Cash Flow Management of ACI Limited

Cash Flow Management of ACI Limited

ACI Limited was established as the subsidiary of Imperial Chemical Industries (ICI) in 1968. After independence, the company was incorporated in Bangladesh in 1973 as ICI Bangladesh Manufacturers limited as a Public Limited Company. In 1992, the company was separated from local management and the name of the company became Advanced Chemical Industries (ACI) Limited. ACI is the first company in Bangladesh to achieve ISO S001 in 1995 for quality management and also the first company to achieve ISO 14000 in 2000 for environmental management system.ACI has three strategic business units along with 11 subsidiaries, 3 joint ventures and 1 associate. In pharmaceuticals ACI formulates and markets a comprehensive range of more than 400 products covering all major therapeutic areas, in form of tablet, capsule, powder, liquid, cream, ointment, gel ,ophthalmic and injection.

Consumer brand is another major and important profit earning department of ACI. This business segment has three major categories of product range- home care, air care and hygiene care. Products under home care category include ACI Aerosol, ACI Mosquito Coil.

Under air care ACI has produced Angelic Fresh Air Freshener. This is the first ever locally manufactured Air Freshener of this country. And under hygienic category it has Savlon Liquid Antiseptic, Savlon Antiseptic cream, Savlon Family Protection Soap and Savlon Femme Sanitary Napkin, Vanish Toilet Cleaner, Shinex floor cleaner etc. It has also in agribusiness as well. Under Agribusiness, it has different kinds of product like Crop care & Public health is dealing with all type of crop protection items, Seeds division is dealing with hybrid rice, vegetable and maize seeds, Cropex is dealing with commodity buying, storing, preserving and selling, animal health division is dealing with high quality nutritional, veterinary, poultry medicine and vaccines. As a joint venture ACI represents Colgate Palmolive Company as exclusive marketing partner and distributor and also represent the Godrej Consumer Products for the territory of Bangladesh.

 

Origin of the Report

As a compulsory part of Internship program, this particular report is being prepared on the proposed topic “The Cash Management and the raw material purchase Process of ACI Limited”. The intention was to give an opportunity to the students to gain some real world experience by working in a practical environment.

 

Scopes and Objectives

The scope of this report will be limited to the overall description of the company organizational structure, management policies and financial performance analysis. The report will provide an outline of the various cash management concepts and principles as well as the purchase process in commercial department of ACI LTD. It will mainly focus on what standards ACI LTD is maintaining in recording and reporting its cash management performances as well as how they purchase raw material. The main objective if the report-

  • To get an organizational over view of ACI Limited
  • To provide theoretical development of Cash Management and raw material purchase process
  • To give an overview of the procedures followed for Cash management and raw material purchase
  • To summarize the overall analysis

 

Research Methodology

In this study, exploratory research was undertaken to gain insights company procedures and practices. Then the gathered data was analyzed and compared with the accepted practices according to the standard accounting principles. Both the primary as well as the secondary form of information was used to prepare the report. The details of these sources are highlighted below:

Primary Sources

  • Oral interview with various executive and manager of the company.
  • Accounting records- vouchers, journal, ledgers etc; both in electronic and paper
  • Company manuals

 

Secondary Sources

  • Various accounting related books and periodicals.
  • Bangladesh Accounting Standard guide.
  • Website information.

 

Company Overview

Historical Background

ACI Limited was established as the subsidiary of Imperial Chemical Industries (ICI) in then the East Pakistan in 1968. After independence, the company was incorporated in Bangladesh in 1973 as ICI Bangladesh Manufacturers limited as a Public Limited Company. In 1992, the company was divested to local management and the name of the company changed to Advanced Chemical Industries (ACI) Limited. ACI inherited the rich ICI culture of product quality, customer service and social responsibility.

Initially in 1992, ACI started primarily with pharmaceutical business with a turnover of BDT 80 million only but later the new management brought about fundamental changes in the policies and in the year 2011 turnover grew to over BDT 2,443.66 million. The Company has diversified business interest in pharmaceuticals, agricultural including fishery & livestock and consumer brands. At present, ACI has three strategic business units along with 11 subsidiaries, 3 joint ventures and 1 associate.

