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Velky Potraviny

Velky Potraviny

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Published by Umair Babar Chishti

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Published by: Umair Babar Chishti on Jan 06, 2012
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12/12/2012

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Supply Chain Management
 
Velky Potraviny
 
December 8, 2011Presented by:
 Ahsan Khawar 12020378Fahd Iqtidar Mir 12020367Nabeel Siraj 12020325Umair Babar Chishti 12020157
 
Question 1Warehousing Space:
Currently they have 37stores but they plan to expand it 67 retail stores in a few years so this will obviously needmore warehouse space. The current warehouse is having problems managing the workload, so how will itmanage when the retail stores to be served increase by 81%! But if we analyze the details carefully we wouldsee that there is a lot of space not used effectively because of the information asymmetry and poor coordinationamong employees. But he might need more space, which would increase the already high costs.Further when we see the layout of the warehouse it is so disorganized that it disrupts operations, nor is it used atits full capacity. In total four ramps could not be operated, two because of their height and two because there is³Work In Progress´ lying in front of them. So this disrupts the smooth flow of goods across the warehouse, itincreases time to unload and thus increases the cost. Also the offices are setup at different segregated areas inthe warehouse, which might reduce the between the employees. Further, because we would need to providefacilities like Wi-Fi/kitchen/clean water etc. at multiple locations this will further increase the costs. Further there is empty space as well which should be utilized in such a way as to not disrupt the current flow of thegoods, but to improve it,
Coordination and Asymmetric information:
If there is more coordination they can reduce their cycle time, as stated in the case that at one instance whenthey planned and coordinated they were able to reduce their unloading time by about 1/3
rd
. This will reduceuncertainty and certainly the need to keep more stock because of this uncertainty. Further this will help themreducing cost as the freed labor time because of shorter cycle times could be used in other areas. All the four  people, driver, stepper, picker and receiver are dependent on each other. If one does not work correctly all other are affected. So it is extremely crucial that the three have access, because of limited access what happens is thatthey both try to maximize their own particular goals and in return do not care about other needs. Further, because of the non-existence of a bar codes system, the people at the warehouse had little knowledge of theactual demand at the retail network, so a bull whip effect was also created, which further increased the problems.
Employee Satisfaction and rewards
The problem of Coordination is further exacerbated by the key performance indicators decided for thewarehouse employees. They are based on optimizing individual performance. So the receiver tries to unload asmany pallets as possible without having any reference to the capacity of the stepper, and the stepper tries tomove maximum pallets without any regard to the final order. The stepper places goods in no particular order and it is not easy for the picker to pick and for the driver to deliver. Similarly the buyer is judged on the number of stock outs, so he tries to buy as much inventory as possible to maximize his bonus. In this he ignores theadded costs that others would have to bear because of the excess inventory.
Change from a communist to capitalist society:
In the communist era, most of the infrastructure was destroyed. After it ended, restoration was done but still alot of improvements were needed. Because of the poor transportation system delivery was usually slow andunpredictable. And it was difficult to predict when the truck will arrive. This also increased the transportationtime, and further added to the uncertainty, thus higher safety stock is needed for that. Also there was a shortageof warehousing space so as Velky will grow they might face this problems in regard to this. But as the economyis growing this might not be a very big problem.So Velky faces numerous problems related to its warehouse and should make a concrete plan to make sure thatthese problems do not re occur.
 
Question 2Picking process:
The picker upon receiving the pick list picks the items from the respective shelves and aisles. As discussed inthe meeting, the major issue that the picker faces is that the items are not placed in their correct aisles and hehas to travel longer distances to locate the items that need to be picked.There are several ways through which the picking process can be improved. Firstly, the fast moving goods can be in easy to access locations, such as main aisles. Also, they can be placed near the shipping area to reduce the picking time. Furthermore, items that are complementary and are usually picked together can be placed closer toeach other to reduce picking times.Another issue that is related to the picking process and maybe some of the other processes is the inventorydamages that occur during handling. These damages can lead to a huge increase in the overall costs for Velky.To address this issue, locations can be allocated on the basis of item fragility and weight. For instance, fragileitems can be placed in the ground shelves and the heavier items can be placed closer to the shipping area.
Receiving Process:
The first issue in the receiving process is the fact that deliveries are not scheduled. So there are times when twoor three supply trucks come in together and during such times the receiving process gets overburdened. At suchtimes it is important for the receiver to make sure that all suppliers deliver complete orders and quantities.Besides an erratic delivery schedule, the receiver had no idea about how much quantities were going to bedelivered during the coming day or week. This happened because the supplier either went short on an order or they would deliver an order very late due to the infrastructure problems. Resolving this issue requiresimprovements at multiple levels. Firstly, there is a need of building stronger relationships with the suppliers.Such relationships would reduce the number of orders that are shorted by the suppliers and also reduce thedelays in deliveries. Also, by dealing with a select number of suppliers who are more reliable, the receivers will be able to better forecast the delivery schedule and hence plan ahead.
Driving and shipment Process:
There were two issues that effected the shipment and driving process. Firstly, the drivers were not able to loadthe shipments efficiently due to a much unorganized expedition area. The shipments for a specific store werenot placed in a specific area and it took considerable time for the driver to find the specific pallets to be shippedto a specific store. This in turn was related to the second flaw in this process, the drivers had no fixed schedulesof pickup and delivery and the picker and stepper had no idea when the driver was going to show up for the nextdelivery. These inefficiencies could be answered through developing a fixed schedule for the drivers and the pickers. There should be some safety margins between these timelines so that when a driver has to show up for  pickup, the picker has already picked the goods and assorted them into a pallet. So time lines should be given toeach department especially the drivers so that all the departments are aware of the time boundaries within whicheach of them is supposed to complete their task and hand over to the next party.
Stepper Process:
The main issue in this process is the fact that the stepper only cares about making sure that FIFO is beingfollowed. The stepper doesn¶t care if the items are placed in the wrong place or the wrong shelve and this ismainly because the SKU #¶s are too small to read and hence the stepper or the receiver makes a lot of errorswhile receiving and assorting the goods in the shelves. The need for having better SKU tags is imminent.Firstly, it can reduce the number of misplaced items and reduce the picking time by a great extent. Secondly, itwill also improve the shipment process by making it easier for the driver to spot shipments for specific stores.Another issue is that the stepper replenishes the picking area only on the basis of visual observation. Thisincreases the chances of the picking area being out of stock when the picker starts filling orders. It can beavoided by using a formal replenishment system such as minimum stock levels and reorder points.

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