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
. 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.