Kunjah Textile Mills Ltd

KUNJAH TEXTILE MILLS LTD

TEXTILE INDUSTRY OF

PAKISTAN

In 1947, at the time of independence Pakistan Textile Industry was like a feeble

child with only three cotton mills, a small woolen spinning, whereas weaving,

hosiery and knitwear were features of cottage industry. Now when we have

entered into new millennium, Pakistan’s Textile Industry has become a stalwart

fellow, which has grown in all sections. Now we are not only self-sufficient but

are also exporting surplus products. Today we have over 8.358 million installed

spindles, 166,000 installed rotors 20,000 shuttle less looms, 200,000 power looms,

8,000 terry towel looms, 7620 canvas looms, 157,000 woolen/worsted installed

spindles, 15,000 woolen looms, 12,000 knitting machines, over 600 processing

units and over 2500 garments units.

We all know, journey of textiles starts from seed and culminates at ready-to-

wear garments and in present competitive world scenario, it is combination of high

production efficiencies, most appropriate technologies and work methods, together

with trained work force, management and marketing skills which can give any

industry a successful status.

Textile industry today is the backbone of economy of Pakistan and provides the

largest number i.e. about 40% of total industrial jobs and very vast industrial

service opportunities. It has always been the pillar of Pakistan’s economy

contributing substantially to Govt. revenues. It also has a dual linkage. As a major

consumer of domestic cotton, it provides a market for a leading cash crop and thus

has a critical influence on the growth and productivity in agrarian sector. Hence

the performance of the textile industry has a vital impact on the over all growth

and development of the economy. The industry also tops, as an earner of ever-so-

INTERNSHIP REPORT 1


scarce foreign exchange and exported goods worth US $4.9billion last year and

this amount is about 60% of the total national exports. Its share in total GDP is

8.5%. The investment in Textile Industry is 31% of total investment. The interest

that banks and other financial institutions earn from Textile sector is RS. 4 billion

per annum. The salaries and wages that Textile sector provides to workers is Rs.

40 billion per annum. Its contribution to R & D is RS.116 million per annum.

This very remarkable achievement did not come easily and is due to the combined

and tireless efforts of the Govt. Planners, industrialists, technical support staff and

our hard working and inexpensive labor. On the top of these, Pakistan has been

blessed with suitable climate and perennial supply of good quality water to grow

about 1.7 million tons per annum of the lint cotton, “the silver fiber” that forms a

natural and sound base for a viable textile industry. Pakistan textile industry

consumed 1441 million Kg raw cotton and 406 million Kg fiber during 1998-

1999.

Value-added product exports of Pakistan Textile industry are very less. The

percentage of yarn exports in total textile exports is 20% and percentage of cloth is

24% while 56% of total textile exports includes others textile manufactures. We

should produce more value – added products because if we see the value addition

chain the prices of cotton, yarn, cloth, garments, towels, bed wear are US$ 1.33,

US$ 2.33, US$ 5.41, US$ 6.71, US$ 4.05, US$ 5.51 per Kg respectively. Thus we

can earn additional foreign exchange by exporting value – added products.

SPINNING INDUSTRY OF PAKISTAN

Areas comprising West and East Pakistan were big producers of good

quality cotton and jute fibrous raw materials but the value-added conversion

industries were mainly located around the Indian cities of Bombay and Calcutta in

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the respective order. At the time of independence Pakistan was producing about

one million bales of cotton, which were exported and from the receipts, cloth and

yarn for the handlooms were imported. The Govt. took notice of this situation

immediately and encouraged setting up mills in both the wings of the country and

in 1960 installed two million spindles and 30,000 looms. In those days Govt.

sanctioned only composite mills with 25,000 spindles, 500 looms and a wet

processing unit to finish the cloth produced in mills. The balanced quantity of yarn

was required to be sold often through an official channel to the weavers of

handlooms and later to the power looms. The mill owners made huge profits but

their efforts for further investment were hindered due to paucity of foreign

exchange. This situation, however eased when the machinery manufacturers

started offering their plants under “ the suppliers credit or pay as you earn” plans.

This facility brought in its wake escalation of prices of the textile machines and

this started a new development of installing only the spinning units of 12,500

spindles. Many of the spinning units were then sanctioned on political

considerations but went into the hands of genuine entrepreneurs is no time. At the

time Govt. tried to disperse the industry away from the existing industrialized

cities and new textile centers emerged in small towns like Kotri , Sheikhupora etc.,

although these were quite close to the existing centers in the big cities. By 1971,

Pakistan had a substantial textile industry with about 3.5 million spindles and

38,000 looms in the mills sectors and exported textile goods worth US$400

million.

After the separation of East wing, Pakistan was left with about 2.5 million

working spindles but growth was continuous and rapid and by 1985, the figure

reached 3 million. At that time the Govt. took a decision to convert all the home

grown cotton into yarn and for the first time, decided to waive the requirement of

getting official sanction for setting up a spinning mill. This decision opened the

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floodgate and in just five years, the capacity increased to 5 million spindles. The

present working capacity is about 8.358 million spindles and 166,000 rotors. It

may be mentioned that about 1.724 million spindles are lying idle in 143

financially sick mills which being of old technology have become redundant.

In 1998-99, the spinning industry produced 1542 million kg of yarn out of

which about 26% was blended yarn, 47% was coarse count yarn, 24% was

medium count yarn, 2% fine and 1% super fine yarn.

Development in the spinning sector is not in numbers alone but there is also

an improvement in average productivity. On the basis of 20/1 count productivity

has gone up from 190 gms in 1986-87 to 235 gms per shift per spindle in 1996-97.

Pakistan exported 508 tons that is about 33% of total cotton yarn produced in

1996-97 and this makes her the largest exporter in the world with a share of about

28%. This is not to be very proud of because of yarn is a primary and not a value-

added commodity. Incidentally it has been estimated that about 70% of the total

cotton yarn is exported directly or after conversion into the value-added products.

During 1998-1999 textile industry produced 1,542 million kg of yarn, out

of which 54.94 million kg (3.56%) was consumed in mill while 417.78 million kg

(27.10 %) was exported and 1,069.2 million kg (69.34%) was available for local

market.

