Find out the barriers in Pakistani FMCG industries sourcing from other countries
Chapter # 01
Introduction
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
1. Introduction
1.1 Background
Global sourcing is the practice of sourcing from the worldwide market for goods and services
across the geopolitical boundaries. Worldwide sourcing often aims to utilize global efficiencies
in the delivery of a product or services. These efficiencies include low cost skilled labor, low
cost raw material, and other economic factors like tax cuts and low trade tariffs. Some of these
barriers can be a company should have to spend some time to build a mutual trust between both
the parties. The quality of raw material the timings of the delivery they should have consider all
of these matters. The companies which go for sourcing always keep in mind that they are going
for reducing their cost at the same time they should have to minimize the risk as low as possible.
They should try to be smooth and clear at all levels. They should understand at a ground level the
problems faced by the companies and firms from which they are building relationship.
According to a study there are three major barriers in sourcing which includes Rigidity which
shows an attitude to not accepting a new change. Lack of sharing is also the barriers in sourcing
when the companies do not share their ideas with each other they cannot built a strong
relationship. Last but not the least collaboration issues it includes both the parties that they have
fear of not giving the required value of the thing. The companies should also have to understand
that most of the things move slowly in the developing countries so they should not give them a
tight deadline so that they cannot meet it. It will take time to understand them and to obtain the
quality and everything as your company standards. The other thing which can be considered is
that it is a way to develop the nations which are still in the process of developing by providing
the chance to pool resources with international industry so that they can benefit their economy.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
The basic goals of the firms which select worldwide sourcing have more or less same as they all
wants to lower their cost, to achieve high quality and to build strong relationship with the
supplier.
How FMCG sectors are booming in Pakistan. Business recorder1 took interview from Ehsan
Malik (Chief Executive Officer) of Unilever Pakistan. And business recorder tries to indentify
all of those factor from which FMCG sector are booming in Pakistan. Mr. ehsan malik told that’s
as a nation we like to spend more and we do not save the money from our income. We live for
today only that’s why we consume big portion of our income. Urbanization is second main
reason of growth in FMCG industry. Urbanization means those people who was shifting in urban
cities and trying to adopt urban practices and living style. But now many people are not moving
from rural areas to urban areas but they are adopting the big cities life style & practices like tea
whitener, expensive consumer & luxuries products. Because shifting in urban areas purchasing
power is decreasing due to home rent, heavy utility bills etc. that’s why now people are not
shifting from rural areas but they are adopting urban items, practices& enjoying luxuries life
style. Then many companies have put extra efforts to create penetration in rural areas. Unilever
also doing below the line promotional tricks and complete supply chain & marketing unique
campaign like noodles example, noodles are not Pakistani food but due to promotional activities
and campaign we have launched to the noodles in rural areas successfully. People have realized
that noodles are not only tasty but this is also the low price & have more protein than breads &
rice as well as noodles can be cooked easily. FMCG companies are doing promotional activities
and sending sales persons in rural areas where FMCG demands are high like sun silk shampoo,
pounds beauty cream and Colgate Palmolive tooth paste boosted the profit from 15 percent at
1
http://www.brecorder.com/brief-recordings/0/1143077/
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
least. Unilever Pakistan’s Vice president for customer development Syed Shazia told in the
interview that’s “rural area market growth is more than twice that of domestic sales”
Nestle Pakistan2 is spending 326 Million US dollar to twice the dairy products in 4 years ;
boosted the sales by 29% to 378 Million US dollar in the short time horizon of 6 months..
Managing director of nestle Pakistan unit, Mr. Ian Donald told in the interview “we are watching
that Pakistan’s rural market is performing better than urban economy And Nestle Pakistan have
strongly focusing on rural markets”. Mr. Sherani former economic adviser of finance ministry &
CEO at Macroeconomic Insights Pvt said consumer sector double digit growth come completely
from the rural market areas.
1.2 Problem Statement
Many studies have been performed to find out the barriers in sourcing. 3The researchers found
that most of the foreign firms select the firms in low cost countries due to reduce their final cost
of the product.Imports are increasing due to low cost and it begins competition among the firms.
The problem here arise that due to increase in the sourcing by firms there must be some barriers
which they have to face in taking decision of sourcing. Countless research work has been
conducted on this topic but in Pakistani FMCG industries this topic is remained untouched yet.
1.3 Research Objective

Find out the barriers faced by Pakistani FMCG Companies in sourcing from other
countries
2
http:////www.businessweek.com//news//2011-10-05//Pakistan-terror – no – bar –as-unileverconverges-with-nestle – retail.html
3
Coucke & Sleuwaegen (2008)
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Find out the barriers in Pakistani FMCG industries sourcing from other countries

Overcome to the barriers through which Pakistani FMCG companies can reduce their
cost while improve their quality, etc.
1.4 Research Questions
1. What are the barriers faced by FMCG companies of Pakistan in sourcing from
other countries?
2. How FMCG companies of Pakistan overcome to these barriers?
1.5 Scope of the Study
FMCG companies are doing global sourcing due to get the benefits of low cost material with best
quality etc. The study is beneficial for the managers of FMCG companies of Pakistan. Through
this research work they could find a better way to source from other countries and could reduce
barriers in sourcing. It will also be beneficial for the organizations to make the sourcing
strategies or policies accordingly. Hence they could find the better way to reduce their cost.
