Value Chain Process Of Rak Ceramics Commerce Essay
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This is an assigned project of the course "Business Strategy" the aim of which is to enable us to learn about the overall value chain process of an organization. RAK ceramics is fully backward and forward integrated. This study is providing us with valuable practical knowledge about "business strategy" in respect to the value chain activities of RAK Ceramics as it is the market leader in ceramic business in Bangladesh at present.
Reason for choosing RAK Ceramics:
The reason for choosing RAK Ceramics is to learn about value chain process of RAK ceramics which can give us a practical overview of the whole value chain process.
Objective of the report:
The main objective of the report is described below:
An over view on RAK Ceramics
Overall value chain process of RAK Ceramics
Primary activities of RAK Ceramics (like starts from supply chain management to delivering products to the end user)
Support activities of RAK Ceramics( like R&D, general administration and human resource management)
The report only focuses on RAK ceramic's tiles production
The limitations are given below:
Information unavailability due to confidentiality
The research methodology is given as followed:
Primary Data: Primary data is collected by visiting RAK ceramics production plant, interviewing office personnel.
Secondary Data: Secondary data is collected by visiting relevant websites and published journals.
RAK ceramics UAE:
RAK a global ceramic multinational is in the Ras Al Khaimah. It is a public shareholding company with H.H. Sheikh Saud Bin Saqr Al Qassimi. He is the Crown Prince & Deputy Ruler of Ras Al Khaimah as the Chairman and Dr. Khater Massaad as the Chief Executive Officer. It has worldwide sales of over USD one billion.
To build a world standard for quality and beauty, the company basically starts manufacturing. They start their first production in 1991. Within 19 years it became a world class organization.
2, 27,000 sq meters of tiles and over 8500 pieces of sanitary ware is producing per day by Ras Al Khaimah alone. It has operation in China, Sudan, Bangladesh, India and Iran. The global production of RAK Ceramics is over 3, 60,000 sq meters of tiles and 11,500 pieces of sanitary ware per day. These huge production of tiles making RAK Ceramics' one of the largest multinational ceramic and porcelain tiles and sanitary manufacturing in the world.
More than 150 countries across 5 continents, they are now exporting. In the Far East, Australia, USA & Canada along with European countries they sells a large quantities of RAK ceramics with regular shipments to all those countries. Among those countries, they have independent agents to fulfill the marketing efforts.
With the subsidiaries in Germany, UK, Italy, Belgium, Georgia, Australia, China, India, Saudi Arabia, Sudan, Bangladesh & Iran, RAK Ceramics' plant capacity stands as follows-
China - 11 million square meter per annum,
Sudan - 6.5 million square meter per annum,
India- 7 million square meter per annum & 250,000 pieces of sanitary ware per annum,
Iran- 3.0 million square meter/annum and
Bangladesh - 6 million square meter and 250,000 pieces of sanitary ware per annum.
In terms of their model, they also have wide range of variation. They regularly add several new designs in almost every week. Not only in production and design, RAK has wide range of size variety in their products from 10 cm x 10 cm up to 125 cm x 185 cm. They also has 125 x 185 slabs which are the largest Gres Porcellanato slabs in the world and used for a variety of internal and external applications.
RAK Ceramics is a ISO 9001: 2008 (ISO 9001:2008 Quality management systems Requirement is a document of 30 pages which sets standards for organization's management ) & ISO 14001: 2004 (ISO 14001 is a standard which is provided by international organization for standardization for reducing the negative impact on environment ) certified organization.
RAK Ceramics (Bangladesh) Limited:
RAK Ceramics (Bangladesh) was incorporated in 26 November, 1998. It is a joint venture company with UAE. It was first incorporated as a public limited company. Now it is public limited company and changed its name from RAK Ceramics (Bangladesh) Private Limited to RAK Ceramics (Bangladesh) Limited on 10 June, 2008. They are now manufacturing ceramics tiles, bathroom sets and all types of sanitary ware. They basically came to this position of producing products in some steps which are given below-
From 12 November, 2000 they started Commercial production.
From 10 January, 2004 they start the production of sanitary ware within their own plant.
Further expansion of tiles and sanitary plant ware in the year of 2007.
With 90% portion of ownership of RAK Ceramics by RAK Ceramics PSE and its nominees they basically start their business in Bangladesh. Rest 10% is owned by S.A.K. Ekramuzzaman. Within eight years RAK has become one of the leading manufacturing companies with an annual turnover of over BDT 3248 million. They basically produce high quality wall, floor tiles, gres porecellanato and sanitary wares products in Bangladesh.
