Internship report on Application of Supply chain management on textile industries of Bangladesh

Executive summary

A sound supplychain management helps to identify the supplier and the customer demand thatoperation must satisfy, link customer demand with suppliers and productionplans, and keep the operation function focused on satisfying customers’ need.The supply chain not only includes the manufacturer and suppliers, but alsotransporters, warehouses, retailers, and customer themselves. Supply chainmanagement (SCM) is the synchronized of a firm’s processes and those of itssuppliers to match the flow of materials, services, and information withcustomer demand. It is also a process of managing operations control, resourceacquisition and purchasing, and inventory to improve overall efficiency andeffectiveness.

In this paper, Itake Maksons Spinning Mills ltd. asa field of my investigation and research. This paper focuses on some of themajor aspects of supply chain management with its major recompense and how todesign and implement effective and efficient supply chain management.

This report iscomposed of eight chapters, which are further divide into different parts. Inthe first chapter, the introductory portion has been present along withbackground of the study, rationale of study and the objective of the study andthe methodology, limitation and theoretical understanding of supply are discussin chapter two. A focus on the MSML is included in chapter three from where wewill be able to get the basic idea about the operation of the company. Chapter fourincludes the import aspects of spinning sector. From where the spinning millscollect raw materials, how they collect the raw materials, what are the basicraw material required by the spinning sector are discussed in this chapter.What are the main considerations in selecting suppliers, process of makingorder for raw material, landing procedure of import are also discussed in thechapter. Basic ideas about the production process of textile industry speciallyspinning mills basic operational functions are discussed in chapter Five. Chaptersix highlighted the export aspect of spinning sector, The sales terms andcondition, modes of export of finished product, managing demand, maintainingappropriate stock level, market condition and various pre and post salesservices i.e., transportation facilities, replacement facilities etc,warehousing, retailing  are included inthat chapter. Chapter seven explains the SWOT analysis. And in chapter eight, Itried to give a summary and conclusion along with my findings andrecommendation.

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Table of contents

Chapter One: Introduction

1.1 Introduction………………………………………………………………………..01

1.2 Rationale of the study……………………………………………………………..01

1.3 Objective of the study……………………………………………………………..02

1.4 Methodology……………………………………………………………………….02

1.5 Limitations………………………………………………………………………...03

Chapter Two: Theoretical Framework of Supply Chain

2.1Supply Chain………………………………………………………………………04

2.2Decision Phase in a supply Chain………………………………………………...04

2.3Drivers of Supply Chain Performance…………………………………………...05

2.4 Managing Supply……………………………………………………………….….06

2.5 Managing Demand…………………………………………………………….…...07

       2.6 The Role of IT in the Supply Chain……………………………………………....08

2.7 The Role of E-Business in Supply Chains………………………………………..09

2.8 Activities of Supply Chain Management………………………………………....10

Chapter Three: Company Profile

3.1 Organ gram………………………………………………………………………....13

3.2 Means of Finance…………………………………………………………………...14

3.3 Description of Business…………………………………………………………….14

3.4 The objects for which the Company isestablished………………………...……….17

3.5 The authorizedshare capital of the Company………………………………..…….20

3.6 Additional disclosure by the Managementof the Company…………………..…...21

Chapter Four: Import Analysis

4.1 Basic ideas on Fiber and yarn……………………………………………………….23

4.2 Basic Considerations in selection of raw material…………………………….……24

4.3 Characteristics of textile Spun yarn……………………………………………...…26

4.4 Characteristics of textile blended yarn &fabric……………………………….…...27

4.5 Suppliers Selection and Contracts…………………………………………………..28

4.6 Placement Process of an Order………………………………………………...……28

4.7 List of Banks involved in import of MSML………………………………………...28

4.8 List of Major local Agents of MSML……………………………….……………….29

4.9 List of Major Supplier of raw cotton of MSML………………………………..……30

4.10 The Procurement Process………………………………………….……………….30

4.11 Making Sourcing Decisions in Practice…………………………….……………...34

4.12 Estimating Landing cost……………………………………….……………………35

4.13 The Role of the Safety Inventory in the Supply Chain………….……….………..36

Chapter Five: Production

5.1 Flow Chart for Producing Yarns at MSML ………………………….………….…38

5.2 Spare Parts and machinery used By MSML for yarn production…….…………...39

5.3 Textile Yarn Construction……………………………………….…………………..40

5.4 Yarn Faults…………………………………………………………..……………….41

5.5 Factors Governing optimum spinning condition at MSML…….…………………..47

5.6 Discussion on new spinning systems…………………………….…………………..48

5.7 Textile knit yarn production system……………………….………………………..51                                                                             

5.8 Textile Yarn finishing system of MSML……………….…….……………………..53

Chapter Six: Export Analysis

6.1 Terms and conditions of sales at MSML…………………………………………54

6.2 Growth in demand………………………………………………………………….55

6.3 Cost Comparison…………………………………………………………………...55

6.4 Domestic demand estimation……………………………………………………...55

6.5 Yarn price of various spinning mills...........................................................................57    

6.6 Export demand analysis………………………………………….………………....58

6.7 Managing Demand at MSML…………………………………….……………….60

6.8 Means of receiving Order………………………………………….………………62

6.9 Transportation facilities……………………………………………….…………...62

6.10 Returning………………………………………………………………………….63

6.11 Different Ratios of MSML……………………………………………………….63

6.12 List of major foreign & local buyers of Maksons Spinning MillsLtd……......…68

Chapter seven:  SWOT Analysis

   ……………………………………………………………………70

Chapter eight: Findings & Recommendations

8.1 Reasons behind applying effective supply chain management…………………72

8.2 Benefits of implementing supply chain management in spinning mills……..…..75

8.3 Findings…………………………………………………………………………….76

8.4 Recommendation…………………………………………………………………..77

8.5 Conclusion………………………………………………………………………….79

References………………………………………………………………………………80

Chapter One: Introduction

1.1 Introduction:

Supply chainmanagement seeks to synchronize a firm’s processes and those of its suppliersto match the flow of materials, services, and information with customer demand.Supply-chain management has strategic implications because the supply systemcan be used to achieve important competitive priorities.

It also involvesthe coordination of key processes in the firm such as order placement, orderfulfillment, and purchasing, which are supported by marketing, finance,engineering, information systems, operations, and logistics. I begin by takinga bird’s eye view of supply chain management, focusing on it implies actionsfor manufacturers and service providers. I then describe how companies managetheir customer and supplier interfaces. Next, I discuss the important operatingand financial measures of supply chain performance, followed by a comparison ofsupply chain designs and their strategic implications. I conclude withdiscussions of the dynamics of supply chains and supply chain management.    

1.2 Rationale of the study:

Theoreticalinformation is not sufficient for business students because there is a gapbetween theoretical knowledge and practical ground. This internship program hasbeen initiated mainly to less this gap. So, this practical idea on variousactivities and functions of different department of Maksons Spinning Mills Ltd.help me in future to increase my efficiency and effectiveness.  .

I believe thatthe analysis, findings and recommendations will be helpful for the organizationto effectively utilize the benefit of supply chain management & increasethe efficiency and effectiveness of their current operations. The use of thesetools enables the textile industries to greatly increase its profitabilitybecause it is able to match supply and demand in a much more coordinatedfashion.

1.3 Objective of the study:

The majorpurpose of this project aims to develop an appropriate quality yarnmanufacturing to turn out quality fabric for direct export and export linkageto Ready-made garments industry of the country.  

Other objectivesof the study are;

• achieving a realistic idea that how the system working in spinning industries,
• to understand the importance of supply chain management in the spinning industries,
• to define the nature of supply chain management and give real examples of its application in manufacturing and service industries,
• to control the supply of material and inventory,
• to reduce cost and risk,
• to maintain appropriate level of supply,
• to receive and issue materials smoothly,
• to satisfy existing customer and attract new customer,
• to ensure appropriate use of working capital.

1.4 Methodology:

This paper is being tried tocomplete micro level study in a confined, specific, and a given period. Toprepare the seminar paper I have followed some specific methods and technique,which were helpful for collecting and analyzing data. After I determined whatand why I am looking for, then I set adrift our boat to the sea. In this paper Ihave used mainly primary data.

After getting adequate materialsI then went through the materials and was trying to find the answer of myobjective questions. Within the process I had to contact with my supervisor andsome of the teachers of our university.

Evaluating all the information Igathered, I reached the conclusion.

Differentrecord, statement, BTMA report has helped me preparing this report. The subjectmaterial of this report is on primary and secondary sources of data andinformation.

Sources ofinformation:                         

Primary source

• Relevant document studies  as provided by the officers concerned
• Observation of various departments

Secondary source

• Annual report of Maksons Spinning Mills Limited.
• Prospectus of Maksons Spinning Mills Limited-2008 published for issuance of IPO.
•  Brief of MSML chief officers and staff.
• Extensive literature search on the basis of document and publication, BTMA, BTMC, BGMEA.

1.5 Limitations of the study:

I won’t say thatmy study and the decisions I made are self sufficient. That doesn’t mean thatthere was any dearth of my professionalism and eagerness to reach to thesolution, rather it means that I had to face some obstacles. Those may besummarized as follows:

• It was so difficult to collect the adequate and real data from the assigned organization.
• Lack of experience in related field.
• The research area was so far from our institution.
• Due to the lack of time I could not acquire in depth knowledge of the activities of different department perfectly and clearly..
• Improper combination among various departments
• Adequate books, publication and journals were not available

 Chapter Two: Theoretical Framework of Supply Chain

2.1 Supply Chain

A supply chain (SC) consists of allparties involved, directly or indirectly, in fulfilling a customer request. Thesupply chain not only includes the manufacturer and suppliers, but alsotransporters, warehouses, retailers, and customer themselves. Within eachorganization, such as a manufacturer, the supply chain includes all functionsinvolved in receiving and filling a customer request. These functions include,but are not limited to, new product development, marketing, operations,distribution, finance, and customer service.

A typical supplychain may involve a variety of stages. These supply chain stages includes:

• Customers
• Retailers
• Wholesalers/Distributors
• Manufacturers
• Component/ Raw material suppliers

2.2 Decision Phase in a supply Chain

Successfulsupply chain management requires many decisions relating to the flow of information,product, and funds. These decisions fall into three categories or phases,depending on the frequently of each decision and the time frame over which adecision phase has an impact.

1. Supply chain strategy or design: During this phase, a company decides how to structure the supply chain over the next several years. It decides what the chain’s configuration will be, how resources will be allocates, and what processes each stage will perform.
2. Supply Chain planning: For decisions made during this phase, the time frame considered is a quarter to a year. Therefore, the supply chain’s configuration determined in the strategic phase is fixed. This configuration establishes constraints within which planning must be done.
3. Supply chain operation: The time horizon here is weekly or daily, and during this phase companies make decisions regarding individual customer orders. At the operation level, supply chain configuration is considered fixed and planning

2.3 Drivers of Supply Chain Performance

To efficientlyperform Supply Chain management, some drivers are useful for success of SCM.The role of drivers in SCM is discussed below:

Facilities:

If we think ofinventory as what is being passed along the supply chain and transportation ashow it is passed along, then facilities are the where of the supply chain. Theyre the location to or from which the inventory is transported. Within afacility, inventory is either processed or transformed into another state(manufacturing) or it is stored before being shipped to the next stage(warehousing).

Inventory:

Inventory existsin the supply chain because of a mismatch between supply and demand. Thismismatch is international at a steel manufacturer where it is economical tomanufacture in large lots that are then stored for future sales. The mismatchis also international at a retail store where inventory is geld in anticipationfor future demand. An important role that inventory plays in the supply chainis to increase the amount of demand that can be satisfied by having productready and available when the customer wants it.