1.6 Limitations of Study
The research is limited to only one industry that is FMCG industries. Therefore for getting more
authentic and reliable results other industries can be taken into account. Another limitation of the
study scare financial resources of researcher’s and time constraints that for getting more credible
results more companies could be include.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Chapter # 02
Literature Review
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
2. Literature Review
2.1 Theoritical Background
Many companies are using global souricng as an essential part of supply chain strategies. Global
sourcing is the one significant economic trend in last twenty years for corporate survival4. One of
the major Benefits of worldwide sourcing are low cost. The expansion of manufactured goods
worldwide has one of the most well-defined economic trends of the previous fourty years it has
enable to grow the GDP of the most development countries.
Many developing countries like india and china are making worldwide sourcing as an cost saving
opportunities on the buying side. Price/cost benefits are attached with worldwide sourcing in
developing countries 5 . One of the major reason of global souricng are the cost saving ,
availability , innovation and quality many studies have been indicated on this. Marketplace
structure are also changing by worldwide sourcing. Global companies want to increase their
scope in all markets. Many firms are going to global sourcing because there are no any suitable
supplier are available in the home country. After identification the commodity to purchase
globally, a company must evaluate to the potential suppliers and identify to the suitable supplier
for that task. If organization have very limited information and outside contacts then evaluation
of supplier can be an challenging task for the company. Cultural differences are the major barrier
involve in the global sourcing. Cultural is an multidimentional concept including religion,
language, values and attitudes, customs, social institution and education. Values and behaviour
these two very significant part of culture can affect the supply manager. Values are the way of
the people think and an group norms and then behaviour is the based on the attitudes and values
4
5
Watters (2010)
Monczka (2009)
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
it affect they way to people act. Cultural differences and understanding about those cultural make
an easy to conducting business worldwide. Language differences can also have an significant
affect on smooth and effective global sourcing. Legal system also vari from origin to origin.
Advanced countries have very strong legal sytem that provide protection to the buyer. But in
developing countries this may not be correct & true. Many countries offer no successful safety
against the piracy of intellectual property.In global sourcing one more important concern are
managing the risk attached with fluctuations of currency. And companies take to the different
steps to reduce the risk of currency fluctuations.
In the supply chain management one concept is three Vs,visibility, velocity, & variability these
are the very major components of successful SCM strategy. 6Supply chain management goal is
reducing the variability by increasing visibility and velocity as seen in Figure:02.1
6
APICS CSCP-certified supply chain professional (2012)
=
VARIABILITY
+
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Figure: 02.1
The ability to see important information throughout the chain is called visibility. However
visibility will be increasing so ultimately customer and SC partner will get the benefits. A supply
chain manager can view the complete picture of the chain and from this clear picture he/ she can
minimize to the upcoming problems/ risk like POS (point of sale) data can increase the supply
chain partner’s visibility. SC members can realize saving in time and cost as well as better
visibility has resulted in greater velocity. A term used velocity the speed of transactions within a
SC partners. Velocity of transaction in the supply chain can increase by using the JIT delivery ,
lean manufacturing as well as eliminate to the non value added activities from this chain &
eliminating of non value added activities the transactions time will be reduce too, speed up the
velocity of inventory and the flow of cash. Variability is the fluctuation of below and above the
average value like average number of sales or defects. Variability is decrease by the better
visibility and velocity in the supply chain. To minimizing the risk or variability supply chain
partners need the clear and better visibility and velocity.
2.2 Empirical Studies
Batista,, (2012) studied the transport performance in the strategic sourcing as this is the
age of sourcing. They studied that how the barrier of sourcing can effect the performance of
overall supply chain performance. They perform a qualitative study and applied delphi technique
on the data collected by 20 managers sho are invloved in outsourcing. The results if the study
shows that there is need to be a specific frame work or network for transportation for the trade.
There is also need to be specific or particular focus on transportation network from the
perspective of international sourcing.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Lorentz, et al. (2012) tested that how geographical location matter for the performance of
inter firms processing of supply chain. They collected the sample data of 95 manufacturing firms
and applied GLM 7 technique. The findings or results of the study shows that when the
geographical distance increase the performance of supply chain effectiveness decrease due to
increase in cost. It will also increase the time delays. Hence the performance of supply chain
decreases.
Wang, et al. (2011) investigated& examine the decisions making taking by Australian
firms for sourcing from China as it is a low cost country. They took the sample of 35 Australian
firms to analyze the phenomenon. All of these firms are involved in sourcing from China.
Descriptive statistics was applied on the data the results of the study reflects that most of the
firms choose China for outsourcing to reduce their cost and by doing this they significanlty
reduce their cost. But by reducing their cost sometime they sometime compromise on quality,
delays in timings etc.
Pazirandeh,, (2011) investigated and analyzed the sourcing of health products from the
developing countries of the world. They performed a qualitative study and reviewd number of
sourcing strategies. The findings of the study shows the in the sourcing of vaccines the
companies should have to be more quality concious. For this type of sourcing the
product,country and organizational characterstics should be taken into account.
