final_siemens_internship report_hudaibia tariq

Siemens Pakistan Engineering Co Ltd.

Internship ReportSubmitted to: Mr. Hussain Ismail

Hudaibia TariqCommercial Internee, OLMAugust 10th-September 18th 2009

Internship Report-Hudaibia Tariq Siemens Pakistan Engineering Co Ltd.

Acknowledgements:

To begin with, I would like to thank to Allah s.w.t for giving me an

opportunity to work in this prestigious organization. I would also like to acknowledge

Mr. Hussain Ismail for his cooperation and consideration in accommodating this

valuable internship. I would also like to particularly recognize my supervisors: Mr.

Ammad Saleem and Ms. Rabia Anis, for their constant support, time, and unrelenting

guidance throughout my 6 weeks here.

This internship has been the most fulfilling work experience I’ve undertaken.

It has given me a deeper knowledge of the business world and office culture, has

sharpened my IT skills and significantly improved my multi-tasking and decision-

making capabilities. What I felt was a greatest asset was the knowledge I gained here

on how to operate corporate accounting software, the Spiridon System. I found the

work environment to be very friendly, and the people I worked under always

encouraged me to ask as many questions as possible while at the same time I was

expected to learn on my own. Through this experience I acquired the unique

opportunity to look deeper into my chosen career field, by interacting with employees

and clients, working on real assignments and shadowing commercial officers.

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Table of Contents

Company Profile Overview............................................................................................4 Siemens Pakistan Engineering Co. Ltd..........................................................................4 Principle Business Functions ........................................................................................7 Products and Services.....................................................................................................7 Corporate Structure......................................................................................................10 OnCall-, Logistics-Repair Services & Maintenance (OLM) Business Unit................11 Commercial Department Overview............................................................................12 Bank Guarantees’ used at Siemens Engineering Pakistan...........................................17 Process of Billing and Follow Up................................................................................17 Credit Analysis.............................................................................................................17 Sales Document Index..................................................................................................18 Financial Reporting......................................................................................................19

Company Profile Overview:

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Siemens (Berlin and Munich) is a global powerhouse in electrical engineering

and electronics. Siemens provides innovative technologies and comprehensive know-

how to benefit customers in over 190 countries.

The company was established in 1847. Initially it began its operations as a

small precision-engineering workshop, and overtime grew into what is now one of the

world's largest companies in electrical engineering and electronics. Landmark

inventions, an immense readiness to innovate, and a strong international commitment

have driven the company's success since its very beginnings. Siemens’ operations are

divided into three main sectors:

• Industry

• Energy

• Healthcare

Siemens in Pakistan

Siemens Pakistan is currently in the leading position in the country in the areas

of Power, Automation and Control, Medical, Transportation, Information Technology

and Industrial solutions. Siemens is the country’s prime supplier of high-voltage grid

stations, switchgear products and systems, power distribution and power transformers,

and network consultancy. The Power Generation Group is a major player in the

country. To date, the Group has added over 2,500 MW to Pakistan's power generation

capacity, which represents 15% of the country's installed output. The Automation and

Drives Group is the only major local supplier with 35 years of experience in the local

manufacture of diesel generating sets to meet customer specific demands from clients

on both the domestic and international front. The company further flourishes with its

Medical Solutions Group, which at the moment is the chief supplier of state-of-the-art

equipment to major hospitals.

Siemens is one of the most important employers in the country; it has a

monumental workforce of 1550 employees. Siemens is also the single largest

employer of engineering graduates in the country. It also boasts a significant number

of women in important positions in every department and thoroughly follows a gender

equality policy.

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Siemens Engineering Pakistan was established in 1953 as a private limited

company. The company then evolved to become a public limited company in 1963.

Company shares have since then been quoted on the Karachi, Lahore and Islamabad

Stock Exchanges. The head office is located in Karachi and the regional offices are

based in Lahore and Islamabad. The company is an essential subsidiary of Siemens

AG and consists of three main divisions:

1) Energy Solutions

2) Industry Solutions

3) Healthcare Solutions

The products manufactured locally are done so under license from Siemens

AG, in Germany and thus the quality of the products are in line with the products

being produced at Siemens AG factories that provide specialised technical support

and back up when needed.