ACI is the first company in Bangladesh to achieve ISO S001 in 1995 for quality management and also the first company to achieve ISO 14000 in 2000 for environmental management system. ACI is also the first company from Bangladesh to become the honorable member of United Nation Global Compact. It is the only Bangladeshi company which was declared as a notable COP (Communication on Progress) recognized by UNGC (United Nation Global Compact). ACI has been accepted as a founding member of community of Global Growth Companies by the World Economic Forum which is the most prestigious business networking organization in the world.

 

ACI Policy

Mission

ACI’s mission is to enrich the quality of life of people through responsible application of knowledge, skills and technology. ACI is committed to the pursuit of excellence through world-class products, innovative processes and empowered employees to provide the highest level of satisfaction to its customers.

 

Vision

To realize the mission ACI will:

  • Endeavor to attain a position of leadership in each category of its businesses.
  • Attain a high level of productivity in all its operations through effective and efficient use of resources, adoption of appropriate technology and alignment with our core competencies.
  • Develop its employees by encouraging empowerment and rewarding innovation.
  • Promote an environment for learning and personal growth of its employees.
  • Provide products and services of high and consistent quality, ensuring value for money to its customers
  • Encourage and assist in the qualitative improvement of the services of its suppliers and
  • Establish harmonious relationship with the community and promote greater environmental responsibility within its sphere of influence.

 

Values

  • Quality
  • Customer Focus
  • Fairness
  • Transparency
  • Continuous Improvement
  • Innovation

 

Quality Policy

ACI’s mission is to achieve business excellence through quality by understanding, accepting, meeting and exceeding customer expectations. ACI follows International Standards on Quality Management System to ensure consistent quality of products and services to achieve customer satisfaction. ACI also meets all national regulatory requirements relating to its current businesses and ensures that current good Manufacturing Practices (cGMP) as recommended by World Health Organization is followed for its pharmaceutical operations.

The management of ACI commits itself to quality as the prime consideration in all its business decisions.

All employees of ACI must follow documented procedures to ensure compliance with quality standards.

The pool of human resources of the company will be developed to their full potential and harnessed through regular training and their participation in seeking continuous improvement of work methods.

 

Environmental Policy

ACI is committed to maintain the harmonious balance of our eco-system and therefore constantly seeks ways to manufacture and produce products in an eco-friendly manner so that the balance of nature remains undisturbed and the environment remains sustainable.

In pursuit of this goal, ACI will

  • Comply fully with all local and national environmental regulations.
  • Conserve natural resources like water and energy for sustainable development, and adopt environmentally safe processes.
  • Ensure appropriate treatment of all effluents prior to discharge, to prevent pollution or degradation of environment.
  • Ensure appropriate communication and cooperate with internal and external interested parties on environmental issues.
  • Create awareness on environmental issues among employees and suppliers.
  • Adopt modern waste management technology.

 

Global Compact Endorsement

The ACI group has consistently demonstrated its commitment towards its employees and the environment over the years. It has been recognized as the practitioner and promoter of socially responsible business behavior.

To take this commitment even further, ACI has endorsed the Principles of Global Compact on August 18, 2003. The Global Compact is a remarkable initiative sponsored by the United Nations Secretary General Koffi Annan. It is based on a very simple notion: whether or not required by law, corporations should enforce basic human rights and accepted labor and environmental standards in all their business activities, to counterbalance possible negative effects of globalization.

The compact calls on companies to embrace the ten universal principles in the key areas of human rights, labor standards and the environment. These ten principles are:

Human Rights

  • To support and respect International Human Rights within the company’s sphere of
  • To make sure that their own corporations are not complicit with Human Rights Violation.

Labor

  • To end discrimination in the workplace.
  • Abolition of child labor.
  • The right to collective bargaining and recognition of freedom of association.
  • To eliminate the use of forced and compulsory labor.

Environment

  • To support a precautionary approach to environmental challenges.
  • To undertake initiative to promote greater environmental responsibility.
  • To encourage the diffusion of environmentally friendly technology.

