Executive Summary
DG Khan Cement Factory is one of the computerized cement factories in Pakistan. It produces the cement by adopting dry process.
Production ProcessThese are three raw materials of Cement:
Lime Stone
Shale and
Gypsum
Limestone and shale is taken from quarry with the help of 7-Km long conveyor belt. The both raw material and mixed in raw mill, heated in kiln upto 1600 OC ground in cement mill along with gypsum almost 5%. The final product cement is prepared.
Location:The company is located at Sattai Khofli, which is about 40 Km from city of Dera Ghazi Khan.
Capacity:The company has two plants
Existing
Expansion
Both the plants capacity is 2200 ton and 3300 ton clinker per day respectively.
Quality ControlThe company believes on quality assurance not on quantity inspection. So they have got ISO 9002 certification. Following tests are performed at different stages of production process.
Raw Materials
Test on these material are performed
Raw Mill
Following Tests are applied
Hydraulic Modulus
Silica Modulus
Limestone Factor
Kiln
Same tests are performed as in raw mill.
Clinker
Tests are performed to see the quality of clinker.
Cement
Following physical tests are performed:
Expansion
Fineness
Strength
Loading
Tests are performed after loading.
Aggregate planning is done to cope with demand by using both demand and capacity alternatives.
PurchasingPurchasing of items is the duty of purchase department. Need is recognized when the indentor raises the demand notice. The purchase department identifies and selects the supplier and order is placed. Placed order is checked by store department and indentor to accept the order.
Inventory ControlThe store is responsible to manage and control the inventory of inputs. The inventory of outputs (cement) kept in silos. The received order is inspected by store department. And accepted material is stored in the store.
DistributionThe company has four sales offices in the following cities:
Multan
Lahore
Karachi
D. G. Khan
These sales offices accumulate demand of their respective regions and send the orders to the head office Lahore.
Introduction
State Cement Corporation of Pakistan (S. C. C. P) was established in 1984 managed by the Federal Government. In the beginning, existing plant was purchased from U.B. E. industries of Japan. It had installed capacity of 2300-ton clinker daily and started its production in April 1986.
The main purpose for the establishment of plant was to fulfil the demand of Northern Marketing zone. In 1977 the annual demand for cement in Pakistan was about at 3.7 million tons while the production was about 3.1 m. To fulfill 0.6 million gap, a new plant was required. After a detailed investigation, they selected a place D. G. Khan City where large high quality material reserves were available at least or 100 years. The location is ideal because it is near to market as well as prior to raw material.
The govt. privatized the SCCOP, first purchased by Segol Group of Industries and Nishat Group of Industries combinely. In 1992, the company purchased by Nishat Group of Industries solely. After privatization it name changed from SCCOP to D. G. Khan Cement Factory. Before the establishment of expansion plant (new plant) in 1997.
The cement was brought to this and either from Maple Leaf Cement Factory Mianwali and Zeal Pak Hyderabad and ACC Rohi. The new plant is the relief for Bhawalpur, Lodhran, Khanewal Muzafargurh, Bhawalnagar, Vehari. It was purchased from F. X. Smith of Denmark. Its design capacity of 3300 ton clinker per day.
Types of CementThe company has following types of cement:
Ordinary Portland Cement
Sulphate Resistance Cement
Black Cement
Heat Resistance Cement
White Cement
Slag Cement
Quick Setting Cement
Under Water Setting Cement
Acid Resistant Cement
The mission statement of D. G. Khan Cement Company is:
“D. G. Khan Cement Company committed to produce and supply high quality conforming the local and international standards adopting modern technique satisfying the customer requirements the most competitive prices.”
Future Planning of CompanyThe company recently did two things:
Establishment of Expansion Plant
Getting ISO 9002 Certificate
Both the measures to reveal the future planning of the company. The future planning of the company is to export their high quality cement. The existing plant is unable to cope with the demand of country. With the establishment of expansion plant, their supply is more than demand. So, they can easily export their high quality cement. The main purpose of ISO 9002 certificate it to get the approval from ISO, they can export their high quality cement according to international standards and can export after 2000 A. D. when only ISO certified companies can export their products.
Production Process
D. G. Khan Cement factory adopt true dry production process for the manufacturing of cement. This process consists of following steps.
