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CIO Entry Number: CIO-2017-018

Project Name: Stand Alone 2.0

The CIO Story

STAND ALONE 2.0

Insert Teams Group Picture Here (PLS. FOLLOW THIS SIZE)

THE WILD ONES

Monde Nissin Corporation Cebu

Team Members: Maritoni Surabia, Evelyndo Gades, Joseph Quicho

Leader: Reperlyn Carwana

Adviser: Remedios Gayrama / Keanu Henri Yu

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

I. INTRODUCTION
Monde Nissin Corporation (MNC) is one of the Philippines leading manufacturer and
distributor of food and beverages today. MNCs partnership with LF Logistics in the
Visayas and Mindanao (Vismin) region started in Cebu with only a floor stacking pallet
capacity of 3,000 on May 1, 2005. Now, the business has grown to 8,000 which is almost
triple the value of the starting capacity. For 12 years, LF has been MNCs partner in
distributing a wide array of products under renowned brands in the industry like MY San,
Dutchmill, Mama Sitas, Kellogs, Pringles, Kratos, Jelly Vit, Peckish, in addition to its own
brands, Lucky Me! Noodles and Monde Nissin biscuits.
LF Logistics Cebu handles all warehouse transactions from receiving to dispatch for
MNCs on-site warehouse. With an average monthly volume of 2.9 million cases serving
236 accounts across Vismin with a daily dispatch of 48 trucks. The current requirement
for manpower is a headcount of 66, operating 31 jack lifts and 3 forklifts which cover
both the plant warehouse and the overflow warehouses. These overflow warehouses
have been rented to support the limited storage capacity in the plant warehouse. The
number of SKUs maintained in the overflow are almost equal in both sites, requiring
dedicated and disciplined personnel stationed to closely monitor the transactions.
Other services rendered for MNC include maintaining agreed service levels, inventory
accuracy, and standard KPI. Given the consistent performance in operations, MNC has
also expanded their business with LF by awarding their bundling service requirements
for preparation and packaging of their promo products.
LF-MNC Cebu has operated manually in dispatching and receiving transaction for the
past 12 years using a mode of inventory monitoring called Stand Alone. LF-MNC Cebu
came up with this idea to closely monitor the IRA since LFs Exceed WMS was
discontinued due to connectivity issues and the lack of an interface between both
companies systems.
Despite the manual nature of operations, LF-MNC Cebu was not exposed to any
gargantuan charges and has not contributed to the companys financial leakages.
Furthermore, this manual nature molded the operations team to stay vigilant, take
ownership, develop high level of execution, and continuously seek improvement.

II. ABSTRACT OF PROJECT


Another challenging aspect of LF-MNC Cebu operations is the management of 2 overflow
warehouses located at Paknaan & Canduman with a travel distance of 4 and 6 kilometers
respectively. These overflow sites were rented to support the limited capacity of the
plant warehouse and serve the production pallet requirement. Everyday an average of 18
trips using a forward truck is needed to supply orders. In fact, 59% of the daily dispatch
volume of non-Cebu produced products comes from the overflow warehouses.
This setup causes problems which affect day to day warehouse transactions: waiting time
for arrival of stocks from the overflow, delays in loading, over stocking of less needed
items, and shortage of needed stocks a result of a poor transfer plan due to no
available exact data of the dispatch quantity prior loading transaction. MNC Cebu can
only provide the projected outgoing at around 9:30 am daily which often contains
inaccuracies due to advanced and/or late processing of orders.

To overcome these challenges, The Wild Ones implemented:

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

1. Advance daily encoding of pick lists for next day loading

The plan was almost effective however most of the time the encoder cannot finish
encoding all the pick lists prior to loading transactions for the following reason:

1. Encoding is too intensive using the current stand alone template (see Figure 1).
Encoding would often end at around 9 am negating the purpose of advance
encoding
2. Less accuracy in posting

Figure 1: Encoding Time Old Template

Without an existing WMS in LF-MNC Cebu, the team resorted to revision of the template
to increase encoders productivity. With the newly implemented Stand Alone 2.0, the
transfer plan has become effective since the exact data of the dispatch quantity is
readily available before 6:00 am.