The price of yarn (20/1) during 1998-1999 was 472.61 rupees per bundle of 10

LBS.

Pakistan exports yarn to the following major countries: Hong Kong

(25.38% of total yarn export), Japan (19.72%), South Korea (8.90%), Asian

countries (8.31%), E.C.M-“under quota restraint” (7.41%), Dubai (3.72%), China

(7.77%), USA- “under quota restraint” (4.81%).

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Kunjah Textile Mills Limited

Introduction

KTML is a Public Limited Company incorporated in the year 1991 under the

Companies Ordinance 1984 and engaged in the production of Cotton Yarn for

knitting and weaving industry both for local and export markets. The plant and

machinery is a combination of Chinese, Japanese and European Origin and

comprises of 31,680 spindles. We have already made additions of Reiter Draw

frame and Combers / Unclip Machinery which has greatly improved the quality of

the Yarn. The company is manufacturing yarn under the brand name of "WHITE

DOLPHIN" which has achieved a very secure and favorable share in the

international market due to our quality. The Federation of Pakistan Chambers of

Commerce & Industry (FPCCI) awarded the Export Trophies our company for the

year 1999, 2000 & 2001 while company has also been nominated as the winner of

Export Trophy for the year 2002. The group is well renowned in textile sectors of

the country. The sponsors of the company are professionally equipped and fully

competent to run a corporate entity. They enjoy good market reputation and are

well experienced in their line of trade. The company has a team of qualified

engineers and technicians to look after the upgrading and maintenance of the plant

and machinery. The annual production of the company is 7000 Metric Tones.

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MISSION & OBJECTIVES

Mission Statement

For getting a profitable return on investment through a process of

continuous improvement on upholding the highest standards of quality

yarn in textile industry.

Objectives

The best profitable company by improving terms of quality,

productivity, reliability and buyers satisfaction.

To build the company on sound financial bases with better

productivity, quality and improve production at stable cost by

using latest technologies.

To become a leader in textile production in the domestic and

international market and to achieve a highest level of success.

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MANAGEMNET PROFILES

KUNJAH TEXTILES MILLS LTD

HEAD OFFICE 20 E –1 ,(C) GULBERG-3 LAHORE-2

PH: 92-42-5764721-5

MILLS LOCATION DISTT. GUJRAT

STATAUS PUBLIC LIMITED COMPANY

PAID UP CAPITAL RS. 73.568 M

NO OF EMPLOYES 890

MANAGEMNT

MANAGING DIRECTOR MR. MUHAMMAD UMAR VIRK

BSc. Textile Engineering

Over 25 Year Experience

CHIEF OPERATING OFFICERS MR. KHALID MAHMOOD

MBA (BZU)

Over 20 year Experiences

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DIRECTOR MARKETING MR. KAMRAN RASOOL

Senior Civil Servant

Over 27 Year Experiences

In Public Administration

TECHNICAL DIRECTOR MR HAMID NAZIR

BSc. Textile Engineering

Over 20 year Experiences

BUSINESS PROFILE

COMMERCIAL OPERATION. 1992

BRANDS WHITE DOLPHIN

INSTALLD SPINDLES 30,720

RAW MATERIAL 100% COTTON

PRODUCATION CAPACITY 7000 TON/YEAR

COMBED YARN PRODUCTION 85 %

CARDED YARN PRODUCTION 15%

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FINANCIAL YEAR

The financial year of the company starts from October 1, and ends on

September 31, of the next year.

RAW-MATERIAL

Ginned cotton is used as raw material in KUNJAH TEXTILE MILLS

LTD

LABOUR AND TECHNICAL KNOW-HOW

The textile industry, being the oldest and largest industry in the country,

there is abundant labor available both skilled and unskilled. The company has an

experienced team which is engaged in the running of existing manufacturing

facilities.

BUILDING AND CIVIL WORKS

MAIN FACTORY BUILDING

LABOUR AND STAFF QUARTERS

ACCOUNTS OFFICE

MECHANICAL WORKSHOP

STORE ROOM

FAIR PRICE SHOP

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ADMINISTRATION

DEPARTMENT

This is very important department of the organization as the name shows,

this department has to Administer all the operations of the organization. This is

headed by the A.M (Admin manager) of the company. Sections of this department

are divided into offices as follow:

Labor Office

Security Guard Office

Gate Office

Time Office

LABOUR OFFICE

As required by the labor department of the government of Pakistan, this

office has been set up to deal with all the matters that are related with labor. The

dept. is headed by the labor officer. He is responsible to resolve all the disputes,

conflicts, misunderstandings and any other kind of matter which may arise from

time to time b/w the labor and the immediate supervisor or with any other person

in the organization.

It is the duty of the labor officer to inform the legal requirements

concerning the labor and company affairs.

It is also the duty of the labor officer to satisfy himself regarding payment

of bonus, gratuity, and other benefits to labor and to keep their morale and

motivational level high.

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It is also a requirement to be a successful labor office that he should keep

his knowledge up to date regarding the rules and regulations of the labor

department.

SECURITY GUARD OFFICE

The main objectives of the security office are to safe handling of the goods from/to

the mill premises. For the achievement of such objective a team of security guards

has been employed by the Company. All the keys relating to the mills office,

labor colony, (quarters) are lying into the responsibility of the security officer.

* No out side visitor can come into the Mills premises without the

permission of the security guards.

* Whenever any visitor wants to enter into the mills, security guard firstly

contact with the authority in the Mills to grant the permission to enter into

the Mills premises.

* Security guards can check each and every person before coming in or

going out of the Company gate for the security purposes.

* They see and check the OUT WARD GOING PASS of the certain things

when these ought to bring out of the Mills premises.

* They have certain uniform of blue shirt and light brown pent.

They are the guardians of the every thing of the Company.



GATE OFFICE

This office has been made to keep the record of each and every thing

coming into and going out of the Mills gate.

For this purpose gate office clerk maintains two type of registers called:

1- outward-going pass register

2- Inward-going pass register.