Anti-Corruption

  • To work against all forms of corruption, including extortion and bribery.

ACI pledges to keep all its employees, customers, shareholders and suppliers regularly informed about the compact and the company’s initiatives to uphold the principles.

 

Activities of the Organization

ACI Limited is committed to providing customers with a broad range of quality products from its business operations. It has diversified its business in various sectors such as the health care division, consumers’ brands division, and agribusiness division. Other than its 3 major strategic business units, it has 11 subsidiaries, 3 joint ventures and 1 associate.

 

Major Business

Pharmaceuticals

ACI formulates and markets a comprehensive range of more than 400 products covering all major therapeutic areas, which come in tablet, capsule, powder, liquid, cream, ointment, gel ,ophthalmic and injection forms. ACI also markets world-renowned branded pharmaceutical products imported from world-class multinational companies like ASTRAZENECA, UK and UCB, BELGIUM. ACI is actively engaged in introducing newer molecules and Novel Drug Delivery Systems (NDDS) to meet the needs of present and future.

ACI introduced the concept of quality management system by being the first company in Bangladesh to achieve ISO 9001 certification in 1995 and follows the policy of continuous improvement in all its operations.

 

Consumer Brands

This business segment has three major categories of product range- home care, air care and hygiene care.

Products under home care category include ACI Aerosol, ACI Mosquito Coil. ACI Aerosol is market leader in the mosquito repellent category having market share of 85%. ACI Coils enjoys very predominant position and striving to become absolute leader in the market place. ACI has also very attractive product range in this Air Care category with Angelic Fresh Air Freshener. This is the first ever locally manufactured Air Freshener of this country whose fragrances has been applauded by the users and has become market leader in two years time.

ACI has another very strong range of products in its Hygiene Product category. Savlon Liquid Antiseptic is the highest selling antiseptics in the country. It has more than 75% market share of its category. Products like Savlon Antiseptic cream, Savlon Family Protection Soap and Savlon Femme Sanitary Napkin, Vanish Toilet Cleaner are also under this category. ACI Consumer brands also deals with products of internationally acclaimed company like Colgate Palmolive and Nivea. Recently ACI Electronics a sub unit of ACI Consumer Brands has launched Panasonic Audio visual items in the country.

 

Agribusiness

ACI Agribusiness is the largest integrator in agricultural sector of Bangladesh. ACI Agribusiness deals with livestock and fisheries, crop protections, seeds, fertilizer and agro-machineries. Under Agribusiness, the following business units are currently operating:

 

Crop Care & Public Health

Crop care & Public health is dealing with all type of crop protection items. It is providing a complete range of cost effective products which can provide appropriate solutions for the farmers through insecticides, herbicides, and fungicides. This business has been transferred to ACI Formulations Limited form 1st January of this year.

 

Seeds

Seeds division is dealing with hybrid rice, vegetable and maize seeds. It has partnership with renowned HYV seed companies of the world. ACI started the seed business in 2006. It has its own research and development stations in Gazipur and Bangladesh Agricultural University, Mymensingh.

 

Animal Health

This division is dealing with high quality nutritional, veterinary, poultry medicine and vaccines including proposal for pisiculture, cattle rearing and cattle fattening. Integrated fisheries and livestock project will be implemented soon.

 

International Alliances

ACI represents Colgate Palmolive Company as exclusive marketing partner and distributor for the territory of Bangladesh. Colgate is the worldwide leader of the oral care products category. ACI was appointed as sole distributor and marketing partner of Beiersdorf AG, Germany; the manufacturer of Nivea brand products. ACI represent Godrej Consumer Products Limited. ACI consumer Brand is also selling low calorie sweetener products of Merisant for weight conscious customers and also for them who want to avoid direct sugar. In additions to these, ACI represents significant number of world’s reputed companies in Pharma and Agriculture sectors.