Christopher,, et al. (2011) analyzed the manager approaches to avoid the risk associated
with global sourcing. They used 15 cases of global sourcing in seven different industries. They
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
perform a qualitative study. According to the results and findings of the study they manager does
not have particual phenomenon or formula to reduce the risk associated with the sourcing. They
cope up with the risk associated with the sourcing with different manner for example the risk
which are involved are demand risk, sustainability risk, environmental risks and supply risk etc.
Platts & Song., (2010) investigated that cost of sourcing from china. As most
multinationals choose china for sourcing because of low cost so the author campare that to what
extent they are successful in reducing their cost. They performed a comparative analysis of the
cost associated. The data used in the study collected by six case studies and 201 Big MNCs firms
who are involved in sourcing from china. The findings or results of the study shows the most of
the time firms underestimate the total cost associated with the overall process of sourcing. They
suggest the companies that they should completely analyze the each and every cost in the
sourcing afterthat make the final sourcing decision.
Crone & Watts, (2010) investigated the factors that influence multinationals to stay on
regional sourcing. They collected the data 50 multinational operating in UK. ANOVA was
applied to analyze the data. The results of the study show that the multinationals prefer to source
from regions whereas sometime the demands coincides with the supply so that they has to source
from outside. Or sometime some policies act as barriers in regional sourcing.
Hameri & Hintsa,, (2009) investigaed the factors that contribute to bring a change in out
sourcing or sourcing from out side the borders. They perform a qualitative study by reviewing
the literature and by unstructured interviewing 33 officials of different industries. To identify
factores they applied delphi technique. The results of the study shows that there is a future
planning of more than 20 years by WTO to increase the outsourcing which includes physical
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
sources, material, information , technology etc. In addition the risk will also increase with this
process or phenomenon.
Deane, et al. (2009) studied that how a company should select the supplier from which
they are planning to souruce their product to minimize the level of risk associated with it. They
analyzed the different types of risk and check the reliability. The results of the study shows that
there are basically two types of risk which are most important they are density risk and
environmental risk. They managers can apply firrent sourcing strategies like multiple supplier
selection, single supple or cross borders supplier selection etc.
Fredriksson & Jonsson,, (2009) investigated the consequences of the low cost sourcing
faced by European manufacturers from china. They perform a qualtiative study based on the case
studies. The findings of the shows that low cost sourcing effects the companies in the manner
that it effects the supply chain structure, supply chain netwrok of the company. They suggested
that the managers should taken into account the relationships with the supplier and the overall
performances of the suppliers.
Coucke & Sleuwaegen,, (2008) investigated that how the manufacturing firms of
Belgium take the sourcing strategy as their survival in this age of competition and the effect of
importing from the developing countries. They consider the exit behavior of Belgian firms in the
period of 1999-2001. Descriptive statistics and logistic regression applied on the data. They
results of the study suggested that due to increase of globalization the sourcing improves and
also the firms imports goods and have to face tough competition so to overcome this problem the
firm have to develop and establish strong supply network.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Khan K & Pillania,, (2008) tested the performance of the indian manufacture firms by
sourcing. The data used in the study was of 128 manufacturing firms operating in India. The
statistical technique used was multiple regression and ANOVA. The results of the study shows
that the relationship between supplier and partner, flexibilities in timings and trust on suppliers
are the key factors on which performance relies. They suggest the companies to improve their
lovel of trust and the key factors to bring more improvement in performance.
Leamer, (2007) investigated that how the geography of a country helps its firms to source
or to create relationship with the firms of the other country. The study based on the qualitative
relationships. The writer concluded the study by saying that due to increase in the globalization
the world become flatter now the trade is as easy as we think. And so theoutsourcing is also easy
for the organization to import goods etc.
Ruamsook,, et al.(2007) analyze the supplier performances when the U.S firms go for
sourcing from the low-cost countries. The data was collected through the mail surveys 3400
supplier managers and the data collected by five point likert scale. Goodness of fit test was used
to analyze the data. The findings of the analysis shows that low cost coutries like china have leaa
satisfactory product. Indias results is same as china. It is shown that it is not mandatory that all
the low cost countries provide the same quality as required by the managers.
Kumar & Momaya,, (2007) empirically identify the evolution in demand translation in
global sourcing of components.
Research results reflects that ATO (assemble to order)
environment has a high dependency on the component level demand accuracy to improve the on
time delivery and control the inventory. In future researcher can include the variation in
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
component, lead time, the variation in the customer preferred features and the short life cycle of
the end products.
Chan et al (2007) investigated the strategic sourcing in the Hong Kong toy industry.
Samples of 205 Hong Kong toy companies results reflect that the implementation of strategic
sourcing in the Hong Kong toy industry is lagging behind the degree of importance of strategic
sourcing researcher implications here is a gap between the implementation & importance of
strategic sourcing and the also the study is only on Hong Kong toy industries
Hartley et al (2006) examine exploring the barriers to the adoption of e-auctions for
sourcing. Sample used 163 firms and propositions were developed based on the literature and
case studies. Results are no significant differences were found between adopters and non
adopters on the buye’s e-auctions knowledge lack of supplier participation and the importance of
supplier relationships. Further research can be on the large sample size and the results may not
generalize beyond the sample.