RAK is financed by IFC Bangladesh other than Lafarge Surma Cement Ltd, the only two company financed by IFC. With over 1000 models active ceramics and porcelain they have huge collection of design. Moreover, their R & D are adding more new design into their portfolio to meet the preference of the customers. They have more than 40 models of exclusive range of sanitary ware like wash basins, water closets, bathroom sets, bath tubs, shower trays, bathroom cabinets, accessories and decorated sets. . They not only emphasized in the designing part of the RAK Ceramics, but also they emphasized in the size of the tiles. They have different types of tiles from 13 cm * 13 cm to 60 cm * 60 cm.
The manufacturing plant has a production capacity of 24,000 square meter tiles and 2,500 pieces of sanitary ware per day. This total production is consumed by local market. RAK Ceramics (Bangladesh) Limited is certified by ISO 9001:2008(ISO 9001:2008 Quality management systems Requirement is a document of 30 pages which sets standards for organization's management). RAK ceramics also have a future plan to expand their operation by setting a new production plant in Hobigonj to fulfill the rising domestic demand for tiles. For their reputation and good brand image they have been awarded as "Superbrands" in 2009-2011
RAK is the market leader of the ceramics industry in Bangladesh. RAK has approximately 35% market share in the industry. The major competitions of RAK ceramics are:
Fu-Wang Ceramic Industry Ltd: Fu-Wang Ceramic Industry is one of the major competitors of RAK ceramics. Fu-Wang's main emphasis is on the quality of the product and also they are focus on designing also. They are also focused on achieving customer satisfaction by providing standard product with innovation. Fu-Wang's market capital is 2025.375 million BDT (http://dsebd.org/displayCompany.php?name=FUWANGCER). The main production plant of Fu-Wang ceramic industry is in Hotapara, Gazipur.
China-Bangla Ceramic Industry: Another major competitor is China Bangla Ceramics Industry. They focus mainly in the quality of the product. For these they basically use machine imported from SACMI, Italy and specialized people recruit from china to operate production process, technology and R & D.
Great Wall Ceramics Industries Ltd: Great Wall Ceramics Industries has a factory in Gilarchala, Sreepur, Gazipur, Bamgladesh. From Italy and China they basically bring their machines which are being used to make their products. Great Wall Ceramics Industries Ltd is also focused to improve their quality of their products.
RAK is not facing any major competition from the local producers. RAK ceramics market capital is 46635.898 million taka (http://dsebd.org/displayCompany.php?name=RAKCERAMIC). But they are facing competition from Chinese Tiles. The main Raw material for Tiles is different clays. And among those clays China clay is a major element. China has an advantage over the cheap raw materials which helps them to reduce their production cost and gain advantage over other competitors. Whereas RAK have to purchase raw materials at a high price and also pay tax for those raw materials. However RAK established them as market leader by providing superior quality product and good brand image which enables them to compete with the competitors effectively.
SWOT Matrix analysis of RAK Ceramics: RAK Ceramics is the market leader in ceramic industry. They have huge advantages which differentiate them from other competitors ex: advanced production facility, focus on quality, and huge investment in R&D, customization option in product designing etc. These are the major strengths which is helping RAK ceramics to be the market leader. They also have a major weakness in control of sub dealers. RAK ceramics have the opportunity to go for exporting after meeting domestic demand and they can also expand their product line by producing ceramic plates, salt and pepper pots. RAK ceramics is facing threat on competition for the growing Chinese ceramic companies. This is the overview of the SWOT analysis of RAK ceramics, brief explanation and SWOT matrix analysis is given in Appendix 3.
The Value Chain Process: RAK ceramics value chain process follows the traditional value chain process which starts from supply chain management to delivering its products to the end users and supporting activates like: R&D program, general administration and human resource management. RAK ceramics is fully backward and forward integrated. The value chain process of RAK ceramics is described below in details.