When every thing including raw material, stores supplies, or any other thing

comes into the Mills premises a document named as I.G.P is made in which

information like date of supplies, description, quantity of the material and any

other remarks are written. In the same way, O.G.P is prepared for out going things

etc.

TIME OFFICE:

* This office keeps and maintains the time record of all the workers on time

cards and pay register for the final costing of the workers salaries.

* It keeps the attendance records, which is than used to calculate the salary

to be paid to the workers on monthly basis.

* It keeps the records of the overtime, leaves, number of days worked of all

the workers and than calculate their overtime on the basis of the basic

salary of each worker.

* It keeps the records of Social Security, E.O.B.I Education etc.

* It keeps the records of Gratuity, Bonus.



PRODUCTION &OPERATION

Kunjah Textile Mills, has 31,721spindles installed, which have the capacity to produce 7000

Tons/Year of combed and carded yarn.

Type Counts Production

Combed 16/1 to 80/1 82%

Carded 30/1 18%

At present Kunjah occupies an export of 78%, this share is increasing along with the

companies reputation in the world market.

Major Export Markets: Hong Kong,South Korea, South America, Vietnam, USA

and Canada.

RAW MATERIAL USED

Ginned cotton is used as a main raw material to produce the yarn. The

cotton is purchased from different dealers in the local market.

Input cotton Spinning Out put Yarn

YARN

Any sort of thread, which is prepared for weaving purpose, is named as

yarn. There are two main kinds of yarn. These are as under.

COTTON YARN

Cotton thread is prepared which is twisted in the form of yarn.

To produce this type of yarn 100% cotton is used.



TYPES OF YARN BEING PRODUCED BY THE KUNJAH

TEXTILE MILLS LTD.

DOUBLE YARN

When two fibers or threads of a same count yarn are twisted together to

make a single, it is called double yarn. In it, for a same count, the weight and the

thickness of the yarn becomes doubled.

SINGLE YARN

Simple yarn not joined together of a certain count is called single yarn.

TYPES OF COUNTS BEING RODUCED

KUNJAH TEXTILES MILLS LTD is producing the following different

kinds of counts:

COTTON YARN (100%)

COMBED 20/1, 30/1, 40/1,50/1, 60/1,80/1

CARDED 30/1

SPINNING

KUNJAH TEXTILES MILLS LTD has 30720 installed spindles and

Different types of yarn are produced in the spinning function. Spinning process

includes the following steps:

Material Handling

Opening & Packing

Carding

Drawing

Simplex or Roving

Ring

Auto Cone

Packing



BLOW ROOM

Following are the objectives of blow room:

Mixing

Opening

Cleaning

Lap-formation

Mixing

This function is performed in blow room. In the mixing room different

bales of cotton from different lots are mixed for humidity control purposes. In the

mixing room, from 100 lots of cotton approximately 85 bales are opened for

mixing according to the capacity of the room.

1 Lot = 100 Bales

Mixing time is approximately 24 hours, because it affects on the production

quality.

There are two ways of mixing:

1- Manual

2- Auto mixing

IN MANUAL MIXING, different grades of cotton are mixed, so that there is best

quality variation. This function is performed through human hands.

IN AUTO MIXING, a machine, name Auto Pluckier is used. Cotton bales of

different grades are spread in a circle. This machine cuts and picks the surface of

cotton heap automatically and mixes up to great uniformity in raw material.

MATERIAL OPENING

Mixed cotton material is opened in this step. Joined fibers of mixed cotton

are separated to facilitate the cleaning process.

CLEANING

Waste material (trash) is separated from raw cotton through this process.

A machine, named Beater is used for this purpose.



LAP-FORMATION

Lap-sheet is prepared in last step (End-Product) of Blow-Room. The

purpose of this process is balancing and controlling the uniformity in the quality of

production.

CARDING

Carding is also called the “Heart of Spinning” the fault created and

maintained in this step cannot be controlled in any other step.

A sliver is prepared from Lap-Sheet. This sliver (role) is called Carded

Sliver. Carding Automatic Fiber Straightening Machine performs this function.

Banded fiber is straightened and nips and Slums are controlled. The fault created

at this stage, seriously disturbs the quality of yarn. So it is called the “Heart of

Spinning”

DRAWING

The main objectives are;

Fiber straightening

Creation of uniformity

Variation control

Drafting

DRAFTING

In this section, six or eight carded slivers are joined and mixed to get a

single sliver (rope). This sliver is called Drawing sliver.

SIMPLEX OR ROVING OR FLY FRAME SECTION

In this process, drawing sliver is further converted into Roving by

drafting. Roving is a very thick cotton rope. This thick cotton rope is folded

around a cylinder shape called Bobbin. This bobbin is called simplex bobbin.

RING SPINNING

Objectives:

Further drafting



Twisting

Winding

The twisted cotton thread is winded around a bobbin by spindles speed. This

bobbin is called Ring Bobbin.

AUTO CONE

In this section, cotton thread cones of specified weight, are prepared. A

machine called Usters in fixed with each ring bobbin. This machine control the

thread. This machine is Automatic and cuts the thread at Slums & Nips etc. and

join the both ends after sucking into it, waste material.

PACKING

Cones prepared in Auto Cone section are transferred to finished good

Store Room. These Cones are packed in polythin bags and shipped according to

customer’s specifications.

Normal Packing 1 Bag = 40 Cones = 100Lbs

100 Lbs. is the net weight of cotton yarn packed in a bag.

QUALITY CONTROL SECTION

To control the quality of yarn is not easy job. There are different variables

for the measurement of quality of yarn. It is even affected with the weather

conditions KTML Quality Control Department is headed by General Manager.

There is technical manager and laboratory in charge who are responsible for the

quality of yarn. Quality is checked at each and every step of production process.

KTML has fully equipped quality control laboratory where quality is measured

using different statistical techniques. Quality is maintained from the purchase of

cotton bales to the final manufacturing of yarn. The different variables for

measuring quality of cotton and yarn are following

This can be achieved through:



a) Acquisition of quality raw material

b) Proper planning and supervision of production process

c) Effective quality control at every process stage.

d) Timely deliveries

e) Customer feedback

f) Employee’s training.

