Industries play a pivotal role in the economic development of every country

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“Industries Play a Pivotal Role in the Economic Development of Every Country”

Executive Summary

Anwar Jute Spinning Mills Ltd. (AJSML) is one of the leading jute yearn manufacturing company in Bangladesh. The prime function of Anwar Jute Spinning Mills Ltd. (AJSML) is to produce jute yarn and supply them to the consumer. Jute industries are playing an important role in the economic development of Bangladesh. This is why industrialization has been adopted as a vital instrument of economic development in many developing countries. Realizing this, Government of Peoples Republic of Bangladesh has facilitated the jute yarn companies by providing necessary loans and incentives so that the companies can run their businesses smoothly. The jute yarn business is potential in our country that’s why our jute yearn manufacturing companies are producing jute yarn and exporting them in various countries of the world and making contribution to the national economy of Bangladesh.

Chapter 01

1. Introduction

Anwar Jute Spinning Mills Ltd. is the cash cow unit of Anwar Group of Industries which was established in 1997 and still producing jute yarn and exporting them in various countries. Behind of this success, they have a suitable operational policy practice. Without practicing accurate operational policy, no company can gain benefits. As they have a hard working executive team, a better working environment, strong supervision, favorable reward system and so on. They are getting goodwill day by day. Lucky that got a chance to do my internship in this company with an interesting topic. Think it will help all who are interested to know the suitable policy of a manufacturing company.

1.1 Background of the Study:

Industries play a pivotal role in the economic development of every country. This is why industrialization has been adopted as a vital instrument of economic development in many developing countries. Realizing this, Government of Peoples Republic of Bangladesh has facilitated the jute yarn companies by providing necessary loans and incentives so that the companies can run their businesses smoothly. The jute yarn business is potential in our country that’s why our jute yarn manufacturing companies are producing jute yarn and exporting them in various countries of the world and making contribution to the national economy of Bangladesh.

1.2 Problem Statement:

Like every country Bangladesh needs to set up necessary operational policy to run any business. In order to get maximum benefits from such manufacturing company, a suitable policy is very important. Any error in formulating policy will have an adverse impact on total business of the country.

Certain major issues confront the central management in adopting suitable policy of a country. Policy means to take strategies to run the business. It refers to the evaluation of total process and selection between alternatives. The authority of the company prepares policy. An expert team consisting of engineer, economist and financial analyst has appraised the policy. This report critically evaluates the proposed policy through technical analysis, economic analysis and financial evaluation. When the policy found to be technically feasible, financially rewarding and economically & commercially viable only then that policy is accepted by the authority. This study will make an attempt to the operational policy practice of Anwar Jute Spinning Mills Ltd. (AJSML).

1.3 Objectives of the Study:

This report examines the procurement and marketing polices practiced in Anwar Jute Spinning Mills Ltd. (AJSML). The information about the operational policy has been taken from the entrepreneur, executives, accountants and other employee of the company. The objectives of the study are to find out what are using in manufacturing company, how they are using them, what are the suitable policies for the manufacturing company, how a company can formulate a suitable policy for its business, how capable they are in pursuit of suitable policy, how they are dealing with this policies, what kinds of people are needed for formulating suitable policy, the companies who are practicing accurate policy are in what position, the companies who have failed to setup accurate policy for their businesses are in what position and what aspects a policy maker need to scrutinize & evaluate its particular operational policy.

The objectives are summarized as follows:

• To get an overall idea about the existing operations and marketing policy of Anwar Jute Spinning Mills Ltd. (AJSML);
• Evaluate the particular existing operational policy;
• To determine the limitations or problems (if any) of the operational policy;
• To recommend necessary steps to overcome such limitations.

1.4 Scope of the Study:

This report will mainly focus on the operational policy of Anwar Jute Spinning Mills Ltd. (AJSML). The proposed study will cover the policy practice, procedures and techniques followed by the company in their total purchase and selling. Moreover the evaluation of its procurement and marketing policy of the Anwar Jute Spinning Mills Ltd. (AJSML).

1.5 Methodology of the Study:

Correct and smooth completion of research work requires adherence to some rules and methodologies. Rules were followed to ease the data collection procedure. Accuracy of study depends on the information and data analysis.

(i) Study Area:

The area of my study has been encompassed the operation area of Anwar Jute Spinning Mills Ltd.’s (AJSML) Head office at 27, Dilkusha Commercial Area, Dhaka-1000.

(ii) Target Group:

To accumulate the required data, contacted with each departmental head along with other concerned executives of Anwar Jute Spinning Mills Ltd. (AJSML) In case of industry diagnosis, I got in touch with the responsible personnel of policy and procurement selection and implication Department of Anwar Jute Spinning Mills Ltd. (AJSML) to collect the information.

(iii) Types of Research:

In this study the descriptive type of research has been undertaken to gain insights and understanding about overall procedure and policy operation of Anwar Jute Spinning Mills Ltd. (AJSML), a strong part of jute yarn manufacturing industry.

(iv) Source of Information:

The data has been collected from both primary and secondary sources.

(a) Primary Sources:

Among the primary sources the main sources are as follows:

• Interview and conversation with respected personnel of Anwar Jute Spinning Mills Ltd. (AJSML).
• Officials’ records & documents of Anwar Jute Spinning Mills Ltd. (AJSML).

(b) Secondary Sources:

Among the secondary sources the main sources are as follows:

• Annual report & appraisal manual of Anwar Jute Spinning Mills Ltd. (AJSML).
• Annual brochure of Anwar Jute Spinning Mills Ltd. (AJSML).
• Journals and relevant books.