Transportation:

Transportationmoves product between different stages in the supply chain. Like the othersupply chain drivers, transportation has a large impact on both responsivenessand efficiency. Faster transportation, whether in the form of different modesof transportation or different amounts being transported, allows a supply chainto be more responsive but reduces it efficiency. The type of transportation acompany uses also affects the inventory and facility locations in the supplychain.

Information:

Informationcould be overlooked as a major supply chain driver because it does not have aphysical presence. Information, however, deeply affects every part of thesupply chain. Its impact is easy to underestimate as information affects asupply chain in many different ways. Consider the following:

1.    Information serves as the connection between the supplychain’s various stages, allowing them to coordinate and bring about many of thebenefits of maximizing total supply chain profitability.

2.    Information is also crucial to the daily operations ofeach stage in a supply chain. For instance, a production scheduling system thatallows a factory to produce in an efficient manner. A warehouse management systemuses information to create visibility of the warehouse’s inventory. The companycan then use this information to determine whether new orders can be failed.

• Impact of the promotion on demand
• Product margins
• Cost of holding inventory
• Cost of changing capacity

When a promotionis offered during a period, that period’s demand will go up. This increase indemand results from a combination of the following three factors:

1. Market growth
2. Stealing share
3. Forward buying

2.4 Managing Supply

A firm can varysupply of products by controlling a combination of the following two factors:

·      Production capacity

·      Inventory

Following I listsome specific approaches to managing capacity and inventory with the goal ofmaximizing profits.

Managing Capacity:

When managingcapacity to meet predictable variability, firms use a combination of thefollowing approaches.

a)    Time flexibility from workforce

b)    Use of seasonal workforce.

c)    Use of subcontracting.

d)    Use of dual facilities

e)    Designing product flexibility into the production in processes

Managing Inventory:

When managinginventory to meet predictable variability, firms use a combination of thefollowing approaches:

a)    Using common components across multiple products

b)    Build inventory of high demand or predictable demandproducts.

2.5 Managing Demand

Supply chainscan influence demand by using pricing and other forms of promotion. Marketingand sales often make the promotion and pricing decisions and they typicallymake them with the objective of maximizing revenue. Pricing decisions based onrevenue considerations often result in a decrease in overall profitability.

Four key factorsinfluence the timing of a trade promotion:

• Impact of the promotion on demand
• Product margins
• Cost of holding inventory
• Cost of changing capacity

2.6 The Role of IT in the Supply Chain

All the SupplyChain drivers discussed up until this point have dealt directly with somephysical aspect of the supply chain. Information is the supply chain driversthat serves as the glue allowing the other three drivers to work together tocreate an integrated, coordinated supply chain.

Information iscrucial to supply chain performance because it provides the foundation on whichsupply chain processes execute transactions and managers make decisions. Without information, a manager will not know what customers want, how muchinventory is in stock, and when more products should be produced and shipped.In short, without information a manager can only make decisions blindly.Therefore, information makes the supply chain visible to a manager. With thisvisibility, a manager can make decisions to improve the supply chain’sperformance. In much way’s information is the most important of the four supplychain drivers because without it, none of the other drivers can be used to delivera high level of performance.

Given the roleof information in a supply chain’s success, managers must understand howinformation is gathered and analyzed. This is where IT comes into play. ITconsists of the hardware and software throughout supply chains that gather,analyze, and act on information. IT serves as the eyes and ears of managementin a supply chain, capturing and analyzing the information necessary to make agood decision.

Using IT systemto capture and analyze information can have a significant impact on a firm’sperformance. For example, a major manufacturer of computer work stations andserves found that much of the information on customer demand was not being usedto set production schedules and inventory levels.

Information isthe key to the success of a supply chain because it enables management to makedecisions over a broad scope that crosses both functions and companies.

Information musthave the following characteristics to be useful when making supply chaindecisions:

1. Information must be accurate: Without information that gives the true picture of the state of the supply chain, it is very difficult to make good decisions. That is not to say all information must be 100 percent correct but rather than the data available paint a picture of reality that is at least directionally correct.
2. Information must be accessible in a timely manner: Often a accurate information exists, but by the time it is available, it is either out of date or if it is current, it is not in an accessible form. To make good decisions, a manager needs to have up-to-date information that is easily accessible.
3. Information must be of the right kind: Decision makers need information that they can use. Often companies will have large amounts of data that is not helpful with decision making. Companies must think about what information should be recorded so that valuable resources are not wasted collecting meaningless data while important data goes unrecorded.

2.7 The Role of E-Business in Supply Chain

E-business is theexecution of business transaction via the internet. Supply chain transactionsthat involve e-business include the flow of information, product, and funds.For instance, the following are all transactions that can be executed withe-business:

• Providing product information to participants across the supply chain
• Placing orders with suppliers
• Allowing customers to place orders
• Allowing customers to track orders
• Filling and delivering orders to customers
• Receiving payment from customers

Thesetransactions are obviously not new tasks that have come into existence throughthe creation of e-business. Rather, they are traditional tasks performed byallowing them to take place over the internet where they can often be executedmore efficiently and with a higher level of responsiveness.

E-business canbe divided into two main categories, B2C e-business involve transaction betweena company and a customer. Examples include Amazon.com, Dell, and Wal-Martselling products to customers over the internet. A B2B e-business involvestransactions between two companies. Examples include Dell selling computers tocorporations and Intel Selling microprocessors to Dell.

2.8 Activities ofSupply Chain Management:

Supply chain management is a cross-functional approach to managing themovement of raw materials into an organization, certain aspects of the internalprocessing of materials into finished goods, and then the movement of finishedgoods out of the organization toward the end-consumer. As organizations striveto focus on core competencies and becoming more flexible, they have reducedtheir ownership of raw materials sources and distribution channels. Thesefunctions are increasingly being outsourced to other entities that can performthe activities better or more cost effectively. The effect has been to increasethe number of organizations involved in satisfying customer demand, whilereducing management control of daily logistics operations. Less control andmore supply chain partners led to the creation of supply chain managementconcepts. The purpose of supply chain management is to improve trust andcollaboration among supply chain partners, thus improving inventory visibilityand improving inventory velocity.Several models have been proposed forunderstanding the activities required to manage material movements acrossorganizational and functional boundaries. SCOR is a supply chain managementmodel promoted by the Supply Chain Management Council. Another model is the SCMModel proposed by the Global Supply Chain Forum (GSCF). Supply chain activitiescan be grouped into strategic, tactical, and operational levels of activities.

 Strategic

• Strategic network optimization, including the number, location, and size of warehouses, distribution centers and facilities.
• Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.
• Product design coordination, so that new and existing products can be optimally integrated into the supply chain, load management
• Information Technology infrastructure, to support supply chain operations.

Tactical

• Sourcing contracts and other purchasing decisions.
• Production decisions, including contracting, locations, scheduling, and planning process definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise

Operational

• Production and distribution planning, including all nodes in the supply chain.
• Production scheduling for each manufacturing facility in the supply chain (minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving inventory.
• Production operations, including the consumption of materials and flow of finished goods.
• Outbound operations, including all fulfillment activities and transportation to customers.
• Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

 Chapter Three: Company Profile

MAKSONS SPINNING MILLS LTD

Registered Office: 28, Dilkusha C/A (3^rd & 4^thFloor), Suite # 303& 402, Dhaka-1000, Bangladesh.

Tel: 7168613-4Fax: 88-02-9564503, E-mail:maksons@citech.net

Website: www.maksonsgroupbd.com

Factory: Holding # 87, Ward # 5, Block # B, Road # Shaheed MinnatAli Sarak-4, Gouripur, Savar, Dhaka.

 

3.1 ORGANOGRAM OF CORPORATEADMINISTRATION

OF MAKSONS GROUP 

 

3.2 Means of Finance

Description	Equity	Loan	Total	Debt	Equity
Land	1,196	-	1,196	0%	100%
Building	47,590	31,300	78,890	40%	60%
Imported Machinery	4,444	111,108	115,552	96%	4%
Local Machinery	12,900		12,900	0%	100%
Consultant Fee	1,500		1,500	0%	100%
Interest During Consntruction Period	6,702		6,702	0%	100%
Furniture, Fixture & Equipment	4,000		4,000	0%	100%
Erection and installation	-	8,000	8,000	100%	0%
Pre-Operating Expenses	2,500	-	2,500	0%	100%
Total	80,832	150,408	231,240	65%	35%

3.3 Description of business

Corporate Status and Background:

MaksonsSpinning Mills Limited is a Public Limited Company but the Company wasincorporated in Bangladeshon September 25, 2003as a Private Limited Company under the Companies Act 1994. Subsequently  the Company was converted into Public LimitedCompany on  25.01.2005 under theCompanies Act 1994 with the purpose for setting up a 100% export oriented45,000 spindle spinning unit to produce 100% cotton combed & carded yarn. The Project is located atGouripur, Ashulia, Savar, Dhaka. The startedits commercial operation on May 16, 2006. 

Nature of Business:

Theprincipal activities and operations of the Company are production and sale ofcotton yarn.

Principal Products:

Theproject has been set up to produce 100 % cotton combed & carded yarn. 

Market of the products: 

Exportoriented Ready Made Garments (RMG) and knitting industries are the consumers ofthe products of the Company. Relative contribution of the services contributingmore than 10% of the total revenue The Company produces only 100 % cottoncombed & carded yarn. So contribution of a product contributing more than10% to t revenue does not arise. 

Associates, subsidiary/ related holdingCompany:

Consideringvoting right of 20% or more in another company there is no associates companyof Maksons Spinning Mills Ltd. as per Para 4 but there are common directorshipin some companies. The following companies are associates company on the basisof directorship. 

a.Metro Spinning Limited    

b.Maksons knit & Rotor Spinning Ltd.     

c.Maksons Properties & Development Ltd.  

Distribution of product:

The Companysupplies its products to the premises of its customers at own risk againstback-to-back Letter of Credit (L/C).

Competitive Conditions in the Business:

There is a hugedemand-supply gap for the product of the Company in the yarn market. TheCompany earned good name & fame in the market of the country for itsquality. The following companies can be considered as competitors of thecompany:

 

1.  Metro Spinning Limited

2.  Arif Knitspin Ltd.

3.  Amber Cotton Mills Ltd.

4.  Hanif Spinning Mills Ltd.

5.  Keya Spinning Mills Ltd.

6.  MSA Spinning Mills Ltd.

7.  Square Spinning Mills Ltd.

8.  Shamsudding Spinning Mills Ltd.

9.  Shameem Spinning Mills Ltd.

10.  R. K. Spinning Mills Ltd.

11.  Gulshan Spinning Mills Ltd.

Sources of, requirement for, power gas andwater:

Allrequired utility facilities are available at the project site and those arestated below:

Power:

Powerrequirement for the project is   4,120 KWwhich are met up from own gas generator. Yet for smooth operation of the prconnection from REB has been arranged as stand by.   

Water:

Theproject is required for 9m3 of water per day which are met up from owndeep-tube well.

Gas:

TitasGas Transmission & Distribution Co. Ltd supplies required gas for theproject.

Employees’ position as on 30.08.2008:

Particular	Officer & Staff		Worker	Total employees
	Factory	Head Office
No. of employees	133	32	1,059	1,224

Production Capacity and Current Utilization:

Particulars	Installed Production Capacity	Current Utilization  (1 Jan to 30 August 2008)
Annual Production of Yarn in Kg.	91,60,000 Kg.	65,84,512 Kg.

The project ofthe company is equipped with balanced modern machinery imported from Switzerland, Germany, Japan, China, Spain, India, USA, Italy, France, Taiwan, with aview to producing product of international standard. This happens to be theproject of state of art, which has earned high reputation in textilesector.  

VAT, Income Tax, Customs Duty or other Tax Liability:

(I) VAT: 

Theproject of the Company is 100% export oriented. Government of Bangladesh hasdeclared that there is no VAT on 100% export oriented project.  

(II)  IncomeTax: 

TheCompany has been granted Tax holiday for 4 years from May 01, 2006 to 30, April2010 by the National Board of Revenue (NBR). Hence no current Tax Provision hasbeen made in the Financial Statements. 

