PROCUREMENT , INVENTORY & DISTRIBUTION

ASSIGNMENT PROCUREMENT, INVENTORY & DISTRIBUTION

PREPARED BY : MOHAN SUBRAMANIAM I.C : 730122-02-5199

PROCUREMENT , INVENTORY & DISTRIBUTION

Table of Contents:

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Contents Assignment Question Warehouse Management System Objective of Warehouse Management System Purpose of Warehouse Management System Role of Warehouse Management System Team Activity Based Costing (ABC) Refferences

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1. Assignment Questions

The effectiveness of warehouse management system (WMS) and related solutions can have major impact on the bottom line for a distribution operation.

(a) Describe : What is WMS- Warehouse Management System? (b) Describe : Why a company must implement WMS? (c) Describe : What can the right WMS Software deliver? (d) Selecting and implementing the right warehousing and distribution system requires a blend of operational and IT expertise .Explain. (e) Activity- based costing (ABC) has proved to be successful tool in the financial control of warehouse activities. Explain.

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Warehouse Management System A warehouse management system (WMS) is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking. The systems also direct and optimize stock putaway based on real-time information about the status of bin utilization. A WMS monitors the progress of products through the warehouse. It involves the physical warehouse infrastructure, tracking systems, and communication between product stations.[1] More precisely, warehouse management involves the receipt, storage and movement of goods, (normally finished goods), to intermediate storage locations or to a final customer. In the multi-echelon model for distribution, there may be multiple levels of warehouses. This includes a central warehouse, a regional warehouses (serviced by the central warehouse) and potentially retail warehouses (serviced by the regional warehouses). Warehouse management systems often utilize automatic identification and data capture technology, such as barcode scanners, mobile computers, wireless LANs and potentially radio-frequency identification (RFID) to efficiently monitor the flow of products. Once data has been collected, there is either a batch synchronization with, or a real-time wireless transmission to a central database. The database can then provide useful reports about the status of goods in the warehouse. Warehouse design and process design within the warehouse (e.g. wave picking) is also part of warehouse management. Warehouse management is an aspect of logistics and supply chain management.

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Basic Functions of Warehouse Management Inventory Management exact to storage bin level Mapping and control of all goods movements Monitoring of the processing of these goods movements Connection to mobile data entry as part of the integrated radio frequencysolution Connection to specialist external systems using an interface

WarehouseManagement enables a precise specification of the exact location of a particular quantity of material and informs you whether this quantity is currently in a storagebin or on the move.

Warehouse Management uses aspecial document, the transfer order to map and control warehouse movements.When you create a transfer order, the system determine suitable storagebins to put away or pick stock (we can also manually specify the same).

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Graphic 1. Warehouse Management Process Diagram The Obejective of WMS The objective of a warehouse management system is to provide a set of computerized procedures for management of warehouse inventory with the goal of minimizing cost and fulfillment times. This includes:

A standard receiving process to properly handle a shipment when it arrives. This process can be individualized to each warehouse or product type.

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The receipt of stock and returns into a warehouse facility. An efficient warehouse management system helps companies cut expenses by minimizing the amount of unnecessary parts and products in storage. It also helps companies keep lost sales to a minimum by having enough stock on hand to meet demand.

Modeling and managing the logical representation of the physical storage facilities (e.g. racking, etc.). For example, if certain products are often sold together or are more popular than others, those products can be grouped together or placed near the delivery area to speed up the process of picking, packing and shipping to customers.

Enabling a seamless link to order processing and logistics management in order to pick, pack, and ship product out of the facility.

Tracking where products are stocked, which suppliers they come from, and the length of time they are stored. By analysing such data, companies can control inventory levels and maximize the use of warehouse space. Furthermore, firms are more prepared for the demands and supplies of the market, especially during special circumstances such as a peak season on a particular month. Through the reports generated by the inventory management software, firms are also able to gather important data that may be put in a model for it to be analyzed.

Alone warehouse management cannot automate the process. It also involves the combination of business process to be followed along with system to achieve 100% productivity and accuracy .

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Warehouse Structure With WMS When you implement the Warehouse Management System (WMS) in a plant, you define the individual warehouses (high-rack storage, block storage, picking area, and so on) as storage types within a warehouse complex and group them together under a warehouse number. As a rule, it is not necessary to define several storage locations for a plant since you assign the WMS warehouse number to a storage location from Inventory Management (IM). It is appropriate to define further storage locations for a plant if other warehouses (storage types) exist within a plant that is not managed using WMS but with Lean WM, for example. In WMS you define storage bins for each of the storage types. In this way, WMS manages stock information on all materials in the warehouse at storage bin level. In addition, the stock quantities of the material are managed in Inventory Management (MM-IM) at storage location level. In order to link the information at storage location level with the information from the storage bin, assign a warehouse number to the storage location.

