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Essay: Nisar Spinning Mill: Setting Trends and Delivering Quality Products

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Acknowledgement

It is a genuine pleasure to express our deep gratitude to our instructor Professor Fareed Fareedy. His dedication and timely advice have helped us to a great extent in accomplishing this task. In the end, our group would like to thank Mr. Faisal Tufail (mill manager) & Mr. Sannaullah (General manager) at Nisar spinning in providing in depth knowledge about company’s strategies which are valuable for us in conducting this project report.

Executive Summary

Nisar Spinning Mill has primarily capitalized on job/unit production as its primary method, which has subsequently resulted in a smaller degree of investment for the company allowing the firm to be flexible at the same time regarding its production methods, design and order size. The company believes in paying equal attention to each and every single item that they produce and provide believing in not being differential between their products. Furthermore, the company utilizes a fixed order quantity system, as the management of the company believes that maintain one particular system is not feasible to be used as a tool to be successful in the textile industry while maintaining a separate warehouse for each of their varied production units. The project will focus on the internal and external analysis of Nisar spinning mills. The internal analysis will include the strengths, weaknesses, and a detailed financial analysis of how the company is performing with respect to the industry. The external analysis will include a detailed structure of the opportunities and threats that the company is exposed to.

Organizational Structure

Company Overview

Introduction

The ATS group of industries has a new venture by the name of Nisar spinning mill.it is founded by chairman Mian Nisar Elahi in 1968 in Lahore, Pakistan. It is the largest manufacturer of manmade leather and they have excelled in making their product. With their peak quality and innovation they have archived national and international recognition. The products of ATS include i.e. PVC, PU/PVC coated fabric, PU coagulated leather with woven and non-woven backings, PVC transparent film/sheets, vinyl flooring, rigid PVC, PU-coated leather, Vinyl Flex and DOP. The products are manufacture in premium quality using state of the art technology.

There are prone to developed in the fields of operation and market with their commitment to diversification. With this commitment the director of Nisar spinning mill is anticipating annual sales of 1 billion rupees (16 million u$). This is happening all because the company has invested in state of the art technology, the new Reiter plant which went into the operation in January 2007. This all imported machinery has inspired to archive the profits.

Organization and Production

The location of Nisar spinning mill is in the south of Punjab. It is situated 35 km from thokar in the Sundus Industrial estate at the Ijtama Chowk. This firm could be said to be equipped with the most modern ring and compact spinning mill in Pakistan. The firm is occupying a space of 160,000 sq. all the machinery that is operating in the firm was supplied by the Reiter of Swaziland. The total investment that the firm has done is of 1.5 billion rupees (US$ 24 Million). the mill that is operating 24 hours a day,365 days a year, in three shift have secures the jobs of almost 500 blue collar and 100 white collar workers.

Nisar spinning mill specialized on spinning of cotton only .the creation of e 12 to200 can be produced. This range from middle staple to extra-long staple.  The average Yarn count is around Ne 32. Nisar spinning mill can produce up to 5000 tons each of ring and compact yarn annually. This includes weaving, knitting and wrap knitting. They have for now installed capacity of 24000 spindles.  The prime textile and apparel are made from the fabrics of spinning mill. They are distributing there products in the local market as well as exporting to other international market under their own brand name “Nisar”. The name that is synchronized with compact yarn and high quality yarn.

Nisar spinning mill believes in continuous improvement in quality and broadened commitment to product development t. hey are planning to expand into cra and slub yarns in the future, as they gear machinery to facilitate the plant for their expansion. State of the art machinery has been installed to produce only high quality stuff.

The mill has also its own electricity generating plant. As they fall short of electricity that is provided by wapda. The reason why they have chosen o import the machinery from Swaziland is because they want to develop a relationship with the supplier and gain a cooperation partner.

They provide training program to the labor to make them skilled. These programmer are internal as well as external.

Vision

“Setting trends globally in the textile industry .responsibly delivering products and services to the our customers”

Mission

“To deliver value to our partner through innovative technology and teamwork. Fulfilling our social and environmental responsibility “

Proposed Mission Statement

“To strive in manufacturing of products with uncompromised quality”

Objectives

The main objective of Nisar Spinning Mills is to carry on the business of manufacture exporting and dealing with the supply relation. Their objective includes state of the art machinery installation in the plant. The firm is committed to diversification this is the reason why as discussed earlier they have invested heavily in the Reiter spinning plant.