The firm is predominantly engaged in providing solutions that address all

three sectors; Industry, Energy and Healthcare. The Industry sector aims to provide

avant garde solutions to customers in the fields of production, transportation and

building systems. Similarly, the Energy sector offers products and solutions for the

generation, transmission and distribution of electrical energy. Meanwhile, the

Healthcare Sector strives to come up with innovative products and complete solutions

as well as service and consulting in the healthcare industry. In a nut shell the company

deals with manufacturing electrical and mechanical equipment, installation and sale of

telecommunication, household and medical equipment and mobile devices and

executing projects under contract. The firm has been contributing to the Pakistani

economy by channelling their tech savvy knowledge into producing contemporary

solutions and products as well as services.

The firm is centrally located in the heart of the industrial vicinity of Karachi at

S.I.T.E. and is one of the oldest and largest industrial estates. Furthermore, the firm

also boasts an ISO 9001 certification proving its high standards in manufacturing

second to none in the region. The firm was given such recognition by Siemens AG

that it is now the competence centre for the entire region and has been permitted to

export its high tech products and services to countries in the Middle East and Central

Asia.

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Siemens Engineering Pakistan is one of the few firms in the country that uses

the SAP/ERP Technology. This corporate accounting software, the Spiridon System

(formerly known as SAP) is heavily used in the day to day business function of each

business unit within the firm. Siemens Engineering Pakistan uses this software

globally and many other successful MNC use it in order to ease the flow of

information in their worldwide divisions. At Siemens the Spiridon System is used to

produce Financial Statements and record important data related to clients and vendors.

The fiscal year at Siemens Engineering Pakistan runs from October through till

September and annual closings take place on the 31st of September.

The Spiridon System is generally used to compile transactions with related

parties separately for each related party with complete analysis product-wise, order-

wise, period-wise, nature of transaction wise etc. Furthermore, separate reports may

be generated for transactions carried out at arms length (those transactions whose

terms are similar to that of the knowledgeable and willing unrelated parties in the

ordinary course of business) or otherwise. The system is used to generate quarterly

returns, default budgets and forecasts which are then submitted to business units.

There are three main types of businesses that get reported by Siemens world-

wide and they are:

Direct Business- The business from external clients.

Intra Company Business- This is the business generated from within

the company; business units may require each other’s services and thus are treated as

clients hence charged the same. However if a business unit requires services form

another division the reporting is done under Direct Business.

Commission Based Business- Refers to commission based income

where the business units act like a third party. Thus Siemens Pakistan receives

commission as the ‘middle-man’ in the case where a business unit may not be able to

provide a particular product or service, they outsource and receive commission.

Although Siemens Pakistan doesn’t receive hefty amounts of commission based

business. It does deal with it especially concerning Lahore offices and regional deals.

Principal Business Functions at Siemens Engineering Pakistan:

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1. Sales & Marketing

2. Engineering & Design

3. Manufacturing

4. Installation & Commissioning

5. Services

Products & Services

Energy and Power Solutions

Energy Automation

Generating sets

High Voltage Sub-stations

Power Generations

Power Transmission & distribution services

Solar power

Switch boards

Transformers

Industrial Solutions

Engineering & Construction Motors & Alternators On call Logistic, Repair service & Maintenance Process Industries Automation Standard Products UGS PLM Software

Transportation Solutions

Automotive Telemetric Solutions Transport Systems

Building Management Solutions

Building management solutionsCommunication Solutions

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Communication Networks

Information Technology Solutions

SAP Academy

SAP Solutions

Health Care Solutions

Medical Solutions

Home Appliances

Siemens Home Appliances

Corporate Structure:

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The corporate structure at Siemens Engineering Pakistan is such that each

division has several separate business units. Each business unit has two heads, one

being a commercial head and the other a technical head. Both subsequently work

together towards achieving operational efficiency. The Commercial heads are

commerce related persons holding an MBA and Technical heads are the Executive

Engineers. Mr. Hussein Ismail is the General Manager of the OnCall-, Logistics-

Repair Services & Maintenance (OLM) Business Unit where I was placed for my

Internship. Mr. Mohammed Mehdi is the DGM of OLM. The hierarchy is such that

each commercial head of a business unit reports to the commercial sector head who

then reports directly to the CFO of Siemens Pakistan, Mr. Gerhard Wilcke.