Mishra & Tadikamalla, (2006) analyze the benefits of sourcing from single supplier as
compare to source from two different suppliers. They perform a qualitative study. The results
shows that the effectiveness of order splitting in which there needs to be only one supplier and
we order them from time to time it is called order splitting. It will enhance the quality as well as
the trust relationship between supplier and the company.
Murray, ,et al. (2005)tested the effect of sourcing which takes place in the results of
strategic alliance on the market performance. They identify this relationship on the foreign firms
which are operating in China. The data used in the study was of 487 foreign manufacturing firms
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
operating in China. Confirmatory factor analysis was applied on the data. The results indicated
that the sourcing of major or critical parts can decrease the market performance of the firms.
They suggested the managers that they should have complete knowledge about the supplier with
whom they are going tobuild strategic alliance.
Trent& Monczka,, (2005) investigated that how can managers get expertise in th global
sourcing. They performed a qualitative study according to their study there are seven
characterstics to achieve excellence in global sourcing. First is that they have strong commitment
to the sourcing, secone is that all the process is clearly well defined. The resources should be
available on time and they should be integerated by I.T department. All the process should be
supported by organizational design. Communication should be strong. And finally the
methodologies should be such type that the savings will also occur.
Dossani and Panagariya,, (2005) investigate how globalization impact on outsourcing of
IT service in the economies like India. The authors finds that indian IT sector is blooming day by
daya with the last few years. Indian It sector is exporting IT servies around the world however
the developed economies outsource It service at high levels low level work has been performed
by themselves. They suggested the india thatthey should develop the It workers as high level
work.
Choi & Davidson,, (2004) investigated the strategic sourcing taken by multinationals.
As multinational firms capture large international markets . they perform a qualitative study
according to their study they found that if multinationals go for the strategic sourcing to the other
supplier they can lower their average cost but sometimes the marginal cost increase so the
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
multinationals have to perform keen study about about make or buy decision that whether to
make or buy.
Chopra &S.Sodhi,, (2004) investigated & analyze how managers manage risk to avoid
the risk associated with supply chain breakdowns. According to their qualitative study there are
so many risk associated with the supply chain process. The risk can be forecast risk, delays risk,
procurement risk, intellectual property risk, inventory risk and receivable risk etc. according to
them the managers can control all types of risk by effective management. They should apply
flexibilities to the processes like increase inventory, aggregate demands, inrease capability etc.
Ghauri,, Lutz, & Tesfom,, (2003) Find out that how multinationals are using the networks
to solve the sourcing problems of small and medium sized enterprises in developing countries.
They perform a qualitative study and review literatures. They found that there are two types of
problems exists internal and external. The multinationals are in practice to firstly solve the
problems of internal issues completely. The network created have keep an eye on the foreign
market activities and demands situations.
Knappe,, (2003) examine the challenges faced by textile industry after 2005 because
industries are reduce the number of the countries from where they source their material. They
perform a qualitative study according to them the quotas plays and important role in this process.
The companies keep the sourcing countries who have complete their quotas regularly. Also who
are consistent in quality.
Vanhaverbeke,,et al.(2002) analyzed that in the todays rapid business world at what
extent companies prefer to source the new technology through strategic alliance. They took the
data of 145 strategic alliances and 140 merger and acquisitions which establish between the
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
period of 1985-1994. They applied descriptice statistics and regression analysis to analyze the
data. The results of the study suggested that the firms continuously engaged in the strategic
alliances more chances are present that one will acquire other. And in the case of acquisition the
firms which lead has more likely to acquire other.
Murray, (2001) investigated that how a company take strategic advantage through the
sourcing which is as the result of strategic alliances. They study that in the todays era firms are
use to strategic alliances base sourcing to increase the market performance. They sstudy the the
top level multinationals whose are performing strategic global sourcing. The results of the study
shows that through thios ohenomenon the firms are more easily can meet up the changing
demands of the customers. Because through sourcing firms are only concerned with the things
they need they don’t have concern how the supplier made this.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Chapter # 03
Methodology
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
3. Methodology
3.1
Research Approach
The research approach means that which type of the study is going to be conducted. The
approach of a research can be qualitative or quantitative. But this research work is qualitative.
And in qualitative research we describe a phenomenon, situation, problem or event as well as in
qualitative research do not include any of the statistical techniques or tool8. And the research
wants to investigate the barriers in worldwide sourcing. It will be identified by the in-depth
interviews with respective personnel’s.
3.2
Research Purpose
The purpose of following research is exploratory. In the exploratory researcher have lack of
clarity about the issues or problems. Researcher develops the concept clearly through exploratory
research. The area of research can be new and unique that need to exploration only to learn & get
knowledge about the dilemma9. In this research explore the barriers occurs in global sourcing
which faced by the FMCG industry in Pakistan.