DrillingDrilling is done in the quarry with the help of drilling machine. They create a space for the powder explosive.
BlastingThe powder explosive is blasted under a controlled process to get different small segments of limestone. The large segments are also converted into small segments which is called crushing process.
TransportationThe small fragments are loaded on the 7-Km long 3 belts conveyor system running over rough terrain. This conveyor takes the new material from quarry to the factory site. The limestone and shale to stored in the open space.
GrindingAfter storage, the stored limestone and shale are fed to the raw mill with the help of two hoppers according to predetermined mixed proportion. The roughly crushed material passed through 3 rollers. The mixture is dehydrated, sized, and fine particulars are separated.
The cyclone extracts different gasses, which are emitted in this process. The collected separated mixture is called raw meal. It is stored in a silo of 15000 ton. During the process water is also used with the purpose:
To lower the gas volume
To control the variation
To maintain the temperature
The raw meal is fed into kiln shell. The kiln shell has following particulars.
Length of shell 45 m
Diameter 3.5 to 6.5 m
Slope 1.5o
In this kiln shell following reactions take place.
CaCo3 CaO + O2 (Calcium Oxide)
CaCo + SI O2 CaoSio2 (Calcium Silicate)
CaOSio2 + CaO 2 CaoSio2 (Dicalcium Silicate)
2CaoSio2 + CaO 3CaoSio2 (Tricalcium Silicate)
CaO + Al2 O2 CaO Al2 O3
CaO Al2 O3 + CaO 2 CaO Al2 O3
2 CaO Al2 O3 + CaO 3 CaO Al2 O3
3 CaO Al2 O3 + CaO + Fe2 O3 C4AF*
(Tetra Calcium Aluminum Fersite)
The kiln shell can be divided into four portions.
Firstly, the incoming raw meal is heated with the help of preheated air which comes from the cooler at the terminal end of the kiln. Heat is provided by the combustion of the furnace oil. The raw meal is moved on the sloped shell which have four zones of temperature.
Calcination zone 1200 OC
Transition zone 1250 OC
Sintering zone 1300 OC
Burning zone 1400 - 1500 OC
After the position of burning zone the mixture is cooled down with the help of air fans of graze cooler. The heated is omitted which reduce the temperature of mixture. This heated air is used to raise the temperature of raw meal entering into the kiln. The finished product is called clinker, which is stored in an open yard having capacity of 30000 tons.
GrindingNow the clinker enters into Cement Mill. In this mill clinker is ground with gypsum. Almost 5% of gypsum is added. The main purpose of addition of gypsum is to increase the setting time.
The final product cement is prepared. It is stored in the silo having capacity of 10,000 ton each.
PackingIn the packing unit, there are 4 rotary packers and each packer has 8 nozzles. The whole packing process is automatic. Cement bags are loaded on the trucks and heavy trollers automatically. Each cement bag has 50 Kg weight. Sometimes heavy users ask for bulk quantity of cement without packing. It is loaded into the truck.
Computerized production process flow is attached at the end of the report.
Product Process Flow Diagram
Cement MillStorage Yard
Cooler
Kiln
Preheater
Silo
Raw Mill
Quarry
Quality Control
Quality a Competitive PriorityThere are four competitive priorities
cost
time
flexibility
quality
The product like cement cost priority is not best because of legal consideration and suffer heavy losses. Time can be used as competitive priority. On time delivery is most important but the sometimes demand is very high the company is unable to provided on time delivery. The flexibility is less because cement is standardized product. The only one competitive priority is the main base which offer the competition. This is achieving the high quality. As it was mentioned in the mission statement of the organization. Provide the high quality cement at competitive prices. Because the prices of cement are fixed so quality is the only competitive weapon through which a company can compete the market. Keeping this in its view, D. G. Cement Factory applied for ISO 9000 certificate.
ISO 9002D. G. Khan cement factory is providing high quality cement for its beginning. After the establishment of expansion department. The company No. 1 in the cement industry Pakistan.
To cope with the environment they apply for ISO 9002 certificate. The company hired Shakeel and Company Lahore as consultant to get ISO 9002 certificate. A committee is formed under the control of GM of the company Mr. Dr. Asif Bashir to be certified as ISO 9002.