(III)Custom Duty or other Tax and contingentLiability: 

Thereare no dues outstanding on account of custom duty or other tax and contingentliabilities.

3.4 The objects for which the Company isestablished

The objects for which the Company is established are allor any of the followings:

All the objects will beimplemented after obtaining necessary permission from the Govt. /Concernedauthority, competent authority before commencement of business:

1.       To  set  up Industry for  the  purpose of  Spinning, weaving, warp  knitting, dyeing,

Printing, processing, finishing, treating, curing, combing, bleaching,pressing,    cutting, packing, baling,storing or otherwise generally manufacturing and dealing synthetic, cotton,polyester and rayon yarn, fabrics and textile of all descriptions.

2.       To carry on the business of manufacturer, importers& exporters of and dealers in all kinds of textile goods and packingmaterials for the purpose of garments industry and for his purpose to apply,negotiate, arrange, secure, agencies, distributions, dealership, buy and sellor otherwise deal in dispose of all goods connected therewith in any mannerwhatsoever either independently through own organizations or through agenciesor dealership as the Company may deem fit.

3.       To Carry on the business of manufacturers, importersand exporters of and dealers in saries, lungies, bed sheets, covers, shirtingand suiting, blouse pieces and other allied cotton, rayon and synthetic textilegoods by power looms or hand looms.

4.       To set up processing and finishing projects for calendaring,dyeing, printing, finishing yarn and textile goods of all descriptions as theCompany may deem fit.

5.       To carry on business of manufacturer, importer,exporter and dealers of threads, balls, spools tape lace, ribbon, hosiery andother packing materials for the use of the garments industry including knittedgoods, socks, canvas, mosquito netting, embroidered cloth, absorbing cotton andsuch other allied products as the Company may deem profitable for the interestof the Company.

6.       To carry on business of manufacturer, importer andexporter and dealers of readymade garments of all kinds for the benefit of theCompany.

7.       To carry on the business of ginning, doubling,spinning, weaving, manufacturing, processing, dressing, packing balling,printing, calendaring, bleaching dyeing and all other manufacturing andpreparing, processes and otherwise generally dealing in and transacting allmercantile business for the benefit of the Company.

8.       Generally to carry of the business of importers andexporters of packing raw materials, finished goods, machines spare parts andcommodities of description whatsoever of both Bangladesh and foreign originincluding own manufactured products and of foreign products in any system theCompany may deem profitable.

9.       To appoint selling agents, sub-agents, dealers,distributors for the products of manufactured by the Company and also for the productsacquired by from other manufacturer in which way and manners and of such termsand conditions as the Directors may think expedient in the interest of theCompany.

10.     Tomanufacturer, import, export, buy, sell, let on hire, exchange, later, improve,manipulate, prepare of market and or otherwise deal in distribute all kinds ofplant, machineries, machine parts, tools apparatus, implements, chemicals, rawmaterials and substances necessary or convenient for carrying on any abovespecified business or any other marketable commodities whatsoever.

11.     Tocarry on the business of manufacture of and dealers in all other articles whichmay deem to Company capable of the being conveniently carried on in connectionwith the above or calculated directly to enhance the value of or renderprofitable any of the Company’s properties or rights.

12.     Topurpose or otherwise acquire plant, machinery, motor cars, trucks, motor busand other equipment and to erect, construct and maintain any building, officeshow room, workshop, factory and other constructions as may be required by theCompany from time to time.

13.     Topurchase or otherwise acquire and undertake all or any business, property,assets and liabilities of any other persons, firm or company engaged in anybusiness which this Company is entitled to carry on or possessed of propertysuitable and convenient for the purpose of this Company.

14.     Toestablish branches, agency, offices of the Company in any part of the Bangladesh orelsewhere.

15.     Tomanage, improve, develop, sell, exchange, lease, mortgage, dispose of turn toaccounts or otherwise deal with the property of the Company.

16.     Toinvest and deal with money of the company not immediately require in suchmanner as may from time to time be determined by the director of the Company.

17.     Topromote any other Company for carrying into effect any of the object of theCompany for purpose of acquiring all or any of the business, property, rights,liabilities of this company or for any other purpose which may seem directly orindirectly to benefit of this Company.

18.     Tosubscribe or contribute from time to time to promote, organize or establish anycharitable fund, institution, establishment, foundations or trust of a publicnature for humanitarian ground, social utility or to promote the interest orthe Company.

3.5 The authorized share capital ofthe Company

The authorized share capital ofthe Company is Tk. 30,00,00,000.00 (Thirty Crore) divided into 26,00,000(Twenty Six Lacs) ordinary shares and 4.00 (Four Lacs) Preference Share of Taka100.00 (Taka One Hundred ) each with powers to increase or reduce the sharecapital for the time being with the provisions of the companies Act, 1994 andto divide the shares in the capital of the Company into various classes and toattach that to respectively such preferential, qualified and special rights orprivileges or conditions as may be determined by the Company in general meetingand to consolidate or sub-divide the shares and to issue shares of higher orlower denominations.

The minimum subscription upon whichthe Directors may proceed to allot shares shall be TK. 1, 00,000 (One Lac)only.

Name of the subscriber.	Number of Shares taken by each share holders
1.     Al-Haj Abdul Ali  Age: 63 2.     Mohammad Ali Khokon Age: 45 3.     Mohd. Ferdous Kawser Masud Age: 33 4.     Mrs. Laila Ali Age: 36 5.     Md. Showkat Ali	10,000 (Ten Thousand) 35,000 (Thirty Five Thousand) 10,000 (Ten Thousand) 10,000 (Ten Thousand) 10,000 (Ten Thousand)

6.     Mohd. Amjad Ali Age: 35    7.     Sanjid Hassan Age: 20 8.     Polly Yeasmin        Age: 26	10,000 (Ten Thousand ) 5,000 ( Five Thousand ) 10,000 ( Ten Thousand )
Total Shares  =	1,00,000 (One Lac)

3.6 Additional disclosure by theManagement of the Company

1.  CashFlows from Operating Activities:

Negativecash flow from operating activity is mostly attributable to delay in collectionof sales proceeds against export. Maksons Spinning Mills Limited is a 100%export oriented   pinning industry,selling its product through 120 days deferred back to back L/Cs but the paymentof these L/Cs is not always made on due maturity date.  It takes 150 days or even more to realize thepayment. The payment of back-to-back L/C is made by the opening bank afterrealization of payment of master/export L/C. In  December ’07 debtor balance wasTk. 578.30 million against the yearly sales of Tk. 1160.89 million that means50% of sales proceeds remained unrealized. We are availing of short termfinancing against the bills of these BTB L/Cs. Short term loan was  Tk. 401.98 million in December ’07 whichreflected financial activity rather than operating activity. On the other handCash Flow Statement furnished for 3 months period whereas 120 days deferred BTBL/Cs received in this period were not realized which also caused negative cashflow.

2.Current and Quick Ratio

TheCurrent and Quick ratio of the Company are 0.81 & 0.70 respectively but theactual scenario is quite different. We have imported capital machinery of Tk.70.37 Crore against 360 days deferred L/C. At the time of maturity of theseL/C’s the payment of Tk.43.20 Crore were made by creating syndicated long termloan, Tk. 22.43 Crore by creating short term loan and Tk. 1.56  Crore from own source. Rest Tk. 3.18 Croreyet to mature, lies as deferred liability. Besides,  that the installments ofTk. 1.95 Crore, which will fall due during the period from 01 October 2007 to31 December 2007 are transferred from long term loan to current liability asper requirement of Para 60(b) of BAS 1 “Presentation of Financial Statements”.Since this amount will be payable in the next financial year. The inclusion ofshort term loan of Tk. 22.43 Crore & deferred liability of Tk. 3.18 Croreagainst capital machinery and current portion of long term loan of Tk. 1.95Crore as current liability caused poor current and quick ratio. If werecalculate current and quick ratio not considering afore said amount then thecurrent and quick ratio will be 1.09 and 0.94 respectively.

Chapter Four: Import Analysis

4.1 Basic ideas on Fiber and yarn

Textile fibers

Fibers used for the production of yarnare called textile fibers. All the fibers are not textile fibers, textilefibers must have some of the essential characteristics e.g.

1)    Minimum length to insert twist.

2)    Strength

3)    Fineness

4)    Pliability or flexibility

5)    Cohesiveness

6)    Rigidity or stiffness

7)    Elongation & Elasticity

8)    Moisture Absorbency etc.

Classification of textile fibers:

Differenttextile fibers are used in textile industry. Some of them we get from naturalsources and some of then are man-male classification of fibers are shown in thefollowing chart:

Figure: Classification of Textile Fiber

4.2 Basic Considerations in selection of raw material

Textile fiber’s length analysis

Wide variationsof fiber lengths occur within a fiber of the same source as well as betweenvarieties obtained from different source. Staple fibers include all naturalfibers except, sild-sidk is a natural filament fiber Man-made fibers,manufactured in filament form, and silk filament fibers may be cut up to formshort staple fibers. Staple is fiber of cotton, wool or ramie etc. of no morethan a few inches long. filament is usually a man made fiber of indefinitelength. The size of yarn is usually related to the weight of the fabric, forheavy fabrics we use thick yarn, for light fabrics we use fine yarn.

Textile fiber’s diameter analysis:

The diameter ofa fiber is the distance across the fiber’s cross section. The diameter of   natural staple fibers is irregular and mayvary from one part of the fiber to another. Staple fiber diameters are measuredin microns. The diameters of the smooth, even filament man made fibers isuniform

Textile blended fibers analysis:

Blended fibers/blends combine two or more fiber substances into a single fiber strand or yarnwith modified or changed properties and appearance of the fiber, yarn orfabric.

Textile Mixed fibers’ yarns analysis:

Mixed fiberyarns are the combination of two or more strands of different fibers to formone yarn. 

There are three method used toblend fibers:

1. Opening method: Fibers are fed into the machine alternately from two or more bales.
2. Roving method: different fiber strands are combined and twisted together drawing the slivers to a size suitable for spinning.
3. Spinning method: The combing of two strands twisted into a single yarn. Long fine fibers migrate towards the center while shorter fibers remain to the outside.

By quality, cotton is basicallydivided into the following four major groups:

1)    Sea Island cotton: It is the best quality cotton in theworld. It has the longest and finest staple reaching 2-1/4” which is themaximum length by nature. Sea Island cotton is a name given to cotton of thisquality particularly that grown in South Carolina, Georgia, and florid of the United Statesand the islands off the coast of these states.

2)    Pima cotton: Pima cotton is just another name given tocotton of the second longest staple reaching 1-3/4”. It is grown in Peru and Egypt. (Alsocalled Peruvian and Egyptian cotton). However, it is also grown in the southwestern U.S, by selection and breeding of Egyptian cottons.

3)    U.S cotton: Generally refers to cotton grown in the United statesother than Sea island cotton. The staple length varies but may reach 1-1/2”

4)    Asian cotton: Asian cotton is grown in Asia-Japan, China,Pakistanand India.The staple length is usually not longer than 1-1/8”. In many cases in order toidentify the origin of the cotton, people draw a line at 1-1/8” If the longeststaple in the cotton is 1-1/8”, we know it is Asian cotton; otherwise it is U.Scotton or Pima cotton.

Other than thelength of cotton staple which is of great importance, the thickness of it isimportant too because we can only use cotton of long and fine staple to makehigh quality fine fabrics.

The wool thickness varies dependingon the kind of wool and origin of it.

Synthetic fiberis made by machine we can adjust he thickness usually between 0.01 mm and 0.04mm based on our needs. Within each kind of cotton named above the staple lengthof each kind of cotton can be substantially shorter than indicated. Before weuse it to spin yarn, we usually would sort out cotton of different staple lengthsinto groups as follows:

a)    Cotton of all long staple we call Fully Combed Cottonfor making fully combed yarn.

b)    Cotton of all medium length staple we call semi combedcotton for making semi combed yarn.

c)    Cotton of all short staple we call carded cotton formaking carded yarn.

