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Top Four Manufacturing Challenges in Pakistan

Because Raja Adeel Khalid leads both the Supply Chain team and the Sales team at Dawlance, he has very interesting perspectives on manufacturing challenges in Pakistan. The fact that he is a customer of his own Supply Chain team, this makes the combination even more challenging yet enjoyable, he feels.

The number one challenge for most companies, he says, is managing working capital. The cost of financing in Pakistan is in the 16 to 17% range, which, Raja says, in light of the economic slowdown is too high, and companies cannot afford it. For that reason, Raja believes it is essential that a company’s minimum working capital is blocked in the entire supply chain — from raw material to inventory in the factory, on the high seas and at the port, at warehouses — all the way to the consumer.

The second challenge is in the area of forecasting. The recession has made forecasting and planning a daunting task. Raja says, no one was able to forecast accurately last year, but we still had to do business, so it must be dealt with and improved gradually but consistently.

Third, Raja says, is the volatility of Pakistan’s currency. The Pak Rupee is not very strong against major currencies, which is a real challenge for Procurement managers or Buyers.

Last, but not least, Raja believes there is a lot of room for improvement in Pakistan’s infrastructure, something that requires Government involvement. If you divide Pakistan into North and South, Raja says, you will see that infrastructure in the North is much better, so again, there is much room for improvement especially in the Southern Region.

Solutions to the Challenges

What can be done to address these issues? That, Raja says, is the million dollar question. However, in terms of managing working capital, Raja believes the days of managing the entire supply chain only with systems, such as SAP or Oracle, are over. What he suggests is a complete “tear-down” of the supply chain. In other words, segregating it into small components, which provide a better view of working capital blocked in each area. “You have to be able to look at how much you have ordered, what your financial commitments are, and how much of your inventory is on the high seas and at port/factory etc, because IT MATTERS!! He says, you can’t use materials that are lying at port. For example, In the US or in Europe, he added, you might have access to those materials in a day or so, but in Pakistan it can take six or seven days. So, the only way to control is to monitor & address each segment separately.

Raja’s solution was to build a dashboard that allows him to focus on each and every component, after setting benchmark for each one of them. And, because you can’t afford to lose orders, he added, you have to hit a balance between managing working capital and monitoring stock outs, which his dashboard addresses as well.

Regarding forecasting, Raja says we have to have our finger on the pulse of the market and we need to be proactive, not reactive. Additionally, he says, we must be able to change and modify our plans as the situation warrants. The solution, he says, is to filter information to ensure accuracy levels within plus or minus 10%. It is essential to be agile enough to adjust future plans accordingly or we will lose our competitive edge, he added.

Pakistan’s currency issues present a real challenge that is not easily solved. Raja says, initially, the country could hedge foreign currencies, but the State Bank of Pakistan currently has regulations against it. Therefore, Pak Rupee devaluing rapidly increases the procurement cost substantially.

Finally, without the support of the government, there is little to be done about improving Pakistan’s infrastructure, and while companies are addressing it by talking to other agencies, at the end of the day, it is mainly in the hands of the Government. Although we have seen some incredible work in Karachi (which is the Financial Hub of the country) by the City District Government, there is still a lot of work to be done in the Southern part of Pakistan, Raja emphasized.

Security-related Disruptions — A Fact of Life

Commenting on Pakistan’s current security situation, Raja Adeel Khalid said, “I think that it is a fact of life and we can’t ignore this but we’ve got to deal with it. We, as a nation understand that and as industry professionals, we have to run our supply chains anyway.”

When Raja was with Toyota, for example, the company introduced Kanban, which meant goods were ordered on a daily basis. Soon afterwards, one of the company’s local suppliers wasn’t able to make one of its daily deliveries due to a strike in the city. The solution for Toyota was to stockpile at least one day of inventory from each of its suppliers.

“There is no right answer,” Raja, says, “and these sorts of disruptions should not happen, but when they do, you just have to deal with them. We’re all fighting against this, and I don’t believe this will be a problem in the long term.”

Empowering Pakistan’s Supply Chain Community

In Pakistan, Raja says, supply chain is a relatively new phenomenon, which makes finding qualified individuals somewhat difficult. Young people, he added, are more interested in other fields at the moment, something Raja and others are working to change.

In 2007, Raja established the Supply Chain Forum of Pakistan, a community similar to Logipi, that is focused on empowering supply chain professionals by providing a space where they can share experience, knowledge and best practices. “The goal of the forum,” Raja said, “is to add value to the nation’s economy and contribute to its competitiveness.” Ultimately, Raja’s goal for the forum is to bring passion and pride to the supply chain profession by ensuring a win-win for all stakeholders, which include industry professionals and supply chain professionals from the academic world.

Meet Raja Adeel Khalid

Raja is a business graduate from the University of Warwick, UK. He was with Toyota Pakistan initially where he was tasked with ordering supplies and managing inventory to ensure the smooth production of Toyota and Daihatsu vehicles. Today, Raja Adeel is Executive Vice President – Head of Sales and Supply Chain for Dawlance, Pakistan’s leading home appliances manufacturer specializing in Refrigerators, Deep freezers, Microwave Ovens, Washing Machines and Split Air Conditioners. Dawlance is the market leader for more than 25 years in Pakistan with the market share over 70%. Dawlance currently exports to 15 countries and has a Vision to be the Regional Champion.

Raja also happens to be a Founder Director of “Supply Chain Forum of Pakistan”, first platform ever for the development of Supply Chain professionals in Pakistan.
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This post was submitted by Anna Kurghinyan.

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