INVENTORY SYSTEM

MAIN INVENTORY

The main inventory of the mill is the cotton which thy buy in the month of Oct.

Nov. Dec. Jan. Feb.

OTHER INVENTORY

The inventory include the consumable store and spares

SCHEDULING

The yarn is produced on receiving orders but if there is no order regular

counts are usually produced on receiving the order a schedule is prepared which

specifies how many frames are to be assigned to a particular count. This schedule

is given to the mill manager who assigns the production to the jobbers who are

responsible for the level of production in their departments.

FACILITY LOCATION

Location of KTML is very good because it is located in the area where

there is favorable labor climate, proximity to markets, proximity to suppliers and

all other infrastructures are available.

PRODUCTION REPORTS

Different reports are prepared when yarn is received from the spinning section and

all records are maintained completely. These are as under;



* Yarn Receipt Report

* Waste Report

i) Hard waste (Yarn)

ii) Soft waste (cotton)

Soft waste is further useable.

* Daily used Report

* Efficiency report

* Daily Production Report.



MARKETING DEPARTMENT

Is the key department of the organization and half of the success of the business

depends upon the activities of this department because this department has direct

contract with the customer

Marketing department deals with two types of markets

International market

Local market

Hierarchy structure of the marketing department is as follows

DIRECTOR MARKETING

G.M MARKETING

MANAGER EXPORT MANAGER SALE (LOCAL)

EXPORT OFFICERS MARKETING ASSISTANTS

EXPORT SECTION

KTML has local market as well as export market; therefore the major job of all the

marketing managers is defined. The major steps, which are involved in this

process, are as follows.

There are two types of customers

A) DIRECT CUSTOMERS



Direct customers are those who directly import the yarn from ATM. This

type of customers enjoys the low prices because of the fact that there is no

commission involved in that case. In this type of correspondence there is no

intermediary.

B) AGENT(COMMISSION AGENT)

In this aspect there are three possibilities

1) Pakistani agent is involved

2) foreigner agent is involved

3) Pakistani as well as foreigner agent is involved.

First possibility occurs when a foreign agent has some direct customer in

the foreign country and that agent contact with KTML. The commission paid to

agent is added to the cost. The commission ranges from 2% to 3%.

Second possibility occurs when a foreign agent has some customer in his

country and that person contact with KTML. The commission in that case also

added to the cost. The limit of that commission ranges 2% to 3% according to the

amount of invoice. The %age depends upon the profit margin, which is given by

the customer

Third possibility occurs when a foreign agent has some customer and that

agent contact with Pakistani agent and then Pakistani agent contact with ATM. In

this case the maximum commission for both the agent is 4% which they distribute

by mutual understanding.



EXPORT ORDER EXECUTION

SCOPE:

This procedure is applicable for all sort of yarn being produced.

PURPOSE:

To maintain & increase the export with better quality goods and services.

To ensure that services fulfill the needs of customers.

RESPONSIBILITIES ACTIVITIES

C..O.O. To give price approval

Dept. Incharge To make inquiry to relevant section and

watch all related activities.

Section Incharge To do costing and setting approval & follow up.

Senior /Junior Staff To sent samples

To note dispatches order register.

To maintain all records in Customer Dockets.

PROCEDURE

INQUIRY

First of all customer send enquiry. He tells about his requirements that

how many quantity of yarn is required in what count and specification. In response

the supplier send quotation to the customer and tells about the detail of his order.

Suppliers sees whether he can meet his requirement or not. The negotiation is



started between seller and customer in which prices is settled, delivery date is

decided and other terms and conditions are discussed

At the end a sales contract is signed from parties, seller and customer. In his sales

contract following things are mentioned.

COSTING

Costing sheet is prepared for C.O.O approval. In absence of C.O.O

department in charge approves price.

COSTING APPROVAL

CEO gives approval or may suggest any other price to be offered.

CONTRACT REVIEW AND ISSUE

Section in charge takes following steps before issuing a contract:

1- Prepare contract review check sheet.

2- The requirements are adequately defined and involvements of

production areas are specified.

3- In-house /Out-house, have the capacity to meet the order requirements.

PRICE QUOTATION

In getting approval of costing and review of customers requirements

prices are quoted to customers for confirmation.

CONFIRMATION OF SALE CONTRACT.

If customer, confirms the price offered, sale contract is issued to the

customer with complete details of price, quality, delivery, payments terms etc. etc.



LETTER OF CREDIT (L/C)

In this supplier’s bank and customer bank are involved. Therefore

payment is done through banks

Procedure Of Letter Of Credit

There are three types of banks involved

1) L/C OPENING BANK

It is also called the bank of importing country.

2) L/C ADVISING BANK

This bank provides L/C to the suppliers. The supplier receives the L/C and

starts the production.

3) NEGOTIATING BANK

The supplier submits the required documents to this bank. Then this bank

provides the amount of L/C to the supplier on certain terms and conditions

ELEMENTS OF LETTER OF CREDIT.

1- Name of issuing bank

2- Form of L/C

3- Revocable or irrevocable

4- Date of issue

5- Buyers name

6- Suppliers name

7- Currency code e.g. US $ or

8- Amount

9- Payment terms

10-Shipments



11-Loading

12-Transportation

Performa Invoice

After the negotiation on prices took place and both the parties agreed.

Then the Performa invoice is formed in which all the conditions of L/C and total

quantity of order and the total price of that order is mentioned. The invoice is

faxed to the buyer and after the confirmation and opening of L/C production is

started of that order.

Description

Count 20/1 carded 100% cotton

Quantity 660 cartons

Packing sea worthy standard

Shipment July 3,2000

Price US $ xxx per kg

Amount US $ xxx

Payment payment by confirmed irrevocable L/C

Commission 2% to foreign agent 1% to local agent.

PRODUCTION MEMO

Production memo is a statement in which all types of instruction about the

production of the given order are written.

DISPATCH OF GOODS /YARN

Packed yarn is dispatched to the customers. If the shipment is to be

custom cleared from Karachi, goods are sent to Karachi on trucks with all

necessary records. Dispatched goods are detail noted in relevant registers.