Fabrics made offully combed yarn would have a smooth silky surface whereas fabrics made of cardedyarn would have nubs or deed cotton on the surfaces which are usually lesscolor absorbent. As a result it is coarse and not very soft. Therefore, weusually use combed yarn which is cheaper to make heavy fabrics such as heavydenim or canvas. For spun yarn we call the yarn sizes 10 count 20 count and 40count etc, In the trade we usually write 10s,20s, and 40s to mean 10 countsingle, 20 count and 40 count single. 10s is twice as thick as 20s and 20s istwice as thick as 40s. In other words the bigger the number is the finer theyarn is or the smaller the number is the thicker the yarn

Theoretically,we can make a piece of yarn of any size, usually from 4 counts to 120 counts,or even heavier than 4 counts or finer than 120 count. 1 count yarn means 840yards of it to weigh 1 lb. 2 count yarn means1,680 yards(twice as long) toweigh 1lb., and of 10 count yarn, 8400 yards ( 10 times as long) to weigh 1 lb.and so on.

4.3 Characteristics oftextile Spun yarn

• Composed of short staple fibers of definite length
• Made from natural cotton, flax or wool staple fibers
• Made from natural or Man-made filaments which are chopped or cut into short lengths and referred to as filament staple yarn.
• Individual fiber length vary
• Bigger and wider in diameter than filament fiber yarns.
• Fuzzy appearance and feel; fiber ends protrude from yarn
• Uneven number of fibers throughout
• Range from soft, loose construction to hard finished, fine twist yarn
• Thick and thin areas highly twisted
• Fall apart when untwisted
• Dull or flat in appearance
• Rough to the touch
• Natural textural appearance and feel
• Bulkier to the feel
• Provide good covering power
• Snagging depends on fabrics structure
• Pilling depends on fiber content

4.4 Characteristics oftextile blended yarn & fabric

In order toachieve certain appearance, and effect on fabrics or to avoid paying highimport duty on garments to be exported to the exported to the United Stateswhich is the biggest buyer of garments from the Asian producing countries, weoften mix different fibers in the yarn to make fabrics. Instead of using onlyone kind of fiber, we may use 2 or 3 kinds. As each kind of fiber has its owncharacteristics, when we plan to mix them, we should consider theircharacteristics to create a hybrid with the characteristics we need. Thereforeit is important that we know the characteristics of the following key fibers:

Cotton: Soft, very absorbent, shrinks when washed easy to crease.

Ramie & linen: Compared to cotton,not soft, less absorbent, shrinks when washed, but to a less extent, easy tocrease

Rayon: Compared to cotton, softer than cotton equally absorbent,Shrinks more than cotton, very easy to crease, has a luster like silk

Polyester: Compared to cotton, notsoft, absorbent at all, does not shrink in normal wash not easy to crease

Wool: The characteristics varydependent on the kind of wool it is, but it has these general characteristics:Compared to cotton, not very soft, not absorbent. The staple is slightly crispywhich can lead to a bulky effect when finally made into fabrics. It shrinks seriously when washed in hot water. Not easy to crease.       

Nylon: Can be soft or firm dependent on the finish applied, notabsorbent, does not shrink when washed, not easy to crease, very strong

Silk: Finer and softer than cotton,equally absorbent, shrinks more than cotton easy to crease, has a smoothsurface with luster when it is made into fabric.

Acrylic: Not soft, not absorbent, dies not shrink in normal wash.The staple is slightly

4.5 Suppliers Selection and Contracts

Once theanalysis has been completed, a list of promising suppliers will emerge. Thefirm select desired suppliers using a variety of mechanisms including off- linecompetitive bids, reserve actions, or direct negotiations. No matter whatmechanism is used, supplier selection should be based on total cost of using asupplier and not just the purchase price.

Before selectinga supplier, the firm must decide whether it will use single sourcing or willhave multiple suppliers from which to source the product. Single sourcing isused to guarantee the supplier sufficient business when the supplier has tomake a significant buyer-specific investment. Once suppliers have beenselected, contracts have to be structured between the buyer and each supplier.

4.6 Placement Process of an Order

MSML places theorder of raw materials to the suppliers. When placing an order for rawmaterials it needs highest 30 days. For placing an order they use some medium,the mediums are:

·      E-mail

·      Fax

·      Letter

·      Phone

The company asksfor proforma invoice from the suppliers using the aforesaid means ofcommunication where the terms and conditions are mentioned clearly.

4.7 List of Banksinvolved in import of MSML

1. Southeast Bank Ltd

1, Dilkusha, Dhaka.

2.Jamuna Bank Ltd

Dilkusha Branch, Dhaka.

3.Mutual Trust Bank Ltd

Principal Branch, Dhaka.

4.Sonali Bank

Local Office, Dhaka.

5. One Bank Limited

Motijheel Branch

4.8 List of Major localAgents of MSML

1.A.R.Cotton

2.DhakaCotton

3.Trade Scan Int'l

4.Desh cot

5.S.M. Cot

6.Wellcot

7.Bakul Limited

8.Wellcot

9.Euro Cotton

4.9 List of MajorSupplier of raw cotton of MSML

1.Indian Cotton Company-India

2.LGW Industries

3.P.D. Sekhsaria-India

4.Omprakash Shiv.

5.Paul Rainhart

6.Sicle Cotton

7.Cottonex -Uzbekistan

8.Mambo Commodities-U.K

9.Plexus Cotton-U.K

10.Fibermax

11.Cargil Cotton-U.K

12.Druchenberg-USA

13. LGW Industries Limited-India

14. Cottimtex -Switzerland

4.10 The Procurement Process

Once supplierhave been selected, contracts are in place, and the product has been designed,the buyer and supplier engage in procurement transactions that begin with thebuyer placing the order end with the buyer receiving and paying for the order.When designing the procurement process, it is important to consider goods thatthe process will be used to purchase. There are two main categories ofpurchased goods Direct and Indirect materials. Direct materials are componentsused to make finished goods. Indirect materials are goods used to support theoperations of a firm A good example of a procurement process that focuses onthese objectives is the e-Hub initiative at Cisco.

As Maksonsspinning Mills Ltd. Produce 100% cotton yarn only, the main raw material is theFibers. The company imports fibers from USA, Canada, Uzbekistan, Kazakhstan, India, U.K andPakistan etc.

In 2005-2006,Opening stock of raw material was 152,963 lbs. worth Tk. 5,292,280 and thepurchase  of raw cotton was 3192320 lbs.worth Tk. 127,747,315. So, The raw cotton available for consumption was 3345283lbs. worth Tk. 133,039,595. Total raw material consumed during this period was2030094 lbs. worth Tk. 82,051,891.

In 2006-2007,Opening stock of raw material was 1315189 lbs. worth Tk. 50,987,704 and Thepurchase of raw cotton was 15144917 lbs. worth Tk. 643,499,462.So, The rawcotton available for consumption was 16460106 lbs worth Tk. 694,487,166.Totalraw cotton available for consumption was 15799255 worth Tk. 664,802,462.

Total carriage inward in2005-2006 was Tk. 323254 and in 2006-2007 was Tk.996581.

Imports of raw cotton by MSML in June-2008

SL	SELLER	INDENTOR	L/C NO		Description	Bales
01	Cargil Cotton, U.K	Bakul Ltd.		2217-08-01-0470	Origin-Uzbekistan Growth-SM, Staple-1.1/8”, Mic- 3.8-4.9 NCL,	1110
02	Mambo Commodities, U.K	Dhaka Cotton		3037-08-02-0003	Growth-Benin, Grade:Kaba-S Staple- 1.1/8”, Mic-3.5-4.9 NCL Pressley-29 GPT	1106
03	Plexus Cotton, U.K	Bakul Ltd.		1335-08-01-0534 (Bulbul Tex)	Origin- Mali Staple-1-1/8”,	1092
04	Cottonex Anstalt, Vaduz	Wellcot Inter’l		1335-08-01-0541	Origin- CIS (Uzbek) Grade- Pervey selected-SM	1164
05	Drachenberg, U.S.A.	Wellcot Inter’l		1335-08-01-0552	Origin- USA,  Growth- Fibermax, Grade- SM, Staple- 1-1/8”, Mic-3.5-4.9 NCL, GPT: 30	527
06	Cottimtex Switzerland	Wellcot Inter’l		2217-04-01-0426	Origin- Benin Grade- Kaba/s, Staple- 1-1/8”,	1045
07	Drachenberg, U.S.A	Euro Cotton		2217-08-01-0506	Origin- USA,  Growth- Fibermax, Grade- SM, Staple- 1-1/8”,	527
08	Cottonex Anstalt	Wellcot Inter’l		1335-04-01-0611	Origin- CIS(Uzbek) Grade- Pervy Selected-SM, Staple- 1-1/8”,	1206
					Total Bales	7777

Statement of Raw cotton Purchase by MSML as on 20 September-2008

1.  L/C IN PIPE LINE

SUPPLIER INDENTOR	L/C NO.	DESCRIPTION OF RAW COTTON	QTY	VALUE
P.D.SEKHSARIA-INDIA DHAKA COTTON CO.	LC- 0793 DT.05-07-08 SBL	MCU-5 –30 MM INDIA	100M/Tons =220,460lbs +150 M/Tons =330,690 lbs (1490 Bales)	$ 156,526.60 $ 234,789.90 $ 3,91,316.00
P.D.SEKHSARIA-INDIA DHAKA COTTON CO.	LC – 0893 DT.08.12.03     SBL	SANKAR-6 (SUPER) –28.56 MM INDIA	120 M/Tons =264,552 lbs (720 Bales)	$ 190,477.44
P.D.SEKHSARIA-INDIA DHAKA COTTON CO.	LC – 0916 DT.17.12.03     SBL	MCU-5 –30 MM INDIA	120M/Tons =264,552 Lbs (720 Bales)	$ 194,445.72
INDIAN COTTON COMPANY- INDIA A.R.COTTON TRADING, DHAKA	LC – 0023 DT. 10.01.04	MCU-5, 30 MM INDIA	244.9M/Tons =539980 Lbs (1400 Bales)	$ 383,385.80

2. RAW COTTON IN BOOKING (L/C DUE FOR OPEN)

SUPPLIER INDENTOR	DESCRIPTION OF RAW COTTON	QTY IN BALES	QTY IN  LBS	U.PRICE	VALUE
MAMBO COMMODITIES, U.K	KABA-S 1.1/8” 28 GPT	260 M/TONS	573,196.00	USC 76.00	$435,628.96

4.11 Making SourcingDecisions in Practice

This involves choosing thesuppliers that will deliver the goods and services you need to create yourproducts or services. It also involves developing a set of pricing, deliveryand payment processes with suppliers and create measurement criteria formonitoring and improving the relationships. Enterprises also need to puttogether processes for managing the inventory of goods and services that theyreceive from suppliers, including receiving shipments, verifying them,transferring them to their manufacturing facilities and authorizing supplierpayments.

1.  Use multifunctional teams: Effective strategies for sourcing result from multifunctional collaboration within the firm. A sourcing strategy from the purchasing group is likely to be narrow and focus on purchase price.

2. Ensure appropriate coordination across regions and business units: Coordination of purchasing across all regions and business units allows a firm to maximize economies of scale in purchasing and also to reduce transaction costs.

3. Always evaluate the total cost of ownership: An effective sourcing strategy should not make price reduction its sole objectives. All factors that influence the total cost of ownership should be identified and used for supplier selection.