This figure depicts two plants that each manage a storage location using WMS.

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Warehouse number 001 is assigned to storage location 0088 in the first plant. In warehouse complex 001 there are two storage types.

Warehouse number 001 is assigned to storage location 0088 in the first plant. In warehouse complex 002, there are three

storage types. You can also manage stock for several plants in the same warehouse at the same time. In this case, the same warehouse number is assigned to the storage locations for these plants.

As a rule, it is a good idea to manage only the stocks of one storage location and the same plant within a warehouse number. However, you can also manage several storage locations of one and the same plant within a warehouse number. For scenarios associated with this structural configuration, see Storage Locations in TRs, Tos and Posting Changes. For information on how to link a plant storage location in IM with a warehouse number in WMS, refer to the Implementation Guide under the path Enterprise Structure Assignment Logistics Execution Assign warehouse number to plant / storage location

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The system uses the links that you create to Inventory Management (IM) to ensure that certain processes in Quality Management (QM), Product Planning (PP), and Sales and Distribution (SD) are carried out in the Warehouse Management System (WMS) for the appropriate warehouse number.

Depiction of the Physical Warehouse in WMS

The warehouse structure in Warehouse Management is hierarchical and consists of the following elements:

The Warehouse Number

You can define an entire physical warehouse complex in WM using a single warehouse number.

The Storage Type

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Each of the warehouse facilities or areas that make up the warehouse complex can be defined as a type of storage area or "storage type" on the basis of its spatial, technical, and organizational characteristics. Each storage type is divided into storage sections. A storage section generally includes all bins that have certain characteristics in common, such as bins for "fast-moving items" near a goods issue area.

The Storage Bin

Each storage type and storage section consists of a row of storage spaces that are referred to in WMS as storage bins. The coordinates of the bins indicate the exact position in the warehouse where goods can be stored.

The Quant

The quant serves to perform inventory management of a material at the storage bin. To depict the setup of your physical warehouse in the system, first define the warehouse structures in WMS in the Customizing application. We recommend that you adhere to the following sequence when setting up your warehouse structure in the system. 1. Define the warehouse number in Customizing under the path Enterprise Structure Definition LogisticsExecution Assign warehouse number to plant / storage location 2. Define the storage types in Customizing under the path Logistics Execution Warehouse Management Master Data Define Storage Type. 3. Define the storage types in Customizing under the path Logistics Execution Warehouse Management Master Data Define Storage Type.
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4. Create the storage bins.

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Role of WMS Team The keyis that this team is truly empowered to make decision regarding operations and how the WMS needs to work in conjunction with that. In many cases, however, such a role and clear responsibility doesn't really exist in a WMS implementation, In those cases, there may be an "executive sponsor" who has ultimate responsibility for the project's success but isn't really involved in the day to day effort, and the WMS project manager in the company who usually is focused on meeting the project's schedule and budget. There may not really be a single decision maker in terms of all the choices that have to be made in a WMS implementation. "This role and person is the one that needs to say in the end, 'Yes, this is the system I can live with' and 'This is the system that is going to propel us competitively for the next 10 years, They are the ones that need to make the calls and ensure operations will work the way they need to." One critical decision this operational lead needs to make, is when it is time for the "go live." to use an approach based on "evidence," - does a company have real evidence that across operations, the system itself, IT interfaces, training, etc., it is time to begin running the WMS in the DC. Every businessman aims to increase profit by way of maximizing efficiency. Different types of warehouse management system software are designed to do just that by staying on top of storage, as well as shipping and delivery operations. Below is a list of benefits that a warehouse management system can provide.

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Task Distribution An efficient warehouse system allows for the even distribution of workload among warehouse laborers. Tasks are listed and monitored by the supervisor to ensure that daily operations are carried out as efficiently as possible. If there are multiple warehouse locations, then the supervisor can also reshuffle the workers depending on which branch is most in need of manpower. Controlled Movement and Storage of Items Having integrated warehouse management systems is crucial, especially if numerous transactions are processed and handled every day. One of the biggest advantages of such technology is that it paves the way for a smooth transition from the production phase to the arrangement of orders, down to the delivery of products. All these are recorded and tracked through the warehouse database. This way, supervisors are also able to monitor and justify the costs for operating the warehouse. Less Shipping Inaccuracies

Warehouse management systems are chiefly designed to ensure that the right items and quantities are shipped to the right customers. Having a validation system integrated in the warehouse management software eliminates the possibility of losing profit caused by wrong deliveries. Consequently, the relationship between the company and its clients is further strengthened by efficient order fulfillment.