3.3
Research Design
Research design is a plan of investigation adopted by the researcher to obtain research problems
or question. The deeper understanding of experiences & nature is the objectives of
phenomenological research10. In this research design is phenomenological. And it will be
8
Cooper & Schindler (2006)
Patton (2002)
10
Cooper & Schindler (2006)
9
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
conducted by taking in-depth interviews to understand that which type of barriers Pakistani
FMCG industry faced in sourcing from other countries.
3.4
Data Source
The data is collected by the primary source and highly authentic and reliable personnel are which
includes managers, senior managers, and executives of different FMCG companies of Pakistan to
give their understanding barriers in sourcing from other countries.
3.5
Target Population
As this research work is limited to explore barriers faced by FMCG industry in global sourcing.
So the research target population respectively is the FMCG companies operating in Pakistan.
3.6
Sample Size
In this research the data of 04 FMCG firms operating in Pakistan and involved in sourcing from
other countries are include. The study will investigate the barriers they faced in global sourcing.
FMCG firm names are following
3.7

National Food Ltd

Johnsons & Johnsons

Unilever Pakistan

Tetley Tea Company
Data Collection
The data for the study is collected by in-depth interviews with the key personnel’s of the
respective companies. This method of data collection chooses because of authenticity of the data
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
and it is the most reliable method for getting primary data. The interviews of 30-60 minutes are
taken by the respective persons.
3.8
Sampling Technique
Purposive sampling technique is chosen by the researcher. This technique of sampling includes
the sample of the relevant person while excluding irrelevant persons. In other words it is a better
way to stay stick on the topic. In this study we have taken the data from only the key personnel’s
of companies which are involved in global sourcing.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
CHAPTER #4
Data Analysis
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
4. Data Analysis
This chapter focuses on the analysis of the data obtained from the different sources. The data for
the study was collected through the most effective way of the data collection which is face to
face interviews. It talks about all the pros and cons of the procedure being carried out in the
supply chain for the purpose of Global sourcing in FMCG sector. All the information gathered in
these interviews are summarized below.R1: Planning & Warehouse Manager (Johnsons & Johnsons Company)
R2: Senior Procurement Officer (National Food Private Ltd)
R3: Factory Manager (Tetley Tea Company)
R4: Supply Chain Manager (Hyeworth Renault Petersen Pakistan Pvt Ltd)
4.1 What are the barriers faced by FMCG companies of Pakistan in sourcing from other
countries?
4.1.1 Quality Issues
R1: We are importing to raw materials from different foreign countries. Because those raw
material is scare in Pakistan or quality is not good. But our imported raw material quality is high
more than local suppliers.
R2: Cost is important factor but not more than quality for us. Because if we will not fulfill to the
quality standard so ultimately our competitor will capture our market share as well as we are in
food items related business so we first emphasize on quality and then cost.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
R3: We import tea from keyneya, Srilanka, vitnam and then grinding here in Pakistan. Because
high quality tea is not farming in Pakistan so that’s why we import as well as we have an brand
name in the market so we cannot destroy to our brand name only due to few saving of money.
R4: Quality is important for us that are why we focus over quality not a cost. Cost is an
important factor but not more than quality. That’s why we are importing to keep our quality
higher.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the quality is more important in FMCG products. Due to higher quality FMCG companies import
to the goods. As well as usually higher quality goods are not available in Pakistan.
4.1.2 Supplier Selection Issues
R1: During Supplier selection we do complete and in-depth analysis on cost, quality, capacity of
supplier etc. And after these screening procedures we put to them in our approved vendor list. As
before I said we also minimize to the supply chain risk. We paid to the supplier after the
inspection of raw material.
R2: National Food quality control team first check to the sample which provide by new supplier.
And after the sample screening process our quality team visit to the supplier in foreign country to
check the processes as well as capacity of our supplier. If one supplier have very good processes
and technology but if they are unable to committed with us to provide our monthly requirement
so then we do not approved them in our supplier list.
R3: Before selection the supplier. We check to the supplier capacity as well as quality of tea and
for this purpose first our quality team visit to foreign countries to check the tea garden. After the
satisfaction report we deal with them.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
R4: We have limited supplier and they are also a brand name in their market. And we buy only
from them and they are working in the industry from more than 50 years.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
FMCG companies have very strong criteria of supplier selection and specially they check to the
supplier financial, capacity, quality and process. Specially they check to the delivery time, higher
quality and low cost these are very important factory in imports. And they do in-depth analysis
before selecting the supplier.
4.1.3 Supplier Relation Issues:
R1:We define all terms and conditions with the supplier so usually there are no any issue occurs
in our relationship with the supplier. And our relationship with our supplier is very strong
R2:In supplier relation we have no any issues face as such. Because we select to the supplier
after strong screening and testing procedure. As well as if any issue occurs so we resolve
immediately.
R3:Supplier relation in the tea business is an important factor. Because we import the tea from
few countries like Kenya, Sri Lanka etc. So we keep good relationship with the supplier to keep
our production flow smoothly.Relationship with supplier is good because foreigner is do not
committed over and deliver under.
R4:We are in seasonal product business so we have limited supplier who’s working in the
industry from last more than 50 years so there are no any major issues face regarding supplier
relationship.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
FMCG companies have very strong & reliable relationship with the suppliers. After the supplier
selection they also maintain a good relationship with them and sustain to the relationship because
they have invested the money during supplier sreening & selection process.