Build long termrelationship with key suppliers: A basic principle of good sourcing is that abuyer and a supplier working together will generate more opportunities forsavings than the two parties working independently

4.12 Estimating Landingcost

Different costsare associated with import of raw cotton. To understand, an example is givenbelow:

Landing cost of R/C (CIS : UZBEKISTAN)1.3/16" 456 Bales Raw Cotton                                   

           

Imported through L/C # 1335- 08-01- 0392 Dated 20.08.08 Amount $ 1, 65,896.15                    

                                               

SL       EXPENDITURE                                                 AMOUNT(TK)

1          5%Margin                                                                    507,700.00

2          Restvalue of invoice (95%)                                      9,112,159.00

3          Exchange Rate                                                           9,619,859.00

4          BankCom. & other charges                                           42,258.00

5          Interest@ 12.00%                                                         110,575.00

6          C&F (M/S.Ruhul Amin )                                               67,550.00

7          Carrying(M/S. A. N.Transport Agency)                        68,759.00

8          PSI(M/S. Royal Inspection International)                     16,984.00

9          PLI(Reliance Inspection Ltd.)                                        60,035.00

10        Insurance(Continental Insurance Ltd.)                        366,161.00

TOTAL                                                                                   9,986,020.00

Per unit cost in percentage (%)                                                       3.81                   

Less Short Weight Claim $1,525.43 @59.75                             91,118.75

T. Exp. After recovering S. Claim                                          9,894,901.25

Landed Net Weight (Lbs)                                                          210,329.42

Landing cost based on Net landedWeight                                     47.04

Total invoice weight                                                                   212,356.57

Short Weight                                                                                   2,027.15

Net Landed Weight                                                                     210,329.42                       

4.13 The Role of the Safety Inventory in the Supply Chain

Safety inventory is inventory carriedfor the purpose of satisfying demand that exceeds the amount forecasted for agiven period. Safety inventory is carried because demand forecasts areuncertain and a product shortage may result if actual demand exceeds theforecast demand.

           

                                    Figure:Inventory profit with safety inventory

For any supplychain, there are two key questions to consider when planning safety inventory:

1. What is the appropriate level of safety inventory to carry?
2. What actions can be taken to improve product availability while reducing safety inventory?

Impact of Supply Uncertainty on SafetyInventory

In manypractical situations, supply uncertainty also plays a significant role.Consider the case of the Dell assembly plant in Austin. Dell assembles computers to customerorder. When planning the level of component inventory, Dell clearly has to takedemand uncertainty into account. Suppliers, however, may not be able to deliverthe components required on time for a variety of reasons. Dell must alsoaccount for this supply uncertainty when planning its safety inventories.

Chapter Five: Production

The basic principle of textile spinning is to spin textile fibersinto yarn. Bales of cotton will be opened, mixed and then will be passedthrough the blow room line to remove dirt, foreign materials and to open thetufts of fibers and ultimately to produce regular lap by scutcher. The lapswill pass through the carding machine to individualize the fibers and to removedirt, neaps & short fibers and finally produces slivers. As and when necessarythese slivers will pass through the lap former to produce comber laps. The lapswill be fed to the combing machine to remove the maximum short fibers andultimately to produce regular slivers.

The combed slivers willpass through the drawing frame, where doubling and drafting will be done andwill produce regular sliver which will be fed to the simplex rrame to produceroving and then eill be fed to the spinning frames where drafting and twistingwill be done and will produce yarn in bobbin form. Finally, heat setting ofyarn will be done, before coning. Thereafter, individual cones will be wrappedin polythene packing in paper cartons ( 100 lb. each carton) and sent to themarket. In rotor card sliver will be feed to the draw frame 1^st and2^nd passage after that final drawing sliver will be feed to therotor frame and in rotor frame drafting and twisting will be done and finallyyarn will be wind in cone form these cone will be delivered to knitting section50% will be sold out.

Figure: Flow chart for producing yarns at MSML

Enterprises need toschedule activities necessary for production, testing, packaging andpreparation for delivery. This is also the most metric-intensive portion of thesupply chain so quality levels, production output and worker productivity haveto be measured.

5.2 Spare Parts and machinery used ByMSML for yarn production

To produce theexport yarn the following Spare Parts and m/c s are mainly used by MSML

SL	Name of section	Machine and spare parts specification	Quantity
01	Blow room	Foreign Fiber Detector	1. Nos
02	Carding	Taken in under Casing Segment and Stationary Flat	14. Nos
03	Carding	Stripping Roller For Flats	14. Nos
04	Simplex	Simplex Shadle Spring SKF Germany	1000 Nos
05	Simplex	Simplex PVC Core Cots (Bevelled) Size: 1 D = 19 mm                            0 D = 28 mm                       Length = 39 mm	1800 Nos
06	Simplex	Spacer White and Green Original SKF	500+500 =1000 Nos
07	Simplex	Flyer Presser For FL 16                                 ( 108 Spindle)	100 Nos
08	Ring	Cot Irredation Machine ( U.V Treatment)	1 Nos
09	Finishing	Yarn Conditioner mic Heat Selting	1 Nos
10	Quality Control	H V I / H F I Mic ( For Fiber Testing)	1 Nos
11	Quality	Twist Testa	1 Nos

5.3 Textile YarnConstruction

Yarn count, yarnply and yarn construction interrelate to form the characteristics of yarn. Yarnconstruction is classified as:

a)    Simple/conventional yarns are two or more simple single yarns plied or twistedtogether. They are referred to as two three, four, five or six ply yarn. Sizeand number of plies may be changed for different weaves or fabric structures.

b)    Complex/NoveltyYarns are single or plied yarn structures characterized by internationalintroduced irregularities in size and twist effects. The irregularities ofnovelty yarns may be uniform.

c)    Metallic Yarnsproduced by lacquering aluminum pigment or by laminating aluminum foil betweenlayers of plastic. Since metallic yarns are flat rather than round as mostother man- made fiber yarns, the size of the yarn is specified in  inches.

d)    Textured Yarnsare the end result of physical, chemical or thermal manipulation of fibers andyarns so that they are no longer straight or uniform. The manipulation processof textured yarns results in the modification and altering of the arrangementof fiber and yarn.

e)    Stretch Yarnsmay be applied to yarns by chemical or mechanical methods. Not all methods orfibers will achieve equality effective stretch properties.

Yarn count numbering system

Yarn count isthe physical thickness, coarseness or fineness of yarn which can be measuredand defined as fine increasing in size to thick or course. The size orthickness of the yarn relates to a unit or length and weight of the yarn andalso influences the covering power of the yarn. Yarns of finer thickness requirea greater number of yarns to fill a square inch measured space of fabric. Yarncount and yarn thickness are measured by a direct and indirect system ofmeasuring.

Direct system

This system measuresfilament yarn only. The direct system is a direct reading where by the weightof the fiber is the same as the yarn count. The basic unit used for measuringis 9000 meters or one gram.

As the number increases, thephysical size of the yarn gets thicker.

Let N = The yarn number or count

 W =  Theweight of a sample at the official regain in the units of the system.

L = the length of the sample.

I =  The unit length of the system.

                                    W*L

            Then N=      ­_____

                                      L

Indirect system:

This systemmeasures spun yarns only. The yarn count number is inversely proportioned tothe weight of the yarn. As the number increases, the physical size of the yarngets finer and thinner.

In an indirect system the yarnnumber or count is the number of units of length per unit of weight.

Measurement of count:

A)  Wrap reel and analytical balance.

B)   Wrap reel and knowledge balance

C)   Wrap reel and quadrant balance

Yarn diameter and countrelationship:

                                                      1

Yarn diameter (in inches) =-----------------

                                               √28 count

5.4 Yarn Faults

Some commonly occurring yarn faultsand the methods of controlling them are as follows:

a)    Slubs: Slubsare fish shaped thick places from 1 cm. to 4 cm. long and about 5-8 timeslarger than the average yarn diameter at the thickest portion. Slubs formedearlier stages due to poor drafting would get substantially elongated during Iring frame drafting and would get appear as slubs in the yarn. It  can be controlled in carding stage and thenRing frame.

b)    Cracders:Crackers are short coil-like places in the yarn. Cracker occur frequently inpolyester or polyester-cotton yarns.

Remedial steps:

1)    Increase top arm pressure

2)    Use large diameter and narrow width top rollers

3)    Ensure that the traverse motion functions properly

4)    Use of wider apron spacers

5)    Increase break draft

6)    Reduce twist in roving

7)    Wider back zone setting

8)    Use of heavier traveler

9)    Avoid stopping of ring frames.

c)    Spinner’s doubles: This fault consists of the yarnbecoming double in its thickest at some portions.

Causes:

1)    Rove from an inter bobbin in the creel at ring framegoing along with the neighboring end.

2)    The ring frame tenter permitting doubled rove to be fedinto the drafting system at the time of replacing a near empty inter bobbin inthe creel.

3)    The strand issuing from the front rollers at ringframes going along with an adjacent end on the ring bobbin.

Remedy:

The ring frametenter should be trained to replace the creel bobbin with a proper piecing ofthe rove and not by letting the fresh rove overlap with the in going rove atthe feed.

To transfer thelap from the lap pin to a lap rod to suitably handle and feed it to the subsequentm/c (carding)

Action of Blow Room Line:

1. Action of opposing spikes
2. Action of air currents
3. Action of beaters
4. Regulating Action

Wastage in Blow Room:

1. Droppings
2. Dust
3. Filter waste

Faults in Blow:

1. Irregular lap
2. Knocking off before completion of full lap
3. Rough appearances of full lap
4. Lap sheet thicker at one side than at the others
5. Soft lap
6. Lap licking
7. Droppings under beater & grid bars.
8. Formation of conical lap
9. Formation of conical lap
10. Barrel shaped lap
11. Ragged lap selvedges.

Types of Beater in Blow room:

1. Porcupine beater
2. Bladed beater
3. Krishner beater

Carding:

Objects of carding m/c:

1. To open the tuft of fibers
2. To make the fibers parallel & straight
3. To remove remaining trash particles
4. To remove short fibers
5. To remove naps
6. To produce a rove like fiber called sliver, which is uniform in per unit length

Main actions of carding machine:

1. Action between feed roller & taker
2. Action between taker in and cylinder
3. Action between cylinder and flat
4. Action between cylinder and doffer

Useful sliver hanks of  different counts:

Count of yarn:                 10s,      20s,     32s,    40s,     60s,     80s

Hank of carded sliver:    0.125,  0.125,  0.13,   0.135, 0.145,  0.165

Wastage in carding:

1. Taker in waste
2. Flat strip
3. Motes & flies
4. Sliver cut
5. Filter waste

Draw Frame:

Objects of draw frame

1. Straightening of crimped and hooked fibers
2. Paralleling of fibers
3. to produce more uniform of sliver of definite wt./ yd
4. To reduce the wt./yard of materials fed.
5. To make perfect blending / mixing of the component fibers

Wastage in Draw frame

1. Filter waste
2. Clearer waste
3. Sliver cut

Comber:

Objects of Comber

1. To remove the fibers shorter than a predetermined length
2. To remove remaining impurities in the comber lap
3. To remove naps in the carded sliver.
4. To make the fibers more parallel and straight
5. To produce a uniform sliver of required per unit length.

Necessity of Combing:

1. Clean fiber
2. Uniformity in length of fiber
3. Absence of naps
4. More parallel arrangement of fibers
5. Straight fibers

The above quality of fibers can onlybe obtained by combing.

Speed Frame:

Objects of Speed frame:

1. Attenuation of draw sliver to a suitable size for spinning
2. To insert a small amount of twist to strengthen the roving
3. To wind the twisted strand roving into a bobbin

Operation involved in speed frame:

1. Drafting
2. Twisting
3. Laying out
4. Winding
5. Building motion

Ring Frame:

Objects of ring frame:

1. To draft the roving fed to the ring spinning frame.
2. To insert the necessary amount of twist
3. To wind the twisted thread or yarn on a cylindrical bobbin or tube.