Supply chain management: RAK ceramics supply chain management is very strong and fully controlled for getting efficient supply for their production process. The basic raw material of ceramics is different types of clay. RAK ceramics select the best quality clay for their quality floor covering. RAK use different types of clay for their tiles production. The types are:
Czech Republican Clay
For glazing or coloring there are several raw materials that RAK use to give an edge in color of the tiles. This material arrives from Italy and Spain. The materials are:
Cerfrit: a company specialized in the manufacture of frits, glazes, serigraphic printing powders and ceramic colors
Adhesive and Chemicals for stabilizing color
Raw material Suppliers: 90% of raw materials of RAK ceramics is are imported from outside the country. The main raw materials supplier of RAK is Global Business Association (GBA) and the supplies are dealt in ordering process. GBA is a sister concern of RAK and it also supplies raw materials to other company's also. RAK places an order of the list of raw materials and GBA supplies the raw materials. Cerfrit a company from Spain supplies "cerfrit" for using in colors. Color pigment is supplied by GBA which is collected from Italy.
Shipment of Raw materials: After placing the order to GBA, raw materials are sent by ship to Chittagong port and sometimes in Naryanganj from Chittagong port. From there Cargo trucks are used to carry the clay to their production plant. Spare parts for their machineries are collected from "SACMI" which is a giant of manufacturing machines and completing plants and it's an Italian company. These spare parts are sent by air.
Packing Raw Materials: The packets which are used to pack the final products are supplied by KEA Printing and Packaging Company which is also a company of RAK. They provide cartoons that are used to package tiles. KEA Printing and Packaging is situated right in front of RAK's manufacturing plant in Sreepur, Gazipur. Therefore it's really easy to collect the cartoons from there.
Inventory Management: The inventory management job is mainly assigned to Store department and accounts department. Accounts department is in charge of raw materials inventory. Raw materials are purchased and stored in the amount of 6 to 7 months of production. Store department is in charge of the management of finished goods inventory. RAK takes extra precautions for not damaging or wasting raw materials and extra security for preventing the risk of theft.
Utilities: They main utility for RAK is production plant is Electricity. RAK ceramics spent over 50 crore taka for planting an electricity plant which produces 6 Mega Watt electricity inside their production plant. RAK uses 4 Mega Watt and 2 Mega Watt of electricity is given to local people for their usage with an exchange of a small amount of money.
Manufacturing Process: RAK ceramics have the most advanced production facility for producing tiles and sanitary ware. They have one production plant for tiles which covers all the production activities. RAK also have a Design Development Program under R&D department which helps to create new design for the customers. In this department, RAK have invested a huge amount to gain advantage over competitors in designing. They are using SACMI technology in their production plant which comes from Italy. SACMI is the most advanced technology used is ceramics production. RAK's production plant is fully automated and computer operated which helps to reduce the chance of error. SACMI's machineries are sensor based in which it is assigned the specific tasks to be performed with minimum error. In every step of production there is a parameter that is being checked for insuring good quality by ensuring size, moisture; pressing power etc.
Step1: RAK's tiles manufacturing process starts from Laboratory There is a miniature version of the whole production plant. In lab "master sample" of tiles with different shapes are made on the basis of moisture, pressing power, density etc. This master sample is the benchmark of tiles which is used to maintain the standard and quality of tiles. This master sample's readings are set into Master CPU for quality assurance of tiles. If the quality of any tiles doesn't meet the standard of "master sample", it is destroyed by Master CPU by using a hammer.
Step2: Quality assurance department composes the composition of raw materials, which means the percentage of different clay will be used to produce the body of tiles. This composition list is given by lab on the basis of the composition used in Master Sample.
Step3: Body preparation sector calculates the weight of different clay which will be used to make the tiles.
Step4: Raw materials are given input in BOX FREEDER by the help of wheel loader. Driver of wheel loader checks the list and weight of each clay and inputs in the machine. There is an operator who monitors this procedure. Figure: BOX FEEDER
Step5: From BOX FREEDER by the use of conveyr belt, raw materials are passed to BALL MILL.
Step 6: In BALL MILL the raw materials are mixed with water to create slip, this procedure is called "milling".
Figure: BALL MILL
Step5: From BALL MILL the present form of clay which is also called slip is stored into SLIP TANK.
Step6: From SLIP TANK, slip is moved to SPRAY DRYER, which forms the slip into powder or granule. This powder or granule is stored into SILO or vertical tank.
Sttep7: This powder will be passed into PRESSING MACHINE through SILO. In PRESSING MACHINE the powder is given five bar pressing which converts the powder or granule in to raw tiles.
Step8: In PRE-FIRING the raw tiles are taken through 200° degree Celsius, to reduce the moisture of the raw tiles.
Step9: The raw tiles will now go through the DISC Glazing BOOTH machine, where it will be covered by the first coat of Coloring or Glazing.