Overall, the business unit heads report to the divisional heads who then in turn

report to CFO, Mr. Gerhard Wilcke and CEO, Mr. Sohail Wajahat Siddiqui of

Siemens Pakistan. A flow chart has been given below:

The organisational chart of Siemens Engineering Pakistan is on the following

page. The chart shows how each division is divided into separate business units and

will help explain the hierchachical flow of the firm.

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Siemens AG Germany

Siemens Engineering Pakistan

Divisions

Business Units


OnCall-, Logistics-Repair Services & Maintenance (OLM) Business Unit

The OLM department is under the Industry Division. The Industry division

consists of two segments and OLM is in the first segment.

The OLM department is generally involved in:

Providing Operation & Maintenance Service for Industrial and Power Plants.

Repairing, Overhauling & Maintenance of Motors & Alternators

Condition Monitoring (Thermography, Vibration Analysis, NDI & Oil

Analysis)

Spare Parts Management

Call Centre for customer support and after sales services.

Furthermore, the department is also involved in providing business based

maintenance and technical support. The OLM department consists of three main

executionary sub-departments.

They are:

Sales & Marketing

Services

Commercial

OLM consist of three main branches Karachi, Lahore and Islamabad. Although there

is a branch in Multan it is reported in Lahore.

Sales & Marketing

The sales and marketing department handles the marketing related activities

and is heavily involved in the Bid Offer Preparation process. The initial stages of

marketing activities begin with the gathering of information through the internet,

newspaper, industrial associations and market intelligence data. The department then

carried out extensive market research in order to calculate market potential.

After the research results have been analysed, a thorough marketing strategy is

defined and the clients are contacted via telephone, email, letter or where appropriate

conduct site visits.

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Commercial

The general business flow at the OLM Commercial Department is given

below:

1. Initially a prospective client sends and inquiry to Siemens Pakistan, in the

relative department dealing with the services needed. The inquiry is basically

sent to find out whether the company can provide the manufacturing and or

servicing of a particular product or service. Based on this, the commercial

department is responsible for sending back quotations; these are the prices

Siemens Pakistan will charge.

2. The inquiry is then received by the client and an offer is generated. The offers

are received by the Commercial officers, who then open the orders.

3. The renewed quoted prices are then sent back to the client who then either

accept or reject the quoted prices. Clients often ask for discounts and the

department reviews the request and tries to accommodate in order to receive

further business.

4. The client then sends a revised offer with the revised amount and prices. At

this stage the terms and conditions usually remain the same.

5. The client, after accepting the revised offer from Siemens Pakistan then sends

a purchase order.

6. Once the order is received, the job is executed. As soon as the job has been

fully completed a job completion note and dispatch note is sent with the

client’s authorised approval.

7. It is at this stage where the orders are booked onto the Spiridon System using a

system generated number.

8. After the order is booked onto the system, the turnover is then booked and an

invoice is generated for the customer signifying the completion if the job.

Through this process I learnt how and when each new order is placed onto the

system and once it is executed it is recorded as sales turnover and communicated to

the entire industry sector.

The commercial department gives it inputs at various stages. During the Offer

Processing stage, the commercial department is responsible for checking the

proposals, cost calculation sheet and calculating the Return on Capital Employed

(ROCE).

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During the order processing stage, the OLM commercial staff remains in touch

with the clients’ right through to the execution process. Through the execution phase,

various costs are incurred; the OLM Commercial staff strives to ensure that the actual

cost remains lower than the planned cost, or within the parameters of the planned

costs. A loss order occurs when the actual cost exceeds the order value.

The Industry sector has a centralized purchase department and a separate

payables and stores department. Once a Purchase Order has been initiated and booked

onto the system, purchasing starts.

There are two main types of purchases:

Local Purchases

And

Imports

Local Purchases:

The local purchases follow a particular procedure which is listed below:

Material Requisition-A material requisition form is received from the

Industry Store. All the materials that are needed and not in inventory are put on the

Material Requisition form. This form is signed and checked for commercial and

technical workings and is then forwarded to the purchase department, who in turn

arrange for the best quotations for the business unit in question with different vendors.

Quotation- A quotation is received either internally from another

Business Unit or externally from a vendor.