 

Future Plans

ACI Pharmaceuticals is expected to be introducing three new lines of medicine products namely Anti Cancer, Hormone & Steroid and Amino Acid. For this new initiative, Company needs funding facilities to allow it to import capital machinery and carry out construction of physical facilities. Out of the total proceeds of BDT 1.00 billion that will be raised through issuance of 20% convertible zero-coupon bond, BDT 597,194,166 (i.e. approx. 60%) is earmarked for the expansion for scheme of the pharmaceuticals division.

 

The Concept of Cash Management and Raw Material Purchase

The internship report entitled – “The Cash Management and raw material purchase Process of ACI LTD.” Will discuss about the way ACI applies various cash management and raw material purchase concepts and theories in their business. For this, it will incite several cash management concepts and their application in the company.

 

Cash management

Treasury management or basic cash management propitiates the development of administrative techniques conducive to optimizing the level of disposable assets to be maintained by a company.

To prevent breaks or gaps in the trading cycle due to lack of cash, administrators must calculate the cash amount best suited to their level of activity, plan the timing of the relevant payments and collections and draw up a policy of investment in assets with high liquidity that can be converted to cash at a low transactional cost to serve as support for the treasury funds maintained by the company.

 

Cash Management Process of ACI

Bank Reconciliation

Bank reconciliation is the process of matching and comparing figures from accounting records against those presented on a bank statement, less any items which have no relation to the bank statement. The balance of the accounting ledger should reconcile (match) to the balance of the bank statement. Bank reconciliation allows companies or individuals to compare their account records to the bank’s records of their account balance in order to uncover any possible discrepancies. When ledgers were written manually, regular checks were important to ensure they remained in balance. It was important to have a reliable source against which to check the accounts ledger.

The statement of account from a bank would have been hand written by a clerk and checked carefully by the bank manager. The statement can be taken as a reliable source, as banks’ primary business is to ensure their ledgers correctly tracked the flow of funds. Hence the bank balance at the end of a given period could be obtained from bank and matched to a bank ledger kept by the company’s accountant.

 

Working Capital

Working capital, also known as net working capital, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.

 

Calculation

These accounts represent the areas of the business where managers have the most direct impact:

  • accounts receivable (current asset)
  • inventory (current assets), and
  • accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit.

An increase in working capital indicates that the business has either increased current assets (that is received cash, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors.

 

Decision Criteria

By definition, working capital management involves short term decisions – generally, relating to the next one year period- which is “reversible”. These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability.

  • One measure of cash flow is provided by the cash conversion cycle – the net number of days from the outlay of cash used for raw material to receiving payment from the customer. As a management tool, this metric makes explicit the inter-relatedness of decisions relating to inventories, accounts receivable and payable, and cash. Because this number effectively corresponds to the time that the firm’s cash is tied up in operations and unavailable for other activities, management generally aims at a low net count.
  • In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm’s shareholders. Firm value is enhanced when, and if, the return on capital, which results from working capital management, exceeds the cost of capital, which results from capital investment decisions as above. ROC measures are therefore useful as a management tool, in that they link short-term policy with long term decision making.

 

Management of Working Capital

Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current asset (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

 

These two cash flows -payments and collections- are the principal source of financing and investment for business activity. Although larger companies may have a specific department to manage these concepts, they are so closely related to treasury matters that they can be subsumed into treasury management in the broad sense. The development of all these functions depends on the corporate culture of the firm, in the sense of the set of shared beliefs and values as to the way in which the above functions are carried out.

  • Cash management: Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs.
  • Inventory management: Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials – and minimizes reordering costs – and hence increases cash flow.
  • Debtors’ management: Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.
  • Short term financing: Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to “convert debtors to cash” through “factoring”.

 

Petty Cash

Businesses often need small amounts of discretionary funds in the form of cash known as petty cash for expenditures where it is not practical to make the disbursement by Cheque.

The most common way of accounting expenditures is to use the imprested system. The initial fund would be created by issuing a check for the desired amount. Usually £100 would be sufficient for most small business needs; however, larger businesses may have several thousand dollars in discretionary funds available as petty cash. The entry for this initial fund would be to debit Petty Cash and credit cash.

As expenditures are made, the custodian of the fund will reimburse employees and secure a petty cash voucher in return. At any given time the total of cash on hand plus reimbursed vouchers must equal the original fund.