The company get the ISO 9002, certificate in the long run. The main aim to get the certificate is to provide the customers the quality cement and competitive prices.
After getting the ISO 9002 certificate. The company reduce its inefficiencies in management as well as in production. It reduce in rework cost because of clear cut responsibilities are awarded to employees. It also increase the reliability of employee upon the D. G. Cement.
Modern equipped laboratory establishment
Quality to check according to plan at each stage.
Cement x-ray Spectrometer is used to check the quality of the product at different stage. It takes 5 minutes to assess the ingredients of the product. There are six tests for the quality assurance at different stages of the production process.
Raw MaterialRaw material of cement can be categorized in three types:
Limestone
Shale
Gypsum
The sampling point of limestone after blasting the rocks. The fragments of the rocks are taken and check its chemical composition. Several benches have been opened and abandoned if found to be lantern* low grade limestone. The main components of limestone is calcium oxide (CaO). The following equation shoes the %age of CaO
Heat
CaCO3 CaO + CO3
100% 56% 44%
The production department accept only those limestone having at least 52% of CaO.
Shale or ClayTh second component of cement is shale. Shale can be found near the quarry. They take different samples of shale at different points to find out which shale has high quality. They utilize these shale first and then any other next.
GypsumGypsum is another component of cement. It is 5% of the whole cement. It is mostly taken from outside supplier. Its quality is checked at the entering gate. If it is according to contsuit* then it is selected otherwise rejected to suppliers.
Raw MillWhen the mixture reach in raw mill, three sophisticated chemical tests are performed.
They take different samples having different composition of two raw material (limestone & shale). Usually six samples of following composition is taken.
Sample No. Limestone %age %age of Shale
1. 77% 23%
2. 78% 22%
3. 79% 21%
Hydraulic Modulus (HM)In hydraulic modulus the above taken samples are taken and put the %age values of composition of different compound in the following formula.
HM = = 2.1-/+ 0.2
CaO
Si2O + Al2O3 + Fe2O3
The standard values is 2.1 and + 0.2 variation is allowed. The above formula tell us by changing the composition CaO we can get the exact result.
Silica ModulusThe test is also performed similarly to the above by taking different ingredients. The formula is given below
SM =
SiO2
Al2 O3 + Fe2O3
The SiO2 is the main component of shale. By changing the composition we can get the standard result.
Ume* Saturation Factor (LSF)This test is applied to find out the amount of CaO in the mixture. We can calculate the LSF factor by the following formula
LSF = = 90 + 3
CaO
28Si2O + 1.2Al2O3 + 0.65FerO3
90% of lime in mixture is a standard value while + 3 stands for variation.
KilnWhen the raw meal is fed to the kiln, it is also checked chemically by taking different samples. Some test of hydraulic modulus, silica modulus and lime saturation factor is applied to raw meal as well. The main purpose of the raw meal test is to find out the temperature required to heating purpose of raw meal.
ClinkerWhen the raw meal passes through kiln shell and take a form of clinker. A sample is taken manually at this moment and then it is analyzed chemically with the help of cement x-ray spectrometer. Clinker is a hasd* granular material. They grand into powder form and analyze. If the result is not according to standard they dispose it otherwise mixed in high quality clinker.
CementWhen the 5% gypsum is added to ground clinker, the final product is cement. They take the sample of cement to find out the right %age of gypsum in cement. As well as the fineness of cement.
Following tests are performed for quality assurance of cement:
Expansion
Setting Time
Fineness
Strength
The expansion test check that upto what extent the cement is expanded after addition of water. It is a complex test. According to world standard the expansion of cement should not be more that 10-mm. The company mostly test shows the expansion of 0.5 to 5.5 mm. Which is obviously excellent.
Setting TimeThe setting time shows the time taken by cement to become solid.
There are two types of setting time.
Initial Setting Time
Initial setting time is the time when we can penetrate the specific middle exact half position of the cement block.
Final Setting Time
It is the time when we can’t penetrate the specific needle into cement block.
We can compare initial and final setting time of D. G. Cement with the world standards.
Setting time | DG Cement | World Standard |
Initial Setting Time | 150 minutes | at least 45 minutes |
Final Setting Time | 200 minutes | at least 10 hours |
Blaine test measures the small size of the particles in specific weights. The world standard for the fineness test is that the should not be less than 2250 cm2/gm while in D G Cement it is 2800 Cm2/gm.