Operation involved in ring frame:

1. Creel in
2. Drafting
3. Twisting
4. Laying out
5. Building
6. Doffing
7. Winding

5.5 Factors Governingoptimum spinning condition

1. Spindle Speed
2. Ring Dia
3. Lift
4. Traveler wt.
5. Relative humidity

Yarn quality assessment:

1. Yarn count & its variation
2. Twist and its variation
3. Evenness CV % or U% of yarn
4. Strength and its variation (csp of yarn)
5. Imperfections

If spinningtension is grater than yarn strength in Ring frame, then end breakage isoccurred and also due to roller lapping

1. Technological causes
2. Mechanical causes

1. Technological causes:

1. Insufficient twist in yarn
2. If travelers fly off.
3. Subbing through
4. Stretched roving
5. Faulty drafting roller setting
6. Faulty Traveler selection
7. Excessive yarn tension
8. Improper atmospheric conditions

2. Mechanical Causes:

1. Faulty drafting system
2. Worn out ring and traveler
3. Faulty gear and wheels
4. Worn out top rollers
5. Faulty apron
6. Spindle vibration
7. Eccentric ring

5.6 Discussion on new spinning systems

Open-End Rotor spinning:

The mostsuccessful of the new spinning systems is open end rotor spinning which is nowtermed as conventional spinning system. The success of rotor spinning is due tothe increase of its productivity.

Advantage of rotor spinning:

1. Lower labor cost
2. Less power consumption
3. Cheaper raw material
4. Larger package size
5. Higher productivity, because of higher speed
6. Elimination of roving, no use of simplex m/c
7. easy handling

Limitation:

1. Wide range of count cannot be spun
2. Very finer count cannot be spun
3. Yarn strength and quality is lower than ring yarn
4. More bulky yarn
5. Higher twist factor

Wrap spinning:

The wrap orhollow spindle spinning system uses the tecjmoque of wrapping, a continuousfilament yarn round a central core of parallel staple fiber and this system canbe used for both short and long staple. Wrap spinning is considered ascomplementary to the ring and not a complete replacement. It is suitable forcoarse count up to 30s.

Limitation of Wrap spinning:

1. Only used for short staple fibers
2. Using of binder is a cost factor
3. Fabric appearance is not good due to the presence of binder
4. Yarn has no self strength

Count                                                                              Production

50 tex.                                                                               89meter/mt.

143 tex.                                                                            134meter/mt.

500 tex.                                                                            250 meter/mt.

Air-jet-Spinning:

The air jetspinning system which are now commercially available are capable for processingof short staple polyester and its blend of medium to fine count range. Comparedto other modern spinning systems it has the advantage of being able to spinfine yarn and at present it can not be used for spinning coarser yarns.

Advantages:

1. Strength of yarn is more
2. Bending modules is higher

Disadvantages:

1. Twist characteristics is different along the length
2. Very short staple fibers cannot be spun
3. Produce harsh and compact yarn structure
4. 100% cotton cannot be spun
5. Variation of c.v of C.S.P. is more

Production:

Count                                                                                            Speed

Ne 45 poly/cotton                                                                            140m/mt.

Ne 60 poly                                                                                      140 m/mt.

Ne cotton                                                                                        130m/mt.

Friction spinning:

The basicprinciple of friction spinning is that it is an opening system, the fibers arecarried with an air flow forward the collecting area between two frictionsurfaces. Friction spinning, like air jet spinning is limited in practice bythe yarn quality.finer count yarn produced in friction spinning than ring orRotor spinning with comparatively production level.

5.7 Textile knit yarnproduction system:

To produce knit yarn, the followingarrangements are needed:

1. Continuous electric supply source i.e. generator needed
2. Wording environment will be comfortable i.e. humidity of plants is needed.
3. Quality control dept. will be well equipped.
4. Schedule of machine maintenance must be maintained properly & carefully.
5. Overall cleaning efficiency must be in adequate position
6. Relative humidity in different section given below:

A)  Blow—room-50 to 55%

B)   Carding-------50 to 55%

C)   Draw frame, combing fly-frame or simplex frame-------50to 55%

D)  Ring frame-----------------------------------------------------50to 60%

E)   Finishing--------------------------------------------------------60to 65%

Yarn faults & Remedies

Faults                                                                      Remedies

1. Thick & thin places:                                  Clean the sliver & yarn deliverypassage

2. Slab:                                                         Un drafted sliver, to increase back zone draft,

                                                                     Clean all covers of delivery passage

3. Hairiness:                                                To follow up ring traveler change schedule

4. Naps:                                                        Proper cleaning of card frame

5. Colorcontamination:                                During mixing supervision mustbe strict.

                                                                     To set a contamination meter in conveyor -

                                                                      Lattice or finishing m/cs.

Uniformity Ratio:

Uniformity ratiois defined as the ratio of 50% span length to 2.5% span length expressed as apercentage. This ratio is a measure of the length variability of the cotton.The ratings for uniformity ratio are as follows:

50%  :                                           Good

     45%    :                                       Average

43%     :                                         Poor

Micronnaire and Maturity:

The ratings ofthe micronnaire and maturity values given below can be used as a guideline:

Macronnaire               Value          Maturity                     Co-efficent

3.0:                             Fine             0.80:                           Good

4.0:                             Average       0.75:                           Avarage

5.0:                             Coarse         0.65:                           Poor

Fiber strength:

The tenacity ofthe cotton obtained at 3 mm. gauge length can be rated on the following basis:

Rating                                            Presley                                   Stelometer

                                                   (1000 lb .sq.in)                             (g/tex)

High                                                75                                                30

Average                                           60                                               24

Low                                                 45                                               18

5.8 Textile Yarnfinishing system of MSML

Yarn finishing starts after Ringtill transfer to finished Godown

For Hank form                                                  For cone form

                                    Figure:Process sequence of finishing

                                                                                                                                                   

                                                                                                                                                          

Chapter Six: Export Analysis

                                                                                                                                                                                                                                                                                                                      

All sales of Maksons Spinning MillsLtd. are 100% exported and those are made against back to back L/C. During theyear 2006-2007 total export were US$15,819,136.Those sales are converted in toBDT time to time at the date of transaction rate.

6.1 Terms andconditions of sales at MSML

1. PAYMENTS: In U.S dollar by confirmed irrevocable L/C favoring of Maksons Spinning Mills Limited. 28, Dilkusha C/A, 4^th floor, suite# 401, Dhaka-1000 at sight from the date of delivery challan. On maturity the payment will be only in US Dollar.
2. INTEREST: For usance period on Buyer’s account interest as per Bank rate after maturity date till payment. Overdue interest if any will be paid @ 16% per annum.
3. L/C TO BE OPENED & VALIDITY: Within 7 days and L/C must bear factory address of buyer.
4. SHIPMENT: Shipment within 30 days from the receipt of L/C.
5. QUALITY & QUANTITY: Buyer must inform the seller regarding the complain about quality and quantity after using 15 dg and within 3 days from the date of each delivery otherwise no claim will be entertained. Shipment within 30 days from the receipt of L/C.
6. FOREIGN BANK CHARGES: All foreign bank charges including reimbursement charges outside Bangladesh are on buyers account. (If any).
7. SPECIAL INSTRUCTION: Bond license of buyer is required to obtain Mushak-11 for the delivery of yarn and L/C must bear VAT registration No. of buyer and seller VAT NO.: 5031023441 ( A mandatory condition of Customer).
8. ADVISING BANK: Southeast Bank Ltd. Principle Branch, 1 Dilkusha C/A , Dhaka-1000
9. NEGOTIATION BANK:  Any schedule bank.
10. REMARKS: To obtain BTMA Certificate, Master L/C No. and date along with quantity of garments and items to be exported under the Master/Export L/C wheather BTMA certificate rewuired for “ GSP or Cash Assistance Facility”. Cash incentive drawn by L/C opener & Certificate issued by the beneficiary after received of payment (If required).

6.2 Growth in demand

Until 1970spublic sector bias dominated economic policy. But from the beginning ofeighties, a distinct shill in emphasis towards the private sector with export-orientedpolicies was gradually initiated. This outward- looking policy enabled Bangladesh toachieve a spectacular growth in export of ready-made garments. Theexport-oriented RMG Industry started in 1977-78 with 9 enterprises with annualproduction capacity of 8.01 million pieces of RMG. The number of enterpriseshas increased to 2200 with an annual production capacity of 2270 millionpieces. The RMG Industry made an unprecedented growth in export earningstarting from US$ 0.07 million in 1977-78 to about roughly US$ 3.0 billion in1996-97.

6.3 Cost comparison

Some quartersoften express their apprehension whether Bangladesh textile is competitivewith that of India.Recently the Government of Bangladesh undertook detailed studies on varioussub-sectors of textile. The study on the spinning sub-sector had mentioned thatmanufacturing cost of Bangladeshi spinning mills is cheaper than not only from India but alsofrom Pakistan,Japan,Korea,Thailandand Indonesia.

6.4 Domestic demand estimation

Presently demandfor yarn is being met through both local production and import. Yarn is mainlyrequired of production from fabrics (Knit & woven). Therefore, itsaggregate demand depends directly on the requirements of fabrics for domesticconsumption as well as to meet requirement of export oriented RMG.

Domestic demand

Domestic demandfor fabrics vis-à-vis yarn in our country has been estimated on the basis ofthe following assumptions:

a)    The average cloth requirement is 11 meter per capitaper year.

b)    1 kg. Yarn of average 32 counts produce cloth of9-meter length and 137.16 centimeter width.

On the basis ofthe above assumptions, the domestic demand for fabric and yarn in the countryhas been estimated at 1820 million meter and 202 million kg respectively for apopulation of 130 million as at end of FY 2001-2002.

Projected domestic demand

Increase ofdemand for fabrics mainly depends on the increase in per capital income, incomeelasticity of demand and growth of population. In forecasting domestic demandfor fabrics , conservauvely considered only the growth of population (1.47%)keeping other parameters unchanged. The projected demand is shown in Table-1below:

6.5 Yarn price ofvarious spinning mills:

Name of Mill
	30kh	28kh	26kh	24kh	20kh	34kh	20ch	30ch	28ch	26ch	24ch
Arif	2.95	2.95	2.90	2.85	2.80	3.20	2.98	3.15	-	-	-
Rising	2.95	2.85	2.90	2.75	2.70	-	-	-	-	-	3.05
Badsha	2.85	2.85	2.80	2.70	2.65	-	-	3.20			-
Square	2.95	2.95	2.75	2.85	2.80	3.30	-	3.25	3.20	3.15	-
Karim	2.95	2.80	2.90	2.75	2.70	-	3.05	-	-	-	-
MSA	2.85	2.85	2.80	2.80	2.75	3.15	-	-	-	-	-
Prime	2.90	2.90	2.85	2.70	2.65	-	-	3.16	3.18	-	-
Akij	2.85	2.90	2.70	2.70	2.65	-	3.00	-	-	-	-
Utah	2.80	2.82	2.70	2.75	2.70	3.20	-	-	3.20	-	-
Delta	2.85	2.85	2.75	2.80	2.75	3.18	-	-	-	-	-
Techno	2.85	2.80	2.80	2.65	2.65	-	-	3.18	-	-	-
Maksons	2.95	2..93	2..90	2.85	2.80	3.25	3.00	3.25	3.20	3.15	3.10

Projected Domestic demand for Yarn  (in million kg.)

2005-2006	211
2006-2007	214
2007-2008	217
2008-2009	220
2009-2010	223

It appears fromTable-1 that the domestic demand for yarn corresponding to fabric requirementis 211 million in 2005-2006 which is expected to increase to 223 million kg. In2009-2010.