Core Values

The core value of the firm is the quality and quality will not be compromised in any situation. Team work also has a major say in the core value system of the firm. The expertise and attention to detail is looked into very closely. The ERP system control are the too competitor advantage. Each and every spindle is of high quality. The employees are included in the core value system. There is a high reward and promoting employee based of merit and performance. There is a motivating force to development. The compliances with the law of the administration in this industry are looked upon. They are setting bench mark for standard and development in the business.

Corporate Governance

Corporate governess can be said as the set of rules, regulations and process as the company is directed and eventually controlled. These generally include management, supply and customer etc. etc.

Proper books of account have been prepared

Appropriate accounting policies have been applied

The preparation of

Accounting estimate are based on reasonable judgment

The head of director adopted a stable strategy for promotions

All the local directors of the company are registered as tax payers

The company has codes of conduct and steps are taken to abide by it

The meeting of the board are prescribed by the chairman, duration of the meeting are appropriately recorded

Economy Overview

As many international uncertainties arises depicting the future economic outlook growth, Pakistan is also affecting due to this international economic background and is currently facing challenges like persistence of high inflation, decrease in private investment and lower Tax to GDP ratio which results in rising total public debt. Considering at the same time, severe energy shortages and volatile security conditions have rendered the domestic economic environment least conductive for production activities.   

Spinning has the firm link in Pakistan’s textile industry value chain. It is considering that spinning sector is the oldest and most matured one with significant investment in human resources and marketing that connects globally to endure competitive global conditions. It is reported this particular sector has shown advancement in less protected surroundings as compared to China and India.

The literature indicates that major part of good quality yarn produced is exported to other countries rather taking benefits in the form of producing high value added products like fabrics and readymade garments. This is a serious structural weakness of Pakistan’s textile industry which results in threatening the whole industry. This yarn is imported by countries who have well flourished textile industries like Japan, Hong Kong and South Korea and they convert into Value added products such as readymade garments and gain much higher prices in international markets. Considering the economy, Pakistan was the greatest sufferer from the quota regime as it had to face high percentage of textile exports restrained because of the quotas imposed by importing countries.

Industry Analysis

Textile sector remains an integral part of Pakistan’s economy as Pakistan has inherent advantage of being fourth largest producer of cotton in the world. Pakistan is ranked 3rd in the field of yarn production. Textile sector consists of value chain activities that starts from cotton picking to the end product that is finished garment. Value chain acts in a way that end product of one sector will be the raw material for other. This creates the value addition to the raw material of particular sector. “Textiles have the longest production chain, with inherent potential for value addition at each stage of processing, from cotton to ginning, spinning, fabric, dyeing and finishing, made-ups and garments.”

“The textiles sector in Pakistan has remained stagnant over the last decade due to a number of exogenous and indigenous factors such as subsidies given to cotton farmers and other textiles products by several countries which distorted prices, marketing constraints, global recession, and increasingly stringent buyer’s conditionality “ CITATION Pak15 \l 1033 (Pakistan Economic survey, 2014-2015).

Cotton production has remained stagnant at about 13 million bales per annum. On the other hand, the value-added garments sector has grown marginally due to its limited product range, low usage of manmade fibers and inability of manufacturing units to restructure in order to meet changing international requirements.

 (Source: Economic survey 2014-2015)

Referring to the above table, Textile as a percentage of exports has increased to 2% in 2014-2015 as compared to 2013-2014 in which it was 55%. In 2014-2015, it shows an increase of 2% and reached to 57%. This means that textile plays an important role in Pakistan’s export.

“Over 60 percent of the output of the textile sector is exported. Exports of textiles showed high growth of 10 percent annually from 2001-02 to 2010-11. Since then they have stagnated at under $14 billion. This is despite cumulative depreciation of 19 percent in the value of the Pak rupee and, more recently, the granting of GSP+ status by the EU. The latter has led to some diversion to exports, without raising substantially the global volume of exports”  CITATION DRH15 \l 1033 (Pasha, 2015).