4.1.4 Communication Barriers
R1:
Usually we deal with USA supplier so there are no as such any issues occur in
communication. Because they also speak English well more than us. Some time issues can be
occur from our side because English is not our native language so we minimize to this barrier as
we finalize the deal with supplier on electronic written documents.
R2:
We do not face any major issues in communicationbarriers. Because we keep all
communication over e-mail so there are no issues in communication with the supplier as well as
we are working with supplier from many years so we understand to each other culture too.
R3: There are no issues faces about communication because they know English very well and
usually we have communication over e-mail which is a type of electronic documentation.
R4: We communicated everything over the e-mail so there is no such an issue about the
communication. And we are working with them from very long time.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
they do not face any major issues regarding communication issues. Because they also keep all
communication over e-mail and also maintain an electronic documentation.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
4.1.5 Cultural Barriers
R1: We do not face any cultural issues. Because we are working with them from very long time
so we understand to each other culture.
R2: As such cultural issues still we do not face with the supplier. As well as National Food have
very good relationship with the supplier.
R3: We do not face any major issues regarding cultural problems.
R4: As I said we are working with the supplier from more than 50 years. So we knows to culture
of them and as well as they also understand to our culture.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
they do not face any major issues regarding culture. Because they are working from last several
years with the same suppliers and they both understand to the culture of each other.
4.1.6 Cost & Long Lead Times
R1: We importing from other countries in huge quantity so ultimately it’s cheaper than local
goods. Lead time is not any major issues for us. Because its compulsory for us to bear this pain
of inventory because we cannot take any risk about stock out. Another wise our competitor will
capture our market share. As well as we are working to minimize the inventory.
R2: Cost is not our first priority but because we import in bulk quantity so we do not face any
issues regarding cost and lead time is an issue for us because when we import from other
countries so its take long time to receive.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
R3: We import tea from Kenya and Sri Lanka, because in tea business we do not find any
quality tea locally so ultimately we import from other countries. Long Lead time we face as an
issue that’s why we have huge inventory in-transit.
R4: We do not face as such any costs issues regarding imported goods because we are a brand
name we focus over quality. Long lead time is not an issue for us because we are in seasonal
product business so before the season start we also place the order and when season starting so
product is available.
Author’s conclusion:By analyzing the answers of all the respondents authors concluded that the
FMCG industry companies do not face any major issues in cost & long lead time as well as low
cost is an important factor. But majority companies emphasize over quality.
4.1.7 Local & Foreign sourcing Issues
R1: We import from outside the country because here that’s raw material is not available or if
available so quality is not better. Johnsons and Johnsons never compromise over quality.
R2: Few years later we procure locally but now we import from outside the country. Because
imported material is has reliable quality and low cost.
R3: As I told we import tea usually from Kenya because Kenya tea is reliable in terms of
quality. As well because quality tea is not available in the Pakistan so that’s why we use foreign
sourcing.
R4: We are using foreign sourcing because we emphasize over quality and quality product in our
industry is not available in Pakistan.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
they companies use foreign sourcing because of higher quality and low cost. That’s they reason
of FMCG companies emphasize over foreign sourcing.
4.1.8 Exchange Rate & Inflation
R1: Exchange rate is an problem from last several years because its changing fluently we
minimize to this issue as when we deal with supplier or place an order so we fixed to the
exchange rate and after the receiving and inspection of raw material we paid them.
R2: Exchange rate is fluctuating too much from last several years. And when we procure locally
so local supplier first do not focus over quality and second they provide us higher cost. Because
local supplier first import to the raw material first and then produce here. After manufacturing
product they sell to us and in that’s product they include all charges as well as they include
inflation impact too.
R3: Exchange rate plays a vital role in imports. They why when we place an order so we fixed to
the exchange rate means we are using hedging to minimize the exchange rate risk.
R4: Exchange rate issues. Because when we place an order so exchange rate is different and we
come to payment term so. On that’s time exchange rate has been change.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
they companies use foreign sourcing because of higher quality and low cost. And also exchange
rate play an vital role in global sourcing. Because when they place the order so exchange rate is
different and when they come to payment term period so exchange rate has been change.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
4.1.9 Custom Delaying Tactics & Bribery Issues
R1: Custom authorities use the delaying tactics with our shipment. They stopped to our shipment
and do not release. And because Johnsons and Johnsons are very stick over the legal procedures
so we never ever give them any speed money. Infect we have clearing agent and we did sign an
agreement with our clearing agent too. And our clearing agent is also bound to follow the legal
procedures. Many times our production has been stopped. Like last time our production was stop
two months but we never give them any extra money for the shipment clearance.
R2: Yes we face delaying tactics from custom side. But actually we have clearing agent to deal
all issues regarding custom. One time our production raw material was only for few hours and
we was facing pressure from our production side. But in the mean time our clearing agent
releases the shipment from the port and we save to keep our production flow smoothly.
R3: Customs people stopped to our shipment for the purpose of inspection. But they do not do
inspection one one months. All custom related issues deal by our clearing agent.