SHIPMENT

If the goods are to be custom cleared at Multan dry Port, these are sent to

dry port for clearance. Documents are sent to clearing agent same day or next day

and followed up to ensure that these goods are custom cleared without any

unnecessary delay. In case of dry port, original bill of loading and 4 th copy of

shipping bills are collected from office agent and dispatched to Karachi office for

preparation of post shipment documents. Concerned staff follows up dispatch of

goods with Karachi office port to ensure on time shipment.

Post shipment documents are received from Karachi office and after

proper recording, handed over to Finance dept. for negotiation. Shipping details

are noted in relevant registers. If there is any delay in receiving payments, relevant

person sends telex/ fax to customer for timely payment. Order registers are up-

dated periodically.

MIS REPORTS

Balance order instructions /status reports are updated periodically.

Balance order list up dated fortnightly for their information. Sale comparison

reports are updated in computer network on monthly basis, it comprises one

month’s status of shipment, invoice values, complaints and claims. (if any)

FOREIGN CUSTOMERS OF KTML

KTML exports its yarn to the following countries

Hong Kong, , , Korea, ,U.A.E , Sri Lanka ,South America, USA , Canada

QUOTA RESTRICTION

There are some countries where the quota restriction is imposed by the

importing countries. This quota is fixed on the basis of past experience. In these

countries where there is no quota you can export as much as you can. This is

distributed by export promotion bureau among different mills.



IMPORT SECTION

KTML imports all those things, which are not available in the local

market and are used in the production process i.e. spare parts, general stores etc.

and some times machinery for balancing, modernizing and replacing.

KTML import department is also headed by export manager. He is responsible for

all the imports and exports of the company. When the company needs material to

import the import/export department contact with the manufacturer through the

agents abroad. The manufacturer sends Performa invoice. In Performa invoice

these things are clearly mentioned.

Name of the exporter

Consignee

Country of origin of goods

Country of destination

Terms of delivery and payment

Port of loading

Port of discharge

Quality and quantity

Rates

Kind of packing

Gross weight

Volume

Means of transportation

After invoice is O.K an L/C is opened by importer in the favor of exporter of the

specified amount. Then imports are made according to the rules and regulations

MAJOR IMPORTS ITEMS



Major import items are machinery & equipment, spare parts, cotton.

PRODUCT MIX

PRODUCT

KTML produces high quality yarn. It produces carded, combed, weaving,

knitting, pure cotton and polyester cotton yarn. KTML exports as well as sells in

the local market. All products are produced according to the requirements of

customer orders.

PRICE

Pricing is an important factor in the marketing process for any company.

The price policy of company should be in such a way it should produce a

reasonable profit, for the company and should satisfy the customer. Following

two factors are very important.

FIXED COST

Fixed cost is the costs which remain always same in total whether produce

large quantity or small quantity. Fixed cost per unit rises as the quantity produced

decreases and vice versa. Some companies always try to use their full capacity of

production because with increase in production the fixed cost decrease.

Following are some important factors of fixed cost.

Salaries

Rent

Local Taxes

VARIABLE COST



Variable cost changes with the change in quantity produced. It increases

with increase in production and vice versa. Per unit variable cost remain same

whether produced large quantity or small quantity. Some examples are:-

Material cost

Labor

Factory overhead.

PRICING STRATEGIES

There is no fix pricing strategy. It depends upon the market situation.

Competitors price also affect the prices. For developing new markers the prices are

relatively low. There are certain elements, which we consider before deciding the

price of our yarn. These are following

Price in case of middleman

Variable cost + fixed cost +desired profit +middleman commission – export

rebate.

Price in case of direct sale

Variable cost + fixed cost + desired profit – export rebate.

Variable and fixed costs are reviewed and revised periodically with the changes of

circumstances.

RICE DIFFERENTIATION

The price of KTML is slightly less with respect to their competitors. They

provide maximum services to their customers and in time deliveries.

PLACE: (DISTRIBUTION PROCEDURE)

Distribution Channel



KTML is using two types of distribution channels

1) Direct

2) Indirect

Direct channel

KTML ======== Customer

Indirect Channel

KTML ===== Middle man (agent) ===== Customer

As most of the product of KTML are sold locally. So they use different

modes of transportation to transfer the product from KTML to customer’s country.

Mostly KTML exports its products through ships. There are other modes of

transportation also being used:

Trucking Cos.

Shipping Cos.

PROMOTION

Because the yarn is an industrial product, middle man (commission agent)

play the major role in selling the yarn. But ATM also directly contacts the

customers and sells yarn personally. So personal selling is a major promotional

tool for selling the yarn.

LOCAL SALE SECTION



Local sale section deals with the sale of yarn in local market. So manager local

sales deals with the parties for yarn selling.

EXECUTION OF SALES PROCESS

For the sale in local market first they check industry rates and then they began

bargaining with the customers .the manager sets the rates with parties and term

and condition also by both the parties so in this way a contract is signed

Buyer name

Seller name

Product specifications

Price

Delivery time

Place etc

Commission is also set by the company with agent if the agent is involved here.

Then order is given to the production unite confining x-mill date destination etc

So in this way local sale is done



ACCOUNT AND FINANACE DEPARTMENTS

The art and science of managing money is known as management of

finance. Finance and accounts departments keep the quantitative control over the

transaction before describing the activities of this department. I would like to

define the hierarchy structure then it will be easy to understand the division of

authority and responsibilities.

G.M FINANCE

SENIOR MANAGER FINANCE

MANAGER ACCOUNTS

ASSISTANT ACC ASSISTANT ACCOUNT DATA OPERATOR

So the activity start in such a way that all the voucher and invoices of all the

transaction first come the concerned mill to this department and then they enter it

in order to maintain their records

FUNCTIONS OF ACCOUNTING DEPARTMENT

Keeping Records.

Cash Management

Payment of Bills and Charges

Cash Receipts.

Stocktaking.

Reporting to Top Management.



Preparation of Bank Reconciliation statement.

Depositing Income tax through Challan.

Preparation of Monthly Trial Balance

Preparation of Final Account.

Stock Procurement

Provide Information During Audit.

Analysis Of Reports.