When the fund gets low the custodian submits the vouchers for reimbursement. Assuming the vouchers add up to Tk. 80 and that the majority of expenditures were for office supplies, a tk. 80 cheque is issued and a Tk 80 debit towards office expenses is marked. Once the cheque is cashed, the custodian has cash at the original amount.

Oversight of petty cash is important because of the potential for abuse. Examples of petty cash controls include a limit (such as 10% of the total fund) on disbursements and monthly audits by someone other than the custodian. Use of petty cash is sufficiently widespread that vouchers for use in reimbursement are available at any office supply store.

 

Steps to be followed by the petty-cash manager (in the faculty or service)

Before making a payment or issuing a refund, the cash manager must make sure:

  • That the signed invoice is indeed
  • That original, unmodified receipts or vouchers are approved in writing by the person or this person’s delegate responsible for authorizing expenses in the budget account specified, and that the documents bear the account number to be debited; receipts, invoices or cash-register slips must have the authorizing initials and the budget code indicated clearly on them;
  • That the invoice has been signed by the claimant and that there is a clear indication it has been paid; the manager must be careful not to double refund expenses for which he has both an original invoice and a credit-card receipt;
  • That all vouchers are detailed enough (for example, a cash-register slip with no Explanation is not acceptable);
  • That individual receipts do not exceed the maximum set out in policy 26 and that they do not date back more than 30 days before the replenishment date.

ACI recommends that the manager group vouchers according to financial code, that add up expenditures applying to the same account including PST and the non-refundable portion of the GST (33 %), and that the manager staple the vouchers to the calculator slip, in the same order as the figures on the slip.

To enter the expense including the PST and the non-refundable portion of the GST (33 %) and the applicable financial code and the refundable portion of the GST (67 % or 100 %) in the appropriate box on the envelope or other equivalent document.

Place all of the vouchers in the envelope.

Count the money on hand in the petty cash and enter the amount in the box provided on the envelope. Add this amount to the total reimbursed according to the vouchers. The sum must correspond to the total in petty cash.

After entering the required information and counting the money remaining, the petty cash custodian must sign the envelope or the equivalent document.

Complete the form titled Petty Cash Replenishment provided by Financial Services; make sure to indicate the number of bills and any change required. The amount the cash manager requests must match the total needed for replenishment.

 

Procedures to be followed by the payer (at the faculty or service)

The manager must remember to treat the petty cash envelope as an invoice. To do so, he follows the instructions in the User’s Guide-Accounts Payable/Payment of Invoices.

  • When he enters data into the AP system, he uses the envelope whose code begins with PC and is followed by four or five numbers.
  • On the Invoice Worksheet 1 screen, the manager must create an expense line for each financial code and enter the amount including the PST and the non-refundable portion of the GST (33%). Create a line to enter the refundable portion of the GST (67 %) and enter the financial code 10204300 – 122980111. Create a line to enter the refundable GST (100 %) and enter financial code 10204600 – 122980111. Next, enter the total expenses in the GROSS AMOUNT box.
  • Give the invoice (envelope) and the vouchers to the person responsible for approving invoices in the financial system.

 

Procedures to be followed by the approving authority (in the faculty or service)

The approving authority must not only ensure that the petty cash manager has followed procedure but also:

  • That each pay-out is backed up by a supporting document (invoice, receipt, cash-register slip) bearing the name of the supplier and the account to be debited;
  • That the invoice signed by the claimant (confirming he or she has received the money in question) is acceptable (see the list of unauthorized expenses in section 7 of policy 26);
  • That the supporting document is approved by the person responsible for authorizing petty cash expenses (for expenses charged to a research project, the recipient of the grant or research contract or this person’s delegate must sign the supporting document);
  • That, for reimbursement of restaurant meals, the form Receptions and Business Meetings is completed according to policy 60 and attached to the restaurant receipt;
  • That the amount of individual receipts does not exceed the maximum allowed under policy 26 and that receipts do not date back more than 30 days before the replenishment date (older receipts may be refused);
  • That the total indicated on the envelope equals the total amount of the petty cash invoice entered in the AP system.