Figure: DISC Glazing BOOTH
Step10: After the DISC Glazing BOOTH process the tiles will go through the PRINTING MACHINE and there it will get the necessary designs on top.
Step11: From the PRINTING MACHINE the tiles are loaded into LOADING CAR by a conveyer belt, and then the LOADING CARs take the tiles to B&T KILN LOADING MACHINE.
Figure: Loading Car Figure: PRINTING MACHINE
Step12: B&T KILN LOADING MACHINE is basically a firing machine which gives huge heat on the tiles to increase the hardness and reliability. It is a 75 meter long oven also known as
Figure: 75 meter B&T KILN LOADING MACHINE
firing zone. The tiles is taken through a sequence of temperature starting from 400° to 800° to 1200° to 800° to 400° Celsius. The temperature sequence is kept like this because after reaching to 1200° if the temperature suddenly falls then the heated tiles will break down. To ensure continuous supply of power the kiln machine is connected with a generator to avoid any kind of accident. Granite tiles are kept in firing machine for 41 to 42 minutes, Porosa is kept for 39 to 40 minutes and Red Body tiles are kept in firing zone for 35 to 36 minutes. The time kept in firing zone is the determinant of hardness, reliability and water absorption. Granite tiles are used in floor which has high reliability, hardness and water absorption to 0.5%. On the other hand, Red Body tiles which are wall tiles has less reliability and hardness then Granite but have high water absorption up to 10%.
Step13: Master CPU plays a major role in the tiles production. Master CPU is provided with the reading of master sample for quality assurance of the tiles production. Master CPU approves those tiles which match with master tile. If not then Master CPU uses a hammer to destroy the tiles with below quality reading. After passing tiles from B&T KILN LOADING MACHINE every tile have to pass through Master CPU and it also checks the level of tolerance for error. ISO 10545 is a British Standard for tiles production which gives approval for 5% error. But RAK ceramics accepts 3% level of error for ensuring more quality for their product.
Step14: After checking by Master CPU, the tiles which have 0% error are categorized as Class A tiles and those tiles which have 3% error are categorized as Class B tiles. These two types of tiles are sorted differently in different sorting machines where tiles are placed vertically in numbers for packing which starts from: 4 pieces of tiles to 25 pieces of tiles.
Step15: Tiles are packed by PACKAGING MACHINE attached with sensors. These sensors detect Class A and B tiles and uses different packages for both. For Class A tiles white box and for Class B brown boxes are used. Then it is tagged by another sensor using OCRCS system. This system is used to track the type, quality, size and other parameters by which they can track the operator who checked the tiles if there is any complain form dealers or customers. The operator's main job is to ensure the quality of the tiles by checking them from 3 feet distance to see whether there is any problem with tiles that can be detected from 3 feet distance. If there is any problem likes this, operator is held responsible. The OCRCS refers:
Operator: Number of Operator
Choice: A grade or B grade
Reference: Model Number
Caliber: Accurate size
Shade: Color of Shades
This OCRCS is used to give customers full guarantee of the quality of the product and also helps to prevent fraud attempt by sellers.
Step16: After packaging, the finished goods are stored in warehouse by Stock Department and dealers arrive with order papers of tiles to receive the delivery of the tiles for Stock Department.
This is the total manufacturing process of RAK ceramics.
Distribution Process: RAK ceramics follows simple distribution process to get products to end users by minimizing complications. They follow 4 level distribution channels which consist of manufacturer, dealers, sub dealers, consumers. RAK follows selective distribution which means they distribute products only few distributors. They don't have their own distribution channel; they use dealers to distribute their products. Currently RAK has 32 dealers all over Bangladesh. They directly control their dealers through 4 state managers in six divisions. Dealers are allowed to appoint sub dealers to sell RAK's product but RAK does not control them.
RAK ceramics distribution process starts from stock department. Stock department stores finished goods in the warehouse. Dealers are informed from the warehouse that their goods are ready for delivery and they arrive to receive the delivery from warehouse for distribution. RAK ceramics have full control over their selective dealers. They pick dealers from location according to their geographical planning of market capturing. RAK ceramics conduct an in depth analysis before selecting dealers. RAK ceramics first analysis their portfolio ex: capabilities, currently which products they are distributing, control, coverage, continuity and also they are given 3 months evaluation period by which RAK tries to find out if they are appropriate or not. These 32 dealers have sub dealers who are directly under control of dealers which they use to capture more market depth and to cover more geographic coverage. Dealers pick the product from RAK ceramics by huge delivery trucks with good protection for not damaging tiles. By the help of dealers and sub dealers RAK ceramics distribute their product to the end user and also they maintain a strict control for reducing error.