According to Business recorder research, about “30% production capacity of textile industry is impaired. The potential idle capacity of textile value chain is mainly in Punjab. Textile Industry have the capacity to export 2625 million square meter of cotton cloth but currently, Pakistan is exporting 1880 million square meter with a shortfall of 28.4%. Pakistan’s export has been declining continuously both in quality and value terms”  CITATION Tex15 \l 1033 (Textile Industry Sustainability and Way Forward, 2015).

This decline in both quality and value terms is mainly because of production cost which is resulted from increasing cost of energy. In Pakistan, textile sector is provided with electricity at the rate of 15 cents per unit while in other areas such as china and Bangladesh the average rate is 8 cents per unit.

(Source: Business Recorder)

Also due to increasing importance of textiles in exports, Government have announced various textile policies to up bring the exports and its competitiveness globally. The Policy states that there will be cash subsidy of Rs 64.15 billion to the textile and clothing sector to boost exports to $26 billion by 2019 from $13 billion. Also subsidies will be given on long term loans.

As our project company is Nisar spinning, this section will highlight performances on spinning sector. Pakistan is considered as one of the largest producers of cotton with leading capacity in Asia. “After China and India, Pakistan’s contribution in spinning is around 5% to the worldwide spinning capacity. Cotton value chain starts from ginning that adds value to it by separating cotton from seed and impurities. Spinning is the first process in the chain that adds value to cotton by converting raw material into a finished product that is conversion of ginned cotton into cotton yarn. Spinning is the foundation process and all the subsequent value additions, that is weaving, knitting, processing, garments and made-ups, depend upon the initial process of the spinning of yarn. Therefore, any variation in quality of yarn spinning directly affects the entire value chain  CITATION DrN15 \l 1033 (Memon, 2015).

According to research analysis, “spinning mills have been in a good time mainly because of the sharp increases in yarn imports from China in recent years. Pakistan is the only country with odd fiber-mix with a ratio of 80% cotton and 20% man-made fiber (MMF) against world proportion of 40% cotton and 60% MMF. Polyester cotton (Pc) and Polyester viscose (PV) blended yarns are mainly produced in Pakistan. The production pattern of the spinning sector of Pakistan remains heavily tilted towards coarse yarn counts”  CITATION DrN15 \l 1033 (Memon, 2015).

The table below shows that the production of yarn increased significantly from 2.79 billion kg in 2009-10 to 3.07 billion kg in 2013-14, thus showing an average growth of 7% per annum.

(Source: All Pakistan textile Mills association & State bank of Pakistan annual report)

Now this table shows the performance of spinning sector in terms of exports.

(Source: Trade Development Authority of Pakistan)

The above table shows that there is significant increase in unit value of spinning exports in last 10 years but there is slight decline after 2010. Average unit price of cotton yarn decreased from US$ 4.10/kg in 2010-11 to $ 3.01/kg in 2013-14.

Competitor Analysis

The main competitors for Nisar Spinning Mills are all the textile Mills that have spinning units, but here we will be conducting an analysis of the following competitors; Nishat Mills, Nisar Spinning Mills, Suraj Cotton Mills and Ruby Textile mills. The major competitor of Nisar Spinning mills being Nishat Mills.

Nishat Textile Mills

Nishat Mills Limited ("the Company") is the most current and biggest vertically coordinated textile Company in Pakistan. The Company initiated its business as an organization firm in 1951 and was joined as a private limited company in 1959. Later it was recorded on the Karachi, Lahore and Islamabad Stock Exchanges on 27 November 1961, 11 March 1989 and 10 August 1992 individually. CITATION Mil15 \l 1033 (Mills N. T., 2015)

The Company's creation offices involve spinning, weaving, printing, coloring, home textile and article of clothing sewing and power era. Overall, the Company has 32 fabricating units each gaining practical experience in a particular item range situated in Faisalabad, Sheikhupura, Ferozewatwan and Lahore. A noteworthy part of the Company's income is export based. Over the years, the Company has accomplished huge geographical broadening in its export deals blend. CITATION Mil15 \l 1033 (Mills N. T., 2015)