Strength TestThe strength test check the strength of cement after passing different number of days.
The world standard and their standard are given below:
Strength | Unit | Company Std. | World Standard |
3 days | PSI | 3800-4400 | 2200 |
7 days | PSI | 4800-5400 | 3400 |
28 days | PSI | 6000-7000 | 5000 |
The final sample is taken when the packed cement is loaded on the truck. The some four tests are performed as it is performed in cement mill. If the cement is not upto the mark dispatch is stopped otherwise no problem.
Location
The location of plant is at Sattie Khofli 40 Km away from the Dera Ghazi Khan City. Different factors are considered for the location selection of the factory. The plant is located at sattai Khofli 40 Km away from the Dera Ghazi Khan City.
Cement industry is heavily raw material based industry. Without proper availability of raw material, no one can think of establishment of the factory. If we look at the Southern Punjab region. No other place is suitable when limestone and shale is available. So, availability of limestone and shale is a dominant factors. If we consume these resources at the present level, it is sufficient for at least 100 years.
The daily design capacity of both production plants is 56000 tons. So, it requires 9520 tons raw material.
1 ton clinker equals 1.7 ton of raw material. The company is located near to the raw material. It will reduce its transportation cost.
The one of the secondary factor is prior to market. The market is exclusive plans is located in the heart of the market. Another nearest plant is 300 Km away. The dealers can be receive their order within one day.
The second secondary factor is availability of labor. The factory is located at remote area. Labor is available at cheaper rate without any shortage. Higher level managers and technician staff are hired from the whole Punjab.
The third secondary factor is govt. legislation. The factory location is not contradicted with any rule of the govt. firstly, the govt. want all these types of factories outside the city.
The govt. declared this zone as tax free zone in order to give prosperity to backward area. It was complemented in the beginning but not now.
Capacity
Capacity is a maximum rate of output for a factory. According to engineers the capacity of both plants is
Plant Name Capacity Clinker per day
Existing Plant 2200 tons
Expansion Plant 3300 tons.
During peak seasons both the plants are working above their allocated capacity while during off season it works slow their allocated capacity. It is harmful for the plant to run it above their recommended capacity.
Distribution
For the efficient distribution, the company open his four sales offices in four different cities.
Multan
D. G. Khan
Lahore
Karachi
And dispatch department at the factory site. Mostly sales offices are located near the target market. Dealers are registered called stockists. They have to deposit at least Rs. 50000 as security. Before the establishment of expansion plant a quota system is introduced. Each dealer has maximum and minimum limit of his quota.
Distribution Requirement PlanningAll the dealers are allotted the dealership number. They booked their orders in one of the sales office. For all orders, dealers have to pay the amount in advance. The sales office clerk accumulates all these orders and sends to the head office in two ways. Either he filled customer order form or telephone.
The Head office (Lahore) make the distribution requirement planning. How much amount of dispatch needed for coming days. Usually dispatch lot size is dependent on two things.
Quota imposed in distribution
Non-quota distribution
Head office informs the GM for daily dispatch all the dispatch process is done on automatic machines. 40% of excise duty is paid on each bag. All the transportation cost paid by dealer.
Although the lead-time is one day but it takes more than one day because of any disturbance in market and operation.
Flow Diagram of Distribution Requirement PlanningStockistStockist
Plant
Head Office
Lahore
Sales Offices
Stockist
Stockist
Stockist
Aggregate Planning
D. G. Khan Cement Factory has a family of cement types which consists of three cements ordinary port land cement, black cement and sulphate resistance cement. They make their aggregate plan keeping in view the demand of cement and capacity of plant. There are two types of alternatives:
Demand alternative (Reactive Alternatives)
Capacity alternative (Aggressive Alternatives)
D. G. Khan cement factory apply both the alternatives to aggregate planning. We discuss these alternatives one by one.
Demand Alternatives (Reactive Alternatives)This alternative is apply to cope with demand of the cement. In summer, the demand of cement is very high. To cope with this demand, they hire extra unskilled and semiskilled labor. They also offer overtime to highly specialized and skilled person. Mostly unskilled labor is taken from subcontractors.