1.6 Coverage of the Study:

This report cover is prepared based on the most important department named as -Procurement and Marketing Policy Selection and Evaluation and Implementation department of Anwar Jute Spinning Mills Ltd. (AJSML).

1.7 Justification of the study:

This study has both practical and academic value. It will help to get a clear idea about the procurement and marketing policy practice in Anwar Jute Spinning Mills Ltd. (AJSML). On the other hand, the findings of this study will help to take appropriate actions and steps for the betterment of the existing practice which basically helps the industrial development of the country.

1.8 Limitations of the Study:

The limitations of the study are given below:

• Shortage of time:  could not spend sufficient time which was necessary to make the report more representable of the fact.
• Many personnel of the Anwar Jute Spinning Mills Ltd. (AJSML) were reluctant to provide useful information.
• Most of the information about the topic relevant in this purpose, was secret from the point of view of organization. So this kind of information could not be collected.
• It was not possible to take face to face interview of the authority of Anwar Jute Spinning Mills Ltd. (AJSML).
• Sufficient records, publications, facts and figures are not available. These constraints narrowed the scope of the real analysis.
• For the reason of confidentiality, some useful information cannot be expressed in this report.
• It takes six months or more for completion of the Procurement and Marketing Policy Report but I was an intern in the Anwar Jute Spinning Mills Ltd. (AJSML) for only three months. So to acquire a vast knowledge, it was the most important limitation.

1.9 Literature Review:

Anwar Jute Spinning Mills Ltd. was established in 1997, Anwar remains as a fully export oriented organization. Current product range of Anwar consists of high-grade jute yarn ranging from grist count 2.50 lbs to 24 lbs of 15,000 M. tones per annum, with a vision to attain a production level of 30,000 M. tones per annum in jute yarn only by the year 2010. Unique innovation at Anwar has enabled us to process natural jute yarn into bleached, dyed, coated, water repellant, fire retardant, wrought resistant and more diversifications. Their distinctive multi system finishing process provides the flexibility to their buyers with the option of packing their spools in weight ranging from 500 gm in mini-spools, balls and corollas spools to 40 kg in jumbo spools with wooden, paper or plastic centers and finally packed in cartons, trusses or pallets.

Mainly their customers, suppliers and personnel engrave their successful endeavor in jute. It is the close cooperation among them all, that has enabled the development & production of individualized technical and industrial natural jute yarn for numerous applications. In accordance with specific demands of their valued customers, they deliver natural jute yarn.

(i) Policy:

Policy means to take some strategic steps to run or operate the whole process of a company accurately.

(a) Operational Policy:

When the company takes a clear, specific and strategic step to operate the total area of operations then it is called operational policy.

(b) Procurement Policy:

Procurement Policy refers to the policy which is used by the company while purchasing their raw materials, consumable items and so on. Purchase policy is basically formulated by considering two facts. One is credit purchase, another is cash purchase. When a company buy their required raw materials in cash, then they follow cash purchase policy. In cash purchase, the company / purchase is more powerful. Because they purchase in cash. On the other hand, when the company purchase their required raw materials in credit, then they follow the credit purchase policy. In credit purchase, supplies are more powerful.

When the authority formulates the purchase policy, they must consider whether the company buy their required raw materials in cash or credit more.

Anwar Jute Spinning Mills Ltd. follows both types of policy to buy their required raw materials.

(c) Sales Policy :

The specific and strategic steps taken by the company for selling their products is called sales policy. They also need to consider cash sales or credit sales, while the company formulates the sales policy for their total sales process. As Anwar Jute Spinning Mills Ltd. is fully export oriented company, they always follow export sales policy for their product. Anwar Jute Spinning Mills Ltd. mainly sales their jute yarn to foreign firms on Letter of Credit (L/C) when any export is occurred. The bank on behalf of the both parties deals with the total payment as this bank is the guarantor of both parties.

Chapter 02

2. Anwar Group of Industries:

While the trading history of the Group and family started from 1834, the industrial history of Anwar Group of Industries (AGI) stretches back almost nine decades ago when Late Rahim Buksh setup an ivory button & comb manufacturing plant. In the early forties, they had the privilege of being the 1^st Bengali to setup and operate a textile unit named Anwar Silk Mills Ltd. It has been a great honor for the Group to be a part of the history of industrialization in this country. The Group has diversified into most of the important industrial and business sectors playing its part in the economic growth of Bangladesh. Anwar Group’s foresight and innovativeness has the distinction of being the first electrical cable, polyester fabrics, corrugated pipes and super enamel copper wire manufacturer in the country. Anwar Group of Industries also has become one of the largest corporate business conglomerates of the country. They never looked back since.

Anwar Group is now one of the selected, leading this country on the road to prosperity through industrialization. They are also honored to have been the promoters of the first private commercial bank (The City Bank Ltd) of Bangladesh.

2.1 Jute (Golden fibre of Bangladesh):

Jute is an indigenous crop plant used from time immemorial for various domestic, households and farmyard uses. Similar to that of cotton’s principal chemical constituent components, Jute is the second most important natural fiber in the world, next only to cotton. Also known as the “Golden Fiber,” other important characteristics of jute include its silky luster, gold-like color, high tensile strength and low extensibility. Bangladesh has a distinct agro-ecological comparative advantage in production of jute. With increasing environmental awareness, a co-friendly and biodegradable jute products are gaining popularity globally for effective retardation of ecological degradation due to the green house effect.