III. PROJECT TIME TABLE


Schedule of activities from start to completion of project. See below sample format

Activity Jan Feb Mar Apr May Jun Jul Aug Se Oc No Dec
p t v
1. Project Team 27
Formation
2. Understanding the 31
Present Condition of
BU
3. Problem 3
identification and
Selection
4. Root Cause Analysis 17
and Verification
5. Objective Setting 18
6. Action Planning 1
7. Implementation of 1
Action Plans
8. Project Evaluation/ 1
Effectiveness Check

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

9. Standardization 28
10. Next Project 11
Planning

IV. Understanding the Present Condition of BU


MNC Cebu dispatches an average of 48 trucks/vans per day, equivalent to an average of
44,530 cases. From this, 59% of non-Cebu-produced stocks is sourced from overflow warehouses
through inter-warehouse stocks transfer. An average of 18 trips of forward trucks is needed for
the daily stocks transfer to complete order volume. This setup demands the ICC to carefully
prepare the transfer plan to avoid problems in the overall daily transaction. The previous process
to prepare the daily stocks transfer can be seen in Figure 2.

Figure 2: Current Process

Step 1 Step 2 Step 3 Step 4

Identifies stocks for Wait Projected Constantly checks Ensure that transfer
transfer by comparing outgoing (TOTCB) stand alone for actual requests are executed
plant balance with provided by monde stocks dispatched and by overflow in charge
overflow stocks as basis for stock update the stocks
transfer If not transfer monitoring
available, makes
initial request for
stocks with critical
inventory

LF-MNC Cebu needs to ensure that majority of the stocks transfer happens in the morning to
avoid/lessen transfer activity after the truck ban (5:00 am to 8:00 pm). This can be done by
starting the transfers at exactly 8:00 am upon availability of the forward trucks. MNC provides a
daily projected outgoing file (referred to as TOTCB), however they often provide it at around 9:30
am already limiting the time for the ICC to properly plan the transfer (see Figure 4). The Team
Leader can give feedback to the ICC of the needed stocks only when the picker complains of an
empty pick face. In return, the ICC must revise the initial request to insert the priority stocks
which have been depleted in the pick face.

Aside from the unavailability of the projected outgoing at an earlier time, there are also
inaccuracies with the contents of the transfer plan causing over stocking of less needed items in
the plant warehouse further limiting storage space. These inaccuracies are due to advanced/late
order processing of orders on the MNC Customer Service Specialist (CSS) (see Figure 5). Overall,
the process of using the TOTCB is ineffective and requires extra processing since the ICC will still
have to check the actual outgoing in the stand alone to correct any inaccuracies .

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

TOTCB On-time Availability


15:13
16:48
14:24
12:00 10:20 10:32 10:30 10:41
9:48
9:36
Time

7:12
6:00
4:48
2:24
0:00
Days

Recei ved Needed

Figure 4: Projected Dispatch Data Supplied by MNC

Figure 5: Inaccuracy of Projected Dispatch Data from MNC

Projected Dispatch (CS) Actual Dispatched (CS) Difference (CS) %Inaccurate


68,201 35,529 32,672 48%

V. Problem Identification and Selection


An average of 40 trucks a month is affected by waiting for stocks from the transfer resulting to loading
delays. The graph below shows the number of loadings affected due to the poor transfer plan. The key
to a properly planned stocks transfer is to know the exact stocks that will be dispatch for the day prior
to loading transactions at 7:00 am. The current process of preparing the transfer plan is especially
difficult for newly hired personnel. This explains the increasing incidents from May to July wherein
some newly hired personnel handled the stock transfer transaction, see Figure 6.

Figure 6: Loading Affected by waiting stocks from overflow

Waiting Stocks From Transfer


60 57
49
50 44
42
40
32
30
22
20

10

0
Ja n Feb Apr May Jun Jul

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

Aside from waiting, there are instances of stocks shortages discovered but the overflow in
charge has already gone home. During this situation, the ICC will request the Team Leader to
act as overflow in-charge to facilitate transfer.
In the worst-case scenario, wherein no one is available to facilitate transfer and trucks are no
longer available, the Team Leader will communicate to the client to transport the needed
stocks via motorcycle risking personnel safety and stocks security.