6.6 Export demandanalysis

Export demandfor yarn export oriented spinning mills, at present, there are 3618 exportoriented RMG registered with the BGMEA. As per data collected from the BGMEA& EPB, Export of readymade garments from Bangladesh during the period fromFY 1997-1998 to 2003-2004 were as follows:

Export of RMG from Bangladesh(Quantity in million doz.):

Financial Year	Woven Garments	Knit Garments	Total
1997-1998	65.59	32.60	98.19
1998-1999	64.79	36.66	101.45
1999-2000	66.64	45.26	111.90
2000-2001	71.48	52.09	123.57
2001-2002	77.05	63.54	140.59
2002-2003	71.48	52.09	123.57

Requirement of Fabrics and Yarn

For export oriented RMG in thecountry

Financial Year	Requirement of fabrics (in million meter)	Requirement of yarn (in million kg.)
1997-1998	1801.51	300.25
1998-1999	1859.79	309.97
1999-2000	2048.85	341.48
2000-2001	2261.42	376.48
2001-2002	2306.44	428.00
2002-2003	2779.44	463.24
2003-2004	3324.67	554.11

Projected exportdemand for Yarn

Table-2 depictsthat export of spinning mills from Bangladesh has increased at anaverage rate of 12% per annum over the last six years. But keeping in view theprobable average impact of free trade economy, imposed quota and duty freeaccess allowed by the USA to 72 countries in Africa & the Caribbean under TDA2000 the requirement of yarn for export has been projected to grow at a rate ofonly 2% per annum coming years a shown in Table-4

Projected demand for Yarn in the countryfor export

Financial Year	Projected domestic demand for Yarn (in million kg.)
2005-2006	565
2006-2007	576
2007-2008	588
2008-2009	599
2009-2010	612

6.7 Managing Demand at MSML

Supply chainscan influence demand by using pricing and other forms of promotion. Marketingand sales often make the promotion and pricing decisions and they typicallymake them with the objective of maximizing revenue. Pricing decisions based onrevenue considerations often result in a decrease in overall profitability.Maksons Spinning Mills Ltd. sales yarn to the buyers against Back-to-back L/Cat 90 days or 120 days sight. After receiving irrevocable letter of credit,Yarns are delivering to the buyer’s factory. To maintain friendly businessrelationship, the company sometimes delivers yarn in advance against deliverychalan before opening L/C. To maintain the operating cycle smooth, the companymakes purchase arrangement of the bills at 16% bank interest.

Sales against back to back L/C by MSML

MONTH	QUANTITY(KGs)	AMOUNT(US$)
July-06	169676.84	475290.00
Augus-06	301900.00	722536.00
September-06	395062.00	954788.92
October-06	339367.00	939224.47
November-06	217207.00	540571.00
December-06	632150.00	1562748.00
January-07	495776.00	1245934.00
February-07	268065.00	690876.00
March-07	447567.00	1130480.00
April-07	462434.00	1210403.00
May-07	492278.50	1139440.38
MONTH	QUANTITY(KGs)	AMOUNT(US$)
June-07	307049.00	781864.00
July-07	948106.00	2447245.50
August-07	662093.00	1769565.50
September-07	737460.00	1909432.00
October-07	439580.00	1192279.50
November-07	604000.00	1638916.00
December-07	188050.00	523575.00
January-08	359677.00	1042831.50
February-08	219445.00	635780.75
March-08	446100.00	1295435.00
April-08	451986.00	1320551.90
May-08	461776.46	1311186.50
June-08	124150.00	347547.50
July-08	351100.00	1012337.50
August-08	423950.00	1164754.50
September-08	616350.00	1683621.00

6.8 Means of receivingOrder:

• E-mail
• Fax
• Telephone
• Mail

6.9 TransportationFacilities:

Transportation refers to the movement of product from onelocation to another as it makes its way from the beginning of a supply chain tothe customer’s hand. Transportation plays a key role in every supply chainbecause products are rarely produced and consumed in the same location.Transportation is a significant component of the most supply chains incur.

Any supplychain’s success is closely linked to the appropriate use of transportation.Wall-Mart has effectively used a responsive transportation system to lower inoverall costs.

Supply chainsalso use responsive transportation to centralize inventories and operate withfewer facilities for example; Amazon.com relies on package carries and thepostal system to deliver customer orders from centralized warehouse.

Transportationis a significant link between different stages in a global supply chain. Dellcurrently has suppliers worldwide and sells to customers all over the worldfrom just a few plants. Transportation allows production to move from suppliersto the assembly plants to customers. Similarly, global transportation allows Wal-Martto sell products manufactured all over the world in the United States.

This is the "logistics" portionof the supply chain. Enterprises need to coordinate the receipt of orders fromcustomers, develop a network of warehouses, pick carriers to get products tocustomers and set up an invoicing system to receive payments.

Maksonsspinning mills limited. has 3 owned vehicles to deliver the product to thebuyers timely. The company tries to deliver the product in shortest possibletime to avoid stock out of the buyers. During the pick season, the company alsorent vehicle to cope with the situation. 

6.10 Returning:

 This is the "problem" part of thesupply chain. Enterprises must create a network for receiving defective andexcess products back from customers and supporting customers who have problemswith delivered products.

The companyallows the buyers to replace the defective products with good products, Thecompany use its own vehicles to collect the defective product for replacement.

6.11 Different Ratiosof MSML

Ratios	Formula	31.12.2007	30.09.2007	30.09.2006
Accounts Receivable Turnover Ratio	Sales/Avg. Receivables	1.820	3.096	2.000
Asset Turnover Ratio	Sales/ Avg. Assets	2.479	1.371	0.180
Gross Margin Ratio	Gross Margin/Sales	26.76%	22.92%	18.14%
Operating Income Ratio (%)	Operating Income/ Sales	23.48%	19.79%	13.43%
Net income Ratio (before Tax) (%)	NIBT/Sales	6.15%	5.66%	6.29%
Asset Turnover Ratio	Sales/ Avg Assets	2.479	1.371	0.180

Sales

Export

2005-2006	BDT.  129,423,902
2006-2007	BDT.  1,077,103,280

Selling & Distribution Expenses

2006-2007              2005-2006

    (Tk.)                (Tk.)

Packing Materials		12,443,008		1,701,485
Carriage Outward		557,955		291,105
Commission against Export Sales	734,080			-
Advertisement		138,100		-
Total		13,873,143		1,992,590

Cost of Goods Sold:                                                                             

	2006-2007		2005-2006
	Quantity (lbs)	Total Amount    (Tk.)	Quantity (lbs)	Total Amount    (Tk.)
Opening Work in Process	49,235	2,933,567	10,188	573,684
Raw Material Consumed	15,799,255	664,802,462	2,030,094	82,051,891
	15,848,490	667,736,029	2,040,282	82,625,575
Less: Recovery	1,803,648	-	201,270	-
	14,044,842	667,736,029	1,839,012	82,625,575
Less: Invisible	110,994	-	20,300	-
Material available for Consumption	13,933,848	667,736,029	1,818,712	82,625,575
Less: Closing Work in Process	59,632	2,992,244	49,235	2,933,567
Production	13,874,216	664,743,785	1,769,477	79,692,008
Add: Direct Expenses	-	26,457,397	-	6,367,469
Add: Factory Overhead	-	144,115,776	-	21,913,513
Cost of Production	13,874,216	835,316,958	1,769,477	107,972,990
Opening Finished Goods	30,127	2,305,085	6,801	272,040
Finished Goods available for Sale	13,904,343	837,622,043	1,776,278	108,245,030
Less: Closing Finished Goods	139,780	7,413,553	30,127	2,305,085
Total	13,764,563	830,208,490	1,746,151	105,939,945

 Material Change from period to period:

                                                                           As per Audited Accounts(Amount in Tk.)

Particulars	From 01.10.07 to 31.12.07	From 01.10.06 to 30.09.07	From inception to 30.09.06
Sales	260,466,436	1,077,103,280	129,423,902
Less cost of Goods sold	19,075,5238	830,208,490	105,939,945
Gross profit	69,711,198	246,894,790	23,483,957
Less Operating Expenses (other than Financial Expenses)	8,555,210	33,759,217	6,098,543
Total Operating Profit	61,155,988	213,135,573	17,385,414
Add non-operating income	2,078,374	92,402	-
Profit before Financial Expenses	63,234,362	213,227,975	17,385,414
Less Financial Expenses	46,403,282	149,237,630	8,837,382
Profit/(Loss) before WPPF	16,831,080	63,990,345	8,548,032
Less Provision for WPPF	801,480	3,047,160	407,049
Net Profit before Income tax	16,029,600	60,943,185	8,140,983
Less Tax Holiday reserve @ 40%	6,411,840	24,377,274	3,256,393
Net Profit after provision for Tax	9,617,760	36,565,911	4,884,590

Finished Goodsavailable for sale:

                                                          2006-2007                           2005-2006         

                                                       (lbs.)            (Tk.)               (lbs.)            (Tk.)                                

20s		28,900		1,472,360		2,843		200,005
24s		28,660		1,507,602		3,552		256,277
26s		65,300		3,497,911		4,417		322,618
30s		16,921		935,681		12,541		938,067
30s (Comb)		-		-		6,774		588,118
Total		139,781		7,413,554		30,127		2,305,085

Yarn Stock Position as on 29.09.2008
CARD YARN		COMBED YARN
COUNT	KGS	COUNT	KGS
18 KH	3,250	20 CH	-
20 KH	5,440	24 CH	4,780
22 KH	2,250	26 CH	3,100
24 KH	1,733	28 CH	0
26 KH	2,288	30 CH	2,500
28 KH	2196
30 KH	7,744
Total	24,901	Total	10,380
Total Stock		35,281.00	kgs

The Management of the Company isalways attempting to maximize production with cost efficiency; as a result,profit is also showing greater in size. 

 SeasonalAspect

In general,demand for yarn is prevailed in whole year yet from September to April demandgoes at high. So most of the company produces yarn at its highest capacityaround the year to sell in pick season but they suffer from various storingproblem of that yarn. Different storing costs are associate with this. ButMaksons Spinning Mills Ltd. maintains effective downward supply chain with thebuyers so they get order for yarn all the year around.

 Known Trends, Events orUncertainties

Fall of demandfor knitwear at international market, scarcity of funds (liquidity crisis),entrance of new technology, government monetary policy, increased competition,natural calamities and political unrest are known events that may affect thebusiness of the Company.

6.12 List of majorforeign & local buyers of Maksons Spinning Mills Ltd

	Major Foreign Buyers
1	Hadad Apparel Group Ltd
2	Meijer Distribution Inc. USA
3	Eagle Canyon Inc. USA
4	JC Penney USA
5	Wal- Mart  USA
6	K - Mart   USA
7	Children's  Wear House USA
8	Auchan - France
9	Americanion - Greece
10	Gueldenpfennig - Germany
11	Tchibo - Germany
12	C & A - Germany
13	Vegotex - Belgium

Major local buyers:

PARTY NAME	PARTY NAME
M/S. AST KNIT LTD.	M/S KPF TEX
M/S. TANQUIL FABRICS LTD.	M/S KAMAL TEXTILE MILLS LTD.
M/S.. SOUTHEAST TEX (PVT) LTD. .	M/S APPARELS-21 LTD. .
M/S. GREEN KNIT WEAR	M/S D.M GARMENTS LTD.
M/S. TURAG GARMENTS & HOSIERY MILLS LTD.	M/S MAJESTIC GARMENTS LTD.
M/S. ASROTEX	M/S DAFFODIL KNIT WEAR
M/S. PADMA POLYCOTTON KNIT FABRICS LTD. .	M/S UNITED COSTUME LTD.
M/S. GREEN KNIT WEAR	M/S RAINBOW KNITTED GARMENTS (PVT) LTD.
M/S. GENIUS FASHION LTD.	PROMINENT APPAREL
M/S. ELAINE APPARELS LTD. 840,KAZI PARA,BEGUM ROKEYA SHORONI MIRPUR,DHAKA	M/S. IFS TEX WEAR (PVT) LTD. MUJIB MARKET(3RD FLOOR),MIJMIJE SHIDDERGONJ,NARAYANGONJ

Chapter Seven: SWOT ANALYSIS

SWOT Analysis ofspinning mills (Bangladesh Perspective)

 STRENGTH

• Advantage over China, Pakistan & India
• Adequate supply of labor force of both sexes, attributed with less attitudes problem (less absenteeism and aptitude for learning, and loyal) and high morale
• Cheaper labor cost
• Low cost of captive power generation using gas as fuel
• GSP facility up to 2015

WEAKNESS

• Bangladesh produce mostly basic products-which are low cost items; the share of fashion products i.e, high value added product is very low.
• Bangladesh does not produce the basic raw materials ( only a negligible quantity of cotton but no manufactured fiber ) and as such has to depend totally on sensitive global market.
• Because of inadequate backward linkage, leak-time happens to be long, nearly 3 months.
• Public power supply is erratic.
• Bank interest rate is still high enough, particularly of private sector bank, for investment of export oriented high  value project.
• HRD facility, productivity and quality support, testing and accreditation support, design support and compliances are yet to be enhanced.
• Cost of doing business is high because of under table money.