Over centuries, jute has developed from simple origin to an efficient raw material for industrial and technical fabrics and products. Our end product Jute Yarn, is used in widespread areas of fabric manufacturing for the automotive industry, base cloth for floor coverings, fabrics for natural fiber reinforced composites, upholstery and home farnishing, construction, agriculture, horticulture, soil saver for erosion control, packaging and many more.

2.2 Commitment:

• To their clients: Quality care and service.
• To their staff: Fulfilling safe & rewarding work environment.
• To the society: Keeping pollution free environment.
• To Government: Bringing glory for country.

2.3  Mission:

The mission of Anwar Jute Spinning Mills Ltd. is to be the market leader by satisfying the need of jute yarn and yarn related products by supplying a high quality jute yarn at a reasonable price.

2.4  Vision:

Anwar Jute Spinning Mills Ltd. has been working as a development associate in building up the homeland for one country. Now at the outset of the twenty-first century, Anwar Jute Spinning Mills Ltd. is more prepared to face the challenging demands of the new millennium. Highly qualified management team, modern management techniques and R&D have empowered the unit to be the forerunner in economic progress of the country. Anwar Jute Spinning Mills Ltd. shall be at the forefront to hold the millennium on the horizon.

2.5 Values:

Anwar Jute Spinning Mills Ltd. has built its strength on more than a century of experience. The cornerstone of the company’s success is sharing knowledge to create relevant solutions- shaping the best thinking to reflect the ideas of a new age. Their corporate strategy emphasizes speed, efficiency, flexibility and innovation in every aspect of the company’s operation from product development to manufacturing and from procurement to distribution. Anwar Group strives to achieve the ultimate goal of satisfying its customers. Honesty, integrity and respect for people are its core values and the basis on which it do businesses. Through a nation-wide commitment to advance this objective, Anwar Group and its many partners who share this commitment, have succeeded in creating a national & international network that comprises of many subsidiaries and affiliates. They are paving the path of their journey into a new millennium for the next generation.

2.6 Objectives of the Company:

The Objectives for which the company is established, are all or any of the following and in constructing the following sub-clauses, the scope of no such sub-clauses shall be deemed to the limit or affected by any other sub-clauses.

• Uphold the interest of the client paramount.
• Provide visible & consistent quality service.
• Ensure specialized and effective care.
• Promote an environment of learning and research & development.
• Embrace a culture of continuous improvement and innovation.
• Provide a safe working environment.
• Comply with the applicable WTO Legislation and export requirement.
• Reduce, reuse and recycle their waste and resources.
• Foster a culture of WTO awareness and Risk Management.
• To form, create, construct, establish, set-up, develop, promote, build, jute yarn mills, jute mills specialized jute mills, jute processes, jute twine mills, cotton mills, textile mills, specialized textile mills, jute tape mills, rayon mills, silk mills, woolen mills, fibrous mills, synthetic mills, newsprint mills, rice mills, flour mills, crushing mills, hard board mills and factories as may be allowed by the Govt. From time to time- to do and carry on the business of spinners, weavers, manufacturers, dealers, brokers, shippers, importers and exporters of jute yarn, jute goods, hessian, sacking bags, twine, carpet backing, blankets, jute cuttings, jute rejections, jute sticks, mesta, rayon, linen, silk, yarn, cloth, wool, synthetic fibres and all other fibrous materials.
• To sell, export or otherwise deal with jute- raw or manufactured and its by-products in any market whether in Bangladesh or any part of the world.
• To purchase, import or otherwise deal with any raw materials and machinery from any market in Bangladesh or any part of the world.
• To purchase, take or in exchange or allotment or hire or otherwise acquire, reject, maintain, equip, reconstruct, repair, renovate or adopt double or movable property including building, residential bungalows, labor lines, quarters, offices, paces of workshop, schools, dispensaries, reservation rooms, canteen, clubs, warehouses, goodwans structures, creations, workshops mills, foundries, places for manufacturing, plant, machinery spindles, looms presses, engines, tools, electric and telephone installations, accessories implements, appliances, apparatus, articles and other things found necessary or convenient for the purpose of the company and for the welfare of the employees of the company and also to expand the business of the company by purchasing, acquiring, getting transferred, adding or enlarging of all or any of the buildings, mills, factories, premises, places being the property of the company or  any of the lands  in possession of the company and by expanding from time to time such sum or sums of money as may be necessary or expedient for improving, adding or altering, repairing and maintaining the buildings, structures, machinery, plant and property for the time being  and to sell or mortgage or let out or hire all or any position of the same as may be thought desirable.

2.7 Global Export Network:

Anwar Jute Spinning Mills Ltd. is a fully export oriented company. It has a global export network. The countries where the company exports its products are –Australia, Belgium, China, France, Germany, Iran, Italy, Japan, Korea, Netherlands, Turkey, Saudi Arabia, Spain and Switzerland.

2.8 Policy Practice:

Polices Practice in Anwar Jute Spinning Mills Ltd. are as follows :

2.8.1 Procurement of Raw Materials:

Anwar Jute Spinning Mills Ltd. mainly purchases two types of materials such as:

• Raw Jute and
• Consumable Items.