The Company allows vacation schedule in winter, the month of Ramazan and rainy days. The plant is shut for repairing and maintenance work.
The company always keeps the anticipation inventory to meet the unexpected demand e.g. in the peak season both the silo are filled most of the time to cope with any mishaps sometimes the bricks of the kiln shell were broken and work was stopped at least 3 days. During these 3 days anticipated inventory cope with the demand.
The company also gives relaxation to their workers during the peak season. Schedules are formed to give the employee more rest.
Capacity Alternatives (Aggressive Alternatives)The company uses these alternatives during the slack. When the demand is less than their capacity. How to utilize their idle capacity? The answer is to apply the aggressive or capacity alternatives. Aggressive alternatives allocation that attempt to modify demand and resource requirement.
In the slack season the demand of ordinary postcard cement is low the company change the production OPC to sulphate resistance cement and supply into the Karachi.
Another method is also used to enhance the demand by lowering the prices. When the price of cement will reduce the demand will increase.
Inventory Management
We can divide inventory management broadly in two ways.
Inventory Management of Output (Cement)
Inventory Management of Inputs
D. G. Cement factory has no inventory in bags. They keep the cement in the 10000 tons capacity silos.
The main problem of inventory management of inputs. Each and every department is responsible for its inventory. Each department has to raise the demand notice to the purchase department. The store department provides them the required. In the case of shortage, the purchase refer it to purchase department.
Types of Inventory in Store DepartmentThe store department provides the inventory of inputs to each department. Its main purpose is to control and manage the inventory.
The store department categorizes its inventory of two types as:
Immediately consumable goods (Fast Moving Goods)
Non-consumable goods (Slow Moving Goods)
Immediately consumable goods are those goods which lose their quality and quality with the usage of items e.g. explosive, stationary, soap, towel, oil etc.
Non-consumable GoodsNon consumable goods are those goods which do not lose their quantity and quality with the usage and time. These are everlasting items e.g. spare parts, machinery, either moving equipment or plant assets.
Functions of Store DepartmentThe store department performs two basic functions:
Management of Inventory
Controlling of Inventory
The store department perform follwing functions for management of inventory.
the inward card is issued when the truck passes through factory gate.
Inspection of quantity of material done on the gate. Inspection note is sent to the concerning department. The manager or incharge who raise the order called indentor write the remarks upon it after checking the quality. It is the duty of indentor to write the acceptance and rejection note upon it.
All accepted material is stored by store department and write material receiving report.
One of copy of material receiving report is sent to following departments.
Finance department
Store department
Purchase department
MIS department
Supplier
All the received items are written in the records books.
Control of InventoryThe store department controls the inventory both manually and by computer. Two systems are introduced for physical control of inventory.
Cardex Card or Bin SystemIn the Cardex card system, all the materials for which store department issued the material receiving report entered in the Cardex cards. Different pieces of information is written on these Cardex cards. Different pieces of information is written on these Cardex cards.
1. Category 2. Code no.
3. Part No. 4. Description
5. Maximum Level 6. Re-ordering Level
7. Location
All the work done manually and balance the card when the inventory coming or going out of department.
Computer RecordsThe second system for controlling of inventory is computer records. All the transactions are updated in the computer.
The store department manages and controls 22000 inventory items for all the departments. In any of stock out (the inventory level down the minimum level) store department is responsible for the replenishment. He order to the purchasing department for purchasing of goods.
Matching the tow systemsBoth the systems records are matched at the end of accounting period in order to check the correctness of records.
In any disturbance in the records the physical inspection is also done.
The possible causes for disturbance of balance for an item may be the following.
Misplacement of inventory
Mistake in records calculating
Due to theft
In order to reduce the theft, the department due the physical inspection after every these months. It also reveals some other problems with the inventory.
Purchasing
The purchasing of or different items done by the purchase department of the D. G. Khan Cement Factory. The purchase department not only purchase for the factory as well as for the sales offices. Usually the department purchases machinery furnace oil, office equipment, supplies, paper sacks, explosive etc:
The purchase department acquire the things through the acquisition process.
The Acquisition ProcessThe acquisition process consist of following steps.