The Company has an exceptionally wide base of clients for its items outside Pakistan. It has a long working association with the top brands of the world, for example, J.K.N. Global, Levis, Next, Pincroft Dyeing, Ocean Garments, Gap, Carreman, Tommy Hilfiger, Tommy Bahamas, Crate and Barrel, Laura Ashley, American Living, Chaps, Hugo Boss, Revman and John Lewis. CITATION Mil15 \l 1033 (Mills N. T., 2015)

Nishat Mills Limited is additionally called the lead organization of the Nishat Group. Nishat Group ("the Group") is a main business element in South Asia. Its total assets makes it the biggest business place of Pakistan. The Group has developed from a cotton export house into the chief business gathering of the nation. Exceptionally differentiated, the Group has a vicinity in all the significant parts including Textiles, Cement, Banking, Insurance, Power Generation, Hotel Business, Agriculture, Dairy, Real Estate, Aviation and Paper Products. Showcasing its changed aptitude and keenness in each feature of its operations, the gathering organizations hold the qualification of being among the main players in every division.CITATION Mil15 \l 1033  (Mills N. T., 2015)

Suraj Cotton Mills

Suraj Cotton Mills Limited is a Pakistan-based organization engaged with the textile business. Organization is employed with the assembling and exchanging of Yarn and Woven Fabrics. The Company has three working units situated at Nooriabad, Sind and Shahkot, Punjab. The Company is an assembling association, working, coordinated spinning and weaving yarn in textile industry and its deciding items are sold to worldwide and national clients. The Company works business by two working units; spinning and weaving. Under the spinning portion the organization produces, Carded Yarn, Combed Yarn and Combed Compact Yarn. Under the weaving fragment the Company produces, Bottom wear, Shirting, Pocketing, Home outfitting and Stretch Fabric (lycra). Suraj cotton timely increases the value of its items like expansion of kicking the bucket office home textile assembling. Deals contains more than 80% as export, which spares in tax collection internal cost controls. Textile Industry is an Independent and Self-Reliant industry.CITATION Sur15 \l 1033  (Mills S. C., 2015)

Suraj cotton has attempted leading endeavors in the advancement of new items which has empowered them to rise as business sector leaders, this together with an imaginative and expert administration style has helped them to assemble a solid and monetarily stable base.  CITATION Sur15 \l 1033 (Mills S. C., 2015)Accessibility of bottomless raw Material, controls costs and lessens the lead-time over the operation. Accessibility of Low Cost and Skilled Manpower gives them the upper hand. Extensive assortments of cotton fiber are accessible and have a quickly developing engineered fiber industry. Suraj cotton has vast and broadened sections that offer wide assortment of items. With a Growing Economy and Potential Domestic and International Market, Suraj cotton has manufacturing flexibility that increases the profitability. Qualified and gifted administration health working environment produces greige fabric for clothing, sheeting, home outfitting and fancy things in 100% Cotton, Polyester Cotton (PC) and Chief Value Cotton (CVC). Fabric for attire has been consistently taking into account the requests of the export markets and the clothing industry. Suraj cotton has additionally wandered into delivering things like slub yarn fabric and stretch fabric. Suraj cotton now positions among the top notch stretch fabric makers in the national and the worldwide markets. CITATION Sur15 \l 1033  (Mills S. C., 2015)

Ruby Textile Mills

Ruby Textile Mills Limited is situated in Riawind, south of Lahore in Punjab, Pakistan. It was built up in 1991 creating polyester cotton yarn. The second unit was additionally introduced in 2007 with the most recent apparatus setup. Here a standout amongst the most current ring and minimized spinning factory in Pakistan has been assembled. We have introduced world's most recent spinning machines with a venture of 1.5 billion rupees (US$ 24 million). The factory works 24 hour a day, 365 days a year, in three shifts. In the factory, there is an aggregate installed limit of 34032 spindles. Ruby Textile Mills Limited produces up to 10 000 tons each of ring yarn for weaving, sewing and weaving. The yarns delivered are utilized as a part of the making of clothing and home textiles. Ruby Textile Mills Limited offers all the yarn it produces in the nearby and worldwide markets under its own particular image name Lamp-a name synonymous with a high quality ring.CITATION Rub13 \l 1033  (Mills R. T., 2013)

“Ruby textile mills limited is member of renowned group of Pakistan engaged in the business of manufacturing of textile Products, Beverages, Ghee and Oils. Ruby Textile Mills was incorporated in 1980 as Private Limited Company and was subsequently was converted to Public Limited and then listed company.” CITATION Rub13 \l 1033 (Mills R. T., 2013)

Porter Five Forces Model

Strategies in many industries can be developed with the help of Porter five forces analysis.