(i) Raw Jute Purchases:

Anwar Jute Spinning Mills Ltd. has no raw jute plants of its own. It purchases its necessary raw jute from farmers through dealers, whole sellers and its cash purchaser. It needs about 72,000 M.Tons of raw jute per annum. 80% of total requirements are bought during the jute season. There are two seasons of jute purchasing in Bangladesh. The cultivable land of Bangladesh is not equally fertile in everywhere. In the low land area jute is planted basically in the month of April-May and harvested in July-August. Then the whole sellers collect raw jute from farmers and store them for resell. On the other hand, the high land area such as the Northern side of Bangladesh plants jute in the month of August-September and harvests them in the month of November-December. The dealers, paikers and the whole sellers buy raw jute from farmers and store them and sell them all over the country through their distribution channel. Anwar Jute Spinning Mills Ltd. also buys  raw materials from these paikers and dealers.

(ii) Procurement:

Jute is produced all most all over Bangladesh in the period of July to September generally in the low land. But it can also be produced in the high land of Bangladesh. Approximately 10,00,000 M.Tons jute is produced every year in Bangladesh. This jute is used in production of different types of jute products.

From jute, Anwar Jute Spinning Mills Ltd. makes yarn for making clothes, chat, ropes, bags and other jute related items. It also has a sister concern named Hossain Dyeing and Printing Mills Ltd. Anwar Jute Spinning Mills Ltd. colours the yarn from its sister concern Hossain Dyeing Mills Ltd. They have interred company transaction. Both the companies work for one another to save expenditure and production cost. Anwar Jute Spinning Mills Ltd. is situated at Meghna Ghat, Gozaria, Munshigonj. This location is selected because it has a good communication linkage both by the river and highway.

Anwar Jute Spinning Mills Ltd. generally collects raw jute from various districts in Bangladesh. These are Faridpur, Pabna, Munshigonj, Mymensingh, Sirajgonj, Rangpur, Gazipur,  Jamalpur etc.

In these places the company has many dealers. They collect 80% of the total collection of raw jute from the whole seller and the rest of the 20% is collected through the purchasers of the company. Anwar Jute Spinning Mills Ltd. purchases raw jute from these dealers. Payment mode of which may be in cash or credit base. Dealers are responsible for delivery of raw jute to the Meghna Ghat. They generally deliver goods through the inland navigation.

Prices of the raw jute are fixed by the bargain purchase option. This totally depends on the current market price of raw jute. This total process is completely done by the direct observation of group’s Managing Director.

When the paikers send the raw jute to the factory, the specialist and engineers check weight, grade, select, measure moisture etc. If they find any fault then they inform it to the head office. If they find excess moisture then they deduct it from total quantity. Authority of Anwar Jute Spinning Mills Ltd. is the Managing Director Mr. Hossain Khaled Saifullah . All the dealings  made from head office are according to the direction of Managing Director.

2.9 Payment policy:

Sometimes the company pays advance to the paiker and the whole seller. The company also pays against bill within the agreement date. If the scarcity of raw jute supply is found then the company look carefully on the supplier. The company then pays advance to the paiker and the whole seller and also give more emphasis on the paiker and the whole seller. Company then gives special commission to the supplier. To fulfill the demand of raw jute the company takes necessary steps so that the production process should be continued. Other wise the production process will be remained stand still. If the production stops then the company will meet loss. So no company wants to think that its production will stop for a single moment. By hook or by cook the company tries to collect its required raw jute.

2.10 Effect of Moisturizer:

If the moisturizer rate is high then it hampers the effective production. Then the raw materials become weak and the products do not ensure long lasting.

(i) Grading of Raw Jute: 

Raw jute cut crops Tk.6.70 (Per kg)

Raw jute Habizabi 6.70

Raw jute Mesta (C)

Raw jute Mesta (SMR)

Raw jute Mesta (X) 12.49

Raw jute Tossa (C)

Raw jute Tossa (SMR) 15.64

Rae jute Tossa (X 1) 20.20

Raw jute Tossa (X 2) 17.47

Raw jute White (C) 19.54

Raw jute White (SMR) 15.59

Raw jute White (X) 17.99

Among those grading of raw jute “Tossa (X1)” is the best, “White (C)” is better and “White (X)” is good one.

(ii) Yarn Grading Rate:

Jute Yarn 10/1CB Tk.36.51 (Per kg)

Jute Yarn 10/1CRM

Jute Yarn10/1Hessinan

Jute Yarn 10/2CR

Jute Yarn 10.5/1CB

Jute Yarn 11/1CRM

Jute Yarn 11/2CRM 4.79

Jute Yarn 12/1CRM 33.62

Jute Yarn 12/2CRM 5.07

Jute Yarn 12.65 /1CB

Jute Yarn 1265/1CRM

Jute Yarn 12.67/5Hessina

Jute Yarn13/1CB

Jute Yarn13/1 Hessian

Jute Yarn13/2CRM 31.67

Jute Yarn134.5/1Paste

Jute Yarn13.7/2CB

Jute Yarn13.7/2CRM 34.00

Jute Yarn14/1CB

Jute Yarn14/1CRM 32.00

Jute Yarn] 16/1CRM 27.19

Jute Yarn16/1CRR

Jute Yarn16/1 Hessian

Jute Yarn16/2CB

Jute Yarn16/2CRM

Jute Yarn18/1CB 28.45

Jute Yarn18/1CRR 24.82

Jute Yarn18/1 Hessian

Jute Yarn 22/1CRT 24.48

Jute Yarn24/CRM

Jute Yarn24/1CRT 25.05

2.11 Production Capacity:

Production capacity of Anwar Jute Spinning Mills Ltd. is 20 M.Tones per day. The company’s total operating days per year is 300 days approximately. So the total demand of purchase is 300 days x 20 MT = 6000 M.Tons per year.