OPPORTUNITY

• Bangladesh has now a scope to go for more fashion oriented products deserving high price in the global market.
• With the help of further increase of productivity & quality and design support, Bangladesh can minimize cost and maximize profit and export value.
• Bangladesh, as a proven experienced RMG & Textile manufacturer, can expand share in the existing market (USA, EU, Australia, Canada etc.) and can also explore opportunity in Japan & CIS countries.
• In the long run, Bangladesh has a scope to target huge populated country like China and India-where demand as well as cost of manufacturing will be wider.

THREAT

·      Unless new strong market is explored in home orabroad, any non-cooperation from USA & EU may jeopardize the wholeBangladesh RMG export business and consequently the textile manufacturing.

·      Sudden price hike of cotton and yarn in theglobal market may push Bangladeshto a very awkward situation to devastate the business.

·      The type of labor and political anarchies of therecent days if prevails in the future, Bangladesh may lose the business inthe way Sri-lanka  has lo

Chapter Nine: Finding & Recommendation

8.1 Reasons behind applying effective supply chainmanagement

(A) To avoid Industry Risk

Textile is thelargest industrial sub-sector in Bangladesh. It contributes highestin the country’s total export earnings, gives employment to over four millionpeople meets the second basic need for clothing of the country and contributesaround 50% of the industrial value addition. But, after phasing out of the MFA,the global textile trade is now free from quota restriction. The phasing out ofMFA has created a tough competitive environment, where Bangladesh isnow competing the countries like China, India, Pakistan, Indonesia, Thailand,Vietnam etc. countries that is very strong in production of textile goods.

The textileindustry has successfully coped with the post MFA competitive situation. Theforce, which is helping the sector for its strong existence, is emergence ofbackward linkage industry. Application of supply chain management aresupporting for minimizing lead-time and cost of production. The Company is afirst state of backward linkage industry of yarn producing that facilitates forbetter existence. 

 

(B)To avoid Exchange Rate Risk

The Company is100% export oriented.  The products ofthe company are sold against foreign currency and payments for raw material arealso made in foreign currency.  Ifexchange rate is increased against local currency opportunity is created forgetting more revenue against sale in local currency.  On the other hand if exchange rate goes downmargin is squeezed in local currency.

The exchangerate of the country is traditionally witnessed of upward trends, which makesample opportunity of export. On the other hand, management perceivesrevaluation of local currency i. e. down trend of exchange rate will have littleimpact on profitability of the Company.

 (C)To avoid Market and technology related Risk

(i) Market Risk:

Among thefunctional areas in a yarn company, marketing exerts the sheer part of theimportance. Proper implementation of the marketing tools as well as identifyingnew clients will ensure the success of the project. The continuous changes onpreference in the garment and textile market will force the company to catchthe trend. For which the company has to produce yarn for international demand.

The company setits focus only in countries export market through inland back-to-back letter ofcredits. The management is trying to sell through direct contact with thecustomers (RMG & Knitting industries) in the selected regions understandingtheir needs. The company also has established relationship with potentialbuyers across the country and expects to find market for its capacity despitecompetition prevailing in the sector. Further, the commercial banks andfinancial institutions provide a thrust in the textile sector as they providecredit facilities to RMG & Knitting industries to acquire the yarn fortheir final products

(ii) Technology related Risk: 

Technologyalways plays vital role for existence of any industrial concern. Innovation ofnew and cost effective technology may obsolescence existence technology, whichmay cause negative impact.  

The project isequipped with world’s modern and latest machinery and technology and to copewith the pace in harmony with modern textile world the Company is continuingmodernization program of its machinery. 

(D)To avoid Potential or existing government regulations:

The Companyoperates under companies act, taxation policy adopted by NBR, Security andExchange Commission (SEC)’s rules and rules adopted by other regulatoryorganizations. Any abrupt changes of the policies formed by those bodies willimpact the business of the Company adversely. 

Unless anyadverse policies are taken, which may materially affect the industry as awhole; the business of the Company will not be affected. Government emphasizeson the growth of Yarn Industry to boost up the export of RMG. Yet the promotersand the sponsors have endeavor to convince the policy makers for adoptingfavorable terms & conditions, which will eventually help the yarnmanufacturers of Bangladesh to compete with the low cost locations in theglobal arena.  

(f) To protect against Potential changes in global or national policies

The performanceof the company may be affected by the political and economical instability bothin Bangladeshand worldwide. Any instance of political turmoil and disturbance in the countrymay adversely affect the economy in general.

The company canprosper in a situation of political stability and a congenial business environment.  Political turmoil and the disturbance are badfor the economy and so also for us.

(g) To avoid Operational risk

Shortage ofpower supply, labor unrest, unavailability or price increase of raw material,natural calamities like flood, cyclone, earth quack etc. may disrupt theproduction of the Company and can adversely impact the profitability of theCompany. 

The compensationas well the benefit package will restrain the employees to leave theirassignment and go for any employee movement for higher benefit packages. Theproject of the Company is situated at a high land where less record of flood.The factory building has strong RCC foundation, RCC floor, pre-fabricated steelstructure to withstand wind, storm, rain etc. along with good drainagefacility. The risks from these factors are also covered through Insurance. Thecompany is also facilitated to keep a rational reserve for any future priceescalation of the raw materials. 

8.2 Benefits ofimplementing supply chain management in spinning mills:

Company implementing supply chain management	Company do not implementing supply chain management
1. Raw cotton of the Spinning is not available in our country. Supply chain management ensures adequate supply of raw material.	1. During the pick season they may not able to collect raw material.
2. Standard quality is maintained because of long-term relationship	2. Standard quality is not maintained when imported raw cotton comes from different foreign suppliers
3. Cost of doing business is considerably low because of planned procedure.	3. cost of doing business may be high
4.  Company can satisfy existing customer and attract new customer	4.may not attract & satisfy new customer
5. No excess Inventory exists.	5. Excess Inventory exists because of a mismatch between supply and demand
6. The use of these tools enables the company to greatly increase its profitability because it is able to match supply and demand in a much more coordinated fashion.	6. Lac of proper coordination may reduce the efficiency and effectiveness level of the company’s capacity

8.3 FINDINGS

During my three months internshipin the Maksons Spinning Mills Limited, Following things are found out from myobservation:

1. Financingcapital is one of the major problems in our country to import raw cotton.

2. Raw cotton ofthe Spinning is not available in our country

3. Standardquality is not maintained when imported raw cotton comes from foreigncountries.

4. Sometimes manylabor organizations do unfair practices for their self-interest.

5. Standard wagerate is not maintained properly in our spinning sector, for this reasonsometimes they move towards their own factories.

6. Our spinningsector faces strong competition like China, India, and Pakistan etc.

7. Raw cottonsupply is not smooth of the spinning sector

8. Sometimespolitical unrest causes a great hamper for improving our spinning sector.

9. Sometimes foreign yarn comes from black market, for this reason ourspinning factories are suffered.

10. Spinningsector faces illegal harassment like shipment and delivery

11. Technology always plays vital role for existence of any industrialconcern. Innovation of new and cost effective technology may obsolescenceexistence technology, which may cause negative impact as ours is a labor-intensive country.

8.4 Recommendations

I have found a fewer number of factors,which impede the achievement of ultimate goals of Maksons Spinning MillsLimited. It is not easy to find out the solution for inexperience intern likeme. But I do believe that the suggestions mentioned below will obviouslyincrease the efficiency of Maksons Spinning Mills Limited.

1. Shippers must ship theconsignment of cotton within the stipulated date as mentioned in the Letter ofcredit. Delay in shipment shall be entertained without prior approval of thebuyer for extension of shipment date.

2. Government should reducetax and tariff on Textile spares, Textile dyes, Chemical and sizing materials.

3. A committee be formed withmembers from various importing and exporting countries to review the existingrules and procedures and suggest reformulation of mew rules due to changes thatare being taken place in World Trade.

4. Arbitration Board to bereconstituted with members from buyers and sellers country and one to beinducted on the recommendation of ICA.

5. Arbitration to be held inthe country of buyer.

6. Compensation to be paid dueto supply of inferior quality cotton should be fixed on the basis of nominalrate fixed by ICAfrom time to time.

7. Membership fees should bereduced to attract more individual members.

8. The Spinning sector offerslower interest rate on long term and working capital.

9. The compensation as wellthe benefit package will restrain the employees to leave their assignment andgo for any employee movement for higher benefit packages.

10. The Sector should prosperin a situation of political stability and a congenial businessenvironment.  Political turmoil and thedisturbance are bad for the economy and so also for us. So, Proper steps shouldbe taken by the government to keep this sector free from politics.

Finally, theproject should be equipped with world’s modern and latest machinery and                                                technology to cope with the pace in harmony with modern textile world.The Company should situate at a high land where less record of flood. Thefactory building should have strong RCC foundation, RCC floor, pre-fabricatedsteel structure to withstand wind, storm, rain etc. along with good drainagefacility.

8.5 Conclusion

Sophisticatedtechnology and high thought laboratories have been introduce in the productionprocess, which brought new dimension in the purchasing, procuring, storing andmaintaining supplies and inventories. The improved transportation andcommunication as well as competitors threat has made the issue more challengingand competitive. Thus, the usage and need for supply chain management areincreasing dramatically. Further, global competitions require the companies’continuous response to the customer with new products and replace those thatbecome obsolescence, for these reason companies are combating to find newsuppliers and building strong and long-term relationship with them. Hence,managers must have to very rational, logical and sensitive in designing andimplementing proper supply chain management in order fight and compete againstcompetitors and attaining organizational goals. Before selecting a supplier, a firmmust decide whether it will use single sourcing or will have multiple suppliersfrom which to source the product. Single sourcing is used to guarantee thesupplier sufficient business when the supplier has to make a significantbuyer-specific investment. Once suppliers have been select, contracts have tobe structured between the buyer and each supplier. Supply chains can influencedemand by using pricing and other forms of promotion. Marketing and sales oftenmake the promotion and pricing decisions and they typically make them with theobjective of maximizing revenue. Pricing decisions based on revenueconsiderations often result in a decrease in overall profitability

References:

·      Krajewskiand Ritzman, Operations Management- strategy and analysis, 6^thEdition

·      SunilChopra, and Peter Meindl, Supply Chain Management- strategy, planning andoperation, 2^nd Edition

·      Khan& jain(2004), FinancialManagement-text & Problem,3^rdedition, p.g 4.1-4.57

·       Prospectus of MSML, published on 18September-2008

§ http://www.itwm.fraunhofer.de/zentral/download/berichte/bericht26.pdf.

§ http://bgmea.com.bd/index.php?option=com_content&task=view&id=12&Itemid=26

§ http://maksonsgroupbd.com/prospectus

§ http://66.102.1.104/scholar?hl=en&lr=&q=cache:OKTGNo7eptwJ:unnayan.org/Solidarity_Forum/Spinning_the_Chain_Lost_in_the_Queue.pdf+spinning+sector+of+Bangladesh