Porter five forces analysis is all about examining four forces, which keep on remodeling the business environment.  These forces are, social political, economic and technological forces.  For strategy formulation, strategists strongly consider the present and future impressions of these four forces. Porter’s five forces model of competitive analysis is a widely used approach According to Porter, “the nature of competitiveness in a given industry can be viewed as a composite of five forces.”

Rivalry between competitors

Rivalry between competitors boosts the competition in any given industry.  Perfect Competition also reduces the margin of profits in most cases but not in all cases.  It contrasts from business to business.  Competitors are trying to earn profits by creating the demand of the customers from using some of the strategies such as cost leadership & offering quality cotton fabric.

Using Marketing segmentation and targeting to their target market through advertising their products regularly to raise the responsiveness of consumers and clients. If the market is very big and customer volume is high then profit margin would high it demand’s on the market and the customer’s volume.  So we have analyzed that the rivalry among the competitors in this industry is high because large number of textile mills are producing cotton fabric and offering processing of the cotton fabric.

Substitute products

Substitutes effect could impact on the market’s situation anytime substitute cotton fabric and other cotton related products like polyester can impact very hard on the market and profit margin and demand of the cotton fabric in given market.

Buyer’s Power

In Cotton fabric, we see buyer’s power is significantly high because customers are concentrated, large, or they are very price elastic because with the change in price customers would shift to other brands. That is reason buyer’s power is high. And this is the reason that the customers have substitute brands in the market. Therefore, their bargaining power represents a major force affecting intensity of competition in the in the market of Cotton fabric.

Supplier power

In Cotton fabric market, companies cannot do backward integration because of high setup costs of looms and related processing units. So the power of supplier or raw material like cotton, yarn etc. in this industry is high because with an increase in the raw material prices the textile unit has to pay high price to the supplier and this reason leads to a high power of supplier.

New entrants

New entrants in the cotton market anytime could be very effective for the market because it could increases computation among competitors and it can get all the orders of existing companies it could also impact on profit ratio in normal condition the new entrance in the market of cotton and fabric reduce the profit margin of the existing textile mills and processing units. But a new comer in the industry will have to see the entry and exit barriers of the industry, which are rather unfavorable to a new entrant due to high investment as well as due to using an advance technology, with a great disadvantage of the existing competitors. So there are very minute chances of a new competitor in the textile mills industry.

Management Operations

Management operations of Nisar Spinning Mills comprises of the client's necessities and prerequisites. They ought to remember the needs of the clients and the fulfillment of the client while propelling any new item or while making new approach or the methodologies. All their arranging of item, arranging of value and arranging of bundling are on the premise of their client's requirements. That is the explanation behind their prosperity and great name in the business sector.

The organization require new approaches to deal with their workers, the creation of yarn, the evaluating of offers and the request handling for the clients. Taking after are the needs of the administration to better their framework which will actualize new strategies and regulations in time.

Needs of the Management

Order processing

Advertising office needs to put in complete data of new requests and records division and get this data by utilizing an online based framework for book keeping like occupation expenses, order sheets, etc.

Financial forecasting

It's essential for Nisar Spinning Mills to surmise its area of expertise on semiannually or yearly basis. They ought to utilize ORACLE or SAP as their money related data framework to look at costs of every branch of the industrial facility and afterward set a financial plan for every division. However, they don't consider project prerequisites when they settle on choice of planning.

Compensation analysis

HRM office need to utilize an online framework to keep data about each representative of the association (employees) with respect to their compensations, incentives and bonuses, and expected set of responsibilities, and utilize this data when settling on choices about workers for specific jobs.

Inventory management

Directors and managers can utilize ORACLE or SAP based framework that gives them the control to oversee and analyze the inventory in stock, work in procedure and completed merchandise. They simply place data in the software, yet there is no alternative for different offices to update data automatically according to requirements.

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