Maximum inventory purchase depends on annual production. The company needs 6000 M. Tons of raw jute per month. But the company purchases more than 6000 (six thousand) M. Tons of raw jute to fulfill its total requirements and overcome any uncertainty. The excess purchases of raw jute is purchased to meet any uncertain demand which may occur for different reasons such as taking excess supply order from buyers, increasing or rising market demand, destruction of raw jute kept in the warehouse etc. The production capacity of the company is 20 M. Tons per day.

Anwar Jute Spinning Mills Ltd. has two warehouses to store raw jute. Each warehouse can store 50000 M.Tons of raw jute.

Working hour of the company is eight hours per day and six days a week. Generally 300 days is measured for production in a year. There is no chance of shortage as they buy raw jute more than they need per year and store them in a save place.

To fulfill demand and maintain production capacity the company  has to buy according to its needs. If the rate/ price of raw jute increases, then the company will buy the same amount of raw jute but it will be adjusted while costing.

The Company buys major portion of raw jute for the year during the season. It also buys some raw jute all the year round according to its needs.

The consumable items that it buys for production of jute:

(i) General Items:

Cotton Tap, Drill Bits, Cutter, Emery Paper, Flat Bar, Flexible Pipe, Gas Oxygen, Hings, Mala Rope, M.S. Plate, G.I. Tee, Tube Light, Valve, Hand Gloves, Super Glue,  Rubber Star Coupling, Paint, Various Pens, Pencil etc.

(ii) Mechanical:

Ball Bearing, Roller Bearing, Nut-Bolt, Screw Driver, Sly Wrench, S.S Net, Shuttle Thread, Rubber Chain, Round Die, Royal Bolt, Steel Emery, Spade, Side Liver Bolt, Wood Screw, V-Belt, U-Block Buss, Washer, Welding Rod, Trolley Wheel.

(iii) Electrical Items:

Bulb, Various Switch, Cable, G.I. Wire, Battery of Volt, Capacitor, Contractor, Calling Bell, Fuse, Socket, Magnetic Contractor, Circuit, Cut Out, Holder.

(iv) Oil, Diesel, Lubricant:

Oil Compressor, Oil Gear, Oil Hydrolic Acid, Kerosin, Tar Pin, Grease, Spindle Oil, Mobil, Oil Seal Rubber, Oil Dalda, Oil Can.

(v) Procurement:

Procurement policy already described above. The company’s policies in that case are:

• Collection of  better quality of raw jute at a minimum rate for better costing of the finished goods.
• Ensure the safety transportation in  case of carriage of raw jute in the godown of the company.
• Ensure all the processes to keep the inventory in good form to decrease abnormal loss.
• To prepare a raw material purchase budget in every season.

2.12 Production:

The total production process from input to output is completely done under the careful observation. Production policies are as follows:

• To ensure the better quality of  finished products.
• To introduce TQM (Total Quality Management).
• To increase the research and development budget to introduce the different product lines.
• To ensure the yearly production budget and takeing maximum attempt to achieve the  targeted budget.

(i) Transport facilities:

The Company has its own vehicles that are used to distribute and transport raw jute and finished products.

(ii) Production Process:

Broad issues in this area are:

• Choice of technology.
• Extent of division of labor.
• Extent of mechanization and automation.
• Size and decentralization of plants.
• Involvement in process research.

(a) Choice of Technology:

In the production of many products, the manager has no choice regarding the process to be used. Thus AJSML, a manufacturer of yarn using jute as its primary raw material, needs to be in no quandary about the process to be used in removing the small quality of jute remaining in the cane after it passes through a jute mill. The only commercially practiced method is fermentation. By allowing the jute to ferment, it can be almost completely removed and the remaining jute are then in a light and workable state. Since there is only one feasible process, the manufacturer really faces no problems in this regard and turns his attention to the detailed methods and facilities for carrying out the process.

(b) Extent of Mechanization and Automation:

AJSML adopts definite policies regarding the extent to which it will automate its operations. The manufacturer of yarn for example, establishes a policy which operations would be mechanized from start to finish. As a result, the final product might carry the same label as appears on some jute products.

(c) Size and Decentralization of Operating Units:

AJSML, a large manufacturing company, has considerable choice in the size and location of its plants. For many years, it was assumed that the larger the plant, the more economics would be possible; transportation cost of raw materials or finished products were usually considered the limiting factors for the size of a plant. Present thinking challenges these assumptions. At least the advantages of large plants are not taken for granted.

One concern that produces nine related products, for instance, has a clear-cut policy that each product is to be manufactured in a separate plant even though three of the plants employ fewer than two hundred people. Plants are to be located in relatively small communities rather than big cities, preferable within seventy miles of the home office  to make face-to-face contacts easy. Several of the plants have already been relocated in accordance with this policy.

(iv) How much Capacity:

Data from a variety of sources must be brought together to estimate the productive capacity a company needs. Sales forecasts of physical volume, policy decisions on what will be purchased instead of made, engineering estimates of machine productivity, production plans on how equipment will be used, all contribute to project the size of the plant needed. In addition to overriding such data, are several central management policies regarding the capacity desired. These policies deal with provisions for peak versus normal requirements, backward taper of capacity, allowance for growth and balance of facilities.