VI. Root Cause Analysis/Verification


An average of 40 trucks a month affected by waiting stocks from overflow resulting to
loading delays. This is due to unavailability of dispatch data for the days transaction.

Warehouse
Over stocking of Complaints
less needed
items Affected cycle
Incorrect count
count
No Actual
Dispatch Data Delays in
Waiting OT extension
loading

Delays in
Short stocking OT extension
loading

Figure 7: Encountered Problem due to the absence of accurate data for dispatch

VII. PROJECT OBJECTIVE


The specific objectives of the project are:
To eliminate waiting time for stocks from overflow which contributes 3% of
loading delays.
To create a method to readily provide projected dispatch data
To reduce encoding time, or to prepare a mechanism to minimize delays
related to encoding
To facilitate an effective transfer plan
To maintain and grow long-term personnel in key positions which are a critical
part of operations

VIII. ACTION PLANS


Considering that the problem is caused by a simple factor, the following actions were
taken and the results summarized in Figure 8 below:

Figure 8: Action Plans

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

IX. IMPLEMENTATION OF ACTION PLANS


The request for projected dispatch file was raised to MNC during the monthly business
review, and the agreed time is around 6:00 pm. Daily, an excel file copy of the processed pick
lists is supplied by MNC CSS to LF via email. This file is then used by the stand alone encoder
as the source of dispatch data for the next day loading.

Figure 9: Project Outgoing from SAP provided by MNC

Encoder filters the projected data by shipment number of the physical pick lists and copies it to the
new stand alone template. This way, projected dispatch data will be 99% accurate by eliminating
advanced and late processed orders. This data is available earlier than 6:00 am, giving ample time to
the ICC in creating the transfer plan.

Figure 10: SAP Data pasted in excel template

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

The ICC uses this data as basis for the transfer. Picture at the side shows the ICC in the actual
planning of the stocks transfer. Since data is readily available, planning is finished before 7:00 am.
The ICC will only have to ensure that all transfer requests are executed by the overflow in charge. The
ICC will also know the priority and sequence of the stocks for transfer due to the first five feedback
mechanism.

X. PROJECT EVALUATION AND EFFECTIVENESS CHECK


On the first three months of implementation, loadings affected by waiting time
for stocks transfer have declined.

Figure 11: Number of trucks affected by waiting of stocks from overflow

Trucks Affected by Waiting Stocks


60
50 57
49
40 44
42
Number

30
33 32 31
20 27
22
10
12
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Month

The team tried to compute the projects influence on overtime of the personnel involved in transfer
transaction such as receiving, replenishment and overflow operating hours. During implementation,
the OT of the transfer receiver declined at an average of 7 hours monthly.

Figure 12: OT of transfer receiver

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

OT - TRANSFER: RECEIVER
60
5056
40 49.5
OT Hours

30 40.5
20
10
0
JULY AUGUST SEPTEMBER
Month

The team also checked if the project influenced the overtime extension of the personnel in charge of
replenishment. The OT also started to decline on the month of September by around 18 hours.

Figure 13: OT transfer replenishment

OT - TRANSFER: REPLENISHMENT
70
60
58.5
50 60.4
OT Hours

40
42
30
20
10
0
JULY AUGUST SEPTEMBER
Month

The previous inaccuracies have been mentioned to affect the day to day operations resulting in
increased operating hours of the overflow sites and consequently, the utility costs in electricity.
Based on the actual electricity billings, consumption has decreased in September and October. If this
continues, LF can save around PHP 3,000 monthly on electricity cost. Figure 14 shows the monthly
electricity billings and savings, while Figure 15 shows the graph.