Comparative Statement- The comparative statement is made by the

purchase department. The different quotations are then reviewed on a comparative

statement. The quotation that is most viable to the business unit is then selected. The

commercial staff is responsible for making sure that the planned cost remains greater

than the committed cost. The cost of the items to be procured is also checked with the

planned cost of those items.

Purchase Order-The Purchase Department then issues a purchase

order. A Spiridon generated purchase order number is then raised and sent to the

selected vendor (internal or external).

Once procurement is made from the vendor a Materials Received

Report is generated by the Industry Store.

Material Inspection Report- A material inspection report is generated

once all the materials have been checked.

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Goods Received- After MRR & MIR, a goods receipt is entered in the

system by the Industry Store.

Invoice-Following the goods receipt note, an Invoice is received from

the vendor (internal & external) by the Industry Payables section.

Verify-This vendor invoice is then verified by the responsible engineer

& forwarded to Industry payables for the preparation of bill sticker.

Bill Sticker-Duely signed Bill sticker is then forwarded to Financial

Control Department for posting by the payables division & release of payments.

Imports

The process of imports is very much similar to that of the processes of

Material requisition, Quotation, Comparative statement and Purchase order.

Material Requisition- A material requisition form is received from the

services department. All the materials that are needed and not in inventory are put on

the Material Requisition form. This form is signed and checked for commercial and

technical workings and is then forwarded to the purchase department, who in turn

arrange for the best quotations for the business unit in question with different vendors.

Quotation- - A quotation is received either internally from another

Business Unit or externally from a vendor.

Comparative Statement- The different quotations offered are reviewed

on a comparative statement. The quotation that is most viable to the business unit is

then selected. The commercial staff is responsible for making sure that the planned

cost remains greater than the committed cost. In the case where a committed cost (the

actual cost of procuring all the raw materials needed to perform or execute a particular

job/order) is greater, divisional management is involved for approval and settling the

misbalance. The cost of the items to be procured is also checked with the planned cost

of those items.

Purchase Order- A Spiridon generated purchase order is then raised

and sent to the selected vendor or internally to the business unit (in this case the OLM

business unit).

Order Acknowledgement- The supplier then dispatches an order

acknowledgement or Performance Invoice which serves as the part of the Agreement

for the establishment of a Letter of Credit or a bank contract.

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Central Imports- During this phase the Letter of Credit or Bank

Requisition is forwarded to the Central Imports department. At Siemens the Imports

department is centralised. They are responsible for handling all the Letters of Credit

and dealing with banks. The Centralised Imports Department receives the respective

business unit’s request for the establishment of an LC or Bank Contract, through an

LC or Bank Contract establishment form. The central imports department then deals

with banks directly who create the LC or Bank Contract. An internal system generated

number is then arranged by the Central Imports Department which is eventually

communicated to the respective business unit.

Letter of Credit/ Bank Contract- Clients dealing with Siemens or vice

versa may often require an LC or Bank Contract. This binding document allows the

buyer (through his/her respective bank) a guarantee that the payment for goods will be

transferred in fact be transferred to the seller and the goods will arrive on the date

agreed. In short, A Letter of Credit is a written undertaking by the Importer’s bank,

known as the Issuing Bank, on behalf of its customer, the Importer (Applicant),

promising to effect payment in favour of the Exporter (Beneficiary) up to a stated sum

of money, within a prescribed time limit and against stipulated documents. It also

further gives the beneficiary the basis for clearance. In order for the payment to occur,

the seller has to present the bank with the necessary shipping documents confirming

the delivery of goods within a given time frame. It is often used in international trade

to eliminate risks such as unfamiliarity with the foreign country, customs or political

uncertainty.

Clearance- Consignment is sent by the seller after which the necessary

shipping documents are delivered to the Centralised Imports department through an

agent for the clearance of the consignment. The Centralised Imports department

organises for a respective clearing agent who is responsible for the customs clearance

and dispatching the shipment to the respective business unit’s ware house/store.

Material Receiving Report- A material receiving report is generated

once the goods have been received.

Material Inspection Report- A material inspection report is generated

once all the materials have been inspected thoroughly.

Goods Received- After MRR & MIR, a goods receipt number is

entered in the system leading to a goods receipt note.

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Invoice-After the goods receipt had been established an invoice is

received from the supplier or business unit.

Verify- The vendor invoice is then verified by an engineer.