(v) Peak versus Normal Load:

A completely stable level of operations is virtually impossible. All types of business activity are affected by cyclical fluctuation and most industries experience seasonal, daily or even hourly variations in volume of business. In addition, the demand for a company’s product may increase or decrease because of wars, governmental regulations, inventions, floods, changing fancies of the consumer and many other influences.

A leading example of AJSML that tries to meet peak requirements is found in the jute yarn industry.

Most companies follow a policy of letting the customer bear the part of the peak’s load burden. Other means of meeting peak capacity will, of course, be incorporated in the policy regarding maximum capacity.

• Manufacturers of Tankard: durable products may manufacture stock during slack periods. This arrangement is explored in the next chapter.
• Overtime work many be feasible for operations not already run by 24 hours a day.
• Obsolete or high-cost equipment may be maintained on a standby basis and placed in service just during the peak.
• Some of the work may be subcontracted; although this is often difficult because potential subcontractors are likely to be busy during the same peak period.
• Off-peak discounts, “mail early” campaigns and other measures may be used to induce customers to avoid peak periods. These devices also involve extra expense and may be more or less satisfactory to customers.

Clearly, policy guidance is needed to indicate the reliance on these various ways of responding to peak needs.

2.13 Sales Policy:

Anwar Jute Spinning Mills is a fully export oriented company.It does not have any local sales. Selling policy of the company is- at first it gives an announcement or advertisement on internet mentioning all the information about the product’s quality, quantity, size, packing, pattern, price, duration time, terms and conditions. The interested firms contact with the company and sign an agreement with the company on the whole purchase process. Then the firm places an order for its requirements to the company. Then the company starts production as per order. Two banks of each country deal with all the transactions in favors of the exporter and importer. Sometimes the importer pays advance for purchase. The importer pays some amount in advance and the rest of amount are paid after receiving goods. If the importer pays no advance, it does not make any reflection on business because most of the businesses run on agreement and faith. Besides both the parties have their bank guarantee. Basically payments are made after receiving goods. Discount or commissions are fixed when both the parties sign on the agreement. There are lots of brokers in Bangladesh who play an important role in selling of finished products. Jute Yarn is the finished goods of Anwar Jute Spinning Mills Ltd. The broker works as a middleman between the seller and buyer. They deal with the whole process of purchase and selling. They fixed a rate of the product negotiating with buyers and also fixed a rate with sellers. Between two-fixed rates they get the commission. Sometimes the broker becomes an agent of dealing the total process. They receive purchases order from the buyer. According to the order, they buy or collect finished goods from various Jute Yarn Mills. They have warehouses and they keep the goods in the stores.  Selling through agent is easier and comfortable. Because the seller only has to meet and negotiate with the agent. The prices of the products are determined by the bargaining process. Here the exporter does not need to know the real importer. Because agents are the one responsible for all transactions. Obviously the importer does not need to know the real exporter. Because the importers import their necessary goods from the agent. It is only in case of buying from the agent. But the buyers do not buy all the times through agent. When the buyer buys through agent then he has to pay extra payment as commission. It increases his total costs. All firms always try to have minimum costs. So importers try to buy from the manufacturers. Today is the age of Globalization, so everyone can see and buy from sitting at home by using Internet. The manufacturers now give advertisement on the Internet of their products. Anwar Jute Spinning Mills Ltd. also gives advertisement of its products on Internet.

Anwar Jute Spinning Mills Ltd. surely is the market leader of jute yarn. Now the prospect of the jute industries is rising in Bangladesh. Government is motivating investors to invest in jute industries although the total environment for the jute industries is not so good. In the financial budgets finance minister is offering various incentives, exemptions and rebates to encourage jute industries and to create market for jute industries. Government reduced the income tax rate from 20% to 15% to encourage jute industries or to increase investment in jute industries. Depending on these various opportunities, Anwar Jute Spinning Mills Ltd. is making different policies for the different departments of the organization. Departments of the Anwar Jute Spinning Mills Ltd.  are as follows:

• Procurement
• Production
• Marketing
• Account
• Human Resource
• Finance

2.14 Nature of Policies:

Certain major issues confront the central management of every company. Time and time again questions about product line, pricing, purchasing, wages and similar basic matters arise. Policies give an­swers to these questions of central management. Policies indicate how these recurring problems are to be resolved  to attain basic objectives.

Policies aid the process of managing an enterprise in a number of ways:

• With policies clearly understood, a busy executive can delegate duties to subordinates with confidence that these duties will be carried out along the general lines he wishes.
• Each executive knows how others will act and this makes coordination easier to achieve.
• There will be a consistency of action taken by different members of the firm from time to time.

Policies should, of course, be modified when necessary to fit new conditions in the industry and within the company. Usually this should be done only after careful study and the changes made should be known to all executives and operating employees. In many companies, clear policies exist even though they are not written; through oral training and supervision an employee learns the guideposts which channel his efforts towards desired ends. Policies are not a set of inflexible rules; instead they are the living precepts which guide the company in a continuing and con­sistant pattern of behavior.

Since our present study is focusing on central management, we shall deal with those policy issues that involve the entire company directly or indirectly. In every company there are major ques­tions regarding:

• Sales policies
• Production and Purchasing Policies.
• Personnel Policies
• Financial Policies

(i) Sales Policies (Product):

Continuing the analytical framework one stage further, the major questions of policies arising in connection with products usually involve diversification versus specialization of the products to be handled, product differentiation and fre­quency of design changed.

(a) Diversification versus Specialization:

Each company must decide how many products it will offer for sale and the variety in which these products will be offered. This is a recurring problem as markets change, competition grows and new technology becomes available.