PARTIALLY COMPUTERIZED ACCOUNTING SYSTEM

The company has not computerized Accounting System. Transactions are

recorded and posted in their respective head both by the Accounts Assistant and

Computer Operators. Some record is maintained only by the Computer operator

or Accounts Assistant. For example: yarn Stock register, Spindles worked

Register are not maintained By the Computer Operator.

Similarly Records of Banks is only kept and maintained by the Computer

operators There is no complete computerized accounting system. To minimize the

error or omission risk record is also maintained manually. At the end of each

month manual and computer record are compared to remove error or omission.

* With the use of computer it is possible to make available required data

promptly.

* Various reports are prepared and presented to top management for

analysis. This was not easy without the computer help.

* Trial balance is prepared at the end of each month.

* Bank reconciliation statement is also prepared at the end of each month.

* Stocktaking is done and production account is prepared at the end of each

month.

* The cashier first, make forecasting and then draw cash from the bank so

that payments can be made on that particular day.



VOUCHERS USED IN ACCOUNTING DEPARTMENT

* Cash Payment voucher.

* Cash Receipt Voucher.

* Bank Payment Voucher.

* Bank Receipt Voucher.

* Journal Voucher.

Other Document used are

* Income tax challan.

* D.D. T.T Slip.

* Bank Pay In slip.

BANKING SECTION

This section is the very important part of the Accounts Department. This

section handles all the functions that are related to the banks. Key functions of the

section are as under:

1- Preparation of Bank reconciliation statement.

2- Treatment of the bank’s debit and credit pieces of advice.

3- Preparation of the duty drawbacks statement and presenting to the authorities.

4- Preparation of D.D., T.T. Payment Orders. (PO) with reference to

payments to the parties.

5- All the works related to the letter of credit. L/C.

6- Re-imbursement and adjustment of the export finance.



PURCHASE SECTION

Purchasing department deals with purchase of any thing that is demanded by

included machines, parts, raw material, packing material, critical accessories, and

lubricants etc

This department headed by a purchase Manager conducts all the

purchases. . Whenever any particular department requires any part of material, its

head makes demands of items to be required. This demands contains the

information like, items description, quality, quantity and others. The demand is

signed by the departmental head and the recommended by the C..O.O

Hierarchy structure of the purchase department is as follows

MANAGER PURCHASE

PURCHASE OFFICER

ASSISTANT PURCHASE OFFICERS

The purchase Manager has the list of preferable suppliers of the certain

items. It selects the supplier from the list. Then he visits personally to the market

and given the purchase order. The purchase officer has been provided a van, he

himself or through some other sources makes the arrangement to bring the

purchased material in the Mills premises.

For the store different heads has been created in the store ledger. these are

* Spare Parts

* Packing Material

* Electrical Goods

* Building Material

* Capital Goods



* Oil and Lubricants

* Stationary

* Miscellaneous.

Each head bas been assigned a code number according to the section in

which they will be utilized in the future. Whenever a part is issued to the

particular section it is then posted to the relevant coded account. Moreover this

item have also been assigned a code number.

When any material is issued to the relevant section , store issued an S.I.V

(Store Issued Voucher). This S.I.V is then sent to store purchase section of the

accounts department. The section clerk then writes down the codes off each item

on the S.I.V. from the Chart of Account each item is then valued from the store

ledger on the basic of the moving average, and then expensed out in the

Company’s expenses account according to the treatment required like.

* Office expenses (general and Administration)

Material issued to the production of the yarn is treated in the C.G.S. (cost

of goods sold).

* Electricity and other such of expenses are charged to the general

expenses.

* Printing and stationary used in the Accounts office is charged to Profit

and Loss A/c as expense.

At the end of the every month and the accounting year the stores valuation is

conducted. For this the section counts the numbers of items from the store valued

them on the basis of moving average. And then are treated into the company’s

monthly and annual accounts as follow.

Opening Stores xxx

Add. Purchases xxx

Less. Issued xxx



=====

Ending Stores xxx

=====

The value of the ending stores is then taken to the Current Assets portion

if Balance Sheet and the value of the S.I.V. is treated as the expenses of the

company for the preparation of the Profit & Loss Account of the particular period.

TAX DEDUCTION:

As required by the Tax Authorities of the Government of Pakistan,

whenever the Company makes purchases from the supplier, gets services on

contract or on commission basis, the paid to the party is tax deducted. When the

Company will make the payment to the party (supplier, contractor or commission

agent) it will deduct the tax from the amount to be paid to them.

PURCHASE OF COTTON

The cotton selectors take samples of different grades from ginners then

tells the ginners that as soon as the company decides the quality and rates it would

call you immediately for deal.

CHECKING OF SAMPLE

These samples of different grades are checked by the chief executive. He

takes into consideration of the lab results too.

FINAL ACCEPTANCE

The final acceptance is made by the mutual agreement of CEO, cotton

selector quality control manager of the mill

PURCHASE SYSTEM

The cotton purchase of KTML is mostly done through different

commission agents then commission vary from company to company . The agent

takes the responsibility of all the function from delivery to payment.



BANK

No spinning mill can purchase cotton with its own financial resources

alone. KTML also does the same. It gets helps of bank in cotton purchase.

Bank Al- Habib and Habib Bank finance KTML

PAYMENT

Mostly KTML purchase cotton on credit basis. The payment is made

through demand draft (DD) directly to the seller or to the agent. The payment is

made well in time to the seller.

LAB TEST

ATM also conducts the lab test inside the mill before doing a final

contract with the ginners in order to check the quality of cotton.

GENERAL PURCHASE DEPARTMENT

The responsibility of the purchase office is to purchase all type of material

needed by the company. Five types of purchases are made by this department.

1-Cash purchases

2-Credit purchases

3-Import i.e. purchase through L/C

4-Partially cash purchase

5-Purchase by advance payment

PROCEDURE

Demand

The purchases are made when demand is raised by different departments.

These purchases are made when main store recommend the demand

PURCHASE OF GENERAL ITEMS

The general things are purchased by purchase department without asking

any quotation from the parties rather it is directly purchased from the market.



PURCHASE OF SPECIAL ITEMS

This type of buying is done by asking quotations from different parties.