R4: They want speed money simple. That’s why they stopped to our shipment and do not release
it. And we have compulsion to deal with them.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the FMCG companies face bribery issues from the custom side. But majority companies do not
pay the bribery infect due to this issues those production suffer for longer time. And some
companies use to the clearing agent for dealing with custom issues.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
4.1.10 Single Sourcing Issues
R1: Johnsons and Johnsons use single sourcing because if we buy from more than one supplier
so there will be variation in our product. Infect we have very strong quality control team but as
you know we can define to the minimum standard of quality or an interval of quality standard.
As well as different suppliers use different processes and technology and human skills variation.
So minimize to the quality variation risk we use single sourcing.
R2: We use multiple sourcing and have two to three suppliers for each raw material to minimize
the supply chain risk. When last time flood came in Pakistan so we was stuck because our local
supplier was unable to provide us LAL MIRCH which we use in masala. If on that’s time we use
single sourcing so we faced difficulties.
R3: We import from different countries Kenya, Sri Lanka, usually we import from Kenya
because Kenya tea is good quality. So we use multiple sourcing to minimize the single sourcing
risk.
R4: We are using single sourcing because as I told we are working with those suppliers who are
old in the industry and we do not face any issue to shift over multiple sourcing.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the FMCG companies use multiple sourcing to minimize the supply chain risk. But few
companies use single sourcing to keep standardized quality. Because as per few respondent if
they use multiple sourcing so slightly variation become in the final product because every
supplier use different technology and processes.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
4.2 How FMCG companies of Pakistan overcome to these barriers?
4.2.1 Supplier Performance Measurement
R1: Johnsons and Johnsons check to the supplier performance on the monthly basis to resolve
the issues in monthly meeting with supplier. We check to the suppliers (KPI) key performance
indicator from different dimensions like delivery time. Perfect order fulfillment, Quality, Cost
etc. Actually we have different ranking for our supplier like Bronze, Platinum and Gold. And we
also share the supplier performance with the supplier. We check if supplier does not meet our
basis criteria which are lower than bronze rank so then we give them warning in supplier meeting
like our one Tube supplier was consistently not fulfilling the basis standard from last many
months so then we replace to this supplier with new one. But its take time around 1.5 years as I
told before we are using single sourcing and our supplier selection procedure is lengthy after indepth analysis we approved to the supplier.
R2: We use supplier performance (KPI) key performance indicator. On the behalf of these
performance metrics we place those orders. As well as we also share the performance report with
the supplier for improvement.
R3: On the monthly basis we do supplier performance measurement and if any supplier is not
fulfilling our standard so we give them warning for the improvement in next time. We also
compare to the supplier performance from his last month performance to analyze that’s, means
supplier is improving his performance or not.
R4: supplier performance we measure and keep them on the board over the e-mail we inform to
them about the issues if any occur.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the FMCG sector do supplier performance measurement and also compare to the supplier
performance from standard benchmark. As well as on the behalf of supplier performance they
place future order.
4.2.2 Information Sharing With Suppliers
R1: Information sharing with the supplier we do to keep our production flow smooth and we
share the six month raw material requirement planning (MRP) with our supplier. We also keep
strong coordination with supplier to minimize the inventory.
R2: National Food share the upcoming months forecast with the supplier to minimize the
problem. Because if we will not share our future requirement with the supplier so supplier can
say us “sorry I am unable to provide your requirement because am committed with my other
customer” that’s the reason to share forecast with the supplier. as well as we have very good
relationship with supplier it’s an “win –win situation” we provide them business and they
provide us on time delivery , quality and low cost.
R3: We share limited information with the supplier about our upcoming goods requirement and
promotion campaign. As well as we have deep relationship with the supplier and if any issue
occur so we resolve this on immediate basis through video conferencing or telephonic
conversation.
R4: We share information we the supplier about our promotion activity like Eid , Ramzan , and
Valentine days because we are in the confectionery item business. As well as we only place the
order when we required as I told our products usually consumed seasonally.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
information sharing they do but limited like upcoming few months requirement of raw material
to keep the production flow smooth as well as they use strong coordination with the supplier to
minimize the inventory.
4.2.3 Improved IT, Processes & Human skills
R1: Information technology has improved to the supply chain as whole and now supply chain
has become an integrated supply chain. As well as we focus over our processes to make it
innovative and easy to use and for maximum output in minimum time. When we planned to
change any process or technology so first we trained to our employees because ultimately they
are the user of this technology and if they can use it efficiently & effectively so return on
investment, and cost benefit analysis will be positive.
R2: Information technology is very important factor for the running smooth supply chain. But
without investment over processes and employees its use less. So we also provide training to the
employees because ultimately they are the user of the system. So our focus is major over
processes to make them improved because if our processes will be best in class so it wills it’s our
permanent investment.
R3: We are using enterprise resource planning system. Which integrate to the all departments
and if any problem arise so it resolve on timely basis. We focus to our processes to improve it
time by time. And when ever put any new technology so first we check to the Return on
investment analysis and also we provide training to our employees to use the system efficiently.