(b) Expansion of a Product Line:

The number of products offered for sale may vary greatly among companies even in one industry. For example, Anwar Jute Spinning Mills Ltd., one of the largest jute yearn producing companies in Bangladesh. The production and sale of numerous lines of products having both direct and indirect connection with its primary activity, that of butchering. In fact, the company has a large Sales Department selling all sorts of products such as wool, yarn etc.

To effectively market its own brand of jute yarn, Anwar Jute Spinning Mills Ltd., added other types of yarn made from materials that had to be secured from outside sources. These other lines have been expanded to such an extent that less than one tenth of the jute yarn now sold by the company is made of by-products of the packing operations. Actually the jute yarn plant has been moved to another city where it can more economically handle the products that are not derived from slaughtering.

In the production area, Anwar Jute Spinning Mills Ltd. entered the yarn business to provide the large quantities that were needed for jute throughout its plant. Having entered the yarn business to provide its own requirements, the company undertook the sale of yarn to outside concerns and thereby assured itself of economics of large-scale production.

Apparently the initial sales were due to the enthusiasm of the salesmen for a new product and willingness on the part of the retailers to try an original stock to see how the product would sell. After this original distribution, however, most new products were discovered to have no unique appeal. Anwar Jute Spinning Mills Ltd. therefore, was found to have a large number of products for which the sales volume was inadequate to justify the cost of manufactur­ing, warehousing and selling. Through careful study the company was able to reduce the number of items, comparatively few products, that really had significant differences. It then concen­trated its attention on selling these products rather than dissipat­ing its efforts on new and unnecessary additions to its line.

Occasionally there may be specific reasons for a wide variety of products. A leading department store, for example, undertakes to show 30 colors of fine Jute Yarn ranging over the entire color spectrum. Such wide variety is per­haps, more important as a sales promotion device than as a useful service to customers. Anwar Jute Spinning Mills Ltd. believes that consumers can be adequately served with main-colors and quality.

A common policy is to fix a limit on the number of items. Then any proposal for a new item must be accompanied by a recom­mendation for dropping an existing one. While exceptions may be necessary, this plan has the advantage of forcing attention to pruning along with justifying the new item.

Factors favoring diversification are possible bene­fits a manager should look for when deciding how far to extend diversification.

In some lines the customer desires to buy a variety of products from the same source. For example, a dealer in jute supplies must offer several types and sizes of jute to meet the needs of his customers and the customers may prefer, to purchase all of these from one source. If a manufacturer of jute offers him only one type, he may refuse to buy this jute because he would prefer to secure it from the same manufacturer from whom he purchases other types and sizes. Again, the retailer may desire to purchase a complete line of hosiery from one manufacturer and may refuse to buy from a manufacturer who offers only one style of product.

The effect, upon a company, of increasing the number of its products before deciding whether diversification is preferable to specialization, a company must consider the impact of an increase in product lines.

Usually a production company cannot produce efficient products of widely different quality. Manufacturers of high-grade jute yarn have found it difficult to adjust the thinking and acting of their organization to the production of cheaper products. An organization, manufacturing its products in which a large degree of tolerance is permissible, will find it difficult to manufacture the prod­ucts of high quality where variations from standards must be very slight.

Another of the dangers increasing the product line is that the ability of the management to supervise activities required in selling a large number of products will be exceeded. In many cases Anwar Jute Spinning Mills Ltd. may be capable of supervising the sales of a few products but if new lines of products are added to which the executives are not familiar with, they may spend an amount of time administering the venture that is quite out of proportion to the importance of the new products.

(ii) Sales Policies (Customers):

Customer policies of every company should be reviewed peri­odically to make sure that those are attuned to shifting markets. The long-term changes have a major impact on customer selection. The revolution in distribution of incomes alone has had a profound effect on markets for luxury goods and mass production items such as jute yarn.

The five-days a week, with the resulting long weekend, has expanded interest in hobbies, sports apparel and related items. To set another example, the sharp drop in the number of household servants, coupled with a higher average income, has promoted women’s emancipation from household’s drudgery prepared foods. Automatic washing machines, electric mixers, electric dishwashers and simplified household designs are only some of the more appar­ent results of this shift. The mechanization of the farm, rising industrial activity in the South, new synthetic materials and drastic changes in our foreign trade give further evidence of the dynamic nature of markets. In the face of such changes as these, it behooves every business administrator like Anwar Jute Spinning Mills Ltd. to keep a vigilant eye on its customer policies.

(a) Distinction between Customers and Consumers:

Confusion some­time arises due to failure to distinguish between “customers” and “consumers,” The term consumer means the one who purchases a product (or service) for his personal satisfaction or benefit; or in the case of industrial materials, the one who  changes the form of the product to alter its identity. A customer, on the other hand, is anyone who buys goods. A customer may be a con­sumer or he may be a dealer who will resell the product to someone else.

The habits and wishes of the ultimate consumer of a product are of vital interest to all businessmen having anything to do with the product. The major objective of Anwar Jute Spinning Mills Ltd. is to increase consumer satisfaction by providing the original design of a jute yarn product during its production and throughout its distribution, consumer satis­faction ever a controlling consideration. While Anwar Jute Spinning Mills Ltd. should always keep the consumer in mind, nevertheless a vast number of sales are made to customers who are not final consumer.