NOTE: The approving authority is the last person to verify documents before checks are issued.

 

The cash manager must remember to include all of the following Items if he plans to use other Types of envelope for petty cash:

  • The petty cash invoice number (always preceded by PC)
  • The list of financial codes to which the debits apply
  • The amount charged to each financial code
  • The total GST amount
  • The total provincial sales tax amount
  • The total number of items reimbursed
  • The amount of money on hand
  • The grand total of the transaction.

 

Working capital management

 Working capital management policy

The basic objective of working capital management is to optimize liquidity and bringing financial flexibility which will allow company to respond and adjust with opportunities and adversities.

The company is more concentrated on gross working capital rather than on net working capital due to the sources of raw materials/ finished goods which are mostly import dependent.

The company is to maintain a satisfactory level of working capital which is neither inadequate nor redundant.

In determining the working capital requirement (level of working capital), the company considers the following factors:

  • Nature of business
  • Industry practice
  • Seasonality of operations
  • Production policy
  • Market and competitive conditions
  • Conditions of supply

This will ensure expected growth to be attained without facing redundancy and excessive receivables.

The company finances working capital mostly with short term sources to minimize the cost of capital. However company has also policy to finance permanent portion of working capital through long term sources.

The Company should maintain working capital at a level that will satisfy the following mark unless there are any specific reasons behind this.

  • Current ratio- 100%
  • Quick ratio- 60%
  • Net working capital ratio- 3.2 times.

Working Capital policy specific to inventory management ensures uninterrupted production across all company’s factories following agreed inventory policy for both imported and local items including finished stock based on robust sales forecasting tools applied by the company using computerized systems and procedures.

 

Cash Conversion Cycle

Cash conversion cycle or CCC is the time duration in which a firm is able to convert its resources into cash. It is actually the total time period required to first convert resources into inventories, then inventories into finished goods, then goods into sales, sales into accounts receivable and then receivables into cash. Here the resources are including raw material, labor, power and fuel, etc.

In other words, it can be defined as the time taken to collect cash from sales after making payments for resources acquired by the firm.

From the analysis of cash conversion cycle of ACI Limited for last 3 years it can be shown that the time duration for converting its resources to cash is increasing every year which depicts that the cash is remaining tied up in the firm’s core operations, leaving little leeway for other uses of this cash flow.

 

Financial Derivatives in ACI

Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), or other items (e.g., weather conditions, or other derivatives). Credit derivatives are based on loans, bonds or other forms of credit.

The main types of derivatives are: forwards (which if traded on an exchange are known as futures); options; and swaps.

Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.

ACI and Standard Chartered Bank (SCB) have successfully concluded a GBP/USD Range Forward Deal.

This is not only the first derivative deal of ACI Limited; it is even the first deal of this kind in Bangladesh.

It should be mentioned here that Bangladesh market is not ready for derivatives; at least country’s central bank Bangladesh Bank thinks in that way. With a view to opening the market and for pressure from different quarters, Bangladesh Bank started allowing derivatives in selective areas and again after maintaining a lot of formalities. SCB is one of few banks who was authorized to do derivatives deal.

These deals are mostly known as “vanilla” option rather than “exotic” option.

ACI was exploring an innovative solution for hedging their exchange rate against underlying GBP exposure. As ACI Treasury always wants to be in the forefront in utilizing new products available in financial market, when SCB approached ACI to link-up for derivative deal ACI accepted it. Catering to this SCB Financial Markets structured a GBP/USD Range Forward solution to hedge against ACI’s cross currency exchange risk.

