehicles for inbound transportation, acquiring land for plant manufacture, purchasing few raw materials for a longer run such as Vitamins, sodium, sulphuric acid and other chemicals.
While Punjab Oil mills incur capital expenditures, it has to focus more over operational assets.
These assets include equipment and property that is expected to last more than a year. Punjab
Oil Mills does not take loan on regular basis, but it manages to regulate the cash on hand to qualify as capital budget expenditures. Hence the income that is generated from operational transactions is then allocated towards capital assets. For instance, the income that is generated from daily sales is then allocated towards acquiring a machinery or bidding for any new supplier. These tasks are related to buying the items that will last longer than a year or for a longer time period.
Production and Non Production
Production costs of Punjab Oil Mills include costs that are directly related to manufacturing unit of the firm. This may include raw material costs, costs of any machinery and so on. Perhaps these may directly impact over the cost of the finished product that is being introduced.
Non Production costs include costs that are not directly related to manufacturing aspect of the firm or the core business of the firm. And these may include administrative costs and other office related costs. Although they do not have a direct impact on the cost of the finished goods but they may indirectly impact upon the cost of the end product.
Government plays limited part in purchasing the supply of normal components except for one core item that is Sulphuric acid, used in manufacturing all types of finished goods by the firm.
As per normal procedure, if the product has to be bought in huge bulks, then a certain NOC has to be prepared beforehand, but since this Sulphuric Acid is bought in limited amounts because of its very small part in manufacturing process, the firm does not have to prepare any NOC for the product item to ensure that the material good.
Punjab Oil Mills Procurement VS Current Scenarios
The b/m diagram illustrates the Procurement procedure being adopted by different organization and further points will elaborate the concept of Procurement procedures

Selection of Suppliers to be invited to Tender
Tenders are a competitive bidding between selected suppliers. However, in certain cases, a specific supplier may be designated based on patent rights held by that supplier, compatibility with the existing facilities, whether they are the sole supplier of a given item, or similar situations. Request For and Submission of Tenders
A request for tenders indicating the conditions of the tender, contract conditions, and tender specifications will be provided to potential suppliers who will be invited to submit tender proposals. Financial and technical proposals must be submitted by the specified date. In addition to the proposal made in accordance with the tender specification, alternative proposals containing additional cost-saving options other than as specified.
Technical Evaluation
In principle, technical proposals will be evaluated prior to the opening of the financial proposal in order to confirm that the technical proposal conforms to the conditions and requirements set forth. In cases where such changes could result in a change in the bid price, the supplier will be asked to submit such price adjustment and explanation.
Negotiation and Award of Contract
Negotiation is the most important part while procuring any specific requirement of a company which might take days and hard work in order to meet the requirements asked by the End-User.
Delivery, Inspections, and Payment
Products are to be delivered as agreed to in the contract. Organizations reserve the right to claim liquidated damages if delivery is delayed beyond the specified delivery deadline.
Companies will inspect all products delivered by the supplier to ensure that they meet the requirements and conditions stipulated. Products which pass such inspections will be accepted.
When necessary, inspections may also be carried out during the production process.
In principle, payment will be made the month following acceptance of the product. However, other payment methods may be considered based on mutual discussions in cases where a long time period is required for production or where other special circumstances exist.

With reference to Punjab Oil Mills, we haven’t seen such a strong Supply Chain and neither a strong Procurement Procedure being adopted by them. The Procurement of POM is divided into three categories where they purchase raw material from their middle level suppliers which

are nationwide available across Pakistan, then their low level inventory such as cans, tins and other daily necessities are purchased and procured from local vendors available. Last but not the least, the most important and expensive category that is Canola Oil is procured from
Germany, which being the most expensive item that is used while making oil. The Procurement procedure for the supply of canola oil is through a single source. If you compare procedures being followed now a day, most of the big reputed organization through proper sourcing channels first source suppliers, evaluate them, rank them and then select them for further procurement. That we have seen for Punjab Oil Mills is that they are totally dealing with a single source supplier and who is their major supplier for the most important, crucial and critical item they use.
This single source supplier has both of its pros and cons. As pros are that there is a strong relationship between vendor and organization, there trust level are high, both know the demand and supply, both work together for better output and are continuously working with each other or quite some time. But what we can see on the other hand is when there is only a single source supplier; the supplier has the supreme power in order to provide their client the material. Just in case there is lesser option in fact rarely one other vendor available to cater the urgent or critical demands which might occur due to any reason.
The supplier being the sole vendor may also be charging its own high prices which there are chances can be availed at a better price in the market. This is a very alarming situation for
Punjab Oil mills as they have to seek the only supplier they are in contact with for the most valuable item they are producing. Due to this, if the raw material is not available, or the vendor even doesn’t agree to provide the raw material on time or may change the prices will definitely effect the production of POM way too much.
Furthermore, the staffing is also very minimal as there were only 3 to 4 people looking after all the Procurement and Supply Chain department. This might also impact the performance measure of their Procurement department. Maybe when the demand is on the higher node in reference to occasions, probably they might also face huge pressure in order to cater the requirement of their customer.