(b) Problem Arising in the Selection of Customers:

In laying plan for effective relationships with consumers and customers, Anwar Jute Spinning Mills Ltd.should establish policies regarding:

• The types of consumers that offer the best market for company products.
• The locations that it will seek to cover.
• The channels of distribution to be used to reach desired crusaders in the selected areas.
• The size of customer that will be most efficient and strategic for the company to serve.

2.15 Foreign Markets:

Bangladesh increasingly involving in world affairs, more and more companies are considering exports as a way of expanding sales. Selling in foreign markets, however, presents several special factors that should be weighed. Many countries have tariffs or import quotas that interfere with free trade. Local competition in Bangladesh is strong and local firms receive favored treatment. Bangladeshi exporter must, of course, be prepared to do business in accordance with local customs and not attempt to impose Bangladesh’s business codes where it does not fit. Currency regulations may make withdrawal of money difficult after the goods are sold to foreign countries.

In spite of these difficulties, export business often is attractive. In analyzing foreign markets, as any other new markets, the added or incremental costs should be balanced against the added income. Once Anwar Jute Spinning Mills Ltd. has completed its product “Jute” and  “Jute Yarn” for production, the cost per unit of turning out an added 5% or 10% is less than the total average cost of the basic output. If the company has idle capacity in its plant, this incre­mental cost may be very much lower. So, even though there are difficulties in selling abroad, the net revenue received may still be above the incremental cost.

Foreign markets may be tapped by means other than exporting. One arrangement is to license a local firm to make products with foreign partner and to know-how. Another is to build a foreign plant. Neither of these plans calls for export of Bangladeshi products (except perhaps, special parts that cannot be made eco­nomically in the foreign country), but Bangladesh has enabled a number of companies like Anwar Jute Spinning Mills Ltd. to secure profits from foreign operations.

2.16 Delimiting the Market Area:

Involved in every decision regarding the location of consumers to be sought are costs of selling and delivery.

Usually the costs of selling to customers increase as the distance of the customer from the location of the manufacturer or retailer increases. Even though Anwar Jute Spinning Mills Ltd.  may have salesmen located in the territory where the customer lives; it is more expensive to supervise salesmen working at a considerable distance from the central office. It is also difficult to maintain intimate contact with the customer who is situated far from the central office and as a consequence the cost of selling to such customers is higher because of greater sales resistance. Delivery costs, particularly on heavy bulky articles, may place definite limits on the territory that can be served economically.

2.17 Distribution Channel:

The broker usually performs only one major function of distribution – selling. As contrasted with the jobber, he usually sells only one type of product or at most only a few closely related products. Although the broker is used most fre­quently in the distribution of produced goods, he may also be used in the distribution of consumer goods. Anwar Jute Spinning Mills Ltd. also collects its raw jute and sells its products though brokers and agents.

Brokers are often used in the same way by small canneries that do not have sufficient output to justify a full-time sales force and therefore need the services of someone who is familiar with the potential market for their products. Anyone who has publicly announced his intention of buying; a house or a suburban lot knows that brokers are also used in the real-estate field. Here, again, it is difficult for buyers and sellers to get together without the aid of someone who is in close contact with the markets.

(i) Selecting a Channel of Distribution:

Professor Thomas L. Berg suggests that selecting a channel of distribution be viewed as an organizational problem and that the activities analyzed include the total distribution system. More specifically, his approach involves.

• Listing all actions necessary between producer and consumer— promotion, actual selling, transportation, financing, warehousing, repackaging, risk-taking, installation and repair service etc.
• Grouping these activities into jobs that can be effectively and efficiently performed by separate firms. These firms may be banks or warehouse men who also do other things or it may be firms exclusively involved in this particular channel. The crucial matter here is to conceive of jobs (packages of activities) that are the most effective combinations.
• Defining relationships between the jobs that will assure cooperation and necessary flow of information. Also define how each firm involved is to be compensated for its efforts. And work out necessary, minimum controls to be exercised by various members over other members.
• On the basis of this organization’s design (the policy adopted by the designer) developing specifications for the firms are to fill each job.
• Then moving on to execution of the plan by recruiting people to take the specified jobs (some negotiation may arise here since independent firms will be participants), educating people on how the plan is to work, supervising the day-to-day operations and exercising necessary controls.

2.18 Influence of Size of Company (Quoting Low Prices):

The effect of a price change on competitors will depend partly on the size of the company. Price changes by a large and dominant firm in an industry is very likely to affect the prices of the entire industry. For example, Jute Yarn industry, all small companies follow the leadership of one or two large companies in pricing. On the other hand, it is sometimes possible for a small company to quote prices lower than those of its large competitors because its total sales volume is not important enough to the large company to warrant an adjustment of its entire price schedule. Anwar Jute Spinning Mills Ltd. has been able to increase its business by shading the prices quoted by the leading company.

2.19 Selling at a Normal Profit Above Cost (Effect of High Profit Margins):

Many managers state that they establish prices covering all costs of production and distribution plus a normal profit. Even assuming that the total cost attributable to a particular product can be determined, there still remains the question as to what constitutes a normal profit. One is tempted to believe that the profit margin will be made as large as possible without inviting competition within the field.

The jute industry, for example, has followed a policy of maintaining prices at comparatively stable levels during recession as well as periods of prosperity. When operating at a reasonable volume, these prices permit the large jute yarn companies to realize a “normal” profit. Actually, the price has been so high that new producers have been able to enter the field and capture part of the business. In this instance, maintenance of prices by large companies is said to have provided an “umbrella” under which the small companies took shelter.