Figure 14: Overflow Warehouse Electricity Billing

Aug Sep Oct


Overflow Electricity Cost PHP10,379.39 PHP 7,738.09 PHP 6,943.33
Aug Average Monthly Cost (Sep-Oct) Monthly Savings
10,379.39 7,340.71 3,038.68

Figure 15: Decrease in Electricity Billing

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

Overflow Warehouse
12000
10000
10,379.39
8000
7,738.09
6000 6,943.33
4000
2000
0
Aug Sep Oct

Also, improvement in the productivity of the encoder has greatly improved. Four pick lists/loadings
were used for testing of the Stand Alone 2.0. These are all accounts under the customer, Sanford,
considered as the most intensive pick lists to encode in LF-MNC Cebu. Four personnel were tested to
do actual encoding of the old template versus the new one. The result showed improvements in
encoding time by 70%. This also attributed to the required outgoing data to be ready before 6:00 am.

Figure 16: Encoding time comparison

The average OT billed to the client for the encoder is 3 hours. With the Stand Alone 2.0
implemented, OT billed is reduced to an average of 1 hour only: a 66% improvement. If this will be
computed on a daily basis, 2 hours saved for 2 encoders (1 encoder per shift) for 26 days over 5
months at an OT rate of PHP 50.00 is equivalent to PHP 26,000.00 billed to MNC Cebu. This supports
MNCs initiative in cutting down costs and maximizing their resources including that of their service
provider.

Figure 17: OT improvement

ITEM BEFORE PROJECT AFTER PROJECT IMPROVEMENT


Average Daily OT for 3 hours 1 hour 2 hours
Encoder (66% reduction)

Using a year to year comparison, there is also a significant decrease in the OT extension of the
encoder at around 75% from the month of August and October.

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

Figure 18: Year on Year comparison

Y.O.Y. Encoder OT
Encoder (OT) 2016 Encoder (OT) 2017
90 84
80
66
70
52.5
60
50
40
30
20
26.5 23.5 21
10
0
Au g Sep Oc t

MNC started to require LF to improve traceability procedures and one of the requirement was to
assign a dedicated personnel for the job. This is evident in the new contract of MNC Davao. Since
stand alone encoding has been improved and can be completed earlier, the traceability job has been
delegated to the stand alone encoders, requiring no additional manpower to be billed to MNC. Given
the daily rate is PHP 366 over 26 working days a month, savings from avoided additional manpower
is PHP 9, 516 monthly.

In addition to the tangible savings, consequential savings have been included consisting mainly of
prevented costs and/or charges to LF due to the project.

First, is the safety of warehouse personnel tasked to get the stocks from the overflow warehouse late
at night due to short stocking as a result of ineffective stocks transfers. Accidents can happen that
can implicate LF financially in terms of disability charges.

Second, a total of 9 personnel resigned from the stand alone encoder position from 2010 to 2017
due to the stressful and repetitive task. Employees are easily discouraged from continuing in the job
resulting in high employee turnover, resulting in repeated turnover and teaching of the critical task to
new employees. This risks smooth execution of operations due to the learning curve of new
employees. Implementing this project also aims to lessen the hassles and stress of the job, and lower
the job turnover. That way, there are better chances of retaining and developing personnel assigned
to the job in the long run.

Lastly, MNC has a total of 5 DCs in Vismin; just like Cebu DC, the other 4 DCs face the same
challenge. The only means of monitoring and controlling inventory is through the stand alone. With
an effective and improved stand alone, there are very minimal risks of incurring inventory charges to
LF due to inventory variances: a feat proven time and time again since LF has never incurred any
major inventory charges with MNC, earning savings through preventing any financial leakages. This
can be computed below at a 0.10% inventory variance against each DCs inventory holding cost
multiplied against the average cost per case:

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

Savings From Prevented Inventory Losses


Average MNC Cebu Inventory Holding in Cases 419,387
Average MNC Iloilo Inventory Holding in Cases 57,959
Average MNC Bacolod Inventory Holding in Cases 51,970
Average MNC CDO Inventory Holding in Cases 122,659
Average MNC Davao Inventory Holding in Cases 150,370
Average VISMIN Inventory Holding in Cases 802,345
Estimated Inty Variance w/out Stand Alone monitoring 0.10%
Estimated Inty Variance in Cases 802
Average Cost Per Case (Pesos) 1,180
Inventory Losses Prevented by Stand Alone Monitoring - VISMIN 946,767