Because in good quality product employee skills involvement is very important.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
R4:Information technology has evolved to the supply chain. Yes if any latest technology come
and it’s supportive with our processes so we adopt this.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the FMCG companies use latest technology whenever require but they focus over processes to
keep the best in class processes and they invest over processes to keep them smooth. As well as
before implementing the any technology they first calculate to the Return on investment and cost
benefit analysis and then implement to the technology and also provide proper trained to the
employees because ultimately they are the user of the technology if they will use technology
efficiently and effectively so directly impact will come over the final product.
4.2.4 Multiple Sourcing
R1: Now we have planned to go on multiple sourcing because as one case has been done with
our Tube raw material supplier. This was not fulfilling to our standard from last several months
and then we develop to another supplier for replacement which took around 1.5 years.
R2: When flood came in Pakistan so our local supplier was unable to provide our LAL MIRCH
quantity requirement and then we did import LAL MIRCH also. If we did not use multiple
sourcing so. On that’s time so it’s hard for us to keep production continue for the NATIONAL
MASLA product. as well as one time GHANNI GLASS was unable to provide us our bottle
requirement. Because Ghanni glass was committed with the Pepsi and coca cola. So on that’s
time we also did import. That why we use multiple sourcing to minimize the risk.
R3: Supply chain risk is end to end. Because if supplier is unable to provide us goods so I am
also stuck to continue or production flow. To minimize this risk we use multiple sourcing. If one
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
supplier is unable to provide our requirement so we go to second supplier who’s in our approved
supplier list.
R4: No we do not require multiple sourcing because we are doing business with top companies
whose have and brand name in the industry of USA like Ferrero chocolate etc.
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the companies use to the multiple sourcing to minimize to the supply chain risk. And few
companies whose still do not use multiple sourcing have plan to use multiple sourcing in the
future.
4.2.5 Hedging To Minimize Exchange Rate Issues
R1: We use hedging to minimize the risk of exchange rate. Because exchange rate is changing
fluently from last several years and it become and big risk for us.
R2: Due to exchange rate fluctuating problems we use hedging techniques to minimize the risk
in the supply chain.
R3: In the global sourcing exchange rate is play a vital factor. And to minimize this risk we are
using hedging. So when we place the order so. On that’s time exchange rate fixed over them time
of payment.
R4: We keep over estimation like 5% of plus minus in the cost. If exchange rate change and it’s
rely during this cost so we do not required any further approval. But whenever its over the 5%
then we go to take new approval for the procurement price. We are thinking to use hedging
techniques because from last few years Pakistani currency is devaluing too much and it’s create
over cost for us.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Author’s conclusion: By analyzing the answers of all the respondents authors concluded that
the FMCG companies minimize to the exchange rate risk they use to the hedging. And which
companies still do not use hedging they have plan to use hedging in upcoming future.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
CHAPTER # 5
CONCLUSION &
RECOMMENDATIONS
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
5. Findings & Recommendation
5.1. Conclusion
The research was based on the barriers in sourcing from other countries in FMCG sector of
Pakistan. Due to globalization now the global sourcing is very common in almost all the
countries. Now organizations prefer to source their product from foreign supplier rather than
local suppliers. It is because of many reasons based on the criteria that what is the preference of
the organization on the basis of which they are selecting foreign supplier sometime quality
matters sometime cost matters. But as sourcing increases there are barriers also arises which an
organization must taken into account before making the decision of sourcing.
The following are the outcomes of the thesis.

The organizations must have to improve their systems of information technology to make
their supply chain management process more efficient.

They should make a proper team which can handle all the custom barriers as they should
not involve in any type of speed money in any case. As well as whenever they receive
online documents of shipment so they should start to the process of clearing good from
the ports.

Proper forecasting of exchange rate fluctuation to minimize the risk otherwise it can play
a role of huge loss for them. And also can destruct to their profit margin.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries

They should not block too much money on safety stock or in-transit inventory but to the
certain specified level only. Because due to huge inventory in safety stock or in-transit
can create a big risk like higher obsolesce rate, pilferage etc.

They can cope up with communication and time barriers like they should email the
required documents to the other part from office so when they open they can easily get
your email. As well as they can also use to the written documents to minimize the
communication barriers.

For shipment barrier they should select a route which cannot stop their ship at any stop
hence their product will not spoil. And also product obsolesce rate will be decrease too.

They should have to make strict QC (quality control) team in such a way that they would
not compromise on quality at any cost. As well as QC (quality control) team should be
able to check to the supplier performance time to time infect after supplier selection too.
5.2. Future Recommendation
This study has focus over only for FMCG (fast moving consumer goods) sector that’s
existing in Karachi - Pakistan premises.
 This study has been done for the FMCG sector of Karachi- Pakistan, so, it can extend in
different cities of Pakistan as well as it can also performed other than FMCG sector.
 Compare and analyzed the scenarios of non development countries and development
countries and how they create effect over Pakistani FMCG companies.
 Impact of government trade policies and global relationship of Pakistan with other
countries how it’s create impact over global sourcing in FMCG sector of pakistan this can
also analyzed through quantitative research.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
 Trend of increasing and decreasing of sales in FMCG Sector in Pakistan can analyzed the
reasons by conducting of quantitative study.
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
Reference
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Find out the barriers in Pakistani FMCG industries sourcing from other countries
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