Marketing, sales and service: RAK ceramics is the market leader in ceramics production in Bangladesh.RAK ceramics mainly emphasize on commercial production for meeting domestic demand but they also have industrial production which is not in massive condition due to low demand and huge affordability issue by industries in Bangladesh. But if a company places order for industrial tiles they fulfill their demand. RAK have a good marketing department for marketing which is in the main headquarters in Uttara. RAK ceramics sales force is mainly used to convince owners of industry firms to use RAK ceramics because industry productions of ceramics product have high durability and price. To provide good support to these buyers, the sales force is mainly used for any complaining and ordering and also providing important information. The process mainly starts from industry placing order with specifications to dealers of RAK, sales force contacts with the buyer to provide more specific information and details along with pricing and choice, sales force confirms their specifications and sends it to RAK. RAK ceramics go to the production and send their product via dealer to the desired person. This is the role of sales force which plays a vital role in selling industrial products. RAK ceramic doesn't use any direct selling in marketing, if a customer place order from RAK head office where they have a showroom, then instead of selling directly to them RAK provides reference of nearby dealers to their location for providing convenient support. As it is mentioned before, RAK ceramics uses sales force for industry buyers and dealers reference for normal customers.
Marketing Research and Planning: RAK display new design of tiles and sanitary wares in their main head office for getting feedback from customer about the new design. This new design mainly is the reflection of ongoing global trend around the world or the new design of RAK UAE which is a great success worldwide. This new design is placed in the main showroom for 6 months for gathering customer feedback. After getting feedback and doing market analysis they go for production on those new designs. RAK provide huge emphasize on marketing research to identify new style trends on the basis of global trend and customer preference. Because of their advanced marketing research they are able to visualize the demand of customers. For their good market research, analysis and reading, they are able to respond quickly to the changing customer demand and preference which made them the market leader.
Advertising and Promoting: RAK ceramics doesn't follow massive advertising technique for promoting because of their superior position in the market and huge demand helps to promote their product itself. But RAK still do some advertising via billboards and some promotional activities in Boishakhi TV by sponsoring some shows, because the Managing Director of RAK ceramics is the 25% owner of Boishakhi TV.
Support from Dealer: RAK ceramics have 32 dealers around the country which are handpicked by them after judging their portfolio. These dealers provide great support to RAK for capturing and enabling the product to get available in market. RAK ceramics tries to give full support on their activities for making them more flexible and dealers also provide support for making the product more available in market. From RAK's point of view, by the support, help and loyalty from these dealers have helped them to spread the product in whole country and they also played a huge role for their current market position.
Service: RAK ceramics doesn't have a specialized service center for customers because it isn't required in that extend. But they provide full support to the customers by providing information and details of tiles before purchasing to avoid deceptive selling.
Product R&D, Technology and Systems Development: RAK makes a huge investment on R&D. They are the only ceramic company in Bangladesh to spend 150 crore in R&D. To make continuous innovation on design they have a dedicated Laboratory which focuses on designing new tiles and sanitary wares. RAK use SACMI manufacturing machines and complete plants for the Ceramics making which is the best technology for making ceramics. RAK uses Effluent Treatment Plant (ETP) to reduce environmental hazard. RAK ceramics factory have computer controlled guided vehicles which transfers semi finished good from station to station, all of the machines are controlled by laser sensors, skilled technician to operate sophisticated operations. RAK ceramics emphasize more on designing on tiles. For this purpose the MD of the company attends different Ceramics fair to get idea of overall new technology innovation and new design trends. These designs are submitted to Design Development Program which falls under R&D department; they conduct in depth research and develop the design. RAK also has soil scientist who conducts research and test on various types of soil to create quality composition of clay for creating quality tiles. Purchase managers visit to Indonesia, Malaysia, India, China and Czech Republic to monitor Class A and B raw material (clay) and check quality report and sent it to laboratory more researching on clay about the quality. An active team of ceramist is dedicated to find more cost effective solution for gaining competitive advantage over competitors. Due RAK's huge investment and dedication on R&D, enables them to compete with competitors and gain competitive advantage.
Human Resource Management:
Recruitment and Hiring: In RAK Ceramics, HR department is fully co-ordinate according to their standard. The whole recruitment process is described below step by step.
Step 1: To recruit employee for RAK Ceramics, they basically go through-