Overall savings and avoided costs from Stand Alone 2.0 were considered based on the following:
1. Reduction in OT hours of encoders
2. Reduction in OT hours related to inter-warehouse transfers
3. Reduction in overflow warehouse electricity billings
4. Avoided manpower cost from additional headcount for traceability
5. Prevented inventory losses
6. Other consequential savings

Figure 19: Total Savings Computation

Savings From Encoders' OT Hours


Average Daily OT Hours - Before Project 3.00
Average Daily OT Hours - After Project 1.00
Hours Saved Per Day 2.00
Number of Working Days Per Month 26.00
Number of Hours Saved Per Month Per Encoder 52.00
Number of Encoders 2.00
Total Number of Hours Saved Per Month 104.00
Rate Per OT Hour 50.00
Savings Per Month - Encoders Overtime 5,200.00
Savings From Interwarehouse Transfers Related OT
Reduced OT hours for interwarehouse transfer receiver 7.00
Reduced OT hours for interwarehouse transfer replen 18.00
Number of Hours Saved Per Month 25.00
Rate Per OT Hour 50.00
Savings Per Month - Interwarehouse Transfers Related OT 1,250.00
Savings From Overflow Warehouse Electricity Billings
Est. Electiricy Billing before project implementation (Aug.) 10,379.39
Est. Electiricy Billing after project implementation (Ave.) 7,340.71
Savings Per Month - Overflow Warehouse Electricity Billings 3,038.68
Savings From Avoided Additional Manpower for Traceability

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

Avoided headcount 1.00


Daily rate 366.00
Number of Working Days Per Month 26.00
Savings Per Month - Avoided Additional Manpower for Traceability 9,516.00
Savings From Prevented Inventory Losses
Average MNC Cebu Inventory Holding in Cases 419,387
Average MNC Iloilo Inventory Holding in Cases 57,959
Average MNC Bacolod Inventory Holding in Cases 51,970
Average MNC CDO Inventory Holding in Cases 122,659
Average MNC Davao Inventory Holding in Cases 150,370
Average VISMIN Inventory Holding in Cases 802,345
Estimated Inty Variance w/out Stand Alone monitoring 0.10%
Estimated Inty Variance in Cases 802
Average Cost Per Case (Pesos) 1,180
Inventory Losses Prevented by Stand Alone Monitoring - VISMIN 946,767
Other Consequential Savings
Turnover and Training 5,124
Permanent Disability 100,000
Partial Disability 50,000
Other Consequential Savings 155,124
Summary of Savings From Project Stand Alone 2.0
Savings from Reduced OT Hours for Encoder 5,200
Savings from Reduced OT Hours related to Interwarehouse Transfers 1,250
Savings from Overflow Warehouse Electricity Billings 3,039
Savings from Avoided Additional Manpower for Traceability 9,516
Inventory Losses Prevented by Stand Alone Monitoring - VISMIN 946,767
Other Consequential Savings 155,124
Total Savings Per Month 1,120,896

Above all these financial savings, its the continued improvement and the effective use of the stand
alone together with operational discipline that has provided LF-MNC Cebu operations with an
advantage that cant be put in numbers: a strong relationship with the client built on trust and
confidence from quality service. Its this relationship that has helped LF-MNC Cebu to continue as
MNCs service provider for the past 12 years and counting, and is the base for the expanded
relationship with MNC after having been awarded the opportunity to service them in a built to suit
DC in Cebu.

The stand alone 2.0 project can be adopted by all MNC operations or even its concept on
improvement by other operations. But this project stands not only to provide a template for
cascading and improvement, but to influce fellow LF DCs and employees and their mindset on
addressing operational problems through both simple and creative solutions design.

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CIO Entry Number: CIO-2017-018
Project Name: Stand Alone 2.0

XI. TEAMS FUTURE PLANS


The teams future plans include preparation for possible implementation of WMS in the near future
to further improve productivity.

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