On the arrival of quotations, these are compared according to the rates and

quality of samples.

APPROVAL

With so much care and consent final approval is made by M.D and C.O.O

FINAL BUYING

The purchase department purchases the desired items from the winning

party and send it to store department of mill. Here these items are issued whenever

demanded by different departments. Even the head office also gets its desired

goods and stationary and supplies from the store of the mill.

COTTON STOCK REGISTER:

In this section a cotton control account register is maintained. When

purchase section makes a contract with the buyer, it seeks for that certain Purchase

order form the ginning mills. When the cotton comes in the factory gate, the gate

clerks makes contact with the commercial section and the Mills Manager who

checks the cotton that whether the cotton is according to the requirements or not.

If the answer is in O.K. then an I.G.P ( inward gate pass) is issued by the gate

clerk.



HUMAN RECOURSE MANAGEMNT

Although the KTML has no formal human resource department (HRD) a

lot had been done and is being done to make the morale of the workers of the

organization high & high.

Recruitment & Selection

The recruitment is done when different departments require some

employees. Usually management prefer to hire experienced persons for position.

They more rely on the reference either by employee or a reliable person.

Selection

Usually the selection of employee is done through the consent of top

management for the managerial jobs and for the technical posts selection is done

through mutual consent of management representative and respective department’s

head.

For officers

The different procedures are followed for the selection of managers

Following things are included in the selection procedure of managers.

Experience

Interview by panel

For workers

Following is the procedure for the selection of workers

Interview

Experience

MOTIVATION AND INCENTIVES

Motivation is willingness to do something. People who are motivated

exert a greater effort to perform than those who are not motivated. Here people are



motivated at workers and management level but more incentives are given at

management level.

Different benefits and incentives are given which are as follows.

WAGES AND SALARIES

Wages and Salaries are paid on monthly basis to the permanent

employees.

LEAVES

There are 14 annual leaves, 10 causal leaves and 8 medical leaves. In

other words every employee can take 32 total leaves in a year.

WPPF (Workers Profit Participation Fund)

This is the name of the fund given to workers when company earns profit.

It is 5% of the total profits earned during an accounting year. Every

workers/Employee whose pay is Rs. 3000/= is eligible for getting this fund.

BONUS POLICY.

The Company maintains a bonus policy for its workers to initiate the

motive to work whole-heartedly for increasing workers and organizational

efficiency. According to this policy, Company shall give a sum equivalent 60%

basic salaries of worker at the end of the every accounting year in case of report

earning.

E.O.B.I. (Employees Old age Benefits Institution)

This is an important deduction from the salaries of the workers for the

regular income in the old age /post retirement age so that workers have a thought

of relief that there would be no financial problem after the expiry of their

employment. EOBI is an institution where this deducted amount is accumulated

for the future use when these people will not be able for employment.



HOUSING FACILITIES

The workers have provided with the residential facilities and small

quarters are provided to the workers. These quarters are often visited by the

admin. Manager for the checking of cleanliness and other important matters if

raised by any situation from the workers side.



MIS SECTION

This is the era of information technology and very one wants to get as much

benefits that’s why many companies want to have a strong in information

system .MIS section in Kunjah Textile Mills Ltd is performing well s the

requirement of the time

Technology is the most impotent weapon to compete with changing environment

KTML is using such sort of technology

Computer Technology

KTML is increasing their business value by using computer application in the

work. Their finance and accounts department are totally computerized. But all

other department are also using computer to facilitate their work and its used for

electronic data processing and for

Record keeping

Accounts practices

Export marketing

Pay roll adjusting

Purchase department

Financial summaries

Computer soft ware such as fox pro excel word etc are using carrying of activities

Function and responsibilities

Maintenance of hardware &software configuration.

Problem for data communication and net working

Assist the workers to increase their productivity

Do all the programme required by the workers

So all these responsibility are performed by MIS section



FINANCIAL ANALYSIS

Financial statements are prepared primarily for decision-making. They

play a dominant role in setting the framework of managerial decisions. But the

information provided in the financial statements is not an end in itself as no

meaningful conclusions can be drawn from these statements alone. However, the

information provided in the financial statements is of immense use in making

decisions through analysis and interpretation of financial statements

ANALYSIS FOR LIQUIDITY OR LIQUIDITY RATIOS

This analysis is also called analysis for short-term solvency or short-term financial

position. The short-term creditors of a company like suppliers of goods on credit

and commercial banks providing short-term loans, are primarily interested in

knowing the company’s ability to meet its current or short-term obligations as and

when these become due. The short-term obligations of a Company can be met

only when there are sufficient liquid assets.

CURRENT RATIO

CURRENT RATIO may be defined as the relationship between current

asset and current liabilities. It is a measure of general liquidity and is most widely

used to make the analysis for a short-term financial position or liquidity of a firm.

It is calculated by dividing the total of the current assets by total of the current

liabilities.



CURRENT RATIO

(Current Assets/Current liabilities)

YEAR 2002 1.25

YEAR 2001 1.15

Company ratio has improved in fiscal year 2002 and assets are .25 times greater

then current liability so performance is well

.

QUICK RATIO:

This ratio is also termed as “acid test ratio” or Quick ratio. It is the ratio

of liquid assets to current liabilities. The true ‘liquidity’ refers to the ability of a

firm to pay its short-term obligations as and when they become due.

liquid assets = ( current assets- inventory)/Current liabilities

YEAR 2002 2001

0.35 0.35 0.43

Liquidity is satisfactory in both year and company has ability to meet its short-

term obligation in a nice way

ACTIVITY ANALYSIS

Activity ratios are used to measure the speed with which different accounts are

converted into cash or sales



INVENTORY TURNOVER RATIO.

Inventory turnover ratio measures the velocity of conversion of stock into

sales. Usually, a high inventory turnover/stock velocity indicates efficient

management of inventory because more frequently the stocks are sold, the lesser

amount of money is required to finance the inventory. A low inventory turnover

ratio indicates an inefficient management of inventory.

YEAR 2002 2001

20.45 19.25

COMMENTS: Inventory turn over of the Company is constant. The stock turn

over of the Company is slow. There is high investment in the stock.