Need RecognitionNeed for the acquisition of raw material arises when the production department asks to the store department of some particular item. The store department is unable to fulfil the need. So he recommends to the purchase department.
Production Department
Needs a calculator
Store Department
Calculator is not available
Purchase Department
Need to Purchase calculator
In the supplier selection stage, Different suppliers are identified. Suppliers are of two types.
Permanent Suppliers
Random Supplier
The company has permanent contractor to the different items. Contracts are of long term in nature. So they don’t need any frequently selection of random supplier. The company selected the supplier do to following characteristics.
Past experience
Past performance
Financial strength
Quality of material supplied
Price charges
Nature of relationship with the supplier
One of these factors can change the decision.
Placing the orderThe purchase department has authority to buy the items. The purchase is done once the particulars given by the store department. The following particulars are given in the indent form:
Name of the department
Description of the item needed
Last purchase date
Quality of item
Quantity of item
The order placement is dependent upon the requirement of item. Different purchases procedure are adopted depending upon
Urgency
Availability
Importance
There are three types of purchase processes:
Regular Purchase
Spot Purchase
Importance
Regular purchase is the purchase of those items which they are required after the certain period with regularity. It exhibits the follwing characteristics.
Such items are very expensive
Such items are not needed urgently
These are consumable goods.
The order is placed in the newspaper in the form of tender notice. The terms and condition are mentioned in the tender notice. The supplier get the tender form from the nearest sales office (mentioned in the newspaper) on submission of fee. In this tender notice all the description of item is mentioned. The supplier fills the form and submits to department with a security fee. The supplier is selected on the basis of low bid of the supplier. In case, the company accepts the tender notice of supplier who give maximum discount.
Sometimes the indentor is also considered for the selection of supplier which negotiate with the supplier in term of quality of item.
After the supplier has been identified and selected the company will issue purchase order to the supplier.
Spot PurchaseSometimes, different items are purchased on the spot. These items are urgently needed, having more alternative and payment made in cash e.g. towels, tube lights, stationary, bullets, bed sheets and spoons, dishes etc. Spot purchase is done through spot purchase committee which is consists of
Indentor or end user
Purchase department representative
Commercial
The spot committee visits different suppliers evaluate the items in terms of price, quality and delivery date. The committee make the payment to the supplier on the spot. One month is needed for the spot purchase to be completed.
ImportThe company imports those items which are not available here or having low quality. Import is a long and complex process, it takes six months for an import purchase to be completed mostly earth moving machinery, fire bricks and spare parts are imported.
Track the orderTrack the order means routine follow ups of orders to anticipate late deliveries or probable deviations from requested order quantities. Different modes are used or tracking the orders e.g. telephone, letter, fax. The company usually tracks the order when some delay will stop the production.
Receiving the orderWhen the order is received from the supplier, the indentor checks the quality of the incoming materials. The indentor writes the remarks about items either it is accepted or rejected. Acceptance or rejection note is issued by the store department. If the materials are accepted the store department issues material receiving report. One copy of the material receiving report is issued to each of the following department.
Supplier
Finance Department
MIS Department
Store Department
Purchase Department
The rejection of items is informed to the purchase department and they return to the supplier. The purchase department also maintain and updates their records of different supplier on punctuality, quality, quantity deviations and price. All these information help for future evaluation of supplier.
When the finance department has received the material receiving report from the store department supplier as paid and entries are passed in their records.
Supplier ContractsThe purchase department of D. G. Khan Cement company has identified and registered different suppliers for the materials, which have vital importance such as furnace oil, paper sacks and explosive.
Furnace Oil90% of furnace oil is purchased from Pakistan State Oil
10% of the required furnace oil is purchased from Shell
Paper SacksThe company usually makes a contract of six months duration for the supply of paper sacks. Generally, the company awards contract to any of the following companies.
Pakistan Paper Sack Corporation Karachi
Khyber Papers Private Ltd. Gadoon.
Cherat Paper Sack Gadoon.
Following printing agencies are the suppliers of stationary to the D. G. Khan Cement Company:
Dera Press
Freedom Art Press
Top Signs
All located in Dera Ghazi Khan City.
There is only one supplier of explosive in the whole country. So the company also makes purchase of explosive from that very company i.e. Pakistan Ordinance Factories Wah Cantt.