Payables- Once the invoice has been properly verified, it is forwarded

to the payables department. This is then forwarded to Financial Control Department

for posting by the payables division.

The different types of Bank Guarantees’ used at Siemens Engineering Pakistan

There are three main types of bank guarantees: Bid Bond/Earnest Money-A surety bond filed by contractors,

guaranteeing that in the event where a bid is accepted, the successful contractor

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will sign the contract and present a performance bond. This is basically given at

the time of submission of the tender and is often referred to as earnest money’.

Advance Payment Guarantee- This is to secure any claims by the

buyer on the seller for reimbursements of the buyer’s advance payment on the

contract price before delivery of the goods (or advance payment of the full

contract price) - in the event that the seller has failed to meet his or her contractual

delivery obligations. This usually occurs once the job has been awarded, after

which a certain percentage or all is given as a guarantee to the client.

Performance Bond-A performance bond is a surety bond issued by an

insurance company to guarantee satisfactory completion of a project by a

contractor. In short, a performance guarantee basically makes sure that the job has

been executed properly as per the client’s requirements. If not, then the guarantee

can be en cashed (taken back or withheld), it is a form of security for the client.

The process of billing and follow-up: As soon as an invoice is booked on to the system, the recovery section is

involved in making sure that the payment is released by the customer through

consistent follow up.

Credit Analysis:

At Siemens Engineering Pakistan, certain credit limits are usually assigned to

new customers. These limits are often revised as business grows with a respective

client. The credit limits are assigned at the business unit level and an authority of Rs.

500, 000 is given as a general credit limit. A certain formula is applied in order to

obtain credit exposure. The formula is given below:

Credit Exposure = (Turnover + Receivables) - Advances

One particular client had an extended credit limit amounting to Rs. 1 Million.

Therefore using the formula given above its credit exposure would be Rs. 2 Million.

In this case the credit exposure of that client was greater than its prescribed credit

limit. As a rule, credit limits need to be greater than or equal to credit exposures in

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order for the system to operate. The Spiridon system restricts bookings on any such

orders where the credit exposure exceeds the credit limit.

Sales Document Index:

At the OLM department at Siemens Engineering Pakistan, a sales document

items list is prepared on a regular basis. It is obtained from the Spiridon system and

basically includes all the orders on hand. The OLM commercial department is

responsible for responsible for billing the orders. These bills are then transported to

the central Financial Control Department. Each division at Siemens (out of the three)

basically has several business units. Each unit prepares orders relating to varying

products and services. The accounting done here is at the business unit level. The

company reporting is then handled by the FC dept.

The sales document items list shows us which orders have been booked and

for what purpose. It also further acknowledges all the costs incurred from procuring

raw materials form vendors (known as committed costs) to planned costs. The

document list also allows us to see which orders have been booked as a loss order.

The aim of the business unit is to keep the various costs during the order execution

phase to a minimum, or to keep the actual cost lower or within the parameters of

planned costs. Each purchase order has a special system generated number once the

order is issued by the vendor.

Through this process a committed cost automatically appears on the document

list. The business units in turn work hand in hand with the purchase departments and

eventually submit their reports (usually on a monthly basis) to the FC Dept.

Financial Reporting at Siemens Engineering Pakistan:

There are many types of Financial Control based reporting done at the

business unit level. The focal one’s being:

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1. Budgeted Monitoring Reporting (BMR)

2. General Reporting

Budget Monitoring Reporting

A budget monitoring report its main sheet consists of two parts of an Income

Statement and Cash Flow. The income statement calculates the Earnings before

Interest & Taxes (EBIT) at the business unit level for the actual, seasonal &

forecasted figures for the month. Budgeted Monthly Reporting is compiled at sector

level and is then forwarded to Financial Controls Department. Various strategic

decisions are devised on the basis of BMR at divisional level.

At Siemens Engineering Pakistan, General Reports constitute of the following: Regional Reports-Siemens Pakistan is divided into three regions

Karachi, Lahore & Islamabad

Budget Module-The budget module is prepared once a year.

Segments Reporting (GG wise)

Divisional Reporting

Siemens AG Reporting

Corporate Reporting

OLM BU has 5 segments defined to it which is Cross Industry, Pulp & Paper,

Cement, Industry Infrastructure and Logistic/ Repair Services & the Quarterly &

yearly forecasting & planning reporting is done in these segments.

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