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Improved Effectiveness in Bin Location Supervision The bigger the warehouse (and the more branches it has), the more necessary bin location supervision becomes. Effectively managing the location and arrangement of warehouse bins in one database saves time and effort for workers and supervisors alike. With an integrated system in place, it will be easier to track the codes and locations of items in the inventory. It is crucial that distributors running their own warehouses are properly informed of the advantages of having warehouse software from providers like Scan for Mas. Not only will it generate more profit by way of increased efficiency, but can also lessen costs and boost overall customer satisfaction.

Warehouse management system software (WMS) aims to supervise and control the flow and storage of stocks in a warehouse. It involves tracking stocks to monitor quantity, location, and unit of measures. It also includes the integration of these factors for storing positions, picking positions, and the extent of how to execute each of them. No two WMS software are created alike, although they have similar rudimentary functions: track what goes in and what goes out without any redundancy. More advanced versions provide real-time analysis and seamless integration into the companys existing business software. Some are even able to provide Radio Frequency Identification (RFID) and voice-activated commands for easier and more accurate stock handling. The Pros of WMS Theres a right way to tackle warehouse inventory, and it takes more than knowing whats in there. A good WMS anticipates your needs, emphasizes trends, and allows you to examine the business from various perspectives to
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ensure that you are doing what needs to be done. And because WMS software gets better with each successive version, it can make warehouse management more efficient than ever before. Warehouse inventory software can help you in 5 ways, namely: 1) quicker order replies; 2) reduced error rates; 3) reduced paperwork and delays; 4) more efficient use of warehouse space; and 5) improved customer service. To put it simply, a WMS solution means you are raising your warehouse to a whole new level of operation. The Cons of WMS As with any software system, there are some drawbacks and challenges that come with the implementation of WMS. These problems are nothing major, but some ground-level changes need to be done. Its not unusual for a company to restructure its whole operation just to accommodate WMS; and they dont come cheap. The initial cost of WMS systems will weigh heavily on your companys finances. WMS systems are also data-dependent and regulative in nature. A WMS comes with highly-specialized functions which provide management with relevant control over inventory operations. Once installed, the measurements to which it must operate must be put in place. To make it effective, a lot of testing, man-power training, and continuous evaluation must be done, and this takes around 6 months to 2 years, depending on the stocks and size of a warehouse. A warehouse management software system like Scan for MAS can have sizeable benefits, especially if you want to become a leading company in your industry. By implementing WMS, you demonstrate your companys readiness to compete in todays aggressive supply market.

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How to choose a WMS System from out the cluttered marketplace? There are many companies that provide software solutions for 3PL providers. However, none of them have developed the industry insight like SphereWMS. As a result, their WMS system truly adds value to an organizations business without heavy investment. They speak your language: SphereWMS developed its WMS system with your company and clients in mind. Their WMS system allows you to have greater visibility into your inventory and processes which leads to better decision making. SphereWMS developed the best WMS system to help you deliver the top notch customer service. Because, SphereWMS knows that reputation and service are assets that you can never lose track of. Dedicated Management Expertise: Sphere WMS brings an excellent leadership team to help your business succeed. Their experience in the logistics and supply chain industry has led to the development of the best WMS system in the industry. With experience working with industry leaders such as Level 3 Communications, IBM, Hyundai, and Sprint, the SphereWMS team developed the insight and expertise to develop cutting edge a WMS system and solution. Online and On-call, all the time: The best part of this WMS system is it is available 24/7. Because the WMS system is a fully hosted, web-based product you wont have to worry about your servers and IT infrastructure crashing. The WMS system is also supported by excellent technicians and customer support after hours. SphereWMS team is available via telephone, email, or the support portal on the WMS system. When you need the critical elements of your WMS system to work, SphereWMS will be there to ensure youre able to deliver on your promises.