 

Raw Material Purchase Process

  • Identification of need: This is an internal step for a company that involves understanding of the company needs by establishing a short term strategy (three to five years) followed by defining the technical direction and requirements.
  • Supplier Identification: Once the company has answered important questions like: Make-buy, multiple vs. single suppliers, then it needs to identify who can provide the required product/service. There are many sources to search for supplier; more popular ones being Aruba, Alibaba, other suppliers and trade shows.
  • Supplier Communication: When one or more suitable suppliers have been identified, requests for quotation, requests for proposals, and requests for information or direct contact may be made with the suppliers.
  • Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established.
  • Supplier relationship: During this phase, the company evaluates the performance of the P/S and any accompanying service support, as they are consumed. Supplier scorecard is a popular tool for this purpose. When the P/S has been consumed or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be reordered, the company determines whether to consider other suppliers or to continue with the same supplier.
  • Logistics Management: Supplier preparation, expediting, shipment, delivery, and payment for the P/S are completed, based on contract terms.

 

Recommendation

Computerize the cash forecasting process can be performed in different ways, and there are several different types of systems to choose from. The three major categories of system support are the forecasting module in the ERP system, a standardized forecasting system and a customized forecasting system. There are pros and cons to every one of these:

ERP systems:

The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.

Benefit – there is couple of benefit of ERP system for different department likeEnhanced

Technology for the Institution: the first benefit will be the enhancement of the technology in the organization

Efficiency in Processes: A new system will make more efficient critical business processes for many departments. It will make data collection better and more efficient, more efficient use of bright people in office and don’t have to enter things by hand.

Easier Reporting: An advantage of a new system will be improved and more customizable reporting. A great desire for improving reporting capabilities to be better equipped to respond to complex requests for data and it will also other sector as well like Finance team: Finally gains integration with operations, including accurate costing, and real-time reporting.

Supply chain team: Gains real-time communication with your partners and vendors to meld planning, scheduling, production and delivery into a seamless, dependable process, a complete integration between planning and execution.

ERP system includes integrated functions and thus may be easy to implement. However, with all the advantages that ERP offers, there are a number of disadvantages as well.

Drawbacks –

  • Perhaps one of the biggest disadvantages to this technology is the cost. The biggest challenges companies will face when trying to implement ERP deals with investment.
  • The employees must be continually trained on how to use it, and it is also important for companies to make sure the integrity of the data is protected.
  • The success of the system is fully dependent on how the workers utilize it.
  • Another biggest problem with ERP is that it is hard to customize. Very few companies can effectively use ERP right out of the box.

 

Customized Systems:

When a software developer customizes software, he attempts to change or add to its code so that it better suits the needs of a specific set of users. This system is much more effective for any kind of organization because in ERP system you cannot change anything where in customized system you can set the thing as your requirement.

This system provides a business organization so many facilities like-

Custom software solutions enable you to develop a software solution that maps your unique business processes rather than changing your business processes to conform to what “packaged software” provides

Custom software solutions enable you to automate your business processes the way you feel is best for your business meeting the unique needs of your business.

Custom software solutions automate processes that you currently do manually.

It is easy to simply computerize current process without exploring the possibilities offered by the technology. Similarly, it is easy to misjudge a system and end up with one that does not fulfill all needs and future needs, and thereby restrict the development of the forecast process when the implementation project has ended. Therefore, it is important to ensure that the standardized system does not set restrictions on what the organization is trying to achieve by implementing it. It is especially important to ensure that flexibility in the standardized system meets future requirements.

 

Conclusion

At the wrapping up it can be said the ACI limited has working hard to grab the best position in different sector like Pharmaceuticals, Consumer Brands and Agribusiness. But due to the high competition in this industry it is still standing behind. ACI Limited currently scores 50% in the index and it is currently ranked equal 11 out of 4206. This is in the top 0.26% of Pharmacy companies ranked in the index. But yet ACI Ltd is fighting in competitive spirit and ready to get back in top three positions. Not only that ACI ltd. Is also trying to improve in other sector and they have also taken some step to doing this like previously they were did their work manually like they were signed there PO manually then also signed there CS manually but now they are starting to it online. Not only that to get a better result now they are now also held several meeting in every week which makes them aware of their current situation and based on this situation the top management give them suggestions. As ACI Ltd. is one of the biggest companies in our country so it has so many product lines in market but unfortunately not all the product are profitable as well as not all the product is affordable for all so they are again thinking to withdraw those unprofitable product from market which low margin profit and thinking to lunch new product with different variation for all group of customer which is an important issue behind getting success.