AVERAGE COLLECTION PERIOD

The Debtors/Receivables Turnover Ratio, when calculated in terms of

days known as Average Collection Period or Debtors Collection Period Ratio.

The Ratio measures the quality of debtors. A short collection period implies

prompt payment by debtors. It reduces the chances of bad debts. Similarly a

longer collection period implies too liberal and inefficient credit collection

performance.

ACP = account receivable /average sale per day

YEAR 2002 2001

20.17Days 17.56 Days

COMMENTS:

The debtors of the Company are turning into cash promptly. These ratios shows

that the debtors management of the Company is efficient.



AVERAGE PAYMENT PERIOD:

This ratio is similar to Debtor collection period. This ratio gives the

average credit period enjoyed from the creditors.

Average payment period = Account payable /Average purchase per day

YEAR 2002 2001

45 Days 56 Days

The average payment period ratio represents the number of days taken by the firm

to pay its creditors. A higher creditors turn over ratio or a lower credit period ratio

signifies that the creditors being paid promptly, thus enhancing the

creditworthiness of the Company.

LONG TERM SOLVENCY ANALYSIS

Liquidity Ratios, which indicate the short-term financial position of the

business, have been already explained. Now the long-term solvency ratios are

dealt with. The term solvency refers to the ability of concern to meet its long-term

obligations.

DEBT EQUITY RATIO:

Debt Equity Ration indicates the relationship between the external

equities or outsiders funds and the internal equities or shareholders funds. It is

determined to ascertain soundness of the long-term financial policies of the

company.

DEBT EQUITY RATIO = LONG TERM DEBTS / SHAREHOLDERS

EQUITY

Year 2002 2001

0.46 0.40



To assess the extent to which the firm is using borrowed money, we may use debt

Equity ratio.

Long-term financial position of the company is satisfactory.

In 2002 shareholders are providing .46 of the total long-term funds of the

Company. Creditors would generally like this ratio to be low. The lower the

ratio, the higher the level of firm financing by the shareholders and larger is the

Creditors margin of protection. Debt Equity ratio will vary according to

the nature of the business. But generally it must be 1:1.

TOTAL DEBT ASSET RATIO:

(TOTAL DEBT / TOTAL ASSETS)

This ratio shows the %age of total assets financed by the borrowed money.

YEAR 2002 2001

52.00 43.56

COMMENTS:

This ratio shows the outsiders financing in the total assets of the company

is more than 50% . The higher this ratio, the more financial leverage a firm has.

This ratio serves a similar purpose to equity ratio.



PROFITIBILTY RATIOES

Profitability ratios allow the analyst to evaluate the firms earning with respect to the given level of sales. With out profit a firm can not attract the outside capital Following profitability ratios are calculated to analyze the profitability of company

1- Gross profit margin = Gross profit/sales*100 YEAR 2002 2001 7.56 % 5.7%

2 -Operating profit margin = operating profit/sales*100 YEAR 2002 2001 3.8% 2.5 %

3- Net profit ratio = net profit/sales*100 YEAR 2002 2001 1.7% 0 .98 %

So the company performance is satisfactory in term of profit



SWOT ANALYSIS

Environment is the most important elements that effects the operation of the

organization that’s why manager are always aware of the environment for instance

they want to know that, what the competitor are doing? How the government can

affect the organization .for the analysis of environment managers are use the

techniques of SWOT analysis that tells about the strength weakness opportunity

and threats created by external and internal environment

STRENGTHS

1-Positive image of the company.

2-Situated in an area where cheap labor is available

3-Imported Machinery.

4-Strong Market Image.

5-High Financial Resources

7-Team of highly competent professional

WEAKNESSES

2- De motivated employees

3- No Promotional Activities

4- not enjoying the Economies of large scale

5- Centralized control

6- Centralized decision making.

7- Obsolete plant and Machinery.

9- High labor cost and power &fuel cost

10- WTO post 2004 regime

OPPORTUNITIES

1- Potential in market

2- untapped market of China.



3- throughout local market in Pakistan.

THREATS

1- New Entrants

2- Economic Instability

3- Tough Competition

4- Increasing cost of production

5-Growing intense competition

6- Price fluctuations.

7- Political Situation of the country.

8- Day by day changing Govt. policies

9- antidumping duties from the foreign buyers countries.

10-ISO 9000 implications

11-Fluctuating cotton crop in the country.



FINDINGS

KTML is one of the major yarn-producing units of Pakistan, which has

30,710 Spindles. KTML is famous for its quality yarn at competitive rates. Beside

this it is also famous for its fair dealings in the market that is why it is considered

as a good credit risk among its competitors. Organizational structure is highly

formalized and centralized. Departmentalization is done on the basis of different

functions. Every employee clearly knows his responsibility and authority because

the jobs are well defined. There is good cooperation between sales and marketing

department and production department. There is complete integration between

sales order and production schedule that is why an order never late

Previously there was less emphasis on the promotional activities but now the

management is very much concerned about it. They attend international exhibition

of yarn. But there is long way to go.

SUGGESTED STRATEGY

There is strictly needed a strategic focus to face the present intense

competitive situation. The market for textile products is becoming more

competitive every year. The customer is emphasizing on quality over all other

things and easily search for the most cost-effective supplier anywhere in the world.

Keeping this in mind, KTML is focus should be on meeting its customers demand

and requirements, improving its competitiveness, increasing productivity, and

enhancing its existing quality control systems.



Every element of cost and quality should scrutinized and measured

according to worldwide standards. Each activity should be analyzed to reduce cost

and should be seen how it affect on the cost and quality of other activities. The

quality assurance department has should be further strengthened with the addition

of trained staff and state of the art equipment.

In post 2004 free trade regime. There would be free economy and

every country will be free to sell its product every where ion the world and all

quota restriction will be abolished and this is this main threats to our textiles

industry So by following this there would be any compromise on quality and

company which will gain competitive ness would be able to compete globally. So

there is need to have value \addition in our production and need to have modern

technology modern process techniques.

So new broad base marketing strategies must be adopted which deemed to be in

the best interest of the textile industry and country.