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ACTIVITY -BASED COSTING ABC Definition: Activity Based Costing is a term describing the accounting breakdown of overhead expenses for a particular product according to each activity that is involved in the manufacturing or handling of the product. This is a very specific retail or manufacturing accounting method that requires the accurate tracking and input from each person and process that contributes to the product in any way. Activity-based costing systems, known as ABC systems in practice, are not compliant with generally accepted accounting principles. However, this does not mean that ABC systems aren't useful. ABC systems provide valuable information for managerial decision-making. However, knowing the similarities between ABC systems and GAAP-compliant systems can help you decide if the extra expense of keeping two systems is worthwhile for your small business. Manufacturing Costs One of the major reasons that ABC is not compliant with GAAP is that ABC systems do not assign all manufacturing costs to products. Organizationsustaining costs, such as expenses related to factory security, heating and air conditioning and building rent, will be incurred regardless of the level of production. As such, ABC systems do not assign these costs to products. The thinking here is that if a cost doesn't change based upon what is going on in the factory, then the cost isn't relevant to decision-making. While this makes sense from a managerial decision-making standpoint, this is in violation of GAAP. Non-manufacturing Costs ABC systems assign some specific non-manufacturing costs to products, even though this process is not allowed under GAAP. ABC principles dictate that all costs that are relevant to the product should be included in product cost. For example, if a custom product requires additional phone support staff to take customer orders, then this cost should be included as part of the product cost.
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Even though this isn't a manufacturing cost, if the phone personnel did not take these calls, there would be no product orders. In addition, if the company discontinued the custom product, the phone employees could be eliminated. Cost Pools In contrast with traditional costing systems, ABC systems use multiple cost pools to allocate overhead to products. Cost pools are "buckets" where costs are accumulated to be assigned to products. These cost pools are related to specific activities that occur in the company. For example, a small business may produce more than one product and need to set up machinery when switching from manufacturing one product or another. The overhead costs incurred due to switching products would be accounted for as part of the job setup cost pool. The disparity between this method and traditional costing systems is that traditional costing systems use a plant-wide or departmental rate to allocate all overhead costs as part of one large "bucket." Traceable Costs Traditional costing systems and ABC systems treat traceable costs in the same manner. Traceable costs, those costs that can be easily and cost-effectively directly traced to products, are directly applied to products under both systems. For small businesses, these costs are most often related to materials and labor costs. For example, if an employee works 8 hours at a rate of $20 per hour and manufactures a batch of 160 products, each product would be traced $1 of this employee's labor cost.

Cost reduction and analysis Understanding your cost is a vital prerequisite of being able to reduce cost. An important feature of activitybased costing is providing this knowledge.

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But this is definitely not the only aspect, maybe not even the most important one. Other ways of activitybased management in this category are: ge on resource utilization

- and external understanding of departmental cost drivers -if analysis

Within different types of businesses and business functions, ABC can be used to gain knowledge on resource utilization, for example: In libraries, activity-based costing is used to assign cost to the different types of loaning, like internal borrowers versus interlibrary loans. It gives library management more understanding on how their scarce resources are being utilized. For hospitals it can be used in the same way for different types of patient services, in banks for client services. -based costing to improve cost estimation and, as mentioned before, for a customer/product profitability study. The last function can also be used for other businesses functions like logistics. A specific concern for departments/businesses is that customers, corporate management and other departments within the business, do not have a clear understanding on how (order) behavior impacts the efficiency and cost of the processes. Activity-based costing can help to build this understanding by: om activity-based costing for what-if analysis to show the cost impact of changes in for instance batch size.

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Presenting and explaining the cost implication of using a particular order type and/or transportation mode. E.g. based on ABC it can be explained why an emergency order or air shipment is more expensive to pick/pack then a regular order.

The information can also benefit customers because they can be advised on how to reduce their own cost. An additional aspect is that the outcome of ABC can be used for (internal) benchmarking of the efficiency of activities. For example by comparing the tariff per activity between different sites of the same business. This can only be applied when it is assured that the basic principles of the activity-based costing models are exactly the same. Meaning that the cost categories and the cost drivers used, need to be exactly aligned

REFFERENCES (a) http://www.sciencedirect.com/science/article/pii/0925527394000859 (b) http://retailindustry.about.com/od/retaildefinitionsab/g/Definition-MeaningActivity-Based-Costing-Retail-Glossary-Business-Terms-Dictionary.htm (c) http://www.scdigest.com/ontarget/11-04-20-1.php?cid=4462 (d) http://www.scdigest.com/ontarget/11-04-20-1.php?cid=4462 (e) http://www.wikipedia.com (f) http://quickmba.com (g) IGE notes

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